Camp v. Smith

Headnote

1. Payment—Application—Secured and Unsecured Claims.

Where a creditor holds an unsecured claim against a debtor, and also holds, without the debtor’s knowledge, notes of a firm of which the latter is a member, a payment by him out of his personal funds, of which no application is made by either party, will not be applied to such firm notes to protect them against the operation of the statute of limitations, but to the unsecured individual obligation, under the rule that a payment will be applied to the obligation of which the security is most precarious.

2. Same—Application—To Remove Bak oe Limitation.

Neither will payments made hy such debtor generally, and indorsed on the firm notes by the creditor, after the debtor becomes aware that his creditor holds the firm notes, and after the same are barred by the statute of limitations, operate to remove the bar of the statute, as the payments were not made on account of the firm notes, nor under circumstances indicating a willingness to pay.

Appeal from, judgment on report of Hamilton Odell, Referee.

Action by James VV. Camp, as executor of Mary Etta Camp, deceased, against James W. and Wilbur F. Smith upon two promissory notes made by defendants to William Smith, and by him indorsed. From a judgment dismissing the complaint, plaintiff appeals. The opinion of the referee, referred to in the opinion, is as follows: “This action is brought by the plaintiff, as executor of Mary Etta Camp, deceased, upon two promissory notes made to William Smith, by the defendants as copartners, in the year 1872. The defense is the statute of limitations. William Smith died in 1875. Mary Etta Camp, his daughter, died in 1884. These notes were found by the plaintiff among her papers, indorsed by William Smith in blank, and inclosed in an envelope bearing this inscription in his handwriting: “June 7, ’73. Mary E. Camp. $7,448. Notes.” In 1868, Mrs. Camp became the assignee and owner of a bond and mortgage for $35,000, made by the defendant James W. Smith to William Smith, which still remains, in a large part, unpaid; and the same defendant, in 1875, and following years, became individually indebted to her in a large amount for moneys received by him, and which represented, substantially, her share of her father’s estate, of which said defendant was an executor. It is alleged in the complaint, and admitted in the answer of James W. Smith, that ‘ before February 1, 1874, and thereafter, from time to time, in each and every year, until the death of said Mary Etta Camp, the defendant James W. Smith made various payments to said Mary .Etta Camp; ’ and also that on the 14th day of October, 1885, the plaintiff, as executor, received from said defendant the sum of $100, and the further sum of $100 on the 14th day of November following. These latter payments the plaintiff claims to have applied on account of the two notes in suit; and his testimony is that such application was made by him in January, 1886, by advice of his counsel, in order to 1 renew the notes, or to keep the notes alive.’ The proofs show that all of these payments were made by Mr. Smith out of his persona] funds. It is not claimed that any of the payments made by James W. Smith were made on account of these notes specifically; and the proof is that he had no knowledge, prior to November, 1885, that they were held by Mrs. Camp. Neither is it claimed that Mrs. Camp applied any such payments upon either of these notes. But it is contended by the learned counsel for the plaintiff that, as neither debtor nor creditor made application of such payments, the duty of applying them devolves upon the court, and that justice and equity require that they shall be so applied that these copartnership notes shall be protected against the operation of the statute. In another case between these parties, I have, in effect, ruled this point against the plaintiff, and have held that payments made by James W. Smith individually, out of his individual moneys, to a creditor to whom he was individually indebted, should be applied to such individual indebtedness, to the exclusion of any joint indebtedness of himself and his co-defendant in this action. If there is error in that decision, it has not been pointed out to me. The suggestion that the court will presume that a debtor, making a general payment, makes it with the intention of'keeping alive all his debts, has force, perhaps, as to such debts and demands as he knows the creditor to hold against him. Unless so limited, I should deny the accuracy of the proposition. And the argument which is pushed by the plaintiff’s counsel, that it may be inferred from the circumstances of this case that the payments in question, or some of them, were intended by Mr. Smith to be applied upon the notes in suit, goes down

before the fact that he did not know, when the payments were made, that the notes were held or claimed by Mrs. Camp. The question remains, what was the effect of the plaintiff’s indorsement upon the notes of the two payments of $100 each, made by James W. Smith in October and November, 1885? The notes were then outlawed. Were they revived by the indorsements? It is for the debtor to decide whether a debt barred by the statute shall be revived and paid. Graham v. Keys, 29 Pa. St. 189 . The statute is a complete bar, and no admission of the debt will avoid the discharge, unless made under circumstances which indicate a willingness to pay, (Blood-good v. Bruen, 8 1ST Y. 369; 'Burner v. Martin, 4 Bob. (H. Y.) 664; Fiske v. Hibbard, 13 Jones & S. 333 ; Loomis v. Beaker, 1 Daly, 188 ;) and, where an admission is inferred from a partial payment, it must appear that the payment was in fact made on account of the debt for which the action is brought, (Arnold v. Bouming, 11 Barb. 554 ; Stafford v. Bryan, 3 Wend. 532 .) These propositions appear to be well settled. They are decisive of this part of the case. The debtor’s assent, plainly expressed, is absolutely necessary to the revival of a dead cause of action. Such revival cannot be accomplished by any act of the creditor alone. The motion to dismiss the complaint is granted. ”

In Camp v. Smith, ante, 372, to which case the reference is made in the foregoing referee’s opinion, it appeared that James W. Smith, being indebted to plaintiff’s intestate, as evidenced by a certain bond and mortgage, his own individual and unsecured notes, and the notes of the firm of which he was a member, paid to plaintiff, out of his individual funds, certain sums of money, of which no application was made either by plaintiff or defendant. A controversy arising as to the application of such payments, the referee decided that, under the rule that a payment will be applied to- the obligation of which the security is the most precarious, the sums in question should be applied to the unsecured individual notes of defendant James W. Smith.