My associates stress the point that the defense relied upon by H.A. Frank is based upon his memory over a period of eleven years. The two items that he claims credit for are undisputed in the record. That he paid the taxes is conceded and the court so found. That he received no credit therefor is also conceded and is shown by the endorsements on the note. The $500 item relied upon by H.A. Frank is also not disputed and is sustained by documentary evidence.
The note in suit contains the following endorsements on the back thereof: *Page 26
— -------------------------------------------------------- Date Interest Principal ---------------------------------------------------------- Jan. 31, 1919, to 1/1 92.00 July 15 " to 7/1 92.00 Jan. 13, 1920 1/1 92.00 July 16 " 7/1 92.00 Jan. 10, 1921 1/1 92.00 July 27/21 to 7/1 92.00 Jan. 23/22 to 1/1 92.00 July 18/22 to 7/1 92.00 Jan. 17/23 to 1/1 92.00 Aug. 6/23 to 7/1 92.00 Jan. 9/24 to 1/1 92.00 July 8/24 to 7/1 92.00 Jan. 10/25 to 1/1 92.00 July 10/25 to 7/1 92.00 Jan. 13/26 to 1/1 92.00 May 2/29 to 7/1/28 460.00 May 2/29 a/c 40.00 July 22/29 to 7/1/29 144.00 56.00 12/30/30 to 1/1/31 269.28 730.72 — --------------------------------------------------------
Defendant H.A. Frank testified that he had not seen the note from the time it was given until plaintiff showed it to him in 1936 and hence had no knowledge as to how payments and credits were endorsed on the note and that all credits were not so endorsed. The defendant H.A. Frank figured and thought that he and Lou were about square when he made the last payment in 1930 amounting to $1,000. The several items of $92 credited as interest on the note at various times were not made by defendant Frank in person but were made by the Jones Storage Transfer Company, or some other representative of defendant H.A. Frank.
H.A. Frank contends that there was a credit of $500 that should have been applied on the payment of principal on the note as of August 18, 1918, and which is not endorsed as a payment. *Page 27 He also contends that he paid taxes on property owned jointly by himself and Lou Frank and that if one-half thereof, or $166.24, be also credited as payments on the note, it is fully paid. He also contends that when the above credits are taken into account the items of $92 credited as payment of interest on the note are erroneous in that a part of each of such payments should have been applied as payment of principal.
The record discloses that Lou Frank commenced an action in Silver Bow county on the same note on March 7, 1929, which was about five years and ten months before his death, caused attachment to be issued and levied, but that no summons was ever served upon H.A. Frank during the lifetime of Lou Frank, though H.A. Frank was frequently in Silver Bow county to the knowledge of Lou Frank; that after the commencement of that action H.A. Frank made three payments on the note, one for $500, one for $200, and the last for $1,000, believing that the payment of the $1,000 about squared the account, when there was taken into consideration the $500 credit and the taxes paid by him on property owned jointly by him and Lou Frank. All of these payments it should be noted were made by H.A. Frank after the writing of the letters set out in the majority opinion. The trial court found that the taxes which defendant Frank paid were paid from the year 1918 to the year 1926, and that they were barred by limitations. The court made no express finding as to the $500 item that H.A. Frank contended should be credited as payment on the note. The evidence is undisputed that this item was due and owing to H.A. Frank from Lou Frank in that a lot valued at $1,000, owned jointly by them, was turned over to Ellen Cammack in payment of a joint obligation to her by Lou and H.A. Frank of $1,000; that thereafter Lou Frank purchased the property for which the $1,000 obligation was paid under a promise that he would reimburse H.A. Frank for anything he had in the property.
The main contention made in this proceeding by the defendants is that Lou Frank in his lifetime was guilty of laches in not prosecuting the action which was instituted in 1929 and *Page 28 in not causing summons to be served upon H.A. Frank, and that this plaintiff has no better right than Lou Frank would have were he living. It is well settled that laches will bar an action if because of the delay there has been such a change in the relations of the parties as to prejudice the rights of defendant in making his defense. Lewis v. Bowman, 113 Mont. 68, 121 P.2d 162. See, also, 30 C.J.S., Equity, sec. 118, page 540 et seq., and 21 C.J. 231.
"The mere bringing of an action does not relieve a person from the imputation of laches. The lack of diligence in prosecuting it after it is brought leads to the same consequences as delay in bringing it. Witnesses die or disappear, or the facts fade from memory. The positions of the parties change, or the subject of the controversy fluctuates in value. The right sought to be enforced becomes doubtful or uncertain, or it becomes impossible for the court to administer equity between the parties with any degree of certainty. In all such cases the court will, in its discretion, refuse to entertain the action and leave the parties as they are." Streicher et al. v. Murray, 36 Mont. 45,92 P. 36, 40.
It has been declared that where the defendant has lost a defense through the bar of the statute because of the delay of the plaintiff in asserting or prosecuting his claim, plaintiff's claim is barred by laches. This was so held in Murphy v. DeFrance, 105 Mo. 53, 15 S.W. 949, in Chapman v. Bank of California, 97 Cal. 155, 31 P. 896, and in Vermilion County Children's Home v. Varner, 192 Ill. 594, 61 N.E. 830, and see Dohnerts' Appeal, 64 Pa. 311.
"A court of equity applies the rule of laches according to its own circumstances. Whether the time the negligence has subsisted is sufficient to make it effectual is a question to be solved by the sound discretion of the court. * * * The law of laches, like the principle of the limitation of actions, was dictated by experience, and is founded in a salutary policy. The lapse of time carries with it the life and memory of witnesses, the muniments of evidence, and other means of proof. The rule which *Page 29 gives it the effect prescribed is necessary to the peace, repose, and welfare of society. A departure from it would open an inlet to the evils intended to be excluded." Mahaffy v. Faris, 144 Iowa 220,122 N.W. 934, 936, 24 L.R.A., N.S., 840, and see Gray v. Bloom, 151 Iowa 566, 132 N.W. 42.
Here defendant's defenses, if treated as separate and independent claims or set-offs, are long since barred by the statute of limitations unless for some reason the running of the statute has been tolled. The claim for reimbursement for taxes paid was not barred when Lou Frank commenced his action against H.A. Frank. Had that action been prosecuted with reasonable diligence, or at all, H.A. Frank could have pleaded that item as a set-off. The commencement of that action, according to the majority rule, stopped the running of the statute against an existing set-off. See note, 127 A.L.R. 910. Failure to serve summons in that action upon H.A. Frank or to otherwise prosecute the action prejudiced the right of defendant to plead this set-off if it may not now be pleaded. While that action was pending defendant H.A. Frank was privileged to rest secure in his right to plead this item as a set-off when it came time for him to plead in the case. In consequence, if defendant may not now plead this set-off as a defense he has been prejudiced by the lack of prosecution of the action brought by Lou Frank. It seems to me that since this action seeks identically the same relief sought in the action brought by Lou Frank, we should either hold that the running of the statute against this set-off was tolled by the action commenced by Lou Frank in his lifetime or else hold that the doctrine of laches applies and that plaintiff is precluded from maintaining this action at least so far as defendant has been prejudiced by his inability to plead the set-off existing by reason of the payment of taxes.
As to the $500 credit claimed by defendant H.A. Frank, if we treat it as a separate and independent set-off, it would have been barred even at the time of the institution of the action by Lou Frank. However, it does not follow that Lou Frank would have elected to plead the statute of limitations had the action *Page 30 been prosecuted with diligence and had defendant pleaded the set-off. The circumstances point to the conclusion that Lou Frank, like H.A. Frank, must have considered the account squared by the payment of the $1,000 after the institution of the action or else the action would not have been permitted to slumber for nearly six years while Lou Frank was still alive and more than four years after H.A. Frank made the last payment.
It is well settled that an action may be barred by long lapse of time where one who participated in the transaction has in the meantime died. 19 Am. Jur., Equity, sec. 511, page 355. Delays under such circumstances create the presumption that the deceased participant would, if living, testify unfavorably to plaintiff. 30 C.J.S., Equity, sec. 119, page 543, note 43. This principle found expression in the case of Halstead v. Grinnan,152 U.S. 412, 14 S. Ct. 641, 643, 38 L. Ed. 495, where the court said:
"The defense itself is one which, wisely administered, is of great public utility, in that it prevents the breaking up of relations and situations long acquiesced in, and thus induces confidence in the stability of what is, and a willingness to improve property in possession; and at the same time it certainly works in furtherance of justice, for so strong is the desire of every man to have the full enjoyment of all that is his, that, when a party comes into court and asserts that he has been for many years the owner of certain rights, of whose existence he has had full knowledge, and yet has never attempted to enforce them, there is a strong persuasion that, if all of the facts were known, it would be found that his alleged rights either never existed or had long since ceased."
"The courts have uniformly and wisely held, after a long and unexplained delay in instituting or prosecuting a suit for the recovery of a debt, especially where there is no allegation of fraud or trust, that the allaying hand of time shall be deemed to have composed all strife, and quieted all contentions so that `men who are mortal, shall not permit controversies to become *Page 31 immortal.'" Covington v. Griffin, 98 Va. 124, 34 S.E. 974, 975. The court erred, in my opinion, in not finding that plaintiff's action is barred by laches.
I think the judgment should be reversed and the cause remanded with directions to dismiss the action.
Rehearing denied Jan. 23, 1946.