US SUPREME COURT DECISIONS

An action was brought upon three promissory notes with interest payable annually, each providing that if not paid when due, it was to bear the rate of interest of the principal, "it being expressly agreed that in default of payment of interest when due the principal is to become due and collectible." Each note recited the fact that it was secured by a deed of trust executed to a named trustee on certain described property. The deed described the notes and declared:

"provided, however, it is agreed that if at any time said interest shall remain unpaid for as much as ninety days after the same shall become due and payable, then the whole debt as well as the interest shall become and be due and payable, and further it is understood and agreed that if said note first falling due shall remain unpaid thereafter for as much as six months, 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."

It also contained a clause to the effect that if the money due on the notes was not paid "according to the tenor aid effect of said notes in hand, and according to the terms, stipulations, and agreements of this instrument," the deed should remain in force, and the trustee, or in the event of his death or refusal to act,

"then, at the request of the holder of said notes, the sheriff . . . may proceed to sell said described property, or any part thereof at public vendue to the highest bidder for cash, . . . and shall receive the proceeds of said sale, out of which shall be paid first the costs and expenses of executing this trust, including compensation to said trustee or said sheriff for his services, and next to the said third party or holder of said note whatever sum of money may be due thereon, and the remainder, if any, shall be paid to the said parties of the first part, or their legal representatives."

The statute of Texas provided that

"Actions for debt where the indebtedness is evidenced by or founded upon any contract in writing must be commenced and prosecuted within four years after the cause of action accrued, and not afterwards."

The case was heard by the court, and a general finding made. No bill of exceptions was signed.

Held:

(1) The error in this case was one of law, apparent on the record, and need not have been presented by bill of exceptions.

(2) Construing the notes and the deeds as contemporaneous agreements relating to the same subject matter, the limitation of four years under the law of Texas ran from the dates named in the respective notes, as the dates of maturity, and not from the date of the chanrobles.com-red

Page 141 U. S. 617

default in the payment of interest; otherwise if the option given to the payee or holder by the deed of trust, to make them due upon such default, had been exercised by the payee or the holder.

The Court stated the case as follows:

This action was brought October 31, 1889, to recover the amount due on three promissory notes, each for the sum of $2,000, executed January 21, 1882, by John A. Webb and J. W. Webb, composing the firm of John A. Webb & Bro., and payable, with interest from date at eight percent per annum, to S. W. Wheelock or order on the 1st days, respectively, of November, 1885, 1886, and 1887. The original petition alleged that the notes, prior to their maturity, were endorsed, in due course or trade, to the Moline Plow Company, a corporation of the State of Illinois.

The first of the notes was in this form:

"$2,000. Austin, Texas, January 21st, 1882. On or before the first day of November, 1885, we promise to pay to S. W. Wheelock or order at Austin, Texas, two thousand dollars, for value received of him, with interest from this date till paid at the rate of eight percent per annum, said interest being due and payable annually, and, if not paid when due, to bear the same rate of interest as principal, it being expressly agreed that, in default of payment of interest when due, that the principal is to become due and collectible. This note is secured by a deed of trust, this day executed by us to E. A. Wright, trustee, on 10 feet off of the east side of lot No. 3, all of lot No. 4, and 23 feet off of west side of lot No. 5, all in block No. 68, on East Pecan Street, in the City of Austin. John A. Webb., J. W. Webb, composing firm of Jno. A. Webb & Bro."

The following payments were endorsed on the note: $6.48, October 19, 1883; $250, February 3, 1888; $250, September 15, 1888. The other two notes differed from the first one only in their dates of maturity.

The deed of trust referred to in the notes conveyed the real estate therein described in trust for the following purposes:

"Whereas the said first parties [Webb & Co.] are indebted to the said third party [the payee] in the sum of six thousand

Page 141 U. S. 618

($6,000.00) dollars, evidenced by three promissory notes of even date with these presents, executed by said first parties to said third party, each for two thousand ($2,000.00) dollars, and due, respectively, on the first of November, 1885, the first of November, 1886, and the first of November, 1887, each bearing interest at the rate of eight percent, payable annually, on the said 21st day of January of each year, provided, however, it is agreed that if at any time said interest shall remain unpaid for as much as ninety days after the same shall become due and payable, then the whole debt, as well as the interest, shall become and be due and payable, and further, it is understood and agreed that if said note first falling due shall remain unpaid thereafter for as much as six months, 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."

It also contained a clause to the effect that if the money due on the notes was not paid "according to the tenor and effect of said notes of hand, and according to the terms, stipulations, and agreements of this instrument," the deed should be void, and the trustee, or, in the event of his death or refusal to act,

"then, at the request of the holder of said notes, the sheriff . . . may proceed to sell said described property, or any part thereof at public vendue to the highest bidder for cash, . . . and shall receive the proceeds of said sale, out of which shall be paid first the costs and expenses of executing this trust, including compensation to said trustee or said sheriff for his services, and next to the said third party or holder of said note whatever sum of money may be due thereon, and the remainder, if any, shall be paid to the said parties of the first part, or their legal representatives."

To the original petition (which describes the notes generally, without setting out either them or the deed of trust) the defendants demurred, and at the same time answered denying all and singular its allegations and pleading in bar of the action the statute of Texas providing that actions for debt, where the indebtedness is evidenced by or founded upon any contract in writing, must be commenced and prosecuted within chanrobles.com-red

Page 141 U. S. 619

four years after the cause of action accrued, and not afterwards. 2 Sayles' Texas Civil Statutes, Art. 3205.

The plaintiff, by way of answer to the plea of limitation, filed a supplemental petition, exhibiting, as part of it, the notes in suit, the deed of trust, and the following communication from the defendants to its attorneys:

"Austin, Texas, Feb. 3, 1888"

"West & McGown, Austin, Texas:"

"Dear Sirs: We will pay you $250.00 in cash and $250.00 on Sept. 15, '88, if you will stay suit on the Moline Plow Co. claims until Jan., '89. In the event of our failure to pay $250.00 in Sept., your obligation to stay till Jan. 1, '89, will be at an end. If we do, we are to have till Jan. 1, '89, to raise $1,000.00 and take up the first note, due Nov. 1, '85."

"Jno. A. Webb & Bro."

The supplemental petition proceeded upon two grounds: 1. that, the owner and holder of the notes never having exercised the option of declaring them due and payable in advance of the dates specified in them, namely, the 1st days of November, 1885, 1886, and 1887, limitation would not bar an action until four years after those respective dates. 2. That by the two payments of February 3, 1888, and September 15, 1888, the defendants recognized the notes as subsisting obligations, such payments, it was alleged, being made and accepted for the sole purpose of giving the defendants time to settle the notes, and being specially based on the agreement of February 3, 1888, which, the plaintiff insists, was both an acknowledgment that the debt evidenced by the notes was just, due, and unpaid, and a promise to pay it. The latter proposition was based upon the statute of Texas providing that

"When an action may appear to be barred by a law of limitation, no acknowledgment of the justness of the claim, made subsequent to the time it became due, shall be admitted in evidence to take the case out of the operation of the law unless such acknowledgment be in writing and signed by the party to be charged thereby."

2 Sayles' Texas Civil Statutes, Art. 3219. chanrobles.com-red

Page 141 U. S. 620

By way of reply to the supplemental petition, the defendants answered that they never in any manner acknowledged the notes sued on to be binding and subsisting obligations; that neither the notes nor the deed of trust gave plaintiff any option as to the maturity of the notes; that if plaintiff had any option whatever, it related only to the property described in the deed of trust, and that no part of the interest on the notes was paid within ninety days after the same became due, whereupon the notes, both as to principal and interest, became due more than four years before the institution of this suit; consequently it was insisted all right of action on them was barred by limitation.

A jury having been properly waived, the case was heard by the court, which found that the notes sued on were barred by the statute of limitations of four years; that the new promise, dated February 3, 1888, applied only to the extent of $1,000 from January 1, 1889, and no more, and to that extent was binding on defendants.

Judgment was accordingly rendered for the plaintiff against the defendants for $1,090, with interest from the date of the judgment, and the plaintiff sued out this writ of error. chanrobles.com-red

Page 141 U. S. 622