Case Name: CLARENCE H. SMITH, surviving partner of ISAAC H. SMITH & SONS, Plaintiff and Respondent, v. THOMAS RYAN, Defendant and Appellant
Court: New York Superior Court General Term
Jurisdiction: New York
Decision Date: 1875-06-14
Citations: 7 Jones & S. 489
Docket Number: 
Parties: CLARENCE H. SMITH, surviving partner of ISAAC H. SMITH & SONS, Plaintiff and Respondent, v. THOMAS RYAN, Defendant and Appellant.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 39
Pages: 489–510

Head Matter:
CLARENCE H. SMITH, surviving partner of ISAAC H. SMITH & SONS, Plaintiff and Respondent, v. THOMAS RYAN, Defendant and Appellant.
I. LIMITATIONS—STATUTE OF.
1. Promissory note of a third party, payable at a future
TIME, ENDORSED AND DELIVERED BY THE DEFENDANT IN PAYMENT OF, OR AS SECURITY FOR, A PART OF HIS INDEBTEDNESS.
a. As of what time it operates to talce the case out of the statute.
1. It so operates as of the day of its delivery to the creditor,
and
not as of its payment,
h. Principle of the decision.
A payment on account, or a transfer of a security as collateral security on account, operates to take a case out of the statute only by reason of a promise implied from the act, to pay the balance. Such a promise can be implied only from the act of the debtor himself or his authorized agent. In the case at bar, the only act done by the defendant was the transfer of the notes—the payment of them at maturity by the makers was not the act of defendant or of his authorized agents. The payment by the makers was not made as agents of the defendant, but in discharge of their principal debt, pursuant to their legal obligations.
Before Monell, Ch. J., Freedman and Sedgwick, JJ.
Decided June 14, 1875.
Appeal from a judgment.
The action was to recover a balance of an account for goods sold, &c., for which the defendant was indebted April 10, 1868.
The defense was the statute of limitations. On April 14, 1868, the defendant endorsed and delivered to the plaintiffs two promissory notes of five hundred dollars each, made by Betts & Gay, dated April 6, 1868, and payable in two and five months, with interest. The notes were secured by a chattel mortgage made by the makers to the defendant, which he assigned to the plaintiffs.
Upon the receipt of the notes from the defendanr they were entered in the books of plaintiff’s firm by charging them to bills receivable, and crediting them to the defendant’s account.
Upon the maturity of the notes respectively, the principal and interest thereon for two and five months respectively, were paid to the plaintiff’s firm, and the sums collected for principal thereon were carried to the credit of bills receivable, upon their books, five hundred dollars on June 9, 1868, and five hundred dollars on September 17, 1868.
The last item proved in the mutual account between defendant and the plaintiff’s firm, was the receipt, in September, 1868, of the amount of the note of Betts & Gay, for five hundred dollars, and interest thereon for five months.
The action was commenced on June 5, 1874, within six years after the said last item of the said account between the defendant and plaintiffs firm.
The action was tried by a referee, who, upon finding the foregoing facts,«gave judgment for the plaintiff.
The defendant appealed.
Lockwood & Post, attorneys, and James B. Lockwood, of counsel for appellants, urged:
I. The referee erred in finding that the account between the appellant and respondent was a mutual, open, and running account, such as is excepted from the operation of the statute of limitations by section 95 of the-code. (1) There is no evidence in the case to sustain, such finding, and an inspection of the account upon which this suit is founded, at the end of the printed case will show to the court that it does not come within section 95. The English statute (21 James I.) left no doubt upon this question. It excepted “ such accounts as concern the trade of merchandise, between merchant and merchant, their factors or servants” (Cotes v. Harris, Bull, N. P. 149). In the revised statutes before the adoption of the code, the language was as-follows: “In all actions of debt, account or assumpsit brought to recover any balance due upon a mutual,, open, and current account, the cause of action shall be deemed to have accrued,” &c., and the decisions of the courts followed the English statute in construing it (Coster v. Murray, 5 Johns Ch. 522; Kimbell v. Brown, 7 Wend. 322; Edmondstone v. Thomson, 15 Wend. 544; Hallock v. Losee, 1 Sand. 220; Palmer v. The City of New York, 2 Sand. 318). In section 95 of the code, the words “where there have been reciprocal demands between the parties ” have been added, so that there can be no doubt as to the nature of the account to be excepted from the statute of limitations (Peck v. The N. Y. & Liverpool U. S. Mail S. S. Co., 5 Bosw. 226). See also Ingraham v. Sherard (17 Serge & Rawle, 347). (2) The referee also erred in finding that the payment of the five hundred dollars by Betts & Gray in September, 1868, constituted the last-item in the account. The last credit in the appellant’s account was the credit for the two notes on April 14, 1868. The credit given for the proceeds of the two notes was made in another account called “bills receivable.” The only relation it bore to the account of the appellant is shown by the testimony of respondent’s book-keeper who says:. “Mr. Ryan’s- account showed no credit for Betts & Gay’s notes after April 14, 1868 ; if they had not been paid at maturity they would have been charged back to his account; that is what I meant by'saying the bills receivable account was connected with the defendant’s account.”
II. If it be held that this is an item in the account, and that the account comes within section 95 of the code, still it does not affect the appellant. The principle that in a mutual, running account the cause of action accrues from the time of the last item proved in the account, is based upon the theory that the item within six years is an admission of an unsettled account and equivalent to a new promise (Catling v. Skoulding, 6 T. R. 189). That the admission must be made and the new promise given by the debtor or his authorized agent, is well settled. It follows, also, that the payment, or the demand, or whatever constitutes the item in the account from which the new promise is inferred, must be the act of the party himself or of some one authorized to make a new promise for him (Harper v. Fairly, 53 N. Y. 442). In this case the payment of the item by Betts & Gay without the privity of the appellant, was not an act from which his (appellant’s) new promise could be inferred.
III. The only question in this case is this—has the appellant made a payment within the six years previous to the commencement of this action on account of his indebtedness to the respondent, or done any act which the law recognizes as an admission of the debt and a new promise to pay it. (1) The evidence shows that the last act of the appellant in respect to his indebtedness was in April, 1868, when he delivered the two notes of Betts & Gay. It is immaterial whether or not the notes were received as payment—their delivery in April followed by their payment, constituted a payment in April as between the debtor and creditor, and the statute began to run from that time (Turney v. Dodwell, 3 Ell. & B. 135; Irving v. Veitch, 3 M. & W. R. 90; Gowan v. Forster, 3 Barn & Ad. R. 507). (2) We have seen above the reason of the rule that payment on account of an antecedent debt restrains the operation of the statute, viz., from the act of payment an admission of the indebtedness is inferred as well as a promise to pay. We have seen also that the payment from which the admission and promise are inferred, must be made by the debtor himself, or his authorized agent (Harper v. Fairly, supra). Is the payment, then, by a third party of his note to the creditor, without the debtor’s knowledge, such a payment by the debtor as to constitute an acknowledgment and revive the debt? Here the third parties’ notes were given by the debtor to the creditor in April, and were paid by the makers in June and September, without the knowledge of the debtor. If the notes had never been paid, there can be no doubt that the acknowledgment was in April. How, then, can the payment of the notes without the privity of the debtor change the principle ? If the appellant has made any acknowledgment of his indebtedness, it was when he delivered the notes to the respondent in April, 1868. This was more than six years from the commencement of the suit, and the debt is therefore barred by the statute.
George W. Van Slyck, of counsel for respondent, urged:
I. The payment by the defendant to plaintiff’s firm by the transfer before their maturity of the two notes of Betts & Gay, is to be reckoned from the date of the maturity of the notes, and not from the time of the delivery.' The notes were given on a precedent debt, and the presumption is that they were not given or received as payment but as collateral (Noel v. Murray, 13 N. Y. 168; Gibson v. Toby, 46 Id. 640; Vail v. Foster, 4 Id. 312). This presumption of law was not rebutted nor did the defendant attempt to rebut it. The notes were endorsed by the defendant, which established affirmatively that they were not given as payment (Whitbeck v. Van Epps, 9 John. 408; Breed v. Book, 15 John. 241; Darnell v. Morehouse, 45 N. Y., pp. 64 and 71). By the contract of endorsement the defendant was liable on the notes if they were not paid at maturity, and the plaintiff not guilty of laches. A guaranty even of a note by a debtor, though void by the statute of frauds is evidence that the note was not taken in payment (Murray v. Hoff, 5 Denio, 360). The notes being held, then, as collateral security,, payment should be reckoned from the time of their respective maturity and not from their delivery. The term “ payment,” in its legal import, means the satisfaction of a debt, and in no sense could it be said that the debt was satisfied until the notes were paid. Again the taking of the notes suspended the right of action as to the one thousand dollars until their maturity, but if they were not paid the plaintiff could have returned them to the defendant and resorted to the original demand (Van Epps v. Dillaye, 6 Barb. 24; Fowler v. Clearwater, 35 Barb. 149). The notes operated only as an extension of credit to their maturity if not paid.
II. If the notes were given in satisfaction of the debt, the date of the payment is to be reckoned from the date of payment of the notes, provided they are paid at maturity, or within a reasonable time thereafter (Fowler v. Clearwater, 35 Barb. 143; Whipple v. Blackington, 97 Mass. 473; Chapman v. Boyce, 16 N. H. 237; Haven v. Hathway, 20 Me. 347). In the above cited case of Whipple v. Blackington, the debtor gave note of third person, which was then over due, and the note was afterwards partly paid. The case of Harper v. Fairly (53 N. Y. 442), was cited before the referee, and is relied on by the defendant to establish his defense. It is submitted that that case is clearly distinguishable from the case at bar. In that case the- note of a third person was not paid to the creditor until several years after its maturity. The opinion in that case holds that a continuing agency will not be presumed to exist on the part of the maker of the note for years after the maturity of the paper so as to bind the debtor by the payment of the collateral obligation by the maker. In that case the payment was made years after the maturity of the note, and without the knowledge of the debtor. The decision does not conflict with the well- established rule that the debtor, in the transfer of a third party’s note, gives an implied authority to the maker thereof to pay the same at or about the time of its maturity. The defendant has admitted that the notes were paid on account of the debt and with his sanction. He has ratified the payment by the makers, so that the case (Harper v. Fairly) in 53 N. Y. does not apply (Huntington v. Ballou, 2 Lans. 120; Commercial Bank of Buffalo v. Warren. 15 N. Y. 577).
III. Payment of the interest which accrued on the notes at their maturity, can not be said to have been made until the interest had been earned. The credit for the interest could not be given by the plaintiff until it was earned, and the defendant must be presumed to have authorized the payment of the interest at the times only when the same had accrued and not before. The payment of the interest will in itself take the case out of the operation of the statute (Wenman v. The Mohawk Insurance Company, 13 Wend. 267).
IV. A chattel mortgage was assigned by the defendant as collateral security to the two notes of Betts & G-ay endorsed by the defendant to the plaintiff’s firm. The mortgage could not be enforced until protest of the notes. If the notes had not been paid at their maturity and the plaintiff had foreclosed the mortgage, the payment would have been reckoned from the time of the sale of the chattels, provided the sale had been made by the plaintiff within a reasonable time after the maturity of the notes (Porter v. Blood, 5 Pick. 53). It is only on the actual reduction of the pledged or mortgaged property to money that the same is treated as a payment and accounted for as such, and in the meantime the property is held as collateral (Brown v. Tyler, 8 Gray, 35).
Whether a note made by the makers for the accomodation of the defendant, and so as that between them the makers were sureties, and the defendant was principal, would have a different effect, was not considered or determined.

Opinion:
By the Court.—Monell, Ch. J.
The question in this case is, whether the statute began to run from the time the notes were transferred, or from the time of their payment. The referee has found the later period, regarding the payment of the notes as a payment by the defendant, so as to imply a new promise at that time.
It does not seem to me to be of any importance, so far as it affects the implied new promise, whether the plaintiffs received the notes in or as payment of the antecedent indebtedness, or merely as security for its payment. The transfer of a security by the debtor to be applied upon his debt, would imply a new promise, as well as an actual payment on account. But the implication would arise at the same time ; that is, by the act of transfer or payment. "
In this case, the last act of the defendant was the transfer of the securities, more than six years before suit brought; and the implication which is raised of a new promise is, not by the delivery, but by the subsequent payment of the notes by the makers.
It is not claimed that the defendant directed, or was even privy to the payment. But the payment was by third persons, of their own obligation ; the payment of which to the plaintiffs, as the lawful holders, the law required. This, in the view of the referee, was a payment by the defendant.
To make a part payment evidence of a promise to pay the balance, it must occur under such circura stances as are consistent with an intent to pay such balance (Miller v. Talcott, 46 Barb. 167). Actual payment by a debtor, or by his authorized agent, is consistent with such an intent. It is such a recognition of the debt as will authorize the assumption of an intention to pay the balance.
But when the payment is not by the debtor, but by a third person, his authority, derived from the debtor, to bind bis principal to a new promise by implication from the fact of payment, must distinctly appear, and can not be inferred from the payment alone (Read v. Hurd, 7 Wend. 408).
To make the payment of the notes a payment by the defendant, it must be assumed that the makers were acting under the authority, or by the direction of the defendant. There was no such express authority or direction in this case; and it can be implied only from the obligation of the makers to pay a debt which the defendant had parted with by transfer to the plaintiffs, and which at the time of its payment belonged absolutely to his creditor.
An implication of an authority to the makers of the notes to make the payment on behalf of the defendant, must have arisen, if at all, at the time of the transfer.
The transfer might be construed into a direction to the makers to pay the amount to become due upon the notes to the plaintiff. But such direction could not of itself continue until the maturity of the note, so as to make the payment such an act of the defendant as would authorize, at that time, a new promise to pay. In Creuse v. Defignoiux (10 Bosw. 122), the court say: "An agent can not bind his principal by an implied promise made within six years, where the authority to make it was more than six years before. The statute would commence running from the time the authority was given, not from the time the agent made the new promise."
In Pickett v. Leonard (34 N. Y. 175), the assignee of a debtor under a general assignment for the benefit of the debtor's creditors, made a payment out of the assigned property to the creditor. Within six years thereafter, the debtor was sued for the balance of the debt. It was held that such payment did not take the case out of the statute. By virtue of the assignment the creditor became entitled to receive, and the assignee was bound to pay. But there the obligation ceased. The assignee was not the agent of the assignor for any purpose other than to pay his debts, and could not, either expressly or impliedly, make for him a new promise. Justice Hurt says: " The assignor places his property in the hands of the assignee for the purpose of paying his debts, who, from the proceeds, pays a creditor a part of his debt; and this is interpreted into saying, 'My assignor is willing to pay the residue of your debt, and on his behalf I promise you that he will do so.' The assignor might well answer, ' I have given no such authority and made no such contract.' "
It seems to me the cases are not distinguishable. The transfer of property in trust to pay debts generally, is the same as the transfer to pay a single debt, and the effect of the payment must, therefore, be the same. But no more in the one than in the other, is the person making the payment the agent of the debtor, so that he can bind him by a promise. Nor is the authority to make the payment less in one case than in the other.
How, then, can the payment of the note be construed into a promise to pay the remainder of the debt ?
In Read v. Hurd (supra) one Skiff being indebted to Hurd, the maker of a note, made a payment of the amount of his debt to the plaintiff, to be applied upon the note, and it was endorsed thereon. Hurd was not present, nor did he request the payment. It was held that it was not a payment by the defendant, and that no new promise could be implied from it.
There was some difference in the facts in the case of Harper v. Fairly (53 N, Y. 442), which the respondent's counsel claimed distinguished it from the case now before us. In that case the creditor retained the transferred note for a number of years, receiving the interest, but the principal was not paid until several years after the transfer. This fact is alluded to in the opinion more, I think, to give emphasis to the principle decided, than as constituting any essential element in it. The court had charged the jury that the payments made by the maker of the note had the same effect to take the case out of the statute, as if made by the defendant. In holding that to be error, the character and not the time of payment, was made the essence ; and the court say that the reason that it is so is, that a part payment is an acknowledgment by the debtor of his liability for the whole demand. But to bring a case within the reason of the rule, the part payment must have been made by the party to be charged with the effect of it, or an agent authorized thus to charge him. After citing Pickett r. Leonard (supra) and other cases in support of the rule, the court continues to say, "The payment in the present case was not made by the debtor, nor with his knowledge, but by one whose obligation had been transferred several years previously to the creditor as security for the debt." Then alluding to the payment long after the maturity of the note, they proceed, " There could consequently be no implied authority to make the payment at the time it was made." These latter words, as I have already said, emphasize the rule and forcibly illustrate its propriety, but do not confine the principle to a payment made long after the maturity of the transferred security. There can be no difference. It is the payment, and not the time of the payment, from which the new promise is to be implied. Laches or delay can not change the rule. If the payment is authorized, it must be authorized when it is made, and the time is not essential.
The new promise must recognize and apply to the old debt, and the transaction must be such, that it can be fairly inferred from it that the defendant intended to pa.y the residue.
In the language of Harper v. Fairly (sup.) "it is impossible to spell out of the transanction any new promise of the debtor, cotemporaneous with the part payment, to pay the residue of the debt."
An implied promise, like an express promise, must not only be an admission of the existence of the debt, but also a recognition of a liability to pay it; and no other or greater effect can be given to a part payment, than that from it a new promise containing all the elements above stated may be implied.
There is no doubt that when the defendant transferred the notes to the plaintiff, that act could have been construed into a new promise. It admitted the existence of the debt, and was a recognition of the defendant's liability to pay it. And from that time the statute would have began to run. And that is so whether the notes were taken in actual part payment, or as security for the part payment of the debt (Turney v. Dodwell, 24 Eng. L. & Eg. 92).
Notes and bills, when received from a creditor upon antecedent indebtedness, are never a payment, unless expressly made so ; but the effect upon the statute is the same. Hence in the case just cited, it was held that the word " payment" must be taken in its popular sense, and to exclude the species of payment in question. In this view the court say the acknowledgment of liability as to the remainder of the debt is not altered by the fact of the notes not being paid. That the acknowledgment is from the delivery of the notes, and that such delivery is a sufficient acknowledgment.
Suppose the notes transferred had not been paid* would the plaintiff have conceded that the transfer was not a payment % I think not. Then if the delivery of the notes was, to save the statute, the payment, how can it be claimed that there was another payment at a subsequent day, which would also save the statute 1
The effect of the transfer of the notes as raising by implication a new promise, was complete when the transfer was made, and could not be extended to the subsequent act of the makers of the notes, when the defendant was not present, and which act was not with his authority nor by his direction. Hence, the case fails to show a new promise by the defendant at any time after the delivery of the notes, or by any one having authority to make a new promise for him, and* therefore, the statute began to run from such delivery, and not from the time when the notes were actually paid.
For these reasons I think the referee erred in hie conclusion of law.
The judgment should be reversed, and a new trial ordered, with costs to the appellant to abide the event.
Sedgwick, J.
I think the judgment should be reversed. The only fact that supports the judgment as against the statute of limitations is that the makers of the promissory notes given to plaintiff by defendants as security for the defendants' indebtedness, paid the notes within six years. Then to make this evidence of the new promise by the defendant, Judge Rapallo. said, in Harper v. Fairley (53 N. Y. 445), "the part payment must have been made by the party to be charged with the effect of it, or an agent authorized thus to charge him.''' He also said that the reasoning: of the cases determined "that a part payment, whether made before or after the debt is barred by the statute, does not revive the contract, unless made by the debtor himself or by some one having authority to make a new promise on his behalf for the residue." Under this case the dispute is settled, in my mind, by inquiring if the makers of the note were the agents of the defendants, either to make the payment of the notes or to give a promise on behalf of the defendants to pay the remainder of the debt. They were not agents to make the promise, unless their relation to the notes given as •security made them agents of the defendants to pay the note. There is no evidence that the makers of the note ever had any dealings or communication with the defendants, except by giving the notes for a valuable consideration in a transaction altogether disconnected with the present case. Then, when they paid, did they act for the defendant in making the payment? Perhaps it is well to say that they were not makers for the -accommodation of the defendant, and so that between them the makers were sureties while the defendant was principal. But they were on the notes, which they paid acting on principal obligations of their own, arising not from any authority given or agency made by the defendant, but from their contract with the defendant which the defendant had assigned to the plaintiff. At the time of the payment the defendant could not have forbidden or stayed it, or modified it or given any particular direction to it. Indeed, if we look nicely into the matter, the makers never made any payment, so far as they were concerned, on the original indebtedness. They only paid their own notes, and the money paid was afterwards or cotemporaneously applied, by the plaintiff's firm, on the principal indebtedness, by virtue of the arrangement made between the defendant and them, at the time of the transfer of the note by the defendant.
Nor was this application of the money by defendant's authority given beyond the six years, a payment by defendant of a kind to take the case out of the statute. It could only do so by giving to the transfer, in which alone the defendant took actual part, the effect of a promise to pay the remainder of the debt, in case of payment of the notes. There is no reason, it seems to me, why such a promise is not barred by the statute of limitations, as much as the original assumpsit of the defendent.
I think the judgment should be reversed, with costs to appellant to abide event.