Ford v. Schall

221 P. 1052, 110 Or. 21, 1924 Ore. LEXIS 175

• Court: Oregon Supreme Court
• Decided: January 14, 1924
• Status: Published

Opinions

BROWN, J.

1. It is familiar law that the plaintiff must recover, if at all, upon the cause of action averred in his complaint, and not upon issues without the record; Boothe v. Farmers’ Nat. Bank, 47 Or. 299 (83 Pac. 785); Eastman v. Jennings-McRae Logging Co., 69 Or. 1 (138 Pac. 216, Ann. Cas. 1916A, 185); Portland v. O’Neill, 98 Or. 162 (192 Pac. 909).

2. The plaintiff’s evidence establishes that the defendant herein, who is sued severally, received no part of the $1,500 evidenced by the promissory note. Hence, defendant asserts that this action cannot be successfully prosecuted for the reason that the testimony shows him to be an accommodation maker, and known to be such by the payee of the note, and entitled to be released under the provisions of Section 7912, Or. L., reading:

“A person secondarily liable on the instrument is discharged (1) by any act which discharges the instrument; (2) by the intentional cancellation of his signature by the holder; (3) by the discharge of a prior party; (4) by a valid tender of payment made by a prior party; (5) by a release of the principal debtor, unless the holder’s right of recourse against the party secondarily liable is expressly reserved; (6) by any agreement binding upon the holder to extend the time of payment, or to postpone the holder’s right to enforce the instrument, unless made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved.”

This section of the statute does not release either of the joint makers of the note referred to because of the institution of this several action, or for any other reason of record. The defendant is in no way affected by the provisions of that section of the Code, for—

“As joint and several obligations involve separate obligations on the part of each obligor, a judgment in favor of or against one is no bar to an action against another. Indeed, the plaintiff may simultaneously bring separate actions against each of the obligors, but not a joint action against any number less than all.” 1 Williston on Contracts, §328.

To similar effect, see Sears v. McGrew, 10 Or. 48; Noble v. Beeman-Spaulding-Woodward Co., 65 Or. 93 (131 Pac. 1006, 46 L. R. A. (N. S.) 162).

3. The defendant, for a defense, pleads the protection afforded by the statute of limitations.

Debts are not paid by the statute of limitations, but the effect of the statute is to bar a remedy for the collection thereof.

We have seen that the defendant, answering, asserts that his comaker had made no payments of interest or principal upon the obligation sued upon, within six years prior to the commencement of this action, and that the defendant had never made any payments thereon.

In early times, the statute of limitations was looked upon with disfavor by the courts, and when the. slightest acknowledgment of the existence of an obligation was made by the debtor he was deprived of the shield of protection provided by the statute.

“Even the courts of law resorted to a species of artifice to exclude its operation. * * But the judicial attitude of recent years is rather in favor of the statutes of limitations than otherwise, since they are considered as statutes of repose, and as affording security against stale claims.” 17 R. C. L., Limitations of Actions, § 30.

Because of a statute peculiar to our own state, the decisions of other jurisdictions are not of great assistance in the determination of this cause.

Under the holdings of this court, the statute of limitations, pleaded as a defense by the defendant, cannot avail the defendant anything because of the provisions of Section 25, Or. L., reading':

“Whenever any payment of principal or interest has been, or shall be, made upon an existing contract, whether it be bill of exchange, promissory note, bond, or other evidence of indebtedness, if such payment be made after the same shall have become due, the limitation shall commence from the time the last payment was made.”

In actions and suits against joint makers of promissory notes, it has been held a number of times by this court that a payment by one joint obligor will continue the liability or right of action thereon as against all of the joint obligors: Partlow v. Singer et al., 2 Or. 307, 310; Sutherlin v. Roberts, 4 Or. 378; Dundee Mtge. & Trust Inv. Co. v. Horner, 30 Or. 558, 561 (48 Pac. 175); Smith’s Estate, 43 Or. 595 (73 Pac. 336, 75 Pac. 133); Sheak v. Wilbur, 48 Or. 376 (86 Pac. 375, 11 Ann. Cas. 58); Scott v. Christenson, 49 Or. 223 (89 Pac. 376, 8 L. R. A (N. S.) 1066); Kaiser v. Idleman, 57 Or. 224 (108 Pac. 193, 28 L. R. A. (N. S.) 169); McLaughlin v. Head, 86 Or. 361 (168 Pac. 614, L. R. A. 1918B, 303). The doctrine of these cases is to make the fact of part payment the test for ascertaining whether the action or suit is barred in cases to which it applies, and if it is not barred, the action, then, is based, not on a new promise arising from the fact of part payment, but upon the original promise.

In many other jurisdictions, a payment or promise to toll the statute of limitations is treated as a new promise. A pertinent observation is made by Freeman, in a note, 102 Am. St. Rep. 752:

“The statutes of limitation have always been a most fruitful source of doubt and discussion, and the decisions in regard to them have always been more or less conflicting. Hence, whenever it has been found that the question presented in the particular case under consideration has been settled by the adjudications of the appellate court of the state wherein the case is presented, those adjudications are deemed controlling, regardless of the character of the adjudications elsewhere.”

It has been written by a text-writer that:

“An acknowledgment by a joint debtor does not remove the bar of the statute as to his codebtor. The promise of one of several joint obligors cannot avail to revive as against the others a cause of action barred by the statute, or to suspend the running of the statute * * .” 1 Wood on Limitations (4 ed.), § 81d (2).

“Except in the four states already referred to (one of which is Oregon), the doctrine in reference to joint debtors — except partners — may be said to be, that one codebtor can neither suspend nor remove the statute bar by an admission of, or promise to pay, the joint debt, nor by partial payment thereof, out of his own funds, without the direction, assent, or subsequent ratification of his codebtors.” 2 Wood on Limitations (4 ed.), § 287.

In the case of Partlow v. Singer et al., supra, the plaintiff commenced an action on a promissory note executed by defendants to him on April 1, 1859. The complaint averred a payment of $10 on the note March 25, 1861. The suit was filed March 25, 1867. It was defended upon the grounds that the action had not been commenced against the defendants Charman and Warner within the time limited by law. It was admitted by both parties that the payment mentioned in the complaint was made by the defendant Singer without the knowledge or consent of the other defendants Charman and Warner, or either of them. It was urged by the defendants, that a payment by one joint, or joint and several, maker of a promissory note, and indorsed upon the obligation, did not, in any way, affect the other makers. Decisions from other jurisdictions were cited, which strongly supported the defendants’ contention. The court, speaking through Mr. Justice Boise, observed:

“It has been strenuously urged in the argument that our statute can be so construed as not to overthrow the doctrine, now so well established by the weight of modern authority, ‘that a promise or payment by one joint contractor does not bind his co-contractors so as to revive their liability’; and this is the sole question here. This requires an examination of Section 25 * * of the Code * * .

“In this case, the note was due at the time of the payment. The statute is silent as to the several liability of the party making the payment, and any obligor to a note may properly make a payment on it; and, as the statute fixes the time when the limitation shall commence, we think it was the intention of the legislature to revive the old rule, reviving liability as to all on a payment made by one of severai joint debtors. We do not see how any other construction could be put upon it without violating the ordinary interpretation of language.

“Ordinarily, the statute begins to run when the note is due; in this case, the statute fixes the time at the date of the last payment, and such plain language can have no other signification. With the same statute, such is the rule in Minnesota (9 Minn. 13).”

The Minnesota statute was afterwards repealed. See Willoughby v. Irish, 35 Minn. 63 (27 N. W. 379, 59 Am. Rep. 297).

This construction, placed upon the foregoing section of the Code by this court, has never been changed, but, to the present time, it has often been followed and cited with approval by the court that rendered it.

The effect of Section 25 was next before this court in the case of Sutherlin v. Roberts, supra, involving a mortgage foreclosure. It contains the fullest discussion of the meaning and history of Section 25 found in any of the cases contained in our reports. Among other things, the court said:

“The most prominent feature of what is new in our statute is, that by Section 25, part payment prevents the time limitation from commencing to run; whereas, under previous statutes and adjudications, the time of limitation actually ran against the debt, and part payment was held to be evidence of a new promise which, being supported by the original consideration, became the basis of a new cause of action * * . It needs but a cursory examination of the cases relating to the effect of part payment under former statutes, to perceive that most embarrassing complications encumbered the subject when our statute was being enacted; a condition of the law which would naturally create a desire to substitute more simple rules for determining the liabilities of parties. By referring to the review of Whitcomb v. Whiting, above cited, it will be seen that the subject had not only become extremely complicated, but that there were numerous points still involved in doubt. * * Conflicting decisions on many of these and on other similar practical questions rendered this subject an exceptional field of unsettled disputes * * .

“The express words of the statute make the fact of the payment the test for ascertaining’ the period within which an action may be commenced on the original promise or cause. The fact of payment being made the test for determining when the period commences to run, the theory of requiring a new promise or of founding an action on a presumed new promise is abandoned, and the new promise is no longer the foundation of the plaintiff’s right of action. * * By the words of the act, ‘the limitation shall commence from the time the last payment was made.’ ”

In Creighton v. Vincent, 10 Or. 56, 57, the court, in referring to Section 25, said:

“It refers only to payments made on contracts before the statute has run against them, and fixes by such payment a new date from which the limitation of actions thereon commences to run, de novo.”

It is said in Dundee Inv. Co. v. Horner, supra:

“Its effect (Section 25) is to make the fact of such part payment operate as a continuation of the original promise, while, under the rule prevailing elsewhere, the payment is only evidence of a new promise, which, being supported by the original consideration, becomes substantially the basis of a new cause of action: 1 Wood on Limitations, 287. In other words, under the statute, the payment prevents any interruption of the original obligation. It simply fixes the time when the statute commences to run, and does not operate by means of a new promise to take a case out of a statute which is already running at the time the payment is made. At least this is the effect of the construction put upon the statute by the adjudications of this court, and it has therefore been held that payment by any person liable, directly or in a representative capacity, will keep the debt alive as to all persons liable thereon, whether such payment was made by their authority or not.”

Again, in Smith’s Estate, supra, we have:

“In this state a payment by one joint maker of a promissory note before the statute of limitations has fully run will continue the liability or right of action thereon as to all, its effect being to continue the original promise.”

In Sheak v. Wilbur, supra, the court said:

“The effect of a part payment is regulated in this state by a statute essentially different from that of any other state except perhaps Montana: §§ 24, 25, B. & C. Comp. This statute (Section 25) has repeatedly been before the court for consideration, and the doctrine was early announced that the payment by a joint maker * # will keep the debt alive as to his co-obligors.”

From Scott v. Christenson, supra, we carve:

“The rule is settled in this state that a payment of a part of a joint obligation by a maker thereof, or by his agent or legal representative, revives it as against all persons who were liable thereon, though made without their knowledge or consent.”

In Kaiser v. Idleman, supra, the court wrote:

“In this state a part payment continues and keeps alive the original promise.”

See, also, McLaughlin v. Head, supra.

This case presents a principle of law of very frequent application in the transaction of business, and one which has been acted upon for a long course of time. It is always unsafe to depart from the settled law upon some theory of our own notion of justice in a given case.

Each, of the makers of the note involved herein promised to pay Ford his $1,500, with interest. Every payment of interest on that note, made by King, innred to the benefit of Schall, in this: that it reduced his obligation to Ford in the amount paid.

Defendant asserts, in effect, that it is unfair for the plaintiff to maintain his action against Schall alone when Schall, well known to plaintiff, never received a cent of the $1,500 loaned to King. However, Section 25, as interpreted by the court, was established law and binding upon Schall when he signed the note. He was bound to know that, in the event of court action the plaintiff had his choice of remedies; that is to say, he had the lawful right to sue both makers jointly, or to sue each, or either, severally. The plaintiff chose to sue Schall severally. It was the right that the law gave him, and one that we cannot, if we would, abridge. Schall promised to pay the note, either severally or jointly. He is sued upon his own contract. Defendant’s relief must come from King, not from Ford, who parted with his money on the strength of the joint and several promises contained in the writing. It follows that the court committed prejudicial error in allowing defendant’s motion to strike from the record the evidence of King’s payments of interest on the note. As a consequence, the findings and conclusions of the court, based upon a record from which the evidence of those payments was excluded, were erroneous. The statute of limitations had not run, because King’s payments preserved the life of the note.

In the statement we set out the record relating to the effort made by plaintiff to amend his complaint.

“The court may, at any time before trial, in furtherance of justice, and upon such terms as may be proper, allow any pleading or proceeding to "be amended by adding the name of a party, or other allegation material to the cause; and in like manner and for like reasons it may, at any time before the cause is submitted, allow such pleading or proceeding to be amended, by striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect, or when the amendment does not substantially change the cause of action or defense, by conforming the pleading or proceeding to the facts proved.” Section 102, Or. L.

4. Where the opposing party is not misled and it is in the interest of justice, the above provision of our Code should be liberally construed.

This court has held many times that the exercise of the power conferred by the quoted statute is within the sound discretion of the court, and that the appellate court will never reverse the judgment of the trial court except for an abuse of the conferred discretion.

5. The trial court properly held that it was unnecessary to amend the complaint. The complaint set out a joint and several note, bearing the names of King and Schall. It did more. It alleged payments of interest within the period of time fixed by the statute of limitations and within six years prior to the commencement of the action. The defendant’s answer treated the note as joint and several, and the court found that it was the joint and several note of King and Schall.

Because of the errors hereinbefore noted, growing out of the court’s order striking competent evidence from the record, this cause is reversed and remanded.

Reversed and Remanded.

Mr. Justice Burnett did not participate in the consideration of this case. For the petition, Mr. W. H. Brooke, Messrs. Gallagher & Kester and Mr. J. W. McCulloch. Contra, Mr. Wm. E. Lees and Mr. B. W. Swagler.