Opinion
The right to foreclose a mortgage for overdue interest, when the principal is not yet due, is generally recognized. A clause in a mortgage and note accelerating the maturity of the entire indebtedness for nonpayment of interest at the option of the holder of the note, is solely for the benefit of the mortgagee or his assignee, who have the option to enforce it or not. The inclusion, by means of a supplemental complaint, of the interest payments accruing subsequently to those covered by the original complaint, is permissible and proper. It is proper for a mortgagee and one to whom the mortgage has been pledged as security for a debt of less amount than the mortgage, to join as coplaintiffs in an action to foreclose it, especially if the mortgage contains an acceleration clause.
Argued January 24th, 1930
Decided March 3d 1930.
ACTION to foreclose a mortgage of real estate predicated on overdue interest payments, brought to the Superior Court in New Haven County and tried to the court, Dickenson, J.; judgment for the plaintiffs and appeal by certain defendants. No error.
By his note dated April 8th, 1927, Abraham Lander promised to pay to the order of Rose Glance, on and after July 1st, 1937, $25,000, with interest at the rate of twelve per cent per annum, payable monthly. The note contains the proviso that if any payments of interest shall remain in arrears and unpaid for ten days after the same shall fall due, the principal of the note shall immediately thereafter, at the option of the holder thereof, become due and payable on demand. To secure this note he gave a mortgage on real estate in West Haven. On January 12th, 1928, Rose Glance assigned the note and mortgage to Annie Lander, who, on January 17th, 1928, assigned the same to Israel Gordon, trustee, as collateral security for a loan of $15,000, the assignment being conditioned for the payment of the note evidencing the indebtedness of Annie Lander to Gordon, trustee, payable one year after date, with interest at the rate of nine per cent per annum, payable monthly.
On January 14th, 1928, Abraham Lander, the mortgagor and owner of the equity, conveyed the real estate to Walter Donovan who expressly assumed and agreed to pay the mortgage in question as well as a first and prior mortgage for $35,000 on the same property. On January 16th, following, Donovan conveyed by warranty deed, subject to these mortgages, to Woodruff, Sanderson and Peck, and on January 28th the last-mentioned grantees, by quitclaim deed, conveyed to Elmer E. Keller. Woodruff, Sanderson and Peck are in possession of the real estate and hold a mortgage thereon subsequent and subject to the mortgage in suit.
This action, in which both Annie Lander and Gordon, trustee, are plaintiffs, was brought by complaint dated April 18th, 1928, and was predicated on two interest payments of $250 each, due February 8th and March 8th, and unpaid, and the substituted complaint expressly set up that the principal ($25,000) is not due or payable, as the plaintiffs have not exercised the option, contained in the note, to render the principal due and payable on demand, upon default in payments of interest. On April 9th, 1929, the plaintiffs filed, against the objection of the defendants, a supplemental complaint alleging that interest was further unpaid on the note from April 8th, 1928, to March 8th, 1929, and claiming a foreclosure of the mortgage predicated on the overdue interest payments described in the supplemental complaint as well as in the substituted complaint, subject to the mortgage of the plaintiffs. The court decreed such foreclosure, in favor of both plaintiffs, finding the debt to be $3500, the amount of the overdue interest payments, plus interest at six per cent, to date of judgment.
Robert J. Woodruff and John G. Confrey, for the appellants (defendants).
Joseph I. Sachs and Manuel S. Sachs, for the appellees (plaintiffs).
Assignments of error seven and eight question the right to decree foreclosure predicated upon interest payments due without foreclosure, also, of the principal of the note; assignment six questions the right to include in the judgment interest payments accruing after the date of the original complaint; assignments two, three and four were intended to question the right to render judgment in favor of both of the plaintiffs.
As to the first question, the right to foreclose for overdue interest, where the principal is not yet due, is generally recognized. Butler v. Blackman, 45 Conn. 159; Boyer v. Chandler, 160 Ill. 394, 43 N.E. 803; Silverman v. Silverman, 189 Ill. 394, 59 N.E. 949; Morganstern v. Klees, 30 Ill. 422; Omaha Loan Trust Co. v. Kitton, 58 Neb. 113, 78 N.W. 374; Dederick v. Barker, 44 Mich. 19, 5 N.W. 1064; Central Trust Co. v. New York City Northern R. Co., 33 Hun (N. Y.) 513. The existence of junior incumbrances or the fact that the mortgagor had assigned his interest in the premises before the interest became due does not afford reason for an exception to the rule. The appellants' principal contention appears to be that it was incumbent upon the plaintiffs to declare the principal due and foreclose upon that as well as the arrears of interest, or that the mortgagor or his successor in interest has, or should have, the right to accelerate the maturity of the principal. The settled rule is decisively to the contrary. "The whole debt is not due until the mortgagee or other holder has exercised his election; . . . [it] does not become due ipso facto upon default but the mortgagee has a mere option which he may exercise or waive." 2 Jones on Mortgages (8th Ed.) § 1512. "A clause in a mortgage accelerating maturity of the entire indebtedness for nonpayment of interest or an installment of principal is solely for the benefit of the mortgagee or his assignee, who have the option to enforce it or not." 1 Wiltsie on Mortgage Foreclosure (4th Ed.) § 72; Richardson v. Warner, 28 F. 343; Blakeslee v. Hoit, 116 Ill. App. 83; Cresco Realty Co. v. Clark, 128 N.Y. App. Div. 144, 112 N.Y.S. 550; Tibbetts v. Bush Lane Piano Co., 111 Wash. 165, 189 P. 996; Coman v. Peters, 52 Wash. 574, 100 P. 1002. The right to declare the whole debt due belongs to the mortgagee and not to the mortgagor. Fletcher v. Daugherty, 13 Neb. 224, 13 N.W. 207; Cox v. Kille, 50 N.J. Eq. 176, 24 A. 1032; 41 Corpus Juris, 850.
The inclusion, by means of a supplemental complaint, of the interest payments accruing subsequently to those covered by the original complaint was permissible and proper. § 188, Rules, Practice Book, p. 286; Woodbridge v. Pratt Whitney Co., 69 Conn. 304, 334, 37 A. 688; Duessel v. Proch, 78 Conn. 343, 350, 62 A. 152; Beach v. Isacs, 105 Conn. 169, 176, 134 A. 787. Separate foreclosure actions upon the after-accruing interest payments would unnecessarily multiply suits, complicate adjudication, and impose an additional burden of costs upon redeeming defendants.
Assignments two, three and four, being general instead of specific, fail to conform to our statute and rule (General Statutes, § 5833; Practice Book, pp. 100, 107) and our repeated admonitions that such assignments will not be considered. Even if properly made they could not avail the appellants. Both Annie Lander (the absolute assignee from Rose Glance, the original mortgagee) and Gordon, trustee, the conditional assignee from Annie Lander and holder of the note and mortgage as collateral security, were necessary parties to the action. Hopson v. AEtna Axle Spring Co., 50 Conn. 597, 602; Barnes v. Upham, 93 Conn. 491, 495 107 A. 300. "When the owner of a mortgage has pledged it as collateral security for a debt of less amount than the mortgage, he still has such an interest in it as entitles him to bring an action for the foreclosure [of it] . . . . But in such an action the pledgee is a necessary party, and may be made a coplaintiff, or a defendant; . . . It is . . . proper for the mortgagee and the pledgee to join as coplaintiffs, . . . as they are together the owners of the entire bond and mortgage. Neither the mortgagor nor other parties to the action can object to such joiner of plaintiffs, as all the parties interested in the mortgage debt are thereby brought before the court, so that its decree will be binding and conclusive upon them." 1 Wiltsie on Mortgage Foreclosure (4th Ed.) §§ 304, 305; General Statutes, § 5640; Barnes v. Upham, supra; 3 Jones on Mortgages (8th Ed.) § 1757. Where, as here, the note and mortgage assigned as collateral security contain an acceleration clause, an additional justification for joinder of assignor and assignee as plaintiffs is afforded since neither, alone, can declare the entire debt due or, per contra, waive the exercise of the option. The election must be made by both. Cresco Realty Co. v. Clark, 128 N.Y. App. Div. 144, 112 N.Y.S. 550; Shaw v. Wellman, 59 Hun (N. Y.) 447, 13 N.Y.S. 527; Marine Bank v. International Bank, 9 Wis. 57; 1 Wiltsie on Mortgage Foreclosure (4th Ed.) § 72. The assignor and assignee, by uniting as parties plaintiff, unequivocally manifested an election, by both, not to exercise the option to declare the principal due but to base the foreclosure upon the interest payments, only.