CLARK, C. J., dissents; HOKE, J., concurs in dissent. *Page 243 Civil action, tried upon these issues:
1. Did the defendants execute the note, as alleged, and make the payments down to April, 1907, as alleged? Answer: Yes.
2. Did the plaintiff sell the stock for $1,500, and apply the proceeds thereof on the note, as alleged in the pleadings, on 25 February, 1913? Answer: Yes.
3. Is the plaintiff's cause of action barred by the statute of limitations? Answer: No.
4. Are the defendants indebted to the plaintiffs, as alleged; if so, in what sum? Answer: $1,036.36, with interest on $1,005.58 from 2 May, 1913.
The defendants excepted to the charge of the court upon the third issue, and appealed. The part of the charge excepted to is as follows: "Inasmuch as the note contains a provision authorizing the plaintiff bank, its president or cashier, to sell the stock mentioned in the note of 18 July, 1906, and apply the proceeds of such sale to the note, the court holds and charges you that in making the sale of the twenty shares of stock of the King Buggy Company, mentioned in the note sued on, to E. H. Crenshaw, on 25 February, 1913, W. H. Hunt, cashier of plaintiff bank, was acting as the agent of defendants, and the application of the proceeds of such sale on said date by plaintiff bank to said note was such a voluntary payment as revived the debt and created a new promise or obligation upon the part of defendants to pay said note. Thereupon the court charges you, if you find the facts to be as testified to in the evidence, to answer the third issue `No.'"
The uncontradicted evidence proves that the defendants executed their obligation to plaintiff, of which the following is a (305) copy:
$2,000. OXFORD, N.C. 18 July, 1906.
On 1 September, 1906, after date, for value received, we promise to pay to the First National Bank of Oxford, N.C. or order, $2,000, negotiable and payable at said bank, with interest at the rate of 6 per cent per annum after maturity, having deposited with said bank as collateral security for payment of this or any other liability or liabilities *Page 244 of ours to said bank, due or which may be hereafter contracted, the following property, viz.:
Certificate No. 15, twenty shares King Buggy Company stock attached as collateral. It is hereby understood and agreed that we are to pay $75 per month on this note until paid in full, with such additional collaterals as may from time to time be required by the president or cashier of the First National Bank of Oxford, N.C. and which additional collaterals I hereby promise to give at any time on demand, and if not so given when demanded, then this note to become due and payable at once, with full power and authority to said bank to sell, assign, and deliver the whole or any part thereof, or any substitutes therefor, or any additions thereto, at any broker's board, or at public or private sale, at the option of said bank, or its president or cashier, or its or their or either of their assigns, on the nonperformance of this promise, or the nonpayment of any of the liabilities above mentioned, or at any time or times thereafter, without advertisement or notice, which are hereby expressly waived; and upon such sale the holder hereof may purchase the whole or any part of such securities, discharged from any right of redemption; and by these presents we do hereby constitute and appoint W. H. Hunt, cashier, and his successors in office, our true and lawful attorney, for us and in our name and behalf, to assign and transfer said securities to the purchasers thereof, and after deducting all legal or other costs and expenses for collection, sale, and delivery, to apply the residue of the proceeds of such sale or sales so to be made to pay any, either, or all of said liabilities to said bank, or its (306) assigns, as its president or cashier, or its or their or either of their assigns, shall deem proper, returning the overplus, if any, to the undersigned. And the undersigned agree to be and remain liable to the holder thereof for any deficiency.
CLAUD KING, MOSES A. KING, JESSE KING.
The defendants afterwards made the following payments on said note, to wit: 6 August, 1906, $60; 1 September, 1906, $30; 12 October, 1906, $70; 23 April, 1907, $15; and 25 February, 1913, from sale then made of the stock deposited as aforesaid, $1,500.
There is a conflict of authority on the question of the effect of applying the proceeds of collaterals left with the creditor by the debtor as part payment of the debt. In some jurisdictions it is regarded as sufficient to interrupt the statute, provided the collaterals are realized on within a reasonable time. This is the rule laid down in Maine, Massachussetts [Massachusetts], Nebraska, New Jersey, and Vermont. *Page 245
In others it is ineffectual to stop the bar of the statute in the absence of evidence of notice to or assent by the debtor. This is held in Alabama, New York, and Minnesota. 25 Cyc., page 1379 and notes.
The author of Cyc. says: "If the debtor constitutes a third person his agent to hold, and, in case of default, to realize on collateral and apply the proceeds to his debt, payment of such proceeds by such agent will interrupt the statute." 25 Cyc., page 1379 and notes.
This distinction is based upon the idea that when the debtor's duly constituted agent makes the sale of the collateral and applies the proceeds to the payment of the note, it is the debtor's own act.
This principle seems to be supported by all the authorities. In the case before us the defendants not only appointed Hunt as their agent to hold the collateral, sell it and apply the proceeds to the payment of the note, but they specially bound themselves to pay (307) any deficiency remaining after such application.
The words, "and the undersigned agree to be and remain liable to the holder hereof for any deficiency," constitute a contract to pay such deficiency when ascertained, and that could not be ascertained until the defendants' agent sold the collateral and applied the net proceeds to the note.
No error.