Adler v. Berkowitz , 254 N.Y. 433 ( 1930 )

Defendant Rose Gast and her husband executed a bond to plaintiff's assignor for a sum of money and at the same time she alone gave a mortgage on premises owned by her to the same person in the same amount. The acceleration clause in the bond provides that at the option of the obligee after default for thirty days in the payment of interest or of any installment of principal the whole of the principal sum shall become due. The mortgage embraces a similar clause except the time is stated to be twenty instead of thirty days, and the provision relative to an option by the obligee is omitted. Rose Gast conveyed the mortgaged premises to defendant Berkowitz who took them subject to the mortgage but did not agree to pay the debt. On a certain date when the premises were worth enough to pay all incumbrances, an installment of principal and the quarterly interest became due. Berkowitz paid the amount after the expiration of twenty days but within the thirty days. Without Rose Gast's knowledge, plaintiff accepted payment. Nine months later a second default occurred. In this action of foreclosure plaintiff recovered a deficiency judgment against Rose Gast at a time when the value of the premises had depreciated. It has been reversed as to her by a divided court.

The bond is the evidence of the original indebtedness. The mortgage is to secure the debt and by its terms the installments of principal and the interest are made payable "according to a certain bond or obligation bearing even date herewith." That bond does not require the obligee to declare the principal due at the expiration of twenty days; it may become due at the expiration of thirty days and then only "at the option of said obligee." The parties to the bond put into exact words the meaning which section 254 of the Real Property Law (Cons. Laws, ch. 50) requires to be inferred from language in mortgages in statutory form. Ordinarily, when provisions in a bond and a mortgage are inconsistent, the terms of the bond are held to control. (Rothschild v. Rio Grande Western Ry. Co., 84 Hun, 103; affd., 164 N.Y. 594.) On the facts before us the usual rule should apply. Rose Gast absolutely promised to pay plaintiff's assignor certain definite sums on specific dates and gave him the option in the event of default to declare the whole principal due. He was under no obligation to exert this discretionary power. As between her and the holder of the bond, the terms of the bond rather than the mortgage must be held controlling.

The judgment of the Appellate Division in so far as it strikes out the provisions for a deficiency judgment against the defendant Rose Gast should be reversed and the judgment of the Special Term affirmed, with costs to the appellant in the Appellate Division and in this court.

CARDOZO, Ch. J., POUND, CRANE, LEHMAN, KELLOGG and HUBBS, JJ., concur.

Judgment accordingly.