Davis v. Alexander, 207 N.C. 417 (1934)

Dec. 12, 1934 · Supreme Court of North Carolina
207 N.C. 417

W. L. DAVIS, Executor of J. M. DAVIS, Deceased, v. F. B. ALEXANDER, D. E. TURNER, and J. W. VAN HOY, Administrator of C. M. ALEXANDER, Deceased.

(Filed 12 December, 1934.)

1. Bills and Notes O a — As against payee, person signing note as mater may show he signed same as surety to knowledge of payee.

As between the payee of a negotiable note and the signers thereof, a person signing his name on the face of the note may prove by parol evidence that to the knowledge of the payee he signed the same as surety and not maker, 0. S., 2977, 3041, and the answer in this case, broadly construed, is held sufficient to allege the indispensable allegation that plaintiff payee knew that defendant signed the note as surety.

S. Limitation of Actions A c — Action against surety on note is barred in three years.

An action on a note under seal against a surety thereon is barred after the lapse of three years from the maturity of the note, or after three years from the expiration of an extension of time for payment binding on the surety. O. S., 441 (1).

3. Limitation of Actions O a — Payment by maker after action against surety is barred will not repeal bar of statute as to surety.

After the statute of limitations has barred the right of action by the payee of a negotiable note against the surety thereon, payment on the note by the maker thereof operates as a renewal only as to the maker, and does not repeal the bar of the statute as to the surety. O. S., 417.

4. Limitation of Actions E c—

Where defendant pleads the statute of limitations, the burden is on plaintiff to show that his action is not barred.

*418Appeal by D. E. Turner from Harding, J., at May Term, 1934, of Ibedell.


The plaintiff, executor of J. M. Davis, deceased, brought this action against the defendants to recover $1,008.00, with interest from 1 January, 1933, on the following note: “800.00. Mooresville, N. O., 1 January, 1923. Twelve months after date, without grace, for value received, we, or either of us, promise to pay to the order of O. M. Davis, Executor J. M. Davis, eight hundred and no/100 dollars, negotiable and payable at the First National Bank of Mooresville, N. C., with interest at six per cent per annum until paid. The drawers and endorsers severally waive presentment for payment, and notice of protest, and nonpayment of this note, all defenses on the ground of any extension of the time of its payment that may be given by the holder or holders to them, or either of them. F. B. Alexander (Seal), C. M. Alexander (Seal), D. E. Turner (Seal).

“No. Due 1 January, 1924. P. O., Mooresville, N. C.” The following credits appear on the back of said note: “Received from F. B. Alexander interest to date, 1 January, 1924. Received interest to date, 1 January, 1925. Received interest from F. B. Alexander. Interest on note for 1926. Received of F. B. Alexander $50.00 Fifty Dollars on interest 3-3-30. Received $30.00 on interest 2-3-31.”

The issue submitted to the jury and their answer thereto was as follows: “Are the defendants indebted to- the plaintiff, and if so, in what amount? A. $1,008.00, with interest from 1 January, 1933.”

The court below charged the jury, in part, as follows: “The plaintiff has offered the note in evidence, together with the credits thereon. The defendant has pleaded the statute of limitations. Now counsel for the defendant tell the court in the trial of this case, at the conclusion of the evidence, that if the plaintiff’s right to recover against the defendant is not barred by the three-year statute of limitations, that you may answer the issue, $1,008.00, with interest from 1 January, 1933. The defendant has offered no evidence; it is not required to do so; therefore, the court charges you, gentlemen of the jury, upon all the evidence, if you believe it to be true, it would be your duty to answer the issue, $1,008.00, with interest from 1 January, 1933.”

The material exceptions and assignments of error made by defendant D. E. Turner are to the judgment as signed and overruling his demurrer to the evidence and for motion for judgment as of nonsuit at the close of plaintiff’s testimony. The defendant D. E. Turner duly made exceptions and assignments of error, and appealed to the Supreme Court.

Burén Jurney for plaintiff.

Grier, Joyner & Hardness for JD. H. Turner.

*419ClaeksoN, J.

The defendant D. E. Turner introduced no evidence, and at the close of plaintiff’s evidence made a motion in the court below for judgment as in case of nonsuit. C. S., 567. This motion was overruled, and in this we think there was error.

The note in controversy was dated 1 January, 1923, due at twelve months, payable to plaintiff’s testator, under seal and signed by E. B. Alexander, C. M. Alexander, and D. E. Turner, for $800.00.

E. B. Alexander paid the interest up to 1 January, 1927, and as to these payments being'made within three years, there is no question by defendant Turner as to the statute of limitation. The defendant Turner (1) contended he was surety on the note under seal. (2) As to him, it is barred by the three-year statute of limitation. The credit of $50.00 on the note, 5 March, 1930, was over three years from the previous payment of the note on which the interest was paid to 1 January, 1927. The present suit was instituted on 12 January, 1933.

The questions involved: Was the note under seal signed by D. E. Turner, under the facts and circumstances of this case, barred by the three-year statute of limitations? We think so.

Did a payment made by the maker of a note under seal, after three years, operate as a renewal to a surety on the note? We think not, under the facts and circumstances of this case.

N. C. Code, 1931 (Michie), sec. 2977, is as follows: “The person primarily liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are secondarily liable.”

C. S., 3041, is as follows: “The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to endorse.”

In Howell v. Roberson, 197 N. C., 572 (573-574), it is written, citing numerous authorities: “Under the law in this jurisdiction, all three who signed the note were joint makers and may be so held by the payee or holder of the note. C. S., 2977, 3041. As among themselves, they may ordinarily show by parol their respective liability to each other on the note. Coprincipals and cosureties are presumed to assume equal liability, but this presumption may be rebutted by parol evidence.” Trust Co. v. York, 199 N. C., 625; Stanley v. Parker, ante, 159.

In Williams v. Glenn, 92 N. C., 253 (255-256), is the following: “In Robinson v. Lyle, 10 Barb. (N. Y.), 512, it was held that ‘as between the makers of a promissory note and the holders, all are alike liable, all are principals; but as between themselves, their rights depend upon other questions, which are the proper subject of parol evidence. On the trial of an action, therefore, between the signers of such a note, it is right to receive extrinsic proof to show which of the parties signed the *420note as principal and which as sureties.’ To' tbe same effect is Sisson v. Barrett, 2 Comst., 406.

“Tbe distinction is tbis: As between tbe makers and payee of a note, it is made for tbe purpose of being tbe proof of tbe contract, and is tbe exclusive proof of tbe contract, and cannot be contradicted by extrinsic proof. Tbe only exception to tbis rule is in tbe class of cases like Welfare v. Thompson (83 N. C., 276), and tbe other cases of tbat character cited above. But as between tbe signers, it was not made or intended to be exclusive proof of tbe agreement or relation between them. Tbat may be shown, by parol proof. . . . Tbe fact is not overlooked tbat tbe decisions cited are mostly upon matters arising upon promissory notes. But tbe same reasons apply with equal force to sealed instruments.” Citing numerous authorities, 65 A. L. R., 823.

In Welfare v. Thompson, supra, at p. 278, citing authorities, tbe .exception is as follows: “We believe it is conceded tbat whenever it is proposed to prove tbat a copromisor or coobligor to' a note or bond is surety only, tbe fact not appearing upon tbe face of tbe instrument, it is competent to show by parol tbat fact, and tbat tbe creditor knew at tbe time be received tbe note tbat be was surety.” Hunter v. Sherron, 176 N. C., 226 (228); Kennedy v. Trust Co., 180 N. C., 225 (229); Haywood v. Russell, 182 N. C., 711 (713); Chappell v. Surety Co., 191 N. C., 703 (708); Taft v. Covington, 199 N. C., 51; Barnes v. Crawford, 201 N. C., 434; Furr v. Trull, 205 N. C., 417.

Tbe periods provided for tbe commencement of actions relative to tbis controversy are as follows: C. S., 437, within ten years. (2) “Upon a sealed instrument against tbe principal thereto.”

C. S., 441, is as follows: “Within three years an action — (1) Upon a contract, obligation, or liability arising out of a contract, express or implied, except those mentioned in tbe preceding sections.”

In an action between sureties to a note, as between themselves, tbis can be shown by parol. Gillam v. Walker, 189 N. C., 189. So as to an endorser, Dillard v. Mercantile Co., 190 N. C., 225, in these cases, tbe three-year statute of limitation applies. See Waddell v. Hood, Comr., ante, 250.

Tbe present action is brought by plaintiff against tbe makers of tbe note under seal. Tbe contract as written must ordinarily abide between tbe parties, but it can be shown by parol tbat a maker was a surety, known to tbe payee.

In tbe answer of defendant D. E. Turner it may be broadly construed tbat be set up tbe fact tbat plaintiff’s testator knew tbat be signed tbe note as surety, tbat allegation is indispensable. Manley v. Boycott, 75 E. C. L., Rep. 45, cited in Barnes v. Crawford, supra, at pp. 437-8.

In plaintiff’s reply be says: “Tbat tbe defendant D. E. Turner, when be signed said note as surety for E. B. Alexander, expressly waived all *421defenses on tbe ground of any extension of tbe time of tbe payment of said note tbat might be given by tbe bolder or holders to tbe maker, or either of tbe parties to said note, as fully set forth on tbe face of said note.” Tbe payments were made by F. B. Alexander. There is no evidence of any definite extension of time. Tbe defendant introduced no evidence.

Tbe plaintiff introduced tbe note under seal, and also tbe following: “Tbat on or about 1 July, 1923, tbe defendant F. B. Alexander, being indebted to tbe estate of J. M. Davis, deceased, in tbe sum of $800.00, made, executed, and delivered renewal note to tbe said O. M. Davis, one of tbe executors in tbe estate of J. M. Davis, deceased, bis promissory note under seal, and due and payable twelve months after date, drawing interest at tbe rate of six per centum per annum from date until paid; tbat said note was signed on tbe face of said note under tbe principal’s name by O. M. Alexander and D. E. Turner, as sureties.

“This portion of paragraph one of tbe defendant’s further answer and defense: ‘That be signed tbe note set out in tbe fifth paragraph of tbe complaint as surety for tbe said F. B. Alexander.’ ”

N. C. Code, 1931 (Micbie), sec. 417, is as follows: “No act, admission, or acknowledgment by partner after tbe dissolution of tbe co-partnership, or by any of tbe makers of a promissory note or bond after tbe statute of limitations has barred tbe same is evidence to repel tbe statute, except against tbe partner or maker of tbe promissory note or bond doing tbe act or making tbe admission or acknowledgment.”

N. C. Practice and Procedure in Civil Cases (McIntosh), sec. 134, pp. 126-127, is as follows: “Where there are several persons bound for tbe same obligation, as partners, surety, and principal, or joint debtors, and a new promise or payment is made by one, tbe rule as to its effect upon tbe liability of tbe others has not been uniform. In some cases it has been held tbat it would affect only tbe person making it; in others, tbat it would affect all; and in others, tbat it would affect all only when made while tbe obligation was still in force.

“In this State it was held tbat, in tbe case of partners and other joint obligors, tbe act of one would bind all, until tbe act of 1852, which is also tbe present law, provided tbat no act or acknowledgment of a partner after tbe dissolution of tbe partnership, or of any of tbe makers of a note or bond after tbe statute of limitations has barred tbe same, shall be evidence to repel tbe statute, except as against tbe person doing tbe act or making tbe acknowledgment. Under this statute, no new promise or a payment by a partner, after tbe dissolution of tbe partnership, will have any effect to bind the other partners.

“As to coobligors on a note, it was held tbat a payment by one before tbe debt was barred would extend tbe time as to tbe other, but a promise *422to pay would not have that effect. This rule as to payment has been applied to all coobligors who come within the same class as original makers of the instrument, having a community of interest and a common obligation. A payment by a principal or surety, before the debt is barred, will continue the obligation as to both. But the rule would not apply to obligors in different classes, as endorsers and makers. Under a former statute, endorsers were made liable as sureties, and a payment by the principal extended the liability of the endorser; but this has been changed by the Negotiable Instrument Law, and a payment by the principal will not affect the endorser.” Houser v. Fayssoux, 168 N. C., 1, is not contrary to the position here taken.

Where defendant pleaded the statute of limitations, plaintiff had burden to show that action was timely commenced or otherwise was not barred. Marks v. McLeod, 203 N. C., 257; Moore v. Charlotte, 204 N. C., 37; Wilkes County v. Forester, 204 N. C., 163; Drinkwater v. Western Union Tel. Co., 204 N. C., 224; Aldridge v. Dixon, 205 N. C., 480.

From the statute above quoted, C. S., 417, a payment made by the maker of the note under seal, E. B. Alexander, after the bar of the statute operates as a renewal as to himself only. It was alleged by plaintiff, and admitted, that D. E. Turner was a surety on the note under seal, and known to plaintiff's testator, therefore the three-year statute was applicable. See Bank v. Hessee, ante, 71; Piano Co. v. Loven, ante, 96.

For the reasons given, the judgment of the court below must be