Imagens das páginas

W. E. SNYDER, Plff. in Err.,


Charles N. MILLER et al.
(...... Kan.........)

1. A mortgage securing a series of notes due at intervals of one year provided that nonpayment of any one of them, together with nonpayment of taxes due on the mortgaged premises, should mature the entire debt. None of the notes was paid at

maturity. At the date of the maturity of the first note, taxes on the land were due and such unpaid, and default continued until after all the notes were due. A purchaser of the land from the mortgagor, who did not assume payment of the mortgage, then paid the taxes. Subsequent to the payment of taxes, and more than five years from the date of the default upon the first note and taxes, the mortgagee brought suit to foreclose the mortgage. Held:


a. The statute of limitations menced to run at the date of the default upon the first note and taxes.

b. The running of the statute of limitations was not suspended by the payment of taxes.

c. By paying the taxes the landowner did not waive the right to plead the statute of limitations, or estop himself from so doing.

2. The case of First Nat. Bank v. Peck, 8 Kan. 663, approved and followed, and the case of Douthitt v. Farrell, 60 Kan. 195, 56

Pac. 9, criticized.

(May 6, 1905.)

E RROR to the District Court for Ottawa County to review a judgment in favor of defendants in an action brought to foreclose a mortgage securing certain promissory notes. Affirmed.

The facts are stated in the opinion. Messrs. E. C. Sweet and Garver & Larimer, for plaintiff in error:

Where the condition of the mortgage is that the whole debt shall become due upon the failure to pay "interest and taxes," both conditions must exist.

Lewis v. Lewis, 58 Kan. 563, 50 Pac. 454. But, even where both such conditions have existed so as to start the running of the statute of limitations, the subsequent pay ment of the taxes by one interested in their payment suspends the operation of the


Douthitt v. Farrell, 60 Kan. 195, 56 Pac.


A payment by Miller, the subsequent grantee of the land, had the same effect as if such payment had been made by the

mortgagor himself.

Schmucker v. Sibert, 18 Kan. 104, 26 Am. Rep. 765; Mc Lane v. Allison, 60 Kan. 441, 56 Pac. 747.

Messrs. Thompson & King, for defendants in error:

When a default matured all the notes, and this default continued until after the time when the notes became due by their terms, the purpose of the conditions had been accomplished, and they were functus officio; and the payment of taxes on the mortgaged premises after that time, when the statute of limitations was running on the face of the notes, and not under the conditions in the mortgage, could not affect the operation of the statute.

Lewis v. Lewis, 58 Kan. 564, 50 Pac. 454; Green v. Goble, 7 Kan. 301; Atchison, T. & S. F. R. Co. v. Atchison Grain Co. 68 Kan. 585, 75 Pac. 1051.

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Burch, J., delivered the opinion of the court:

This proceeding in error grows out of an action commenced in the district court of Ottawa county on December 12, 1903. The petition prayed for the foreclosure of a mortgage securing four promissory notes due respectively on February 18, 1896, February 18, 1897, February 18, 1898, and February 18, 1899. The mortgage contained a provision to the effect that, if any one of the notes secured and the taxes upon the mortgaged premises should not be paid when due and payable, the entire mortgage debt should at once mature. The absence of the makers of the notes from the state was pleaded to avoid the running of the statute of limitations. The answer pleaded default in the payment of taxes for the year 1895, resulting in a tax sale of the land in 1896 followed by an indorsement on the tax-sale certificate of taxes paid by the certificate holder for the years 1896, 1897, and 1898. The defendant purchased the land subject to mortgage on November 18, 1897, and was not charged with any personal liability on the notes. Because of the default in the payment of the taxes for the year 1895, and the default in the payment of the note due February 18, 1896, he claimed the entire mortgage debt matured on the date last mentioned, and prayed the benefit of the statute of limitations. The reply pleaded payment of the delinquent taxes by the defendant on August 21, 1899. A demurrer to the reply was sustained, and the correctness of this ruling is the matter now in question.

As long ago as 1871 this court decided that a stipulation in a mortgage of the same character as that under consideration was not a one-sided affair, vesting a mere option in the mortgagee, but that the mortgagor had an equal right with the mortgagee to in

sist upon it, and to receive whatever advantages it might confer upon him. Mr. Justice Brewer, speaking for the court, said: "This clause is inserted in mortgages usually for the benefit of the mortgagee; but, being a valid stipulation, the mortgagor has equal right to insist upon it, and receive whatever advantage he can from its enforcement. When the payor, at the expiration of six months, failed to pay the note then due, by the terms of the contract all three notes became due. The statute of limitations began to run on all, and a subsequent purchaser purchased after maturity." First Nat. Bank v. Peck, 8 Kan, 663. The same rule was announced in England at least as early as 1843. A defendant gave a warrant of attorney to secure a debt payable by instalments; the plaintiff having the right in case of any default to have judgment and execution for the whole, as if all the periods for payment had expired. In an action of assumpsit it was held that the defendant might show, under a plea of the statute of limitations, that the first default was made more than six years before action, and that this was a complete defense, not only as to instalments due more than six years before, but also as to those due within that period. Lord Denman, Ch. J., said: “We are of opinion that the defendant is right, and that the cause of action accrued upon the first default for all that then remained owing of the whole debt. In this case there was a default more than six years ago, and upon that the plain-scribe a different date at which it shall be tiff might, if he pleased, have signed judgment, and issued execution for all that remained due, or he might have maintained his action. If he chose to wait till all the instalments became due, no doubt he might do so; but that which was optional on the part of the plaintiff would not affect the right of the defendant, who might well consider the action as accruing from the time that the plaintiff had a right to maintain it. The statute of limitations runs from the time the plaintiff might have brought his action, unless he was subject to any of the disabilities specified in the statute; and, as the plaintiff might have brought his action upon the first default, if he did not choose to enter up judgment we think that the defendant is entitled to the verdict upon the plea of the statute of limitations." Hemp v. Garland, 4 Q. B. 519, 523, 524. This case was expressly approved in 1891 by the court of appeal, on appeal from the Queen's bench division, in the case of Reeves v. Butcher [1891] 2 Q. B. 509. Lindley, L. J., said: "I am of opinion that we cannot differ from the judgment below without altering the law. The agreement is one reasonably easy to be understood. It provides for a loan for five years, subject to

a provision that, if default is made in punctual payment of interest, the principal shall be recoverable at once. Now, the statute of limitations (21 Jac. I. chap. 16) enacts that such actions as therein mentioned, including 'all actions of debt grounded upon any lending or contract without specialty,' shall be brought 'within six years next after the cause of such action or suit, and not after.' This expression, 'cause of action,' has been repeatedly the subject of decision, and it has been held, particularly in Hemp v. Garland, decided in 1843, that the cause of action arises at the time when the debt could first have been recovered by action. The right to bring an action may arise on various events, but it has always been held that the statute runs from the earliest time at which an action could be brought." The reason for allowing the debtor to take advantage of the stipulation is well stated by the supreme court of Texas in the case of Harrison Mach. Works v. Reigor, 64 Tex. 89, 90, 91, as follows: "The purpose of statutes of limitation is 'to compel the settlement of claims within a reasonable period after their origin, and while the evidence upon which their enforcement or resistance rests is yet fresh in the minds of the parties or their witnesses.' Wood, Limitation of Actions, § 5. If the holder of a note may, at his option, treat the claim as due at a later date than the maker has agreed that it shall mature, and thus pre

So in

barred, the evidence for its enforcement may
be preserved, whilst that for its resistance
may be destroyed, and thus the purpose of
the statute be wholly defeated.
no option was left to the creditor. He was
forced to treat the debt as due. It is true
he was not obliged to bring suit upon it upon
default in payment of the first note. Neither
is any creditor compelled to sue upon a claim
so soon as it becomes due. But the statute
was put in motion without consulting his
wishes, by the very terms of the contract,
which neither party had any right to change
without the consent of the other."
Noell v. Gaines, 68 Mo. 649, 656, it is said:
"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 hap-
pened, 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 fur-
nish any guide as to their maturity." And
the benefit to be derived by sureties from a
contract providing that nonpayment of a
part of the debt shall mature the whole is
forcefully stated by the Kentucky court of


appeals as follows: "It is easy to conceive | all accrued costs, would not, after suit had that a surety might require such a clause been commenced, discharge the default and as a condition for his own protection. He reinstate the contract as to notes otherwise might be unwilling to bind himself for five not due for a long period of time. Stanclift years unconditionally, whereby he might be v. Norton, 11 Kan. 218. The legislature has compelled to pay at the end of that time not seen fit to interfere, and the rule thus both the principal and interest, and might earl announced is now definitely estabvery prudently say: 'Insert a clause which lished as a part of the law of this state. Darrequires the interest to be paid quarterly, row v. Scullin, 19 Kan. 59; Meyer v. Graeand which provides that, if not so paid, the ber, 19 Kan. 165; Ellwood v. Wolcott, 32 debt is to become due, so that, if not paid, Kan. 526, 4 Pac. 1056; Lewis v. Lewis, 58 I will have the right to pay it or secure Kan. 564, 50 Pac. 454; Douthitt v. Farrell, myself."" Ryan v. Caldwell, 106 Ky. 543, 60 Kan. 195, 56 Pac. 9; Kennedy v. Gibson, 50 S. W. 966, 967. The reasoning of these 68 Kan. 612, 75 Pac. 1044. At a date earcases applies with peculiar force to the sit- lier than that of the decision in First Nat. uation of one who has purchased subject Bank v. Peck this court held: “As a gento a mortgage which he has not assumed, eral rule, when a statute begins to run, it and especially so if the mortgagors have continues to run until the demand is barred. left the state, and he may be deprived of This principle is laid down with great unitheir aid in making proper defenses to a formity in all the authorities, and may be belated claim. When on the United States considered as settled. Undoubtedly the circuit bench, Mr. Justice Brewer said: legislature may prescribe differently, and in "Now, here, according to the averments of this state several exceptions are made, but this petition, this mortgage and this deed none such as is claimed in this case." Green of trust were executed at the same time, v. Goble, 7 Kan. 297, 301. and to secure these notes; they were parts and parcels of one transaction, and are to be construed as one instrument; and if there were but one instrument, and that containing a promise to pay money at three separate times, with a proviso that, upon a failure to pay the first sum at the time named, all should become due, I cannot see how, logically, we can escape the conclusion that the parties have made an absolute, unconditional stipulation, operative under all circumstances and for all purposes. I had occasion when I was on the supreme bench of my own state to consider this matter in two or three cases, and that was the conclusion I then came to, and it is unchanged. I am aware that Judge Hough, in his dissenting opinion, suggests certain contingencies in which the application of this rule, where there are several negotiable promissory notes secured by mortgages or deeds of trust, might work out some embarrassments; but still I do not think that the possibility of such embarrassments can avoid the clear force of the language the parties have used. I do not see why they cannot make such a contract, and if they made it, and its language is clear. I do not see why the courts should not give force and effect to it." Wheeler & W. Mfg. Co. v. Howard, 28 Fed. 741. Although the courts of some of the states and some of the Fed- | eral courts have taken a different view, the doctrine propounded in First Nat. Bank v. Peck has been steadily adhered to by this court. It has been carried to the extent of holding that a tender of delinquent taxes, whose nonpayment constituted the sole breach of the contract, and the payment of

By applying the rules recognized in these cases to the facts of the case under consideration, it becomes plain that the demurrer to the reply was properly sustained. But the defendant claims that the court should have been guided by the case of Douthitt v. Farrell, 60 Kan. 195, 56 Pac. 9, the syllabus of which reads as follows: "Where a promissory note was given, by the terms of which the principal became due in five years from date, with interest payable semiannually; and a real-estate mortgage securing it was given, which provided that upon default in payment of any of the interest when due, and the taxes on the mortgaged premises when due, the whole indebtedness should mature; and both such defaults occurred; and the statute of limitations thereupon commenced to run against the indebtedness; and the delinquent taxes were thereafter paid by the mortgage debtor,—held, that the running of the statute in his favor was ended by his voluntary correction of the one default; and, although more than five years elapsed from the occurrence of the two defaults mentioned, the cause of action on the note and mortgage was not barred." This decision was based upon the case of Smalley v. Ranken, 85 Iowa, 612, 52 N. W. 507. Smalley v. Ranken refers, in turn, to Watts v. Creighton, 85 Iowa, 154, 52 N. W. 12, and Watts v. Creighton discusses and expressly rejects the doctrine of First Nat. Bank v. Peck. The argument in the Smalley Case is as follows: "What did the parties stipulate that the taxes should be paid by defendant for? To protect the plaintiff from the loss or impairment of his security. At the filing of the amendment every right

ingen v. Lahner, 93 Iowa, 147, 26 L. R. A. 765, 57 Am. St. Rep. 261, 61 N. W. 431.


of the plaintiff in this respect was fully pro- | viding for penalties or forfeitures. Swear tected. The object of the condition of the mortgage was to enable the plaintiff to treat the debt as due, and save himself from loss because of the default. After the payment of the taxes, all such liability for loss was at an end. His situation was exactly as if there had been no default, as far as the conditions for forfeiture were concerned. To justify a forfeiture under such circumstances would work an injustice that the court ought not to permit." This reasoning proceeds upon premises wholly incompatible with those employed in the decisions of this court already quoted and cited. Stipula tions for the acceleration of the maturity of debts do not provide penalties or forfeit ures. "It is therefore settled by the overwhelming weight of authority that if a certain sum is due, and secured by a bond, or bond and mortgage, or other form of obligation, and is made payable at some future day specified, with interest thereon made payable during the interval at fixed times, annually or semiannually or monthly, and a further stipulation provides that, in case default should occur in the prompt payment of any such portion of interest at the time agreed upon, then the entire principal sum of the debt should at once become payable, and payment thereof could be enforced by the creditor, such a stipulation is not in the nature of a penalty, but will be sustained in equity as well as at law. In exactly the same manner, if a certain sum is due, and is secured by any form of instrument, and is made payable in specified instalments, with interest, at fixed, successive days in the future, and a further stipulation provides that, in case of a default in the prompt payment of any such instalment in whole or in part at the time prescribed therefor, then the whole principal sum of the debt should at once become payable, and payment thereof could be enforced by the creditor, such stipulation has nothing in common with a penalty, and is as valid and operative in equity as at the law." 1 Pom. Eq. Jur. 2d ed. § 439. "Provisions such as that under consideration are not in the nature of penalties; nor have they anything in common with forfeitures, but are to be regarded as nothing more than agreements between the parties fixing the time and the conditions upon which the whole debt may become due. Such an agreement may be as advantageous to the payor as to the payee. Buchanan v. Berkshire L. Ins. Co. 96 Ind. 510; Malcolm v. Allen, 49 N. Y. 448; 1 Pom. Eq. Jur. § 439; 2 Jones, Mortg. § 1186." Moore v. Sargent, 112 Ind. 484, 485, 14 N. E. 466. Indeed, the supreme court of Iowa itself, in a later case, has expressly held that such stipulations are not to be regarded as pro

But a more fundamental consideration is that the parties made the contract, and the courts cannot make another to take its place. Its language excludes the idea that the creditor may or may not "treat the debt as due." It becomes due in fact. If an election were all that the parties intended, words appropriate to that purpose should have been used. "It is not necessary to assume that the parties to such a contract intended to provide for none but wrongful refusals to pay instalments. It might happen that the debtor, upon good grounds, would afterwards deny his liability upon the contract, and therefore refuse to pay instalments, in which case the provision would serve him a useful purpose, in bringing the question at issue to a prompt test, and not leave it entirely with the creditor to delay until, perhaps, evidence of the defense had been lost. The question at last is one of construction of the language used, and that which makes it mean just what it says is not without reason or good authority to support it. Where the purpose is only to give the option to the creditor, language expressive of it may be easily inserted." San Antonio Real Estate Bldg. & L. Asso. v. Stewart, 94 Tex. 441, 86 Am. St. Rep. 864, 868, 61 S. W. 386. This distinction was recognized, and, indeed, controlled the decision, in the very recent case of Kennedy v. Gibson, 68 Kan. 612, 75 Pac. 1044. The opinion reads: "The note provided that a default should mature the entire debt, at the option of the holder, while the provision in the mortgage was that a default made the whole debt due, regardless of an election by the holder. Which of these provisions should control? In the absence of an option clause in the note, the stipulation in the mortgage would have operated to mature the whole debt upon a default, and the mortgagors could have taken advantage of the stipulation. First Nat. Bank v. Peck, 8 Kan. 660. The stipulation in the note as to default, however, conflicts with that of the mortgage, and, of necessity, the former controls. The note contains the obligations of the mortgagors, and the mortgage, concurrently executed, is an incident to and security for the note. The stipulation in the note must therefore prevail, and, unless the holder exercised the option and elected to declare the whole debt due, the statute would not run earlier than the time originally fixed for the maturity of the note." Such being the established position of this court the Smalley Case must be eliminated as a support for the conclusion reached in the Douthitt Case. In deciding the Douthitt


Case the court in effect declared reciprocal | Moore v. Sargent, 112 Ind. 484, 485, 14 N. estoppels against the parties. The debtor E. 466, it is said: "The provision in the lost the right to plead that the statute was mortgage for accelerating the time when the running on account of his default, and the whole debt should become due and collecticreditor lost the right to sue on account of ble did not make the maturity of the debt the same default. The wound was healed evidenced by the second note depend upon without a scar. The condition in the mort- the election of the mortgagee. The second gage that the creditor could, under certain note became absolutely due upon failure to circumstances, insist upon payment of the pay the first note at maturity. According note before maturity according to its terms, to the terms of the contract, upon the hapwas restored to the status of an unbroken pening of that event the whole debt became covenant for the future protection of the in- as effectually and absolutely due as if furdebtedness secured, and the indebtedness it-ther credit had not been, in any contingency, self was restored to the status of an unma- agreed upon. The mortgagor had then the tured claim. The opinion reads: "We have right to pay or tender the whole debt, and no doubt but that the voluntary payment of by that means suspend the accumulation the taxes by the debtor was a waiver by him of interest. The acceptance of a part by of the conditions under which the statute of the mortgagee did not defeat the right of limitations was running in his favor, and the mortgagor to pay or tender the balance was a restoration by him of the plaintiff to at once, nor did it, without a new agreethe status of a holder of an unmatured in- ment, extend the time or prevent the former debtedness." Manifestly no such rehabili- from enforcing payment of what remained tation of rights could be accomplished in unpaid. Under a provision which this case. The last note had matured by its gives the creditor the exclusive right to own terms six months before the taxes were elect, within a time fixed, whether or not paid. The plaintiff could not be reinvested he will treat the whole debt as due in case with the rights of a holder of an unmatured the debtor makes default in paying interest, indebtedness, and the mutual modification of it may well be that the unconditional acthe legal relations of the parties adverted to ceptance of interest by the creditor, after in the Douthitt Case was impossible. True, the expiration of the time, without notice the term "voluntary waiver" is used in that of the election, would waive the default. 2 decision, but, as already observed, the Jones, Mortg. § 1186. Or if the default was waiver was of such a character that it neces-induced by the fraudulent or inequitable sarily worked a change in the rights of the conduct of the creditor, or by any agreeopposite party. That the conduct of a ment or promise upon which the debtor single party to the contract may have such might rely which operated to mislead or far-reaching effect, unless the other throw the debtor off his guard, a court of party has been influenced in some manner equity would interfere to stay proceedings, by it, is not conceded by those courts which or the action might be abated upon the facts enforce the rule of peremptory maturity being properly pleaded.” adopted in this state. Thus, in the case of San Antonio Real Estate Bldg. & L. Asso. v. Stewart, 94 Tex. 441, 86 Am. St. Rep. 864, 668, 61 S. W. 386, it is said: "It is not in the power of the creditor, by his acts alone, to change the rights of the parties resulting from the maturity of the debt. But both parties, by their joint action, may so alter such rights that the creditor would no longer have the right to demand, nor the debtor to pay, the entire indebtedness.


While neither party, by his separate action or nonaction, could impair the rights of the other, each could waive his own rights as they accrued from the default in payment of an instalment so as to estop him from relying upon such default. To accomplish this, it would only be necessary that each should so act as to justify the other in believing, and acting upon the belief, that the effect of the failure to pay an instalment was to be disregarded, and that the contract should stand as if there had been no default." Likewise, in the case of

But under either theory the judgment of the district court in this case was correct, because the condition in the mortgage now in controversy had spent its force when the taxes were paid. No acceleration of the maturity of the notes secured could occur by virtue of it. Failure to comply with it could not start the running of the statute, and a payment of taxes could not stop the statute from running. No rights could be gained or lost on account of the stipulation. On February 18, 1896, a cause of action accrued in plaintiff's favor, and the statute of limitations then commenced to run against it. From February 18, 1896, until the notes matured by their terms, the plaintiff had an indisputable right to bring suit upon them, and during all that time the statute of limitations continued to run. After the notes matured by their terms, the cause of action continued to exist, unimpaired, and the statute continued to run. The payment of taxes on August 21, 1899, could not prevent suit on the notes, and hence could not

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