Lincoln Nat. Life Ins. Co. v. Kelly

• Decision Date: 05 March 1945
• Docket Number: 6956.
• Citation: 17 N.W.2d 906,73 N.D. 622
• Court: North Dakota Supreme Court

17 N.W.2d 906

73 N.D. 622

LINCOLN NAT. LIFE INS. CO. v. KELLY.

No. 6956.

Supreme Court of North Dakota

March 5, 1945

Syllabus by the Court.

1. There can be no mortgage without an existing debt which is secured thereby.

2. In this state the distinction between sealed and unsealed instruments has been abolished.

3. A written contract is presumed to have been made for a sufficient consideration.

4. The contract contained in a note and the contract contained in a mortgage given to secure the debt represented by the note, are separate contracts. These contracts are of equal dignity. They afford separate remedies.

5. The statute of limitations bars the remedy to which it applies but does not extinguish the debt.

6. The six year period of limitation fixed by sec. 28-0116 R.C.1943, applies to a cause of action based upon a note. Where the mortgage securing the debt represented by the note contains a promise to pay the debt, that promise constitutes a contract contained in a mortgage affecting the title to real property; to the remedy for the enforcement of that contract the ten year period of limitation prescribed by sec 28-0115, R.C.1943, applies.

Nilles Oehlert & Nilles, of Fargo, for plaintiff and appellant.

Walter O. Burk, of Williston, for defendant and respondent.

MORRIS Judge.

This is an appeal from a judgment dismissing plaintiff's action on the ground that it is barred by the six year statute of limitations, sec. 28-0116, R.C.1943. The facts are all stipulated. On August 14, 1925, John Heffernan procured a real estate loan from the Royal Union Life Insurance Company in the amount of $7,782.75 which was evidenced by eleven promissory notes in various amounts and due at annual intervals from January 1, 1926 to January 1, 1936, inclusive. As security the mortgagor executed a real estate mortgage in writing covering certain lands in Williams County. The mortgage contains a description of the notes as to dates, amounts, due dates, place of payment, and rate of interest, and in addition thereto provides that: 'And the said John Heffernan do further covenant and agree to and with the said party of the second part, its successors, executors administrators and assigns, to pay said sum of money above specified at the time and in the manner above mentioned together with all the costs and expenses if any there shall be, and, also, in case of the foreclosure of this mortgage, the statutory attorney's fees in addition to all sums and costs allowed in that behalf by law, which said sum is hereby acknowledged and declared to be a part of the debt hereby secured, and which shall be assessed and payable as part of said debt, and that he will pay all taxes and assessments of every nature that may be assessed on said premises, or any part thereof, previous to the day appointed by law for the sale of lands for town, city, county or state taxes.'

The mortgage was assigned to the plaintiff on March 17, 1934. The mortgagor defaulted with respect to the principal and interest of the notes due in 1932, 1933, 1934, and 1935 and failed to pay taxes on the lands covered by the mortgage for the years 1931, 1932, 1933, and 1934, whereupon the plaintiff on February 28, 1935, declared the entire amount of the loan due and payable in accordance with the terms of the mortgage and instituted foreclosure proceedings. The mortgaged premises were sold at foreclosure sale on July 2, 1935. After applying the amount realized upon the sale there remained a deficiency of $2,049.40.

John Heffernan died on March 20, 1942. His will was admitted to probate and the defendant and respondent was appointed administratrix with the will annexed. The plaintiff filed a claim against the estate within the time and in the manner provided by law, which claim was disallowed. The plaintiff then instituted this action in which it seeks to recover a judgment for the deficiency and interest thereon from the date of sale. There was no redemption from the sale.

The defendant sets up in her answer that the entire amount of the notes was declared due by the plaintiff on February 28, 1935, that more than six years elapsed thereafter and before the commencement of this action, and that the plaintiff's right to recover is barred by the statute of limitations.

At the time this action was commenced the state of limitations had become a defense against any recovery upon the notes but no statute of limitations had run against the mortgage. The statute applicable to the mortgage is sec. 28-0115, R.C.1943, which reads as follows:

'The following actions must be commenced within ten years after the cause of action has accrued:

'1. An action upon a judgment or decree of any court of the United States or of any state or territory within the United States;

'2. An action upon a contract contained in any conveyance or mortgage of or instrument affecting the title to real property except a covenant of warranty, an action upon which must be commenced within ten years after the final decision against the title of the covenantor; and

'3. Any proceeding for the foreclosure of a mortgage upon real estate.'

The statute applicable to the notes is sec. 28-0116, R.C.1943, the first paragraph of which reads:

'The following actions must be commenced within six years after the cause of action has accrued:

'1. An action upon a contract, obligation, or liability, express or implied, subject to the provisions of section 28-0115;'.

The appellant contends that the promise of the mortgagor to pay the debt is a contract contained in a mortgage affecting the title to real property, and that the ten year statute applies to that promise and further urges that the promise contained in the mortgage may be enforced within ten years even though a suit upon the notes is barred by the six year statute.

The determination of the application of our statutes of limitations may be aided by some historical references. The legislature of the Territory of Dakota in the Revised Codes of 1877 abolished distinctions between sealed and unsealed instruments. Sec. 925, Civil Code 1877. That code, however, retained a statute of limitations of twenty years with respect to actions upon sealed instruments. Code of Civil Procedure 1877, sec. 53. Sec. 54 then provided a limitation of six years for 'an action upon a contract, obligation, or liability, express or implied, excepting those mentioned in section fifty-three.'

The abolition of distinctions between sealed and unsealed instruments has continued down to the present time. See sec. 9-0611, R.C.1943. When the territorial legislature abolished distinctions between sealed and unsealed instruments it also provided 'a written instrument is presumptive evidence of a consideration.' Sec. 914, par. 2, Civil Code 1877. This provision now appears as sec. 9-0510, R.C.1943. Thus any written contract is presumed to have been made for a sufficient consideration.

When the state legislature adopted the Revised Code of 1895 it dropped the provision of the territorial code providing a twenty year statute of limitations for sealed instruments and enacted a ten year limitation with reference to 'an action upon a contract contained in any conveyance or mortgage of or instrument affecting the title to real property except a covenant of warranty, an action upon which must be commenced within ten years after the final decision against the title of the covenantor' (sec. 5200, par. 2, R.C. 1895), which is the same provision that we now find in par. 2 of sec 28-0115, R.C.1943. Sec. 5201, R.C.1895, provided a six year...