Macloon v. Smith , 49 Wis. 200 ( 1880 )

Cole, J.

Without doubt, the circuit court excluded the evidence in support of the first defense or counterclaim because it presented no case entitling the defendants to relief. In that view of the answer we fully concur. It is claimed by the learned counsel for the defendants J. Maurice Smith and wife, that the note and mortgage sought to be foreclosed were not voluntarily made; that they were executed under a species of duress or compulsion, so as not to be the free act of the mortgagors. But this claim, as it appears to us, is overwhelmingly disproved by the allegations of the answer. The answer sets out the agreement entered into between the plaintiff and J. M. Smith and wife, bearing date July 31, 1876. By the express covenants of this agreement, Smith and wife bound themselves to execute a note and mortgage to the plaintiff upon tbe undivided one-balf of the premises described, to secure the amount paid out by the plaintiff in the construction andffurnishing of - the building which the parties contemplated and provided should be erected. There is surply no pretense that this agreement was not freely and voluntarily executed; and the note and mortgage in suit were given merely in accordance with its terms. It is futile to claim that the note and mortgage were executed under duress or compulsion, in view of these matters in the answer.

Rut it is said that if the note and mortgage were not void in toto, they should be reformed upon the facts stated, and the amounts stipulated in them to be paid should be greatly reduced. The most considerable item which it is insisted was wrongfully included in these securities, is the judgment in favor of the United States v. J. Maurice Smith et al. in the U. S. circuit court for the western district of Wisconsin. But the agreement before referred to .provides that, in case vSbm’iA should be unable to cause that judgment to be set aside and discharged, and the plaintiff should be of the opinion that it was necessary, for the purpose of securing the leases mentioned, that this judgment should be discharged of record, then he had the right to pay and satisfy the judgment, and to include the amount paid by him for that purpose, with interest, in the note and mortgage which it was agreed should be given. This right to discharge the judgment is provided for in language so clear as to leave no room for doubt upon the subject. As the plaintiff was thus plainly authorized to pay that judgment if he deemed it necessary to do so in order to protect his rights, and include the amount paid in his statement of expenditures upon the property, there is no ground for excluding" that sum from the amount of the mortgage debt. It certainly does not lie in the mouth of the mortgagors to insist that it should be deducted from the mortgage debt, in the face of their clear, positive and explicit stipulations, more than once repeated in the agreement, that it might be included in tlie note and mortgage, provided, in tbe opinion of the plaintiff, it became necessary to pay the judgment for the protection of his interest in the building and premises; and for the purpose of perfecting the title to the property, and to secure liis interest therein, it seems that he considered it necessary to discharge this judgment, and did actually pay it in December, 1876, as he had the undoubted right to do. It is further alleged in the answer, that, “ under a like duress and compulsion,” the defendants were compelled to allow tlie plaintiff to include in the note and mortgage the unnecessary expense of laying a marble, instead of a wood, floor, in the room leased to the United States for a post-office;, and also the expense of finishing off a part of the building for the city offices, amounting together to nearly $800.

No satisfactory explanation or reason is assigned in the answer for allowing these claims when the note and mortgage were executed, February 1, 1878, if they were really unjust and improper. At that time the parties had an accounting and settlement of the moneys due the plaintiff according to the contract. This is an irresistible inference from the answer. It is true, at the outset of the answer there is tlie general charge that the plaintiff, holding the title to the real estate, refused to convey the same as he had agreed to do, unless the defendant would include in the note and mortgage the unjust and fraudulent claims for money unjustly and fraudulently expended, or claimed to have been expended, upon the property, and so, by duress of estate and not of his own free will, the defendant was forced to include in the note and mortgage the sum of $1,802.25, or thereabouts, in excess of the amount actually owing by the defendant on the agreement; and that the note and mortgage were made to extricate the title from the unjust grasp of the plaintiff, and as the only means of so doing, except by litigation.

We have already seen that the judgment of $1,000 was rightly paid; that the defendants could not be relieved from including that in the note and mortgage;'and in respect to the other claims, for putting down the marble floor and finishing off the rooms for the city offices, the answer is barren of all facts which tend to show that any duress or coercion, in the proper sense of the word, was used to compel the defendants to allow them. According to the answer, the defendants were induced to consent that these claims should be included in the note and mortgage “under like duress and compulsion” to that which influenced them to include the judgment. Without spending any further time upon this point, we will say that there is nothing stated in the answer which would justify a court in setting aside the accounting and settlement made when the note'and mortgage were executed. Manifestly the matters stated in the answer do not impeach the settlement either for fraud or duress.

The note and mortgage bear date February 1, 1878, are given to secure the payment of $6,663.25, five years from date, with interest thereon at the rate of ten per cent, per annum, payable quarterly, on the first days of January, April, Jnly and October, in each year. There is a condition in the mortgage to the effect that in case of the non-payment of any sum of money, either principal or interest, insurance or taxes, at the time or times they should become due agreeably to the terms of the note and mortgage, or within ten days thereof, the whole amount of the principal sum secured by the mortgage should, at the option of the mortgagee, be deemed to have become'due, and the same, with interest thereon, should be collectible in an action at law, or on foreclosure of the mortgage, in the same manner as if the whole principal had been made payable at the time when any default should occur. There was a default in the payment of the interest due.on the first day of July, 1878; and on the twelfth day of that month the plaintiff exercised his option by giving notice to the defendant J. M. Smith that he elected to have the whole principal sum due.

The next question to be considered .is, Had the plaintiff the right to exercise the option given him at the time and. in the manner he did? On the part of the defendants it is insisted that the interest was not due and payable on ’the first day of July, because days of grace, by the law merchant, were allowed for its payment. If this position is correct, notice of the option was prematurely given. We have not been referred to any authority which holds that days of grace are allowed on interest payable as this was, while there are some intimations in the books adverse to this view. Thus in National Bank of North America v. Kirby, 108 Mass., 497, the question before the court was as to what effect the failure to pay interest should have upon the credit of a note which was payable four years from date, with interest payable annually. Colt, J., in delivering the opinion of the court, says: “ Interest is an incident of the debt, and differs from it in many respects. It is not subject to protest and notice to indorsers, or to days of grace, according to the law merchant.” p. 501.

In Catlin v. Lyman, 16 Vt., 44, an action was brought to recover a year’s interest on a note payable ten years from date, with annual interest. It was held that the action might be immediately brought if the interest was not paid on the day fixed. When a bill or note is payable in installments it is entitled to grace on each installment, for the reason that it is considered and treated as so many instruments in one form. Oridge v. Sherborne, 11 M. & W., 374.

In Coffin v. Loring, 5 Allen, 153, Bigelow, C. J., says: “We suppose the rule to be well settled by uniform commercial usage, that when a note, or an installment of a note, bearing interest, becomes due on a certain fixed day, both the principal and interest are payable on the same day; that is, after the expiration of the three days allowed for grace. The interest, being a mere incident of the principal, follows the latter, and becomes payable at the same time. . . . Whether the same rule would apply if no part of the principal, but only the interest, on the debt had fallen due on the first day of the month, we are not called on to determine in the present case.” p. 154.

In the light of these authorities we are inclined to hold that the interest became due on the first day of July, and that the defendant Smith was not entitled to days of grace for its payment. The plain object of these provisions is to secure the prompt payment of interest, and we think the plaintiff might exercise his option and give notice on the twelfth of the month that he elected that the principal sum should be due. These conditions are held to be valid, and are not treated as being in the nature of a penalty or forfeiture. Basse v. Gallegger, 7 Wis., 442; Marine Bank v. International Bank, 9 Wis., 57; Rosseel v. Jarvis, 15 Wis., 633; Schooley v. Romain, 31 Md., 574; Rubens v. Prindle, 44 Barb., 336.

It is insisted that the plaintiff had ho right to exercise his option, because he had rendered no statement as to the amount of interest due after applying the rents which he was authorized to collect. It is a sufficient answer to this objection to say that the defendant J. M. Smith must have known that, if all of the rents were applied to the payment of interest, there would still be due on the first of July, 1878, $27.63. Moreover, in order to protect his mortgage and make it good security, the plaintiff was compelled to pay taxes and insurance, which the defendant himself had agreed to pay. The defendant’s obligation to keep the property insured for the benefit of the plaintiff, and pay the taxes, was as binding as the covenant to pay the principal sum secured; and a failure to perform that covenant was a default, within the meaning of the mortgage, as much as a failure to pay the interest.

In what is called the second defense in the answer, certain matters are stated for the evident purpose of showing that Mary C. Smith, a sister of the defendant J. M. Smith, is really the” owner of the property, and should be made a party to the action. It is alleged that the plaintiff obtained a tax title on the property in 1874, and soon thereafter conveyed his interest under the tax deed to Mary C. Smith. For years prior to this time J. M. Smith claimed to be the owner and in possession of the property under a deed from O. B. Mattison, dated April 17, 1867, and of course was bound to pay the taxes for the nonpayment of which the property was sold in 1871. But on the 31st day of July, 1876, at the date of the agreement before referred to, Mary C., together with J. M. Smith and wife, conveyed, by deed of warranty, the property to the plaintiff, to perfect in him a good and sufficient title, in fee simple to an undivided one-half of the property, free from all liens and incumbrances except the judgment in favor of the United States, in compliance with the covenants in that agreement. In March, 1877, J. M. Smith and wife conveyed their interest to Mary 0. Smith, and assigned to her the agreement of July “31, 1876. Afterwards they executed the note and mortgage in suit. Mow it is said that the effect of these various instruments and conveyances was to make Mary C. the real owner of the equity of redemption. But whether that was so or not we shall not inquire, nor enter at all into the question as to the effect of these various transactions. It is sufficient to say that if the position of counsel is correct as to them, it really affords no reason why this mortgage, given by J. M. Smith and wife on the property, should not he foreclosed as to them. In the mortgage itself, J. M. Smith covenants to defend the title against all claims, and he is therefore clearly estopjjed from saying here that his sister has a title which defeats the mortgage. But, further, we remark that if Mary C. Smith has any interest whatever in the property — a question we do not feel called upon now to consider, — certainly it is one prior and paramount to the mortgage, and her rights will not be affected by the foreclosure, to which she is not made a party. This is all we deem it necessary to say as to the second defense.

By the Court. — The judgment of the circuit court is affirmed.