Court Opinion

ID: 7892003
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:49:56.924327+00
Date Added: 2024-06-11T16:31:56.747501
License: Public Domain

Pollock, J.
(dissenting) : I do not agree with either the reasoning employed or the conclusion reached in the opinion of the majority of this court. The question is important and its determination should find support in the well-recognized principles of the law and the adjudicated cases. As determined, it has neither.
It is conceded that Williams, by his purchase of the property and assumption of the debt, became, as between the mortgagors and himself, the principal debtor, and the mortgagors his sureties ; but this relation was created by an application of the principles of equity and not by any contract to' that effect between the parties. After the purchase and assumption of the debt by Williams, the- owner of the mortgage debt had a choice of remedies for its collection : A separate right of action against Williams upon his engagement of assumption ; or, a separate action against the mortgagors on the notes and to foreclose the mortgage ; or, a single action against the purchaser upon his assumption and the mortgagors on the notes and for a foreclosure of the mortgage ; or, a right first to exhaust the mortgaged property and the non-exempt *118property of the mortgagors, and in a subsequent action recover any deficiency from the purchaser. (Rouse v. Bartholomew, 51 Kan. 425, 32 Pac. 1088; Mfg. Co. v.Burrows, 40 id. 361, 19 Pac. 809.)
It is also conceded that whether .this equitable relation of principal and surety extended to and became binding upon the mortgagee is a question of fact. This question of fact, under appropriate instructions, was submitted to the jury and by the jury determined against the mortgagors. This court now holds that the action of the trial court in submitting this question of fact was error; that from the facts recited from the record it was incumbent upon the trial court to declare, as a proposition of law, not only that the equitable relation existing between the mortgagors and purchaser extended to and became binding upon the mortgagee, but also, as the right of action for the collection of the debt from the purchaser, who has remained a resident of the state, liable to action at any time on his assumption, is barred by the statute, the creditor’s right of action on the notes and to foreclose the mortgage is also barred against the makers, in whose favor confessedly the statute has not run, on account of absence from the state.
This conclusion is erroneous on three grounds :
First:- Williams may not plead the statute of limitations as to the foreclosure of this mortgage ; nor can the mortgagors plead the statute through Williams. While Williams may plead the bar of the statute as to his personal liability to plaintiff arising from his engagement of assumption of the debt, yet, having taken title to the property in express recognition of plaintiff’s mortgage and in subservience thereto, it does not lie in his power to avail himself of the statute in this action on the notes and to fore*119close the mortgage. The right to plead the statute being a personal right, the mortgagors cannot avail themselves of the same through Williams. This court, in Waterson v. Kirkwood, 17 Kan. 9, held :
“P. mortgaged his land to K., and then, after an action-had accrued on the mortgage, but before the same was barred by the statute of limitation, left the state and has never returned. Just before he left he transferred his interest in the land to W. W. and K. have remained in the state, and a sufficient time has elapsed to bar all action on the mortgage, provided P. had also remained in the state. Held, that W. stands merely in the place of P., and therefore, as P. could not plead the statute of limitation in a suit on the mortgage, W. cannot.” (See, also, City of Fort Scott v. Schulenberg, 22 Kan. 658; Schmucker v. Sibert, 18 id. 104, 26 Am. Rep. 765; Sibert v. Wilder, 16 id. 176, 22 Am. Rep. 280; Pears v. Wilson, 23 id. 346; Ryan v. L. A. & N. W. Rly. Co. et al., 21 id. 367.)
In Ordway v. Cowles, 45 Kan. 447, 25 Pac. 862, it was held:
‘ ‘ The plea of the statute of limitations cannot be interposed by the holder of a tax title, to a note and mortgage not barred at the commencement of the action against the original mortgagor.”
In the opinion this court said:
“We do not think that Ordway can avail himself of the statute of limitations. He claims under a distinct and independent title, in no way derived from the mortgagor. Generally, the plea of the statute of limitations is a personal privilege, and a third party cannot interpose the defense. (Baldwin v. Boyd, 18 Neb. 444, 25 N. W. 580; Wood, Lim., 1st ed., § 41; 10 A. & E. Encycl. of L. 710; 7 Wait, Act. & Def. 236; Waterson v. Kirkwood, 17 Kan. 9.) Walton, the maker of the notes and mortgage, could not successfully plead the statute of limitations, and we do not see by what process of reasoning we could reach the conclu*120sion that Ordway could, even if lie had succeeded to the .right to the land in question through Walton, which he did not; he certainly could obtain no greater right than Walton had. We think the statute can only be set up by Walton, or some one holding under him, and when it is not available for Walton, no other person can take advantage of it. It necessarily follows that because Walton never had the right no other person could avail himself of such right.”
Second: But assuming that Williams may plead the statute, and the mortgagors through Williams, and assuming the record does show by undisputed evidence all the facts stated in the opinion, the question arises, Do these facts standing admitted in the record, as a matter of law, constitute such an acceptance of the relation of principal and surety existing between Williams, the purchaser, and the Mulvanes and Munks, the makers of the notes, by Sedgley, the owner, as to bar her right of recovery as against the makers of the notes ? This precise question has not been before this court for determination. It has been many times decided that had a valid extension of the time of payment been made by the owner of the notes, without the knowledge or consent of the makers, their release from liability would follow. The question now here for determination is a different one. In this case, before the court will be warranted in declaring, as a matter of law, that the relation of principal and surety existing between the mortgagors, the Mulvanes and Munks, and the purchaser of the property, Williams, extended to and became binding upon the mortgagee, Sedgley, there must exist, as a matter of law, a valid contract, by the terms of which the mortgagee agreed to accept the purchaser as her principal debtor and the mortgagors as her sureties only. In the absence of such an acceptance of the existing rela*121tion by agreement on the part of the mortgagee, she had the right to treat both the mortgagors and the purchaser as her debtors, and in the absence of other defenses to have judgment for the debt and decree of foreclosure as against both. Undoubtedly the great weight of authority and the well-considered cases conclusively establish this doctrine. (Jones, Mortg., 5th ed., §§ 741, 742; Shepherd v. May, 115 U. S. 505, 6 Sup. Ct. 119, 29 L. Ed. 456; Cucullu v. Hernandez, 103 id. 105, 26 L. Ed. 322; James v. Day and Close, 37 Iowa, 164; Thompson v. Bertram, 14 id. 476; Corbett v. Waterman, 11 id. 86; Robertson v. Stuhlmiller, 93 id. 326, 61 N. W. 986; Waters v. Hubbard, 44 Conn. 340; Hebert v. Doussan, 8 La. Ann. 267; Spycher v. Werner, 74 Wis. 456, 43 N. W. 161, 5 L. R. A. 414.)
In Shepherd v. May, supra, Mr. Justice Wood, delivering the opinion of the court, said:
“And if Walker had expressly promised May to pay the debt, that would not, without the assent of May, have converted Shepherd from a principal debtor into a surety merely. (Cucullu v. Hernandez, 103 U. S. 105, 26 L. Ed. 322; Rey v. Simpson, 22 How. 341, 16 L. Ed. 260.) The only way in which Walker could become the principal debtor of May, and Shepherd the surety, was by the mutual agreement of all three.”
Justice Miller, in James v. Day, supra, said :
“While upon a sale by Day of his interest in the land to Close, á valid agreement by the latter to pay the entire debt to plaintiffs would create the relation of principal and surety as between Close and Day, yet such agreement could not affect the mortgagees; as to them both Close and Day remain principals. (Corbett v. Waterman, 11 Iowa, 86; Massie v. Mann, 17 id. 131, 135, and cases cited.) Both Close and Day were originally principal debtors. They remain such as to the plaintiffs unless the latter, for a valid consideration, agreed to release Day, or to accept him as a surety only.”
*122The case of Robertson v. Stuhlmiller, supra, is identically parallel with the case at bar. On the 1st of November, 1875, Stuhlmiller executed two promissory notes in the sum of $500, due one and two years from date, secured by mortgage on a city lot. Stuhlmiller conveyed the property to Jacob Coons. In January, 1887, Coons sold the mortgaged property to Chapman, who assumed and agreed to pay the mortgage. In January, 1880, Chapman conveyed the property to Fernbach, who assumed and agreed to pay the mortgage. Fernbach paid the interest on the notes from the year 1880 to the year 1889, and on the 13th day of April, 1888, paid $150, to be applied on the notes. After conveying the property, and before the statute of limitations had run, Stuhlmiller removed from the state, and remained a non-resident at the time action was brought. Robertson, the payee in the notes, brought his action against Stuhlmiller, Chapman, and Fernbach, asking a personal judgment against Chapman and Fernbach upon their assumption, and against Stuhlmiller upon the notes and for a foreclosure of the mortgage. Foreign summons was served on Stuhlmiller in the state of Missouri. He made no appearance. Fernbach and Chapman demurred to the petition, which demurrer was sustained. Plaintiff appealed. In the opinion the court said:
“But it is said that when Anselm Fernbach assumed and agreed to pay the mortgage debt he became as to the plaintiff a principal debtor, and that, as the debt assumed was then due, the statute of limitations commenced to run at that time. The demurrers were not general, but were based upon specific grounds. The theory which they present is that there was a novation by which. Fernbach became the principal debtor and Stuhlmiller a surety only, and the claim that Fernbach was one of two or more principals seems to have been made for the first time in this *123court, in argument. When Fernbach assumed and agreed to pay the mortgage debt, he made it his own, and became the principal debtor, as between himself and Stuhlmillér. Corbett v. Waterman, 11 Iowa, 87. But the relation of Stuhlmillér to the plaintiff depended upon the written agreement between them and, could not have been changed except by an agreement with the latter. Corbett v. Waterman, supra; James v. Day, 37 Iowa, 164; Massie v. Mann, 17 id. 132. The acceptance by the plaintiff of money paid by Fernbach to apply on the notes did not in any manner change the relations of the parties, and nothing which could have had that effect is shown. Therefore, there is no ground for the holding that, as to the plaintiff, Fernbach became the principal debtor, and that, if an action on the notes is barred as to him, it is also barred as to Stuhlmillér. And the same conclusion must be reached if the two are regarded as principal debtors. The fact that one of them continued to be a resident of this state until the right of action was barred as against him would not affect the liability of his coprincipal. Denny v. Smith, 18 N. Y. 567; Cutler v. Wright, 22 N. Y. 476; Caswell v. Englemann, 31 Wis. 98; 13 A. & E. Encycl. of L. 745.”
After holding the action barred as to the personal obligation created by the assumption of the debt as against Fernbach and Chapman, the court proceeded :
‘(But the obligation of Stuhlmillér on the notes is valid, and the lien of the mortgage is still in force. The pleadings show that the plaintiff is entitled to a judgment for the amount of his claim as against the mortgaged premises, and to a foreclosure of his mortgage. The interest of the Fernbach estate is junior to the lien of the mortgage, not because of the obligation of Fernbach to pay the notes, but because the title he acquired was subject to the mortgage.”
Some of the language employed in the opinion in Stove Works v. Caswell, 48 Kan. 689, 29 Pac. 1072, is in conflict with the view here expressed. The lan*124guage there used, however, is purely obiter dictum, and a decision of the principle here under discussion was neither involved in nor necessary to a determination of that case, and the language there used to the contrary should be disapproved.
As no acceptance by agreement on the part of the mortgagee of the relation of principal and surety existing between the mortgagors and the purchaser is shown by the facts conceded to be admitted in the record, Sedgley could not only have commenced her suit against Williams as a principal debtor with the Mulvanes and Munks, as was done, but she might also have prosecuted such suit to judgment, and in the event it was determined from the evidence that a recovery as to Williams on his contract of assumption should not be adjudged on account of the bar of the statute of limitations, her rights as to the remaining debtors, the maker’s of the notes, would remain and in no manner be prejudiced by such detex’mination.
Third: But suppose the facts found to exist are sufficient, as a matter of law, to extend the equitable relation of principal and surety existing between the mortgagors and the purchaser to plaintiff; and that, as a matter of law, it may be said from the facts that the plaintiff recognized and accepted the relations, Is the conclusion reached by the court in this case, that, as the statute of limitations bars a recovery against the purchaser upon his assumption, it also bars a recovery as against the mortgagors and to forclose the mortgage, sound?
The contract of a surety is an absolute promise that he will pay the debt of his .principal. (Campbell v. Sherman, 151 Pa. St. 70, 25 Atl. 35.) It is conceded in this case that a valid debt did exist, for the payment of which both the mortgagors and purchaser were lia*125ble. It is not contended that this debt has been paid or extinguished. It is merely contended that as the statute bars a recovery from the principal the sureties are relieved from their contract to pay. To relieve the sureties from their obligation to pay they must establish one of three facts : (1) That the debt has' been paid or extinguished ; (2) a valid release or discharge ; (3) or the bar of the statute of limitations as to themselves. It is conceded the debt has not been paid. It is also conceded the statute has not run as to the mortgagors, on account of their absence from the state. The fact that the statute bars a recovery as against the principal does not extinguish the debt. Did the failure to bring the action upon the notes and to foreclose the mortgage, until the statute had run in favor of the purchaser upon his contract of assumption, release or discharge the mortgagors or the property ?
It is held in all jurisdictions that indulgence of the principal or mere delay in bringing suit will not discharge a surety. (Barnes v. Mowry, 129 Ind. 568; Wright v. Yell et al., 13 Ark. 503, 58 Am. Dec. 336; Hunt v. Bridgham, 2 Pick. 581, 13 Am. Dec. 458; Newell et al. v. Hamer et al., 4 How. [Miss.] 684, 35 Am. Dec. 415; Martin v. Pope & Son, 6 Ala. 532, 41 Am. Dec. 66.)
A surety is not discharged by failure of the creditor to present the claim to the administrator of the deceased principal within the time allowed by law. (Minter and Gayle v. Br. Bank at Mobile, 23 Ala. 762, 58 Am. Dec. 315; Ashby et al. v. Johnston et al., 23 Ark. 163, 79 Am. Dec. 102; Johnson v. The Planters’ Bank, 4 Sm. & M. 165, 42 Am. Dec. 480.)
In the case of Willis & Bro. v. Chowning, 90 Tex. 617, 40 S. W. 395, it was held that, although a debt *126is barred against the principal, judgment may be entered against a surety if he remains liable thereon; and if he pays the debt a cause of action thereupon accrues in his favor against the principal, though the latter, because of the statute of limitations, was not at the time of such payment subject to an action in favor of the original payee.
In the case of Bull v. Coe, 77 Cal. 54, 18 Pac. 808, it was said :
. “It is well séttled in this state, as elsewhere, that mere delay of the creditor to proceed against the principal would not discharge the surety. (Humphreys v. Crane, 5 Cal. 173; Critzer v. Mills, 9 id. 22; Hartman v. Burlingame, 9 id. 557; Williams v. Covillaud, 10 id. 419; People v. Jenkins, 17 id. 500.) In extension of this principle it was held that the surety was not discharged, even if the delay of the creditor was such that his remedy against the principal became barred by limitation. (Whitney v. Clark, 17 Cal. 407.)”
In an exhaustive opinion, in Sichel v. Carrillo, 42 Cal. 493, the court said :
“The argument is that a mortgage is only an incident to the debt; that when the debt is paid, satisfied, or in any manner extinguished, the mortgage is also discharged or extinguished; that the mortgage cannot exist without a debt to support it, and that the debt, being barred by the statute on failure to present it to the administrator within the ten months prescribed, is extinguished, and the mortgage thereby discharged for the want of a debt to support it. There is, at least, one mistake in this argument in assuming that the statute of limitations extinguishes the debt. It is well settled, with reference to actions for moneys due on contracts, that the statute does not discharge the debt, or in any way extinguish the right or destroy the obligation, but only takes away a remedy. The debt remains unsatisfied and unextinguished. It is a sufficient consideration to support a new promise. (Townsend v. *127Jemison, 9 How. [U. S.] 413; Bulger v. Roche, 11 Pick. 37; Lincoln v. Battelle, 6 Wend. 485; Ang. on Limit. 268, §213.) . . . Thus, if two parties are jointly liable on a demand, and one dies, the demand would undoubtedly be barred as respects the estate of the deceased party by a failure to present the claim within the ten months prescribed; but this would in no respect affect the right of action against the survivor. The debt is not extinguished, paid, or discharged, nor is the cause' of action barred as to the survivor. A payment, or valid release or discharge, or extinguishment of the debt as to the deceased, no matter in what form it might be accomplished, would also be a payment, discharge or extinguishment as to the survivor, because the debt no longer exists. Suppose Mrs. Carrillo had not been the wife of Rains, and, having no interest in the matter herself, had indorsed the notes in suit, intending to be security for their payment; the notes had fallen due, the proper steps had been taken to charge her as indorser, Rains had subsequently died, and the holder had failed to present the notes to the administrator, and the claim had thereby been barred as against the estate, although four years have not elapsed since the making of the notes. We apprehend it would not be claimed that an action could not be maintained against Mrs. Carrillo on her indorsement. The bar did not attach to her contract, and the fact that she was a surety merely would not affect the question. Her contract is still in force. The failure to make the money out of the principal was the result of neglect — mere non-action on the part of the holder. The principal might be involved, and the holder look only to the surety. The surety might at any time have paid the demand and presented the claim herself, and thus protected herself. This would have been her remedy. The non-action of the holder, by which the claim became barred, would not discharge the surety.”
In the case at bar the mortgagors have had their right of action against the purchaser to compel ? per*128formance of his contract of assumption ever since the maturity of the notes, even before payment of the debt by them, unless such right of action is lost by their laches. (Jones, Mortg. §769; Locke v. Homer, 131 Mass. 93, 41 Am. Rep. 199.)
This was their remedy, and they cannot now avail themselves of the plea made. It follows that, even should the equitable relation of principal and surety existing between the mortgagors and the purchaser be properly extended to the mortgagee, and the statute of limitations prevent a recovery against the purchaser, the mortgagors, on account of non-residence from the state, remain personally liable and the property held subject to the lien of the mortgage. (McLane v. Allison, 60 Kan. 441, 56 Pac. 747.)
The proposition of the agent, Mulvane, to accept for his principal a conveyance of the property in satisfaction of the mortgage debt will avail plaintiffs in error nothing in this case. For, should it be held to have been within the scope of the agency and without the statute of frauds, until the proposition made by Mulvane was accepted by performance on the part of Williams, it remained amere naked proposition, revocable at will by the maker. The bringing of the suit before performance was a revocation.
The judgments of the district court and of the court of appeals were right and should be affirmed.
Doster, C.J., and Cunningham, J., concurring in dissenting opinion.