Cafritz Const. Co. v. Mudrick

• Decision Date: 31 May 1932
• Docket Number: No. 5470.,5470.
• Parties: CAFRITZ CONST. CO. v. MUDRICK et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

61 App. DC 189, 59 F.2d 864 (1932)

CAFRITZ CONST. CO. v. MUDRICK et al.

No. 5470.

Court of Appeals of the District of Columbia.

Argued April 11, 1932.

Decided May 31, 1932.

Milton Strasburger, of Washington, D. C., for appellant.

Jacob N. Halper, of Washington, D. C., for appellees.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, and GRONER, Associate Justices.

MARTIN, Chief Justice.

An appeal by plaintiff from a judgment entered by the lower court after plaintiff had elected to stand upon its amended declaration, to which a demurrer had been interposed and sustained.

The amended declaration alleges, in substance, that on February 14, 1930, the defendants executed and delivered to Morris Cafritz their two certain promissory notes, payable to his order; the first note calling for $3,500 payable in monthly installments of $45 each until paid, the second note being for $1,000, payable one year after date. The notes were secured by a deed of trust executed by the defendants upon certain real estate owned by them, which contained an acceleration provision to the effect that upon default of payment of any installment of the debt the property might be sold and the proceeds applied to the payment of any sum remaining unpaid upon the notes, whether due or not, and containing the following stipulation, to wit: "It being agreed that said notes shall, upon such sale being made before the maturity of said notes, be and become immediately due and payable at the election of the holder thereof."

Each of the two notes when executed and delivered had written upon its face the following inscription, to wit: "This is to certify that this is the note described in a deed of trust to the trustees named hereon, and bearing even date herewith, said deed of trust and note having been executed in my presence. J. Miles Miller, Notary Public, D. C." — and also the following statement, to wit: "Given as deferred purchase money and secured by second deed of trust on lot 83, square 3207, Arthur J. Bridgett and Milton Strasburger, trustees."

The notes and deed of trust were afterwards duly assigned and transferred by the payee to appellant. After default of payment of one of the installments a sale was made under the deed of trust, and, after the application of the proceeds upon the debt, a part of the debt remained unpaid. This balance was not yet due and payable according to the terms of the notes, if taken alone, but plaintiff claimed judgment for it under the acceleration clause contained in the deed of trust.

The lower court sustained a demurrer to the amended declaration, the plaintiff elected nevertheless to stand upon it, and judgment was entered against it. This appeal followed.

The appeal presents a single question, to wit, whether the acceleration clause in the deed of trust as aforesaid will be limited to a foreclosure for the full amount of the notes, or whether under such conditions it will mature the debt itself. It is our opinion, based upon both principle and authority, that the clause matured the entire debt, and that the ruling of the lower court was erroneous.

It first should be noted that the present issue is raised by the debtors who signed the notes and deed of trust, and not by any third parties such as guarantors or others who might have become liable upon the notes. Accordingly the defendants concededly stipulated in the deed of trust that, upon sale being made thereunder before full maturity of the notes, the notes should thereupon be and become immediately due and payable at the election of the holder. There is no reason apparent why the defendants should not be held to their admitted contract. It is true that the acceleration clause appears in the deed of trust and not in the notes, but "it is elementary that, when separate writings are executed between the same parties at the same time, in the course and as part of the same transaction, and intended to accomplish the same general object they are to be construed as one and the same instrument." 8 C. J. 196. Especially is this true where one instrument refers to another as in the present case.

It is suggested that, if an acceleration clause should be enforced in such a case, the effect would be to destroy the negotiability of the note. But, if the parties chose to issue a nonnegotiable note, they are certainly entitled to do so. However, it has been definitely settled that the negotiability of a note is not affected by the fact that it might at the option of the holder and by reason of the default of the maker, become due at a date earlier than that fixed. Bowie v. Hume, 13 App. D. C. 286, 311; Smith v. Nelson Land & Cattle Co. (C. C. A.) 212 F. 56; Chicago Ry. Co. v. Merchants' Bank, 136 U. S. 268, 10 S. Ct. 999, 34 L. Ed. 349.

Our view is fully sustained by the federal decisions, and by a decided preponderance of state cases.

In Gregory v. Marks, 8 Biss. 44, 10 Fed. Cas. page 1194, No. 5802, it was held by District Judge Blodgett that, where a clause in a trust deed provided that the indebtedness secured thereby was to become wholly due and payable in case of default in the payment of interest, the note and trust deed, being contemporaneous instruments,...