107 N.Y.S. 1047 | N.Y. App. Div. | 1908
Lead Opinion
This action was brought to foreclose a mortgage for $1,900 upon certain real estate described in the complaint. The mortgage was dated June 1,1883, and payable three years thereafter, with interest at six per cent, payable semi-annually on the first days of June and December. Both the mortgage and the bond, which it was given to secure contained a provision that in case of default in the payment of interest, the principal sum should, after thirty days, become due and payable, at the option of the mortgagee. Mo part of the principal or interest was ever paid and this action was commenced on the 5th of January,. 1906. The judgment from which the appeal is taken ad judges that there is due to the plaintiff the principal sum of $1,900, with interest thereon at six per cent from the 1st day of June, 1883, and directs that the mortgaged premises be sold and the proceeds, or so much thereof as may be necessary for that purpose, applied towards the payment of such sum.
The judgment is attacked upon two grounds: (1) Lack of consideration for the execution of the bond and mortgage; and (2) the Statute of Limitations.
As to the first ground, very little need be said. The mortgage was under seal, which was presumptive evidence of a consideration, and
As to the second, claim — that the action is barred by the Statute of Limitations — an interesting question is presented. Default was made in the payment of interest on the 1st day of December, 1883, and in accordance with the terms of the bond and mortgage the mortgagee had the option to declare the whole debt due and pay-. able thirty days after default occurred. This action was not brought until the 5th of January, 1906 —more than twenty years after the mortgagee could have declared the principal sum due. His failure, therefore, to declare the whole sum due makes it necessary to determine the effect of this, clause in the mortgage. The Code .of Civil Procedure provides (§§ 380, 381) that an action upon a sealed instrument must be commenced within twenty years after the cause of action has accrued; and that the period of limitation must be computed from the time of the accruing of the right to relief by action to the time when the pi aim to that relief is actually interposed, (§ 415.) The appellants contend that thq right to commence this action accrued to the plaintiff thirty days after the '1st of December, 1883, and that since more than twenty years have elapsed between'that time and the time the action was commenced, the right to maintain the action was barred by the Statute of Limita- ■ tions. What effect the Statute of' Limitations has on a clause of this- character in a bond and mortgage has not, so far- as I have been able to discover, been determined in this State. It lias- to some extent been determined in some of the other States; but the decisions are' conflicting, and a review of them ■—■ in ■ view of the peculiar wording of our own statutes — would throw little light on the question here to be determined. It is unquestionably true that the mortgageé might have commenced an action to foreclose the mortgage on January 1, 1884, and by reason of that fact it is urged that under the provisions of the Code before cited, the statute then commenced to run, but'I. do not think this is a proper
In the case last cited action was brought on certain promissory notes, payment of which was secured by a deed of trust which provided that in case of default in the payment of interest for ninety days, the whole debt should become due, and that if the first note remained unpaid for six months after it became due, then “ the whole debt is to be and become due and payable and this trust in either event to be executed and foreclosed at the option of said third party,” the payee of the notes. In an action to recover upon the notes the Statute of Limitations was pleaded as a defense and it was urged there as here that the statute began to run from the time when the plaintiff could have brought the action. Mr. Justice Harlan, in delivering the opinion of the court, referring to tins claim, said: “In our judgment the parties intended to give the holder of the notes an option after default in the payment of interest, not only to declare the principal due, but to foreclose the deed of' trust, in advance of the dates of maturity named in the notes and deed. That option not having been exercise'd when or after the several defaults occurred, limitation began to run on the several notes only from their respective dates of maturity as specified in them.”
The appellants also contend that the statute begins to run when the right to make the demand is complete. But there is no basis for the contention. Here a time was fixed for payment and the
As regards the interest, a somewhat different> and much more serious ■ question is presented. By the terms of the bond and mortgage, as ,we have already seen, the interest was payable semi-annually. on the first days of June and December in each year: When thesp installments of interest became due the mortgagee could have main.tained an action, to recover them if not paid. Such an action, in my opinion, would be subject-to the twenty-year period of limitation, since the promise to -pay was under seal. This being so, it becomes necessary to determine whether these installments of interest, although they became due and payable prior to the maturity of the bond and mortgage, nevertheless can be recovered any time before an action on the bond .and mortgage is barred. The interest thus payable at fixed times is, as.it seems to me,-analogous in the legal aspects to the interest upon a bond to which separate coupons' for. the interest are attached. It has been held, both in this, State and in the Federal courts, that such coupons partake of the nature of the bond, and while in a sense they may become independent instruments, they are governed by the same Statute - of Limitations as the bond itself. (McClelland v. Norfolk Southern R. R. Co., 110 N. Y. 469; Bailey v. County of Buchanan, 115 id. 297; Kelly v. Forty-second Street R. Co., 37 App. Div. 500; City v. Lamson, 9 Wall. 477; City of Lexington v. Butler, 14 id. 282; Clark v. Iowa City, 20 id. 583.)
The same view was subsequently expressed in Amy v. Dubuque (98 U. S. 470), where a ten-year period of limitation was under consideration. Mr. Justice Harlan said: “ It seems from these authorities to be the settled law of Iowa: 1st, that where interest is, by contract; made payable at stated times, an action may be maintained therefor in advance of the maturity of the principal debt. * * " 2d, that within the meaning of the Iowa Statute of Limitations the cause of action accrues when suit may be commenced for the breach of such contract. * * * This action is, beyond question, founded upon written contracts. The coupons in suit matured more than ten years prior to its commencement. Upon the nonpayment at maturity of each coupon, the holder had a complete cause of action. In other words, he might have instituted his action to recover the amount thereof at their respective maturities. From that date, therefore, the statute commenced to run against them. The premises conceded, as they must be, there is no escape from the conclusion stated.” It was also held that the same rule applied, even if the coupons had never been severed from the bond.
In the decisions cited from this State, what was actually held was
The obligation to pay interest at stated times- is precisely the saíne whether evidenced by coupons- attached to., the bonds or not,, or by the . bond itself. The language used and the reasoning adopted in the authorities cited are as applicable to one. case as to the other. It is true thé obligation to pay interest is merely an incident to the principal debt, but where the time is specified for the payment of interest a separate action may be maintained to recover it. The condition of the bond and mortgage here under consideration was the payment, of a fixed sum at a fixed time, with interest at fixed times, and five installments of interest thus became due and payable more than -twenty years before . this action was commenced. As to this interest, the plaintiff "has had more than twenty years in which to-bring his action, and -the statute prevents his.recovering, the same. He could not, at. tile time this action was commenced, have brought an independent action for this .interest, and to permit him to recover it in this action, upon the same instrument and the same promise, is repugnant to reason and contrary to ■the express provisions of the Code.
Í am of the opinion that the judgment appealed from should he modified so as to permit a- recovery for only $1,9.00 and interest ■thereon from the 1st day of December, 1885, and as thus modified affirmed, without costs in this -court to either party.
Pattebson, P. J., Ingbaham and Clabke, JJh, concurred; Houghton, J., dissented... ■
Dissenting Opinion
I think this judgment should be affirmed without modification. No question of coupons or separate and independent contract as to interest represented by them is involved. An ordinary bond and mortgage is the subject óf the action.
In my opinion the Statute of Limitations did not begin to run on the installments of interest 'until the bond itself was due.
If the rule enunciated in the prevailing ^opinion be correct, annual installments of interest bn a fifty-year bond, not represented by independent coupons, .could be recovered for only twenty years, although fifty years’ interest was unpaid and the bond only presently due. The holder of an obligation may insist upon payment of liis interest when due or he may let it accumulate.
Frequently ordinary notes provide for payment of interest annually for a term of years. ' The effect of the rule would be to prevent recovery of interest on such notes for more than six years prior to bringing the action. Although agreement be made as to time, of payment of interest still the interest remains an incident of the debt itself, and it should be controlled by the limitation. pre- ‘ scribed for the principal obligation. Such is the holding in Massachusetts (Ferry v. Ferry, 2 Cush. 92) and in Vermont (Grafton Bank v. Doe, 19 Vt. 463), and it impresses me as sound. The presént action was brought upon the bond before it outlawed, and I think the plaintiff was entitled to recover, all the unpaid interest thereon, whether the samé was payable more than- twenty years prior or not.
I, therefore, vote to affirm the judgment.
Judgment modified as directed in opinion, and as modified affirmed, without costs. • Settle order on notice.