Opinion
Submitted October 30th, 1931.
Decided February 1st, 1932.
1. A mortgagee's rights are legal rights, and they are fixed by the terms of the bond and mortgage. A mortgagee has the right to insist upon the strict observance of these rights unless he himself has done something sufficient in the eyes of the court of equity to excuse the default on the part of the defendant mortgagor of which they complain.
2. Complainant seeks to foreclose a mortgage given by the defendant because of failure of the defendant to pay the interest within the time provided by the instrument. Held, on the weight of the evidence, this failure to pay the interest within time was due to the conduct of the complainant, and that the complainant is therefore estopped from declaring a forfeiture.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Buchanan, who filed the following opinion:
"The bill is filed to foreclose a mortgage securing a bond originally of $200,000, upon which there had been paid, prior to December 1st, 1929, $20,000 on account of principal, and the interest which had accrued up until June 1st, 1929. The mortgage provided for the acceleration of the maturity of any unpaid principal if the interest were not paid or if an installment of principal were not paid, within thirty or sixty days, I do not recall which, of the dates fixed by the bond and mortgage. It also provided that there should be paid $5,000 a year on account of principal, by the mortgagor.
"The mortgagor had, in fact, paid $10,000 on account of principal in each of the two years the mortgage had been in existence. The interest was not paid upon the due date in December of 1929 and it remained unpaid and in arrears for a period long enough to entitle the mortgagee to the acceleration of the entire unpaid balance, unless that non-payment were in some way excused. The mortgagee thereupon, after declaring the unpaid balance matured and due, filed his bill to foreclose.
"The defendant sets up the defense that the payment of the interest by him was not made on December 1st, 1929, because he was at that time abroad, and that he had, before going abroad on July 3d 1929, had a conversation about July 1st, 1929, with the mortgagees, or with Mr. Leo Schwed, one of the mortgagees in the course of which he had told Mr. Schwed that he was going abroad, going to be married, and expected to stay perhaps six or seven months, that he was somewhat concerned about his getting back in time for the next due date of the interest, and called Mr. Schwed's attention to the fact that he had paid $10,000 more on account of the principal than by the terms of the bond and mortgage he was required to pay, and he wanted to know whether Mr. Schwed would take care of the interest out of that, or carry him, in the event that he should not return to America in time to pay the interest on the next due date. And he says Mr. Schwed told him that he would, that he was entirely satisfied, and told him to go ahead and not worry, that he would take care of it and carry him.
"Now, the whole question in the case is one of fact as to whether or not that conversation took place, whether or not such a statement, or a statement to that general effect, was made by Mr. Schwed; for if it was, I think no one will contend but that it was a statement sufficient to excuse the non-payment of the interest on the due date, to the extent necessary to prevent the complainants being entitled to take advantage of the forfeiture which the strict terms of the bond and mortgage entitle them to do.
"The mortgagees' rights are legal rights, and they are fixed by the terms of the bond and mortgage, and they have the right to insist upon the strict observance of them unless they, themselves, have done something sufficient in the eyes of a court of equity to excuse the default on the part of the defendant, which they complain of. That law is well established. Therefore, as I say, the only question here is one of fact as to whether this conversation which I have referred to took place.
"In my judgment, the weight of the evidence before me on that proposition is in favor of the defendant. He testifies to it and his nephew testifies to it. It is denied by Mr. Leo Schwed, and this denial is corroborated by Mr. Schwed's secretary or bookkeeper, to a certain extent.
"As between the two parties, themselves, the weight to be accorded their testimony before me is equal; each has the same interest, and neither has had his credibility attacked in any way excepting as it may have been impaired by the testimony and the evidence in this case. As I say, upon that weighing of the evidence I think the scales turn in favor of the defendant, upon comparison and upon a consideration of the manner of these two witnesses upon the stand, the way in which they testified and in which they gave their answers.
"In addition to that, the complainant Schwed is very seriously discredited upon a number of minor issues, and as to a number of statements made by him is discredited by his own witness, Fitzpatrick. That is not true as regards the defendant.
"The letter which has been referred to by counsel for the complainant does not have the same significance to my mind which counsel evidently attaches to it. The witness for the defendants is no longer in the employ of his former employer, which I think makes some difference in the weight to be given his testimony as compared with the weight to be given the testimony of the corroborating witness on the side of the complainants. For another thing, it is not established by the testimony that this witness of complainant was the girl that was said to have been in the office at the time of that conversation; again — she testified not merely that she was not there, but she testified that Budrecki and his nephew did not come in on the 1st of July or the 30th of June, 1929, whereas it is quite obvious from the rest of her testimony that they might have been there long enough to have had such a conversation (which would not have taken very long), without her having seen them. Also, the complainants' own witness testified to the sending of the girl out of the room on another occasion. It is possible that the witness for the defendants may have mixed up in his mind these two occasions. The important point, however, is that the testimony by the defendant and the nephew is not impaired by necessary inference from the entire testimony as to the leaving of this girl.
"There is one other bit of testimony which bears upon this issue, and that is the testimony of the complainants' witness, Fitzpatrick, who was called to rebut the testimony of the defendant that on an occasion after he had returned from Europe he had, in the presence of Fitzpatrick, said to Schwed, in effect, `I had this conversation with you: "you promised to take care of me out of this $10,000, because there was $10,000 I paid to you in excess of what I was obliged to pay, and now you have gone back on it"' — words to that effect. Mr. Fitzpatrick says that he heard no such conversation as that. He does not say that it was not said by Budrecki. He does say, however, that he did hear Mr. Budrecki say something about the $10,000 excess that had been paid. The witness, Schwed, said that no mention of that was made in any of the conversations. In that he is contradicted by his own witness.
"To anyone who has been in this court room to-day and who has heard the speech of Budrecki, and therefore knows the difficulty of understanding precisely and completely the things that he says in English (and this conversation referred to was in English) it is quite easy to believe that the thing which Budrecki says about this $10,000 was precisely the thing which he says he said, but which might very well have failed of complete comprehension by Fitzpatrick.
"Another thing of much significance is the fact — proven by the defendants, and not attempted to be contradicted — that defendant had on deposit to his credit at his banks in Elizabeth, during the time the interest in question fell due and thereafter, sums of money far in excess of the amount of the interest due; so that he could well have arranged for the payment of the interest at the due date, notwithstanding his absence in Europe, if he had not believed that complainants had waived for that occasion, the strict performance of the requirement of the bond and mortgage.
"Defendant paid the interest on his return to this country — and has ever since performed the requirements of the bond and mortgage.
"The defendant has satisfied me, on the weight of the evidence, that his failure to pay the interest within time was due to the conduct of complainant, and that the complainants are therefore estopped from declaring a forfeiture.
"The difference in the scales is not as great as it is in some cases, but it seems to me it is great enough to weigh in favor of the defendants on that issue, and that is the sole issue. This finding upon that issue leads to the determination that the defendant is excused from forfeiture, which necessarily results in the dismissal of the bill.
"The defendant will be allowed by way of counsel fee $750, with costs."
Mr. Abe J. David, for the appellants.
Mr. Charles J. Stamler, for the respondents.
The decree appealed from will be affirmed, for the reasons expressed in the opinion of Vice-Chancellor Buchanan.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, CAMPBELL, LLOYD, CASE, BODINE, DALY, DONGES, VAN BUSKIRK, KAYS, HETFIELD, DEAR, WELLS, KERNEY, JJ. 15.
For reversal — None.