
    Anna Mermelstein, Plaintiff, v. Realty Associates Securities Corporation, Defendant.
    First Department,
    May 2, 1947.
    
      
      Henry Waldman of counsel (Abraham Perlof, attorney), for plaintiff.
    
      Lynn G. Goodnough of counsel (William C. Hare with him on the brief), for defendant.
   Peck, J.

In this submission of a controversy the following facts have been stipulated: Plaintiff is the owner of premises 1158 Colgate Avenue in Bronx County which she acquired on or about April 3,1937, at a time when the property was incumbered by a $33,000 mortgage held by the trustees of the Graves estate. The mortgage provided for the payment of interest at the rate of 5%' per annum. Prior to the conveyance of the property to plaintiff the former owner sought an extension of the mortgage and a reduction of the interest rate. The negotiations resulted in a. letter dated February 27,1937, sent by the attorneys for the mortgagees to the attorney for the then owners. The letter sent pursuant to written authority received from each of the trustees was as follows: “ Replying to your letter of February 3rd, copies of which were sent to the trustees of the Graves Estate that hold a mortgage of $32,500, covering premises 1158 .Colgate Avenue, we have just received the decision of the last trustee in answer to your request for extension of this mortgage. The trustees have decided that they prefer to have the mortgage continue as an open one at the rate of four per cent per annum.”

From the time plaintiff became the owner of the property to January 2, 1946, she paid interest upon the unpaid principal balance of the mortgage at the rate of 4%. The payments so made were accepted by the holders of the mortgage without objection or protest. On January 2,1946, the mortgage was assigned to the- defendant. Shortly before the assignment defendant received an Estoppel Certificate ” executed by the plaintiff in which it was stated that the unpaid principal balance of the mortgage bore interest at the rate of 4%. Immediately after it acquiréd the mortgage, defendant made demand upon plaintiff for the payment of interest at the 5% rate provided for in the mortgage.

On May 16, 1946, plaintiff tendered a payment of interest at the rate of 4%. Defendant refused the amount offered and informed plaintiff that an action to foreclose the mortgage would be instituted unless interest was paid at the 5% rate, Whereupon plaintiff made payment at the higher rate under protest.

Upon the foregoing statement of facts we are asked to determine whether defendant is entitled to interest at the rate of 4% or 5%.

The question, as posed by the parties, is whether the reduction in the interest rate to 4% was at the will of the mortgagee or was for the duration of the emergency under the Mortgage Moratorium Law. Plaintiff contends that the reduction was made in contemplation of the act and must be construed as being for the period of the emergency declared by the act. Defendant observes that apart from the act such a reduction would concededly be at will, that in the absence of any contrary expression in the agreement of the parties it remained at will, and that the Moratorium Law does not affect the matter.

Plaintiff relies on section 1077-cc of the Civil Practice Act, but we find nothing there that helps plaintiff. That section simply provides that the rate of interest shall not be increased by reason of the maturity of the obligation during the emergency period, but shall continue after maturity at the rate specified in the obligation. The obligation here matured prior to the letter granting a rate reduction. Maturity in no way affected the rate, which at the time was 5%. Except for the letter reducing;the rate to 4%, the rate would have continued at 5% by virtue of section 1077-cc. The collection of interest at 5% is, therefore, perfectly consistent with section 1077-cc.

The question is whether the letter, which was a waiver of the right to collect interest at 5% for any period during which 4% was actually collected (Title Guarantee & Trust Company v. 2846 Briggs Avenue, Inc., 283 N. Y. 512), was also a waiver as to the future or a contract or commitment to accept 4% for' the indefinite. duration of the emergency. Or, to put it another way, does the law imply what the parties certainly failed to express, viz., that the agreement had a term and that the term was the duration of a statutory emergency as it might be extended from year to year by successive sessions of the Legislature.

We see no warrant for such construction or implication. While an agreement to reduce interest on a bond and mortgage need not be supported by consideration (Real Property Law, § 279), the fact that there was no consideration or term here is significant. The letter can hardly be called an agreement, it was merely a voluntary unilateral statement. It is not to be given legal implications beyond its clear intendment. Its scope can be exactly determined from its wording against the admitted factual and legal background. An extension had been requested and refused, meaning that a commitment as to the future was eschewed. The mortgage was an open one by law, and, in the absence of the extension which was refused, continued as an open one. When the mortgagee said that it preferred to have the mortgage continue as-an open one it was merely taking the only course allowed by law as an alternative to an extension. The grant of a lower interest rate was an indulgence, which by any ordinary test or rule of law was at will. (See Wadlef Realty, Inc., v. Manhattan Life Insurance Company, 294 N. Y. 884.) We think it not permissible to give the favor a term by construction or to say that the parties contemplated, as a matter of law, that it would have the indefinite and continuing term of the emergency declared by the Legislature. The Moratorium Law has for its purpose the preservation of a mortgagor’s interest in his property and the preservation of interest rates against increase above the amount specified in the obligation. There is no violation of the purpose or spirit of the Moratorium Law in requiring a mortgagor to pay or permitting a mortgagee to collect the amount of interest specified in the obligation.

Judgment should be for the defendant.

Glennon, J.

(dissenting). The letter of February 27, 1937, having been acted upon by the parties, constituted a valid and enforcible agreement reducing the rate of interest for which no consideration was required under the provisions of section 279 of the Real Property Law. It was written in reply to a request for an;iextension of the mortgage and á reduction in the rate of interest. The extension was refused but the interest reduction was granted. The question therefore is one of construction, namely,' whether the interest reduction was one at will or for a specific term.

The mortgage is subject to the provisions of the emergency legislation which was originally enacted in 1933 affecting mortgages made prior to July 1, 1932 (L. 1933, chs. 793, 794). The purpose of that legislation was to maintain the status quo and was intended for the protection of mortgages that were then “ matured and open ” as well as those that had not as yet matured (Metropolitan Savings Banh v. Tuttle, 290 N. Y. 497, 503). Those laws, as amended, suspend the remedies of mortgagees where the only default is in the payment of the principal balance of the indebtedness. Where all other terms and conditions are complied with, a matured mortgage continues as an open one by operation of law.

At the time the letter was written the mortgage here involved was an open one by virtue of the emergency laws. Rather than grant an extension of the mortgage the mortgagees preferred to have it “ continue as an open one at the rate of four per cent.” In other words, the mortgagees agreed to accept the 4% rate for the period during which the mortgage remained open. ■ The reduction therefore was for a definite term and not at the will of the mortgagees.

The fact that there was no consideration given is of no significance since no consideration was required. What is significant, although not controlling, is the stipulation that the letter was written in behalf of trustees by a firm of reputable attorneys and that the 4% rate was accepted for a period of eight years without objection or protest. It was not until January, 1946, when defendant acquired the mortgage that the effect of the agreement was questioned.

The defendant maintains that since the interest reduction applied to an open mortgage it was terminable at will and that the demand of January 2, 1946, reinstated the 5% rate specified in the mortgage and allowable under section 1077-cc of the Civil Practice Act. The difficulty with that position, however, is that the mortgage was as much an open mortgage after the demand as it was before. Nor did the threat of foreclosure in May, 1946, change the character of the mortgage.

The case of Title Guarantee & Trust Company v. 2846 Briggs Avenue, Inc. (283 N. Y. 512), relied upon by the defendant, is distinguishable. There the agreement reduced the interest rate to 5% to date of maturity, June 1, 1935.” Interest at that rate was accepted for several years beyond June 1, 1935, and then a demand was made for interest at the 6% rate provided for in the extension agreement. The voluntary acceptance of interest at the lower rate on each interest date after June 1, 1935, was a waiver of the 6% rate as to those payments, but the acceptance of those payments did not constitute a waiver of the mortgagee’s right to insist upon the higher rate of interest as to future interest installments. In the Briggs Avenue case there was no agreement to accept the lower rate beyond June 1, 1935; here the mortgagees agreed to accept the 4% rate so long as the mortgage continued as an open one.

As we have seen, the agreement relied upon by the plaintiff was written by the attorneys for the mortgagees at a time when the emergency legislation had been in effect for a number of years. At that time the right to enforce payment of the principal balance was conditionally suspended and by virtue of section 1077-cc the mortgagees were entitled, during the emergency period, to the 5% rate specified in the mortgage. The mortgage was an open one by operation of law and bore interest at the rate of 5%. In those circumstances a reduction of the interest rate to 4% was granted without any reservation whatsoever. By express language the 4% rate was-made to apply during the period that the mortgage continued as an open one, without regard to whether that status was maintained by virtue of the emergency laws or otherwise. The mortgage will remain open until such time as steps to enforce payment of the principal balance may be effectively taken. In the meantime the defendant is limited to interest at the rate of 4%.

Judgment should, therefore, be directed in favor of plaintiff.

Dore and Callahan, JJ., concur with Peck, J.; Glennon, J., dissents in opinion in which Martin, P. J., concurs.

Judgment directed for defendant. Settle order on notice.  