Wells v. Smith

Decision Date11 October 1940
Docket NumberNo. 14117.,14117.
Citation144 S.W.2d 430
PartiesWELLS v. SMITH.
CourtTexas Court of Appeals

Appeal from District Court, Delta County; Charles Berry, Judge.

Suit by James A. Smith against C. F. Wells on notes executed by defendant for purchase money of two tracts of land, and for foreclosure of a vendor's lien given to secure the notes. From a judgment for plaintiff, the defendant appeals.

Affirmed.

C. C. McKinney, of Cooper, and Jackson & Stell, of Sulphur Springs, for appellant.

Hutchison & Fisher, E. L. Myers, and Long & Wortham, all of Paris, for appellee.

DUNKLIN, Chief Justice.

C. F. Wells, defendant in the trial court, has appealed from a personal judgment in favor of James A. Smith, plaintiff, for the amounts due on certain promissory notes executed by him for purchase money of two tracts of land, with foreclosure of vendor's lien to secure the same; and the principal complaint urged by him here is alleged error in overruling his plea of the four-year statute of limitation to that demand.

The notes in controversy are a series of seven, executed by defendant, C. F. Wells, in consideration of a deed of conveyance to him of two tracts situated in Delta County, Texas, by plaintiff, James A. Smith, and wife, Bess Smith, joined by W. S. Smith, dated October 23rd, 1929. W. S. Smith, a single man, died in the year 1935. After his death all his heirs, except plaintiff, J. A. Smith, deeded to the latter all their interest in the land, together with all rights and appurtenances thereunto belonging. Under that conveyance plaintiff claimed ownership of the purchase money notes and the vendor's lien given to secure the same; and that ownership has not been challenged by appellant, if the notes have not been barred by the defense of limitation pleaded.

The deed referred to, above noted, recited the consideration therefor as follows: "One hundred and twenty and no/100 dollars, to us in hand paid by C. F. Wells, the receipt of which is hereby acknowledged, and the further consideration of 7 promissory notes of even date herewith, each for the sum of $200.00, and bearing 8% interest from date, and due annually. First note due October 23rd, 1930, second note due October 23rd, 1931, third note due October 23rd, 1932, fourth note due October 23rd, 1933, fifth note due October 23rd, 1934, sixth note due October 23rd, 1935, seventh note due October 23rd, 1936, being payable to order of James A. Smith, Paris, Texas; it being understood that failure to pay any note as same becomes due shall mature the entire series of notes unpaid, and the owner and holder may proceed to collect same. (To secure payment of which notes we hereby retain the vendor's lien on the land hereinafter conveyed.)"

The seven notes recited in the deed were executed by C. F. Wells contemporaneously with the execution of the deed. None of them has been paid and all are now owned by plaintiff, James A. Smith. Each of those notes embodies this recital: "This note is a series of seven similar notes this day given by C. F. Wells as a part of the purchase price for said above mentioned property, and it is understood and agreed that failure to pay this note or any installment of principal or interest thereon when due shall at the election of the holder of all said notes or any one of them mature all the said notes and they shall at once become due and payable, and the vendors lien herein mentioned shall become subject to foreclosure proceedings as the holder may elect."

Plaintiff's amended petition, on which the case was tried, included two counts, the first for recovery of superior title to the land covered by the deed to C. F. Wells, because of the vendor's lien retained therein; and second, and in the alternative, for judgment for the amount now due on the seven promissory notes, with foreclosure of the vendor's lien. And judgment was rendered on that alternative pleading.

Plaintiff's original petition was filed January 18th, 1937, which was more than four years after the respective due dates of any of the first three notes.

The controverted question here presented is, did the four-year period of limitation, Vernon's Ann.Civ.St. art. 5520, pleaded by defendant begin at the date of maturity of the first note, as insisted by appellee, or on or about February 5th, 1936, which, according to the uncontroverted testimony introduced by plaintiff, was the date he first exercised the option given in the notes to accelerate the maturity of all the notes then unpaid.

Apellant cites several authorities with special reliance on the decision of our Supreme Court in San Antonio Real-Estate, Bldg. & Loan Ass'n v. Stewart, 94 Tex. 441, 61 S.W. 386, 387, 86 Am.St.Rep. 861, and decisions there cited. In that case, Stewart and wife executed 72 instalment notes, payable monthly, in favor of the Building & Loan Association, to pay for improvements on their homestead, together with a mechanic's lien on the property, in consideration of which the Association erected the improvements contracted for. The contract giving the lien included this provision: "* * * that, whenever any three of said notes or monthly payments remain unpaid, in whole or in part, after due, then and thereupon the balance of said notes remaining shall be due and payable, and said association may at any time thereafter proceed to foreclose said debt and lien."

The suit was for foreclosure of the mechanic's lien, to which the four-year statute of limitation was pleaded, and the question involved was certified to the Supreme Court by the Court of Civil Appeals. The following is quoted from the opinion:

"`Question. Did all the unpaid notes become due upon default in the payment of the three notes, in such manner that the statute of limitations has barred appellant, regardless of what took place, as hereinbefore stated, between Stewart and the association in reference to the contract?'

"The notes and the instrument creating the lien, executed at the same time concerning the same subject-matter, are to be construed together as constituting one contract. According to the great weight of authority, including decisions of this court, the stipulation in the last-mentioned writing has the effect of fixing a contingency upon the happening of which the debt should mature at a time earlier than the dates given in the notes for their maturity. Dodge v. Signor , 44 S.W. 926; [First Nat.] Bank v. Peck, 8 Kan. 660; [Wheeler & Wilson] Manufacturing Co. v. Howard (C.C.), 28 F. 741; Brownlee v. Arnold, 60 Mo. 79; 1 Daniel, Neg.Inst. [sec.] 156; Gregory v. Marks, Fed.Cas.No.5,802, 8 Biss. 44; Noell v. Gaines, 68 Mo. 649. There is some authority for the construction that such a stipulation in the mortgage alone does not have the effect, upon default in the payment of an installment, of maturing the notes for general purposes, but operates only to allow foreclosure of the mortgage, and the application of the proceeds of the property to the whole debt, without otherwise affecting the terms of credit expressed in the notes. Owings v. Mackenzie , 33 S.W. 802, 40 L.R.A. 154, dissenting opinion of Hough, J., in Noell v. Gaines, supra, and cases cited. This view cannot be adopted consistently with the previous decisions of this court or the current of decisions elsewhere, of which many others could be cited besides those before referred to, and the effect of the stipulation in question in the instrument giving the lien must be held to be the same as if it had been inserted in the notes. Among the courts so treating it, another difference of opinion has arisen as to its effect, some treating it as maturing the notes absolutely, upon default in payment of one of the installments, and others holding that it merely gives to the creditor a right of election to declare the whole debt to be due, or to waive the default, and insist upon the performance of the contract as it originally stood, unaffected by such default.

"The view first stated has been adopted by this court, with the result that upon default in an installment the debt matures and limitation begins to run. Harrison Machine Works v. Reigor, 64 Tex. [89] 91; Dodge v. Signor, supra. Other authorities to the same effect are Hemp v. Garland, 45 E.C.L. 519; Moore v. Sargent, 112 Ind. 484, 14 N.E. 466; [First Nat.] Bank v. Peck, supra."

Appellant also cites 6 Tex.Jur., sect. 79, page 685, reading: "When it is provided that if any one of a series of notes is not paid at maturity all the notes shall become due, a default in any payment ipso facto brings to maturity the entire series." And McCray Refrigerator Co. v. Simms, Tex. Civ.App., 268 S.W. 275 to a like effect.

It is our conclusion that the option given in the notes to the effect that if default be made in payment of any of the notes at maturity, the holder of all the notes then unpaid would have the option to mature them, with right of foreclosure of the lien executed to secure them, is determinative of the issue of limitation. In other words, we conclude that the option given in the notes should be controlling, to the exclusion of what the terms of the deed with respect to its recitals of consideration would import, in the absence of the option given in the notes alone. While the notes and lien are all to be construed as one transaction, the notes themselves are better evidence of the consideration than...

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