Case Name: Harlow Chapin, Appellant, against John Murphy, Respondent
Court: Minnesota Supreme Court
Jurisdiction: Minnesota
Decision Date: 1861-07
Citations: 5 Minn. 474
Docket Number: 
Parties: Harlow Chapin, Appellant, against John Murphy, Respondent.
Judges: 
Reporter: Minnesota Reports
Volume: 5
Pages: 474–482

Head Matter:
Harlow Chapin, Appellant, against John Murphy, Respondent.
APPEAL FROM THE DISTRICT COURT OF RICE COUNTY.
The Defendant borrowed money, and agreed to pay it in one year, with four per cent, per month interest, with the privilege of keeping it two years by paying the interest annually at the same rate. At the end of the first year nothing was paid on the note for principal or interest, and no action was taken by the holder. Action at the end of the second year for the amount of principal, with interest, at four per cent, per month, for two years. Hdd¡ That the contract was an alterna-tivo one; no act of the lender could extend the contract for a longer time than one year against f) the will of the borrower, and the election was -with the borrower. Had he paid the interest at the end of the first year, no action could have been sustained against him upon the note until the end of the second year; but as soon as he failed to make such payment, a right of action accrued to the lender, and he could have sued at any time during the second year. The damages recoverable upon the note after the first year, is interest at seven per cent, per annum.,
Points and authorities of Appellant.
First. — Tbe doctrine enunciated by tbis Court in Mason Crwig, et al., vs. Callender, Flint & Co., 2 Mirm., 350/ and Talcott vs. Ma/rston, 3 Minn., 339, that “ upon breach of a money contract as to tbe principal, interest ceases, and damages only are recoverable at tbe rate fixed by law,” is too well supported by both reason and authority to admit of dispute, if, indeed, our case required it.
Tbe error of tbe Jud^e in tbe Court below consisted in ignoring tbe marked distinction which separates tbe case at bar from those to which we have adverted.
Second. — A memorandum upon a note made at tbe time of its inception, becomes a. part of tbe contract, and limits its construction and effect.
In the note in suit, Defendant promised to pay the principal one year from date, witb interest at four per cent. This promise was limited and controlled by the memorandum, guaranteeing to him the privilege of retaining the money two years at the same rate, of interest.
The effect of the memorandum is to give the note the same construction as if written : “ One or two years from date I promise to pay, &c., with interest, annually, at four per cent, per month. Makepeace vs. Harvard College, 10 HicJc, 298/ Haywood vs. Perrin, 11 Pide, 228; Hunt vs. Lvuermore, 5 Piek, 395; Jones vs. Pales, 4 Mass., 244; Young vs. Adams, 6 Mass., 181; Springfield Banle vs. Merrick, 14 Mass., 322; Bernard, et al., vs. Cushing, et dl., 4 Met., 231; Wheelock vs. Freeman, 13 Pick., 165; Chitty on Con., 8th Am. Bd., 90, Pote.
Third. — The Judge below found, 'as his conclusions of law, that at the expiration of the first year the contract on the part of the Plaintiff, of forbearance to sue, expired, and a right of action existed in him, and that the Defendant, having paid no interest at the maturity of said note, was under no obligation to keep the money an additional year, and pay the rate of interest specified in the note, thus treating the clause, “ by paying interest annually,” &c., as a condition precedent to the right of Defendant to retain the money another year.
To this we answer :
1st. — We may well admit the soundness of the foregoing conclusions, and still be entitled to judgment for the amount claimed in the complaint.
Certainly the Defendant was under no obligation to keep the money an additional year ; the contract was in the alternative, and he had his election, and by neglecting to pay at the expiration of the first year, the last day upon which he could make his election, he elected to retain the money the second year, upon the terms specified in the contract, and the first branch of the contract having become impossible, he was bound to perform the last. 2 Parsons oh Con., 163-4,110-1; Chitty on Con., 624-6, a/nd note.
2d. — ’Admitting the clause, “ by paying interest annually,” to be a condition precedent, the Plaintiff, for whose benefit the condition attached, had an undoubted right to waive it. A discharge, hindrance or waiver of the performance of a ■condition precedent by the party to be benefited, is in law equivalent to performance. Mitchell vs. Da/rthy, 2 Bingham, K. 0., 555/ Lúeas vs. Ooockoin, 3 Bingham, N. O., 737/ Ohitty on Oon., 633.
Ue chose not to take advantage of the breach of the condition, and a party in default cannot take advantage of it, and thus profit by his own wrong. Chitty on Oon., 636, see. 16/ 2 Ba/rsons on Gon., 191.
But it will be said that the rule that a party cannot take advantage of his own wrong, applied just as forcibly in the case of Taleott vs. Marston as in this. True, but the plain answer is, that that was an attempt to contract upon a matter which was not the subject of contract, to wit, damages fixed by law, and was simply void.
3d. — But the clause in question, when read as it must be, in connection with the body of the note, is not a condition precedent, because it does not go to the whole consideration of the contract, and a failure to pay only gave the Plaintiff an action for the year’s interest then due. 2 Parsons on Oon. 40-1, Note K. and L., a/nd cases cited/ Ohitty on Oon., 636; Knight vs. New Eng. Worsted Oo., 2 Oush., 271.
The clause “by paying interest annually, at four per cent.,” amounted to an express agreement on the part of the Defendant to pay interest annually at the rate of four per cent, per month for two years, if he should elect to keep the money so long. 1 Ohittfs Plead, 4; 4 Kent Oom., 136; Pike vs. Brown, 7 Oush, 133; Ohitty on Oon., 8ih Am. Ed., 85-6; 1 Bouvier's Law Die., 262,1; Eeleh vs. Taylor, 13 Piole, 137.
Fourth. — The rule laid down in Taleott vs. Marston, applies only when a collateral and additional contract having reference to interest or damages for the detention of money is superadded to the principal contract, to commence at the determination and after the breach of the latter. See 3 Minn., 345.
Fifth. — The case turns upon the question whether the sum recoverable for the use of the principal during the second year is recoverable as-interest or damages, and this depends upon whether the contract expired at the end of the first year. A condition differs from a limitation in this, that it terminates the estate only at the election of the party injured by its breach. 4 Kent Oom., 131.
"With reference to the determination of the estate, in or .right to retain the money, the clause, if a condition at all, is a condition subsequent, and by analogy the rule as to real estate, laid down in NieoTls vs. The New YorJc and Erie R. R., seems applicable. See 2 K&rnan, 131.
Points and authorities of Respondent.
Fi/rst. — If the Court below committed any error whatever, it was in finding that the note in suit became due at the end of the first year. This being found either for or against the Respondent, the rule, as established by this Court, in the case of Taleott vs. Marston, 3 Minn., 339, fixes the rate of interest which the note will draw, and which may go to make up the judgment.
Second. — The Court below did not err in finding that the note matured at the end of the year for which it was given.
Thi/rd. — The Respondent, by refusing to pay the interest at the end of the year, notified the Plaintiff that he would not continue the contract on the terms of the condition.
Fourth. — If the Plaintiff has suffered, it was from his own negligence in not bringing suit at the end of the year, when the Respondent failed to avail himself of the privilege of two years, by paying the interest accrued at that time.
Fifth. — It was no fault of the Respondent that the Plaintiff did not bring suit as soon as he might. He could not compel him to do so, and that he could not pay the note at the end of the year,' when he had the right, is perhaps more his misfortune than his fault, and his having set up this de-fence is not profiting by his own wrong within the meaning of the law.
Sixth. — The rule sought to be established by the Plaintiff in this ease seems to be that the Respondent could not have paid his note,-principal and interest, at the end of the year, nor at any time before the expiration of two years, unless the Plaintiff had been entirely willing that he should do so, but that he? the Plaintiff, might refuse to receive payment and compel the payment of interest at four per cent, per month. Such a doctrine is contrary to common, as well as judicial sense, and will not meet with favor in this court.
Seventh. — After the court below found that the note became due at the end of the first year there is no distinction between this case and that of Talcott vs. Marston, and the rule in that case must apply in this.
Eighth. — The payment of one year’s interest at the end of the first year was a condition precedent to the right of the Respondent to retain the money two years, and admitting for the argument, that the Plaintiff, by neglecting to sue, in effect waived the performance of the condition, yet he did not do it in such legal shape as to bind him, and so as to debar his right of action at any time after the first year, and the Respondent had no guarantee against a suit by the Plaintiff. This being the case, his promise, if a promise, was without mutuality and without consideration.
Ninth. — Admitting that the clause, at the bottom of the note, “ with privilege of two years by paying interest annually, at 4 per cent, per month,” must be read and taken in connection with the body of the note, that even will not vary the construction already given in favor of the Respondent.
Tenth. — In cases of this nature the decision must always ‘‘depend upon the intention of the parties, to be collected from the terms of the agreement itself, and from the subject matter to which it relates.” 2d Parsons on Oon., 6, 10, 39, and oases cited; Dutch Qhtvrch vs. Bradford, 8 Oowcm, 477. Adopting this rule of construction, there can be but one result for considering the nature of the subject to which the contract relates, the customs and usages of the country in that kind of business. It is apparent that the intention of the parties was, that upon failure of the Respondent to pay the interest, a right of action should immediately accrue to the Plaintiff.
Eleventh. — In case of a money alternative contract, if he who has the election fails to élect, by performance of the condition precedent, usually a right of action at once vests in the other party. 2 Pa/rsons on Con., 163; Chitty on Con., 624. If this is an alternative contract it is of this nature. If Re spondent elected to hire the money another year, on the specified terms, he could do so by paying interest at that time ; if he failed to elect, and the other party had the right of election, he had it then, and should then have exercised it in some legal and definite way; but by no act of his did he signify such election. He could not continue to hold the right of action and election during the whole year. He should have notified the Defendant of his option. 2d Parsons on Con., 182-3, Note “ V;’ Respondent cites 3d Minn., 339, Talcoit v. Marston.
Cole & Case, Counsel for Appellant.
Davis & TaNNEb, Counsel for Despondent.

Opinion:
By the Court.
ElaNdeau, J.
The Defendant executed a Promissory note to the Plaintiff for three hundred and twenty dollars, payable in one year, with interest at the rate of four per cent, per month. After the signature the following note or memorandum was written : " With privilege of two years by paying interest annually at four per cent, per month." At the end of the first year nothing was paid on the note for principal or interest, and no action was taken by the holder. After the expiration of the second year, nothing being paid by the maker, suit was commenced to foreclose a mortgage, which was collateral to the note, and the only question raised in the case is, what is the Plaintiff entitled to for the use of the money the second year ? Can he recover four per cent, per month, or only seven per cent, per annum, the legal measure of damages ?
The contract is clearly an alternative one, and the question turns upon whether the election rested with the creditor or the debtor to extend it to two years. This, in contracts of this nature will vary with the purpose and object of the agreement; sometimes it may be with one, and sometimes with the other, but the test will generally be, who is the first agent, and ought to do the first act ? Who shall have the election ? As, if a man granteth a rent of twenty shillings, or a robe, to one, and his heirs, .the grantor shall have the election ; for be is tbe first agent, by payment of one or delivery of the other. So, if a man maketh a lease, rendering a rent or a robe, tbe lessee shall have the election, causa qua supra. Co. Litt. 145 a.; Layton vs. Pearce, Doug. 15; Bac. Abr. Election, B.; Chitty on Con., 8th Amer. Ed., p. 625.
In Giles vs. Bradley, 2 Johnson's Cases, 253, tbe Plaintiff purchased of tbe Defendant's testator a negro slave, and paid for him, and it was agreed that if tbe Plaintiff or bis wife did not like tbe boy, tbe testator was to take him back and refund tbe money, if be was returned within five months of tbe purchase. Tbe Plaintiff returned him, and was allowed to recover, tbe Court holding that tbe contract was obligatory at tbe option of tbe Plaintiff, and be could elect to determine it at any time within tbe five months. See also Note "A," at tbe end of this case, where several authorities are collected.
In Disborough vs. Neilson, 3 John. Cases, 81, tbe Plaintiff contracted to deliver to tbe Defendant from 700 to 1,000 barrels of meal from tbe 15th of March to tbe 1st of May. It was held that tbe Defendant was bound to receive tbe whole one thousand barrels if tendered by tbe Plaintiff within tbe time, as tbe election to deliver a less amount rested entirely with tbe Plaintiff. 11 Vermont, 612; 19 Maine, 79; 4 Greenleaf, 497.
In McNitt vs. Clark, 7 John. R. 465, tbe Defendant purT chased a patent right, and agreed to pay $400 at tbe end of six months, or pay two-thirds of tbe profits, or six hundred dollars at tbe end of twelve months, or pay two-thirds of tbe profits at that time. He did neither, and tbe Court held that under tbe contract tbe election was with tbe Defendant to pay $400 at tbe end of six months, or account, or to pay $600 at tbe end of tbe year, or account for tbe profits ; but having totally failed to do either, be bad lost bis election, and tbe Plaintiff could elect for himself, and recover either be sued for.
In Smith vs. Sanborn, 11 John. R., 59, tbe Defendant agreed to pay eight dollars per acre for a piece of land within a certain time, or if be defaulted, be was to pay nine dollars per acre for tbe land within a certain other time. Before tbe expiration of tbe time within which tbe De fendant was allowed to pay for tbe land, at nine dollars per acre, tbe Plaintiff commenced suit for tbe first default and sought to recover «'for tbe land at eight dollars per acre, but the Court held that tbe election was with tbe Defendant, and be could have bis full time to pay tbe greater amount at bis option, and the Plaintiff was nonsuited.
These cases present a fair illustration of tbe obligations arising under such contracts. In the case at bar, tbe Defendant borrowed tbe money and agreed to pay it in one year, with four per cent, per month interest, with tbe privilege of beeping it two years by paying tbe interest annually at the' same rate. It is clear that no act of tbe Plaintiff could extend tbe contract for a longer period than one year, against tbe will of tbe Defendant. Had tbe Plaintiff, at tbe end of tbe year offered to pay tbe whole amount, principal and interest, 'be could have terminated the contract by so doing. The election, therefore, was with the Defendant, and to accept tbe privilege be must have paid tbe interest due at tbe end of tbe first year. Had be done so no action could have been sustained against him on tbe note until tbe end of tbe second year ; but tbe moment be failed to perform tbe condition by which alone be could avail himself 'of tbe privilege of keeping tbe money tbe second year, tbe Plaintiff bad a right of action against him for tbe note and one year's interest. If tbe Plaintiff could sue at any time during the second year, then it follows, of course, that tbe Defendant bad no right to the money under tbe contract, and consequently there rested upon him no obligation to pay tbe contract price for it.
Tbe Plaintiff insists that as tbe condition of paying tbe interest annually was all for bis benefit, be could waive it, and that by waiting tbe second year be bad done so. Tbe answer to this, is, that tbe election in such contracts must be in one or tbe other party, and cannot be in both. If tbe Plaintiff, by bis act could make tbe contract a continuing one for two years, then the election was with him ; but tbe test above given proves it otherwise. Tbe Defendant was tbe first agent; be was to pay tbe interest annually, and on that act depended tbe adoption of tbe privilege of extension.
Tbe Plaintiff bad bis right of action at tbe end of tbe first year, and if be did not avail bimself of it be has no one to blame bnt himself. Tbe dama^e'fe recoverable upon the note after tbe first year are seven per cent, per annum. Talcott v. Marston, 3 Minn. R., 339.
Judgment affirmed.