Farmers and Merchants Bank v. Copple

• Decision Date: 07 July 1962
• Docket Number: No. 42838,42838
• Citation: 190 Kan. 170,373 P.2d 219
• Parties: FARMERS AND MERCHANTS BANK, Mound City, Kansas, a Corporation, Appellee, v. Murray T. COPPLE, a/k/a Tim Copple, and Opal Copple, a/k/a Opal H. Copple, husband and wife, Appellants.
• Court: Kansas Supreme Court

Page 219

373 P.2d 219

190 Kan. 170

FARMERS AND MERCHANTS BANK, Mound City, Kansas, a Corporation, Appellee, v. Murray T. COPPLE, a/k/a Tim Copple, and Opal Copple, a/k/a

Opal H. Copple, husband and wife, Appellants.

No. 42838.

Supreme Court of Kansas.

July 7, 1962.

Syllabus by the Court

1. In a foreclosure action on a note and mortgage, the real estate mortgage incorporated in the petition contains specific clauses wherein the mortgagors covernant to pay the debt which it secures according to the terms of an accompanying promissory note, and to procure insurance in a specified amount and keep said insurance up on the mortgaged premises; and also contains a provision that in case default is made in keeping the insurance up, the mortgagee may keep the premises insured at the expense of the mortgagors, and the mortgage should stand as security for the amount paid by the mortgagee with interest at 10%; and further contains a provision that upon default of the conditions set forth in the mortgage, or any one of them, which are stated in the disjunctive, the whole debt should become due and the mortgage become subject to foreclosure at the option of the mortgagee. On appeal from an order overruling a demurrer to the petition it is held: (a) A default in the payment of insurance premiums when due by the mortgagors served, at the option of the mortgagee, to accelerate the maturity of the note; and (b) the payment of insurance premiums on the last day of the grace period by the mortgagee did not prevent the mortgagee from maintaining an action in foreclosure upon the note and mortgage, all as more particularly set forth in the opinion.

2. Where a note and mortgage are executed on the same date and as a part of the same transaction between the same parties, they will be read and construed together and the terms and conditions of the real estate mortgage given as security for the promissory note are part of the entire loan transaction, so that a breach of the conditions set forth in the mortgage, or any one of them, if they be stated in the disjunctive, serves, at the option of the mortgagee, to accelerate the maturity of the note, although there is nothing due upon the note according to its terms.

3. The right to declare a promissory note due and foreclose a real estate mortgage given as security for the note, for failure of the mortgagors to keep the premises insured in accordance with a covenant in the mortgage, is not, on the facts in Syllabus p1, dependent upon the premises being uninsured, but is dependent upon failure of the mortgagors to keep the insurance up in accordance with the agreement--by the payment of insurance premiums when due.

Harry C. Blaker, Pleasanton, was on the brief for appellants.

Leighton A. Fossey, Mound City, argued the cause, and John H. Morse, Mound City, was with him on the brief for appellee.

The opinion of the court was delivered by SCHROEDER, Justice.

This is an action on a promissory note secured by a real estate mortgage seeking judgment against the defendants and foreclosure of the mortgage. Appeal has been duly perfected from an order of the trial court overruling a demurrer to the plaintiff's petition.

The question presented is whether the petition alleges sufficient facts to accelerate the maturity of the note. Included within the foregoing question is whether the petition expressly alleges a breach of the condition in the mortgage requiring the mortgagors to keep the premises insured for the benefit of the mortgagee.

The note and mortgage are in ordinary form. The petition alleges the execution and delivery of a promissory note to the plaintiff dated the 4th day of December, 1960, wherein the defendants agreed to pay the plaintiff three years after date the sum of $15,000 with interest at 6% per annum payable semiannually. A copy of the note was attached to the petition, and the only condition specified in the note which is material to this appeal reads:

'* * * If any part of this note or installment thereof, or interest thereon is not paid as herein specified, this note shall at once become due, at the option of the holder, and bear ten per cent interest thereafter. * * *'

The note indicates that it was secured by a real estate mortgage, No. 2556, and specifies that it is due December 4, 1963.

The petition further alleges that to secure payment of the note the defendants at the same time and as part of the same transaction executed and delivered to the plaintiff a properly signed and acknowledged real estate mortgage, bearing the date of September 4, 1960, covering fourteen lots of real estate in the city of Mound City, Kansas. The real estate mortgage was attached to and made a part of the petition by reference. The conditions of the mortgage material to this appeal read as follows:

'And this conveyance shall be void if such payment be made as in said note, and as is hereinafter specified, and the said parties of the first part hereby agree to pay all taxes assessed on said premises before any penalties or costs shall accrue on account thereof, and to keep the said premises insured in favor of said mortgagee in the sum of Fifteen Thousand and no/100 DOLLARS, in some insurance company satisfactory to said mortgagee, in default whereof the said mortgagee may pay the taxes and accruing penalties, interests and costs, and insure the same as the expense of the parties of the first part; and the expense of such taxes and accruing penalties, interests and costs, and insurance, shall from the payment thereof be and become an additional lien under this mortgage upon the above described premises, and shall bear interest at the rate of ten per cent per annum. But if default be made in such payment or any part thereof, or interest thereon, or the taxes assessed on said premises, or if the insurance is not kept up thereon then this conveyance shall become absolute and the whole principal of said note, and interest thereon and all taxes and accruing penalties and interest and cost thereon remaining unpaid or which may have been paid by the party of the second part, and all sums paid by the party of the second part for insurance, shall be due and payable, or not, at the option of the party of the second part; * * *' (Emphasis added.)

The petition then alleges said mortgage was duly recorded and the registration tax was duly paid. It alleges:

'4. That defendants have paid the seim-annual installment of interest in the amount of $450.00, due March 4, 1961, but that on or about July 8, 1961, plaintiff was advised by the Farm Bureau Mutual Insurance Company that installment insurance premiums on the following described premises in the amounts shown were in default:

'Lot 4, Block 42, City of Mound City, Kansas, $13.38;

'Lots 1 and 2, Block 37, City of Mound City, Kansas, 13.29;

'Lots 7 and 8, Block 31, City of Mound City, Kansas, 16.25;

and that unless said premiums were paid the insurance policies on said premises would be cancelled effective 12 o'clock noon July 21, 1961; that defendants failed and neglected to pay said premiums and that plaintiff, on July 21, 1961, in order to avoid cancellation of such insurance, paid said insurance premiums in the total amount of $43.02; that by the terms of said mortgage said amount becomes an additional lien under said mortgage, to bear interest at the rate of 10% per annum.

'5. That the plaintiff is the present owner and holder of said note and mortgage and have and do hereby declare the whole of said sums with interest thereon as aforesaid due and payable by reason of the default of said defendants as provided by the terms and conditions of said mortgage.' (Emphasis added.)

The petition concludes with a prayer for...