Summary
In Belhaven College v. Downing, 216 Miss. 299, 62 So.2d 372 (1953), we again pointed out that the presence of an interest clause in a demand promissory note does not per se take such note outside the operation of the general rule that such notes become due and payable as of the date of execution, no demand thereon being required.
Summary of this case from United States Fidelity Guaranty Co. v. KrebsOpinion
No. 38484.
January 26, 1953.
1. Negotiable instruments — note due on demand — contemporaneous written agreement as to manner and time of payment — limitation of actions.
As a general rule a simple demand note is matured at the date of its execution without actual demand for payment, but when contemporaneously with the execution of the note and deed of trust securing it, a written agreement was made and delivered between the parties providing for payment in specified monthly installments and further providing that upon default of the monthly payments the payee could demand payment of all the remainder due, upon ten days written notice to the makers, such an agreement must be construed along with the note and as postponing the due date of the note until after the written notice of the demand had been given, with the result that the statute of limitations did not begin to run until notice of the stated demand has been given as provided by the agreement.
Headnote as approved by McGehee, C.J.
APPEAL from the circuit court of Leflore County; ARTHUR JORDAN, Judge.
Hardy Lott, for appellants.
As to the proposition of construing the three instructions together, the appellant relies upon the following authorities: 12 Am. Jur. 781, Contracts, Sec. 246; 7 Am. Jur. 820, Bills and Notes, Sec. 62; Floyd v. Arky, 89 Miss. 162, 42 So. 569.
The law in Mississippi with reference to when the statute of limitations begins to run upon a demand note is set forth in the following cases: Butts v. Vicksburg Meridian R.R. Co., 63 Miss. 462; Shapleigh Hardware Co. v. Spiro, 141 Miss. 38, 106 So. 209, and on a second appeal in 153 Miss. 81, 118 So. 429; Minor v. McDowell, (Miss.), 113 So. 576; and Finger Merchantile Co. v. Adair, 159 Miss. 303, 131 So. 875.
The question is whether the note in the case at bar is governed by the exception to the general rule set forth in the Spiro case or whether it is governed by the general rule laid down in the Finger Merchantile case.
We submit that it is very clear, indeed, in the case at bar that the parties contemplated the making of an actual demand to mature the note, and that in this respect the case at bar is a much stronger case than the Spiro case itself. In the Spiro case, this Court held that the parties contemplated an actual demand on the sole evidence of the interest provision in the note. In the case at bar, we rely upon the following as showing that the parties contemplated that this note would run for some time and that an actual demand would be made to mature it.
1. The note in the case at bar is payable "on demand after date," provides for interest, and provides for attorney's fees if not paid when due. To hold that this note was matured at the date of its execution is to make the words "on demand after date" mean the opposite of what the language states. The additional fact that the parties provided for interest and attorney's fees appears to indicate that they did not intend the note to be due as of the date of its execution but contemplated that it would run some time until a demand was made, for if it was to be due on the date executed or the following day there would be no reason for providing for interest and attorney's fees. Nevertheless, if these were the only facts showing that the parties contemplated an actual demand, we would be forced to concede that this case would be governed by the Finger Merchantile case. We have here, however, a number of additional facts, which we think are strengthened by the matters here mentioned under the number 1.
2. The very fact that the makers of the note secured its payment by executing a deed of trust conveying land and chattels is certainly cumulative evidence to show that they did not contemplate that the note would be due the day of its execution but on the contrary contemplated that it would run for some time and be matured by an actual demand. But there is much further evidence to the same effect.
3. The very fact that the makers of the note assigned to Miss Cooper as security for its payment a life insurance policy on the life of Mr. Downing is further cumulative evidence that the parties did not contemplate that the note would mature the day of its execution.
4. The makers of the note then obligated themselves to keep the life insurance policy "in full force and effect during the term of the above described loan or any part thereof, and in default of the payment by the grantors of any premium thereon, the legal holder shall have the right to pay the same and such amount so paid shall be secured by this deed of trust." These provisions with reference to keeping the policy in force and as to the paying of premiums thereon in the future are not consistent with an intention to mature the note the day of its execution. It appears to us to conclusively show that the parties intended that the note would run more than one day and that an actual demand in the future would be made to mature it. But this is only a part of the evidence showing such intention.
5. In the deed of trust the makers of the note obligated themselves to secure hazard insurance policies on the property therein conveyed with mortgage clause attached in favor of Miss Cooper. This is additional evidence to show that the parties did not contemplate that the note would be due the day it was executed, but that they meant what they said when they made the note due "on demand after date" and contemplated that an actual demand would be made to mature the note.
6. The Court will also note that the deed of trust provided that it should secure the payment of any amounts paid by Miss Cooper for insurance, taxes or other liens on the property, and further provided that all such amounts paid thereafter should bear interest at the rate of six per cent per annum. This in itself alone appears to us to be sufficient to show that the parties did not contemplate that the note would be immediately due.
7. A construction holding that this note was due when executed would make meaningless the following provisions in the deed of trust: "but if said note, or any other amount herein provided for are not paid at maturity, the trustee herein at the request of the legal holder of said note shall sell . . . . "the property conveyed.
"If any note, or other indebtedness herein secured shall not be paid at maturity, the entire indebtedness herein provided for shall become due and payable at once."
The language shows that the parties intended that the note would become due in the future when a demand was made.
8. The instrument styled "agreement," executed by the Downings, conclusively shows that the parties contemplated an actual demand would be necessary to mature the note. In that signed agreement, the Downings agreed to pay certain monthly sums to Miss Cooper that she, presumably as their agent, should use in part to pay their indebtedness to the Lamar Life Insurance Company. This alone disclosed the intention of the parties that the note to Miss Cooper should run for some time. The agreement then provided that if the Downings defaulted in any of these agreements, "the party of the second part may declare all of her indebtedness at once due and payable upon giving the parties of the first part ten days written notice thereof."
This instrument, signed by the Downings and accepted by Miss Cooper, not only provides for an actual demand but provides that even then the indebtedness shall not become due except on ten days written notice. This alone clearly shows that the parties contemplated that an actual demand would be made to mature the note.
Bell McBee, for appellees.
If we consider this note separately and apart from the deed of trust and the contract, the general rule announced by this Court in an earlier case styled Butts v. Vicksburg Meridian R.R. Co., 63 Miss. 462, applies. This rule is as follows: "Suit may be brought on an ordinary bill or note payable on demand generally, on the day of its date or immediately, without demand being previously made, and consequently the statute of limitations would begin to run against such an instrument from that date."
This rule has not been changed by our Court and is a general rule in most jurisdictions. See annotation under Shapleigh Hardware Co. v. Spiro, a Mississippi case in 44 A.L.R. p. 397.
In the case of S.S. Finger Mercantile Co. v. Adair, 159 Miss., 303, 131 So. 875, suit was filed on a note almost similar to the one in this case.
In deciding that case our Supreme Court applied the rule which is restated as follows: "The general rule is that a note payable on demand is due at once, and that suit may be brought thereon immediately after execution without any actual demand."
The appellants in the Finger case sought to have an exception to the general rule set out in the case of Shapleigh Hardware Co. v. Spiro, 141 Miss. 38, 106 So. 209, 44 A.L.R. 393, applied but it was held that due to the wording of the note sued on the exception was not available.
Appellants contend that the note, the deed of trust and the contract attached as Exhibits "A", "B", and "C" to the bill of complaint should be construed as one instrument. If we concede for the sake of argument that this is true, still the appellants cannot recover.
The most that the deed of trust could do for the note is to give evidence of an intention of the parties that the note would not mature until a demand was made. The contract, however, if considered by this Court sets forth a plan of payment which in itself according to the appellants' view established different terms of payment of the note sued on. The contract after reciting that the appellees are indebted to Miss Lula W. Cooper in the sum of $3,500.00 bearing interest at the rate of six per cent per annum from date states an agreement between the parties that the appellees shall pay to Miss Lula W. Cooper $125.00 on the first day of each month after December 5, 1929, of this sum $58.05 would be applied to an indebtedness due the Lamar Life Insurance Company and the balance of $66.95 would be applied on the note of $3,500.00 and when the note to Lamar Life Insurance Company was discharged, then the $125.00 would be applied on the Cooper note. The contract, therefore, if the appellants' view is correct, substituted a different plan of paying the note. Instead of being due on demand it became due in monthly installments of $125.00 per month beginning January 1, 1930. The contract recites as follows: "And it is further agreed that as long as these payments of $125.00 each month are made promptly as provided herein, the party of the second part (Miss Lula W. Cooper) will not demand payment in full of the note of $3,500.00, payable to her, but same shall be retired and liquidated by the monthly payments of $125.00, or such part thereof as may be applied thereon as above provided."
We, therefore, take appellants' contention at their word and say that for the sake of argument the contract substituted a monthly installment plan of paying the demand note. Nothing in the record shows how much was due the Lamar Life Insurance Company and we assume, since it is for the benefit of the appellants, that of the $125.00 monthly payments agreed to be made under the contract only $66.05 should be applied to the note.
The first of these installments was due January 1, 1930 and a like amount became due on the first day of each month thereafter. According to the declaration and the exhibits attached thereto only $25.00 was paid under the contract and this was on February 11, 1931. The first monthly installment under the contract, therefore, was not paid and according to our view the statute of limitations began to run on that installment payment January 1, 1930. The statute of limitations correspondingly began to run against all subsequent installments on the first day of each month thereafter.
Assuming that only $66.05 of the monthly installment of $125.00 could ever be applied on the note for $3,500.00 bearing interest at the rate of six per centum per annum, according to Delbridge's Amortization Tables the note would be fully paid in approximately sixty-two months. If we are wrong in our contention that the statute of limitations began to run against each separate delinquent monthly installment as it became due, then certainly the statute of limitations would begin to run at the maturity of the last installment of the note under the contract which would be February 1, 1935. Suit on the note, deed of trust, and contract was filed in the circuit court of Leflore County, Mississippi, on February 2, 1949, which was more than six years after the right of action accrued either (1) on the note separately or (2) on the note, deed of trust, and contract. See the annotations to Rich v. Arinco, et al., (Mass.), 82 A.L.R. 313 and Leighton v. Leighton Lea Asso., 122 N.Y. Supp. 139; and Columbian Mutual Life Insurance Co. v. Craft, 186 Miss. 234, 185 So. 225.
Under the contract, which according to appellants' view substituted a different plan of payment than that set forth in the note, all monthly installments would have matured February 1, 1935, and the cause of action on the contract and the note must have been filed within six years from February 1, 1935. That gives the appellants the advantage of everything they contend for in this case. They certainly must rely on the note or the contract, and not both. It is either (1) that the note was payable on demand or (2) that it became payable under the contract in monthly installments beginning January 1, 1930. Since the appellants rely upon the contract, their pleadings will be construed against them and they will be held to the terms of the contract. There is, therefore, as we see no great concern over the question of exactly when the statute of limitations began to run since the action is barred under all views taken by the appellants. How can the appellants come into this Court with a note, payable on demand, and urge that a demand must be made before the right of action accrues and at the same time present a contract to the Court which sets up an entirely different plan of paying the note, urging that it be construed with the note, yet disregarding its terms of payment altogether? Apparently the appellants are asking the Court to use the contract only as evidence of the intention of the parties that a demand be made on the note. We say that the appellants cannot present this contract to the Court in part but that the entire contract must be considered.
It will avail the appellants nothing to rely upon that part of the contract which gives the holder of the note the right to declare all of the indebtedness due at once if default is made in the installments set forth in the contract. Since all of the installments were in default, then certainly the entire debt matured when the last installment was not paid and no demand was necessary and the right of action on the whole debt began February 1, 1935.
Hardy Lott, in rejoinder for appellant.
The note and contract were executed and delivered at the same time as a part of the same transaction between the same parties and must be considered together; and when so considered they disclose that the parties to the transaction contemplated that an actual demand would be necessary to mature the note. Being unable to answer that argument, the appellees seek to avoid it by considering the note and the contract separately as though they were executed in different transactions or involved in different lawsuits or as though the contract was executed at a later date for the purpose of superseding the note. The appellees first consider the note alone, without reference to the contract or anything else in the record, and state that when so considered it is barred. The appellees then consider the contract alone without reference to the note or anything else in the record, and state that the monthly payments mentioned in the contract are barred. They then conclude that, since both are barred when considered separately, the entire cause of action is barred.
The vital defect in this maneuver of divide and conquer is that both the note and contract are in the record, both bear the same date, both relate to the same transaction, and both were executed and delivered at the same time; and they must therefore be considered together. The question is not, as appellees would have it, whether the note would be barred if the contract and deed of trust had not been executed or whether the contract would be barred if the note and deed of trust had not been executed. The fact is that they were all executed and they all appear in the record. The true question is therefore whether the note sued on is barred when considered with the contract and the deed of trust.
The point we are making is that the three instruments must be construed together as a part of the same transaction. Having been executed and delivered at the same time as a part of the same transaction, it cannot be urged with logic that they set forth separate agreements and must be considered separately. No one of then was executed to supersede any of the others. They were executed and delivered at the same time for the obvious purpose of setting forth one complete plan for the payment of the indebtedness. They are each a part of one single plan or agreement. The appellees are avoiding the question therefore when they state that the appellants "must rely on the note or the contract, and not both."
Clearly the contract was not intended to supersede the $3.500.00 note and it does not conflict therewith. It merely provides that Mr. and Mrs. Downing are to pay Miss Cooper $125.00 per month; that Miss Cooper will then, presumably as the agent of Mr. and Mrs. Downing, pay $58.05 of that amount to the Lamar Life Insurance Company and will then apply the balance of the $125.00 to the said $3,500.00 demand note. It provides that if the payments are made Miss Cooper will not demand payment of her demand note for $3,500.00, but that if they are not made, then Miss Cooper "may" demand payment of same on ten days notice in writing to Mr. and Mrs. Downing. Clearly, Miss Cooper had the right to mature her note by demanding payment in writing, but she was not obligated to mature the same. The instrument does not declare that the demand note will automatically become due if the monthly payments are not made or that Miss Cooper must mature it with the written demand if the payments are not made. On the contrary it clearly provides that if the payments are not made, then Miss Cooper may on ten days written notice demand payment of her note.
In the case at bar the parties, as they had a right to do, entered into agreements under which Miss Cooper could only mature her demand note by making a written demand on ten days notice and under which she was given the option as to whether or not to mature it. Under the authority of Shapleigh Hardware Co. v. Spiro the note was not matured and the statute of limitations did not begin to run against it until written demand for its payment was made in 1948.
This suit was originally filed on February 2, 1949, by the Bank of Clarksdale as Executor of the Estate of Miss Lula W. Cooper, deceased, and the cause of action was thereafter assigned one-third each to Belhaven College at Jackson, Old Ladies Home Association at Jackson and Southwestern at Memphis, Tennessee, on August 30, 1949, being after the suit was filed but before the trial thereof.
The suit is on a promissory note executed and delivered by M.G. Downing and his wife, Ara E. Downing, bearing date of December 5, 1929, payable "On demand after date" to Miss Lula W. Cooper or bearer, in the principal sum of $3,500 "with interest at the rate of six per cent. per annum after date until paid, with reasonable attorney's fee for collection if not paid when due."
A plea of the six-year Statute of Limitation, Section 722, Code of 1942, was interposed in the answer of the defendants to both the original and amended declarations; and this plea was sustained on the face of the declaration and the exhibits thereto and the suit was dismissed upon the failure of the substituted plaintiffs to plead further. It is from that final judgment that this appeal is prosecuted, and it is conceded in the briefs for both sides that "The sole question involved herein is whether or not appellants cause of action is barred upon the face of the amended declaration and exhibits thereto. The note sued on was dated December 5, 1929, and payable on demand"; and it is further conceded that "This suit was instituted on February 2, 1949."
It is to be further conceded that under the former decisions of this Court, and under the general rule prevailing elsewhere, the promissory note sued on, if considered separate and apart from a deed of trust and an agreement as to the time and manner of payment of the indebtedness, both duly signed by the makers of the note and delivered along therewith to the payee on the date of its execution, would be barred by the six-year statute of limitation, as shown on the face thereof, even though no demand for payment had been made until shortly prior to the bringing of the suit.
It may also be conceded that the deed of trust executed by the makers of the note on the said 5th day of December 1929, when considered along with the note alone, and without regard to the written agreement of the same date which accompanied the note and deed of trust, does not render inapplicable the said statute of limitation on the note, as having begun to run on the date of the execution thereof.
It is also true that if the written agreement signed by the makers of the note and deed of trust and delivered along therewith to the payee and kept in her possession until her death nearly eighteen years thereafter as a part of the understanding of the parties as to the manner in which the note was to be paid, if considered separate and apart from the remainder of the transaction, would not prevent the statute of limitation from having barred the collection of the note, for the reason that the payments of $125 per month on the note, as provided for therein, are now all barred by the said statute, on the face of such agreement.
However, the written agreement above referred to must be considered along with the note and deed of trust in determining whether or not it was contemplated by the parties in December 1929, that a demand for payment would be necessary in order to start the running of the statute of limitation on the note. In that connection, it is to be noted that this written agreement, after providing for the payment of the sum of $125 on the first day of each month after the execution of the note contains the following stipulations:
"Out of the said sum of $125.00 paid monthly as aforesaid, the party of the second part shall pay to The Lamar Life Insurance Company the monthly installment under its said deed of trust of Fifty-eight Dollars and Five Cents ($58.05), which said installment falls due on the 14th day of each month. The balance of the said $125.00 is to be applied by the party of the second part upon the note of $3500.00 executed by the parties of the first part in favor of the party of the second part. In event the full indebtedness to The Lamar Life Insurance Company should be paid off before the said indebtedness to the party of the second part, the said full monthly payment of $125.00 each shall be applied upon the said indebtedness to the party of the second part.
"And it is further agreed that as long as these payments of $125.00 each month are made promptly as provided herein, the party of the second part will not demand payment in full of the note of $3500.00, payable to her, but same shall be retired and liquidated by the monthly payments of $125.00, or such part thereof as may be applied thereon as above provided. In event of any default by the parties of the first part in any of the provisions herein contained, the party of the second part may declare all of her indebtedness at once due and payable upon giving the parties of the first part ten days written notice thereof."
Thus, it will be clearly seen that it was not contemplated by the parties that the payment of the $3,500 note could have been legally demanded on the next day after the execution thereof; and that it was contemplated by the second paragraph of the foregoing quoted stipulations that ten days written notice was required in order for the payee to declare the whole indebtedness due upon default in the payment of either of the monthly installments. In other words, the case comes within the well-recognized exception to the general rule in regard to a note "payable on demand after date" being due on the next day or at any time thereafter without demand being first made therefor.
We are of the opinion that under the rule announced in the case of Shapleigh Hdw. Company v. Spiro, 141 Miss. 38, 106 So. 209, although involving a different factual situation, an actual demand for the payment of the note here sued on was necessary to commence the running of the statute of limitation; that such was within the contemplation of the parties, as shown by the amended declaration and these three exhibits thereto.
The Court, in the case of Shapleigh Hdw. Company v. Spiro, supra, recognized the general rule as to a demand note when it said that: "The general rule that a simple demand note is matured at the date of its execution without actual demand for payment has been so long and so well established by our court as well as most of the other courts in this country that we are unwilling to disturb it. However, it is subject to the just criticism that it makes the provision that the instrument shall be payable on demand mean the opposite of what the language indicates."
In the instant case, the appellee, M.G. Downing, died pending this appeal, and his co-appellee caused the suit to be revived as to him in her name as executrix of the estate, and the appellees relied upon the general rule as to a note payable "on demand after date", as applied by this Court in the case of S.S. Finger Mercantile Company v. Adair, 159 Miss. 303, 131 So. 875, and in other cases in this jurisdiction and elsewhere. The authorities thus relied on would be controlling if the plaintiffs had exhibited to their declaration only the promissory note for $3,500 sued on in this case, but we are of the opinion, as hereinbefore stated, that when the note, deed of trust and written agreement, all bearing the same date and delivered to the payee at the same time that the note was delivered, when considered together, bring the case within the exception to the general rule in that they show that a demand for payment was contemplated before a suit could be maintained thereon and before the beneficiary in the deed of trust was entitled to have the real estate and other property described in the deed of trust sold for the satisfaction of the note in question.
We therefore conclude that the trial court was in error in sustaining the plea of the statute of limitation contained in the answer of the defendants and dismissing the suit, and that therefore the cause must be reversed and remanded for further proceedings not inconsistent with the views herein expressed.
Reversed and remanded.
Roberds, Kyle, Holmes and Arrington, JJ., concur.