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used to signify a transfer of negoti- same as to subsequent creditors and able instruments.” 5 C. J. p. 841. purchasers for value without notice,
The use of the word "assignment” unless the assignment be by writing in this statute referred only to non- duly acknowledged and filed for recnegotiable instruments, and was not
nd was not ord; and every assignment by an asmeant to, and does not, include the signee of any such lien shall be envarious indorsements of negotiable tered in like manner and with like instruments. The Chancellor held effect in case of failure.” that the indorsees
Section 2306, Hemingway's Code Assignmentnotation-appli
of the note were not (chap. 196, Laws 1910), among othcability of stat. liable to this pen- er things, provides: "But the clerk
alty. This is also a shall not record any mortgage or penal statute, and must be strictly deed of trust in which the name of construed.
the beneficiary is not disclosed thereThe decree of the lower court is in; and if such instrument is reaffirmed.
corded, it shall not impart notice to Cook, J., dissents in part.
anyone; provided, the failure to dis
close the name of the beneficiary Ethridge, J., dissenting in part:
shall not apply to mortgages and I dissent from that part of the
deeds of trust given by corporations opinion which holds that $ 2296,
either foreign or domestic, to secure Hemingway's Code ($ 2795, Code
the payment of serial bonds payable 1906), is not applicable to deeds of
to bearer; and the assignment or trust securing negotiable instru
transfer of such mortgages or deeds ments. Section 2296, Hemingway's of trust or bonds secured by the Code ($ 2795, Code of 1906), is set
same need not be entered on the out in the majority opinion, but it
margin of the record. But it shall ought to be construed in connection with $ 2295, Hemingway's Code (§ securities covered by this proviso to
be the duty of the holder of such 2794, °Code of 1906), and with list and assess the same for taxation, 2306, Hemingway's Code ($ 2805,
if liable for taxation, in the hands Code 1906), and chapter 196, Laws
of the holder, such list or assessment of 1910, amending § 2805, Code of 1906, and the meaning and purpose
to show the amount, date, date due
and value of such securities of such of the legislative scheme determined from a reacing of all these sections corporation so made payable to beartogether. In other words, $ 2296,
er, and on failure of the holder to
so assess the same, all interest thereHemingway's Code ($ 2795, Code
on shall be forfeited in his hands 1906), does not stand alone, and a
and as against him, and he shall be construction which might be reason
denied the right to recover such inable if it stood alone may not be
terest in the courts of the state." reasonable when considered with other sections in pari materia.
The original section of the Code Section 2295, Hemingway's Code
of 1906 (2805) ended as follows: (§ 2794, Code 1906), reads as fol
“But said clerk shall not record any lows: "When the indebtedness, or
mortgage or deed of trust in which any part thereof, secured by a mort
the name of the beneficiary is not gage, deed of trust, or other lien of
disclosed therein, and if such instrurecord shall be assigned by the per
ment is recorded it shall not impart son appearing by the record to be notice to anyone." the creditor, he shall be required by The legislative policy is clearly inthe assignee to enter the fact of the dicated in the last sections, and esassignment on the margin of the rec- pecially by chapter 196, Laws of ord of the lien; and in default of 1910 (2306, Hemingway's Code), making such entry, any satisfaction which makes its own exceptions by or cancelation of the lien or instru- providing that the failure to disclose ment evidencing it entered by the the name of the beneficiary shall not original creditor shall release the apply to mortgages and deeds of
97 So. 465.) trust given by corporations, either have such debt listed for taxation. foreign or domestic, to secure the It may be that the instrument which payment of serial bonds payable to is secured by the mortgage is a bearer. This is plainly a legislative negotiable instrument, and under declaration that the section shall ap- our law the security passes with the ply to all deeds of trust and mort- transfer of the debt; but people are gages not excepted from the opera- supposed to make their contracts in tion of the section, under the rule view of the law, and, if it is desired that, where the legislature enumer- that a note should be negotiable and ated the things to be excepted, the pass from hand to hand by delivery, enumeration embraces all that is in- that purpose could be carried out by tended to be excepted,
and all other either not taking the security, or not classes are included. These sections placing it of record, taking the condeal with the record of instruments, sequences, in either case, that would and have no bearing on the negoti. follow such action. The state has ability or non-negotiability of in- full power to deal with the record of struments. The statutes probably instruments, and to provide such intend to serve several purposes, one conditions as it may deem best for of which was to enable the debtor to the public interest. In my humble know who his creditor was, so that opinion, the decision in the present he might deal with his obligation in case emasculates the statute, and dethe light of such information, and feats the purpose indicated by the the suit before us demonstrates the legislature.
legislature. The statute may not be benefit of having such knowledge, a wise one, and may be in fact subbecause the maturity of all the debt
versive of the public welfare, but is attempted to be accelerated in the
that is a question with which the case before us, without any notice to
court has no kind of concern, bethe debtor, in advance, of the accel
cause the shaping of public policy eration. The sections also intend to
and the making of laws is for the give information to the taxing au
legislative department. thorities as to who is the owner of the recorded debt, so that the state, Suggestion of error overruled counties, and municipalities may September 24, 1923.
Time within which taxes may be paid to prevent operation of acceleration
clause in mortgage.
Time at which taxes are delinquent.
Decisions on the question under annotation involve cases where clause in the mortgage provides that, upon default in the payment by the mortgagor of legally assessed taxes or assessments on the mortgaged property, the debt secured by the mortgage shall immediately become due and payable, if the mortgagee so elects.
The courts in general hold that where there is a provision for the acceleration of the mortgage for failure of the mortgagor to pay taxes on the mortgaged premises, the mortgagee's right to declare the entire debt due matures as soon as the taxes become delinquent, and a foreclosure action
thereafter instituted is not commenced prematurely. Parker v. Olliver (1894) 106 Ala. 549, 18 So. 40; Hume v. Indiana Nat. L. Ins. Co. (1922) 155 Ark. 466, 245 S. W. 19; Buffalo Center Land & Invest. Co. v. Swigart (1916) 176 Iowa, 422, 156 N. W. 422; Elwood v. Wolcott (1884) 32 Kan. 526, 4 Pac. 1056; Condon v. Maynard (1889) 71 Md. 601, 18 Atl. 951; National L. Ins. Co. v. Butler (1901) 61 Neb. 449, 87 Am. St. Rep. 462, 85 N. W. 437; Farmers Security Bank
Security Bank v. Martin (1915) 29 N. D. 269, L.R.A.1916D, 432, 150 N. W. 572.
But in the reported case (HUGHES v. KAW INVEST. Co. ante, 727) it is held that, since the mortgagor has the right to pay the taxes at any time be- been given the mortgagor by the colfore the lands are sold, a forfeiture lector, as required by the Code in order under the acceleration clause could to enforce collection, for they are none not be declared, at least, until the day the less due and in arrear in the abof the sale for nonpayment of the tax. sence of such notice, as taxes must be See Gray v. Robertson (1898) 174 Ill. necessarily due before payment can be 242, 51 N. E. 248.
enforced, and when due are legally deAn allegation of a custom in delay- mandable, though summary proceeding payment of taxes is no defense. ings to compel payment may not be at Parker v. Olliver (Ala.) supra.
once resorted to. Condon v. Maynard It has been held that, where a (1889) 71 Md. 601, 18 Atl. 957. mortgage contains a covenant by the It has been said that an agreement mortgagor to pay the taxes when due, to pay taxes before they become deand gives the mortgagee the power of linquent is not fulfilled by paying such sale in case of the mortgagor's fail- taxes on the day they become delinure to pay the principal or interest quent. National L. Ins. Co. v. Butwhen due, or in case of the nonpay- ler (1901) 61 Neb. 449, 87 Am. St. ment of any taxes, a mere naked Rep. 462, 85 N. W. 437, where it was breach of the covenant to pay the held that, as the mortgage was contaxes gives the mortgagee no right to ditioned on the mortgagor's default in foreclose. Heller v. Neeves (1896) 93 that respect and the mortgagee could Wis. 637, 67 N. W. 923, 68 N. W. 412. pay the delinquent taxes and add such There was no other covenant in this payment to the original debt, a paycase touching the payment of taxes ment of taxes by the mortgagee on the or the effect of nonpayment, nor any
1st day of December was
not premastipulation that the mortgagee could ture and unauthorized, where the statpay the tax and recover the amount ute provided, "on the 1st day of as part of the debt, or that the debt December next succeeding the levy should become due in default of pay- thereof, all unpaid taxes shall become ment, and it appears that the plain- delinquent,” and the mortgagee could tiff was the second mortgagee, and not only make the payment which the that the amount which he had paid out debtor had failed to make, but could on account of the delinquent taxes had also at its option declare the whole been repaid to him by the first mort- debt due, and immediately proceed to gagee, so that, at the time the action
collect it by suit. was tried, nothing was due the plain
And it has been held that where the tiff on account of taxes.
mortgagee has exercised his option to And in Newark Trunk Co. v. Clark
declare the mortgage debt due for (1922) N. J. Eq. 118 Atl. 263,
failure of the mortgagor to pay taxes it was said that the failure to pay
by filing a bill to foreclose, alleging taxes within the time specified by the
that the taxes have become delinquent, acceleration clause matured the mortgage, unless it could be shown that the
it is no defense to allege that the faildefault was in some way attributable
ure of the mortgagor to pay taxes to the fault of the mortgagee. And
when they become due was in accordsee Arkenburgh v. Lakeside Residence
ance with a long-established custom Asso. (1897) 56 N. J. Eq. 102, 38 Atl. to pay taxes for the preceding year be297.
fore a certain date of the following Where taxes for the preceding year year, and that the mortgagee had, are due and in arrear on the 1st day of after the filing of the bill, paid the taxJanuary, and from that date bear in- es and offered to pay the complainant terest, if unpaid, there has been a de- all costs which had accrued, for the fault in the payment of taxes within contingency of the stipulation for the the meaning of the acceleration clause acceleration of the mortgage was the in a mortgage by which the mortgagee delinquency in payment of the taxes, covenanted to pay taxes, "when legally and the plea does not contradict the demandable,” though no notice had happening of the contingency. Parker
v. Olliver (1894) 106 Ala. 549, 18 So. 40.
In Brockway v. McClun (1909) 148 Ill. App. 465, affirmed in (1909) 243 Ill. 196, 90 N. E. 374, where it was contended that an action to foreclose a mortgage for default in payment of taxes under an acceleration clause was prematurely brought, inasmuch as the mortgage had been extended for five years, it was said that the mortgagee had the power to declare the whole debt due and file a bill with that object in view, without any further notice of his intention to do so than is to be implied from the commencement of the foreclosure proceedings.
In Buffalo Center Land Invest. Co. v. Swigart (1916) 176 Iowa, 422, 156 N. W. 701, it was held that, where taxes are due on the 1st of January, and are delinquent unless paid before the 1st of April, the mortgagee is in default within the meaning of the acceleration clause in the mortgage, where he did nothing toward paying the taxes until the 1st of September, after the foreclosure action was instituted for default in payment.
In Gray V. Robertson (1898) 174 III. 242, 51 N. E. 248, it was said that the right of the creditor to foreclose a trust deed which contained an acceleration clause for the nonpayment of taxes accrued upon the failure of the debtor to keep and observe the covenant in relation to the payment of taxes and the protection of the property from sale for delinquent taxes and assessments.
In Farmers Security Bank v. Martin (1915) 29 N. D. 269, L.R.A.1916D, 432, 150 N. W. 572, the court stated that any time after the taxes became delinquent, in the absence of equitable reasons preventing it, the mortgagors were in default under the terms of the acceleration clause, and the mortgage could be foreclosed under the power granted on account of the default, such power being valid and enforceable in equity. Tender or payment after taxes are delinquent.
A majority of the courts hold that, after having failed to pay the taxes on property when they became due,
the mortgagor may thereafter pay the taxes and thus bar the mortgagee's right to foreclose for such default, where such payment, or a tender thereof, is made before the foreclosure suit is commenced. Shaw v. Wellman (1891) 59 Hun, 447, 13 N. Y. Supp. 527; Noyes v. Anderson (1891) 124 N. Y. 175, 26 N. E. 316; Ver Planck v. Godfrey (1899) 42 App. Div. 16, 58 N. Y. Supp. 784; Germania L. Ins. Co. v. Potter (1908) 124 App. Div. 814, 109 N. Y. Supp. 435; Fleming v. Franing (1908) 22 Okla. 644, 22 L.R.A. (N.S.) 360, 132 Am. St. Rep. 658, 98. Pac. 961; Smalley v. Renken (1892) 85 Iowa, 612, 52 N. W. 507; HUGHES v. KAW INVEST. Co. (reported herewith) ante, 727; Swon V. Stevens (1898) 143 Mo. 384, 45 S. W. 270.
Some of the courts base their decisions on the ground that as the acceleration clause is put in for the purpose of protecting the mortgagee from loss or impairment of his security, a payment before actual sale of the premises fulfils that purpose. Smalley V. Renken (1892) 85 Iowa, 612, 52 N. W. 507; Ver Planck v. Godfrey (1899) 42 App. Div. 16, 58 N. Y. Supp. 784; Shaw v. Wellman (N. Y.) supra.
And it has been said that the failure to pay taxes is a mere technical default, which is cured by prompt payment by the mortgagor when his attention is called thereto. Germania L. Ins. Co. v. Potter (1908) 124 App. Div. 814, 109 N. Y. Supp. 435, supra.
And it has been held that the mortgagee's right to take advantage of the acceleration clause is devested by the mortgagor paying the delinquent taxes after the foreclosure suit is commenced. Shaw v. Wellman and Germania L. Ins. Co. v. Potter (N. Y.) supra.
But the better view seems to be that a payment, or tender of payment, of the delinquent taxes after the foreclosure suit is commenced under an acceleration clause, is too late to bar the mortgagee's right to foreclose for default in payment of taxes. Stanclift y. Norton (1873) 11 Kan. 218; Lotterer v. Leon (1921) 138 Md. 318, 113 Atl. 887; Plummer v. Park (1901)
62 Neb. 665, 87 N. W. 534; Hockett v. concerned. To justify a forfeiture Burns (1911) 90 Neb. 1, 132 N. W. 718; under such circumstances would work Arkenburgh v. Lakeside Residence an injustice that the court ought not to Asso. (1897) 56 N. J. Eq. 102, 38 Atl. permit. We think the payment of the 297.
taxes, after a breach of the condition Some courts have held that a tender for their payment, and in a way that or payment after the mortgagee has no prejudice could result because of given notice of his intention to fore- the default, and before suit brought close is too late. Thompson v. Hirt to declare the debt due because of the (1923) 195 Iowa, 582, 191 N. W. 365; default in payment, is a bar to such Stewart v. McCaddin (1908) 107 Md. a proceeding." 314, 68 Atl. 577.
Under a mortgage clause providing And it has been held that the fail- that the whole amount of the mort. ure of the mortgagor to pay the taxes gage debt shall become due at the absolutely accelerates the mortgage. option of the mortgagee, for default Newark Trunk Co. v. Clark (1922) in payment of taxes before the same N. J. Eq. – 118 Atl. 263.
become delinquent, a default and subIn Smalley V. Renken (1892) 85 sequent sale of the mortgaged propIowa, 612, 52 N. W. 507, the mortgage erty does not entitle the mortgagee to stipulated that if default should be foreclose, where all taxes, penalties, made in the payment of the principal and interest lawfully assessed against or interest secured thereby, or of the the said property have been fully paid taxes assessed on the premises, and the off and discharged by the mortgagor same should remain unpaid for a space and notice thereof given to the mortof thirty days, the whole indebtedness
gagee before the foreclosure suit was should become due; under this clause instituted. Fleming Franing the mortgagee commenced an action (1908) 22 Okla. 644, 22 L.R.A. (N.S.) to foreclose, based on the nonpayment
360, 132 Am. St. Rep. 658, 98 Pac. 961. of interest at a time when taxes were In Ver Planck v. Godfrey (1899) 42 in default within the meaning of the
App. Div. 16, 58 N. Y. Supp. 784, the acceleration clause, but such default
mortgagee notified the mortgagor by was not stated as a ground for fore- letter of an election to consider the closure; the mortgagor later paid the whole amount of the debt due and paytaxes and thereafter the plaintiff able on the ground that the mortgagor amended his foreclosure petition by
had failed to pay the taxes; the mortalleging that the debt had matured on
gagor immediately tendered the the failure to pay taxes, and the court amount of the taxes to the mortgagee's held that as the stipulation for the attorney, and, upon his refusal to acpayment of taxes was intended to pro- cept the same, paid the taxes to the tect the mortgagee from loss or im- proper tax officer and exhibited the pairment of his security, that purpose tax receipts to the mortgagee's atwas fulfilled by the payment of taxes torney. In reversing a decree of forebefore the amendment of the petition, closure and order of sale of the mortand the mortgagee was not thereafter gaged premises, where the summons entitled to foreclosure on that ground. had not been serve on the defendant The court stated: “At the filing of until after the plaintiff had actual the amendment every right of the knowledge that the taxes had been plaintiff in this respect was fully pro- paid, the court stated that it was at a tected. The object of the condition loss to understand upon what equitaof the mortgage was to enable the ble principle a judgment of foreplaintiff to treat the debt as due, and closure could be decreed, for, at most, save himself from loss because of the there was but a technical default in default. After the payment of the the payment of the taxes, and since taxes, all such liability for loss was they had been paid by the mortgagor at an end. His situation was exactly before the commencement of the acas if there had been no default as far tion, the plaintiff was not injured by as the conditions for forfeiture were the default, nor had her security been