Court Opinion

ID: 9756332
Source: CourtListenerOpinion
Date Created: 2023-08-28 21:24:17.581749+00
Date Added: 2024-06-11T09:57:39.087390
License: Public Domain

Grimes, J.,
dissenting: I cannot accept the literal construction of this note and mortgage urged by the bank and adopted by the court.
The note and mortgage which must be read together (RSA 382-A:3-119) clearly contain provisions that are inconsistent with demand instruments. These inconsistencies, however, can easily be resolved by construing the instruments as installment obligations payable on demand only in the event of default. True, the note states it is “payable on demand.” A note payable on demand is due and payable upon execution, and the bank could maintain an action against a homeowner on the same day the mortgage is given. Merrimack River Sav. Bank v. Higgins, 89 N.H. 154, 195 A. 369 (1937); Newell v. Clark, 73 N.H. 289, 61 A. 555 (1905). However, this note and mortgage also provide that “on failure of performance of any said conditions [make monthly payment, adequately insure, pay taxes, water rates and assessments, and not suffer waste of the premises] the full sum or any unpaid balance of the mortgage debt hereby secured shall become due and payable” and that interest and principal shall be payable $144 per month commencing seven months from date.
It is inconsistent for a debt both to be due and payable immediately and to become due and payable upon default some time in the future. It is further inconsistent for a mortgage to be actionable without default the day it is given and to also provide for monthly installments not beginning until seven months later. In addition, a provision for renewals contemplates a postponement of maturity and is more *377appropriate to a time obligation than a demand obligation. Black’s Law Dictionary 1460 (4th ed. 1951); 11 Am. Jur. 2d Bills and Notes 55. 307-08 (1963).
Here, there was an application for a loan for a term of 20 years. The bank’s investment committee recommended a loan for a term of 20 years. Both the note and mortgage provide for monthly payments which are consistent with a twenty-year installment debt. Ordinarily, a demand note does not provide for installment payments (4 Uniform Laws Annotated ss. 2-108; 1 Willier & Hart, Forms and Proceedings Under the U.C.C. 5. 32.14), and a mortgage note is not ordinarily a demand note. Modern Legal Forms s. 5696-5711 (1972); 6 Nichols, Cyclopedia of Legal Forms 5. 6.1128 (1959); 1 Jones, Legal Forms 55. 18.40, 18T3, 18.45 (1962).
I believe that a layman generally believes a home mortgage to be a time obligation. McMichael and O’Keefe, How to Finance Real Estate 4 (1953). Its purpose is to permit a person to purchase a home and pay for it over a period of time. The bank’s claim that the debt is due immediately is inconsistent with this general practice and would defeat the very purpose of the loan. Yates v. Goodwin, 96 Me. 90, 51 A. 804 (1901). The inconsistencies in this note and mortgage support the common expectation that a mortgage is a time obligation. A layman who reads that the entire obligation will become due and payable upon default and that interest and principal is payable at $144 per month commencing in seven months, would reasonably expect that in the absence of default only each monthly installment will be due and payable monthly and that the provisions for payment on demand are impliedly conditional upon default. I Ie does not expect that the bank has the right in the absence of default to demand immediate payment in full.
If the note and mortgage mean what the court says, then there would have been no need for the provision providing that the entire obligation would become due on default. The inclusion of this clause, however, misleads the owner into believing that he is secure in his home in the absence of default only to find under today’s decision that he is at the mercy of the bank.
*378The note is consistent with being a time obligation. RSA 382-A:3-109. As the report of the Editorial Board Subcommittee on articles 3 and 4, 5. 3-109 at page 110 (1954) remarked: “There is, one supposes, a difference between a demand note and a note payable at some future time. The layman who signs a note may well wish to know whether he is signing time paper or demand paper. He should not be expected to sign what is actually a note payable on demand when he thinks he has a specified time to pay his debt.” The course of dealing between the parties (the payment and acceptance of installment payments) and the usage of trade (the custom of not calling for payment in absence of default) both support the note and mortgage being installment obligations. RSA 382-A: 1-205. Giving effect to the intention of the parties gleaned both from the language itself and from the surrounding circumstances, I would hold the note and mortgage in this case to represent an installment obligation. Griswold v. Heat, Inc., 108 N.H. 119, 229 A.2d 183 (1967); Salmon Falls Manufacturing Co. v. The Portsmouth Company, 46 N.H. 249 (1865).
Prior cases when presented with a similar instrument have uniformly construed it to be an installment note, despite the technical language that it was payable “on demand”. In Trigg v. Arnott, 22 Cal. App. 2d 455, 71 P.2d 330 (1937), the instrument provided for payment “on demand” and also for monthly payments of principal and interest and for the entire note to “immediately become due and payable at the option of the holder” in the event of default. The court, reversing the trial court, held the instrument was not a demand note, but was rather an installment note. Although the note was ambiguous, it was “clear” that the instrument was only to be considered a demand note in the event of default. In Barron v. Boynton, 137 Me. 69, 72, 15 A.2d 191, 193 (1940), the instrument provided for payment “on demand” and also for monthly payments of principal and interest. The supreme court, reversing the trial court, held the instrument was nob a demand note, but was rather an installment note. Although the note was ambiguous, “the plain intent of the parties was that the makers of this note were to have time .. . and not *379be compelled to pay the entire debt on demand.” In Collateral Liquidation, Inc. v. Renshaw, 301 Mich. 437, 3 N.W.2d 834 (1942), the instrument provided for payment “on demand” and also for monthly payments of principal and interest and for the holder’s election that the obligation be “due and payable on demand” in the event of default. The supreme court, reversing the trial court, held the instrument was not a demand note, but was rather an installment note. In Maffett v. Emmons, 52 N.M. 115, 192 P.2d 557 (1948), the instrument provided for payment “on demand” and also for monthly payments of principal and interest. The supreme court held the instrument was not a demand note, but was rather an installment note.
I fully accept the unquestioned law of Merrimack River Savings Bank v. Higgins, 89 N.H. 154, 195 A. 369 (1937), and Newell v. Clark, 73 N.H. 289, 61 A. 555 (1905). The instruments in those cases were obviously demand notes. Annot., 71 A.L.R.2d 284, s. 9 (1960). In Merrimack River Savings Bank v. Higgins, supra, there were no provisions for installment payments of principal, nor were there any provisions inconsistent with the debt being payable on demand; clearly the court was correct not to permit “parol evidence ... to vary .. . the settled legal import” of those notes. But this is not a parol evidence case; here the note and mortgage themselves provide for monthly installments of principal as well as interest and are inconsistent with the debt being payable on demand. They should be construed, consistent with the parties’ intent, as installment notes.
It is argued that the parties agreed to monthly payments “without the bank’s waiving the right to demand payment at any time.” I would construe that provision as protecting the bank against any acts or conduct on its part which would tend to show it had relinquished the right to demand payment in full in the event of default. See 92 C.J.S. Waiver, at 1041 (1955); Bowers, Law of Waivers. 1-2 (1914). Here, the plaintiffs do not claim the bank has waived any rights through its acts or conduct, but rather that the note by its express terms is inconsistent and ambiguous, and construed according to the reasonable intent and expectation of the parties *380is an installment note. In addition, I find the effect of this provision to be nothing more than a provision allowing the bank to “accelerate at will” which, under RSA 382-A: 1-208, must be “construed to mean that he shall have the power to do so only if he in good faith believes that the prospect of payment or performance is impaired.” See also La Sala v. American Sav. & Loan Ass’n, 5 Cal. 3d 864, 489 P.2d 1113, 97 Cal. Rptr. 849 (1971). There is no claim here that the prospect of payment or performance was impaired.
In summary, I find the instruments involved here, the equities between these parties, and all relevant cases prohibit the bank from foreclosing this mortgage in the absence of default.