Court Opinion

ID: 6654617
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:56:52.150429+00
Date Added: 2024-06-11T15:59:50.784716
License: Public Domain

Sedgwick;, J.
After the decision of Garnett v. Meyers, ante, page 287, a rehearing was granted in this case, and in others involving the same questions. Upon this hearing the plaintiff’s attorney has furnished us an able and exhaustive argument upon the questions involved, which has been of great assistance to us. Questions involving the negotiability of notes secured by mortgages and other collaterals have frequently been considered by this court As early as 1876 it was determined in Webb v. Hoselton, 4 Nebr., 308, that “A bona-fide purchaser, for value, of a negotiable promissory note, secured by mortgage, before maturity and *297without notice, takes the mortgage as he does the note, discharged of all equities which may exist between the original parties,” and also that “The mortgage is a mere incident to the debt and passes with it.” These principles have been since adhered to, and so it was said in the first opinion of Garnett v. Meyers: “The long established and general rule is that if the note is in form negotiable, a sale and transfer of the note transfers the mortgage.” In Webb v. Hoselton, the security was in the form of a deed of trust. Its sole object was to secure the payment of the note. It does not appear to have contained any provisions affecting or limiting the indebtedness itself, and the effect of such provisions when incorporated in the mortgage or deed securing the note was not considered.
2. That the note and mortgage, when executed and delivered together as one transaction, will be construed together, is not a new doctrine in this state. Grand Island Savings & Loan Ass’n v. Moore, 40 Nebr., 686, and Seieroe v. First Nat. Bank of Kearney,50 Nebr., 612, were cited as establishing the proposition as the doctrine of this court. In the former case there is a somewhat extensive discussion of the question, and the conclusion is that the provision in the mortgage that “if the mortgagors should fail to pay the money when due * * * the plaintiff might elect to pay the same and declare the whole amount due and payable at once” gave the holder of the papers the right upon such failure “to elect to declare the whole debt due, not only for the purpose of foreclosing, but also for the purpose of enforcing the personal liability.” The conclusion is fortified by the consideration and discussion of authorities from this and other courts, and is considered as settling the law of this state upon that question. In the course of the opinion it is said: “The writer was at first of the impression that where the note is absolute and the mortgage contains such a provision, the provision should be restricted to the remedy by foreclosure, rendering the debt due for the purpose of foreclosure only, but leaving the maturity of the debt for the purpose of enforcing the *298personal liability to be determined by the note itself. The adjudications do not, however, bear out this view. In this state it has been determined that in deciding such questions the note and mortgage should be construed together. Fletcher v. Daugherty, 13 Nebr., 224; Lantry v. French, 33 Nebr., 524. This principle alone would not be decisive of the question, for the reason that, construing the two instruments together, the fact that the stipulation referred to was contained in the mortgage and not in the note, might be taken as an evidence of the intention of the parties to restrict the effect of the stipulation to the enforcement of the mortgage. * * * First Nat. Bank of Sturgis v. Peck, 8 Kan., 660, was a suit upon notes under similar conditions. The court there held, in an opinion by Brewer, J., that the notes and mortgage were to be construed together, that all the notes became due upon the failure to pay one, and that the statute of limitations ,ran against all from that time.” It may be said that this opinion determines the law of this state to be that conditions inserted in the contemporaneous mortgage which clearly and necessarily relate to the indebtedness itself, and manifestly constitute an attempt to modify or enlarge the terms of the note will be construed with the note, and parties chargeable with notice of such provisions will be bound thereby. This decision, so far as the writer is aware, has not been criticised by this court, but, on the other hand, has been followed as authority, and it is not perceived that parties dealing with commercial paper have cause to complain of such a rule. The rule itself does not trench upon the sacredness of commercial paper under the law merchant. The parties who attempt to' make a promissory note mean one thing to one person and another thing to other persons; who want to hold the note out to the world to be that which they have expressly agreed it shall not be; who seek to set it afloat with a string attached which may or may not be used to control the note as their interests may thereafter demand, are responsible for the uncertainty that attaches to such securities. If doubtful, *299conflicting, and uncertain provisions in the contract result in rendering such papers non-negotiable, the remedy is to limit the provisions of the mortgage to their proper functions of securing the indebtedness, and define the terms of the indebtedness in the note which is given for that purpose. See, also, Seieroe v. First Nat. Bank of Kearney, 50 Nebr., 612; 1 Randolph, Commercial Paper, 198.
3. The note and mortgage, together with an assignment pf the mortgage, were sold and delivered to the plaintiff. It is idle to argue that under such circumstances the plaintiff was not bound to take notice of the provisions of the papers which he purchased.
1. The provision of the mortgage which was held to affect the negotiability o>f the note is copied in full in the first opinion in Garnett v. Meyers, ante, page 280. The note and mortgage in this case were identical in their provisions with the papers involved in Garnett v. Meyers. Upon this hearing it was strenuously contended, and is ably and exhaustively argued in the brief, that these provisions were not intended to and did not affect the indebtedness itself, but relate only to the security, and ought not, therefore, to render the note non-negotiable.
The question thus presented is not free from difficulty, but we are inclined to adhere to the construction placed upon these provisions upon the second hearing of Garnett v. Meyers. After fully providing for the protection of the securities, other conditions are inserted which seem to have no meaning, unless they are construed to protect the holder of the securities against taxes that may be imposed upon these securities. If this is their meaning and intention, there can be no doubt that such conditions render the amount that the mortgagor may be compelled to pay upon the indebtedness, as a part thereof, uncertain; which would clearly render the paper non-negotiable. Tbe papers being non-negotiable, payment to the original payee without notice to the payor of any transfer of the papers; will discharge the paper.
The brief, and argument of appellant are. fflostly em*300ployed in the consideration of questions of fact as disclosed by the evidence. But these considerations are unimportant in view of the conclusion reached in the foregoing discussion which requires a reversal of the judgment below.
The judgment heretofore rendered is vacated, the judgment of the district court is reversed, and the cause remanded with instructions to dismiss, the case.
Reversed and remanded.