Clark v. Paddock

• Decision Date: 22 May 1913
• Citation: 24 Idaho 142,132 P. 795
• Parties: ASAPH D. CLARK et al., Respondents, v. EMMA L. PADDOCK, Appellant
• Court: Idaho Supreme Court

132 P. 795

24 Idaho 142

ASAPH D. CLARK et al., Respondents, v. EMMA L. PADDOCK, Appellant

Supreme Court of Idaho

May 22, 1913

NOTE AND MORTGAGE-FORECLOSURE-DEFAULT IN INTEREST PAYMENT-DEFAULT PROVISION OF NOTE AND MORTGAGE CONSTRUED TOGETHER-EXERCISE OF OPTION.

1. A note and mortgage given to secure the payment of the same must be construed together as one contract, and where the provisions of the two instruments can be so construed as to give effect to the provisions contained in both note and mortgage, such construction will be given to the contract.

2. Where a promissory note provides that interest shall be paid annually "and if not so paid the whole sum of both principal and interest to become immediately due and collectible," and a mortgage given to secure the payment of the same provides that "if the interest be not paid as therein specified, then and from thenceforth it shall be optional with the said party of the second part.... to consider the whole of said principal sum expressed in said notes as immediately due and payable," etc., the provisions of the note and mortgage will be construed together with a view to giving effect to the intention of the contracting parties, and when so construed held, that a default in payment of any interest payment when due will mature the whole indebtedness of both principal and interest at the option of the holder of the note and mortgage, and that a tender of the overdue interest made before the holder elects to declare the whole debt due is in time and prevents the subsequent exercise of the option by the holder of the note and mortgage.

3. Where there is an uncertainty or ambiguity in, or inconsistency between, the stipulation contained in a mortgage and a note given to secure the same providing for the acceleration of the maturity of the principal debt, the court should follow the rule of construction which requires every provision of the contract to be given force and effect when it is possible so to do, and will place that construction upon the contract which is consistent with the provisions of both instruments and accomplishes the apparent intention of the contracting parties.

4. Where it is possible so to do, such a construction will be placed upon ambiguous, uncertain or apparently inconsistent provisions of a contract as will give protection to both parties, as against a construction which would be only in the interest of one of the parties to such contract.

5. Under the statute of this state, sec. 4520, Rev. Codes, there can be but one action for the recovery of any debt secured by mortgage on real or personal property, and that action is under the provisions of chap. 1, title 10, part 2, of the Code of Civil Procedure, which chapter is entitled "Actions for the Foreclosure of Mortgages," and the holder of a note secured by mortgage cannot maintain an action at law for the collection of his note without at the same time and in the same action proceeding to foreclose his mortgage, unless it be shown in such action that the security has become wholly valueless.

APPEAL from the District Court of the Third Judicial District for Ada County. Hon. Charles P. McCarthy, Judge.

Action for the foreclosure of a mortgage. Judgment for plaintiff. Defendant appealed. Reversed.

Reversed and remanded, with direction. Costs awarded in favor of appellant.

Good &amp Vaughan, for Appellant.

The question of estoppel arose when the tender was made to the plaintiff in the form of a draft on Feb. 27, 1911; he did not object to the form of tender or to the amount of tender. He did not intimate in any way that he had elected to declare the whole amount due, neither did he demand at the time that the whole amount of principal and interest should be paid to him. (Barnhart v. Fulkerth, 73 Cal. 526, 15 P. 89; Loughborough v. McNevin, 74 Cal. 256, 5 Am. St. 435, 14 P. 369, 15 P. 773; Oakland Bank of Savings v. Applegarth, 67 Cal. 86, 7 P. 139, 476.)

A note and mortgage, being parts of one transaction, are to be read together, and the mortgagee may rely on the provision in the mortgage making the principal due for nonpayment of interest, at his option, though the note contains no such provision. ( Trinity County Bank v. Haas, 151 Cal. 553, 91 P. 385; 35 Cent. Dig. 579; Phelps v. Mayers, 126 Cal. 549, 58 P. 1048; Meyer v. Weber, 133 Cal. 681, 65 P. 1110.)

The appellants had the right to pay the accrued interest and to defeat the right to exercise this option at any time before it had actually been exercised. (Belloc v. Davis, 38 Cal. 242; Wilson v. Winter, 6 F. 16.)

Where a mortgagor, in default as to an instalment, tenders the amount due before the mortgagee elects to treat as due the entire debt, as the mortgage authorizes him to do on default, the right of election is lost. (Sykes v. Arne, 5 Cal. Unrep. 601, 47 P. 868.)

The note and mortgage are one instrument, the same being executed at the same time. The mortgage would be of no value without the note, and the plaintiff depended upon the mortgage to secure the note as much as he did the note itself, and he treats the same as one instrument. He does not bring this action upon the note, but brings it under the statute in foreclosure. The note and mortgage must be construed together. (Foxcroft v. Mallett, 45 U.S. (4 How.) 353, 11 L.Ed. 1008; Wheeler & Watson Mfg. Co. v. Howard, 28 F. 741; Trinity County Bank v. Haas, supra.)

When a mortgage provides that the mortgagee has the right to declare and treat the entire amount secured as immediately due and payable, upon default in the payment of any instalment or of interest or of taxes due, that provision is permissive only and is not self-executing. It makes the whole debt due and collectible only in case the mortgagee so elects, and while the election is not requested to be made instantly upon the default, it must be exercised within a reasonable time thereafter. (27 Cyc. 1523; Swearingen v. Lahner, 93 Iowa 147, 57 Am. St. 261, 61 N.W. 431, 26 L. R. A. 765; Wheeler etc. Mfg. Co. v. Howard, supra; Broadbent v. Brumback, 2 Idaho 336, 366, 16 P. 555.)

Alfred A. Fraser and Charles S. Kingsley, for Respondents.

The notes sued upon in this action provide, among other things:

"Interest to be paid annually, and if not so paid, the whole sum of both principal and interest to become immediately due and collectible."

Under this provision of the note, we contend that upon the failure to pay the interest instalment when due the whole obligation matured, and an action can be commenced and prosecuted for the collection of the whole amount. (Hutchinson v. Benedict, 49 Kan. 545, 31 P. 147; New England Mtg. Security Co. v. Casebier, 3 Kan. App. 741, 45 P. 453; Rothschild v. Rio Grande W. Ry. Co., 84 Hun, 103, 32 N.Y.S. 37; Banzer v. Richter, 68 Misc. 192, 123 N.Y.S. 678; Fletcher v. Daugherty, 13 Neb. 224, 13 N.W. 207; Magee v. Burch, 108 Mo. 336, 18 S.W. 1078; Indiana etc. Ry. Co. v. Sprague, 103 U.S. 756, 26 L.Ed. 554; Kennedy v. Gibson, 68 Kan. 612, 75 P. 1044; Bull v. Edward Thompson Co., 99 Ga. 134, 25 S.E. 31; Hawes v. Mulholland, 78 Mo.App. 493; McDonald v. Elfes, 61 Ind. 279; Levally v. Harmon, 20 Iowa 533.)

The conditions of the note must prevail over those stated in the mortgage; under the circumstances of this case, the tender cannot constitute a defense, as the note itself being absolutely due and payable on default of the interest, and providing in express terms that the whole sum therein expressed should become immediately due and collectible, the only manner or method by which the plaintiff could collect this note is by this proceeding and foreclosure, as under our statute and the decisions of the court no action could be commenced to collect the note except through foreclosure proceedings. (Sec. 4520, Rev. Codes; First National Bank of Lewiston v. Williams, 2 Idaho 618, 670, 23 P. 552.)

AILSHIE, C. J. Sullivan and Stewart, JJ., concur.

OPINION

AILSHIE, C. J.

The motion made in this case to strike the agreed statement of facts and the reporter's transcript from the record is not well taken, and must be denied. The stipulation of facts constitutes a part of the evidence in the case and is referred to both in the reporter's notes and the findings of the court. The transcript of the evidence is duly settled and certified by the presiding judge in accordance with the statute.

This is an action for foreclosure of a real estate mortgage. On the 16th day of August, 1909, Asaph D. Clark, one of the respondents herein, sold to Emma L. Paddock, the appellant, a farm, and as part payment therefor received two promissory notes secured by a mortgage on the land sold. The first note was for the principal sum of $ 10,800, due August 11, 1911, and the second note was for the sum of $ 15,000, due August 11, 1914. The notes each contained the following stipulation: "Interest to be paid annually, and if not so paid the whole sum of both principal and interest to become immediately due and collectible." The mortgage contained the following stipulation with reference to any default in making payment of interest:

"But in case default shall be made in the payments of said principal sums of money or any part thereof as provided in said notes, or if the interest be not paid as therein specified, then, and from thenceforth it shall be optional with said party of the second part, his executors, administrators or assigns, to consider the whole of said principal sums expressed in said notes as immediately due and payable, although the time expressed in said notes for the payment thereof shall not have arrived."

On about August 3, 1910, the appellant paid to respondent Asaph D. Clark, the sum of $ 1,290 by draft payable to his order, and this sum was received and accepted and indorsed on the...