Schmeider v. McNett ( 1929 )

Rosenberry, C. J.

On the part of the plaintiff it is contended that the privilege of extension created by the provisions of the note was for the benefit of the payees. In respect to this contention it is argued by the defendants that the privilege was for the benefit of the makers, and in support of this argument it is urged that, the makers having by the terms of the note the privilege of paying $500 or more on any interest-paying date, any privilege to the payees to extend the note would be ineffectual because the note by its terms might be discharged on any interest date and therefore the privilege of extension must be for the benefit of the makers, and that the language' “with privilege óf a ten years extension by payees” means that the payees must grant a ten years extension upon the demand of the makers; that the privilege runs to the makers and the extension is to be granted by the payees. It must be frankly conceded that these considerations are entitled to much weight. On the other hand, it is urged that the note runs for an unusually long period — ten years, — and that if the extension privilege be construed as defendants contend it should be, the maturity of the obligation would be extended an additional ten years, making twenty years in all; it being a farm mortgage given for a part of the purchase .price of the farm, that this would be a very unusual period for such an obligation to run. It is further urged that if it had been the intent of the parties that this provision was for the benefit of the makers, much more appropriate language might naturally and properly have been chosen to express that intent. The use of the word “privilege” instead of the word “right” is in itself significant. Bouvier defines privilege as an exemption from such burdens as others are subjected to. In the civil law it apparently had a very different and ka much wider meaning. We speak of "privilege from arrest, privileged communications, privileges and immunities. In common parlance the word is most frequently used in the sense of permission or license. It is said one has a privilege or license to practice medicine or law, privilege or license to operate a soft-drink parlor, or to do anything which people in general may not do without being privileged or licensed. The word is often used interchangeably with the word “right.” The ordinary layman would speak of his right to travel a public way and of a privilege or permission to cross the land of a neighbor. If the privilege was for the benefit of the payees according to the language of the instrument, then what was the purpose or object of the parties in inserting it? It is quite apparent that the instrument was drawn by some one skilled to some extent in the use of legal terms, such as a banker or possibly a lawyer. It is well known that any extension granted by , a subsequent holder to the makers without the consent of prior parties may operate to discharge them. Both parties may have had in contemplation the fact that the note and mortgage in question might be sold by the holders or the premises conveyed by the makers, in which event there might be negotiations for extension by subsequent parties. Without the privilege being provided for in the note itself, such negotiations might operate to discharge or affect the rights of subsequent holders or those who might thereafter become obligated to pay the debt, or affect the relation between the subsequent holders and the original makers. Fanning v. Murphy, 126 Wis. 538, 105 N. W. 1056. By the insertion of the clause the whole matter was left open for future negotiations with freedom of action.

If the privilege had been intended for the benefit of the makers, a much more appropriate place to have inserted it would have been at the end of the note by inserting the words, “The makers shall have the right to extend the time of payment for ten years;” or if the language be inserted at the place where it was, the much more natural and appropriate phrasing would have been to say, “with the right of ten years extension.” The insertion of the words “by payees” must be given some significance. If it be held that the privilege is for the benefit of the makers, the word “makers” is in effect substituted for “payees.” The use of the word “payees,” taken in connection with the word “privilege,” leads us to the conclusion that the clause was inserted for the purpose of leaving the matter of extension open to further negotiations and for an agreed extension without affecting the relations of the payees or subsequent holders to the makers or those who might subsequently become liable for the payment of the debt. No doubt the draftsman thought it safer to fix a maximum period of extension, otherwise it might be argued that the extension could not be greater than a reasonable time, an indefinite and uncertain period.

The present holders have never consented to the extension. Therefore the declaration of McNett was ineffectual to extend the time of payment and the trial court was in error in holding that the action was prematurely begun. A search of the books has revealed no case which throws light upon the question here presented.

The conclusion at which we have arrived makes it unnecessary to consider other questions raised in the case.

By the Court. — Judgment appealed from is reversed, and cause remanded for further proceedings according to law.