Demai v. Tart, 221 N.C. 106 (1942)

March 18, 1942 · Supreme Court of North Carolina

221 N.C. 106

KATIE LEE DEMAI, Administratrix of the Estate of JESSE B. LEE, SR., Deceased, v. FLONNIE M. TART and MRS. IONAH WILSON, Executrix of JESSE F. WILSON, Trustee, Deceased.

(Filed 18 March, 1942.)

1. Limitation of Actions § 12a—

Notation of part payment entered on a note by the payee after the note has become barred by the statute of limitations is incompetent as a self-serving declaration; but such notation made prior to the bar of the statute is competent as a declaration against interest. However, entry of the date by the payee is no evidence that the notation was made prior to the bar of the statute, but such fact must be established by evidence aliunde, and in the absence of evidence aliunde it is insufficient as a matter of law.

2. Same—

Part payment operating to start the running of the statute of limitations anew against the right of action to foreclose a mortgage or deed of trust, O. S., 437 (3), is any payment on the debt secured by the instrument, and the action to foreclose is not barred within ten years from such payment notwithstanding that the part payment is applied to only one of the notes secured, resulting in the bar of the statute as to an action on the other note.

3. Limitation of Actions § 1—

Our statutes of limitation generally limit the time within which actions may be brought, and thus operate upon the remedy but do not destroy the right.

4. Same—

Trustor made part payment on one of the notes secured by the deed of trust, and an action to foreclose the deed of trust was instituted within ten years thereafter. Held: Although an action on the note not credited with part payment was barred, the debt evidenced thereby was not destroyed, and the proceeds of sale may be lawfully applied to the entire balance of the debt secured by the deed of trust, including that evidenced by the barred note.

Appeals of plaintiff and defendant Flonnie M. Tart from Grady, Emergency Judge, at September-October Term, 1941, of HaRNEtt.

On 14 January, 1928, tbe defendant Tart executed to Jesse B. Lee, Sr., plaintiff's intestate, a deed of trust conveying tbe lands therein described in security for tbe payment of a debt of $2,000.00. Tbe defendant at tbe same time executed to tbe plaintiff’s intestate two promissory notes in tbe sum of $1,000.00 eacb, bearing interest from date, due respectively 13 April, 1928, and 15 December, 1928, wbicb are recited in tbe deed of trust.

Alleging failure to pay tbe notes, and bence breach of tbe conditions of tbe trust, tbe plaintiff, administratrix of tbe mortgagee who bad meantime died, brought this action to recover on tbe notes and foreclose tbe mortgage. Suit was instituted 6 March, 1941.

Tbe defendants admitted the execution of tbe notes and mortgage, pleaded partial payment of tbe note due 13 April, 1928, and pleaded tbe statute of limitations on tbe note maturing 15 December, 1928.

Tbe jury found with tbe defendants as to tbe note maturing 13 April, 1928, and no controversy respecting it is involved in tbe appeal.

On tbe note due 15 December, 1928, there appears tbe following entry of credit, in tbe bandwriting of the now decedent payee: “Paid on this note $2.50 April 20, 1938.”

Being of opinion that tbe endorsement was not sufficient, as there was no evidence aliunde to support it in any aspect, tbe judge gave tbe jury a peremptory instruction to find tbe issue relating to the bar of tbe statute in favor of defendants and denied recovery on tbe note. Tbe form of tbe instruction is, in hac vice, immaterial. Upon instruction tbe jury found tbe action to foreclose tbe mortgage not barred by the statute of limitations. Judgment of foreclosure followed, with provision that tbe proceeds of sale be applied, as necessary, in satisfaction of tbe whole debt, including that evidenced by tbe $1,000.00 note barred by tbe statute. Tbe amount due on this note, without application of tbe statute of limitations, was ascertained by tbe verdict.

Tbe plaintiff appealed, assigning as error tbe instruction given to tbe jury to find that tbe note due 15 December, 1928, was barred by tbe statute, and refusal of recovery thereupon in tbe judgment, supporting these objections by formal exceptions to tbe instruction, to tbe refusal to set aside tbe verdict on tbe appropriate issue, and to tbe signing of tbe judgment wbicb does not specifically decree recovery on tbe note.

Defendant Tart appealed, assigning as error tbe signing of tbe judgment authorizing tbe sale of tbe lands and tbe application of tbe proceeds to the barred note, or tbe debt evidenced thereby. Tbe defendant remained in possession of the lands and was in such possession at tbe commencement of this action.

Tbe appeals are more conveniently considered together.

J. A. McLeod for plaintiff.

I. R. Williams for defendant.

Seawell, J.

The appeals of plaintiff and defendant present two main questions: (a) whether the note due 15 December, 1928, was barred by the statute of limitations as a matter of judicial determination, and (b) whether, upon foreclosure of the deed of trust, the proceeds of the sale may be lawfully applied to the debt evidenced by the barred note.

(1) The first question depends upon the effect of the purported credit endorsement on the note maturing 15 December, 1928.

Much the greater weight of authority of decided cases is to the effect that a credit endorsement in.the handwriting of the payee made upon a promissory note is competent in evidence of the fact of the payment when supported by evidence aliunde that the endorsement was actually made before the bar of the statute fell. Anno., 59 A. L. R., 905. This is put upon the ground that the credit, by reason of the fact that it diminishes the amount due upon the note, is in the nature of a declaration against interest. Goddard v. Williamson, 72 Mo., 131; Wilson v. Pope, 37 Barb. (N. Y.), 321; Williams v. Alexander, 51 N. C., 137; Addams v. Seitzinger, 1 Watts & S. (N. Y.), 243. The holding is otherwise as to such an endorsement made after' the bar of the statute has become complete, since the endorsement would be obviously in the category of a self-serving declaration. Smith v. Simms, 9 Ga., 418; Young v. Alford, 118 N. C., 215, 23 S. E., 973; Bond v. Wilson, 129 N. C., 387, 40 S. E., 182; Concklin v. Pearson, 30 S. C. L. (1 Rich.), 391. Our own Court has long been committed to the majority view. Williams v. Alexander, supra; Woodhouse v. Simmons, 73 N. C., 30; Grant v. Burgwyn, 84 N. C., 560; White v. Beaman, 85 N. C., 3; Young v. Alford, supra; Bond v. Wilson, supra. The fact that the entry itself bears date within the statutory period, without evidence aliunde that the endorsement was actually so made, is not accepted as evidence of the date of the endorsement. Goddard v. Williamson, supra; Grant v. Burgwyn, supra; Mills v. Davis, 113 N. Y., 243, 21 N. E., 68.

The credit of a relatively insignificant amount on a large obligation, close to the time at which the bar of the statute would become complete, is looked upon with suspicion, Chambers v. Walker, 38 S. C. L. (4 Rich.), 548; Merchants & P. Nat'l Bank v. Hunt, 113 S. C., 394, 102 S. E., 720, and presents a circumstance which challenges the soundness of the ruling. But it is still within the range of minor tolerances which are often the price of a rule intended to be of general service. Our courts, while agreeable to the admission of endorsements as evidence of payment, when supported by proper evidence aliunde, have not yet adopted the view that such evidence, when admitted, is given a presumptive effect in the sense that it is in law a prima facie establishment of the fact of payment; and the best considered cases in other jurisdictions regard it as a matter for the jury. Brown v. Hutchings, 14 Ark., 83; Smith v. Simms, supra (9 Ga., 418); Wheeler v. Robinson, 50 N. H., 303; Ward v. Hoag, 78 App. Div., 510, 79 N. Y. Supp., 706; Mills v. Davis, supra (113 N. Y., 243, 21 N. E., 68); Young v. Alford, supra (118 N. C., 215, 23 S. E., 973).

In the case at bar it is not necessary to pass upon the legal effect of the endorsement as evidence of payment, since there is in the record no evidence aliunde as to when the endorsement was made. The court below was therefore justified in holding as a matter of law that the note had been barred by the statute when the present action was instituted.

(2) Under C. S., 437 (3), an action for the foreclosure of a mortgage or deed of trust is barred unless begun “within ten years after the forfeiture of the mortgage, or after the power of sale became absolute, or within ten years after the last payment on the same.” Of significance in the case at bar is the expression “within ten years after the last payment on the same.”

It is admitted that on 21 March, 1931, a payment of $725.83 was made upon the note maturing 13 April, 1928, or at least within ten years from the maturity of the said note. Although this payment was allocated to one of the notes in a series of two evidencing the entire indebtedness, the language employed in the subsection above quoted — C. S., 437 (3) — must be held to refer to any payment on the debt secured by the deed of trust, without regard to its subdivision into notes suitable to the convenience or necessities of the parties. It is only when we seek the forum of enforcement that a distinction arises, and that relates to a distinction between causes of action rather than a difference in the nature of the secured debt.

Unlike the older statutes which created a rebuttable presumption of payment, our present statute limits the time within which actions may be brought and thus operates upon the remedy and not the right. The bar of the statute on a sealed promissory note — C. S., 437 (2) — is of that character, and while it takes away the forum for the enforcement of the note, it does not destroy the debt. See cases cited infra.

A mortgage or deed of trust which creates a lien upon lands and in effect sets them apart in a trust for the payment of a debt with suitable provisions for sale and application of the proceeds is a separable specific agreement and raises an obligation with respect to both the debt and the lands not comprehended in the promissory note given with respect to the same debt but is in addition thereto, and, in the absence of an agreement to the contrary, it is independently enforceable. Capehart v. Dettrick, 91 N. C., 344, 352; Menzel v. Hinton, 132 N. C., 660, 44 S. E., 385. The equitable remedy of foreclosure and execution of the trust is still available, although the legal remedy of personal action on the note is barred. Lewis v. McDowell, 88 N. C., 261; Capehart v. Dettrick, supra; Long v. Miller, 93 N. C., 227; Arrington v. Rowland, 97 N. C., 127, 131, 1 S. E., 555; Overman v. Jackson, 104 N. C., 4, 8, 10 S. E., 87; Woody v. Jones, 113 N. C., 253, 18 S. E., 205; Williams v. Kerr, 113 N. C., 306, 18 S. E., 501; Taylor v. Hunt, 118 N. C., 168, 172, 24 S. E., 359; Hedrick v. Byerly, 119 N. C., 420, 25 S. E., 1020; Menzel v. Hinton, supra; Jenkins v. Griffin, 175 N. C., 184, 186, 95 S. E., 166. In Menzel v. Hinton, supra, the principle was applied to the power of sale, although action upon the mortgage might be barred. This resulted in the enactment of C. S., 2589, which prohibits the execution of the power of sale when a mortgage or deed of trust has become barred. Spain v. Hines, 214 N. C., 432, 434, 200 S. E., 25.

The exceptions disclose no error upon either the plaintiff’s or the defendant’s appeal.

No error.