EILKE v. RICE (1954)

This is an appeal from a judgment of dismissal following the sustaining of a demurrer without leave to amend.

The action is on two promissory notes dated August 1, 1944, one payable on or before six months and the other on or before one year after date. The notes were for $3,000 each. Regular payments were made on the notes, thirty payments in all, the last on November 15, 1952.

The notes made by respondent were in favor of Herta Reinach who died April 26, 1953.

As recited in appellant's brief, ‘The crux of the controversy is strictly one of statutory interpretation, i. e., the meaning and effect of Section 360 of the Code of Civil Procedure, and, particularly, the meaning and effect of that section as amended in 1947.

‘Section 360, since the 1947 amendment, and with the portion added in 1947 set forth in italics, reads as follows:

“[Acknowledgment or promise.] No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title, unless the same is contained in some writing, signed by the party to be charged thereby, provided, that any payment on account of principal or interest due on a promissory note made by the party to be charged shall be deemed a sufficient acknowledgment or promise of a continuing contract to take the case out of the operation of this title and the time within which an action may be brought upon a promissory note or upon any installment of principal or interest thereof shall not commence to run until the last payment of principal or interest made by the party to be charged prior to the time when the statute of limitations would otherwise have run on the principal sum or on the installment thereof last due.'

‘Prior to the 1947 amendment, the section read:

“[Acknowledgment or promise.] No acknowledgment or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title, unless the same is contained in some writing, signed by the party to be charged thereby.'

‘It will be observed that before the 1947 amendment the section was the same as at present, except that the portion beginning with the word ‘provided’ was not included. It will also be observed that the language added by the amendment has to do with the issue now under consideration, that is, the effect of interest payments upon the running of the statute of limitations. The added language being introduced by the word ‘provided,’ it is apparent that the section as amended must be considered as a whole if its true significance is to be appreciated.'

‘Defendant's demurrer was based upon the premise that the action was barred by Section 337, subdivision 1 of the Code of Civil Procedure. Unless tolled or extended by the payments of interest as aforesaid, the statute of limitations would have run on the first note on February 1, 1949, and on the second note on August 1, 1949. The issue involved in the court below and on this appeal is whether or not the payments of interest on said notes, made regularly by the defendant until November 15, 1952, had the effect of extending or tolling the operation of the statute of limitations beyond the date of the filing of this action, namely, November 30, 1953.

‘Appellant contends that the periodic payments of interest on the notes, made with regularity up to and including November 15, 1952, had the effect of extending the running of the four-year statute of limitations so that the time would commence to run at the time of the last payment of interest made by the defendant, i. e., November 15, 1952.’

Respondent on the other hand argues that, ‘The plain language of Section 360 clearly indicates when the statute of limitations shall commence to run. A simple reading of the statute is all that is required to sustain the respondent's position, and that of the Court below, that the statute of limitation shall commence to run from the date of the last payment of principal or interest made by the party to be charged prior to the time when the statute of limitations would otherwise have run on the principal sum or on the installment thereof last due.

‘The period of limitation applicable to an action on a promissory note is four years, Section 337, subd. 1, of the Code of Civ.Proc. In the case at hand both notes were made on August 1, 1944. One was payable on or before six months from date and the other one year from date. Hence, the first note was payable on or before the close of business January 31, 1945 and the second note on or before the close of business July 31, 1945. Therefore, the statute of limitations ‘would otherwise have run’ on the first note on February 1, 1949 and ‘would otherwise have run’ on the second note on August 1, 1949. This action was filed on or about November 30, 1953. Clearly then, but for the amendment to Section 360, appellant's action would be barred by the provisions of Section 337, subdivision 1. The irregular payments of interest made by respondent over approximately an eight-year period would not have tolled the statute of limitations.

‘It is agreed that the amendment to Section 360 was intended to extend the time within which one might bring an action on a promissory note. The language of the statute indicates that payment of interest will toll the statute of limitations and it shall not commence to run until the last payment of principal or interest made before the time when the statute of limitations would otherwise have run on the principal sum or on the installment thereof last due. Of the many payments of interest made by the respondent, two were made within the period of time specified by the amendment to Section 360 as the time when the statute of limitations shall commence to run. An interest payment was made by respondent on November 10, 1948 and another on May 9, 1949. Both payments, therefore, were the last ones made prior to the time when the statute of limitations would otherwise have run on the respective notes. Under appellant's interpretation of Section 360, the dates of the above two payments of interest would be a starting date for the running of the statute of limitations; with this respondent agrees. But appellant goes further and reads into Section 360 that the legislature intended to toll the statute of limitations indefinitely, as long as an interest payment is made and there is not a period of four years intervening between successive payments of interest. Such an interpretation is not warranted by a simple reading of Section 360.’

Obviously the trial judge's interpretation of the code section is correct. As argued by respondent, it was not the intent of the legislature ‘to toll the statute of limitations indefinitely’.

The judgment is affirmed.

DORAN, Justice.

WHITE, P. J., and DRAPEAU, J., concur.