
    MINKS et v BYERLY et
    Ohio Appeal, 5th Dist, Stark Co
    No 1794.
    Decided October 11, 1936
    Merle D. Evans, Massillon, for apnellant.
    Charles M. Murphy, Massillon, and Austin, Smythe & Sweeney, Canton, for appellee.
   OPINION

By LEMERT, J.

The plaintiffs in the court below by way of Petition alleged that on the 9th day of August, 1928, the plaintiffs, together with the defendants, Rudolph W. Byerly and Florence Caillet, nee 'Florence M. Byerly, in the city of Massillon made and executed their promissory note, in writing, in the words and figures following:

“$3500.00 Massillon, Ohio, Aug. 9, 1928
FOR VALUE RECEIVED we promise to pay to the order of THE FIRST SAVINGS AND LOAN COMPANY OF MASSILLON, OHIO, of which we are members, THIRTY FIVE HUNDRED Dollars ($3500.00) together with interest, and such taxes, assessments and insurance as arc in default, in monthly installments of not less than THIRTY FIVE Dollars ($35.00) each, payable at the office of the company on or before the 15th of each calendar month, during the continuance f the loan. Said payments shall be credited to said members on the last day of April and October each year as follows:
First: To the payment of interest on said loan for said six months period or fraction thereof, at the rate of six per cent, per annum, provided the regular monthly payments above set forth are paid on or before the date stipulated. In default of any of said installments being paid as provided above, the interest for the current period shall be at the rate of seven per cent, per annum.
Second: To the payment, at the option of said company, of' such taxes, assessments, insurance and other liens, with interest i hereon at seven per cent, as may be paid by the Company on property securing this loan.
Third: The balance of said payments shall be credited on the principal of the loan.
If any payment required hereby be unpaid for a period of two miotbs, the entire amount of this obligation shah ihereuoon become due and payable at the option of the Company.
It is agreed and understood that at any time after six months from the date hereof the whole amount then unpaid on this loan shall, at the option of said Company, become due and payable and the mortgage or other security enforced for the payment thereof.
Clyde M. Minks
Sarah M. Minks
Florence M. Byerly
Rudolph W. Byerly
Endorsements thereon:
FOR VALUE RECEIVED (I or we) hereby agree to pay interest on this note at the rate of 6%% per annum, provided payments are made as stipulated in said note, and if not made as stipulated, at the rate of 7% per annum, from the 1st day of May, 1930, and ratify this note in all other particulars.
Feb 19, 1930.
Rudolph Byerly
Oct. 1, 1934
For $1 and other valuable consideration we hereby transfer without recourse on us all our right, title and interest in and to the within note to Clyde and Sarah Minks.
The First Savings & Loan Co.
By Arthur J. Ellis, Secretary.”

To this petition in the court below defendants demurred, for the following reason: That it appears upon the face of the petition that the facts therein contained do not constitute a right of action in favor of the plaintiffs and against defendants. The court below sustained this Demurrer, and error is prosecuted to this court upon questions of law.

This is an action of the plaintiffs against the defendants upon the note hereinbefore set forth, alleged to have been signed by the plaintiffs, the defendant Rudolph W. Byerly, and Florence M. Byerly, now known as Florence Caillet. ;

Plaintiffs allege in their petition that on or about September 8, 1934, there was a balance of $1167 due and owing on said note, and that the defendants, Rudolph Vv. Byerly and Florence M. Caillet failed and neglected to pay that amount.

The plaintiffs further alleged that they were compelled to pay said note and that they did so pay the said balance remaining due and owing on said note on or about the 1st day of October, 1934.

Now these plaintiffs attempt to found their action on the pro.m'ssory note, which they alleged in their petition nas been paid.

The note set forth in plaintiff’s petition is in the form of and therefore is a negotiable note under §8224 GC.

The plaintiffs in this action, Clyde M. Minks and Sarah M. Minks, are, according to the note set forth in the petition, principal debtors. They are makers on the note and were, under the Ohio General Code governing negotiable instruments, primarily liable on said instrument. The note, according to the petition, contained a provision that if any payments required to be made on said note remained unpaid after a period of two months the entire amount of the obligation was due at the option of the named payee and holder. The petition al-. leges that the named payee-holder did exercise its option to declare the whole amount due and required them, said plaintiffs, to pay off the balance of $1164 then remaining unpaid. The plaintiifs did therefore come mto possession of the note at or after maturity and therefore became holders of the instrument and the instrument was thereby discharged.

We are of the opinion that the purported assignment of The First Savings & Loan Company, the named payee and holder of the note, to the plaintiffs, is therefore in law a mere nullity. Th's we believe to oe the law' of Ohio as evidenced by a long list of authorities, w'hieh we believe is unnecessary here to recite at great lerigth, but we do take occasion to refer to the 60th Ohio State, at page 27., In that case the action was brought by the plaintiff in error to be subrogated to the rights of a mortgage creditor to whom, as a surety of the ancestoi of defendants in error, he had paid the mortgage debt. The sufficiency of the petition was the only question before that court, the same as in the instant case. The court in its opinion in that case, at page 34, says:

“Where a surety who pays a debt of his principal takes from the creditor an assignment of the securities the creditor held, there arises no necessity for an appeal to equity, for - the surety, by the concurrent acts of himself and the creditor, has .become vested with the. legal title to the securities, and under our system of jurisprudence may sue on the securities, in his own name. According to the doctrine that generally prevails, and as we think the better doctrine, where he has not taken this precaution, a surety cannot maintain an action at law on the security, for at law the payment extinguishes the security whatever its nature may be, whether a note, a judgment or a mortgage. In such case it is chose principles peculiar to our system of equitable jurisprudence that preserve the securities for the benefit of the surety and subrogate him to the rights of the creditor. This'right of subrogation thus arising is purely and simply, a creature of that system of jurisprudence to which it owes its existence. But for that system which we call equity, the right of subrogation would not arise.”

This case is authority for the proposition that merely paying off an obligation does not in this state, at least, operate as a subrogation to securities but that it wili be necessary to bring a special equity proceeding before subrogation.

In a very well considered Nisi Prius case, Elsea v Pepple, 12 Nisi Prius, 468, the court there held:

“A surety who pays his principal’s promissory note when due has a cause of action against him for reimbursment, but where the note is not in judgment and independent of the security, lien or preference, the action in favor of the surety arises upon the implied promise of tile principal to save him harmless in the premises and is barred in six years under the provisions of §11222 GC, notwithstanding the note has been assigned to the surety by the payee.”

The Court further said:

“It is argued m support of the plaintiff’s contention that the same principle which entitles a surety to a subrogation to the rights of the creditor or securities for the debt applies with equal force to the debt, itself. This argument is without reason or authority where the debt is independent of any securities.”

The case at bar seems to he on all fours with the foregoing case, and it is apparent that the assignment of the note gave no lien or preference. We are aware of the fact that the decisions in other states are not uniform, but following the 60 Oh St 27, and 12 O. N. P. (N.S.) 468, the court finds that the surety in this case cannot base an action upon the note, itself, and for that reason we are of the opinion that the court below was right in substaining the Demurrer to the .petition. The judgment will be affirmed. Exceptions may be noted.

MONTGOMERY, PJ, and SHERICK, J, concur.  