Case ID: ohio-st_14/html/0367-01.html
Source: Caselaw Access Project
Author: {"author": "Brinkerhoee, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Guernsey Branch of the State Bank of Ohio v. Irad Kelley and Wife.
    The Ohio Life Insurance and Trust Company being authorized by its charter to loan money at seven per cent, interest, made a loan to K., and tooK from him notes and mortgages, stipulating for the payment of interest at that rate. The notes having been reduced to, and merged in, a judgment, which, .under the laws of this state, bore interest at the rate of six per cent, only: Held, that in a subsequent proceeding in equity for the sale of the mortgaged premises, the amount of the decree upon the mortgages was properly limited to the amount of the judgment, with interest thereon at six per cent, per annum.
    Error to the court of common pleas of Cuyahoga county. Reserved in the district court.
    On the 29th January, and 18th June, 1835, Kelley and wife executed and delivered two mortgages on real estate, of those respective dates, to the Ohio Life Insurance and Trust Company, to secure the payment of two promissory notes for $5000 each, given, at the date of the mortgages, by Kelley to said company, payable to it, or order, 'on demand, with interest at seven per cent, per annum.
    The mortgages are alike in condition, and provide, that the mortgagors “ shall well and truly pay or cause to be paid to the Ohio Life Insurance and Trust Company, or their assigns, the just and full sum of five thousand dollars, with interest thereon from the date hereof, until paid, at the rate of seven per cent, per annum, according to the tenor and effect of a certain promissory note, bearing even date herewith, drawn by the said Irad Kelley, and payable to the Ohio Life Insurance and Trust Company, or order, and also the premium that may be paid for the further security of the above sum of money, with interest, as aforesaid, by the said Life Insurance and Trust Company, for insurance on said premises, of any sum of money not exceeding-dollars; then this indenture to be absolutely void, and the estate hereby granted to cease and determine, otherwise, to be and remain in full force and virtue.”
    The mortgages were duly recorded.
    On April 3, 1843, the company obtained judgment against Kelley on the two notes, in the supreme court of Hamilton county.
    On September 4, 1858, the judgment being unpaid, the company assigned the mortgages and debt to the plaintiffs in error, who, afterward, in 1858, brought a civil action in the court of common pleas of Cuyahoga county, against Kelley and others, on the mortgages and notes, praying an account and finding as to the amount of the mortgage debt, and an order for payment, or sale of the mortgage premises.
    Kellej claimed that there was nothing due on the notes, but that they were merged in the judgment taken upon them.
    In the finding by the court, of the amount of the debt, the court regarded it as bearing only six per cent, interest per annum, after the recovery of the judgment on the notes. To this opinion and judgment of the court the plaintiff in error excepted, claiming that under the conditions of the mortgages the debt bore seven per cent, interest per annum, and to reverse the judgment, allowing only six per cent, interest, filed their petition in error in the district court. That court reserved the question for decision here.
    
      H. SJcinner and S. J. Andrews, for the plaintiff in error argued:
    The proceedings on the notes in nowise affected the condition of the mortgages. The notes were not the debt, but only securities for the debt, and a suit upon one security, without satisfaction, would not, even at law, affect a suit upon another security given for the same debt. But here the securities and .the remedies upon them are essentially different in their character. The suit on the notes is a proceeding in personam, seeking satisfaction out of the general estate of the debtor. The suit upon the mortgage is a proceeding in rem,, seeking to subject the security alone, if the debtor fails within the time limited by the court to perform the condition. 6 Johns. 0. 77.
    ' That the notes were not the debts secured by the mortgages, is clear, not only from the form of the conditions, but from the consideration that if these notes had been given up, and others substituted for them, the validity of the mortgages would not have been affected. 2 Hilliard on Mortgages (2 ed.), 448,449.
    Nothing, then, short of payment, actual satisfaction of the debt, or a release will discharge the mortgage; and it is well settled that the substitution of a judgment or other higher security_ for a promissory note, does not affect the mortgage. Davis v. Maynard, 9 Mass. 242. This authority is directly in point to show that the mortgagor must pay according to the condition of his mortgage.
    The same principle was recognized and adopted by this court in Hollister v. Dillon et al., 4 Ohio St. Rep. 197; and in Hilton v. Catherwood et. al., 10 Ohio St. Rep. 137.
    So where a mortgagee recovered judgment on his mortgage ■debt, and took the body of his debtor in execution, it was held that he' was nevertheless entitled to the benefit of his mortgage security. Davis v. Battine, 6 Cond. Eng. C. Rep. 404.
    It was at law, so far a satisfaction of the judgment, that no •further proceedings could be had to enforce it, but it was not a performance of the condition, upon which, by the express .agreement of the mortgagor, the estate of the mortgagee was to cease and determine.
    Again, though the right of action on the note is barred by the statute of limitations, that does not affect the right of the ■creditor, to proceed on his mortgage. 2 Parsons on Contracts, sec. 8, pp. 379, 380; Angelí on Limitations, sec. 73, p. 91; Fisher v. Mossman, 11 Ohio St. Rep. 42.
    The result of all the authorities seems to be that the creditor may pursue all his remedies at the same time,.and each may be prosecuted without reference to the other, and as if the other was not prosecuted at all. He is entitled to one ■satisfaction, and he may elect by which remedy he will obtain it. Until his debt is satisfied, all his remedies are open to him, and if he elects to proceed on his mortgage, and to enforce the breach of the condition, the court will not relieve the debtor upon any other terms than those which he has himself inserted in his contract.'
    
      G. W. S. Stetson, for defendants in error:
    The distinction taken by the plaintiff between an agreement to pay a note, and an agreement to pay money and interest specified in the note, has no existence in fact. The note itself is mere evidence, and a contract to pay a note is, in legal effect, a contract to pay the money evidenced by the note at the time and in the manner specified in the note. The condition ■of the mortgages in this ease is, in legal effect, precisely the .same as it would have been if the language had been “ that the mortgagors should pay the notes.” In either case, the condition would be to pay the money in the. note and interest at seven per cent.
    By the rendition of the judgment, the contract of the defendant to pay the principal sum with seven per cent, interest ceased, and in place of it he became, by operation of law, liable to pay the amount of principal and interest then found due, with six per cent, interest on the said amount. But this liability was not one of contract — was not one on which the legislature had authorized the company to collect seven per ■cent, interest, and they had voluntarily given up this contract liability, in order to obtain this legal one in its place.
    Counsel for plaintiff claim that there is one measure of liability upon the judgment, and another upon the mortgage; but there is no authority to be found for this assumption, and counsel do not attempt to cite any. It is true that the personal liability of the mortgagor may cease entirely without affecting the right of the mortgagee under the mortgage, as in case of the bankruptcy of the mortgagor, or of the note being barred by the statute of limitations. But the measure of liability can not be different, because the mortgage is but a mere security for the debt evidenced by the note, and when the note is converted into a judgment, the indebtedness remains precisely the same as to its identity and as to its relation to the mortgage. This appears by the case of Davis v. Maynard, 9 Mass. 242, cited by the plaintiff’s counsel. But it does not necessarily draw the same rate of interest, because the contract regulates the interest before judgment, and the law regulates it after either judgment or decree.
   Brinkerhoee, J.

We are of opinion that there was no error in the decision and judgment of the court of common pleas. Although the Ohio Life Insurance and Trust Company was, by its charter, authorized to loan money at seven per cent, per annum, yet neither at the time these notes and mortgages were «executed, nor when judgment was taken on the notes, nor when the judgment in this case was rendered, was there any law in Ohio authorizing a higher rate of interest than six percent. per annum on judgments or decrees in any case.

By the voluntary act of the plaintiff’s assignor, these notes were sued on and reduced to judgment. The debt represented by the notes was thus, by operation of law, merged in the judgment. The Trust Company is presumed to have known the law, and to have contemplated the legal consequences of its own voluntary act. And it seems to us that the case is, in effect, the same as it would have been, if, instead of taking judgments on the notes, the Trust Company had entered int> an agreement with Kelley, that the latter might substitute new notes bearing but six per cent, interest, in lieu of the original notes, and that agreement had been carried into execution.

The debt was the principal thing — represented first by the notes, and then by the judgment, into which they had' been merged. The mortgages were but the security for, and incident of, the debt they were given to secure. Payment of the debt would have extinguished the security. And as that debt,, from the time it was reduced to judgment, bore but six per cent, interest, the decree upon the mortgages was properly limited by the same rate of interest.

Judgment affirmed.

Peck; C.J., and Scott, Ranney and Wilder, JJ., concurred*