Dillard v. Farmers Mercantile Co., 190 N.C. 225 (1925)

Oct. 7, 1925 · Supreme Court of North Carolina
190 N.C. 225


(Filed 7 October, 1925.)

1. Bills and Notes — Endorsers—Sureties—Statutes.

Tbe writing of one’s name upon tbe back of a negotiable instrument makes tbe person liable as an endorser, nothing else appearing, O. S., 3044; but where upon the face of tbe note is written that tbe endorsers hereto are bound as sureties, it becomes a question of law for the court, though denied by the pleadings, and the liability of such persons will be that of sureties.

*226a. Same — Limitation of Actions.

Where from the conditions stated upon a negotiable note, the endorsers sign as sureties, a payment thereon of the maker before the same is barred, suspends the running of the statute of limitations as to all within this class, C. S., 416, and a payment of the interest on the note by one of the sureties will repel the bar of the statute as to all of the sureties thereon.

Appeal by W. A. Edgerton and N. E. Edgerton, administrator, from Sinclair, J., at February Term, 1925, of Nash. No error.

Action upon note dated 28 January, 1913, due 1 January, 1914. Defendants, W. A. Edgerton and N. E. Edgerton, administrator, answering the complaint, admit the execution of the note as alleged and rely upon the plea of the statute of limitations as their defense to the plaintiff’s action upon the note. Interest on the note was paid to 1 January, 1922. Issues submitted to the jury were answered as follows:

1. Is the note sued upon barred by the statute of limitations ? Answer: No.

2. Are .the defendants, N. E. Edgerton, administrator, and W. A. Edgerton indebted to plaintiff and if so, in what amount ? Answer: $2,500 and interest from 1 January, 1922.

From judgment upon this verdict against appellants, and by default against the other defendants, the answering defendants appealed to the Supreme Court.

Finch & Vaughan and, Manning & Manning for plaintiff.

Austin & Davenport and S. Brown Shepherd for def&i.idants.


On 28 January, 1913, the Farmers Mercantile Company, Inc., executed its promissory note to plaintiff in words and figures as follows:

“$2,500. Selma, N. C., 28 January, 1913.
“Without grace, on the first day of January, 1914, we the Farmers Mercantile Company, Inc., as principal, and the other endorsers hereto as sureties, promise to pay to Edward Dillard, Spring Hope, N. C., twenty-five hundred and no/100 dollars, negotiable and payable with interest at the rate of six per cent per annum, payable semiannually, for value received, being for money borrowed. All parties to this note hereby agree to continue and remain bound for payment of this note and interest, notwithstanding any extension of time granted to the principal debtor, and notwithstanding any failure or omission to protest this note for nonpáyment or to give notice of nonpayment or dishonor or protest, or to make presentment or demand for payment, hereby expressly waiving any protest and any and all notice of any extension of time or *227of nonpayment or dishonor or protest in any form, or any presentment or demand for payment or any other notice whatsoever.
“Corporate Seal. By Walter G. Ward, Prest

Defendants herein, stockholders of Farmers Mercantile Company, wrote their names on the back of said note as follows: Walter G. Ward, W. A. Edgerton, G. 0. Earp, N. E. Ward and N. E. Edgerton. N. E. Edgerton is dead and the defendant, N. E. Edgerton, his son, has been duly appointed as his administrator.

Interest on this note was paid annually by the Farmers Mercantile Company until 1 January, 1918. On 14 October, 1918, the Farmers Mercantile Company was duly dissolved as a corporation. Interest was thereafter paid on said note by Walter G. Ward and G. 0. Earp, whose names appear on the back thereof, until 1 January, 1922. No other or further payments have been made on said note. Summons in this action was issued 7 June, 1922. Defendants allege that more than three years elapsed from the date the cause of action on the note accrued as to them to the commencement of this action; that no payment made on said note arrested the running of the statute of limitations as to them; and that therefore the action on the note as to them is barred. The contentions upon these allegations are duly presented by exceptions upon) which assignments of error upon appeal are based.

Defendants present, first, for consideration their contention that they are endorsers and therefore liable only secondarily upon the note sued on; plaintiff contends that they are sureties, and therefore liable primarily as makers. Rouse v. Wooten, 140 N. C., 557. The effect of the payments made on the note upon the running of the statute of limitations as to defendants will be determined by their relationship to the note, and the character of their liability.

Defendants placed their names on the back of the note; they are, therefore, nothing else appearing, endorsers and liable on the note only as endorsers.. C. S., 3044. Perry v. Taylor, 148 N. C., 362; Houser v. Fayssoux, 168 N. C., 1; Bank v. Wilson, 168 N. C., 557; Meyers v. Battle, 170 N. C., 168; Barber v. Absher Co., 175 N. C., 602; Gillam v. Walker, 189 N. C., 189; however, on the face of the note, upon the back of which defendants' wrote their names, they acknowledge that they are “endorsers hereto as sureties,” and thus clearly indicate by appropriate, words their intention to be bound, not as endorsers, but as sureties. Their relationship to the note must be determined by their intention at the time they wrote their names upon the note; 3 R. C. L., 1123, secs. 339 et seq.; nothing else appearing to indicate clearly a contrary intention, the place upon which these signatures appear on the note, *228would be conclusive that they intended to become endorsers. C. S., 2998, subsee. 6; tbe words in tbe note, however, indicate clearly an intention to be bound in some other capacity than as endorsers. O. S., 3044. It must be held, in accordance with tbe terms of tbe note, that defendants are sureties and that their rights and liabilities, with respect to same must be determined by tbe law applicable to sureties and not to endorsers. Defendants by their answer to paragraph 4 of tbe complaint, do not admit tbe allegation that they are sureties on said note, but by their admission that they executed tbe note as set out in tbe complaint, present tbe question as to their relationship to tbe note to tbe Court for determination as a matter of law. There was no error in bolding that they are sureties.

It is clear that tbe annual payments of interest on tbe note, made by tbe Farmers Mercantile Company, tbe principal, renewed tbe same to 1 January, 1918, both as to tbe company and as to defendants, who as sureties were liable to tbe plaintiff, payee of tbe note, as makers. C. S., 416. In Houser v. Fayssoux, 168 N. C., 1, Justice Brown says that it is well settled in this State that a payment by tbe principal on a note, before tbe bar of tbe statute, operates as a renewal of tbe debt as to himself and also as to tbe sureties on tbe note; tbe note sued on was therefore extended, as to principal and sureties, to 1 January, 1918.

"What was tbe effect of subsequent annual payments of interest made by Walter G-. Ward and Gr. C. Earp, cosureties with defendants, tbe last payment having been made on 1 January, 1922?

In Barber v. Absher Co., 175 N. C., 602, Justice Allen says: “It is also settled th^t a payment, to have tbe effect of repelling tbe statute of limitations must be made by one in tbe same class and that a payment by tbe maker does not continue tbe right of action against tbe endorser.” Tbe relation of an endorser to tbe note differs from that of a surety, tbe liability of tbe latter being primary, that of tbe former secondary. Defenses available to an endorser, are not available to a surety, tbe distinction being founded upon tbe difference in their liability. As between tbe principal and sureties, and as between cosureties there is a community of interest and a common obligation. Tbe right of a surety who has paid tbe debt to call upon tbe cosurety for contribution is upheld upon this principle. Gillam v. Walker, 189 N. C., 189. Payment by one surety on tbe debt for which there is a common liability, with right of contribution, before an action on tbe debt is barred, renews it as to cosureties. O. S., 417. Tbe note sued on was extended as to all tbe defendants to 1 January, 1922, by tbe payments made thereon by Ward and Earp.

There was no error in tbe instruction of bis Honor upon tbe first issue. Defendant’s assignments of error cannot be sustained. There is

No error.