Scribd Logo
Upload

Welcome to Scribd!

  • 77 views

    1 FOX V KROEGER

    Uploaded by

    iptrinidad
    Kroeger paid off a promissory note as a surety for Mrs. Fox after her death. Kroeger then sued Mrs. Fox's estate to recover the amount paid. The court held that when a surety pays the debt of the principal debtor, the surety is subrogated to the rights of the original creditor and can maintain a suit against the principal debtor to recover the amount paid on the very debt itself. As a surety who paid the debt and took assignment of the note, Kroeger could bring an action directly on the note against Mrs. Fox's estate, rather than being limited to a claim for reimbursement, so the suit was not barred by the statute of limitations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    1 FOX V KROEGER

    Uploaded by

    iptrinidad
    77 views4 pages
    Kroeger paid off a promissory note as a surety for Mrs. Fox after her death. Kroeger then sued Mrs. Fox's estate to recover the amount paid. The court held that when a surety pays the debt of the principal debtor, the surety is subrogated to the rights of the original creditor and can maintain a suit against the principal debtor to recover the amount paid on the very debt itself. As a surety who paid the debt and took assignment of the note, Kroeger could bring an action directly on the note against Mrs. Fox's estate, rather than being limited to a claim for reimbursement, so the suit was not barred by the statute of limitations.

    Original Description:

    Nego

    Original Title

    1 FOX v KROEGER

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Kroeger paid off a promissory note as a surety for Mrs. Fox after her death. Kroeger then sued Mrs. Fox's estate to recover the amount paid. The court held that when a surety pays the debt of the principal debtor, the surety is subrogated to the rights of the original creditor and can maintain a suit against the principal debtor to recover the amount paid on the very debt itself. As a surety who paid the debt and took assignment of the note, Kroeger could bring an action directly on the note against Mrs. Fox's estate, rather than being limited to a claim for reimbursement, so the suit was not barred by the statute of limitations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    77 views4 pages

    1 FOX V KROEGER

    Uploaded by

    iptrinidad
    Kroeger paid off a promissory note as a surety for Mrs. Fox after her death. Kroeger then sued Mrs. Fox's estate to recover the amount paid. The court held that when a surety pays the debt of the principal debtor, the surety is subrogated to the rights of the original creditor and can maintain a suit against the principal debtor to recover the amount paid on the very debt itself. As a surety who paid the debt and took assignment of the note, Kroeger could bring an action directly on the note against Mrs. Fox's estate, rather than being limited to a claim for reimbursement, so the suit was not barred by the statute of limitations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    1 FOX v KROEGER

    Monday, 18 November 2019 4:54 PM

    DOCTRINE: The payment by the principal debtor or by the party accommodated


    discharges the instrument, but payment by a party secondarily liable, other than
    the principal debtor or party accommodated, does not discharge or extinguish
    the debt
    FACTS:
    • Six months before her death, Mrs. C.M. Fox issued a PN
    - In the sum of $769.03
    - Dated June 28, 1921
    - Signed by J.H. Kroeger as surety
    - Payable to the Levi State Bank Trust Co. of Victoria, Texas
    • Feb. 3, 1922: Mrs. Fox died prior to the maturity of the note
    • When the note matured, Levi State Bank (LSB) called upon Kroeger for payment
    - On or about the due date, Kroeger went to LSB and executed and
    delivered to it, his own PN in full satisfaction of the Fox Note
    - LSB delivered to Kroeger the original Fox Note
    § For the amount due thereon, and
    § The bank, by assignment written on the back of the Fox note,
    transferred the same to Kroeger
    • More than two years after Kroeger paid the note, but less than four years after
    the due date of the original note, Kroeger instituted suit against Ben J. Fox on
    the original note.
    - Ben J. Fox is the executor of the estate of Mrs. C. M. Fox
    - The PN was in the principal sum of $769.03
    • Fox's Defense
    - By demurrer in abatement and
    - By the plea of two years statute of limitation
    • TC ruled in favor of Kroeger for the full amount of the principal, interest and
    attorney's fees of the Fox note
    • On appeal, the Court of Civil Appeals for the Fourth Supreme Judicial District of
    San Antonio affirmed the judgment of the TC
    • The case is before the Supreme Court on writ of error granted on application of
    Fox, who argued that:
    - Kroeger's only cause of action was upon the implied promise of
    reimbursement after he had paid off and discharged the PN, upon which
    he was surety
    San Antonio affirmed the judgment of the TC
    • The case is before the Supreme Court on writ of error granted on application of
    Fox, who argued that:
    - Kroeger's only cause of action was upon the implied promise of
    reimbursement after he had paid off and discharged the PN, upon which
    he was surety
    - Kroeger's cause of action was barred after two years from the time of
    accrual thereof, such accrual being the time of payment by him of the Fox
    note.
    • Kroeger's Arguments:
    - A surety on a promissory note, for the accommodation of the maker, can:
    § Pay off the obligation and have the same transferred to him, and
    § Maintain a suit against the original maker on the note itself
    - The Court of Civil Appeals sustained the contention of Kroeger, that is, the
    Court of Civil Appeals held that a surety who pays the obligation of his
    principal, and takes a transfer thereof to himself, can maintain a suit upon
    the obligation itself

    ISSUES/HELD/RATIO:
    1. W/N Kroeger can recover from the estate of Mrs. Fox, the amount he paid on
    the PN as an accommodation surety - YES
    • It is admitted by both parties that if the suit can be maintained upon the note it
    is not barred by limitation, but if the cause of action must be asserted upon the
    implied promise of reimbursement it is barred by the two years statute of
    limitation
    • GENERAL RULE: Where the surety pays the debt of his principal he is
    subrogated to all of the rights, remedies,
    equities, and securities of the principal and can bring an action on the very debt
    itself.
    - Where the surety pays the debt of the principal, he has his election to
    either:
    § Pursue his legal remedies and bring an action on an assumpsit, or
    the obligation implied by law in his favor for reimbursement by the
    principal; or
    § Prosecute an action on the very debt itself
    - In either event he stands in the shoes of the original creditor as to any
    securities and rights of priority.
    § This applies with equal force to all debts whether represented by a
    negotiable instrument or not.
    - Civil Law: For, although it be true that the payment extinguishes the debt,
    and that it seems, for that reason, that the creditor cannot transmit to
    another a right which is extinguished in his person by the payment, yet:
    § The assignment, which is made at the same time, has the same
    negotiable instrument or not.
    - Civil Law: For, although it be true that the payment extinguishes the debt,
    and that it seems, for that reason, that the creditor cannot transmit to
    another a right which is extinguished in his person by the payment, yet:
    § The assignment, which is made at the same time, has the same
    effect as if the creditor had sold his right to him who pays him
    § As to the effect of the assignment, it is the same thing to him who
    pays for the debtor, whether it be the person who is bound jointly
    with him for the debt, or his surety, or a third person
    - Roman Law: The well-settled doctrine of which entitles a surety who pays
    the debt of his principal to an assignment of all the independent securities
    in the hands of the creditor.
    § By that law, not only is he entitled to these securities, but he is also
    entitled to be substituted as to the very debt itself to the creditor by
    way of cession or assignment.
    § The debt in favor of the surety is treated, not as a paid, extinguished
    debt, but as sold to him, — all its original obligatory force
    continuing against the principal.
    § The surety is viewed in the light of a purchaser.
    - Under both the Civil and Roman laws, the rule was that the surety paying
    the debt of his principal:
    § Was subrogated to all the rights of the original creditor, and
    § Could maintain an action on the very debt itself.
    - This is the rule adopted by the Courts of last resort of nearly all of the
    States and by the Supreme Court of the United States. It is also now the
    rule in England and Canada.
    APPLICATION:
    • In the instant case the Court finds that it is a negotiable instrument, a
    promissory note signed by Mrs. C. M. Fox as principal, and J. H. Kroeger as
    surety.
    • Kroeger was compelled to pay the note and on doing so took an assignment
    thereof, and brings this action on the note itself.
    - In such a case we find that regardless of the question as to what the rule
    was in this State prior to the passage of our negotiable instrument act, the
    rule as now prescribed by the statute itself regarding negotiable
    instruments is as hereinbefore announced by us. R. C. S. of Texas, Art.
    5939, Sections 119 and 121
    • The statute above cited, so far as applicable to this case, reads as follows:
    - Sec. 119. A negotiable instrument is discharged:
    § "1. By payment in due course by or on behalf of the principal
    debtor;
    § "2. By payment in due course by the party accommodated, where
    the instrument is made or accepted for accommodation; "
    - "Sec. 121. Where the instrument is paid by a party secondarily liable
    - Sec. 119. A negotiable instrument is discharged:
    § "1. By payment in due course by or on behalf of the principal
    debtor;
    § "2. By payment in due course by the party accommodated, where
    the instrument is made or accepted for accommodation; "
    - "Sec. 121. Where the instrument is paid by a party secondarily liable
    thereon, it is not discharged; but the party so paying it is remitted to his
    former rights as regards all prior parties, and he may
    - strike out his own and all subsequent endorsements, and again negotiate
    the instrument, except:
    § "1. Where it is payable to the order of a third person, and has been
    paid by the drawer; and,
    § "2. Where it was made or accepted for accommodation, and has
    been paid by the party accommodated."
    • If either Section 119 or Section 121, were considered alone, the language might
    make each difficult of interpretation, but the two sections must be construed
    together, and in the light of each other, since they deal with the same subject
    matter.
    • When so construed, the manifest meaning is that the payment by the principal
    debtor or by the party accommodated discharges the instrument, but
    payment by a party secondarily liable, other than the principal debtor or party
    accommodated, does not discharge or extinguish the debt
    - Also by the express provisions of Section 121 (2) the party accommodated
    is excluded from those secondarily liable, payment by whom, does not
    discharge the instrument
    - This exception embraces both an accommodation drawer and
    accommodation endorser
    • It follows from what we have said that under the very terms of our statute it
    requires payment by the principal debtor to discharge a negotiable promissory
    note, and that the payment thereof by the surety does not discharge the
    obligation.
    • CONCLUSION: For the reasons stated, the judgments of the Court of Civil
    Appeals and the trial court, both of which upheld the right to prosecute the suit
    on the original note itself, should be affirmed.
    DISPOSITIVE
    • The foregoing opinion is adopted as the opinion of the Supreme Court, and judgment
    will be entered in accordance therewith.

    You might also like