Cowing v. Cloud

• Decision Date: 10 June 1901
• Citation: 16 Colo.App. 326,65 P. 417
• Parties: COWING v. CLOUD et al.
• Court: Colorado Court of Appeals

65 P. 417

16 Colo.App. 326

COWING v. CLOUD et al.

Court of Appeals of Colorado

June 10, 1901

Appeal from district court, Saguache county.

Suit by Rufus B. Cowing against Margret J. Cloud and others. From a judgment in favor of defendants, complainant appeals. Reversed.

Stuart D. Walling, for appellant.

W.E Cox, for appellees.

THOMSON J.

On the 2d day of December, 1892, Pryor M. Cloud executed and delivered to the Colorado Securities Company his promissory note, whereby, for value received, he promised to pay to the order of the Colorado Securities Company $600 on the 1st day of December, 1897, with interest after maturity at 2 1/2 per cent. per annum. Interest coupons for $21, each representing the interest on the principal sum at the rate of 7 per cent per annum until maturity, and payable, respectively, on the 1st days of June and December, in the years 1893, 1894, 1895 1896, and 1897, were attached to the note. The note contained an agreement that, in case any interest coupon should remain due and unpaid for a period of 30 days, the note and accrued interest should, at the option of the legal holder, become due and payable; and the instrument embracing the note contained a further agreement that, if the note and interest should not be paid in full at maturity, the maker should pay an additional sum of $50 as an attorney's fee. On the face of the note, the maker reserved a privilege of paying it at the expiration of three years. The note and coupons were, by their terms, payable at the office of the Importers' & Traders' National Bank, New York City, or at Denver, Colo., at the option of the holder. Cloud secured the payment of this note by a trust deed of land. Henry J. Aldrich was the trustee named in the instrument. The trust deed was duly recorded immediately upon its execution. On the 27th day of December, 1892, the Colorado Securities Company, for a valuable consideration, indorsed and delivered the note to Rufus B. Cowing. Cowing resided in the city of New York, and, as the coupons matured, presented them at the office of the Importers' & Traders' National Bank in New York City, where they were paid, down to and including the coupon due December 1, 1894. On the 7th day of February, 1895, Henry J. Aldrich, the trustee named in the trust deed, executed and delivered to Cloud a deed of release and quitclaim of the premises conveyed by the trust deed, which deed of release recited that the note and interest had been fully paid. The note remained continuously in the possession of Cowing after its assignment to him, and no interest after December 1, 1894, nor any part of the principal, was ever received by him. Shortly after the execution of the release, Aldrich absconded.

This proceeding was instituted by Cowing against Cloud to obtain a decree setting aside the deed of release, foreclosing the trust deed, and subjecting the land to the payment of the debt. The complaint, in addition to other necessary facts, alleged that the deed of release was executed without the authority or knowledge of the plaintiff. Cloud answered, alleging payment of the note and interest in full to Aldrich. During the pendency of the proceeding, Cloud died, and his heirs and the administrators of his estate were substituted as defendants. Judgment was rendered for the defendants, and the plaintiff appealed.

The fact of the purchase of the note by the plaintiff from the payee for value, before maturity, is conclusively established. In argument, the following propositions are submitted to us in behalf of the defendants: First, that because, by its terms, the note might become payable at an earlier date than that fixed by itself for its payment, and because the instrument contained an agreement for the payment of an attorney's fee in case of default by the maker in the payment of the note, the note was not negotiable, and the title of the plaintiff is not that of an innocent purchaser of negotiable paper before maturity; second, that this is not a suit upon the note, but a proceeding to set aside the release and foreclose the deed of trust, and the deed of trust is not a negotiable instrument; third, the plaintiff constituted the Colorado Securities Company his agent for the collection of his coupons, or, at least, he estopped himself to deny that it was his agent for that purpose; ergo, payment of the note to that company was payment to the plaintiff.

1. The note contained a promise to pay a sum certain within a time certain. On the 1st day of December, 1897, the note would become due, and, if it should not be paid on that day, the maker would be in default. The maker had the privilege, which he might exercise or not, of paying it earlier, or, in case of a failure in the payment of an interest coupon for 30 days after it should become payable, the entire debt, and all accrued interest, would, at the option of the legal holder of the note, be immediately due and payable; but notwithstanding conditions might arise causing the note to mature earlier than the 1st day of December, 1897, on that day it was, in any event, payable. The note was therefore negotiable, unless its negotiability was destroyed by the agreement to pay an attorney's fee. Daniel, Neg.Inst. § 43; Frost v. Fisher, 13 Colo.App. 322, 58 P. 872. But that agreement was no part of the note. Before it could become enforceable, a cause of action upon the note must have accrued to the holder, and payment of the note, in full, at maturity, would render it void. The note was negotiable, notwithstanding the agreement. Seaton v. Scovill, 18 Kan. 433, 21 Am.Rep. 212; Sperry v. Horr, 32 Iowa 184; Gaar v. Banking Co., 11 Bush, 180, 21 Am.Rep. 209; Dorsey v. Wolff, 142 Ill. 589, 32 N.E. 495, 18 L.R.A. 428.

2. It is true that this is a proceeding to cancel the release deed and foreclose the mortgage. It is also true that there are decisions to the effect that, because a mortgage is not a negotiable...