Reetz v. Pontiac Realty Company

• Decision Date: 11 April 1927
• Docket Number: 25448
• Parties: Louis Reetz v. Pontiac Realty Company, Appellant
• Court: Missouri Supreme Court

293 S.W. 382

316 Mo. 1257

Louis Reetz v. Pontiac Realty Company, Appellant

No. 25448

Supreme Court of Missouri

April 11, 1927

Appeal from Circuit Court of City of St. Louis; Hon. Franklin Miller, Judge.

Affirmed.

Buder & Buder for appellant.

(1) All of the terms, conditions and agreements contained in the deed of trust or mortgage were incorporated into and became an integral part of the bond or note sued on, by reason of the express reference thereto embodied in said bond or note, and by reason of the recording of said deed of trust or mortgage. Muren v. Southern Coal & Mining Co., 177 Mo.App 600; St. Louis-Carterville Co. v. South. Coal & Min Co., 194 Mo.App. 598; Brinsmade v. Johnson, 192 Mo.App. 693; Belleville Savings Bank v. South. Coal & Min. Co., 173 Ill.App. 253; Grant v. Winona & Sw. Ry. Co., 85 Minn. 431; Batchelder v. Council Grove Water Co., 29 N.E. 801; Jones on Corporate Bonds & Mortgages, see. 196a, page 219. (2) Plaintiff, and every other purchaser of bonds, was advised, actually and constructively, that he was brought into contractual relations with his co-bondholders, and that his absolute rights with respect to an individual suit or action on his bond, or foreclosure, or collection of principal or interest were limited and restricted by reason of his contract with his co-bondholders, and the provisions of the deed of trust or mortgage. Muren v. South. Coal & Min. Co., 177 Mo.App. 600; McClelland v. Norfolk S. Railroad Co., 110 N.Y. 469; Grant v. Winona & Sw. Ry. Co., 85 Minn. 431; Batchelder v. Council Grove Water Co., 29 N.E. 801, 14 N.Y.S. 306. (3) It was permissible and competent for the bondholders to agree among themselves upon what condition any individual bondholder might exercise his power of action. And a provision in the trust deed that no proceeding at law or equity should be instituted by any bondholder until after the refusal of the trustee to proceed, or to comply, with the demand of a certain percentage of the holders to bring action upon the bonds or mortgage is reasonable and valid. And such provisions do not divest the bondholder of any common-law rights, nor attempt to oust the courts of their jurisdiction, but are merely certain conditions imposed by all bondholders upon each individual bondholder in respect to the exercise of their rights. Siebert v. Railroad, 53 N.W. 1134; Belleville Savings Bank v. South. Coal & Min. Co., 173 Ill.App. 250; Boley v. Railroad, 64 Ill.App. 305; Guiliford v. Ry. Co., 48 Minn. 560. (4) The bond sued on provided for the payment of five per cent interest. Therefore the bond would continue to carry the five per cent rate after maturity until the same was paid or until judgment was rendered. The court erred, therefore, in rendering judgment against defendant for interest after maturity at the rate of six per cent on said bonds. Border v. Barber, 81 Mo. 636; Macon County v. Rodgers, 84 Mo. 66; Broadway Savings Bank v. Forbes, 79 Mo. 226; Moore v. Macon Savings Bank 22 Mo.App. 684; Briscoe v. Kinealy, 8 Mo.App. 76.

Foristel, Mudd, Hezel & Habenicht, James T. Blair, Frank X. Heimenz and Bryan, Williams & Cave for respondent.

(1) The bonds sued on constitute the primary obligation for the debt, while the mortgage securing the payment of the bonds is a mere incident thereof, and the bond itself, and as alleged in the petition, contains an absolute promise on its face to pay the sum of $ 1,000 on July 1, 1922. Because of this absolute promise and because of the rule of law that provisions in an agreement in derogation of the common law should be strictly construed and that a deed of trust must be strictly construed against the grantor, the provisions in the deed of trust relied upon by the defendant to bar the present action should be rigidly construed. Rothschild v. Railway Co., 74 N.Y. 103; Cook on Corporations (8 Ed.) sec. 807, p. 3608; Reinhardt v. Telephone Co., 71 N.J.Eq. 70. (2) The right of a bondholder to sue at common law on the absolute promise contained in his bond is not affected by remedies provided in the deed of trust given as security for its payment unless the provisions in the deed of trust exclude such right in express terms. Muren v. South. Coal & Min. Co., 177 Mo.App. 606; Manning v. Ry. Co., 29 F. 838; Mt. Sterling Company v. Bank, 147 Ky. 376; Kimber v. Gunnell Gold Min. & Mil. Co., 126 F. 137; Fleming v. Fairmont Railroad, 72 W.Va. 835; Marlor v. Tex. Pac. Railroad Co., 19 F. 867; Lyon v. Railroad Co., 15 N.Y. 348; Montgomery Society v. Francis, 103 Pa. 378; Western Pennsylvania Hospital v. Librarian Hall Co., 189 Pa. 269. (3) A mere reading of the foregoing provisions of the deed of trust alleged and relied upon by the defendant limiting the right to sue or have relief only upon the mortgage itself precludes the idea that they can be construed so as to exclude in express terms the right to sue on the bonds. (4) The mere fact that the deed of trust provides for a remedy or remedies by the trustee in case of default in the payment of principal or interest does not, either expressly or by implication, prohibit an action at law by the holder of a past due bond. Cases supra. (5) If the provisions of the mortgage pleaded by appellant are construed as appellant contends they should be, thereby preventing respondent from bringing suit on the bonds, then such provisions, so construed, directly limit or at least tend to limit the time in which an action may be brought on the bonds, and all such conditions are void. Sec. 2166, R. S. 1919; Cobble v. Royal Neighbors, 291 Mo. 125. (6) The bonds sued on having provided for the payment of interest at the rate of five per cent per annum from date until maturity and containing no provisions whatever with reference to the rate of interest after maturity plaintiff is entitled to receive interest at the rate of six per cent per annum from and after maturity because no other rate has been agreed upon for that time. Secs. 6491, 6493. R. S. 1919.

OPINION

Gantt, J.

The petition is in eight counts on eight serial real estate building bonds in the sum of one thousand dollars each, interest at five per cent until maturity.

Appellant admitted the execution of the bonds sued on; that by such bonds it promised to pay to the bearer or holder on July 1, 1922, the sum of $ 1,000 each; that the bonds had been duly authenticated and that interest had been paid thereon until July 1, 1922.

It was further pleaded that (1) each of said bonds was one of a series of bonds for the aggregate amount of $ 350,000, and the payment of both principal and interest was secured by a mortgage on the properties therein described, and that the bonds provided; "which deed of trust or mortgage is hereby referred to and by such reference made a part of this bond;" (2) that the mortgage referred to and mentioned in said bonds was a part of said bond; (3) that the mortgage provided (a) that if default should be made in the principal sums of money in said bonds mentioned, whether the same shall have become due by election or by the regular maturity of said bonds twenty years after date thereof, then the trustee named shall thereupon be entitled to the immediate possession of said premises and shall be authorized to receive and collect the rents and profits thereof; (b) that if default shall be made in the payment of said bonds, whether the same become due by election or by regular maturity, then the trustee, its successors and assigns, at the request of the holders of one-fourth value of said bonds, shall proceed to sell said property described in said mortgage upon such terms as provided therein, and shall distribute the proceeds thereof as therein provided; (c) that the trustee should not be obliged to foreclose the mortgage or to sell the property unless upon a concurrent request in writing signed by the holders of not less than one-fourth in amount of said bonds then outstanding and upon adequate indemnity to the trustee; (d) that any default or breach of the covenants herein may be waived by said trustee upon being so instructed by a majority in interest of the holders of bonds, and that no holder or holders of any bond or bonds shall have the right to institute any suit, action or proceeding at law or in equity for the forecloseure of the mortgage or for the appointment of a receiver or any other action, suit or remedy hereunder or hereupon without first giving thirty days' notice.

Further answering, the defendant alleges that the payment of the principal of said bonds has been waived by the trustee in said mortgage upon the instruction of the majority in interest of the holders of the bonds, and that more than three-fourths in amount in interest in the bonds have waived default in the payment of the principal, and have extended the time of payment of the principal to July 1, 1925.

And the defendant further alleges that the plaintiff has not given to the trustee thirty days' notice in writing of any default in the payment of the bonds, and that plaintiff has not requested the said trustee to institute any action on the bonds under the mortgage.

All of the latter portion of the answer, setting out the provisions of the mortgage deed of trust, was stricken out by the trial court as constituting no defense; and the defendants having failed to plead further, judgment was entered for the plaintiff on the pleadings.

Defendants filed its motion to set aside the judgment on the pleadings and for a new trial, which was by the court overruled, and defendant appealed.

I. Appellant contends the covenants and agreements of the mortgage were an integral part of the bonds. This contention rests on the following clause in the bonds: "Which deed of trust or mortgage is hereby referred to and by such reference made a part of this bond." The...