Noell v. Gaines

• Decision Date: 31 October 1878
• Citation: 68 Mo. 649
• Parties: NOELL v. GAINES, Appellant.
• Court: Missouri Supreme Court

68 Mo. 649

NOELL

v.GAINES, Appellant.

Supreme Court of Missouri.

October Term, 1878.

Appeal from Chariton Circuit Court.--HON. G. D. BURGESS, Judge.

Kinley & Wallace for appellant.

1. The note and deed of trust were executed contemporaneously, and were dependent on each other; the deed of trust providing that the notes could be declared due for a failure to pay the annual interest. This contract governed and controlled the time for the payment of the notes. 2. If the terms of a contemporaneously executed deed of trust can prevent a note from becoming due, as provided by its terms, why cannot the deed of trust thus executed, authorize the holder of the note to declare it due, before its maturity, as expressed on its face. If he does so, should he not notify the indorser, so he can protect himself, for instance, by seeing that the security to be sold under the deed of trust brings its value, or at any rate enough to prevent any sacrifice in the sale of the land. 3. When Noell elected to declare the notes due and payable, he at once should have notified the indorser, and thus have given him an opportunity to have secured the balance due, if any, after the sale of the trust property. 4. Noell declaring said note due on account of failure to pay annual interest, made the note absolutely due, hence the necessity for the demand, notice of non-payment and protest, before the indorser could be held. Brownlee v. Arnold, 60 Mo. 79; Waples v. Jones, 62 Mo. 440. In Whitcher v. Webb, 44 Cal. 127, the court held that in a note containing the condition that upon a failure to pay interest quarterly, the holder of the note might declare it due, and upon such failure, the holder elected to declare such note due, as in the case at bar, that such election on the holder's part made the note absolutely due. The case at bar is similar, except the authority to declare the note due before it matures by its terms, is not found in the note, but in the contemporaneously executed deed of trust, which all the authorities agree is part of the note, and controls it, so far as to prevent its maturing at the time fixed for it to become due. 2 Parson's Cont., 553, and cases there cited. We urge that the note could not become due for one purpose, at the wish of respondent, and not become due absolutely, for all purposes.

Charles A. Winslow for respondent.

The record presents but one question for solution: What effect did the provisions of the trust deed have upon the maturity of the notes? In other words, did these provisions have any other and greater effect than to mature all the notes for the purpose of distributing the funds arising on the sale of the land? It is submitted with confidence that they did not, and that for all other purposes the notes matured according to their face. Morgan v. Martien, 32 Mo. 438; Mason v. Barnard, 36 Mo. 384. There is no similarity between this case and Brownlee v. Arnold, 60 Mo. 79. The provisions of the deed of trust in that case were peculiar and very explicit; and the strong language used furnishes the only reason justifying the application of the rule cited, to instruments of this kind. Surely, the rule cannot be applied generally to all deeds of trust. That case does not in the slightest degree conflict with the two cases cited above, which are precisely like the case at bar, and should control in its determination. In Whitcher v. Webb, 44 Cal. 127, the provision relied on was in the body of the note, and the case, therefore, is not relevant. Waples v. Jones, 62 Mo. 440, decides nothing in addition to Brownlee v. Arnold, 60 Mo. 79, and there is not the slightest conflict between these cases and Morgan v. Martien, 32 Mo. 438, and Mason v. Barnard, 36 Mo. 384. In fact, they are in perfect harmony, and together decide the law correctly. The difficulty with the appellant is, that his case falls within the latter cases, and not within those he cites. 2. Parson's Cont., 553, and the cases cited in note, simply maintain the general rule of construction, about which we make no question, and do not otherwise bear on the case at bar.

SHERWOOD, C. J.

The note in suit is as follows, towit:

“BRUNSWICK, Mo., February 26th, 1872.

Three years after date, I promise to pay to the order of Henry L. Gaines, $500, for value received, negotiable and payable, without defalcation or discount, and with interest from date at the rate of ten per cent. per annum; and if interest be not paid annually, to become as principal, and bear the same rate of interest.

(Signed)

TURGEN WILL.”

Upon which note was the following indorsement: “This note is secured by deed of trust, stamped according to law.”

The petition alleged the due presentment of the note for payment, at the late residence of the maker, on the 1st day of March, 1875, and the due notification to the indorser of non-payment. No point is made as to the form of the protest.

The cause was submitted to the court upon the following agreed statement of facts: It is agreed that the note sued on is one of two notes, executed by Turgen Will to H. L. Gaines, which were secured by a deed of trust herewith filed and made part of this agreement, by which, on non-payment of the interest to become due annually, or of either note as it should become due, it should have the effect of making all the notes secured as aforesaid due and payable; that before the maturity of either of said notes, either by their terms or the terms of the trust deed, the notes were all, for value received, transferred and assigned by written indorsement on their backs, by H. L. Gaines to H. M. Noell; that Noell, before the actual maturity of either note, on account of default in payment of interest becoming due annually on said notes, elected to declare them due and payable, and sold the land thereunder, and that after said sale the note sued on, by its terms, became due and was duly protested, as set forth in plaintiff's petition.

The deed of trust, so far as concerns the present inquiry, is as follows: “But, should the first party fail or refuse to pay the said debt or the said interest, or any part thereof, when the same or any part thereof shall become due and payable according to the tenor, date and effect of said notes, then the whole shall become due and payable, and this deed shall remain in full force and effect, and the said party of the second part, * * at the request of the legal holder of the said notes, shall, or may proceed to sell,” &c. John H. Townsend was the trustee. This suit is brought for the balance due on the note declared on, the sale of the property incumbered failing to realize a sufficient sum. Judgment went for plaintiff, causing this appeal.

The salient question in the case before us is, whether the proper steps were taken “to fix the indorser” thus converting his conditional liability into an absolute engagement. And the proper solution of this question depends upon the like solution of another, viz.: Whether, under the agreed facts, the notes matured according to their face, or whether such maturity was limited and controlled by the terms of the contemporaneously executed deed of trust. It is but the statement of common learning to assert, that instruments executed at the same time and with regard to the same transaction, and making reference to each other, are but one in the eye of the law. 2 Smith's Lead. Cases, 259, et seq. and cases cited; 2 Pars. Cont., 553, and cases cited; 1 Greenl. Ev., § 283, and cases cited; Washington Mut. Fire Ins. Co. v. St. Mary's Seminary, 52 Mo. 480. Nor is it even necessary to give this rule operation, this principle application, to make two instruments virtually one, that refer to each other in terms. 2 Smith's Lead. Cases, Id.

The principle followed in Brownlee v. Arnold, 60 Mo. 79, was but an enunciation of the familiar rule above noted. There the deed of trust executed at the same time as the notes secured thereby, provided that the notes should not become due, nor the deed be foreclosed until the fourth note should mature. The first note was, after its maturity, transferred to a third party, who, for the purpose of an ordinary recovery, brought suit thereon, and we held the action prematurely brought, holding that it was perfectly competent for the original parties thus to contract; that the notes and deed of trust should be “read together and regarded as one instrument,” and that a purchaser with notice of the note falling, according to its face, first due, occupied no better footing than the original payee. So, also, in Waples v. Jones, 62 Mo. 440, pursuing the same line of decisions where notes made payable in three years were secured by deed of trust, which provided that if the interest (made payable annually) was not paid when it fell due, the whole debt should become immediately due, and the trustee might proceed to sell, it was ruled that the trustee rightfully exercised the power of sale on the occurrence of default as to the first year's interest, request being made by the holder of the notes.

In Stanclit v. Morton, 11 Kas. 218, the mortgage debt was payable in four years, but the mortgage contained a provision, that if the annual interest was not paid when falling due, or the taxes were not paid when the law made them payable, the whole mortgage debt should become forthwith due. It was held in an action of foreclosure, that by reason of the default in the payment of taxes, the whole debt had become due, and a number of authorities are cited in support of the conclusion reached. In Whitcher v. Webb, 44 Cal. 127, the notes were secured by a mortgage; the notes bore interest payable quarterly, with the additional proviso, “that if default were made in this respect, the notes should become due at the option of the holder.” The mortgage also contained a clause providing for foreclosure for the entire sum, principal and interest, if the latter were not paid according to stipulation. And in that case the judgment awarding foreclosure was...