F. D. CLINE PAVING COMPANY
v.
SOUTHLAND SPEEDWAYS, INC., G. F. Penny, J. A. Morgan, Archie Fleming, Jr., C. C. Triplett and John W. Griffin.
No. 462.
Supreme Court of North Carolina.
May 20, 1959.*643 Hofler & Mount, Durham, for defendant appellants.
Ruark, Young, Moore & Henderson, Raleigh, for plaintiff appellee.
RODMAN, Justice.
Appellants contend: (1) The filing of the lien and claim with the receiver for $18,342 was an election to release them, which now bars plaintiff's right to proceed against them; (2) the acceptance of the Chesnutt note was a payment of the note endorsed by them; and (3) if the acceptance of the Chesnutt note did not discharge their obligation, the acceptance of the stock in Capital Investment Company was a payment and discharge.
None of these contentions rests on a solid foundation. Speedways was the real or primary debtor; defendants were only secondarily liable. The mere fact that the creditor called on the party primarily liable and sought to compel it to pay the full amount of its debt is not inconsistent with the creditor's right to thereafter call upon the party secondarily liable to discharge his obligation. Since there was no inconsistency in plaintiff's procedure, it was not called upon to make an election as to the remedy sought. Thomas v. Catawba College, 248 N.C. 609, 104 S.E.2d 175; Carrow v. Weston, 247 N.C. 735, 102 S.E.2d 134; Surratt v. Charles E. Lambeth Insurance Agency, 244 N.C. 121, 93 S.E.2d 72; Baker v. J. J. Edwards & Son, 176 N.C. 229, 97 S.E. 16.
Payment is an affirmative defense, which must be established by the party claiming its protection. Auto Finance Co. v. McDonald, 249 N.C. 72, 105 S.E.2d 193. Defendants' plea of payment, if sustained, would require us to hold that a creditor who accepts from his debtor the obligation of a third person takes it in payment, releasing the debtor from his obligation irrespective of the intent with which the new obligation is assigned and accepted. The law is otherwise. It is, we think, correctly stated by Clark, C. J., in Grady v. Pink Hill Bank & Trust Co., 184 N.C. 158, 113 S.E. 667, 668, 28 A.L.R. 660: "The note of a third person given for a prior debt will be held a satisfaction, where it was agreed by the creditor to receive it absolutely as payment, and to run the risk of its being paid. The onus of establishing that it was so received is on the debtor. But there must be a clear and special agreement that the creditor shall take the paper absolutely as payment, or it will be no payment if it *644 afterwards turns out to be of no value. A receipt in full of an account does not establish an agreement on the part of the creditor to accept as absolute payment at his own risk the note of a third person for the debt." First Nat. Bank v. Hall, 174 N.C. 477, 93 S.E. 981; Terry v. Robbins, 128 N.C. 140, 38 S.E. 470; 70 C.J.S. Payment §§ 28-29, p. 240; 40 Am.Jur. 786.
Here the court has found there was no intent to take in payment. The fact, as stipulated, that defendants as well as plaintiff participated in the receivership proceeding without protest to the charge in form of creditors' claims against the properties of Speedways supports the finding and negatives the plea of payment.
The findings establish a partial discharge of Speedways indebtedness to plaintiff. This payment was not a voluntary payment made by Speedways as to which it could direct its application, or which in default of such direction, would permit the creditor to apply as may be most advantageous to it.
The payment came as the result of a lien on Speedways' property. G.S. § 44-1. That lien applied with equal force to each part of Speedways' debt. When defendants, by endorsing the note, became in effect guarantors for Speedways, they became to that extent entitled to the protection of the statutory lien. If plaintiff had voluntarily surrendered the lien and thereby deprived defendants of its protection, they could have pleaded that act as a defense. Bank of Fayetteville v. Nimocks, 124 N.C. 352, 32 S.E. 717; Bell v. Howerton, 111 N.C. 69, 15 S.E. 891; 8 Am.Jur. 471.
The statutory lien by virtue of which plaintiff has received partial payment is analogous to a mortgage securing several notes, some of which are endorsed. The proceeds derived from its enforcement must be applied ratably to the debts secured. Kitchin v. Grandy, 101 N.C. 86, 7 S.E. 663; Whitehead v. Morrill, 108 N.C. 65, 12 S.E. 894; Demai v. Tart, 221 N.C. 106, 19 S.E.2d 130; Madison Nat. Bank v. Weber, 117 Ohio St. 290, 158 N.E. 543, 60 A.L.R. 199; Orleans County National Bank v. Moore, 112 N.Y. 543, 20 N.E. 357, 3 L.R.A. 302; Fielder v. Varner, 45 Ala. 429; Bergdoll v. Sopp, 227 Pa. 363, 76 A. 64; Hargis Bank & Trust Co. v. Gambill, 234 Ky. 538, 28 S.W.2d 769; Bancroft v. Granite Savings Bank & Trust Co., 114 Vt. 336, 44 A.2d 542.
Plaintiff, utilizing that portion of the lien which protected defendants as endorsers, has received payment of one-half, exclusive of interest, of the total debt owing to it. Appellants are entitled to have the monies received from the sale of Capital Investment Company stock applied proportionately to all of Speedways' debt both the part represented by the note and the part not so evidenced. The judgment of the Superior Court fixing the liability of appellants will be modified to conform to this opinion, and as so modified is affirmed.
Modified and affirmed.