Opinion
03-03-1908
BERGMAN v. FORTESCUE et al.
Thompson & Cole, for complainant Bourgeois & Sooy, for defendant.
Bill by Henry J. Bergman against Jane Fortescue and others to foreclose a purchase-money mortgage. Decree of foreclosure stayed until a judgment can be rendered in a pending action at law by defendant to recover damages for breach of covenant in the deed.
The bill is filed to foreclose a purchase-money mortgage for $100,000 made by Jane Fortescue to the Columbia Real Estate Company, and dated March 1, 1906. The mortgage by its terms matures five years after its date; but the mortgage and the bond which it secures contain a provision to the effect that the mortgagee may declare the whole principal debt due in the event of any failure on the part of the mortgagor to pay all taxes which may at any time be assessed against the property, and to produce to the mortgagee a tax receipt therefor within 30 days after such taxes shall have become due and payable. The bill avers that the taxes which became due December 20, 1906, were not paid by defendant, and that complainant has for that reason exercised his election to declare the whole principal debt due and payable.
The answer of defendant Fortescue asserts that complainant has waived his right to declare the mortgage due and payable by receiving certain interest payments since the default of the mortgagor. The following facts may be said to be admitted: December 20, 1906, the taxes for the year 1906 became due, and were not paid. March 1, 1907, a semiannual installment of interest fell due. March 30, 1907, defendant paid to the mortgagee the interest which had fallen due March 1st. At the time this payment was made the mortgagee did not know that the taxes were unpaid. May 8, 1907, the mortgage was assigned to complainant. Between May 8 and June 19, 1907, complainant ascertained that the taxes were not paid, and on the latter date filed his bill of foreclosure. July 1, 1907, defendant paid the, taxes which fell due December 20, 1906. September 10, 1907, defendant paid to the complainant the interest which fell due September 1, 1907, and subsequently amended her answer setting forth the interest payments.
By way of cross-bill defendant asserts that the mortgage was made to secure the payment of a part of the purchase money for lands at that time conveyed by the Columbia Real Estate Company to defendant Fortescue by deed containing a covenant of special warranty, and that the covenant was broken by reason of the fact that a portion of the premises were held by a tenant under a lease from the Columbia Real Estate Company. The cross-bill seeks to offset against the mortgage debt damages sustained by defendant by reason of the breach of the covenant of warranty. An action at law is now pending which has been brought by defendant to recover damages for the breach of covenant referred to in the cross-bill.
Thompson & Cole, for complainant Bourgeois & Sooy, for defendant.
LEAMING, V. C. (after stating the facts as above). I am convinced that neither of the interest payments operated as a waiver of complainant's rights to enforce the payment of the entire mortgage debt.
In accepting the interest payment of March 30th, the mortgagee cannot be said to have waived the benefit of the covenant touching the nonpayment of the tax, for such nonpayment was unknown to the mortgagee at that time. It would be unreasonable to hold that the nonproduction of the tax receipt operated to charge the mortgagee with knowledge that the tax was unpaid. It is entirely consistent with common experience in such cases for the. mortgagors to neglect the formal production of tax receipts when the taxes have in fact been paid. I am unable to treat that transaction as in any sense operative to afford to defendant a license to continue in default. It was not so understood by either party. Had defendant continued in default by reason of such an understanding reasonably attributable to the mortgagee's conduct, equity could properly relieve. Bell v. Romaine, 30 N. J. Eq. 24. But defendant's own testimony discloses that the only reason for the nonpayment of the tax prior to July was purely a matter of personal convenience to defendant. The decisions cited by counsel in landlord and tenant cases are of but little assistance. The right of forfeiture for failure to promptly pay rent is treated as a penalty for the landlord's security, and is properly relieved against if the landlord gets the rent, with interest and costs. Fulton v. Greacen, 30 N. J. Eq. 216, 222; Fleming v. Fleming, 69 N. J. Eq. 715, 717, 61 Atl. 157. In landlord and tenant cases the effect given to the act of receiving rent which has accrued after a known breach is based upon the fact that such a transaction manifests a mutual purpose of lessor and lessee to continue that relation. On the other hand, the stipulation in a mortgage for the whole debt to mature upon default in an interest payment is not treated as a forfeiture clause, but rather as a stipulation for a period of credit on condition. Breaches of such clauses are only relieved against when purely equitable grounds incident to the individual case are presented.Spring v. Fisk, 21 N. J. Eq. 175, 178. A. stipulation for the prompt payment of taxes cannot be regarded as differing essentially from a like stipulation touching the prompt payment of interest. I think nothing can be found in the decisions touching the effect of paying rent after default which may be said to be analogous to the situation here presented.
The interest payment of September 10th was not made with any understanding, express or implied, that it should operate to defeat the foreclosure proceeding then pending. Complainant had at that time lawfully elected to declare the mortgage due, and it was then defendant's duty to pay it, with interest and costs. The payment of a lesser amount could not be operative to defeat the right of complainant to enforce his security in the absence of some agreement upon his part of that effect. Defendant does not even claim that the interest payment was made by her with that understanding either upon her part or upon the part of complainant.
Complainant's rights as assignee of the mortgage were the same as the rights of the original mortgagee, had the mortgage not been assigned.
I am unable to afford relief to defendant by reason of the interest payments.
Touching the relief sought by way of cross-bill, it may be said that if defendant was, contrary to the 'covenant in her deed, kept out of possession of a portion of the premises by reason of a title paramount emanating from the Columbia Real Estate Company, she is clearly entitled to be relieved against the mortgage to the amount of damages sustained by her by reason of the breach of covenant in the deed. The testimony touching the breach of covenant is in conflict; and, should a breach be at this time ascertained, it will be necessary to take further testimony to adequately determine the amount of damages sustained by defendant which may be reasonably attributable to the breach. Under these circumstances, and in view of the fact that an action at law is now pending for the recovery of damages for the alleged breach of covenant, it scorns manifest that the appropriate action of this court is to stay the foreclosure decree until a judgment can be rendered in the pending action at law. See cases collected in Kuhnen v. Parker, 56 N. J. Eq. 286, 38 Atl. 641. To entitle defendant to the stay complainant should be indemnified against any loss arising by reason of it.
I will advise an order to that effect.