Semple & Birge Manufacturing Co. v. Detwiler , 30 Kan. 386 ( 1883 )

The opinion of the court was delivered by

Horton, C. J.:

This was an action brought by the Semple & Birge Manufacturing Company — a corporation organized under the laws of the state of Missouri — against J. R. Detwiler, to recover the sum of $1,770.97, with interest, alleged to be due on three promissory notes executed by the defendant to the plaintiff. For the purpose of securing the indebtedness for which the notes were executed, the defendant had pledged certain other promissory notes as collateral security. Several of the notes thus pledged were collected through the agents of plaintiff, and the amounts thereof, after deducting the cost of collection, were credited to defendant as payment upon the notes sued on. The referee appointed to hear and determine the issues in the case, reported, among other matters, that of the collaterals turned over by the defendant to the plaintiff, was a note executed by G. M. Goldsberg and J. M. Greyman, dated June 12,1876, and due October 1, 1876, for $100, with 10 per cent, interest thereon from date; second, a note executed by Peter Long and J. B. Ellet, dated March 22, 1875, and due September 1, 1875, for $55.35, with 10 per cent, interest from date; that the notes were turned oyer by defendant to plaintiff, on August 2, 1877; that at said time the notes could have been collected by the exercise of ordinary diligence, but were not collected. No suit was brought on them, and more than five years have elapsed since each note fell due and since a cause of action accrued on each of them. No payments have been made by the makers of the notes on either of them, and the amount of interest'on the notes from their dates respectively to November 2, 1881, at 10 per cent., is $90.60, making a total of principal and interest of $245.95. Upon these and other conclusions of fact the referee held that defendant was also entitled to credit for the amount of the notes held by the plaintiff until barred by the statute of limitations, and gave judgment that plaintiff was entitled to recover only $177.93, with 10 per cent, interest from November 21, 1881; the same to be paid by defendant on the surrender and delivery to him of the collaterals remaining in its hands, and the col-laterals unaccounted for.

The principal controversy is over the findings and report of the referee concerning the collaterals which were uncollected, and at the time of trial barred by the statute of limitations. It is claimed on the part of the plaintiff that there is no evidence in the record to warrant the finding of the referee that plaintiff was guilty of negligence in suffering the notes in its possession to outlaw; that the evidence only shows the notes outlawed were collectible when delivered to plaintiff, but does not establish that they could have been collected at any subsequent time; that before plaintiff can be charged with these notes, it must appear affirmatively that they were of some value at the time the statute ran against them; and finally, as the statute did not run until after the action was commenced, the negligence alleged is that only which accrued after the commencement of the suit, and therefore ought not to be considered.

These various objections to the findings and report of the referee must be overruled. Of course the plaintiff ought not to be charged with the collaterals barred by the statute, unless it were shown that they could have been collected. But as evidence was offered tending to prove that at the time these collaterals were turned over to the plaintiff they were good and collectible, sufficient evidence was introduced to sustain the finding that the plaintiff was chargeable with the full amount of the notes. If the makers of the notes were solvent at the time they were turned over to the plaintiff, a like state of things is supposed to continue until the contrary is shown. Even if it had appeared that the makers of the notes subsequent to the delivery of them to the plaintiff had become insolvent, nevertheless, if through plaintiff’s negligence, by delay, or otherwise, the collaterals were not collected, it would be at fault. When the plaintiff accepted from defendant the collateral securities, it incurred the obligation to use due diligence in their collection, and to sue if necessary.

It appears from the findings, that it was the agreement between the plaintiff and the defendant, when the collaterals were delivered to plaintiff, it should collect them, and after deducting all expenses, the net proceeds thereof were to be credited upon the account evidenced by the notes sued on. Now the conduct of the plaintiff in holding two of the col-laterals in its possession, or under its control, and taking no active steps to collect them other than merely demanding payment orally and in writing, and then allowing them to become barred by the statute of limitations, is, within the authorities, not using due diligence toward their collection. (Ward v. Morgan, 5 Sneed, 82; Betterton v. Rooke, 3 Lea, 215; Hanna v. Holton, 78 Pa. St. 334; Hazard v. Wells, 2 Abbott’s New Cases, 451; Trotter v. Crockett, 2 Porter, 411; Fennell v. McGowan, 58 Miss. 261; Miller v. Bank, 34 Am. Dec. 451; Wakeman v. Gowdy, 10 Bosw. 208; Muirhead v. Kirkpatrick, 21 Pa. St. 237; Whitten v. Wright, 34 Mich. 94.) Tiie plaintiff did not return the collaterals at the commencement of the action, but retained them in its possession long afterward, and until they were barred by the statute; therefore the fact that the statute did not run until after the action was commenced does not relieve plaintiff. The suggestion that as the Goldsberg & Greyman note was not barred by the statute until after the filing of the answer, it was error to charge the plaintiff with the amount thereof, is also without force.

The defendant has filed a cross-petition, alleging error to bis prejudice on the part of the district court. The facts upon which this assignment of error is based are substantially these: After the court had rendered judgment in favor of the plaintiff, and against the defendant for the amount found due by the referee, together with all the costs in the case, the defendant tendered in court the judgment, interest and costs, and demanded of plaintiff that it surrender the uncollected collaterals remaining in its hands, and also the collaterals unaccounted for. The defendant further offered to deposit the amount so tendered with the clerk of the court, to be paid over to plaintiff when it surrendered to the clerk the said collaterals, and then asked the court that, in consideration of such tender, it should order that no execution issue. The plaintiff declined to accept the tender of defendant, because it was coupled with the demand for the surrender of all the collaterals theretofore delivered to plaintiff, and mot collected or redelivered, and because plaintiff alleged a portion of the collaterals were worthless; that some were lost, and therefore could not be redelivered. Plaintiff stated it would accept the money produced in court if tendered unconditionally. Thereupon defendant asked: “ Will you give me my notes ? ” and the plaintiff answered by its attorney, u No, for the reasons stated.” The court then declined to order that no execution issue, and to this ruling the defendant excepted.

The ruling of the court must be. reversed. Defendant had the right to receive the collaterals when he paid the judgment and costs, and upon offering to pay the plaintiff the judgment and costs he had the legal right to insist upon the collaterals being redelivered to him as a condition of such payment. It would be unreasonable to require the defendant to pay the judgment and costs in the absence of his collaterals, which consisted of various promissory notes, and then trust to his legal remedies against the plaintiff to recover them in a subsequent proceeding. The answer of the defendant, the evidence produced upon the trial, and the report of the referee, gave the court ample authority to make the order requested, and it was unjust to the defendant not to do so. (Bank v. Fant, 50 N. Y. 476; Overlock v. Hills, 8 Me. 313; Hoffman v. Johnson, 1 Bland’s Ch. 107; Wood v. Matthews, 73 Mo. 481; Company v. Rutledge, 14 N. W. Rep., p. 92.)

Plaintiff insists that the ruling of the court is correct, because the tender was not unconditional, and because the notes not redelivered had become lost and were worthless. There is nothing in the findings of the referee tending to show that the notes not surrendered by plaintiff have been lost or are worthless. On the other hand, the finding is, that the collaterals not produced have not been accounted for in any other way than that they were turned over by defendant to plaintiff, and by plaintiff sent to its agent, the Neosho county ■savings bank, for collection. If the notes so unaccounted for have been lost, it is the duty of the plaintiff to establish that fact; and further, to prove that such loss did not occur by its own negligence. It might have done this upon the hearing before the referee. Such an issue, however, cannot •be determined upon the mere ipse dixit of the plaintiff or its attorneys. Even if the collaterals are worthless, the plaintiff has no right to keep them and demand payment of its judgment. The surrender of the notes and the payment of the judgment ought to be contemporaneous.

The judgment of the district court will be affirmed, with direction that no execution issue on the judgment after the defendant deposits with the clerk of the district court the full amount of plaintiff’s judgment, with interest and costs. Upon the surrender to the court of all the said collaterals, plaintiff will be entitled to receive the amount of its judgment.

All the Justices concurring.