Opinion
No. 8,233.
Submitted November 26, 1941.
Decided January 2, 1942.
Promissory Notes — Statute of Limitations — Alleged Part Payment by Defendant — Insufficiency of Evidence to Show Such Payment — Presumption of Payment Held Overcome by Evidence to Contrary. Promissory Notes — Statute of Limitations — Tolling of Statute by Part Payment — Evidence — Insufficiency. 1. Where, in an action commenced in 1941 on a joint promissory note made in 1929, the defendants pleaded the statute of limitations (sec. 9029, Rev. Codes) and plaintiff relied on a small payment allegedly made by defendants and endorsed on the note in 1934 as having tolled the running of the statute, the defendants testified that they did not make such payment or authorize anyone to make it for them and that it was not made with their knowledge or consent, evidence reviewed and held insufficient to show that defendants made the payment, and that therefore the court did not err in holding as a matter of law that the note was barred and directing a verdict in defendants' favor. Same — Presumption that Part Payment made does not obtain — When Prima facie case of Payment Made. 2. The mere endorsement of a partial payment on a joint promissory note made by an employee of the holder at the latter's direction, relied upon to show the tolling of the statute of limitations, does not raise a presumption that such payment was made by the makers or either of them; and before plaintiff can be said to have made out a prima facie case in that behalf he must show actual payment made by or for the makers with their knowledge and consent. Same — Effect of Part Payment made by one of two Joint makers. 3. Part payment on a promissory note by one of two joint makers does not suspend the running of the statute of limitations as against the other.
Indorsement by creditor is evidence of part payment sufficient to toll statute of limitations, see note in 50 A.L.R. 903.
Appeal from District Court, Cascade County; H.H. Ewing, Judge.
Messrs. Swanberg Swanberg, for Appellant, submitted a brief; Mr. Randall Swanberg argued the cause orally.
Messrs. Speer Hoffman, for Respondents, submitted a brief; Mr. Harvey B. Hoffman argued the cause orally.
The court erred in granting defendants' motion for a directed verdict. The entire question revolves about the $25 payment alleged to have been made on the note in suit on August 7, 1934. The court, in granting the motion, held in effect that the evidence concerning this payment was insufficient to raise a question of fact and be submitted to the jury. We think the matter was one for the jury to determine, and in taking this position, we are mindful of the general rule, stated in 37 C.J. sections 625-627, that a creditor relying on a part payment to arrest the running of the statute of limitations, must show that the payment was voluntarily made by the debtor upon the debt sued upon. In determining the effect of this endorsement, we must consider carefully the facts surrounding its making. An endorsement of payment on the back of a note, standing alone, will not give rise to any presumption that a payment was made on the date the endorsement bears, particularly if the endorsement was made by the holder, rather than by the maker. This is because it is an easy matter for the holder of a note, seeking to avoid the running of the statute, to simply make the endorsement, whether a payment has been made or not. Therefore, such an endorsement is in the nature of a self-serving declaration. But there are exceptions. In the first place, the date of the endorsement is important. If it is dated after the statute has run, the endorsement is obviously self-serving, and no presumption arises. But if the endorsement is dated before the running of the statute, then it was not self-serving, but against interest. Still another consideration arises: It would also be an easy matter for the holder, after the statute had run, to put on the endorsement, and date it back to a time before the statute had run. Consequently, although some cases hold to the contrary, on logical reasoning, the endorsement is still self-serving, and no presumption should arise. But where the endorsement is dated before the running of the statute, and there is evidence aside from the note itself that the endorsement was actually made on the date it bears, then the endorsement was against interest, and a presumption of payment arises.
This rule is nowhere better stated than in 37 C.J. 1242, section 768: "However, where there is evidence that the holder of a note made, or caused to be made, a credit indorsement thereon at a time when it was not barred, and consequently when it was against his interest to make it, it will be presumed that the credit was made on the date it bears, and that an actual payment was made at that time, by the makers or one of them." This presumption is in and of itself sufficient to take the case to the jury. The only evidence opposed to it is the denial of the defendants themselves that a payment was made, and surely it must be the province of the jury to pass upon the credibility of the defendants, particularly in view of their actions and representations concerning this note since the date of the payment.
If the presumption arises at all, it is sufficient to take the case to the jury. Section 10600, Revised Codes, provides that a presumption constitutes indirect evidence, section 10602 defines a presumption, and 10604 provides that unless a presumption is expressly declared to be conclusive, it may be controverted, but unless controverted, the jury are bound to find according to the presumption. (See Renland v. First National Bank, 90 Mont. 424, 425, 4 P.2d 488; Monaghan v. Standard Motor Co., 96 Mont. 165, 29 P.2d 378; Maki v. Murray Hospital, 91 Mont. 251, 7 P.2d 228; Story Gold Dredging Co. v. Wilson, 106 Mont. 166, 76 P.2d 73.)
From the foregoing cases it appears to be the law in this state that once a presumption arises, it presents a question of fact for the jury, unless the evidence contrary to the presumption is practically conclusive. If reasonable men could differ, the case is one for the jury.
That the presumption of payment arises in this case, and is sufficient to take the case to the jury is supported by the vast weight of authority the country over, though the question does not seem to have previously arisen in Montana. The presumption is based upon the fact that the endorsement constituted an admission of a payment, and if made at a time when the statute had not run, the admission is against interest and not reasonably presumed to have been made unless a payment was actually received. (See Addams v. Seitzinger, 1 Watts and S. 243, 59 A.L.R. 912; Meffert v. Lawson, 289 Mo. 337, 233 S.W. 31, 37; Wheeler v. Robinson, 50 N.H. 303; Fowler v. Sone, (Mo.App.) 226 S.W. 995; Smith v. Brinkley, 151 Mo. App. 494, 132 S.W. 301; Sugent v. Arnold's Estate, 340 Mo. 603, 101 S.W.2d 715; Caneer v. Kent, 342 Mo. 878, 119 S.W.2d 214; McElvain v. Garnett, 84 Mo. App. 300; Robinson v. Waddell, 184 Ill. App. 29; Pritchard v. Wilford, 270 Ky. 455, 109 S.W.2d 1184; Vannatta v. Willett's Adm., 103 Ky. 354, 45 S.W. 85; Goins v. Taylor, 37 S.W. 68, 18 Ky. L. Rep. 468; Cunningham v. Davis, 175 Mass. 213, 56 N.E. 2; Mitchell v. Thomas, 197 Mass. 347, 83 N.E. 864; Christopher v. Wilkins, 64 N.J. Eq. 354, 51 A. 728; Ward v. Hoag, 78 App. Div. 510, 79 N.Y. Supp. 706; Purdy v. Purdy, 47 App. Div. 94, 62 N.Y. Supp. 153; Wilson v. Pope, 37 Barb. 321; Mills v. Davis, 113 N.Y. 243, 21 N.E. 68; 3 L.R.A. 394; Easter v. Easter, 44 Kan. 151, 24 P. 57; Alston v. State Bank, 9 Ark. 455; Beatty v. Clement, 12 La. Ann. 82; Clapp v. Ingersol, 11 Me. 83, and Coffin v. Bucknam, 12 Me. 471.) In Barrett v. Sipp, 50 Ind. App. 304, 98 N.E. 310, the court held that the presumption creates a prima facie case which in the face of conflicting evidence should be determined by the jury.
To toll statute, payment must be made by maker. Assuming, but not admitting, a valid note, proof must show payment by the maker to toll the statute, or revive the obligation, or to be the foundation of an implied new promise. 34 Am. Jur., 258, states the rule: "It is an established general rule that in order to take a case out of the statute of limitations, an acknowledgment of new promise must be made by the person to be charged or by someone legally authorized by him so to act, such as his duly authorized agent or attorney." (See, also, cases collected in Decennial Digest. "Limitation of Actions," sec. 155). Recent decisions in support of the rule are: Humbird v. Arnet, 99 Mont. 499, 44 P.2d 756; Brooklyn Sav. Bank v. Jos. Wechsler Est., 259 N.Y. 9, 180 N.E. 752; Sibley v. Bowen, 222 Ala. 13, 130 So. 547; Smith v. Farmers Mer. Bank, 183 Ark. 235, 35 S.W.2d 347; Hall v. Hood, 208 N.C. 59, 179 S.E. 27; Eichman v. Culver, 169 Okla. 495, 37 P.2d 640.) Only the debtors themselves can revive or acknowledge the debt to take the obligation out of the statute. ( Mendini v. Milner, 47 Ida. 439, 276 P. 313; Gray v. Powell (Tex. Civ., App.), 282 S.W. 631; Schmidt v. Hicks, 28 Ohio App. 413, 162 N.E. 762.) The acknowledgment must be made to the creditor or someone acting for him. ( Weir v. Bauer, 75 Utah 498, 286 P. 936; Inre: Kelly's Will, 151 Miss. 277, 271 N.Y. Supp. 457; Thornton's Adm. v. Minton's Executor, 250 Ky. 805, 64 S.W.2d 158; Burdue v. Lamb, 120 Kan. 502, 243 P. 1029.) There must be established a privity between the parties to the transaction. ( Addison v. Stafford, 183 Wn. 313, 48 P.2d 202.)
In Jones v. Hall, 90 Mont. 69, 300 P. 232, this court held that a part payment, in order to interrupt the statute or revive the debt, must be made to the creditor or someone authorized to act on his behalf. 27 C.J. 1170 and authorities are in accord.
Under Section 9062, Revised Codes, partial payment of a note past due by one joint maker does not extend the time within which the action may be brought against a co-maker. ( Breese v. O'Brien, 102 Mont. 547, 59 P.2d 65; Turner v. Powell, 85 Mont. 241, 278 P. 512; 71 A.L.R. 375, 121 A.L.R. 549 in accord.)
There is utterly lacking any proof whatever of privity between the defendants, or either of them, either in the alleged "payment" or the matter of endorsement. Nor is there any proof of privity between Nathan, the administrator, and Ed Hirshberg or the witness young. There is not a case where plaintiff proves the note, introduces it with the endorsement, shows non-payment, and rests. The plaintiff, himself, has shown who made the endorsement at whose request it was made, the source of the $25, with proof of necessary privity utterly lacking. Defendants, in addition, show by clear, uncontradicted testimony, they were not a party in the premises — no privity whatever. Both defendants testify positively they did not make any such payment, and knew nothing of the endorsement until after the statute had run on the pretended note.
Plaintiff could not recover upon any view which could reasonably be drawn from the facts established by the uncontradicted evidence in this case. To permit the jury to speculate required submission only upon conjecture or suspicion. On plaintiff's case, no "presumption" of "payment" by defendants can arise, and plaintiff should have been nonsuited when he rested. Even if a "presumption" be recognized in the mere endorsement, it is removed in this case by all the other evidence and "the presumption" as a rule of law is satisfied and disappears. ( Johnson v. Kaiser, 104 Mont. 261, 65 P.2d 1179.) Reasonable men cannot draw any other inference than that Ed Hirshberg handed Young $25 to apply on the principal indebtedness; that at least Young believed that his endorsement on the note interrupted the running of the statute. The trial court, who saw the witness, found sufficient evidence to satisfy himself that if plaintiff ever had a prima facie case, it was "satisfactorily" overcome.
Counsel for plaintiff relies much upon Meffert v. Lawson, 289 Mo. 337, 233 S.W. 31, 37 and other Missouri decisions. That case might be in point had the evidence in the instant case merely shown that Nathan had endorsed the payment. The case actually holds: That it is "necessary in order to remove the bar of the statute to show that the credit was actually made by the owner of the note, or by his direction, * * * or by more direct evidence that the payment was actually made by the maker" at a time when the note was not barred by the statute. Appellant has not met either of these conditions. Neither Hirshberg nor Young were the owner of the note. Furthermore, both in Meffert v. Lawson and in Flower v. Stone, (Mo.App.) 226 S.W. 995, this "presumption" of payment is good only "in the absence of a showing to the contrary" or, "if nothing to the contrary appears."
Smith v. Brinkley, 151 Mo. App. 494, 132 S.W. 301, seems to hold that mere endorsement does not bar the statute without showing privity of the payor. Likewise, Pritchard v. Wilford, 270 Ky. 455, 109 S.W.2d 1184, holds that mere endorsement by the payee on a note of payment and date is not sufficient of itself to extend the period of the statute of limitations, citing Richardson's Adm. v. Morgan, 233 Ky. 540, 26 S.W.2d 32, which, in turn, expressly upholds our position that such credit must be supported by evidence showing that the amount represented by the credit was paid by the debtor on the note. That was precisely the position of the trial court in the instant case. Nor do we concede that the Missouri cases cited are good law. The instant case illustrates the vice of the rule appellant tries to establish. That vice is well stated in Young v. Perkins, 29 Minn. 173, 12 N.W. 515, in the following language: "The holder of a note, or any person interested in it, can manufacture false evidence of part payment as well after as before the statute of limitations has in fact run against the note, and in this way he can make out a case for himself to which the maker or his representatives must yield, unless he or they can overcome it by opposing evidence. This seems to us to be giving the holder an advantage to which he is not entitled, either in reason or in sound policy or by any analogy of the law of evidence." See, also, pertinent language used as early as 1809, by Lord Chief Justice Ellenborough, in Rose v. Bryant, 2 Camp. 322.
This is an action on a promissory note made by defendants to Frank J. Hirshberg, now deceased. Trial resulted in a judgment for defendants after their motion for a directed verdict was sustained.
The plaintiff alleged in the complaint that a payment of $25 was made on the note on August 7, 1934. The defendants in their answer denied the making of this payment and pleaded the statute of limitations. The motion for directed verdict raised the point that there was no proof showing, or tending to show, that the $25 payment had been made on the note by the defendants or either of them. Hence that question is the only important point in the case.
The evidence discloses that the note was executed on October [1] 31, 1929, in the sum of $925, as a renewal of a note in like amount, and was made payable on demand. Shortly after the note was executed Frank J. Hirshberg died and Edward Hirshberg was appointed administrator of his estate and served until February 16, 1934, when he was succeeded by Robert A. Nathan as such administrator. On August 7, 1934, Edward Hirshberg, in addition to being administrator of the estate of Frank J. Hirshberg, was president of the bank at Fairfield, and J.E. Young was at that time cashier. The $25 endorsement on the note is in the handwriting of J.E. Young, who testified that he made it on the 7th day of August, 1934, at the direction of Edward Hirshberg, and that the latter at that time gave him $25 in currency with instructions to credit that amount on the note. Young did not know where Hirshberg had obtained the money. Plaintiff produced no direct evidence that the money came from the defendants. Both of the defendants deny that they paid the money to Edward Hirshberg, and deny that they had any knowledge of the fact that the $25 credit had been given on the note.
There is evidence that E.W. Huele interviewed defendants several times as plaintiff's agent in the fall of 1937, and the spring of 1938, in an attempt to collect the note together with other indebtedness and informed defendants that the balance due on the note was $900 plus interest. Defendants at that time made no claim that the balance was $925, instead of $900. There is evidence also that defendants attempted to borrow money from the Federal Land Bank and had interviews with Fred Fligman with reference thereto. Mr. Fligman was endeavoring to ascertain all the indebtedness owing by the defendants. They reported to him the note here in question, and at first stated it was something over $900, but later gave the figure as $900. At the trial they explained that this was simply the method of identifying the note and that they did not thereby intend to assert that the note was in the sum of $900, or to imply that it was not in the sum of $925. At any rate, this evidence, as well as that given by Mr. Huele, was not sufficient either to offset their denial of such payment or to show ratification of an unauthorized credit so as to toll the running of the statute. (See note in 124 A.L.R. 234.)
Plaintiff relies upon the rule of law stated in 37 C.J. 1242, as follows: "However, where there is evidence that the holder of the note made, or caused to be made, a credit endorsement thereon at a time when it was not barred, and consequently when it was against his interest to make it, it will be presumed that the credit was made on the date it bears, and that an actual payment was made at that time, by the makers or one of them." This, as we shall presently point out, is not the universal rule.
The only cases cited in support of the text are Missouri cases. The courts are divided as to whether the mere endorsement of a credit on a note by the holder before action thereon is barred is sufficient to make out a prima facie case of part payment to toll the statute. There are cases holding that such evidence makes out a prima facie case. They are listed in the note on page 914 of 59 A.L.R. Other courts take the opposite view and hold that such entry or endorsement, standing alone, is not sufficient evidence of a part payment by the makers or either thereof to toll the running of the statute. They are listed in 59 A.L.R., page 922. And see 37 C.J. 1152, where it is said: "Indorsements by the creditor of payments on a bond, note or other evidence of debt, without more, do not operate to interrupt the running of the statute." "It is payment and not the indorsement on the evidence of debt that operates to toll the statute." (37 C.J. 1151.)
Our statute applying to the situation is section 9062, Revised Codes, reading: "No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of sections 9011 to 9066 of this code, unless the same is contained in some writing, signed by the party to be charged thereby. But this section does not alter the effect of any payment of principal or interest, which payment is equivalent to a new promise in writing, duly signed, to pay the residue of the debt."
We are impressed by the reasoning of the court in the case of Connelly v. Pierson, 4 Gilman 108, 9 Ill. 108, 109, where the court said: "As against the payee, the indorsement would unquestionably be competent evidence of payment, on the principle that the admissions of a party may be used against him; but when introduced by him for the purpose of sustaining his interest, it would seem to be obnoxious to the objection, that the declaration of a party cannot be admitted in his favor. There is no difference between the declaration of the payee that he had received a partial payment on the note, and his written acknowledgment of such payment. The indorsement is the ex parte act of the payee, and is favorable to his interest; for if sustained, he thereby avoids the defense, and recovers a demand, which, without the indorsement would clearly be barred by the lapse of time. The evidence therefore proceeds from an interested source. A rule that the mere indorsement should authorize the presumption that the payment was actually made, and at the time stated, would be inconvenient in its operation, and mischievous in its tendency. It would furnish the strongest inducements to the payee to fabricate testimony in his favor, which could not without great difficulty, if at all, be explained away by the maker. The payment is an affirmative act, much more easily established by the creditor than disproved by the debtor. In the opinion of the Court, an indorsement of a partial payment on a note, made by the holder without the privity of the maker, is not, of itself and uncorroborated, sufficient evidence of payment to repel the defence created by the Statute of Limitations. It was thus expressly decided in the cases of Rosebloom v. Billington, 17 Johns. [N.Y.] 182, and Whitney v. Bigelow, 4 Pick. [Mass.] 110."
It is significant, too, that part payment by one joint debtor [2, 3] does not suspend the running of the statute as against the joint obligator. ( Monidah Trust v. Kemper, 44 Mont. 1, 118 P. 811, Ann. Cas. 1912d 1326; First National Bank v. Bullard, 20 Mont. 118, 49 P. 658; Oleson v. Wilson, 20 Mont. 544, 52 P. 372, 63 Am. St. Rep. 639.) If there be a presumption of payment, then it is purely a matter of speculation as to which one of the defendants is presumed to have made it. (Compare Bender v. Blessing, 91 Hun. 73, 36 N.Y. Supp. 162.)
We think the better reasoned cases support the view that the endorsement, standing alone, does not make out a prima facie case. We can see no good reason why such an endorsement, standing alone, raises a presumption that the payment was made by the makers of the note or either of them. The statute — section 10606, Revised Codes — does not classify this as one of the statutory presumptions. While it is true that such an endorsement is against the interest of the payee, were the defendants asserting that the partial payment had been made, yet, as here attempted to be used, the endorsement promotes the interest of the payee by allowing him additional time within which he must commence the action before it is barred, and in that sense is self-serving. ( Catlin v. Mills, 140 Wn. 1, 247 P. 1013, 47 A.L.R. 545, and Connelly v. Pierson, supra.) Before plaintiff makes out a prima facie case that a partial payment tolled the running of the statute, he must show that such payment was actually made by the makers of the note, or for them with their knowledge and consent. There being no such evidence here, the court was right in holding that the action on the note was barred by the statute of limitations, and hence in sustaining the motion for a directed verdict.
The judgment is affirmed.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES ERICKSON, ANDERSON and MORRIS concur.
Rehearing denied March 24, 1942.