Mayor and Aldermen of Town of Morristown v. Davis

• Decision Date: 27 November 1937
• Citation: 110 S.W.2d 337,172 Tenn. 159
• Parties: MAYOR AND ALDERMEN OF TOWN OF MORRISTOWN v. DAVIS et al.
• Court: Tennessee Supreme Court

110 S.W.2d 337

172 Tenn. 159

MAYOR AND ALDERMEN OF TOWN OF MORRISTOWN v. DAVIS et al.

Supreme Court of Tennessee.

November 27, 1937

Appeal from Chancery Court, Hamblen County; A. E. Mitchell Chancellor.

Suit by the Mayor and Aldermen of the Town of Morristown against R C. Davis and others. From a decree for the complainant, John R. King appeals.

Affirmed.

CHAMBLISS Justice.

This is a bill filed on the 24th day of June, 1936, to enforce liens for unpaid balances on serial obligations for tax assessments levied on abutting property for street improvements, under chapter 501, Private Acts of 1911, as amended. The chancellor overruled a demurrer raising the bar of the statute of limitations of ten years, and defendant John R. King, only has appealed.

The bill shows that the assessments were made on the 25th day of August, 1925, on which day the first of the series of ten payments maturing annually became due. It was not paid, and became delinquent ninety days thereafter; that is, November 25, 1925. It thus appears that the suit was not brought until seven months after the expiration of ten years from the date when the first installment payment became delinquent. But, the bill also shows that, in September, 1929, a few days after the maturity of the fifth of the ten annual serial payments, the defendant King paid the five installments then due, together with interest thereon according to the terms of the obligations, and the suit now pending seeks to recover only the five installments thereafter maturing, with interest thereon.

The insistence for appellant King is that, although not barred otherwise by the terms fixed for maturity, these later maturities now sued on are barred by virtue of an acceleration clause found in section 18 of the aforesaid act of 1911, which section, after providing in detail for the creation of the serial obligations, and for foreclosure in case of default, reads as follows:

"Provided, however, that upon default for the period of thirty days in the payment of any installment and interest thereon the entire unpaid assessment shall immediately become due and payable, and the lien thereon may be foreclosed and collection enforced by the municipality as above set forth or by a suit at law or in equity."

The theory advanced for appellant is that immediately upon default in payment of the first maturing, or "cash payment," installment the provision for acceleration automatically became operative, and the statute began to run from that time against all the remaining installments.

There is no suggestion that the town authorities ever at any time, in any way, undertook to declare the obligations due upon default, until this suit was brought.

It seems clear that the provision for the maturing of remaining installments of a series of installment payments upon default in payment of any one is for the benefit solely of the holder, and an option in him is plainly implied.

The question is not an open one in this state. Two cases directly in point are Wall v. Marsh, 68 Tenn. (9 Baxt.) 438, opinion by Mr. Justice McFarland, and Batey et ux. v. Walter et al. (Tenn.Ch.App.) 46 S.W. 1024, affirmed by this court December 14, 1887, opinion by Neil, J., later for years Chief Justice of this court.

Learned counsel seek to distinguish this case from those contract cases in which an option is expressly reserved to the holder to invoke or apply the acceleration provision.

In neither of these cases above cited was there an option expressly reserved to the holder. In both the provision for acceleration was, as here, "direct and positive," to quote the words of Neil, J., in rejecting recognition of the distinction here urged. The headnote to Wall v. Marsh clearly states the holding well reasoned in the opinion. It reads:

"A stipulation in a promissory note, bearing interest payable annually, that upon a failure to pay interest annually the note shall be due, is a provision for the benefit of the payee, which he may waive, and cannot be taken advantage of by the maker of the note."

In the Batey Case, two notes were involved, and the plea of the ten-year statute was directly in issue. The clause in the notes read as follows: "If either of said notes should not be paid at maturity, or within thirty days after demand for the same, after they shall become due, then they shall both become due."

The learned justice said:

"It is contended by the original complainant that, the first note not being paid at maturity, the second note also became due at once under the terms of the mortgage; therefore that 10 years elapsed from the legal maturity of the second note before the filing of either the original bill or cross bill. It is also contended, if this position is erroneous, still that the mortgage was an existing lien at the date of the passage of the act, and must have been enforced within 10 years from the date of the act. The act was passed on the 20th of February, 1885. Under the first contention it is insisted, therefore, that the bar of the statute ran against the mortgage on the 18th of February, 1896, and under the second contention that it ran against the mortgage on the 20th of February, 1895; so that, in either event, it is claimed by the complainant that the mortgage is barred under the act.

"The first contention is thoroughly met by Wall v. Marsh, 9 Baxt. 438. See, also, a recent discussion on the same subject by this court in the case of Doran v. O'Neil, 37 S.W. 563. It is shown in the authorities referred to that provisions of the character appearing in the mortgage, above copied, are intended for the benefit of the mortgagee, and not for the mortgagor, and that the latter cannot take advantage of them. The provisions in each of the cases referred to were quite as positive and direct as those appearing in the mortgage we have under consideration. We deem it unnecessary to further discuss this subject."

We find nothing in later opinions of this court at variance with these holdings. On the contrary, while not dealing directly with this particular question, expressions in the opinion of Mr. Justice Green in White v. Hatcher, 135 Tenn. 609, at page 616, 188 S.W.61, seem to recognize that a note is not matured by operation of an acceleration clause until exercise of his option by the holder. And in two very recent opinions by Mr. Justice McKinney, National L. & A. Ins. Co. v. Varner, 171 Tenn. 95, 100 S.W.2d 662, and Davis v. Union Planters Bank, 171 Tenn. 383, 103 S.W.2d 579, 582, the first discussing the effect of an acceleration clause upon the liability of indorsers, and the second, upon the negotiability of paper, the acceleration clauses appear to be recognized as operative at the option of the holder. Indeed, in the course of the opinion in the latter case it is incidentally remarked that, "the holder can ignore the acceleration clause," etc.

As pointed out in some opinions, a rule which left no option to the holder would frequently work a hardship on the maker, tending to complicate the granting to him of indulgence.

A number of courts of other jurisdictions have...