First National Bank v. Farmers' & Merchants' National Bank

• Decision Date: 09 December 1908
• Docket Number: 21,234
• Citation: 86 N.E. 417,171 Ind. 323
• Court: Indiana Supreme Court
• Parties: First National Bank v. Farmers' & Merchants' National Bank

86 N.E. 417

171 Ind. 323

First National Bank v. Farmers' & Merchants' National Bank

No. 21,234

Supreme Court of Indiana

December 9, 1908

The Name of this Case has been Corrected October 31, 2003.

Original Opinion of May 26, 1908, Reported at: 171 Ind. 323. [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted]

OPINION

Gillett, J.

In their brief in support of the petition of the appellees seeking a rehearing herein, counsel argue that there was no consideration for the execution of the mortgage, since, under the terms thereof, appellant bank was authorized, upon default in the payment in advance of interest according to the stipulation, to exercise the option to declare the whole sum immediately due and payable.

Granting, for the sake of the argument, that said appellant could, in the circumstances, have proceeded to collect its debt without delay after the execution of the mortgage, it does not follow that it was not a bona fide incumbrancer. It is true that the mere receiving of the mortgage as a security for over-due paper was not sufficient to that end, yet if said appellant advanced any new consideration to procure the conveyance, it thereby became, so far as consideration was concerned, a bona fide incumbrancer. Busenbarke v. Ramey (1876), 53 Ind. 499; Gilchrist v. Gough (1878), 63 Ind. 576, 30 Am. Rep. 250. The question in such a case, to borrow from the language used in the leading case of Bassett v. Nosworthy (1673), Finch 102, "is not whether the consideration be adequate, but whether it be valuable."

Putting the strongest construction upon the language which provided for the exercise of the option to declare the debt due for nonpayment of the interest in advance, it nevertheless follows that appellant bank has yielded a consideration; for although, as it turned out, said appellant may have become entitled to sue immediately after the execution of the mortgage, yet the contract relative to time had a basis for a legal operation, since, during the passing of the very interval or moment on which the claim of a default might have been predicated, said appellant had, by its agreement, put itself in a situation wherein the debtor was empowered, by the payment of the interest, at least to render said appellant liable in damages, should it bring an action, as on a covenant not to sue. See Trayser v. Trustees, etc. (1872), 39 Ind. 556; Ayers v. Hamilton (1892), 131 Ind. 98, 30 N.E. 895. It therefore follows that the provision for delay constituted a consideration, and, however strongly the idea might be enforced that the promise of delay and the promise to pay the interest were strictly mutual or dependent covenants, yet the giving of the former constituted a consideration for the mortgage, since, by the immediate performance of the condition, the debtor, by force of the contract, might have gained a benefit which he would not otherwise have been entitled to. Appellant bank was not bound to yield this privilege, and, having done so, it cannot be said that the mortgage is without consideration. Indeed, it strikes us as a wholly unwarranted view that the matter of nonperformance by the debtor, upon whom performance was devolved, could in any case have anything to do with the question whether there was a consideration for a conditional promise which such party could have availed himself of, even within the shortest interval of time after the execution of the agreement. Speaking in the concrete, appellant bank, by accepting the...