Green v. Frick

• Decision Date: 26 April 1910
• Citation: 126 N.W. 579,25 S.D. 342
• Parties: SAYLES R. GREEN, Plaintiff and respondent, v. JOHN J. FRICK and MARY FRICK, Defendants and appellants.
• Court: South Dakota Supreme Court

25 S.D. 342, 126 N.W. 579 (1910)

SAYLES R. GREEN, Plaintiff and respondent v JOHN J. FRICK and MARY FRICK,

Defendants and appellants

South Dakota Supreme Court

Appeal from Circuit Court, Minnehaha. County, SD

Hon. Joseph W. Jones, Judge

Remanded

Keith & Keith, E. H. Wilson

Attorneys for appellants.

M. A. Butterfield, Sam H. Wright

Attorneys for respondent.

Opinion filed April 26, 1910

SMITH, J.

This action was brought by plaintiff in the circuit court of Minnehaha county to foreclose a purchase-money mortgage given by the defendants, John J. and Mary Frick, to secure payment of seven promissory notes dated July 9, 1894. The four first notes were for $300 each, due, respectively, December 1, 1895, 1896, 1897, and 1898, bearing interest at the rate of 7 per cent. per annum, two notes for $223 each, due, respectively, on December 1, 1900, and 1901, and one note for $224, due December 1, 1902. The last three notes bear interest at 8 per cent. per annum. This action was begun in October, 1905, and was tried upon an amended complaint served in 1908. The amended complaint was in the usual form in foreclosure actions. The defendants pleaded two separate and distinct defenses: First, the six-year statute of limitations; and, second, a special defense, which will be referred to later. None of the notes or interest were ever paid, and, as ground for interposing the six-year statute of limitations against all of the notes and the mortgage, the defendant pleaded a clause in the mortgage which provides:

"If the said parties of the first part shall fail to pay any portion of the above-mentioned sums either principal or interest promptly, and at the times they shall become due, respectively, as aforesaid, or shall neglect to pay all taxes assessed or to be assessed on said property before same shall become delinquent, or shall neglect to keep the buildings on said property insured as herein specified, then the whole sum, both principal and interest, shall at once become due and collectible."

Appellants' contention is that under this clause of the mortgage the entire indebtedness became due and collectible on default in payment of the first note due December 1, 1895, and that the whole indebtedness is barred by the six-year statute; that, the indebtedness itself being barred, the mortgage is also barred, it being merely an incident to the indebtedness. So far as the right of foreclosure alone is concerned, it is immaterial, in the view we take of this question, whether the entire indebtedness became due on default in payment of the first note. This court has held that the remedy by foreclosure is not barred by the running of the statute of limitations against the indebtedness, but that the remedy by foreclosure may be invoked at any time before the expiration of the period of limitations against the mortgage itself. The mortgage as set out in the record contains the following clause:

"In witness whereof, the said parties of the first part have hereunto set their hands and seals the day and the year first above written.

"John J. Frick. [Seal.]

"Mary Frick. [Seal.]

"Signed and sealed and delivered in the presence of: I. J. Todd. E. J. Todd."

Is such a mortgage a sealed instrument within the meaning of our statute of limitations on sealed instruments? This precise

[25 S.D. 314]

question was answered in the affirmative by this court in Philip v. Stearns, 20 S.D. 220, 105 N.W. 467, where Justice Corson says:

"In the mortgage in controversy in this action it is recited: 'In witness whereof I have hereunto set my hand and seal the day and year aforesaid.' It will thus be seen that the mortgagor intended the mortgage to be a sealed instrument, and we are of the opinion that the word 'seal' at the end of the name did make it a sealed instrument within the meaning of section 58 of the statute of limitations (Code Civ. Proc.), providing that sealed instruments shall not be barred until after the expiration of 20 years. Gibson v. Allen, 19 S.D. 617, 104 N.W. 275."

Nor is it necessary that there should be an express covenant in the mortgage to pay the debt secured thereby as contended, by respondent. Hulbert v. Clark, 128 N.Y. 295, 28 N.E. 638, 14 L.R.A. 59. The California decisions cited by appellants in support of their contention are not in point for two reasons: First. Under the statute of that state, there is no distinction between sealed and unsealed instruments as to the period of limitation. In the case of Lord v. Morris, 18 Cal. 483, that court says:

"Nor is there any distinction in the limitation prescribed between simple contracts in writing and specialties. Thus the statute requires an action 'upon any contract, obligation or liability founded upon an instrument of writing,' except a judgment or decree of a court of a state or territory, or of the United States, to be commenced within four years after the cause of action has accrued."

The indebtedness and the remedy by foreclosure were both barred by the same statute. In 1872 the common-law rule previously in force was changed by a statute which reads:

"A lien is extinguished by the lapse of time within which, under the provisions of the Code of Civil Procedure an action can be brought upon the principal obligation."

Civ. Code. Cal. § 2911. In the case of Mutual Life Ins. Co. v. Pacific, etc., Co., 142 Cal. 477, 76 Pac. 67, commenting on this statute, that court says:

"It should be remarked that section 2911 was designedly passed to change the former rule respecting the continued existence of a lien after the statute of limitations has barred the remedy upon the principal obligation. Thus the proposed Civil Code of New York (the Field Code), from which admittedly so many of the provisions of our own Code have been taken, provided (section 1605), in accordance with the common rule: 'A lien is not extinguished by the mere lapse of the time within which, under the provisions of the Code of Civil Procedure, an action can be brought upon the principal obligation.' Our own codifiers industriously changed this language, and declared that a lien is extinguished by such lapse of time. We have thus adopted a rule contrary to that existing at the common law (Taunton v. Goforth, 6 Dowl. & R. 384), and contrary therefore to the authorities of those states where the common-law rule has not been abrogated by express statute."

But under the statute in force in this state which is identical with the Field Code above quoted, it has been held by this court that the running of the statute against the indebtedness is not a bar to an action to foreclose the mortgage. In Philip v. Stearns, supra, this court says:

"Appellant further contends that, as the notes were barred by the six-year statute of limitations, the mortgage was also barred, but the latter contention is settled against the appellant by section 2039, Civ. Code, which provides: 'A lien is not extinguished by a mere lapse of the time within which, under the provisions of the Code of Civil Procedure, an action can be brought upon the principal obligation.' The law as established by our Code seems to be in accord with the general rule."

See Alexander v. Ranson, 16 S.D. 308, 92 N.W. 418, Bruce v. Wanzer, 20 S.D. 277, 105 N.W. 282; Sprague v. Lovett, 20 S.D. 328, 106 N.W. 134; Satterlund v. Beal, 12 N.D. 122, 95 N.W. 518; Hulbert v. Clark, 128 N.Y. 295, 28 N.E. 638, 14 L.R.A. 59; Cyc. 1000, and cases cited. A very complete statement of the law upon this subject in all the states will be found in a note appended to the case of Kulp v. Kulp, 51 Kan. 341, 32 Pac. 1118, 21 L.R.A. 550.

As a part of the decree for foreclosure of the mortgage, the trial court granted an order for a deficiency judgment against defendants for the amount due on those notes maturing within six years, and this portion of the judgment is assigned as error; appellants' contention being that the entire indebtedness was matured by default in payment of the first note, that a right of action then accrued, and the statute began to run against the entire indebtedness on that date. As we have seen, the running of the statute against the indebtedness in no manner affected the right of the mortgagee to foreclose his mortgage and subject the mortgaged property to the lien in satisfaction of the indebtedness. But the right to a deficiency judgment against the debtor on the notes presents an entirely different question. If the whole indebtedness was barred by the statute, no deficiency judgment could be had against the defendants. The rule that the notes and mortgage are to the construed together as evidencing the entire contract of the parties is too elementary to require citation of authorities.

But it becomes necessary to consider the effect of the provision of the mortgage above quoted, to the effect that, upon failure to pay any portion of the sums secured either principal or interest promptly when due, "then the whole sum, both principal and interest, shall at once become due and collectible." None of the notes or interest were ever paid, and the question is whether under this clause in the mortgage all the notes became due on the first default, so as to set the six-year statute of limitations running. The decisions of the courts upon this question in the different states are somewhat in conflict, and the question is now presented for the first time in this court. Some courts have construed such clauses in a mortgage or contract as in the nature of a penalty inserted for the benefit of the creditor, giving him an option to declare the whole sum due, and holding that the statute does not commence to run against his debt until he has exercised the option, or elected to declare the whole indebtedness due upon default. Other courts have construed such a provision in a bond or mortgage as fixing a contingency upon the happening of which the whole debt should mature at a date earlier than that fixed in the note...