Thorpe v. Mindeman

• Decision Date: 15 November 1904
• Citation: 101 N.W. 417,123 Wis. 149
• Parties: THORPE v. MINDEMAN ET AL.
• Court: Wisconsin Supreme Court

123 Wis. 149

101 N.W. 417

THORPE

v.MINDEMAN ET AL.

Supreme Court of Wisconsin.

Nov. 15, 1904.

Appeal from Circuit Court, Milwaukee County; Lawrence W. Halsey, Judge.

Action by Josephine Thorpe against George Mindeman and others. From a judgment in favor of plaintiff, defendants Mindeman appeal. Affirmed.

This is an action to foreclose a note and mortgage given by the defendants Mindeman and wife to one Henry Herman, the defense being an entire want of consideration. The note was a promissory note for $6,500, dated December 11, 1900, payable three years after date, with interest at 5 per cent. per annum, semiannually, and contained the following provisions inserted before the signature: “The payment of this note is secured by a mortgage of even date herewith on real estate. If default shall be made in the payment of interest, or in case of failure to comply with any of the conditions or agreements of the mortgage collateral hereto, then the whole amount of the principal shall at the option of the mortgagee, or his representatives or assigns, (notice of such option being hereby expressly waived), become due and payable without any notice whatever.” The mortgage accompanying the note contained the following provisions: “Provided, always, and these presents are upon this express condition, that if the said parties of the first part, their heirs, executors and administrators, shall pay or cause to be paid to the said party of the second part, his heirs, executors, administrators or assigns, the just and full sum of sixty-five hundred ($6,500) dollars three years after date with interest at 5 per cent. per annum, interest payable semi-annually according to the conditions of one promissory note and coupons bearing even date herewith, executed by the said George Mindeman, one of the parties of the first part, to the said party of the second part, and shall moreover pay annually to the proper officers all taxes which shall be assessed on the said premises and shall deliver or exhibit receipts therefor to said party of the second part, his heirs, executors, administrators or assigns, on or before the first day of May next after such taxes shall have become due and payable, and shall insure and keep insured the buildings thereon or to be hereafter erected against loss or damage by fire in the sum of eight thousand dollars or over, in insurance companies to be approved by the said party of the second part, his heirs, executors, administrators or assigns, such insurance to be payable in case of loss to the said party of the second part, his heirs, executors, administrators or assigns, as his mortgage interest may appear, and the policy or policies of insurance to be held by him, and in default thereof it shall be lawful for the said party of the second part, his heirs, executors, administrators or assigns, to effect such insurance, and the premiums and other legal expenses and charges paid for effecting the same, together with interest thereon at the rate of 10 per cent. per annum, shall be a lien upon the said mortgaged premises added to the amount of the said note, and secured by these presents until the payment of said note, then these presents shall be null and void. But in case of the non-payment of any sum of money (either principal, interest or taxes) at the time when the same shall become due, or of failure to insure said building agreeably to the conditions of these presents, or in case of failure to deliver or exhibit such receipt as above provided, or in case of failure on the part of said parties of the first part to keep or perform any other agreement, stipulation or condition herein contained, then in each case or all such cases, the whole amount of the said principal sum shall, at the option of the said party of the second part, his heirs, executors, administrators or assigns, which may be exercised at any time after any default, without any notice whatever to the mortgagors or either of them, their heirs, executors, administrators or assigns, service or giving such notice in any manner being hereby expressly waived, be deemed to have become due, and the same with interest thereon at the rate aforesaid shall thereupon be collectible in a suit at law or by foreclosure of this mortgage, in the same manner as if the whole of said principal sum had been made payable at the time when any such failure shall occur as aforesaid.” It appeared from the testimony of the defendant Mindeman, which was taken under objection, that the note and mortgage was given to cover advances to be made to him by Herman, but that none were ever in fact made. September 11, 1902, Herman sold the note and mortgage to the plaintiff, who was an innocent purchaser thereof, and made the following indorsement upon the note: “For value received, I hereby sell, transfer and assign the within note and the interest coupons thereto attached and numbered four to six inclusive, (previous interest coupons having been paid and surrendered), to Josephine Thorpe, without recourse.” Findings and judgment of foreclosure were made and signed, and the Mindemans appeal from the judgment as well as from a subsequent order appointing a receiver.Charles J. Weaver, for appellants.

T. L. Kennan, for respondent.

WINSLOW, J. (after stating the facts).

The important question in this case is whether the note in suit is negotiable. The appellants argue that the note and mortgage must be construed together as one contract; that, so construed, the note requires the performance of other acts besides the payment of money, and is rendered uncertain both as to amount and time of payment, and hence is nonnegotiable. The general rule that agreements contemporaneously executed and pertaining to the same subject-matter are to be construed together is so familiar and so frequently acted upon that it needs only to be stated. The question how far, if at all, this rule imports into a promissory note the collateral agreements contained in an accompanying mortgage, is the question to be considered in this case. The collateral agreements contained in the mortgage, which the appellants claim are imported into the note and destroy its negotiability, are: First, the agreement that, in case of failure by the mortgagor to insure the buildings in the mortgagee's favor in approved insurance companies, the mortgagee may insure the same, and the premiums paid shall be a lien on the premises “added to” the amount of the note; and, second, the agreement that in case of failure to so insure, or to pay interest or taxes when due, or to deliver or exhibit tax receipts showing the payment of the taxes, then the whole principal shall become due at the mortgagee's option, and without notice. It will be observed that the only one of these agreements which the note contains in terms is the agreement that the principal shall become due without notice, at the option of the mortgagee, upon failure to pay interest or comply with any of the other conditions of the mortgage; but the argument is, in effect, that all of the collateral agreements in the mortgage have become a part of the note by virtue of the legal principle just stated. This is a decidedly revolutionary proposition. If it be true, both the business world and the courts have been sadly in error for many years. This court held at an early day that a note negotiable on its face retained its negotiable character notwithstanding it was secured by a mortgage upon real estate, and, when transferred before due, carried the mortgage with it relieved of all equities (Croft v. Bunster, 9 Wis. 503); and that the words “secured by real estate mortgage” upon the face of the note were not sufficient to charge the assignee with notice of any defense, nor of the terms of the mortgage (Kelley v. Whitney, 45 Wis. 110, 30 Am. Rep. 697;Boyle v. Lybrand, 113 Wis. 79, 88 N. W. 904). If all the agreements contained in every mortgage are, as matter of law, imported into the note, these propositions could not be true, for the general rule (except as changed by statute) is that negotiable instruments cannot be bound up and fettered with collateral agreements for the doing of other things besides the payment of money, and retain their negotiable character. Upon the principle contended for, the most simple real estate mortgage would deprive the note which it secures of its negotiable character, because it would import into the note one or more collateral agreements which are not for the payment of money. Fortunately it is not necessary to give so violent a shock to the well-understood principles of law governing the negotiability of notes and mortgages. The appellants' contention really results from a confusion of ideas. They lay down the well-understood proposition that contemporaneous instruments relating to the same subject-matter are to be construed together, and conclude that it follows that a note and mortgage, though separately executed, are one instrument, and that the note is that instrument. The rule that instruments are to be construed together does not lead to this result. Construing together simply means that, if there be any provisions in one instrument limiting, explaining, or otherwise affecting the provisions of another, they will be given effect as between the parties themselves and all persons charged with notice, so that the intent of the parties may be carried out, and the whole agreement actually made may be effectuated. This does not mean that the provisions of one instrument are imported bodily into another, contrary to the intent of the parties. They may be intended to be separate instruments, and to provide for entirely different things, as in the very case before us. The note is given as evidence of the debt and to fix the terms and time of payment. It is usually complete in itself--a single, absolute obligation. The purpose of the mortgage is simply to pledge certain property as security for the payment of the note. The...