Whitehead v. . Morrill

ClaRK, J.: By the terms of the mortgage from L. Y. Mor-rill to William Whitehead, it was provided that, upon default in the payment of any of the bonds at maturity, the property therein conveyed could be sold by the mortgagee, after advertisement at the court-house door, for cash or credit, and *68 that the proceeds should be applied “ first to the costs and charges of drawing and executing this instrument; and, second, to the payment of the entire indebtedness of the said L. V. Morrill to the said -William Whitehead, with the interest thereon, whether the whole thereof be due or not.” The three bonds first falling due were assigned to the appellants, the other nine to the appellees. The assignees are bound by the terms of the mortgage, and in this contest between them, by reason of the failure of the property to produce enough to pay all the bonds in full, it is hard to see how the Court could apply the proceeds otherwise than “ to the entire indebtedness, whether the whole thereof be due or not,” that is, pro rata to all the bonds. The validity of a provision in a mortgage, that upon default in the payment of any one bond at maturity all the bonds shall become due and payable, was sustained by this Court in Capchart v. Dettrick, 91 N. C., 344, citing Howell v. Railroad, 94 U. S., 463. And the very point now in issue was presented in Kitchin v. Grandy, 101 N. C., 86, in which it is held by Sjiith, C. J., that upon a sale under a mortgage containing a similar provision, the proceeds should be applied pro rata to all the bonds, whether matured or not. In the absence of such provision in the mortgage a very different case might be presented, though the courts of different States differ as to this. 2 Jones Mort., 1701. But it was competent for the parties to insert the stipulation, and the assignees of the bond are bound by it. If the payee himself held the later bonds unassigned, in a contest between him and the holder of the earlier bonds assigned by him, the assignees of the earlier bonds would be entitled to be paid in full by virtue of the liability by reason of the endorsement. But here the contest is between two sets of assignees, and by the terms of the mortgage “the proceeds of the sale are to be applied to the entire indebtedness whether the whole thereof be due or not.” The cases from other States cited by the distinguished coun *69 sel of tlie appellant apply altogether to mortgages in which there was no such stipulation as in the present instance, and to cases in which the contest over the proceeds was between the assignee of certain of the bonds and the payee who held the others still unassigned. The authority of Kitchin v. Grandy, supra, is in our own Court. It is a very recent case, and “ on all-fours.” We would not feel at liberty, if so inclined, to disregard it upon the strength of precedents, even if equally in point, cited from other States. But, in fact, their rulings agree with ours. Jones on Mortgages, § 1703, says: “When the mortgage provides that upon any default the whole mortgage debt shall become due and payable, then there can be no preference given to the holder of the note on which default was made over the holder of the note not then due, because by such default the whole debt became due at the same time. A pro rata distribution should then be made between the holders of different parts of the debt.” And this is supported by numerous citations of authorities. No error.