Graf v. Hope Building Corp.

Plaintiffs, as executors of Joseph L. Graf, are the holders of two consolidated mortgages forming a single lien on real property the title to which is vested in defendant Hope Building Corporation. According to the terms of the agreement consolidating the mortgages the principal sum is made payable January 1, 1935. Nevertheless, a clause provides that the whole shall become due after default for twenty days in the payment of any installment of interest. David Herstein is the controlling stockholder and also president and treasurer of defendant. He alone was authorized to sign checks in its behalf. Early in June, 1927, he went to Europe. Before his departure a clerical assistant who was also the nominal secretary of the corporation computed the interest due July 1, and through an error in arithmetic incorrectly calculated it. Mr. Herstein signed the check for the erroneous amount but before the date upon which the interest became due, the secretary discovered the error, notified the mortgagee of the shortage of $401.87, stated that on the president's return from Europe the balance would be paid and on June 30 forwarded to the mortgagee the check as drawn. It was deposited by the mortgagee and paid by defendant. On July 5 Mr. Herstein returned, but, through an omission in his office, he was not informed of the default in the payment of interest. At the expiration of twenty-one days this action of foreclosure was begun. Defendant made tender of the deficiency but the mortgagee, strictly insisting on his contract rights, refused the tender and elected to assert the power created by the acceleration clause in the consolidation agreement.

On the undisputed facts as found, we are unable to perceive any defense to the action and are, therefore, constrained to reverse the judgment dismissing the complaint. Plaintiffs may be ungenerous, but generosity is a voluntary attribute and cannot be enforced even by a chancellor. Forbearance is a quality which under the circumstances of this case is likewise free from coercion. Here there is no penalty, no forfeiture (Ferris v.Ferris, 28 Barb. 29; Noyes v. Anderson, 124 N.Y. 175, 180), nothing except a covenant fair on its face to which both parties willingly consented. It is neither oppressive nor unconscionable. (Valentine v. Van Wagner, 37 Barb. 60.) In the absence of some act by the mortgagee which a court of equity would be justified in considering unconscionable, he is entitled to the benefit of the covenant. The contract is definite and no reason appears for its reformation by the courts. (Abrams v.Thompson, 251 N.Y. 79, 86.) We are not at liberty to revise while professing to construe. (Sun P. P. Assn. v. RemingtonP. P. Co., 235 N.Y. 338, 346.) Defendant's mishap, caused by a succession of its errors and negligent omissions, is not of the nature requiring relief from its default. Rejection of plaintiffs' legal right could rest only on compassion for defendant's negligence. Such a tender emotion must be exerted, if at all, by the parties rather than by the court. Our guide must be the precedents prevailing since courts of equity were established in this State. Stability of contract obligations must not be undermined by judicial sympathy. To allow this judgment to stand would constitute an interference by this court between parties whose contract is clear. One has been unfortunately negligent but neither has committed a wrong. If defendant's president had left some person in charge with authority to deal with affairs as they might arise, the first error could have been immediately corrected and the second would not have occurred. Even after Mr. Herstein's return on July 5, two weeks remained before the expiration of the twenty days. The secretary's forgetfulness during this time is not sufficient excuse for a court of equity to refuse to lend its aid to the prosecution of an action based upon an incontestably plain agreement. Such a refusal would set at nought the rules announced and enforced for a century in such cases as Noyes v.Clark (7 Paige, 179); Hale v. Gouverneur (4 Edw. Ch. 207);Ferris v. Ferris (supra); Valentine v. Van Wagner (supra); Malcolm v. Allen (49 N.Y. 448); Bennett v.Stevenson (53 N.Y. 508); Hothorn v. Louis (52 App. Div. 218; affd., 170 N.Y. 576). The words of Chancellor WALWORTH inNoyes v. Clark (supra) express the rule which has since prevailed in respect to the rights of a mortgagee against a defaulting mortgagor under an acceleration clause: "The parties * * * had an unquestionable right to make the extension of credit dependent upon the punctual payment of the interest at the times fixed for that purpose. And if, from the mere negligence of the mortgagor in performing his contract, he suffers the whole debt to become due and payable, according to the terms of the mortgage, no court will interfere to relieve him from the payment thereof according to the conditions of his own agreement. (Steel v. Bradfield, 4 Taunt. Rep. 227; James v. Thomas, 5 Barn. Adol. 40.)" Ferris v. Ferris (supra) illustrates the application of that rule when the court, holding that the acceleration clause works neither a forfeiture nor a penalty, rejected a defense founded upon the fact that the mortgagor was unacquainted with business and suffered the day of payment to arrive sooner in consequence of her own negligence than she would otherwise have done. This court has never departed from that rule. Cases can be found in other courts where the facts may be so distinguished as to take them out of the rule or where other theories have been applied in a way which fails to meet with our approval. We feel that the interests of certainty and security in real estate transactions forbid us, in the absence of fraud, bad faith or unconscionable conduct, to recede from the doctrine that is so deeply imbedded in equity.

Reliance is placed by respondent upon Noyes v. Anderson (supra), but we think that the reasoning in that case requires a reversal here. There the issue related to the effect upon a collateral agreement of a default in the payment of an assessment, and the court, giving full recognition to the principles of the cases above cited, decided that the breach of a condition subsequent in that agreement, unlike a default in the payment of interest on the principal of a mortgage debt, resulted in a forfeiture. The reason for the decision is best understood from a consideration of this language in the opinion: "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. (Noyes v. Clark, 7 Paige, 179; Malcolm v. Allen, 49 N.Y. 448; Bennett v. Stevenson, 53 id. 508.) But the case at bar must be considered and determined in the light of the undisputed facts and circumstances under which the agreement was made, and in reference to the purpose represented by it."

The judgment of the Appellate Division and that of the Special Term should be reversed and judgment ordered in favor of plaintiff for the relief demanded in the complaint, with costs in all courts.