Case Name: JAMES M. BURRUS, Appellant, v. JAMES M. COOK et al., Respondents
Court: Kansas City Court of Appeals
Jurisdiction: Missouri
Decision Date: 1906-03-05
Citations: 117 Mo. App. 385
Docket Number: 
Parties: JAMES M. BURRUS, Appellant, v. JAMES M. COOK et al., Respondents.
Judges: Broaddus, P. J., concurs; Ellison, J., dissents.
Reporter: Missouri Appeal Reports
Volume: 117
Pages: 385–412

Head Matter:
JAMES M. BURRUS, Appellant, v. JAMES M. COOK et al., Respondents.
Kansas City Court of Appeals,
March 5, 1906
1. SUBROGATION: Common Law: Civil Law: Chancery: Surety. The right of subrogation, originated in the civil law, and though unknown to the common law was in time adopted and applied in a modified form by the chancery courts of England. Under the civil law it gave to a surety paying his principal’s debt the “actions” of a creditor.
2. -: -: Payment: Surety. Payment at common law whether made by principal or surety operates as an absolute extinguishment of the debt, and English courts of equity, recognizing this, evolved the idea of founding an equitable right, not upon the creditor’s “actions,” but upon the fact of payment, giving the surety everything the creditor had except the debt itself.
3. -: -: -: -: American Rule. In the American states following the common law the paying surety has a cause of action from the implied promise of his principal to reimburse him, and by operation of law substituted to all the creditor’s liens and securities. [Cases considered.]
4. -: -: Remedies: Election. The paying surety has his common-law remedy for debt against his principal and also his equitable action upon the paid security. The first depends for its existence upon the destruction of the debt, the other upon the debt being kept alive; and if he fails to pursue the former while available, it may be regarded as an election of the latter.
5. -: Action: Limitation: Law: Equity. The right of the paying surety to an action at law and to an equitable action are not concurrent remedies for the enforcement of the same cause of action; and each have their own period of limitation and the equitable proceeding will not follow the law in applying the statute of limitation.
6. -: -: Fraud. The paying creditor in pursuing his equitable remedy must do equity and can recover only so much as he had paid, and if he reaches for more a court of equity will stay his hand.
7. -: Common Law: Action: Remedy: Missouri Doctrine. Missouri has adopted the American doctrine without any curtailment of the rights enjoyed by the creditor; and the surety may pursue his remedy at law under the statute or ground it upon his equitable ownership of the debt. [Cases reviewed.]
Ellison, J., Dissenting.
8. ——: Pleading: Demurrer: Limitation: Exception. The benefit of the Statute of Limitation may be had by demurrer where the face of the petition discloses the bar has been completed; and the exception relieving the plaintiff from a bar of the statute should be pleaded by him.
9. -: Action: Limitation: Surety. The period of limitation begins to run against the surety from the day of his payment, since on that day an action accrues to him; and this applies in proceedings in equity as well as actions at law. [Missouri cases reviewed and Brewing Company v. Jordan, 110 Mo. App. 286, criticised.]
10. -: -: Surety: Limitation. The surety’s right of action is the foundation of his recovery and his right to subrogation is a mere aid to his right of action, which is not based on any actual contract, hut on an implied promise; and the statute only makes it effective when asserted within the five-year limitation; and this is true whether the right of the surety arises from an implied contract or from natural justice and equity.
11. -: -: Limitations: Concurrent Jurisdiction. In cases of this character the right to the action and its ultimate object are the same whether asserted in law or equity and courts of equity and courts of law have concurrent jurisdiction and in such cases equity will no more disregard the Statute of Limitations than would a court oí law.
12. ACT: Intention to Be Subrogated. If the surety, who pays his principal’s debt, does no act before his claim is barred, manifesting an intention to be substituted to the creditor’s rights, , equity will not subrogate him.
13. ISSUES ALIUNDE PAYMENT OF DEBT. There are many issues aside from the payment of the debt by the surety which it may be necessary for him to meet, such as the amount paid, whether it was necessary that he pay it, equities between the parties, etc., and it is necessary that these be met within the period of limitation.
14. -: -. So a surety on payment of the debt does not ipso facto become subrogated to the rights of the creditor.
15. EQUITY: Implied Promise: Limitation. A surety’s right of action, whether considered as arising from an implied promise, or from principles of natural justice, must be asserted within the period of limitation.
16. LIENS: Preferred Claims: Limitations. In cases where possession and control of the evidence of indebtedness paid by the surety is necessary for his reimbursement, as if it represents a lien, or a preferred claim and the like, he will be considered the assignee in equity for the purpose of asserting such right. But equity will not make such assignment when such necessity does not exist merely to avoid the Statute of Limitations.
17. -: -: Assignment of Judgment: Limitation. Whether the surety upon payment takes an assignment of the judgment can make no difference in the period of limitation, since the right of action comes by the operation of law, and the same statute of limitation applies.
18. -: -: -: Evidence. Though the surety has an assignment it does not affect the character of his evidence, and he must prove aliunde his suretyship and his payment, etc., as he would without the assignment.
19. -: -: Limitation: Fraud. The fact that the principal debtor may have fraudulently disposed of his property without the knowledge of the surety is not such fraud as to extend the time for bringing the action, since it does not tend to bring his action within the limitation prescribed by the statute.
20. CERTIFIED, SUPREME COURT. Deeming the decision in this cause contrary to the decisions of the Supreme Court in Singleton v. Townsend, 45 Mo. 379; Burton v. Rutherford, 49 Mo. 255; and Bushong v. Taylor, 82 Mo. 671, and also contrary to the decisions of the St Louis Court of Appeals in Bauer v. Gray, 18 Mo. App. 164, and Williams v. Gerber, 75 Mo. App. 18, the cause is certified to Supreme Court.
Appeal from Jackson Circuit Court. — Son. William B. Teasdale, Judge.
Reversed and remanded ; transferred to the supreme COURT.
James Allen Prewitt & Olney Burrus for respondents.
Paarton & Bose for appellant.
Briefs sent to Supreme Court.
Briefs sent to the Supreme Court.

Opinion:
JOHNSON, J.
This is a suit in equity to enforce the right of subrogation. A demurrer to the petition was sustained upon the ground that the action pleaded is barred by limitation and the case is before us upon plaintiff's appeal.
Jacob Bowlin was the creditor of William Weese in the sum of three hundred and fifty dollars and plaintiff and defendant Cook were sureties for the debtor: On September 20, 1886, Bowlin recovered judgment upon the debt in the circuit court of Jackson county against all three obligors. Weese, the principal, was and is insolvent and for many years has been a non-resident of the State. Before the judgment was recovered, Cook, to evade his liability, fraudulently conveyed his property to his brother. On June 25,1888, plaintiff, compelled to pay the full amount of the judgment, procured from Bowlin a written ássignment thereof, but did not have it made of record. Shortly after this Bowlin died and the administration of his estate has long since been closed. Cook refused to discharge his liability as plaintiff's co-surety and plaintiff, having no reason to doubt the bona lides of the conveyance made by Cook, and believing in the reality of his apparent insolvency, made no effort to enforce contribution. This suit followed the discovery of Cook's fraud. Plaintiff conceding that no other remedy is open to him, because all others are barred by limitation, seeks, as the equitable assignee and owner of tbe judgment, to recover one-lialf thereof from his co-surety. The petition is in three counts and alleges other facts, but those stated are sufficient for the purposes of this inquiry.
The principal questions for solution are these:
1. As the judgment creditor, Bowlin, held no securities for his debt, did the payment of the judgment by plaintiff operate, in equity, to substitute him in the place of Bowlin and thereby invest him with all of the rights and remedies against his co-surety that Bowlin would have had under the judgment, had the payment thereof not been made?
2. If this question should be answered in the negative, plaintiff cannot recover, for, under the statute, any action predicated alone upon the fact of payment, and not upon that of the equitable ownership of the debt would have to be brought within five years from the date of payment to escape the bar of limitation. But should the preceding question be answered in the affirmative, another arises. Under the statute then in force, the judgment was not devitalized until after the lapse of twenty years from the date of its rendition. Is plaintiff, as the equitable substitute for Bowlin, the judgment creditor, the successor to all of all the rights the latter would have possessed under the judgment as its owner to the extent of being vested with the full right of exercising them for the compulsion of contribution from his co-surety, or should he be curtailed in the enjoyment of these rights by limitations that would not have affected them, had they remained with the original judgment creditor? If, by the payment of the judgment, plaintiff's substitution for Bowlin became complete, his action upon the judgment is timely under the statute then in force, but if the substitution was partial, there may be room for saying that the limitations applicable to the statutory action for contribution (which is based upon the fact of payment alone) also should be applied to actions founded upon the equitable ownership of the debt.
The subject now before us was considered in all of its essential features in the case of Brewing Co. v. Jordan, 110 Mo. App. 286, and the conclusion reached that the fact of the payment of the debt by a surety conferred upon him, not only the right to assert his statutory cause of action within the period of time prescribed, but also, through the medium of an equitable assignment of the debt itself, clothed him with all of the rights and remedies possessed by the creditor, so that two separate and distinct remedies or rather causes of action were open to him — one in the nature of assumpsit predicated upon the fact of payment and the other an equitable action founded upon the .implied ownership of the obligation. In that case, as in this, the creditor held no collateral security, but notwithstanding this fact, we held that the debt had been assigned in equity and that in an action brought upon the note, by which it was evidenced, the surety could enforce his equitable right in the same period of time given by the statute for the assertion by the creditor of his legal right. A careful reconsideration of the principles discussed and a re-examination of the authorities consulted convinces the writer of this opinion that, both upon reason and authority, the conclusions there reached are in furtherance of substantial equity and should be sustained and followed, but as we now are confronted With a divergence of opinion among the members of the court relative to the questions decided in the Heim case, and which now confront us, their further discussion appears to be necessary.
The right of subrpgation, that is, the substitution for the common creditor of a surety, who has been compelled to pay his principal's debt, originated in the civil law, and, though unknown to the common law, was in time adopted and applied in a modified form by the courts of chancery in England. The doctrine recognized in the civil law is thus stated by Pothier in his "Treatise on Obligations"It is to be holden, as a principle, that all who are bound for a debt for others or with others, by whom they ought to be discharged either for the whole or a part, have a right, in paying such debt, to require the cession of the actions of the creditor against the other debtors, who-are liable for it. This obligation of the creditor to cede his actions is grounded on this rule of equity, that being commanded to love, all men, we aré bound to grant them everything which they have an interest in having, when we may do so without injuring •ourselves. A debtor in solidum, having then a just interest in having the actions of the creditor, against his co-debtors, to make them pay their part of a debt, which they owe as well as he, the creditor cannot refuse it. For the same reason, he cannot refuse it to a surety and generally to all those who, being bound for the debt, have an interest in being discharged in whole or in part by those for or with whom they are debtors."
This clearly gave to the debtor, who paid the debt of himself and his co-debtors, the "actions" of the creditor, that is, his rights and remedies, regardless of all considerations relating to liens or securities. The substitution was intended to be complete and to afford the debtor, who paid, the right to use his creditor's hand for the enforcement of contribution from his co-debtors.
In the application of this principle by the English •courts, an obstacle was encountered in the rule of the common laAV that makes the payment of a debt, either by the principal obligor or a surety, operate as an absolute extinguishment thereof and denies the right to a surety, who pays, to prevent the destruction of the debt, either by a direct assignment thereof from the creditor, or by any other means. When the debt is paid by one bound in law to pay, it •ceases to exist. Therefore, the English courts of equity, under the maxim that "Equity follows the law," recognized this principle of the positive law and, treating the debt- as extinguished by payment, evolved the idea of founding an equitable right, not upon the creditor's "actions," but upon the fact of payment. In effect, they held that, notwithstanding the debt itself must be treated as non-existent, the fact that one of two or more co-sureties has paid the debt of all gives him in equity the right to be substituted for the creditor as to all liens and securities incidental to the debt. In short, the paying surety was given everything the creditor had except the debt itself, to indemnify him against the default of his principal and co-sureties.
This was the state of the law at the beginning of our national existence and, leaving here the civil and English law, we will turn to the consideration of what has been termed the American doctrine. In all of the states where the common law is followed, the English rule of substitution has been recognized and enforced. That is, under the hypothesis that payment by a surety extinguished the debt, he has been permitted to found a cause of action upon the implied promise of his principal or co-sureties to reimburse him for the amount expended by him in their behalf and, by the operation of law, has been substituted for the creditor as to all liens and securities held by the latter as indemnity against the default of his obligors.
But many courts have found that the English rule is inadequate to meet the requirements of equity and justice in all cases. There are rights, remedies and liens so indissolubly bound up with the debt itself that their destruction attends that of the debt. Therefore, in many cases, a strict adherence to the rule that payment extinguishes the debt means the withholding from the surety,, who pays the debt of another, of a substantial indemnity,, to which in real equity and good conscience he is entitled. To obviate such injustice, resort was had to the-civil law for a principle upon which to found an independent cause of action that would meet the deficiencies of that borrowed from England. Accordingly, the rule- of the positive law relating to the extinguishment of the debt was restricted in its application to the relation between the creditor and debtors and held to be of no effect upon the rights of the debtors among themselves, and announcement was made of the principle that the surety, who paid the whole debt, could sue in equity upon the very debt itself, as the equitable owner thereof. One of the earliest and clearest statements of this doctrine is found in the case of Enders v. Brune, 4 Rand. 438: "In enforcing these principles, courts of equity look not to the form, but to the essence of the transactions. They consider the doctrine of substitution, not as one founded in contract, but the offspring of natural justice. Nor do they leave it to the creditor to cede his actions, but so soon as a third person, who has become bound with the debtor, pays his debt to the creditor, they substitute him to the creditor, giving him every right, every lien, every security, to which the creditor could resort, and if the creditor should, with had faith, release any of those securities, it would be a bar pro> tanto to his recovery against the surety." Aside from those in this State, other authorities sustaining this rule may be found by reference to the following text-books: Bispham's Principles of Equity, secs. 335-336, and cases cited; Beach on Equity Jurisprudence, sec. 811; Sheldon on Subrogation, secs. 1 and 159, and case cited; Pomeroy's Equity Jurisprudence, sec. 1419, and note, and cases cited; 7 Words and Phrases Judicially Defined, 6721, et seq.
From an examination of the authorities, it will be discovered that, independently of statutory enactments, the courts in those jurisdictions, where the American doctrine is upheld, also enforce causes of action founded upon the English rule, notwithstanding the two principles are essentially antagonistic in fundamental particulars. In both, the end to be attained is the same — the indemnity of the surety — and both are set in operation by the same fact, the payment of the debt. But at this point they diverge: One depends for its existence upon the destruction of the debt; the other depends upon the debt being kept alive and cannot exist without it. Therefore, the conditions that sustain one destroy the other. Naturally, it is for the owner of these two remedies to select between them, and here arises the only really •serious question before us. The cause of action, under the English rule, has received the positive approval of legislative action in most of the states — ours among the number (R. S. 1899, secs. 4504-5-6-7) —and the period of time in which suit may be brought in this State for its •enforcement is five years (R. S. 1899, sec. 4273). It is not contended that the equitable cause of action founded upon the debt itself is abrogated by the statute, but it is held in some jurisdictions that, under the rule that •"Equity follows the law," the equitable remedy must be pursued within the period fixed for the enforcement of the statutory remedy. Such is the view expressed in Junker v. Rush, 136 Ill. 179, where it is said: "The true rule would seem to be that a surety, by payment, does not become ipso facto subrogated to the rights of the •creditor, but only acquires a right to such subrogation and that, before the substitution or equitable assignment •can actually take place, he must actively assert his •equitable right thereto. And this assertion must be made before his legal remedies are barred." This is directly in conflict with the principle stated in Enders v. Bruñe, supra, a leading case supported by the great weight of authority: "So soon as a third person, who has become bound with the debtor, pays his debt to the creditor, they [courts of equity] substitute him to the creditor, giving him every right, every lien, every security, to which the creditor could resort."
There is no room here for saying that payment does not 'ipso facto assign the debt at the election of the surety, who pays it, and the better rule, the one more consonant with equity and reason, treats the surety upon his election to assert his equitable ownership of the debt as having succeeded to the rights of the creditor at the time of payment, and in case the period for bringing snit npon the debt exceeds that for the assertion of the statutory cause of action, the fact that the surety permits the latter period to elapse without bringing suit is of itself to be regarded as an election to pursue the equitable remedy. Would not the creditor have had the right to sue at law upon the debt, had it remained unpaid? Upon what principle or reason, can it be said that some, but not all, of the creditor's rights and remedies are assigned with the debt? Is the position of the surety, who has discharged the obligation of another, of such doubtful equity that he should be hampered and restricted in the exercise of his acquired rights and remedies by arbitrary rules? If it is, there is no reason for even a partial substitution. But if equity is altogether upon his side, as all courts agree that it is, his substitution should be either complete or not at all. There is no middle ground that has the support of reason and right.
But it is said that as the rights of the surety, under either action, begin with the payment of the debt, limitation begins to run then, and, as the statute fixes the period for the statutory action, it must result that equity "will follow the law" by holding that period applicable to the equitable action upon the debt. The trouble with this argument is that it starts with a wrong premise. It assumes that the statutory and equitable remedies under consideration are concurrent remedies for the enforcement of the same cause of action. In a certain way, they may be regarded as concurrent remedies, for both reach back to the same right and have in view the same purpose, but they are not concurrent in the sense that both depend upon the same cause of action. Attention has been called to the antagonistic elements that serve to differentiate and separate them into remedies pertaining to different causes of action. That two or more independent causes of action may exist for the enforcement of the same right cannot be disputed, and that the limitation applicable to one of such causes does not of its own force extend to the other is likewise elementary. One illustration will suffice: A creditor holding the promissory note of his debtor at the maturity thereof accepts a new note maturing at a later time, not in payment of the one due, but as security therefor. Default being made in the payment of the second note, the .creditor may sue upon either. Each note furnishes a cause of action, but both represent the same thing — the debt. No one would contend that the cause based upon the later note would be barred by the lapse of the period of limitation controlling that upon the first; yet, in principle, that is the substance of the claim here made. In following the law, equity in the case before us should recognize that applying to the obligation upon which the action is founded, and not that relating to another cause of action.
Further, it is said that, if the surety who pays the debt is to be vested with all of the rights, liens and remedies of the creditor, the door is opened for him to profit at the expense of his co-obligors. That, by inducing the creditor to accept in full payment a less amount than that due, he, as the equitable owner of the debt, could force from his co-sureties contribution upon the full amount, and thereby avoid or lessen his own just burden at the expense of his co-sureties. It must not be overlooked that the "cession of the creditor's actions" is in equity and not in law, and that it is implied for the accomplishment of a specific purpose — the indemnity of the surety. When that purpose is served, the equity ceases and the equitable title falls with it. The equitable assignee must sue in equity and must allege and prove the facts that entitle him to reimbursement from his principal or to contribution from his co-sureties. In seeking equity, he must do equity, and if he reaches for more, the court will stay his hand and give him nothing more than his due.
Considering now the cases in this State, we find that the principle of substitution as embodied in the "American doctrine" is adopted without the curtailment of any of the rights enjoyed by the creditor at the time of payment. [George v. Somerville, 153 Mo. 7; Storts v. George, 150 Mo. 1; Hackett v. Watts, 138 Mo. 502; Benne v. Schnecko, 100 Mo. 250; Humphreys v. Milling Co., 98 Mo. 542; Blair v. Railway, 89 Mo. 383; Ferguson v. Carson, 86 Mo. 673; Hammons v. Renfrow, 84 Mo. 332; Butler v. Lawson, 72 Mo. 227; First Baptist Church v. Robertson, 71 Mo. 334; Berthold v. Berthold, 46 Mo. 557; Furnold v. Bank, 44 Mo. 336; Arnot v. Woodburn, 35 Mo. 99; Miller v. Woodward, 8 Mo. 169.]
The surety's action may be under the statute or it may be grounded upon his equitable ownership of the debt. In the one case, the debt is treated as being extinguished by payment; while, in the other, it is kept alive for the benefit of the equitable assignee. In Furnold v. Bank, 44 Mo. 336, the principal announced in Enders v. Brune, supra, is adopted and followed. In Berthold v. Berthold, 46 Mo. 557, the right of substitution is recognized as applying to cases where no securities are in the hand of the creditor: "It would be altogether superfluous to give the multitude of cases all pointing in the same direction, where it is held that a surety, who has paid the debt of another, is subrogated to all the rights of the creditor as to other securities in his hands . . . So in the United States, though not in England, it is held that a surety, who pays the debt of the principal, is entitled to an assignment of the instrument paid . .
Lord Eldon held in Copis v. Middleton that the payment of the obligation by the surety extinguished it. So it does, so far as the creditor is concerned, but it should not be extinguished as to any right the surety has acquired by its payment. It should still subsist with its liens and priorities to enable him to recover of the principal, as well as to compel contribution by his co-sureties, or to avail himself of any securities turned out by the principal." In Burton v. Rutherford, 49 Mo. 255, with no thought of overruling the Furnold and Berthold cases, the Supreme Court upheld the right of the surety "to sue for money paid as surety" under the hypothesis that payment extinguished the debt. [To-the same effect is Bushong v. Taylor, 82 Mo. 660.] In Benne v. Schnecko, 100 Mo. 250, the facts, in essential particulars, are identical with those before us. The creditor held no securities for his debt and had reduced it to judgement against the principal and sureties. The court said: "And the sureties, having paid the debt of their principal, Schnecko, became entitled to an assignment of the debt Bittner had recovered. Such payment did not extinguish the debt, at least in equity. Mere payment of the debt by the surety is considered to operate as an assignment of it to the party paying, with all the rights and liens which attached to it as incidents in the hands of the creditor."
This language conclusively answers the point supported by the Supreme Court of Texas in Faires v. Cockerell, 88 Texas 428, where it is held that no substitution as to the ownership of the debt takes place except when the creditor holds independent securities. It also answers the argument that the equitable title to the res does not vest in the surety by the fact of payment and that he acquires nothing more than the mere right to ask the court to make him the assignee of the debt.
In the Missouri cases, the intent to regard the right as springing from the broad principles of equity and justice is made manifest and the purpose of giving the surety, not only every right bestowed upon him by the statutory law, but also every right enjoyed by the creditor of benefit to him, is clearly expressed. •
In giving logical effect to these principles, it must be held that the creditor's rights and remedies should be continued in equity for the benefit of plaintiff and that, as his'suit is brought within the period in which the creditor could have sued, had he continued in the ownership of the judgment, the action is timely.
The judgment should be reversed and the cause remanded.
Broaddus, P. J., concurs; Ellison, J., dissents.