Noell v. Gaines , 68 Mo. 649 ( 1878 )

Sherwood, C. J.

— The note in suit is as follows, to-wit:

“ 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 Wild.”

Npon 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 TI. 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 paymeut 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 befoi’e us is, whether the proper steps were taken “ to fix the indorser ” thus convei’ting 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 contempoi’aneously 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 eases 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 actiou 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, “thatif 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 affirmed with damages, the court holding an appeal which sought to accomplish the reversal of such judgment “ wholly without merit.” Counsel for plaintiff, however, attempt to draw a distinction as to that case, by saying that there the provision relied on, was “ in the body of the note.” JBut what of that? If it be true where one instrument refers to another contemporaneously executed, relating to and forming part and parcel of the same transaction, that there both instruments become one in the eye of the law, it must incontestibly follow that it makes no sort of difference in which instrument the proviso be contained.

The case of Morgan v. Martien, 32 Mo. 438, is without pertinency, for there the sole question was whether the exoneration of a surety had been accomplished by means of a subsequently executed deed of trust, to which the surety was no party, containing a provision that if any of the notes were not paid in thirty days after due, all the notes should become due immediately; and it was held that the surety was not released, and Judge Bay expressly gives as the grounds for the conclusion arrived at, that the deed was “ merely collateral, and intended as an additional and further security,” and it was not “ intended that it should operate as an extinguishment of the original contract, or should in anywise enlarge or diminish the liability of either party to such original 'contract.” And the subsequent remarks made in that connection, that “ the notes could not, by the happening of such, contingency, mature for general purposes,” must be construed with reference to the point then under discussion. Construed in this way, they are obviously correct, since no' one would contend that an antecedently signed note could, without the consent .of the surety, be made to mature at an- earlier date than that specified in the note itself.

The decisive point in Mason v. Barnard, 36 Mo. 384, was, that Mi’s. Eithian was not a mortgagor, and consequently the judgment of foreclosure against her was void ; this was amply sufficient to dispose of the case, and it is quite evident that a remark made therein, arguendo, to the effect that it was not intended that.the note “ should become due for the purpose of obtaining a judgment at law,” was not very carefully weighed, as on the theory on which that case proceeds, Mrs. Eithian could not have been liable, even if such had been the intention, because she was party neither to the notes nor deed of trust, both having been made anterior to her reception of the deed for a portion of the land. That case, therefore, does not present the feature so prominent in this, of contemporaneously executed instruments making reference to, and thus becoming incorporated into each other. Besides, the' learned judge who delivered the opinion of the court in that case, concurred in the subsequent one of Brownlee v. Arnold, and himself wrote the opinion in Waples v. Jones, supra, announcing, in all its broadness, the view above expressed.

We are not called upon to, nor do we say, what would be the effect of a purchase made of negotiable paper, secured'by deed of trust, without any knowledge of a provision in such deed similar to the one under discussion. That point may be found discussed in 2 Pai’sons, supra. But we have not the slightest hesitancy as to the correctness of the conclusion reached, that so far as concerns the plaintiff, who, it must be conceded, is a purchaser with notice, the notes and deed of trust are, to all intents and purposes, but one instrument. The holder of the notes and deed of trust, having elected to stand upon the rigid terms of the contract, it was but just to the indorser, in order to charge him, that the maker should have been, when the default as to interest occurred, called upon for the payment of the whole debt which then fell due in accordance with the express terms of that contract; and if payment was not then made by the maker, the indorser should have then been notified; for it cannot, with any show of reason; be urged that the notes could, under the terms of the contract, fall due for one purpose and not for another. If they fell due when the contingency happened, and because it happened, and because the parties upon valid consideration had thus contracted, it must needs follow that the face of the notes under the circumstances mentioned ceased to furnish any guide as to their maturity.

Again, it appears to be conceded by plaintiff’s counsel that upon the occurrence of default in the payment of interest; it was competent for the holder of the notes to have the property sold under the deed of trust. If this be true, and so it was ruled in Waples v. Jones, supra, then under our statute, (2 Wag. Stat., § 2, p. 954,) the holder, instead of requesting the trustee to sell, could have resorted to' an ordinary judgment of foreclosure. In such au event, if the mortgagor were summoned, what would that judgment be ? Clearly that the assignee of the debt recover that debt, to be levied of the mortgaged property; and if that be insufficient, that the residue be levied of other goods, &c., of the mortgagor. 2 Wag. Stat., §§ 8, 9, p. 955. If this be admitted, the correctness of the foregoing views is made manifest; for if the notes mature for the purpose of a sale under the deed of trust, then, also, for the purpose of foreclosure; if for the purpose of foreclosure, then for a general judgment and. general purposes, for it'is not to be supposed that a court would entertain a suit‘for foreclosure when prematurely brought. It seems difficult to answer this reasoning, or combat the force of the -illustration just mentioned, nor does the illustration lose any of its force if the mortgagor be not summoned; for still the judgment must go for the whole debt, to be levied alone, however, of the moi’tgaged propei’ty, and we are of opinion, that it conspicuously portrays the ei’ror of the' idea that the notes might fall due for the purpose of a sede under the deed of trust, but not otherwise. Being of this opinion, we must regard the result reached by the trial corn! as erroneous, and reverse the judgment.

All concur except Hough, J., who dissents.

Reversed.