Schnug v. Schnug

• Decision Date: 17 May 1969
• Docket Number: No. 45327,45327
• Citation: 454 P.2d 474,203 Kan. 380
• Parties: George H. SCHNUG, Appellant, v. Pearl A. SCHNUG, Appellee.
• Court: Kansas Supreme Court

Page 474

454 P.2d 474

203 Kan. 380

George H. SCHNUG, Appellant, v. Pearl A. SCHNUG, Appellee.

No. 45327.

Supreme Court of Kansas.

May 17, 1969.

Syllabus by the Court

1. In construing a contract it is not within the province of the court to reform the instrument by rejecting words of clear and definite meaning and substituting others therefor.

2. Ambiguity in an instrument arises when application of pertinent rules of interpretation to an instrument as a whole fails to make certain which one of two or more meanings is conveyed by the words employed. Ambiguity does not arise from the total omission of language which one party insists should have been inserted.

3. A note 'payable on demand' is due immediately, and an action may be brought on it at once without demand other than suit.

4. One seeking to reform an instrument on grounds of mutual mistake has the burden of proving that the mistake was mutual.

5. In the absence of proof of fraud or mutual mistake, an unambiguous written contract must be enforced according to its terms, and evidence of parol understanding at variance therewith cannot be considered.

6. When findings of fact are attacked for insufficiency of evidence, or as being contrary to the evidence, the power of this court begins and ends in determining whether there is any competent substantial evidence to support the findings, and when so supported they are accepted as true and will not be disturbed on appeal.

7. Where a promissory note secured by a mortgage is barred by the statute of limitations, an action to freclose the mortgage cannot be maintained.

R. Bowland Ritchie, Wichita, argued the caused and was on the briefs, for appellant.

Robert L. Driscoll, Wichita, argued the cause, and Verne M. Laing, Ferd E. Evans, Jr., Ralph R. Brock, Joseph W. Kennedy, C. Robert Bell, Jr., and Robert I. Guenthner, Wichita, were with him on the briefs, for appellee.

KAUL, Justice.

This was an action to recover on a promissory note and to foreclose a real estate mortgage given as security. The plaintiff was unsuccessful and appeals from a judgment rendered in favor of defendant on the ground the note was barred by the statute of limitations.

The plaintiff and defendant were married in September, 1961, and their marriage was dissolved on July 31, 1963, by divorce in the District Court of Sedgwick County. All property rights of the parties were settled in that proceeding.

The instant action was commenced on May 18, 1965. It has been in this court once before. (Schnug v. Schnug, 197 Kan. 174, 415 P.2d 283.) There the trial court sustained defendant's motion for summary judgment on the ground that the indebtedness, evidenced by the promissory note, was barred by divorce proceedings between the parties in 1963. On appeal we reversed, holding the divorce decree did not preclude plaintiff's action. We also held that defendant's answer raised genuine issues of material fact and remanded the case to the district court for trial of those issues.

On November 1, 1957, defendant-appellee, then named Pearl Hachtel-a single woman, executed and delivered to the plaintiff-appellant her promissory note in the amount of $1,631.09. As security for payment of the note, she executed and delivered to plaintiff a second mortgage upon real estate owned by her in the City of Wichita. The promissory note provided that it was 'payable on demand after date.' The mortgage was on a short form and reads in pertinent part as follows:

'* * * to secure the payment of a promissory note in the amount of $1631.09 with interest thereon at 6% per annum from date payable on demand to George H. Schnug.

'This is a second mortgage to a $2000.00 mortgage previously executed to the Railroad Building Loan & Savings Association and said first mortgage is excepted from the warranty hereof. Dated this first day of November 1957.

'/s/ Pearl Hachtel

'Pearl Hachtel.'

After remand of the case to district court, plaintiff amended his petition and alleged four reasons why his action was not barred by the statute of limitations, as pleaded by defendant in her answer. Plaintiff alleged in substance: (1) The defendant made three payments on the promissory note on October 11, 1960, December 15, 1962, and January 15, 1963, which tolled the statute of limitations; (2) the statute of limitations did not commence to run until March 21, 1965, when plaintiff demanded payment of the promissory note; (3) the promissory note and real estate mortgage contained ambiguous language which should be construed to make the note payable only after a prior lien on the property had been liquidated; and (4) a mutual mistake of fact by the parties caused the promissory note to be 'payable on demand' rather than after the prior lien on the property had been liquidated.

With issues thus framed the case went to trial and judgment was rendered in favor of defendant. After plaintiff filed a motion for a new trial, the trial court determined the case should be reopened to allow plaintiff to produce evidence concerning a mutual mistake of fact as to the note and mortgage. After hearing the evidence referred to, the trial court on June 5, 1967, made findings of fact and concluded that no mutual mistake of fact existed between the parties; that the note was barred by the statute of limitations, and the real estate mortgage could not be foreclosed since the note was barred by the statute of limitations.

Plaintiff again filed motions for a new trial and in the alternative to amend findings of fact and conclusions of law, both were overruled. Thereafter plaintiff perfected this appeal.

Plaintiff contends the statute of limitations did not commence to run on the promissory note until after a note and first mortgage on the real estate were paid in full. He argues that since the note and mortgage sued on were executed by defendant at the same time, in the course of the same transaction and because they concern the same subject matter, they must be construed together; and that the parties intended the promissory note was not to become due until after the first mortgage had been removed from the property.

Plaintiff's position appears to be that the court should look beyond the instruments because: (1) The note and mortgage construed together gave rise to an ambiguity or (2) in the alternative a mutual mistake of fact existed between the parties at the time the note and mortgage were executed.

In order to sustain his assertion of ambiguity, plaintiff must first mesh his case with rules governing the construction of a written contract. These rules are well summarized in Oliver v. Nugen, 180 Kan. 823, 308 P.2d 132, where the court said:

'It is a judicial function to interpret a written contract which is free from ambiguity and does not require oral testimony to determine its meaning. Ambiguity in a written instrument does not appear until the application of pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning. (Klema v. Soukup, 175 Kan. 775, 267 P.2d 501.) If a written contract is actually ambiguous concerning a specific matter in the agreement, facts and circumstances existing prior to and contemporaneously with its execution are competent to clarify the intent and purpose of the contract in that regard but not for the purpose of varying and nullifying its clear and positive provisions. (Maltby v. Sumner, 169 Kan. 417, 219 P.2d 395.)' (pp. 827, 828, 308 P.2d p. 136.)

We are unable to find in the instruments in question the ambiguity asserted by plaintiff. The note contained an unconditional promise to pay $1631.09 to plaintiff and 'payable on demand after date.' The mortgage refers to the promissory note as being 'payable on demand.' Neither the note nor mortgage say anything about the note being payable after the liquidation of the first mortgage. The only mention of the first mortgage is the simple statement that this mortgage is second to the mortgage previously executed to the Railroad Building Loan & Savings Association. The law presumes that the parties understood their contract and they had the intention which its terms import. It is not the function of courts to make contracts but to enforce them as made (Springer v. Litsey, 185 Kan. 531, 345 P.2d 669, and Gardner v. Spurlock, 184 Kan. 765, 339 P.2d 65), nor is it within the province of the court to reform the instrument by rejecting words of clear and definite meaning and substituting others therefor. (K & E Drilling, Inc. v. Warren, 185 Kan. 29, 340 P.2d 919, and Geier v Eagle-Cherokee Coal Mining Co., 181 Kan. 567, 313 P.2d 731.)

Even though the note and mortgage are construed together, the language of the note describing the debt controls and, if the debt is barred, the mortgage cannot be foreclosed. (Dickey v. Wagoner, 160 Kan. 216, 160 P.2d 698; Timmonds v. Messner, 109 Kan. 518, 200 P. 270, and 9 Thompson on Real Property, Mortgages, § 4745, p. 384.) The promissory note being 'payable on demand' was a demand obligation (K.S.A. 52-207 (repealed, Laws of 1965, Ch. 564, Sec. 416)) in effect on November 1, 1957. (see, also K.S.A. 84-3-122.) The statute of limitations commences to run on a demand obligation on the date of its execution. (Golden Rule Oil Co. v. Liebst, 153 Kan. 123, 109 P.2d 95; Cassity v. Cassity, 147 Kan. 411, 76 P.2d 862, and Stone v. Barr, 111 Kan. 775, 208 P. 624.) The rule holds regardless whether the payee has made an actual demand for payment. (Stone v. Barr, supra, and Douglass v. Sargent & Bro., 32 Kan. 413, 4 P. 861.)

The phrase 'payable on demand' has a commonly understood meaning in negotiable instruments law and since neither the note nor the mortgage contained other language, stating when the debt is to be paid, there is simply no indication that the phrase was used to mean something different from its commonly understood legal meaning. We find nothing in the instruments which could be...