Cockerham v. Hathaway

BARNARD, P. J. This is an action on a note given in connection with a real estate transaction. On June 20, 1949, the parties executed a contract providing for the sale of certain real property by the plaintiffs to the defendants “for the sum of $23,000, in currency of the United States.” The contract provided that this purchase price was to be paid

“. . . as follows, to wit: $3000 or more dollars to be paid on or before two years from date. Balance of 20,000 dollars to be paid at 150.00 dollars or more each month beginning two years from date. Payments include interest on amortised balance @ 6% and continuing until all of principal and interest have been paid in full. Beginning June 20, 1949 and continuing to the time that the 3000.00 above mentioned is' paid. Party of the second part agrees to pay to the party of the first part, interest on 23000.00 @6% per annum payable in monthly installments of 115.00 each month. This interest is not to apply to purchase price of property.”

It then provided:

“The intent and purpose of this instrument is to insure the partys of the first part that partys of the second part has purchased the property and in leu of a cash down payment and to this end the partys of the second part have given to the partys of the first part notes totaling the amount of the purchase price, which on default of any interest or principie payment become immediately due and payable at the option of the holder.”

At the same time and as a part of the same transaction the defendants gave the plaintiffs two notes, both dated June 20, 1949. One was for $3,000 payable two years after date, with interest at 6 per cent payable monthly. The other was for $20,000 “to be paid according to real estate purchace agreement of even date.”

On June 20, 1949, and on the 20th day of each month thereafter, to and including November 20,1949, the defendants paid $115, which the plaintiffs applied as interest on the two notes without any segregation. On December 20, 1949, the defendants paid $57.50 which the plaintiffs marked “Interest to January 5-50.” On January 5, 1950, the defendants surrendered the property and the plaintiffs took possession, and shortly thereafter sold it to another party.

[887]On January 23, 1950, the plaintiffs filed suit on this $3,000 note, alleging that the defendants had failed to pay $57.50 interest which was due on December 20, 1949, and that by reason of such default they elected to declare the whole amount due. In their answer the defendants relied on the entire contract, including both notes, and denied that anything was due. They also filed a cross-complaint seeking to quiet their title to the property on the theory that if the two notes were to be considered as payments, the purchase price was fully paid, and the defendants had no further interest in the property.