Opinion
17370, 17379.
FEBRUARY 13, 1951.
Injunction. Before Judge G. C. Anderson. Richmond Superior Court. November 9, 1950.
Cumming, Nixon Eve, for plaintiff in error.
Heard Robertson and Eugene T. Gilbert, contra.
Under the terms of the note and deed here involved, the grantor debtor was entitled to a one-month grace period within which to pay any deficiency in any monthly installment, whether the deficiency consisted of the whole or only a part of such installment; and the trial court did not err in restraining the grantee creditor from accelerating the maturity of the entire indebtedness and exercising the power of sale conferred by the deed within such grace period.
Nos. 17370, 17379. FEBRUARY 13, 1951.
Frank H. Fogel brought his equitable petition against Blanchard Calhoun Realty Company, seeking a temporary restraining order and injunction to prevent the defendant from exercising the power of sale in a certain security deed conveying described property in the City of Augusta, Georgia, as security for the payment of an indebtedness originally in the sum of $9000, which the defendant was seeking to do by reason of the failure of the plaintiff to pay the installment due on September 1, 1950. After a hearing the trial court granted an interlocutory injunction restraining the sale of the property pending the final disposition of the case. The defendant excepted to this judgment by direct bill of exceptions.
The record discloses that Fogel, an officer in the Army, obtained from Blanchard Calhoun Realty Company, a so-called "G. I. Loan", which was ineligible for guaranty by the Veterans Administration because there had been no break in his military service since the war and, therefore, he had not qualified as a veteran.
By the terms of the note and the security deed, the loan was payable in installments on the first day of each month over a period of 20 years; and, under the record, all installments were paid in full through the August, 1950, installment. There was evidence in behalf of the plaintiff that a check in payment of the September installment was mailed on August 31, 1950, in an envelope addressed to the defendant. The evidence of the defendant showed that the envelope was postmarked "Sep. 7, 1950" at "4:30 PM", and was actually received on September 8. On September 5, 1950, before the receipt of this check, the defendant elected to declare the entire indebtedness due and payable because of the alleged default in the payment of the September 1 installment. It was stipulated at the hearing that a tender of the September installment was made subsequently to September 5, when the entire loan was declared due by the defendant, and prior to October 1, 1950, which tender was refused.
The trial court, in construing the security deed and the note evidencing the debt, held that the September installment would not have been in default until October 1, 1950; and as it was undisputed that a continuing tender had been made between the time the loan was called on September 5 and October 1, 1950, no default had occurred, and that the defendant was without authority to accelerate the maturity of the entire debt and to exercise the power of sale in the security deed, and granted the interlocutory injunction complained of.
The material provisions of the security deed are as follows: "This conveyance is to be construed under the existing laws of the State of Georgia as a deed passing title, and not as a mortgage, and is intended to secure the payment of a debt in the principal sum of Nine Thousand and No/100th Dollars ($9000.00), together with interest thereon from date at the rate of four per centum (4%) per annum on the unpaid balance until paid, for money lent, as evidenced by a promissory note of even date herewith the terms of which are hereby incorporated in this instrument by reference, executed by the Grantor to the order of the Grantee, principal and interest being payable at the office of Blanchard Calhoun Realty Company, in Augusta, Georgia, or at such other place as the holder of the note may designate in writing delivered or mailed to the Grantor, in equal monthly installments of Fifty-four and 54/100th Dollars ($54.54), commencing on the first day of June, 1950, and continuing on the first day of each month thereafter until the principal and interest are fully paid, except that the final payment of the entire indebtedness evidenced by said note, if not sooner paid, shall be due and payable on the first day of May, 1970.
"THE GRANTOR COVENANTS AND AGREES:
"1. He will promptly pay the principal of and interest on the indebtedness evidenced by the said note, at the times and in the manner therein provided. Privilege is reserved to prepay at any time, without premium or fee, the entire indebtedness or any part thereof not less than the amount of one installment, and in accordance with the amortization schedule.
"2. Together with and in addition to the monthly payments of principal and interest payable under the terms of the note secured hereby, he will pay to the Grantee, on the first day of each month until the said note is fully paid, the following sums:
"(a) A sum equal to the ground rents, if any, next due, plus the premiums that will next become due and payable on policies of fire and other hazard insurance covering these premises, plus taxes and assessments next due on the premises covered by this Security Deed (all as estimated by the Grantee, and of which the Grantor is notified) less all sums already paid therefor, divided by the number of months to elapse before one month prior to the date when such ground rents, premiums, taxes and assessments will become delinquent, such sums to be held by Grantee in trust to pay said ground rents, premiums, taxes, and special assessments.
"(b) The aggregate of the amounts payable pursuant to subparagraph (a) and those payable on the note secured hereby, shall be paid in a single payment each month, to be applied to the following items in the order stated:
(I) ground rents, taxes, special assessments, fire and other hazard insurance premiums;
(II) interest on the note secured hereby; and
(III) amortization of the principal of said note.
Any deficiency in the amount of such aggregate monthly payment shall, unless made good by the Grantor prior to the due date of the next such payment, constitute an event of default under the Security Deed. The Grantee may collect a `late charge' not to exceed an amount equal to four per centum (4%) of any installment which is not paid within fifteen (15) days of the due date thereof to cover the extra expense involved in handling delinquent payments.
"3. . . If, however, such monthly payments [being payments provided under (a) of paragraph 2 above] shall not be sufficient to pay such items when the same shall become due and payable, the Grantor shall pay to the Grantee any amount necessary to make up the deficiency. Such payments shall be made within thirty (30) days after written notice from the Grantee stating the amount of the deficiency, which notice may be given by mail. . .
"13. . . The Grantor covenants and agrees that time is of the essence of this contract and that if he shall fail to pay said indebtedness, or any part thereof, when due, or shall fail to perform any covenant or agreement of this instrument or the note secured hereby, the entire indebtedness hereby secured shall immediately become due, payable, and collectible without notice, at the option of the Grantee or assigns, regardless of maturity, and the Grantee or assigns may enter upon said premises and collect the rents and profits thereof, and, before or after entry, may sell said property at auction at the usual place for conducting sales at the courthouse in the county where the land lies, in said State, to the highest bidder for cash, first giving four (4) weeks' notice of the time, terms, and place of such sale, by advertisement once a week" . .
The material language in the note is as follows: " . . FOR VALUE RECEIVED, the undersigned promises to pay to the order of BLANCHARD CALHOUN REALTY COMPANY the principal sum of Nine Thousand and No/100th Dollars ($9000.00), with interest from date at the rate of four per centum (4%) per annum on the unpaid balance until paid. Principal and interest shall be payable at the Office of Blanchard Calhoun Realty Company in Augusta, Georgia, or at such other place as the holder may designate in writing delivered or mailed to the debtor, in monthly installments of Fifty-four and 54/100th Dollars ($54.54), commencing on the first day of June, 1950, and continuing on the first day of each month thereafter until this note is fully paid, except that, if not sooner paid, the final payment of principal and interest shall be due and payable on the first day of May, 1970. . .
"It is agreed that time is of the essence of this contract and that, if any deficiency in the payment of any installment under this note is not made good prior to the due date of the next such installment, the holder of this note may, without notice, exercise the option of treating the remainder of the debt as due and collectible."
Counsel for both parties agree that the sole question presented is whether the trial court was correct in holding that, under the provisions of the note and deed, the September installment would not have been in default until October 1, 1950.
It is further agreed by counsel that, since in both the note and the security deed the other instrument is referred to and identified, they together constitute but one contract and must be construed together. Cartledge v. Trust Co. of Columbus, 186 Ga. 718, 724 ( 198 S.E. 741); Wardlaw v. Woodruff, 175 Ga. 515 (12) ( 165 S.E. 557); 36 Am. Jur. 748, § 123.
It is thus apparent that whether or not a default has occurred — such default being necessary for an acceleration of the maturity of the indebtedness and for a valid exercise of the power of sale contained in the security deed — will depend upon the meaning and definition of the word "deficiency". Counsel for neither of the parties has cited any Georgia decision or the decision of any other court, and we have been unable to find any, construing the word "deficiency" as used in the deed and note here under consideration, so that in determining its proper definition, and the intention of the parties in its use, we must depend upon the applicable rules of construction and upon such help as may be found in the standard dictionaries.
It must be borne in mind that "The cardinal rule of construction is to ascertain the intention of the parties" (Code, § 20-702); that "Words generally bear their usual and common signification" (§ 20-704 (2)); and that "The construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part." § 20-704 (4).
The word "deficiency" is defined in Webster's New International Dictionary (2d ed., Unabridged), as follows: "Deficiency: . . 1. State or quality of being deficient; inadequacy; defect. 2. A shortage; deficit. . . Syn. lack, want, dearth, insufficiency."
In Webster's Universal Unabridged Dictionary (1937), it is stated that the word "deficiency" is derived from the Latin word "deficiens", which in turn is the present-participle form of the verb "deficere", meaning to lack or to fail.
The New Century Dictionary (1930) defines the word as "state or fact of being deficient; incompleteness; imperfection, or defect; insufficiency; absence or want; that in which anything is deficient; especially, insufficiency or lack of funds for meeting money demands; the amount lacked; a deficit."
Construing the provisions of the note and deed quoted in the statement of facts, it is obvious that the word "deficiency" as there used does not apply merely to the payments in excess of the monthly installments upon the principal indebtedness and the interest thereon. The note, which is expressly incorporated into the security deed, makes no mention of the additional payments for ground rents, insurance, and assessments. It provides only for installment payments upon the principal and interest on the indebtedness specified in the note; and the acceleration clause contained in the note must necessarily relate to a deficiency in the installment payments on principal and interest only. That this is the meaning intended is emphasized by the covenant appearing in the security deed, which provides that the grantor will pay the principal indebtedness and interest thereon at times and in the manner provided in the note; that any deficiency in said payments must be made good before the due date of the next payments, or default will occur. Thereafter, in the security deed, provision is made for the payment of ground rents, taxes, and assessments, such payments to be made monthly along with and in addition to the installments due monthly for the principal and interest. Provision is also made in the deed that, if any deficiency in the total or aggregate monthly installments including these additional payments for ground rents, taxes, and assessments, is not made good prior to the date of the next such installment, this, too, will constitute a default under the security deed.
It would thus seem plain that the true intent of the parties to the contract as expressed by the language used in both the note and the deed, is that, not only must any deficiency in payment of the installment on the note be made good before the due date of the next payment, but also any deficiency in amounts due for ground rents, taxes, insurance, and assessments must be paid in like manner. Such provision applies equally to each type of payment, and is not exclusively applicable to the additional payment of ground rents, taxes, insurance, and assessments.
Applying the definitions above quoted, it is clear that the word "deficiency", in its common and ordinary uses, and as used in these instruments, denotes not only the difference between the whole and any part, however small, but also the difference between the whole and nothing; that is to say, a complete and total absence, lack, or want of the whole.
To sustain the contention of the defendant that the word "deficiency" should be construed to mean the lack of a part only — the difference between the whole, however large, and any part thereof, however small, would have enabled the plaintiff, by paying a very small part, even five cents, upon any monthly installment, thereby to secure a grace period of one month in which to pay the balance of the installment, however large such balance might be, when he would be deprived of any such grace period if the deficiency consisted of the whole amount of the monthly payment. This would lead to an absurdity, and a contract should not be so construed as to bring about such a result. Reno Club v. Young Investment Co., 64 Nev. 312 ( 182 P.2d 1011, 173 A.L.R. 1145 (8)); 17 C. J. S. 739, 741, § 319.
In 3 Words and phrases 572, we find: "`Any deficiency', as used in a bond in which defendants guaranteed the payment of an amount secured by a mortgage or any deficiency, covered the whole amount due on the mortgage, where the mortgaged premises were sold under foreclosure to satisfy a prior mortgage. Crouse v. Owens, 3 N.Y.S. 863, 864, 49 Hun, 610."
That it was contemplated by the parties that there would likely be delays in payments of monthly installments, which would not operate as a default under the provisions of the deed, and authorize an acceleration of the maturity of the debt and the exercise of the power of sale thereunder, is further evidenced by the provision in the deed, that "The Grantee may collect a `late charge' not to exceed an amount equal to four per centum (4%) of any installment which is not paid within fifteen (15) days of the due date thereof to cover the extra expense involved in handling delinquent payments."
Construing the note and the deed as a whole, we reach the conclusion that it was the intention of the parties that a one-month grace period was granted the plaintiff in which to make payment of any deficiency in any monthly installment, whether principal, interest, ground rents, taxes, insurance, or assessments, and irrespective of whether the "deficiency" be in whole or in part of such monthly installment, and that, unless such deficiency remained unpaid until the due date of the next installment, there was no default. In 59 C. J. S. 792, § 495 (5), it is stated: "An election to accelerate the maturity of the debt secured by a mortgage or deed of trust may not be made prior to default, or, where a grace period is provided, before the expiration of such period." It was also held in Wright v. Harris, 221 Fed. 736, affirmed in Dure v. Wright, 228 Fed. 1021 (142 C.C.A. 654), certiorari denied, 241 U.S. 658 ( 36 Sup. Ct. 287, 60 L. ed. 1225), that a mortgagee cannot sell under a power of sale, so as to pass title even to a bona fide purchaser, where there is no default.
The trial court properly granted the injunction and its judgment is affirmed.
Judgment affirmed on main bill of exceptions; cross-bill dismissed. All the Justices concur.