Harding v. Hagler

• Decision Date: 30 January 1928
• Docket Number: (No. 167.)
• Citation: 3 S.W.2d 289
• Parties: HARDING et al. v. HAGLER et al.
• Court: Arkansas Supreme Court

Page 289

3 S.W.2d 289

HARDING et al. v. HAGLER et al.

(No. 167.)

Supreme Court of Arkansas.

January 30, 1928.

Rehearing Denied March 19, 1928.

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor.

Action by Grace S. Hagler and others against J. C. Harding and others. Judgment for plaintiffs, and defendants appeal. Reversed and remanded, with directions.

Carmichael & Hendricks, of Little Rock, for appellants.

Charles W. Mehaffy, of Little Rock, and John E. Miller, of Searcy, for appellees.

McHANEY, J.

On May 11, 1923, appellees sold to Clem A. Schaer lot 1, block 13, Kimball's South Park addition to the city of Little Rock, for a consideration of $12,000, $5,500 of which was in cash and $6,500 evidenced by one note signed by said Schaer, having an accelerating clause providing that the whole amount of the note might be declared due on failure to pay any installment of interest thereon. This note was secured by vendor's lien in the deed executed and delivered to Schaer. The cash payment made by Schaer was obtained from the Union Trust Company by the execution of ten notes by said Schaer and his wife, Ethel F. Schaer, nine for the sum of $100 each, and one for the sum of $5,100, all being dated May 11, 1923, the first of said $100 notes becoming due December 1, 1923, and one $100 note due each six months thereafter, and the note for $5,100 becoming due June 1, 1928, and all of said notes being secured by deed of trust on said property. These notes were identical in form, and all contained the following clause:

"This is one of ten notes of even date aggregating $6,000, all equally secured and all of which shall become payable at election of holder upon default in payment of principal or interest of any of them."

The deed of trust executed by Mr. and Mrs. Schaer contained the following provisions:

"Said parties of the first part (Clem A. Schaer and Ethel F. Schaer) are justly indebted unto the said party of the third part (Union Trust Company) in the principal sum of $6,000.00, gold coin of the United States of America, being for a loan thereof made by the said party of the third part to the said parties of the first part, and payable according to the tenor and effect of the principal notes of Clem A. Schaer and Ethel F. Schaer."

Also:

"But if default be made in the payment of said principal or interest notes, or any of them, or any renewals or extensions thereof, when the same may become due and payable, according to the tenor and effect thereof * * * the whole of said indebtedness herein secured, shall, at the election of the party of the third part, or the legal holder or holders of the indebtedness herein secured, become and be considered due and payable, as if due and payable according to the tenor thereof."

The lien retained in the deed from appellant to Schaer was waived in the face of the instrument in favor of the notes and deed of trust to the Union Trust Company in the sum of $6,000. The $5,100 note heretofore described had interest coupons attached thereto maturing every six months, and these coupons were signed only by Clem A. Schaer. The notes due December 1, 1923, and June 1, 1924, were duly paid. In October, 1924, Clem A. Schaer died. The note becoming due December 1, 1924, was not paid at maturity, but on December 11, 1924, Mrs. Schaer took up this note and all the remaining notes in the hands of the Union Trust Company, and it made the following indorsement on each of said notes:

"For value received, we hereby sell and assign to Ethel F. Schaer, or order, all our interest in the within bond and all our rights under the mortgage securing the same, without recourse. Union Trust Company, Agent, by E. J. Bodman."

And on the same date the following indorsement was made on the margin of the record of the deed of trust securing said notes:

"Note of $100 due December 1, 1923, and note of $100.00 due June 1, 1924, having been paid, for value received, the remaining notes aggregating $5,800.00, together with the lien of this instrument and all rights hereunder, are hereby assigned to Ethel F. Schaer, without recourse, this 11th day of December, 1924. Union Trust Company, Agent, by E. J. Bodman."

Mrs. Schaer thereafter retained said notes until August 10, 1926, when she sold and assigned the same to appellants, J. C. Harding and L. J. Loeb, with similar indorsements on the notes, and the margin of the record as had theretofore been made by the Union Trust Company. Interest on the note to appellees was paid by Clem A. Schaer in his lifetime, and, after his death, three installments of interest were paid, two by Joe Schaer, trustee for Mrs. Clem Schaer, and one by Mrs. Schaer on December 7, 1925, being the last interest payment made. The interest installments due in 1926 not having been paid, appellees exercised the option in their note, declared the whole amount due and payable, and on February 21, 1927, brought suit to foreclose their lien for the whole amount of the note and accrued interest, making Mrs. Schaer and her children and appellants Harding and Loeb defendants to this action, in which they prayed a prior and paramount lien upon the property to the lien of Harding and Loeb, on the ground that the reacquisition of said notes by Mrs. Schaer from the Union Trust Company constituted a payment thereof, so far as their second lien was concerned. Appellants Harding and Loeb filed an answer and cross-complaint, setting up the facts heretofore stated relative to their acquisition of said paper; that they acquired same in good faith and due course; and that their lien was prior and paramount to the lien of appellees. Under the accelerating clause contained in said notes, they had declared the whole amount thereof due and payable, on which they prayed judgment for a first lien on said property. The court sustained the contention of appellees, entered a decree giving judgment to them for the full amount of their note and interest, and making same prior and paramount to the claim of appellants. It also gave judgment to the appellants for the amount of their notes with interest, and decreed a foreclosure thereof subject to the lien of appellees. From this judgment against them, Harding and Loeb have appealed.

The facts are undisputed and are substantially as heretofore stated. The question for our determination is: first, Whether the reacquisition of a negotiable instrument by one of the joint makers before maturity may for a consideration, and before maturity, reissue it after it has become his property; and, second, Whether, if such negotiable paper consists of a series of notes with an accelerating clause, providing that the holder may, at his election, declare all subsequent notes due if default...