
    Leon Pizer, Appellant, v. George W. Herzig, Respondent, Impleaded with Maurice Beckon and Others, Defendants.
    First Department,
    June 14, 1907.
    Foreclosure — provision that whole sum shall he due on default — when right of mortgagee to foreclose absolute — court of equity without ■ power to deny relief. ,
    When a mortgage provides that the whole sum shall become due at the option-of the mortgagee on default in payment of any installment of principal or interest for,twenty days, the mortgagee, after such default, has an absolute right to foreclose, which the mortgagor cannot,defeat by mailing a check fur the,sum due eleven days after the twenty days have expired, if the same was promptly returned by the mortgagee. ¡Nor can a court of equity deny foreclosure on such default when it was not induced by anything that the mortgagee did or refrained from doing, and there were no acts of the-mortgagee upon which the mortgagor relied, and there was no fraud or mutual mistake. . -
    Cases where foreclosure may he denied in spite of the default of the mortgagor fall within two classes: First, .where the default is in the payment, of taxes or assessments, or sums for which the time of payment is not fixed by the instrument and can he known to the mortgagor only by investigation or information dehors the mortgage; second, where, by the course of dealing between the parties, the mortgagor has been induced by the mortgagee to suffer the default.
    Lambert, J., dissented; Ingraham, J., dissented, with opinion.
    Appeal by the plaintiff, Leon Pizer, from a judgment of the . Supreme Court in favor of 'the defendant, George W. Herzig, entered iú the office of the clerk of the county of -Mew York on the 20th day of March, 1907, upon the decision of the court, rendered after a trial at the Mew York Special Term, dismissing the complaint in an action to foreclose a mortgage upon condition that the said defendant pay interest and costs, or, if the plaintiff refuse to accept said interest and costs, that his proceedings be stayed upon the deposit thereof by the said defendant in court.
    
      Max Schleimer, for the appellant.
    
      William M. K. Olcott, T. B. Chancellor with him on the brief [Olcott, Gruber, Bonynge do McManus, attorneys], for the respondent.
   Clarke, J.:

In 1904 one Maurice'Beckon gave a purchase-money second mortgage on premises on Madison avenue near One Hundred and Fourteenth street in the city of Mew York, to Leon Pizer and Jacob Pizer, for the sum of $15,250. By the terms of said mortgage $1,000 was to be paid on the 1st day of April, 1905, and a like sum annually thereafter until the 1st day of April, 1911, when the balance then remaining unpaid became due and payable. Interest at the rate of six per cent was payable semi-annually. It was therein . further provided : Third. And it is hereby expressly agreed that the whole of said principal sum shall become due at the option of the said parties of the second part after default in the payment of any installment of principal or of interest for twenty days or after default in the payment of any tax or assessment for thirty days after notice and demand.”

The defendant purchased the property subject to the said mortgage. The principal had been reduced by the annual payments to. $13,250 and interest thereon became due on -the 1st day of October, 1906, and was not paid on said day, nor in twenty days thereafter. On the first day of Movember, eleven days after the.expiration of the time provided for payment after default, a check "was sent by mail to the plaintiff for the amount of the interest due on October first. On the second- day of Movember the complaint herein was verified and the notice of lis pendens filed. On the third the summons and complaint were served upon the defendant and on the fifth, the fourth being Sunday, he received back by r mail his'check with a letter written upon- the third stating that the check was returned because it had been received after the lis pen-dens, summons and'complaint had been filed; that the defendant had defaulted and that the plaintiff elected that the whole principal should be due and • payable. On' the fifth, after the receipt of this letter, legal tender was made of the interest and interest thereon, receipt of which was refused! The answer admits the default and alleges that through mistake and inadvertence on his part-defendant -failed to enter on his books, kept for that purpose, payment of interest on the' mortgage, and relying upon his books for this pnr- ' pose defendant did not.femember that said interest became due, and sets up the facts as to sending the check, its return !and the tender of cash.

, The' learned court found in its findings of fact that the failure ' to pay interest on October 1st was at most'a technical default. The plaintiff’s security■ is adequate. He had not been injured.by' die default, neither had' his security been impaired in the slightest degree; that the plaintiff, having received a check for the payment of the interest before his complaint was verified and .'his Us pendens filed, made it unconscionable for him to begin this action, and this action was begun by the plaintiff for the purpose of oppressing the défendant Iierzig; that this; court, being a court of equity,’ cannot be used for inequitablé and unjust purposes, and the power of this court should be exercised to prevent injustice' and oppression,” and as a conclusion of law. that “upon the payment by the defendant of the interest referred to in the complaint and the costs of this.action ■ to date, the complaint be dismissed. If the plaintiff, however, refuses to accept the amount- of-interest, I decide that the amount of interest with costs be deposited in- court and the proceedings of the plaintiff be stayed, and that the lis pendens filed herein be can-celled,” and upon said -decision the judgment here appealed from was entered. ■ .

There are two questions presented by this record : First. Was the plaintiff entitled to commence the action to foreclose the mortgage at the'time it was instituted % Second. If he had such a right was it so unconscionable upon his part and so' oppressive to the defendant that the court was warranted in refusing to .permit him to exercise it ?

First. It is clear that the original parties to the written contract under seal expressly agreed that twenty days after default in payment of the semi-annual interest due, without notice, the mortgagee had the right to elect to consider the whole sum due and payable. This was an agreement upon a stated contingency to' advance the time of payment of a conceded debt. It was a contract clearly expressed and within the power of the parties thereto to make. It is not suggested that in the maldng of the contract there was any deceit, mistake or fraud or that the defendant did not clearly understand the provisions thereof.

The defendant being in default the plaintiff elected to consider1 the whole sum due and payable and evidenced his election by the commencement of the suit. “ It is undoubtedly true that where, in order to entitle the plaintiff to bring an action for foreclosure it appears upon the face of the .complaint that it is' necessaiy that such election should be made, it lias been held that the bringing of the suit is to be deemed an election.” (Beach v. Shanley, 35 App. Div. 566.) To the same effect, Hunt v. Keech (3 Abb. Pr. 204); New York Security Co. v. Saratoga Gas Co. (88 Hun, 569); Northampton National Bank v. Kidder (106 N. Y. 221).

In Hothorn v. Louis (52 App. Div. 218; affd., 170 N. Y. 576) Hr. Justice Hirsohberg said: The appellant’s counsel cites no case and we find none which holds that a mortgagee must notify, a • mortgagor in arrears because of non-payment of interest, of an election to regard the entire principal as due before tender of payment Of interest as a condition of the. making of such election. Leaving out all the correspondence in the case and the interview between the defendant Louis and the plaintiff’s husband, and limiting the case to the single fact that after the thirty days had expired the defendant then tendered the interest to the plaintiff and she refused to receive it, but brought an action to foreclose for the entire sum, principal and interest, her right to. maintain the action would be absolute and undoubted.”

' In the ease at bar the sending of a check by mail eleven days after the twenty days had expired, which was received upon the very day that the complaint was verified and the lis pendens filed and which was promptly returned, in no way interfered with the right of the mortgagee, which had already accrued, to exercise his option.

In Rosche v. Kosmowski (61 App. Div. 23) Mr. Justice Spring said : “ However selfish, the plaintiff may have been in refusing to accept this tender, there .was no legal obligation upon him todo so. His right to avail himself of the option had then become' effective. It was a valuable right and when once operative could not be made nugatory by the effort of the mortgagor to compel him to- accept payment in part.”' “ And if,” .said' Chancellor Walworth, in Noyes v. Clark (7 Paige, 179), “ from the mere negligence of. the mortgagor in performing his contract, he Suffers the whole debt' to become due and payable according to the terms - of the mortgage, no court will interfere' to relieve him from the payment thereof according-to the conditions of his own agreement.” .-

There is á class of cases cited in the' opinion of the learned trial court and in "the .brief of the respondent, many of- which- were considered- by the Appellate Division in Hothorn v. Louis (supra), where the court has refused to foreclose upon default. -

Upon examination these cases fall within ■ one of two classes. First, where -the default has been not in..the payment of. the interest, the time for thex payment whereof is known - to the mortgagor and fixed by the terms of his contract, and for a default in which he has simply agreed'for an advance in the. time of payment, but for default in payment of taxes or assessments, neither the amount nor' the time'for payment of which were, fixed in the instrument or could be known to. the mortgagor without investigation or information dehors the mortgage. In those cases it has; been -considered-that for such a default the .foreclosure would be rather in the way of a forfeiture or penalty, while- the simple acceleration .of tire time of payment" of. the whole sum upon default in interest has not been considered as "either .a forfeiture or a penalty. . An illustration of this class of cases is Noyes v. Anderson (124 N. Y. 175).. In" that' case, after the mortgage debt - had become due and payable and an action for foreclosure had been instituted, an independent contract" was entered into under which the plaintiff' agreed that during the -life of the. defendant and, for one year after her decease he would not institute any proceeding' to enforce the bond and mortgage so long as the prior.mortgage remained unforeclosed and no interest on said ■ -prior mortgage remained unpaid, for more than thirty days) and so-long as no. taxes, or -assessments on said premises remained unpaid and in arrears for more than thirty days. The complaint alleged that the premises were, incumbered by an assessment for sewer improvements amounting to twenty-three dollars. The defendant in her answer alleged that she had no knowledge of such assessment until a certain date when she promptly caused it to be paid. The court said that the purpose of this independent agreement -was to obtain and give protection to the defendant’s estate consisting of her equity of redemption and the effect, therefore, given to her default by foreclosure of the mortgage would be the forfeiture of her estate in the premises. “ The stipulation of the plaintiff’s agreement essentially differs in its nature and object from a provision in a mortgage to the effect that the principal sum shall become due on a specified default in the payment of interest as. provided by it. In the latter case provision is so made for' the time when the principal .sum may become due, and that time is regulated by an event which may or may not occur so far as it is dependent upon the default of the mortgagor. The consequence so produced is not deemed a forfeiture. "x" ■ * * And in such case the court, as a rule, will hot grant relief to the mortgagor from the effect of his default when nothing is done on the part of the mortgagee to render it unconscionable for him to avail himself of it.” ' .

So in Ver Planck v. Godfrey (42 App. Div. 16) there was a default in the payment of taxes and in that case there had been a deposit as for future payment of the interest. There was an unconscionable action by the plaintiff and there was a written waiver of default, as the court found, for all of. which reasons the foreclosure was refused.

As to the other class of cases, a foreclosure has been refused where, by the course of dealings between the parties, the mortgagor had been induced by the mortgagee to suffer the default. In French v. Row (77 Hun, 380) the interest was paid and the mortgagee had made a written declaration to that effect, and the mortgagor was relieved because the course of dealings between him and the mortgagee was such as to make it unconscionable, to foreclose. So in Isaacs v. Baldwin, Nos. 1 & 2 (N. Y. L. J., Jan. 24, 1906; affd. without opinion, Isaacs v. Baldwin, N. 1, 114 App. Div. 903; 100 N. Y. Supp. 1122), the mortgagee removed from his residence . for the., express purpose of during the mortgagor into-a default in the payment of interest. .The court held that it would not'permit a mortgagee to practice fraud upon the mortgagor, and refused to hold that the mortgagor was in default of payment of interest.-. So Schieck v. Donohue (92 App. Div. 330) a foreclosure was refused, the court saying: “The plaintiff Was not at liberty to elect that the entire principal should become- due on account of a default in' the -payment of interest for- which he himself was responsible.” It appeared that before the-interest became due the plaintiff changed his residence, and gave the appellant no notice of that fact, and appellant.-after diligent inquiry was unable to ascertain- his residence.

Second. ' There is nothing in the record in this case, as it appears to' me,, which - should cause a court of equity to refuse the relief prayed for. . The default in the payment of interest was not induced by anything that'the mortgagee did or refrained from, doing. 'The mortgagor was lulled, into, no sense of security, and there were no acts of the mortgagee upon which he relied. -He alleges no fraud and no mutual mistake. His sole answer is that the default was a result of his own negligence, and for-that the court will not interfere to relieve him from the payment according to the1 condition .of li-is own agreement. (Noyes v. Clark, supra; Dwight v. Webster, 32 Barb. 47; Grussy v. Schneider, 50 How. Pr. 134; Noyes v. Anderson, supra.)

. I fail to see oppression of the defendant, in calling upon him to pay a sum concededly due at the time fixed by the contract and which the case shows that- he asserts he is able to pay.

The judgment, therefore, should be reversed and a new trial ordered, with costs to the appellant to abide the event. '

Laughlin and Scott, JJ., concurred; Ingraham and Lambert, ' JJ., dissented.

Ingraham, J. (dissenting):

. I should agree with Mr, Justice Olarke if this plaintiff had, before the actual' receipt of the check for the interest, exercised the election that the principal sum of the mortgáge should be presently due and payable; but só far as appears, however, no. such election had been made before the actual receipt of the check for the interest • that was due. When, therefore, lie attempted to exercise such election it must be assumed that he had in his possession the check for the interest sent by the defendant and at that time he had not returned the check or disaffirmed the payment of the interest. . It is disclosed by the evidence that it had been the custom of the defendant to pay the interest by checks, which had been received by the mortgagor without objection. The evidence is undisputed that the check was good, and when it was subsequently returned by the plaintiff no objection was taken upon the ground that it was a check and not money that had been tendered to pay the interest. The contract did not provide that the principal sum should be immediately due and payable upon a default of twenty days in the payment of interest, but that if such a default existed the mortgagee should have the option to declare the principal sum due arid payable. - When, therefore, this defendant sent the check for the interest and the plaintiff received it, the principal sum was not due, the only amount due being the interest. The evidence being that that check was deposited in the post office, directed to the plaintiff, on the first of November, it must be assumed that it was delivered to the defendant on the morning of the second. Before^ therefore, he had exercised his option and declared the principal sum to be presently due he had in his possession a check for the interest.

In all the cases in which it has been held that a court of equity had no power to relieve a mortgagor from such a default it appeared that the election had been exercised so that the amount was actually due and payable before the mortgagor .offered to pay the interest that was in default. It seems to me there is a clear distinction between such cases and a case where the interest due was actually tendered before any election had been made, so that when the interest was actually tendered the only amount due was the interest, and that where the obligor has made a tender of the actual amount due upon his obligation at the time of the tender it gives to a' court of equity the power, when an action is brought to enforce the obligation, to relieve the party from the effect of a failure to pay the interest or the amount due which was attempted to be exercised after the tender was made. What was said by Mr. Justice Hirschberg in Hothorn v. Louis (52 App. Div. 218; affd., 170 N. Y. 576) related to a case where the mortgagee had elected to have the amount declared due and had brought an action to foreclose the mortgage before any tender was made or any attempt by the obligor to comply with his obligation.

■ I think,' therefore, the court had. power to make the judgment appealed from and that as by its provisions- the plaintiff was in all respects fully protected it should he affirmed;

Judgment reversed, new-trial ordered, costs to appellant to abide event. •  