Connor, J.
The notes held by plaintiffs and defendants, at the commencement of this action — executed by H. C. White, each containing an unconditional promise to pay a certain sum of money, at a fixed future time, to the order of J. L. Kilpatrick — are in form negotiable instruments. C. S., 2982, 2985. The recital on the face of each note, to wit: “This is one of a series of notes secured by deed of trust or mortgage” does not affect the negotiable character of the notes. C. S., 2986.
Trust Co. v. Leggett,
185 N. C., 65, 29 A. L. R., 709 n;
Critcher v. Ballard,
180 N. C., 111;
Zollman v. Jackson Trust & Sav. Bank,
32 L. R. A. (N. S.), 858, with note; nor do the words in said recital, “and it is agreed that the failure to pay any note or interest when due shall cause all to become due and payable immediately” render the notes nonnegotiable. The agreement is valid.
Trust Co. v. Duffy,
153 N. C., 62. Acceleration of the maturity of a note, or of notes in a series, as the result of the failure of the maker to pay interest, or to pay one of the notes of said series, when same becomes due, according to the tenor of the note or notes, by virtue of an agreement to that effect, appearing in the face of the note, or notes, does not make the note, or notes of the series, payable upon a contingency, and therefore nonnegotiable, within the meaning of C. S., 2985. The agreement for acceleration may be enforced as against the maker by the holder of the note or notes in the series, at his option.
White v. Hatcher
(Tenn.), 188 S. W., 60;
Chicago Railway Equipment Company v. Merchants National Bank,
136 U. S., 34, L. Ed., 349;
Wilson v. Campbell,
110 Mich., 580, 68 N. W., 278, 35 L. R. A., 544;
Clark v. Skeen,
61 Kan.,
526, 60 Pac., 327, 49 L. R. A., 190. An instrument payable on or before a fixed date is, by statute, C. S., 2985, payable at a determinable future time, within the meaning of C. S., 2982(3).
A provision for the acceleration of the maturity of a note, or of notes in a series, upon default of the maker, is not automatic; such acceleration is at the option of the holder or holders of the note or notes; the option may be exercised by a holder only upon default by the maker. By paying the interest when due, or by paying each note of the series, as it matures, in accordance with his promise, the maker can deprive the holder of any and all rights under the agreement for acceleration; the right to acceleration may be waived by the holder of the note or notes, containing the agreement. An action upon a note accrues, at its maturity, according to its tenor, notwithstanding a provision for acceleration, if acceleration is waived or not enforced by the holder. 13 R. C. L., 909, sec. 97; 8 C. J., p. 138, sec. 237-242, p. 415, sec. 610.
The notes held by plaintiffs were endorsed by J. L. Kilpatrick, payee named therein, who wrote above his signature on the back of each note, the words, “without recourse.” This is a qualified endorsement; its effect is to constitute the endorser a mere assignor of the title to the note, which he held at the date of the endorsement. It does not impair the negotiable character of the note so endorsed, C. S., 3019.
Bank v. Branson,
165 N. C., 344;
Bank v. Hatcher,
151 N. C., 359;
Evans v. Freeman,
142 N. C., 61. By this qualified endorsement of the notes, J. L. Kilpatrick warranted (1) that the instrument is genuine and in all respects what it purports to be, (2) that he had a good title to it, (3) that H. C. White, the maker, and the only prior party thereto, had capacity to contract, and (4) that he had no knowledge of any fact which would impair the validity of the note or render it valueless. C. S., 3046;
Smith v. Godwin,
145 N. C., 242. He did not engage by his qualified endorsement that, on due presentment, the note would be paid, according to its tenor, or that if the note was dishonored and the necessary proceedings on dishonor should be taken, he would pay the amount thereof to the holder of the note, C. S., 3047. His liability to plaintiffs on said notes is that of a qualified endorser; not that of a general endorser.
When plaintiffs became the holders of these notes, for value and before maturity, by virtue of the transfer of the same by the qualified endorsement of J. L. Kilpatrick, each note carried with it the personal credit of H. C. White, the maker, in support of his promise;
Trust Co. v. Leggett, supra.
Plaintiffs are holders of said notes, in due course; in their hands, the notes are free from- any defect in the title of J. L. Kilpatrick, and free from defenses available to H. C. White as against J. L. Kilpatrick. They may enforce payment of each of said notes,
according to its tenor,' for tbe full amount, 0. S., 3038. There is no contention upon this appeal, that there has been a breach of any of the warranties made by J. L. Kilpatrick, as a qualified endorser, to the plaintiffs as subsequent holders of the notes.
In addition to the personal credit of H. C. White, upon which plaintiffs may rely to enforce payment of the notes, each note is secured in the deed of trust executed by H. C. White, conveying the land described therein to G. G. Moore, trustee. The security for each note transferred by J. L. Kilpatrick, as a qualified endorser, passes with the note, as an incident thereto, to subsequent endorsers. This is elementary.
Smith v. Godwin, supra.
This security arises from and is determined by the provisions of the deed of trust executed by H. C. White to G. G. Moore, trustee, contemporaneously with the execution of the notes. The notes recite on their face that they are secured in a deed of trust; the deed of trust was duly recorded.
Plaintiffs, as subsequent endorsees, are entitled to the benefit of all security, which the payee and endorser had for the payment of the notes, at the time of the endorsement — neither more nor less. To the extent to which they relied upon the deed of trust, they took the notes subject to all its terms and provisions; by the express provision of the deed of trust, the three notes, secured therein, first maturing and remaining in the hands of J. L. Kilpatrick, had priority upon the funds arising from the sale of the land conveyed therein; payment of these notes, endorsed by J. L. Kilpatrick, who thereby assigned his title thereto, and now held by plaintiffs, who claim title under the qualified endorsement, with notice of such provision, at least, by virtue of the registration of the deed of trust, cannot be enforced, out of said funds, until the payment in full of the three notes first maturing, now held by defendant, J. L. Kilpatrick. The jury has found that the provision relied upon by J. L. Kilpatrick was not inserted in the deed of trust after its execution and delivery. The provision is valid as between the payee of the first three notes and the holders of the remaining notes who acquired their title under the qualified endorsement of the payee. There is no error in the judgment.
The fact that the notes, held by plaintiffs, are postponed as to payment from funds derived from the sale of the land, conveyed by the deed of trust, for the purpose of securing these notes, as well as the notes held by J. L.
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Connor, J.
The notes held by plaintiffs and defendants, at the commencement of this action — executed by H. C. White, each containing an unconditional promise to pay a certain sum of money, at a fixed future time, to the order of J. L. Kilpatrick — are in form negotiable instruments. C. S., 2982, 2985. The recital on the face of each note, to wit: “This is one of a series of notes secured by deed of trust or mortgage” does not affect the negotiable character of the notes. C. S., 2986.
Trust Co. v. Leggett,
185 N. C., 65, 29 A. L. R., 709 n;
Critcher v. Ballard,
180 N. C., 111;
Zollman v. Jackson Trust & Sav. Bank,
32 L. R. A. (N. S.), 858, with note; nor do the words in said recital, “and it is agreed that the failure to pay any note or interest when due shall cause all to become due and payable immediately” render the notes nonnegotiable. The agreement is valid.
Trust Co. v. Duffy,
153 N. C., 62. Acceleration of the maturity of a note, or of notes in a series, as the result of the failure of the maker to pay interest, or to pay one of the notes of said series, when same becomes due, according to the tenor of the note or notes, by virtue of an agreement to that effect, appearing in the face of the note, or notes, does not make the note, or notes of the series, payable upon a contingency, and therefore nonnegotiable, within the meaning of C. S., 2985. The agreement for acceleration may be enforced as against the maker by the holder of the note or notes in the series, at his option.
White v. Hatcher
(Tenn.), 188 S. W., 60;
Chicago Railway Equipment Company v. Merchants National Bank,
136 U. S., 34, L. Ed., 349;
Wilson v. Campbell,
110 Mich., 580, 68 N. W., 278, 35 L. R. A., 544;
Clark v. Skeen,
61 Kan.,
526, 60 Pac., 327, 49 L. R. A., 190. An instrument payable on or before a fixed date is, by statute, C. S., 2985, payable at a determinable future time, within the meaning of C. S., 2982(3).
A provision for the acceleration of the maturity of a note, or of notes in a series, upon default of the maker, is not automatic; such acceleration is at the option of the holder or holders of the note or notes; the option may be exercised by a holder only upon default by the maker. By paying the interest when due, or by paying each note of the series, as it matures, in accordance with his promise, the maker can deprive the holder of any and all rights under the agreement for acceleration; the right to acceleration may be waived by the holder of the note or notes, containing the agreement. An action upon a note accrues, at its maturity, according to its tenor, notwithstanding a provision for acceleration, if acceleration is waived or not enforced by the holder. 13 R. C. L., 909, sec. 97; 8 C. J., p. 138, sec. 237-242, p. 415, sec. 610.
The notes held by plaintiffs were endorsed by J. L. Kilpatrick, payee named therein, who wrote above his signature on the back of each note, the words, “without recourse.” This is a qualified endorsement; its effect is to constitute the endorser a mere assignor of the title to the note, which he held at the date of the endorsement. It does not impair the negotiable character of the note so endorsed, C. S., 3019.
Bank v. Branson,
165 N. C., 344;
Bank v. Hatcher,
151 N. C., 359;
Evans v. Freeman,
142 N. C., 61. By this qualified endorsement of the notes, J. L. Kilpatrick warranted (1) that the instrument is genuine and in all respects what it purports to be, (2) that he had a good title to it, (3) that H. C. White, the maker, and the only prior party thereto, had capacity to contract, and (4) that he had no knowledge of any fact which would impair the validity of the note or render it valueless. C. S., 3046;
Smith v. Godwin,
145 N. C., 242. He did not engage by his qualified endorsement that, on due presentment, the note would be paid, according to its tenor, or that if the note was dishonored and the necessary proceedings on dishonor should be taken, he would pay the amount thereof to the holder of the note, C. S., 3047. His liability to plaintiffs on said notes is that of a qualified endorser; not that of a general endorser.
When plaintiffs became the holders of these notes, for value and before maturity, by virtue of the transfer of the same by the qualified endorsement of J. L. Kilpatrick, each note carried with it the personal credit of H. C. White, the maker, in support of his promise;
Trust Co. v. Leggett, supra.
Plaintiffs are holders of said notes, in due course; in their hands, the notes are free from- any defect in the title of J. L. Kilpatrick, and free from defenses available to H. C. White as against J. L. Kilpatrick. They may enforce payment of each of said notes,
according to its tenor,' for tbe full amount, 0. S., 3038. There is no contention upon this appeal, that there has been a breach of any of the warranties made by J. L. Kilpatrick, as a qualified endorser, to the plaintiffs as subsequent holders of the notes.
In addition to the personal credit of H. C. White, upon which plaintiffs may rely to enforce payment of the notes, each note is secured in the deed of trust executed by H. C. White, conveying the land described therein to G. G. Moore, trustee. The security for each note transferred by J. L. Kilpatrick, as a qualified endorser, passes with the note, as an incident thereto, to subsequent endorsers. This is elementary.
Smith v. Godwin, supra.
This security arises from and is determined by the provisions of the deed of trust executed by H. C. White to G. G. Moore, trustee, contemporaneously with the execution of the notes. The notes recite on their face that they are secured in a deed of trust; the deed of trust was duly recorded.
Plaintiffs, as subsequent endorsees, are entitled to the benefit of all security, which the payee and endorser had for the payment of the notes, at the time of the endorsement — neither more nor less. To the extent to which they relied upon the deed of trust, they took the notes subject to all its terms and provisions; by the express provision of the deed of trust, the three notes, secured therein, first maturing and remaining in the hands of J. L. Kilpatrick, had priority upon the funds arising from the sale of the land conveyed therein; payment of these notes, endorsed by J. L. Kilpatrick, who thereby assigned his title thereto, and now held by plaintiffs, who claim title under the qualified endorsement, with notice of such provision, at least, by virtue of the registration of the deed of trust, cannot be enforced, out of said funds, until the payment in full of the three notes first maturing, now held by defendant, J. L. Kilpatrick. The jury has found that the provision relied upon by J. L. Kilpatrick was not inserted in the deed of trust after its execution and delivery. The provision is valid as between the payee of the first three notes and the holders of the remaining notes who acquired their title under the qualified endorsement of the payee. There is no error in the judgment.
The fact that the notes, held by plaintiffs, are postponed as to payment from funds derived from the sale of the land, conveyed by the deed of trust, for the purpose of securing these notes, as well as the notes held by J. L. Kilpatrick, cannot be held to impair their validity, or to render them valueless in breach of his warranty as a qualified endorser. The knowledge of this fact by the qualified endorser is not a breach of warranty by him in the negotiation of the notes. There is evidence upon this record that H. E. Walter had actual notice of the provision in the deed of trust relative to the priority of the first three
notes secured therein; the First National Bank of Kinston, N. C., had constructive notice at least of the provision, from the registration of the deed of trust; the recital on the face of the notes, at the time they were transferred to the bank, certainly was sufficient to put the bank upon notice as to any terms and provision in the deed of trust, affecting the security therein for the payment of the notes; if the bank relied upon the deed of trust, in purchasing the notes, it should have ascertained its terms and provisions.
The evidence offered at the trial tends to show that the notes held by plaintiffs were endorsed and assigned by J. L. Kilpatrick to H. E. Walter, pursuant to an agreement entered into between them prior to the execution of the notes and of the deed of trust; that the provision with respect to the priority in payment, upon the foreclosure of the deed of trust, of the first three notes, which under the agreement, were to be retained by J. L. Kilpatrick, was a part of this agreement and was inserted in the deed of trust with the actual knowledge of H. E. Walter. He subsequently assigned two of the notes to his coplaintiff, the First National Bank of Kinston, who holds the same as his assignee. It does not appear whether he is liable as an endorser, either general or qualified, to his coplaintiff. J. L. Kilpatrick, by his qualified endorsement, gave notice to all subsequent endorsees and holders that he assumed no liability on the. notes except for a breach of the warranties which by statute accompanied his qualified endorsement. He made no warranty as to the value of the security for the payment of the notes. He cannot be held to be estopped from setting, up and insisting upon his rights to priority under the express provision of the deed of trust. There is
No error.