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Henry Vs Madison Aerie No. 623
Henry Vs Madison Aerie No. 623
FACTS:
The Bank had in its favor two notes of Madison amounting to $3,000
each, payable in installments.
Acceleration clause: Failure to pay any installment as the same
becomes due shall render the entireobligation then due and
demandable.
For six months commencing Feb. 1, 1932, Madison was able to pay the
installments. In July and August, it defaulted, but the amounts then due
were paid on August 3. The amounts were merely accepted and the Bank
never said anything about extending the time of payment or waiving the
defaults of nonpayment.
The following question was submitted to the jury at trial: WoN the Bank
waived its rights to consider the notes asbeing matured on Aug. 15.The
jury answered yes, meaning, they considered the acceleration clause as
optional.
Effect: Henry can garnish the funds deposited with the Bank
because the latter cannot apply the funds tothe payment of the
notes, having waived its right to invoke the acceleration clause.
ISSUE + RULING:
WoN the acceleration clause in the notes took effect automatically upon
Madisons failure to pay. YES.
Hodge v. Wallace: failure to pay interest when due renders the whole note
due absolutely
and not at the option of the holder.
To construe such language [that of the acceleration clause] as
merely optional or permissive would be to destroy the clearly
expressed contract which the parties made for themselves and
to force upon them contract to which neither of them ever gave
their consent. The terms of the contract are so clear as to
seemingly preclude construction.
Since the notes fell due upon Madisons default, the Bank had the right
to apply Madisons deposits to the
payment of the notes. When garnishment summons was served on the Bank,
there was nothing left to garnish.
DISPOSITION:
Reversed and remanded.