Smith v. Ryan

The question in this case is, whether the statute began to run from the time the notes were transferred, or from the time of their payment. The referee has found the later period, regarding the payment of the notes as a payment by the defendant, so as to imply a new promise at that time.

It does not seem to me to be of any importance, so far as it affects the implied new promise, whether the plaintiffs received the notes in or as payment of the antecedent indebtedness, or merely as security for its payment. The transfer of a security by the debtor to be applied upon his debt, would imply a new promise, as well as an actual payment on account. But the implication would arise at the same time ; that is, by the act of transfer or payment. "

In this case, the last act of the defendant was the transfer of the securities, more than six years before suit brought; and the implication which is raised of a new promise is, not by the delivery, but by the subsequent payment of the notes by the makers.

It is not claimed that the defendant directed, or was even privy to the payment. But the payment was by third persons, of their own obligation ; the payment of which to the plaintiffs, as the lawful holders, the law required. This, in the view of the referee, was a payment by the defendant.

To make a part payment evidence of a promise to pay the balance, it must occur under such circura *497stances as are consistent with an intent to pay such balance (Miller v. Talcott, 46 Barb. 167). Actual payment by a debtor, or by his authorized agent, is consistent with such an intent. It is such a recognition of the debt as will authorize the assumption of an intention to pay the balance.

But when the payment is not by the debtor, but by a third person, his authority, derived from the debtor, to bind bis principal to a new promise by implication from the fact of payment, must distinctly appear, and can not be inferred from the payment alone (Read v. Hurd, 7 Wend. 408).

To make the payment of the notes a payment by the defendant, it must be assumed that the makers were acting under the authority, or by the direction of the defendant. There was no such express authority or direction in this case; and it can be implied only from the obligation of the makers to pay a debt which the defendant had parted with by transfer to the plaintiffs, and which at the time of its payment belonged absolutely to his creditor.

An implication of an authority to the makers of the notes to make the payment on behalf of the defendant, must have arisen, if at all, at the time of the transfer.

The transfer might be construed into a direction to the makers to pay the amount to become due upon the notes to the plaintiff. But such direction could not of itself continue until the maturity of the note, so as to make the payment such an act of the defendant as would authorize, at that time, a new promise to pay. In Creuse v. Defignoiux (10 Bosw. 122), the court say: “An agent can not bind his principal by an implied promise made within six years, where the authority to make it was more than six years before. The statute would commence running from the time the authority was given, not from the time the agent made the new promise.”

*498In Pickett v. Leonard (34 N. Y. 175), the assignee of a debtor under a general assignment for the benefit of the debtor’s creditors, made a payment out of the assigned property to the creditor. Within six years thereafter, the debtor was sued for the balance of the debt. It was held that such payment did not take the case out of the statute. By virtue of the assignment the creditor became entitled to receive, and the assignee was bound to pay. But there the obligation ceased. The assignee was not the agent of the assignor for any purpose other than to pay his debts, and could not, either expressly or impliedly, make for him a new promise. Justice Hurt says: “ The assignor places his property in the hands of the assignee for the purpose of paying his debts, who, from the proceeds, pays a creditor a part of his debt; and this is interpreted into saying, ‘My assignor is willing to pay the residue of your debt, and on his behalf I promise you that he will do so.’ The assignor might well answer, ‘ I have given no such authority and made no such contract.’ ”

It seems to me the cases are not distinguishable. The transfer of property in trust to pay debts generally, is the same as the transfer to pay a single debt, and the effect of the payment must, therefore, be the same. But no more in the one than in the other, is the person making the payment the agent of the debtor, so that he can bind him by a promise. Nor is the authority to make the payment less in one case than in the other.

How, then, can the payment of the note be construed into a promise to pay the remainder of the debt ?

In Read v. Hurd (supra) one Skiff being indebted to Hurd, the maker of a note, made a payment of the amount of his debt to the plaintiff, to be applied upon the note, and it was endorsed thereon. Hurd was not present, nor did he request the payment. It was held *499that it was not a payment by the defendant, and that no new promise could be implied from it.

There was some difference in the facts in the case of Harper v. Fairly (53 N, Y. 442), which the respondent’s counsel claimed distinguished it from the case now before us. In that case the creditor retained the transferred note for a number of years, receiving the interest, but the principal was not paid until several years after the transfer. This fact is alluded to in the opinion more, I think, to give emphasis to the principle decided, than as constituting any essential element in it. The court had charged the jury that the payments made by the maker of the note had the same effect to take the case out of the statute, as if made by the defendant. In holding that to be error, the character and not the time of payment, was made the essence ; and the court say that the reason that it is so is, that a part payment is an acknowledgment by the debtor of his liability for the whole demand. But to bring a case within the reason of the rule, the part payment must have been made by the party to be charged with the effect of it, or an agent authorized thus to charge him. After citing Pickett r. Leonard (supra) and other cases in support of the rule, the court continues to say, “The payment in the present case was not made by the debtor, nor with his knowledge, but by one whose obligation had been transferred several years previously to the creditor as security for the debt.” Then alluding to the payment long after the maturity of the note, they proceed, “ There could consequently be no implied authority to make the payment at the time it was made.” These latter words, as I have already said, emphasize the rule and forcibly illustrate its propriety, but do not confine the principle to a payment made long after the maturity of the transferred security. There can be no difference. It is the payment, and not the time of the payment, *500from which the new promise is to be implied. Laches or delay can not change the rule. If the payment is authorized, it must be authorized when it is made, and the time is not essential.

The new promise must recognize and apply to the old debt, and the transaction must be such, that it can be fairly inferred from it that the defendant intended to pa.y the residue.

In the language of Harper v. Fairly (sup.) “it is impossible to spell out of the transanction any new promise of the debtor, cotemporaneous with the part payment, to pay the residue of the debt.”

An implied promise, like an express promise, must not only be an admission of the existence of the debt, but also a recognition of a liability to pay it; and no other or greater effect can be given to a part payment, than that from it a new promise containing all the elements above stated may be implied.

There is no doubt that when the defendant transferred the notes to the plaintiff, that act could have been construed into a new promise. It admitted the existence of the debt, and was a recognition of the defendant’s liability to pay it. And from that time the statute would have began to run. And that is so whether the notes were taken in actual part payment, or as security for the part payment of the debt (Turney v. Dodwell, 24 Eng. L. & Eg. 92).

Notes and bills, when received from a creditor upon antecedent indebtedness, are never a payment, unless expressly made so ; but the effect upon the statute is the same. Hence in the case just cited, it was held that the word “ payment” must be taken in its popular sense, and to exclude the species of payment in question. In this view the court say the acknowledgment of liability as to the remainder of the debt is not altered by the fact of the notes not being paid. That the acknowledgment is from the delivery of the notes, *501and that such delivery is a sufficient acknowledgment.

Suppose the notes transferred had not been paid* would the plaintiff have conceded that the transfer was not a payment % I think not. Then if the delivery of the notes was, to save the statute, the payment, how can it be claimed that there was another payment at a subsequent day, which would also save the statute 1

The effect of the transfer of the notes as raising by implication a new promise, was complete when the transfer was made, and could not be extended to the subsequent act of the makers of the notes, when the defendant was not present, and which act was not with his authority nor by his direction. Hence, the case fails to show a new promise by the defendant at any time after the delivery of the notes, or by any one having authority to make a new promise for him, and* therefore, the statute began to run from such delivery, and not from the time when the notes were actually paid.

For these reasons I think the referee erred in hie conclusion of law.

The judgment should be reversed, and a new trial ordered, with costs to the appellant to abide the event.

I think the judgment should be reversed. The only fact that supports the judgment as against the statute of limitations is that the makers of the promissory notes given to plaintiff by defendants as security for the defendants’ indebtedness, paid the notes within six years. Then to make this evidence of the new promise by the defendant, Judge Rapallo. said, in Harper v. Fairley (53 N. Y. 445), “the part payment must have been made by the party to be charged with the effect of it, or an agent authorized thus to charge him.''’ He also said that the reasoning: *502of the cases determined “that a part payment, whether made before or after the debt is barred by the statute, ■does not revive the contract, unless made by the debtor himself or by some one having authority to make a new promise on his behalf for the residue.” Under this case the dispute is settled, in my mind, by inquiring if the makers of the note were the agents of the defendants, either to make the payment of the notes or to give a promise on behalf of the defendants to pay the remainder of the debt. They were not agents to make the promise, unless their relation to the notes given as •security made them agents of the defendants to pay the note. There is no evidence that the makers of the note ever had any dealings or communication with the defendants, except by giving the notes for a valuable consideration in a transaction altogether disconnected with the present case. Then, when they paid, did they act for the defendant in making the payment? Perhaps it is well to say that they were not makers for the -accommodation of the defendant, and so that between them the makers were sureties while the defendant was principal. But they were on the notes, which they paid acting on principal obligations of their own, arising not from any authority given or agency made by the defendant, but from their contract with the defendant which the defendant had assigned to the plaintiff. At the time of the payment the defendant could not have forbidden or stayed it, or modified it or given any particular direction to it. Indeed, if we look nicely into the matter, the makers never made any payment, so far as they were concerned, on the original indebtedness. They only paid their own notes, and the money paid was afterwards or cotemporaneously applied, by the plaintiff’s firm, on the principal indebtedness, by virtue of the arrangement made between the ■defendant and them, at the time of the transfer of the note by the defendant.

*503Nor was this application of the money by defendant’s authority given beyond the six years, a payment by defendant of a kind to take the case out of the statute. It could only do so by giving to the transfer, in which alone the defendant took actual part, the effect of a promise to pay the remainder of the debt, in case of payment of the notes. There is no reason, it seems to me, why such a promise is not barred by the statute of limitations, as much as the original assumpsit of the defendent.

I think the judgment should be reversed, with costs to appellant to abide event.

The plaintiff sued as the surviving partner of Isaac H. Smith & Son, to recover a balance due on an account for goods sold and delivered to the defendant by the said firm.

The defendant rested his defense on the statute of limitations.

The referee held that the account between the parties was a mutual, open, and running account, and that the last item proved in the account was the receipt by plaintiffs’ firm, within six years of the commencement of the action, of the proceeds of certain notes made by third parties and transferred by the defendant, with his endorsement thereon, to said firm, on account of his indebtedness. He accordingly gave judgment for the plaintiff.

The defendant appealed.

The referee clearly erred in treating the account between the parties as a mutual, open, and current account within the meaning of section 95 of the Code.

The provision of the Revised Statutes of 1830 (2 R. S. 296, §23), was “that in all actions of assumpsit, •debt, or account, brought to recover any balance due upon an open, mutual, and current account, the cause *504of action shall be deemed to have accrued from the time of the last item proved in such account.”

But section 95 of the Code contains the additional words, where there have been reciprocal demands between the parties.” This means cross-demands, matters of set-off, or a counterclaim ; something upon which the other party could sustain an action (Peck v. the N. Y. and Liverpool U. S. Mail Steamship Co., 5 Bosw. 226).

The account before the referee, though a long one, consisted of items of charge to the defendant, and nothing but credits for payments made and for empty barrels returned by the defendant. This not being sufficient, plaintiffs’ claim was barred by the statute, unless taken out of it in some other way.

It is insisted that this was done by a payment of a portion of plaintiffs’ demand within the six years, and that the evidence and the legal effect of the findings of the referee upon this point are sufficient to sustain the judgment upon this theory.

Section 110 of the Code, which requires that an acknowledgment or new promise shall be in writing, did not change the nature or effect of a payment of principal, or interest, or part thereof. On the contrary, it recognized and continued the rule as established by the decisions of the courts. Such rule depends wholly upon the reason of those decisions. The reason of the rule that a part payment made on account of a claim has the effect to take a, case out of the operation of the statute of limitations, or rather to enlarge the time during which an action may be brought, is that such payment in part is an ackuowledgment by the debtor of his liability for the whole demand. From this acknowledgment a new promise on his part to pay the residue is implied. The undertaking of the debtor, as to the unpaid part of the debt, is thus, by a legal presumption, renewed and made to date from the time of the part payment (Harper v. Fairley, 53 N. Y. 442).

*505The undisputed facts in this case are, and the referee has found:

That on April 10, 1868, the defendant was indebted to plaintiffs’ firm in the sum of two thousand five hundred and one dollars and fifty-three cents on a running and open account, and that being thus indebted, the defendant, on April 14, 1868, endorsed and delivered to said firm two notes for five hundred dollars each, made by Betts & Gay, dated April 6, 1868, and payayable in two and five months, respectively, with interest from their date. The notes were secured by a chattel mortgage given by the makers thereof to the defendant, who assigned and delivered the same to plaintiffs’ firm, together with the notes. Upon the receipt of the notes they were entered in the books of plaintiffs’ firm by charging them to bills receivable, and crediting them to defendants’ account. The notes were paid to plaintiffs’ firm as they matured, and the sums collected for principal thereon were carried to the credit of bills receivable, viz.: five hundred dollars on June 9, 1868, and five hundred dollars on September 17, 1868. The action was commenced June 5, 1874.

Upon this state of facts the first question that presents itself is, whether the part payment is to date from the time of the delivery of the notes to plaintiffs’ firm, or from the time of their collection.

As a general rule, if a vendor of goods receive from the purchaser the note of a third person, at the time of the sale (such note not being forged, and there being no fraud or misrepresentation on the part of the purchaser as to the solvency of the maker), it is deemed to have been accepted by the vendor in payment and satisfaction, unless the contrary be expressly proved (Whitbeck v. Van Ness, 11 Johns. R. 409; Breed v. Cook, 15 Johns. R. 341).

The contrary may be shown by a contract of guaranty (Monroe v. Hoff, 5 Denio, 360), or a contract of *506endorsement (Darnall v. Morehouse, 45 N. Y. 64; Fowler v. Clearwater, 35 Barb. 143).

But when the note or bill of a third person is not taken at the time of the sale, but upon a precedent debt, the presumption is the other way, In such case the presumption is that the note or bill was not taken in payment and satisfaction of the precedent debt, and the onus of establishing that by the agreement of the parties it was so received, is upon the debtor (Noel v. Murray, 13 N. Y. 167; Gibson v. Tobey, 46 N. Y. 637).

In the case at bar the notes were given on account of a precedent debt. They were endorsed by the defendant, and, as additional security, a chatttel mortgage to secure their payment was also transferred. There is no proof of an agreement, or from which an agreement can be inferred, that they were taken in actual satisfaction of the debt pro tanto. Under these circumstances the payment made by the defendant is to date from the time of the maturity of the notes, and not from the time of their delivery to plaintiff’s firm. The second note matured September 19, 1868, within six years of the commencement of the action, and as the payment represented by it was not directly appropriated to a specific item in the account between the parties, in which case the statute would have been left to its operation as to the rest of the items, its effect was to save the whole balance of the account. Where the debtor knows that there exists against him a general account of items, and he designedly pays or furnishes something to lessen the demand on such general account without discrimination, and at that time does not deny his liability for the other previous items, the law reaches an implication of his acknowledgment of the whole account (Peck v. The N. Y. & Liverpool U. S. Mail Steamship Co., 5 Bosw. 226, 337).

It is claimed, however, by the appellant that before a *507part payment can be construed into an acknowledgment by the debtor of his liability for the entire demand, so as to take the case out of the operation of the statute, it must appear that it was made by the debtor himself, or by his authorized agent.

As a general proposition this is true. The courts of this state have refused to follow the rule of decision made at one time in England, and to some extent in this country, under which, by a constructive equity, judicial refinements came near abolishing the statute of limitations altogether, and have reached the conclusion that the said statute is entitled to the same respect as other statutes. The doctrine that the time for bringing the action might be enlarged, or an outlawed demand revived, by a partial payment not made by the immediate debtor but by a joint contractor, an assignee or a trustee, is therefore no longer recognized in our courts (Roosevelt v. Marks, 6 Johns. Ch. 266, 292; Picket v. King, 34 Barb. 193; Bloodgood v. Bruen, 4 Seld. 362; Shoemaker v. Benedict, 1 Kern. 176, 185; Winchel v. Hicks, 18 N. Y. 558; Pickett v. Leonard, 34 Id. 175; McLaren v. McMartin, 36 Id. 88).

But at the same time the principle has been rigidly maintained, and it is still in force, that a recognition or ratification of the agency of the person making the payment will bind the debtor.

Thus in Winchel v. Hicks (18 N. Y. 558) it has-been held that if a surety request the principal to make a payment of the interest on the obligation, and it is accordingly made and endorsed, the act is to be regarded as the acknowledgment of both parties.

In Munroe v. Potter (22 How. 49; S. C., 34 Barb. 358), Morgan, J., held that the surety on an overdue-note, who, with knowledge of the facts, took money of the principal to the holder of the note, and had it endorsed thereon as so much paid by the principal, was bound by the acknowledgment which the act indicated,. *508and which he participated in and approved of at the time it was done.

In Huntington v. Ballou (2 Lans. 120) the defendant was an accommodation indorser of a note. Some time after the maturity of the note, the maker, without defendant’s authority or knowledge, paid to plaintiff the interest due thereon, and took a receipt reciting that the same had been received from and paid by the defendant. The plaintiff showed the receipt to the defendant, and the latter thereupon examined it, and expressed his approval. It was held that by such act the defendant adopted the payment as his own, and became entitled, as between him and the other parties liable on the note, to the benefits secured to Mm by the receipt; that, as to the plaintiff he assumed the legal liabilities consequent upon such payment to the same extent as if it had been actually made by him ; and that for these reasons the payment took the case out of the operation of the statute of limitations as to such defendant.

The case of the First national Bank of Utica v. Ballou (49 N. Y. 155), presented substantially the same state of facts as the case last referred to, and the decision was precisely the same. In delivering the unanimous opinion of the court of appeals, Bapallo, J., says: “ Although Shearman (the maker) was liable on the same notes, yet there was nothing in that circumstance to prevenían arrangement between the parties by which he should make this payment for and on behalf of the defendant; and if he did so, it was immaterial whose money he used. If the defendant had made the pay • ment in person, but Shearman had furnished the money, the payment would be none the less effectual as an admission of liability to bind the defendant. And if the defendant requested Shearman to make it in defendant’s name, the effect of the payment as a recognition of the defendant’s liability, would not be, dimin*509islied by the fact that Shearman used his own money. The subsequent ratification of a payment made in that form is as effectual a recognition of liability as if the payment had been made by previous request.

In the present, case the notes were paid by the makers at maturity as contemplated by all the parties, and as the defendant by his contract of endorsement had undertaken to see that they should be paid. By handing them to plaintiff's firm in the manner he did, and failing to make a specific appropriaton of them, the defendant, as has already been shown, authorized the said firm to apply the payment, when received, in reduction of his general indebtedness. By this arrangement the defendant secured to himself the benefit of an extension of credit. The mortgage could not be enforced until default in the payment of the notes, and the taking of the notes suspended the right of action of plaintiff’s firm against the defendant to the extent of one thousand dollars until the maturity of the notes. Ho reason exists, therefore, why the defendant should not be held to have given implied authority, if not express, to the makers of the notes to pay the same to plaintiff’s firm at maturity.

The case of Harper v. Fairley (53 N. Y. 442), is clearly distinguishable. In that case the payment was made without the knowledge of the debtor several years after the collateral obligation had matured. It was for this reason that the court of appeals held that there could be no implied authority to make the payment “ at the time it was made.” It was conceded, however, that if certain facts sworn to by the plaintiff had been submitted to the jury and found in his favor, the express assent of the defendant to this payment would have been established, and that such assent would have been sufficient. These facts were controverted and were not submitted to the jury; and the instruction of the judge authorized the jury to render *510a verdict for the plaintiff, even though they should disbelieve his evidence in that respect. It was for this reason that the said evidence could not avail the plaintiff on that appeal.

Moreover, the testimony in the case at bar, shows a ratification. Plaintiff’s bookkeeper testified that subsequently to the payment of the two notes he had a conversation with the defendant concerning them, and that in such conversation the defendant said that he had paid so much on those notes, that he owed more,, and would pay the balance. This testimony remained uncontradicted, and is therefore sufficient within all the authorities. Notwithstanding the statutory requirement that acknowledgments and new promises should be in writing, a part payment may be proved by the oral admission of the party (First National Bank of Utica v. Ballou, 49 N. Y. 155, 158). So where an act, though unauthorized, is apparently for the benefit of the principal, a very slight matter will serve to make out a ratification, and when it plainly appears that the principal at the time did mean to' ratify that which apparently was done for his benefit, the law does not compel the court to deny him the privilege. He must be taken to have considered for himself whether the act done was, on the whole, such as he approves and desires to be bound by (Commercial Bank of Buffalo v. Warren, 15 N. Y. 577).

The decison of the referee being right and sufficiently supported, notwithstanding the erroneous effect given to the account between the parties, the judgment appealed from should be affirmed, with costs.