Merrimon v. Parkey

• Decision Date: 15 January 1917
• Citation: 191 S.W. 327,136 Tenn. 645
• Parties: MERRIMON ET AL. v. PARKEY ET AL.
• Court: Tennessee Supreme Court

191 S.W. 327

136 Tenn. 645

MERRIMON ET AL. v. PARKEY ET AL.

Supreme Court of Tennessee.

January 15, 1917

Appeal from Chancery Court, Blount County; Hal H. Haynes Chancellor.

Suit by W. B. Merrimon and others against W. C. Parkey and others, in which respondents filed a cross-bill. From a decree, both parties appeal. Modified, affirmed, and remanded.

H. H Shelton, of Winston-Salem, N. C., and Robert L. Pennington of Bristol, Va., for complainants.

L. D. Smith, of Knoxville, John P. Davis and Montgomery & Montgomery, all of Tazewell, and John C. Crawford, of Mayville, for defendants.,

WILLIAMS J.

On February 13, 1906, W. C. Parkey and Jesse L. Rogers, being the owners of a tract of land of 4,564 1/2 acres, conveyed a three-fourths undivided interest therein to H. E. Fugate, A. J. Moles, and W. S. Moles for a consideration of $42,792.19, a part of which was paid in cash. In order that each of the vendors might receive and handle his own portion of the purchase-money notes, these were executed in two series, of three notes of $6,132.03 each, maturing in one, two, and three years, respectively, from date.

Each note contained a recital that interest thereon "is payable annually," and another that:

"If suit is instituted upon this note or it is placed in the hands of an attorney for collection, we agree to pay ten per cent. attorney's fee, same to be taxed up in judgment."

The purchasers of the land, in order to secure the payment of these notes, executed a deed of trust in which there was conveyed to a trustee the same "undivided three-fourths interest" in the tract of land.

On June 5, 1906, A. J. Moles and W. S. Moles, two of the mortgagors, executed to W. B. Merrimon and Peter Parkey a deed reciting that they conveyed "to the parties of the second part jointly an undivided interest" in the tract of land. The parties to this deed understood that it conveyed a one-half undivided interest in the realty. The consideration was $50 cash and "the assumption of the payment of the six notes of $6,132.03 each" described above.

On March 8, 1907, Peter Parkey conveyed to C. E. Couk and R. L. Pennington jointly the one-fourth undivided interest of Peter Parkey in the tract, for a consideration of $500 and "the assumption of the payment of one-third of" certain notes of the series originally executed to W. C. Parkey and Jesse L. Rogers, "making a total consideration of $6,176.04 payable to W. C. Parkey and Jesse L. Rogers." The deed is expressly made subject to the deed of trust securing the series of notes above described.

Couk and Pennington, it appears, have since paid the principal and interest accrued on the notes so far as assumed by them.

Later on, Rogers took from Fugate two notes to represent balances of the last maturing notes that were originally executed to Rogers as payee, under a written agreement to the effect that they were to be deemed renewal notes and to constitute parts of the obligations secured by the deed of trust, and not to effect any novation. The chancellor held correctly that there was no novation of the debt in the taking of such notes by Rogers.

The assumptions were evidenced in two ways: (a) By recitals to that effect incorporated in the deed executed and delivered to the assumers; and (b) by indorsements of the contracts of assumption on the back of the notes so assumed, except in the case of Couk and Pennington.

The Merrimon interest in the tract was incumbered by subsequent deeds of trust and legal proceedings.

Various payments were made by the several original obligors on the series of notes, and some were made by those who later became obligors by way of assumption of payment. The balances being long past due, the trustee under a power of sale incorporated in the deed of trust on request of the noteholders advertised a foreclosure sale. This sale was enjoined by the original bill of the subvendees, in which it was claimed that they should be treated as sureties, and that they were released from liability by such extension granted; the note obligations were attacked for partial failure of consideration on account of the asserted deficiency in the acreage (a claim abandoned in the chancery court); and the bill also set out that there was a false claim of right on the part of defendants to compound interest on the notes. The holders of the notes answered, and filed a cross-bill in which foreclosure of the trust deed was prayed.

Many subordinate, kindred, and collateral questions have been raised; in fact, a statement of all the facts of and contentions in the case would call for much repetition, be voluminous, and tend more to confuse than to clarify. The principles that solve the above issues avail also to illustrate and solve all of the main issues that involve questions of law, and we refrain from a more detailed recital of the facts.

Two appeals were prayed from the decree rendered by the chancellor--one by the noteholders who filed the cross-bill, the other by the subvendees of the original purchasers of the tract of land.

I. Treating first of the assignments of error of the holders of the notes, cross-complainants:

The stipulation for the payment of interest on the notes annually is valid, and binding on the maker, or an indorser or one who has assumed the payment of the notes. House v. Tenn. College, 7 Heisk. (54 Tenn.) 129; Lane v. Railroad Co., 13 Lea (81 Tenn.) 547.

But it has operative effect only to the date of the maturity of the note, after which time interest must be computed without annual rests.

The rule is thus stated in 22 Cyc. 1516:

"After the maturity of the principal debt upon which interest is payable in periodical installments, no installments of interest will be considered as coming due, in the absence of a specific contract to that effect, for both the principal and interest are due on every day thereafter until paid, and interest will not be allowed on interest that accrues merely by lapse of time after the maturity of the principal debt. But where there is an agreement for the payment of interest periodically after the maturity of the principal debt as well as before, interest will be allowed on installments of interest falling due after maturity of the principal and unpaid."

We think the true rule is more accurately stated, in regard to the necessity of such contract being specific, in 16 Am. & Eng. Enc. L. (2d Ed.) 1071:

"In the absence of all contract, expressed or implied, for interest beyond the maturity of the principal debt, annual interest thereafter is not recoverable, though there may be a provision therefor in the contract, before the principal falls due."

The chancellor's decree in so limiting the allowance of compound interest was correct.

As already noted, the mortgage notes, and the renewal notes, contained the usual provision for a 10 per cent. attorney fee; and the holders insist that since they were put to the necessity of establishing liability on the part of those who assumed to pay the mortgage debt, and of foreclosing the lien of the mortgage or trust deed, the fee should not only be allowed in their behalf as a liability of the assumers in personam, but also should have been decreed to have the security of the lien of the mortgage, treating the fee as a part of the notes.

In this state a fee so provided for in a note is a constituent part of the obligation, enforceable by or in behalf of the holder, and it is not considered to be a distinct obligation or penalty to be enforced in behalf of the attorney or as a separate cause of action.

The liability of one who assumes to pay such a note includes liability for the attorney fee. 8 Corpus Jur. 1098; Franklin v. The Duncan, 133 Tenn. 472, 182 S.W. 230; Daly v. Drug Co., 127 Tenn. 425, 155 S.W. 167, Ann. Cas. 1914B, 1101--the last being a case of involuntary assumption or of imposition by law.

If the purchaser of mortgaged premises assumes the mortgage in general terms, "he becomes liable for all that may be actually due upon it, which may include * * * attorney's fees." 27 Cyc. 1356, citing Johnson v. Harder, 45 Iowa, 677; and see Hatcher v. Kinkaid (Okl.) 150 P. 182.

A vendee assuming an existing trust deed or mortgage on the land takes the incumbrance as it stands, subject to all the conditions touching the mortgage debt. 27 Cyc. 1347. He cannot show that the debt is different, or payable in a manner different, from its terms. 2 Jones on Mortgages (7th Ed.) § 744.

Where a note contains a stipulation for the payment of an attorney's fee, and is secured by a mortgage containing no such stipulation, such fee, on being incurred, becomes a...