Opinion
November, 1905.
Philo P. Safford and O.P. Hurd, for the appellant.
Frederick Collin, for the respondent.
The right to elect that the principal sum of these bonds should be deemed due was by the mortgage made dependent upon a continued default in payment of the interest for six months. A demand and refusal are not necessary to constitute a default. They are only evidence of a default. The default is the failure to pay the contract obligation. In a mortgage to an individual mortgagee he may insist that the payment of the principal has been accelerated by continued default without demand. ( Dwight v. Webster, 32 Barb. 47; Trenor v. Le Count, 84 Hun, 426.) If payable at a given place no demand is necessary. If defendant, however, shows that he was ready at the place of payment he will be relieved of interest and costs. ( Haxtun v. Bishop, 3 Wend. 13.) But these coupons were not even payable on demand. It affirmatively appears that funds sufficient to pay them were not at the place of payment and a sufficient fund has not been there since that date, and the demand for payment was withheld at the request of defendant and for its benefit. Defendant's default or failure to pay existed notwithstanding plaintiff forbore to insist upon payment to the inconvenience of defendant.
Upon this default two rights accrued to plaintiff, first, to collect his interest either by action at law or foreclosure; second, the commencement of the six months' period after which plaintiff might elect to call the full principal of the bonds due. And right here the defendant fails to distinguish between these two rights and insists that a waiver of one is legally a waiver of the other, and that the forbearance to press the collection of the interest is also a consent that the six months' acceleration period be postponed. But there is no such legal sequence. A mortgagee might be very willing to forbear to collect his interest for three or four months and yet be wholly unwilling that if the mortgagor should be unable to pay for six months he should be deprived of the second right which attached to the mortgagor's default, to wit, the right to declare the principal sum to be presently payable. It may be that an agreement to wait for the interest for a period beyond the six months might be deemed an agreement waiving the benefit of the acceleration clause of the mortgage for the time being. Mr. Wright, the president of the defendant, swears that at the meeting in June, at which the directors were asked to postpone the presentment of their interest coupons, it was talked that the defendant would be able to pay those coupons in October or November. Mr. Buchanan swears that upon telling Mr. Arnot of what occurred at this meeting his reply was in substance that they had not lived up to their promises heretofore and he did not believe they would live up to this promise. The fair inference from the testimony is that the promise to which he was referring was the promise to pay the coupons in October or November. Mr. Arnot did not consent to this arrangement. Mr. Buchanan informed Mr. Hawes of his refusal to consent, but stated that if the interest was paid within a short time he thought that no trouble would be made. At the most the inference would seem to be that the consequences of a default were to be deemed waived on condition that the coupons were paid in October or November. But this condition was not fulfilled. The directors of the defendant were warned of Mr. Arnot's attitude and of his refusal to acquiesce in the arrangement and were put upon their guard that he agreed to waive nothing and that they had nothing to expect from him except as he might from day to day neglect to insist upon his interest. Not an act, not a word from him gave to the defendant's directors any right to believe that if they failed to pay that interest in October or November, as was assured to him, that he would waive any right which he had as the holder of a majority of the bond issue secured by the mortgage of which he was trustee.
The case of Ver Planck v. Godfrey ( 42 App. Div. 16) holds no other rule. In that case the payment of the principal of a mortgage was sought to be accelerated by the neglect of the mortgagor to pay a tax. We are not ready to agree to the rule stated as to the effect as a waiver of the letter written by the mortgagee's attorney. After having declared election to consider the full amount due an expression of a willingness to give opportunity to the mortgagor to pay before action brought can hardly, even by a strained construction, be held to be a waiver of the right to declare the full amount due. The case was similar in its nature to the case of Noyes v. Anderson ( 124 N.Y. 175). In both of those cases the right to accelerate the payment of the principal of a mortgage was for non-payment of a tax and was treated as a forfeiture. In Noyes v. Anderson, however, Judge BRADLEY in writing for the court says: "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. The result is maturity of the principal debt at the time, not definitely fixed, when the mortgage is made, but specifically stipulated for in that instrument. And in such case the court as a rule will not 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." In Levey v. Union Print Works (34 N.Y. St. Repr. 900) the mortgage in one respect differs from the mortgage in the case at bar in that it provides that the principal amount shall be deemed due upon a default in the payment of interest if such default continues six months after "payment shall have been duly demanded." The mortgage in the case cited thus made a demand and a refusal of payment a condition precedent to the running of the six months' default. In that case the demand was concealed from the officers of the mortgagor and was not made at the office of the company, but was made of the treasurer, a son of the trustee and a brother of the holder of the bonds. It was still held in that case that it would have been unconscionable that the mortgagor should have been held to have been in default after the concealment of the fact of the demand made under the circumstances which there existed. In the case at bar there was no concealment of the default and of the commencement of the running of the six months' period. It was known to all of defendant's officers. If misled they have been misled by their unwarranted assumption that plaintiff by yielding one right was yielding all. The case of Broderick v. Smith (26 Barb. 539) rested upon an entirely different principle, was decided by a divided court, and in Ferris v. Ferris (28 Barb. 29) Judge INGRAHAM, in writing for the court, declines to approve of the decision.
Our conclusion is that presentment of the coupons for payment was not necessary to constitute a default and that mere forbearance to insist upon payment of such interest had no effect to postpone the commencement of the six months' acceleration period stipulated in the mortgage. Plaintiff has not intentionally waived his right thereunder nor has he done any act from which defendant might lawfully infer that such was his intention. The judgment should, therefore, be affirmed, with costs.
All concurred; PARKER, P.J., in result; HOUGHTON, J., not voting, not being a member of the court at the time this decision is handed down.
Judgment affirmed, with costs.