Broderick v. Smith

15 How. Pr. 434 | N.Y. Sup. Ct. | 1858

Lead Opinion

Clerke, J.

This is an action to foreclose a mortgage under the following circumstancesffn September, 1855, the plaintiffs agreed with the defendant that they would convey certain premises to him on the second of November following, on receiving from him five hundred dollars, in addition to fifteen hundred dollars, which they had already received from him. It was also agreed, that he should give them his bond for four thousand dollars—the remainder of the purchase money—to be secured by a mortgage on the premises, payable on the 27th day of- June, 1860, with interest payable half yearly. The conveyance, bond and mortgage were to bear date 27th of June, 1855. The bond and mortgage contained a clause, that should any default be made in the payment of the interest, or any part thereof, on any day when the same was made payable, and should the same remain unpaid for twenty days, that then the principal sum ($4000) should, at the option of the plaintiffs, become payable immediately thereafter. On the 2d of November, 1855, the defendant was ready and offered to perform the agreement on his part; but the plaintiffs were unable to give an unincumbered title to the premises by reason of a judgment, which had been docketed against them in July previous; and which remained uncam» celed, and was a lien on the premises. The defendant con» sented, at the solicitation of the plaintiffs, to waive his right to rescind the agreement and receive hack the $1500, and was induced by them to accept a conveyance of the premises, to pay the additional $500, and to give his bond and mortgage for the $4000, containing the above mentioned clause. He, at the same time, received from them a written agreement^ that they would, within ninety days., cause the judgment to be canceled, or would deposit the amount of said judgment in his hands, until it should be discharged. This arrangement was made on the said 2d day of November, 1855. The first half year’s interest, according to the terms of the bond, be» came due on the 27th of December, 1855 ; the plaintiffs pro» cured the judgment against them to be canceled on the 31st of December, 1855, but no notice was given to the defendant of the cancelment, nor had he any knowledge of it until the 25th of January, 1856. The twenty days mentioned in the bond expired on the 17th of January, 1856; on the 24th of January, the defendant was required by the plaintiffs' attorneys, without, any previous intimation from the plaintiffs or any other person, to pay the principal and interest on his bond and mortgage. He, thereupon, caused the interest to the 27th of December, 1855, with interest upon that interest to date of tender, to he tendered to the plaintiffs and their attorneys. The tender was refused; and this action was commenced, to foreclose the equity of redemption in the premises.

It will be seen, from this statement, that the defendant allowed the twenty days for payment of interest to elapse, under the impression that the plaintiffs had not procured the judgment, which was a lien on the premises, to be canceled. When the interest became due, on the 27th of December, 1855, the judgment remained uncanceled; after it was canceled, no notification of it was given to the defendant; and no demand of interest was made, or the slightest intimation given, that payment of it would be required, according to the Strict terms of the bond. Usually, when no stratagem is intended, the obligee calls or sends for this interest. But, the plaintiffs allowed the twenty days to elapse without uttering a hint; when they supposed that the default was irrevocable, and that they were entitled to exact prompt payment of the whole principal and interest; and on failure of this, to foreclose the defendant’s equity of redemption. Nothing was more natural, under these circumstances, than for the defendant to suppose that the plaintiffs would not require the payment of the interest ($140) until the lien on his property (for $518.18) shotild be canceled; and, I think, it was contrary to all equitable dealing for the plaintiffs to take advantage of these circumstances, instead of apprising the defendants of the cancelment, and in due time, before the expiration of the twenty days, claiming the payment of the interest. This was oppressive and unreasonable conduct on the part of the plaintiffs ; and one of the principal and benign functions of a court of equity is to afford protection against such conduct, when a suitor attempts to avail himself of it by the instrumentality of a strict legal right. And more especially in a case like the present, when the plaintiffs seek the interposition of a court of equity to enforce a remedy, under circumstances which no court can avoid considering unconscionable, it will refuse to give its aid and countenance for such a purpose.

If there is any one action more than another pre-eminently the subject of jealous supervision by courts of equity, it is the action now under consideration. All transactions between mortgagor and mortgagee, have been always closely scrutinized by them; and, when the latter has taken advantage in any way of the former, or where there has been any detriment or hardship resulting from the inequality of their relative positions, and when there has been a mistake, injurious to the former, of which the latter ought in conscience to have apprised Mm, a court of equity so far from lending its assistance to consummate the wrong, will interpose to repair it. This is not an arbitrary interference with the substantial and essential provisions of a contract; it is shielding innocent or unfortunate persons against the unscrupulous perversion of them; it is interposing to prevent the employment of legal forms for purposes, which legal forms were never designed to promote. The action to foreclose an equity of 'redemption, and indeed permitting an equity of redemption to exist, by courts of equity, is a proof of this. It was instituted for the express purpose of mitigating the hardship of a strict legal right. By the terms of Ihe mortgage, if the day limited should pass without payment of the debt and interest, the estate, as we all know, would absolutely vest in the mortgagee, to the extent to which it is conveyed, free from the claims of the mortgagor. Courts of equity, seeing that it might perhaps be forfeited, according to the letter of the instrument, for a sum equivalent to a small portion of its actual value, interposed, and ordained that the mortgagor must have a further opportunity of paying what is due, and of redeeming the land. Now, this is sanctioned and regulated by statute; and the mortgagee so far from being entitled to the ownership of the land, as provided in the contract, is only entitled to have it sold after due notice, and a considerable lapse of time; and, if it bring more than the debt, the mortgagor is entitled to the surplus. If the court, then, has power to interpose, so as to change ■ the whole character and effect of the instrument, it assuredly has power to mollify the effect of a single clause of it, relating to the period limited for the payment of interest. All that the mortgagee in either case ought to require is, that he should be secured against injury, and that he should derive all the benefit, that natural justice demands.

The judgment of the special term should be affirmed with costs.

Davies, J., concurred,

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Dissenting Opinion

Sutherland, J. (dissenting.)

I cannot agree with my associates in their Conclusion to affirm the judgment of the special term in this case. I think that judgment should he reversed with costs.

On the 2d day of December, 1855, the plaintiffs conveyed to the defendant, Smith, a certain lot of land in the city of New York, for the consideration of six thousand dollars, and at the same time Smith executed to the plaintiffs his bond and a mortgage on said premises for four thousand dollars of the consideration money. The bond and mortgage were dated back, the 27th day of June, 1855, for reasons stated in the defendant’s answer, which are admitted by the plaintiffs; and the case stands precisely as if the bond and mortgage had been executed on the 27th day of June, 1855, the day they bear date. The bond was conditioned for the payment of the said sum of four thousand dollars, on the 27th day of June, 1860, with interest thereon half yearly. The condition of the bond also contained a special agreement, that in case the interest, or any part thereof, should not be paid on the day when the same was payable/ and should remain unpaid and in arrear for the space of twenty days, then the principal sum of four thousand dollars, with all arrears of interest thereon, should, at the option of said plaintiffs, become due and payable immediately thereafter, although the period first above mentioned for the payment of the principal sum might not have expired. On the 27th day of December, 1855, one half year’s interest fell due. It was not paid on that day, and remained unpaid for twenty days thereafter; and thus the principal as well as interest was due and payable on the 16th day of January, 1856, according to the special agreement inserted in the condition of the bond. The mortgage recites the condition of the bond, including the special clause or agreement by which the whole principal was to be due and payable, in case the interest remained due for twenty days; and was given to secure the payment of the bond. On the 22d day of January, 1856, the plaintiffs’ attorneys notified the defendant, that the bond and mortgage had been placed in their hands for collection, and that the same had by the terms thereof become due and payable. This suit was commenced on the 4th day of February, 1856, to foreclose the mortgage, the plaintiffs claiming that the principal as well as interest was due and payable. On the 25th day of January, 1856, the defendant offered to the plaintiffs’' attorneys the half year’s interest, which fell due on the 27th day of December, 1855, with interest on the interest, and to stipulate in writing to pay the costs of the plaintiffs in this action, on their being adjusted. This offer was declined. On the third day of November, 1855, the plaintiffs were unable to give an unincumbered title to the premises, by reason of a judgment for -¡$518.18, which had been recovered against them in July previous, and which was a lien on the premises. But the defendant, at the request of the plaintiffs, consented to accept and did accept the deed, and execute the bond and mortgage, on the plaintiffs executing to him a written agreement, that they would within ninety days from that time, cause said judgment to he canceled or removed, so that the same should cease to be a lien, or deposit the amount of the judgment in the hands of the defendant, to he held until such judgment should be discharged. The judgment was canceled on the 31st day of December, 1855, hut -the defendant received no notice thereof, nor had he any knowledge of such cancelment, until the 25th day of January, 1856. On these, facts, the defendant having paid into court the interest due on the 27th day of December; and the interest thereon, the judgment of the special term was, that the complaint should be dismissed.

Now there not being in -this case a pretense of any surprise, mistake or fraud in the execution of the papers or agreements, out of which the rights of the parties arise, I do not see how the judgment of the special term can be sustained, without setting aside the agreement which the parties themselves made, and making a new one for them. The plaintiffs having1 the right of disposing of their property, the principle is clear, that they had the right of disposing of it on such terms as, they thought proper to fix, provided they were not illegal, or so unreasonable that the law would presume them void. (Roe v. Galliers, 2 T. R. 133.) Was the agreement of the defendant, that if the interest remained unpaid for 20 days, then the whole principal sum should be due and payable, illegal, or so unreasonable that the law pronounced it void ? It was neither illegal nor unreasonable. Why then should it not be enforced ? If public policy, not declared either by the common law or by statute, is a legitimate principle, upon which either courts of law or of equity, can declare contracts between individuals void, (which I do not admit,) what has public policy to do with the time or the contingency at which or upon which, a simple contract debt shall become due or payable ? It is the policy of the law and of the public, that individuals should bo left to make their own bargains and regulate their own affairs, except as restrained by law, or their public duties. Admitting that there are certain cases, in which a court of equity will relieve from a forfeiture, upon what principle is it said, that the plaintiffs in this action seek to enforce a forfeiture ? They seek to foreclose their mortgage because they say it is due. If it is due, it is a common case of foreclosure; and the foreclosure of this mortgage is no more the enforcement of a forfeiture, than any other case of foreclosure.

Is the mortgage due? It is, if the defendant’s express agreement is valid, and is to be enforced. Is the enforcement of it, the enforcement of a forfeiture ? If enforced, what will the defendant have to pay ? The principal and interest. If not enforced, and the defendant is relieved from his own default, what will he have to pay in 1860, when the mortgage becomes due, without reference to the special interest clause ? Principal and interest, and nothing more. How can the enforcement of the payment of a debt, with the legal interest and nothing more, be called the enforcement of a forfeiture ? What would the defendant have forfeited, by paying his debt with interest in 1856, rather than in 1860 with interest; the rate of interest being fixed by law; he paying the same rate in either case? Had money cheapened, and the defendant been able to procure the principal at five per cent, and pay off the mortgage in 1856, he certainly would not have complained, nor called his payment then a forfeiture. As he agreed to pay seven per cent—the lawful interest—how could the payment of the mortgage, with seven per cent, in 1856, be called a forfeiture? I can see no reason for calling, this foreclosure the enforcement of a forfeiture. The plaintiffs ask for no more than they bargained for; and the defendant could not have been compelled to pay any more than he agreed to pay. The parties agreed, that in default of the payment of the interest for a certain number of days, the whole principal should be due and payable sooner than it otherwise would. It was lawful for them so to agree, and if the default happened—if the contingency occurred—the principal thereupon became due and payable, by the agreement of the parties, in 1856, as it would have done in 1860, without such special agreement. What more is there in this case ? Was it the plaintiffs’ fault, or owing to their laches, that the defendant did not pay the interest within the twenty days ? What equity has the defendant, what grounds for relief, growing out of the plaintiffs’ agreement to discharge the judgment, which was a lien on the mortgaged premises, executed at the same time the bond and mortgage were executed ? The plaintiffs, by their agreement, agreed to cancel the judgment, or to deposit the amount thereof in the hands of the defendant within ninety days; say, on or before the first day of February, 1856. The defendant, by his bond or agreement, executed at the same time, agreed to pay one half year’s interest on the $4000, to the plaintiffs, on the 27th day of December, 1855. How can the defendant say that his payment of the interest on the 27th of December, 1855, was dependent on the plaintiff’s discharging or depositing in his hands the amount of the judgment on the 1st of February, 1856—more than a month after the interest became due ? Did the plaintiff’s agreement to discharge the ju4gmept withiq three piontfis, reyoke the defendant’s agreement to pay the interest within two months ? The parties must be presumed to have known and understood' what they mutually agreed to, and to have intended then to fulfill their respective agreements.

The agreements were in no way dependent upon each other. The defendant’s undertaking to pay the interest was not upon condition that the plaintiffs should remove the lien of the judgment.

To permit the defendant to set up in this action, in bar of the plaintiff’s right of foreclosure, the want of notice that the judgment had been canceled before the twenty days expired, is in effect to make a new contract between the parties, and by it to take away the plaintiff’s rights, under the agreements actually made by the parties themselves. The judgment was in fact canceled or removed on the 31st day of December, 1855. Neither the plaintiff’s written agreement, nor any principle of equity or fair dealing, outside of it, that I can see, called upon the plaintiffs to notify the defendant that the judgment had been canceled, as a condition of their right to exact from the defendant the fulfillment of his agreement. The defendant had no right to expect, or to wait for such notice before he paid the interest. If he had gone and paid the interest at any time within the twenty days, it would have been natural for him to have asked whether the judgment had been canceled, and he then would probably have been informed that it had.

If the plaintiffs had not removed the lien of the judgment, or deposited the amount thereof with the defendant, within the ninety days as agreed, then the amount of the same should have been deducted from the mortgage; but I cannot see how a breach of the plaintiff’s agreement, on the 1st of February, could have justified a breach of the defendant’s agreement on the 27th of December previous, and the continuous default of the defendant, for twenty days thereafter.

Outside of the agreement I do not find an act or a declaration of the plaintiffs to mislead the defendant, and estop them from enforcing their rights under the written contracts. I think, therefore, the judgment of the special term should he reversed, with costs.

[New York General Term, February 1, 1858.

Judgment affirmed.

Davies, Clerke and Sutherland, Justices.]