Buss v. Kemp Lumber Co.

• Decision Date: 07 January 1918
• Docket Number: No. 2070.,2070.
• Citation: 170 P. 54,23 N.M. 567
• Parties: BUSSv.KEMP LUMBER CO.
• Court: New Mexico Supreme Court

23 N.M. 567

170 P. 54

BUSS

v.KEMP LUMBER CO.

No. 2070.

Supreme Court of New Mexico.

Jan. 7, 1918.

Syllabus by the Court.

The statute of limitations commences to run against a cause of action on a note upon default of payment of interest, where the note provides that “in case of a default in the payment of any interest payment, then the whole principal sum shall become due and collectable.”

A judgment creditor, having a general lien upon the property of the mortgagor, may plead the statute of limitations against the cause of action of the mortgagee on a note and mortgage.

Possession of mortgaged land by mortgagee, with consent of mortgagor, does not toll the statute of limitations. No such exception is provided by statute, and the court will not create an exception not provided by law.

Appeal from District Court, Eddy County; Richardson, Judge.

Suit by George H. Buss against the Kemp Lumber Company, John H. Fox, and another. Judgment for plaintiff, and the Kemp Lumber Company appeals. Reversed, with directions to overrule the demurrer to appellant's answer.

Hanna, C. J., dissenting in part.

Possession of mortgaged land by mortgagee, with consent of mortgagor, does not toll the statute of limitations. No such exception is provided by statute, and the court will not create an exception not provided by law.

R. C. Reid, of Roswell, for appellant.

Gibbany & Epstein, of Roswell, for appellee.

PARKER, J.

This is a suit by George H. Buss, appellee, against John H. Fox, E. F. Hardwick, and the Kemp Lumber Company, to recover a personal judgment against Fox, obtain a foreclosure of a mortgage executed by Fox, and determine the priority of claims between the appellee and Hardwick and the Kemp Lumber Company. The Kemp Lumber Company has perfected this appeal from a judgment rendered by the trial court in favor of the appellee. The facts, as gathered from the pleadings, are:

That on March 16, 1909, John H. Fox executed his note for $8,000, and to secure the payment thereof executed a mortgage and delivered same to Buss. The note contained the usual provisions, with this addition:

“In case of a default in the payment of any interest payment, then the whole principal sum shall become due and collectable. ***”

The note provided that the principal sum should be paid on or before March 16, 1912. On June 11, 1909, the Wagnon Lumber Company recovered a money judgment against Fox. It was assigned to the appellant, the Kemp Lumber Company, on June 29, 1910, and a transcript of the judgment was docketed in the office of the county clerk on December 14, 1911. The mortgage was not filed for record until the 22d day of April, 1915. On May 3, 1916, the appellant filed a suit to revive its judgment in the district court, and that suit was pending when the case at bar was instituted.

[1] 1. The trial court determined this case upon the demurrer of appellee to the answer of appellant. The first question is whether the statute of limitations had run against the note and mortgage at the time this suit was instituted. The appellant contends that the statute of limitations began to run from the date of the default in the payment of the interest specified in the note-September 17, 1909-and not on March 16, 1912, the time specified for the payment of the principal. The appellee contends that the acceleration clause in the note implies that the holder is vested with the option of declaring the note due and payable in the event of a default in the payment of the interest, and the option not having been exercised, the statute did not begin to run until March 16, 1912. The trial court agreed with this contention. The question is one of first impression here. An examination of the cases discloses that such clauses have not been uniformly construed by the courts. The following statement appears in 17 R. C. L. “Limitation of Actions,” § 161:

“Where a mortgage is given to secure several notes which fall due at different dates, the statute of limitations commences to run as to each note at maturity, and is not postponed until the maturing of the last note. But according to some authorities where a mortgage contains an acceleration clause to the effect that if there shall be a default of the payment of interest the principal sum secured shall forthwith become due and payable, the right of action to recover the principal accrues at once upon such a default, and the statute of limitations then begins to run against that right; it being said that such a clause is not a one-sided affair vesting a mere option in the mortgagee, but confers a right upon the mortgagor, equal with that given the mortgagee, to insist upon it and receive whatever advantage he can from its enforcement. ***”

In the same section it is also said that other authorities hold that such a provision merely gives the option to the holder to declare the principal sum due and payable upon a default in the payment of interest; the theory of such cases being that the clause is inserted for the benefit of the mortgagee, the option of such a character being a mere penalty. A collection of most of the cases on this subject will be found in the note to the case of Hall v. Jameson, reported in 12 L. R. A. (N. S.) 1190. See, also, Central Trust Co. v. Meridian, etc., Co., 51 L. R. A. (N. S.) 151. A well-discussed case holding that the clause is in the nature of an option is Core v. Smith, 23 Okl. 909, 102 Pac. 114. It is apparent that the reason for the adoption of that rule by that court is predicated upon the objection that the other rule makes it necessary for the holder of negotiable instruments containing such an acceleration clause to look elsewhere than to the instrument itself to determine when the same matures. We do not deem that such an objection warrants the court in making a contract for the parties. We prefer to hold with the rule announced by the court in the well-considered case of Snyder v. Miller, 71 Kan. 410, 80 Pac. 970, 69 L. R. A. 250, 114 Am. St. Rep. 489. The apparent reason for the adoption of that rule in that case was on account of the logic of the following statement contained in a case cited by that court:

“But a more fundamental consideration is that the parties made the contract. *** Its language excludes the idea that the creditor may or may not ‘treat the debt as due.’ It becomes due in fact. If an election were all that the parties intended, words appropriate to that purpose should have been used.”

The same quoted case also contained this statement:

“The question at last is one of construction of the language used, and that which makes it mean just what it says is not without reason or good authority to support it. ***”

In Green v. Frick, 25 S. D. 342, 126 N. W. 579, the same doctrine was followed. The court said:

“But to hold that a contract is optional which by its express terms is plainly absolute is unwarranted by any known rule governing the construction of contracts.”

Our conclusion, therefore, is that the statute of limitations began to run in the case at bar upon the default in the payment of the interest installment.

[2] 2. The second question presented is whether a judgment creditor of a mortgagor may plead the statute of limitations against a cause of action by a mortgagee against the mortgagor, the judgment debtor-the suit being on the note and to foreclose the mortgage. The trial court held that the defense of the statute was personal to the mortgagor, and not having pleaded it for himself the judgment creditor was in no position to plead it for him. In 17 R. C. L. “Limitations of Actions,” § 331, it is said:

“Although it is generally true that the statute of limitations is a plea personal to the debtor, which he may use or waive, as he pleases, and which one who is a stranger to him, standing in no relation of privity of estate with him, cannot use, yet where there is a privity between the party who could, if sued, plead the statute and the party offering to plead it, the latter may plead it to save his property. Such is the case with heirs, vendees, unless the grant is fraudulent, and mortgagees. Broadly speaking any person who claims title to, or interest in, any real estate may invoke the aid of the statute of limitations as against a claimant whose claim is prior in time to the person invoking the aid of the statute, where the prior claim has been barred by the statute of limitations.”

A general statement of the doctrine will also be found in 25 Cyc. 1004, and in 14 A. & E. Enc. L. (2d Ed.) 184. In the last-mentioned work it is said that the rule is grounded upon privity of interest, and obtains with reference to strangers, although the latter, by being denied the right to plead the statute, may be seriously affected by the failure of the common debtor to plead the statute for himself. A majority of the cases sustain the view that a judgment creditor, in cases like those at bar, is in privity of estate with the mortgagor, his judgment debtor, and that he may plead the statute of limitations. In such cases it would seem on principle that no distinction can be made between the right of a judgment creditor to plead the statute and the right of a junior mortgagee. In the note to the case of Hopkins v. Clyde, reported in 104 Am. St. Rep. 737, the subject is fully discussed and most of the authorities cited. In Wood v. Goodfellow, 43 Cal. 185, 188, it was held that when third persons have subsequently acquired interests in the mortgaged property they may invoke the aid of the statute of limitations against the mortgage, even though the mortgagor may have elected to waive its benefits. See, also, Watt v. Wright, 66 Cal. 202, 5 Pac. 91; California Bank v. Brooks, 126 Cal. 198, 59 Pac. 302; Wilde v. Stephens, 1 Wyo. 366. Brandenstein v. Johnson, 140 Cal. 29, 73 Pac. 744, and De Voe v. Rundle, 33 Wash. 604, 74 Pac. 836, hold that a judgment creditor may plead the statute of limitations in cases like the one at bar. North...