Case Name: Noell v. Gaines, Appellant
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1878-10
Citations: 68 Mo. 649
Docket Number: 
Parties: Noell v. Gaines, Appellant.
Judges: All concur except Hough, J., who dissents.
Reporter: Missouri Reports
Volume: 68
Pages: 649–667

Head Matter:
Noell v. Gaines, Appellant.
IT otes Secured by Deed of Trust: liability or indorsee. . A deed of trust given to secure two promissory notes, which, by their terms, matured at different dates, provided that if the maker should fail to pay the debt or interest when the same should become due according to the tenor, date and effect of the notes, then both should become due and payable, and the holder should have the right to order a sale under the deed. Plaintiff having become the holder of both notes, upon default in payment of the first, caused a sale to be made, and the proceeds of the sale not being sufficient to satisfy both notes, on the day when the'second becamé due according to its terms, demanded payment of the maker, and, payment being refused, caused notice of dishonor to be given to defendant who had signed the note as indorser. In an action on the note, Held, that the demand and notice came too late; that plaintiff having elected to declare a forfeiture on failure 'to pay the first note, the second then became due, and in order to'charge defendant demand should have been made and notice given then. Hough, J., dissenting.
Appeal from Chariton Circuit Court.- — Hon. G. D. Burgess, Judge.
Kinley & Wallace for appellant.
1. The note and deed of trust were executed contemporaneously, and were dependent on each other; the deed of trust providing that the notes could be declared due for a failure to pay the annual interest. ' This contract governed and controlled the time for the payment of the notes. 2. If the terms of a contemporaneously executed deed of trust can prevent a note from becoming due, as provided by its terms, why cannot the deed of trust thus executed, authorize the holder of the note to declare it due, before its maturity, as expressed on its face. If he does so, should he not notify the indorser, so he can protect himself, for instance, by seeing that the security to be sold under the deed of trust brings its value, or at any rate enough to prevent any sacrifice in the sale of the land. 3. When Noell elected to declare the notes due and payable, he at once should have notified the indorser, and thus have given him an opportunity to have secured the balance due, if any, after the sale of the trust property. 4. Noell declaring said note due on account of failure to pay annual interest, made the note absolutely due, hence the necessity for the demand, notice of non-payment and protest, before the indorser could be held. Brownlee v. Arnold, 60 Mo. 79 ; Waples v. Jones, 62 Mo. 440. In Whiteher v. Webb, 44 Cal. 127, the court held that in a note containing the condition that upon a failure to pay interest quarterly, the holder of the note might declare it due, and upon such failure, the holder elected to declare such note due, as in the case at bar, that such election on the holder’s part made the note absolutely due. The case at bar is similar, except the authority to declare the note due before it matures by its terms, is not found in the note, but in the contemporaneously executed deed of trust, which all the authorities agree is part of the note, and controls it, so far as to prevent its maturing at the time •fixed for it to become due. 2 Parson’s Cont., 553, and cases there cited. We urge that the note could not become due for one purpose, at the wish of respondent, and not become due absolutely, for all purposes.
Charles A. Winslow for respondent.
The record presents but one question for solution: What effect did the provisions of the trust deed have upon the maturity of the notes ? In other words, did these provisions have any other and greater effect than to mature all the notes for the purpose of distributing the funds arising on the sale of the land ? It is submitted with confidence that they did not, and that for all other purposes the notes matured according to their face. Morgan v. Martien, 32 Mo. 438; Mason v. Barnard, 36 Mo. 384. There is no similarity between this case and Brownlee v. Arnold, 60 Mo. 79. The provisions of the deed of trust in that case were peculiar and very explicit; and the strong language used furnishes the only reason justifying the application of the rule cited, to instruments of this kind. Surely, the rule cannot be applied generally to alb deeds of trust. That case does not in the slightest degree conflict with the two cases cited above, which are precisely like the case at bar, and should control in its determination. In Whitcherv. Webb, 44 Cal. 127, the provision relied on was in the body of the note, and the case, therefore, is not relevant. Waples v. Jones, 62 Mo. 440, decides nothing in addition to Brownlee v. Arnold, 60 Mo. 79, and there is not the slightest conflict between these cases and Morgan v. Martien, 32 Mo. 438, and Mason v. Barnard, 36 Mo. 384. In fact, they are in perfect harmony, and together decide the law correctly. The difficulty with the appellant is, that his case falls within the latter cases, and not within those he cites. 2. Parson’s Cont., 553, and the cases cited in note, simply maintain the general rule of construction, about which we make no question, and do not otherwise bear on the case at bar.

Opinion:
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 follow ing 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 fore closure; 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.