
    The Kansas Loan & Trust Company v. Gibson Gill et al.
    
    No. 98.
    1. Note and Mortgage — Construed Together. A note and the mortgage securing the same should be construed as parts of one transaction; and the conditions of the mortgage, when not in conflict with the terms of the note, as to the effect of a default in the payment of interest when due, govern the rights of the parties respecting that matter.
    2. -Default not Waived by Delay. When the conditions of a mortgage provide that, upon a failure to pay interest when due, the holder of the morgage may, at his option, declare the whole sum due, and foreclose the mortgage, the right to exercise the option exists as long as the default continues; and it is not waived by a mere delay, which has not operated to the benefit of the mortgagee nor to the detriment of the mortgagor.
    Memorandum. — Error from Mitchell district court; Cyrus Hbren, judge. Action by The Kansas Loan & Trust Company against Gibson Gill and others to foreclose a mortgage. Judgment for defendants. Plaintiff brings the case to this court.
    Reversed.
    Opinion herein, filed February 14, 1896, states the material facts.
    
      Fuller & Whitcomb, and A. W. Hicks, for plaintiff in error.
    
      James T. Hicks, for defendants in error Gibson Gill and Mary Gill.
   The opinion of the court was delivered by

Gar ver, J. :

This was an action brought April 27, 1892, in the district court of Michell county, by the plaintiff in error, as plaintiff, on a note executed by defendants in error, and to foreclose a mortgage given to secure the same. The note was dated June 1, 1888, and made for the payment of the sum of $900 in five years after date, with interest payable semiannually on the first days of June and December in each year. The mortgage provided as one of its conditions :

“If the makers of said note shall fail to payor cause to be paid any part of said money, either principal or interest, according to the tenor and effect of said note and coupons, when the same becomes due, . the whole sum of money hereby secured shall, at the option of the legal holder or holders thereof, become due and payable at once without notice.”

The petition alleges the failure to make the several payments of interest falling due on and after June 1, 1890, and on that ground plaintiff elected to exercise the option to declare the whole sum due, and to foreclose the mortgage. A demurrer to this petition was sustained, on the ground that it failed to state facts sufficient to constitute a cause of action. This ruling of the court is now complained of.

The specific objection which is made to the petition is, that because of the delay of the plaintiff to exercise its option to declare the whole sum due within a reasonable time after the last default in the payment of interest it must be deemed to have waived such right on account of any default preceding the commencement of the action. Did the petition state a cause of action? Crossmore v. Page, 73 Gal. 213, is cited as the principal authority relied upon for this ruling. Tlie construction which the supreme court of California put upon the contract before it in that case does not seem a reasonable one; and what is said by the court as to the legal effect of the delay is much weakened by subsequent decisions of the same court. (Hewitt v. Dean, 91 Cal. 5; Fletcher v. Dennison, 101 id. 292.) The note and mortgage must be considered together as one .contract, and the conditions of the mortgage, as to the effect of a default in the payment of taxes or interest, become a part of the contract for the payment of the sum named in the note. (Muzzy v. Knight, 8 Kan. 456; Meyer v. Graeber, 19 id. 165.) According to the conditions of the mortgage, upon the failure of the mortgagor to pay the interest when due, the holder of the mortgage had a right to declare the whole sum due and foreclose his mortgage, if he so elected. (National Bank v. Peck, 8 Kan. 660; Stanclift v. Norton, 11 id. 218; Darrow v. Scullin, 19 id. 57.)

The rights of the parties in this case grow out of a contract into which they voluntarily entered. It is not like a case of forfeiture, where the party who exercises the option may derive large benefits from it. Forfeitures are not favored by the courts, and slight circumstances 'will often be seized upon to avoid them. But, even in cases of forfeiture, the rule' requiring prompt action is founded upon the presumption of a change in the situation of the 'parties after the time when a forfeiture might have been first declared. In a contract such as that under consideration, the option is for the special benefit of the mortgagee, and for his protection. Two things are its principal purposes : (1) The prompt receipt of the interest by the holder of the note ; (2) the avoidance of any impairment of the security by an accumulation of interest, taxes or other charges upon the property in addition to the original sum secured. The exercise of the option does not affect the rights of the parties in any manner, except merely as to the time of payment. The agreement of the mortgagor to pay the interest at stated times is a continuing obligation, which can be discharged within the terms of the contract only by actual payment. Whether one week or four months have elapsed since the payment should have been made, the default is still as continuous as is the promise to pay; the reason for giving the option has not necessarily lost any of its force by the delay, and the right to exercise it should be secured as long as the reason exists. If, by reason of the delay, the plaintiff should gain any advantage, or the defendant should suffer any detriment or loss, other considerations would enter into the case, and it might then be said that there was a waiver. In this case, nothing of the kind is claimed. The first default on the interest occurred nearly two years, and the last over four months prior to the commencement of the action, with nothing done otherwise by either party to affect their legal rights. We think the controlling question in such a case is, whether the defendant made default and was continuing so, to the prejudice of the contract rights of the plaintiff, at the time he elected to declare the whole sum due and payable? In this particular case the rule applied by the district court might operate to the advantage of the defendants ; but it is of doubtful benefit to mortgagors generally to lay down a rule which would require the holder of a mortgage containing such conditions to foreclose, if at all under such option, immediately upon the happening of anj default, and to hold that no delay or indulgence could be given by the creditor except at the risk of waiving all right to foreclose for such default. We admit our inability to perceive any reason for holding under such circumstances that the petition does not state a cause of action. Authority as well as reason opposes the construction placed upon the terms of this mortgage by the trial court. (M. R. Ft. S. & G. Rld. Co. v. Brickley, 21 Kan. 275, 295; Manufacturing Co. v. Howard, 28 Fed. Rep. 741; Swearingen v. Lahner, 61 N. W. Rep. [Wis.] 431.)

No special notice of the election was required. The commencement of the action was sufficient notice that the plaintiff had elected to exercise the option to declare the whole sum due. (Shattuck v. Rogers, 54 Kan. 266; Hewitt v. Dean, 91 Cal. 5; Buchannan v. Berkshire Ins. Co., 96 Ind. 510; Princeton L. & T. Co. v. Munson, 60 Ill. 371; Johnson v. VanVelsor, 43 Mich. 208.)

The judgment will be reversed, and the case remanded with directions that the district court overrule the demurrer to the plaintiff's petition.

All the Judges concurring.  