Albertina Realty Co. v. Rosbro Realty Corp.

• Citation: 258 N.Y. 472,180 N.E. 176
• Parties: ALBERTINA REALTY CO. v. ROSBRO REALTY CORPORATION et al.
• Decision Date: 03 March 1932
• Court: New York Court of Appeals

258 N.Y. 472

180 N.E. 176

ALBERTINA REALTY CO.

v.ROSBRO REALTY CORPORATION et al.

Court of Appeals of New York.

March 3, 1932.

Action by the Albertina Realty Company against the Rosbro Realty Corporation and others. From a judgment of the Appellate Division, First Department (233 App. Div. 737, 250 N. Y. S. 841), affirming a judgment of the Special Term, granting foreclosure and sale of mortgaged real property, defendant named appeals by permission of the Court of Appeals.

Affirmed.

Appeal from Supreme Court, Appellate Division, First department.

Joseph Kahn, D. Freiberger, and J. Freiberger, all of New York City, for appellant.

Samuel W. Dorfman and Jacob R. Schiff, both of New York City, for respondent.

HUBBS, J.

Plaintiff is the holder of a real property mortgage upon which there became due $166.66 of principal on July 15, 1930, which was not paid. On July 18th the plaintiff caused to be filed in the office of the county clerk a summons and verified complaint and a lis pendens in an action to foreclose the mortgage. The complaint alleged the default in payment of the installment of principal, and stated that the plaintiff elected that the entirebalance of principal remaining unpaid should immediately become due and payable. Three days later, on July 21st, the appellant, then owner of the premises in question, tendered to the plaintiff the amount of the installment of principal which became due on July 15th. The plaintiff declined to accept the tender upon the ground that it had elected to declare due the whole amount unpaid on the mortgage, had turned the matter over to its attorney, and the summons and verified complaint and lis pendens had been filed in the county clerk's office. The mortgage contains an acceleration clause which reads: ‘That the whole of said principal sum shall become due after default in the payment of any installment of the principal or of interest for thirty days, or after default in the payment of any tax, water rate or assessment for thirty days after notice and demand.’

At the trial two questions of importance were raised: First, at the time of the tender had the whole amount of the principal become due because the plaintiff had so elected, and second, did the mortgage give plaintiff the right to so elect, before the expiration of thirty days from the due date?

It is conceded by appellant that if the action had been commenced by the service of the summons upon one or more defendants before the tender, the tender would have been too late, as the notice of plaintiff's election would have been sufficiently evidenced by the commencement of the action.

It is urged, however, that, as the action had not been commenced by the service of a summons (Civil Practice Act, § 218), there had been no election at the time of the tender, and the only amount then due was the amount tendered, which tender precluded the plaintiff from thereafter maintaining the action to recover the full amount unpaid. We think the construction urged by appellant is too narrow.

The acceleration clause does not constitute a forfeiture or a penalty. It is a fair and legal contract which the parties to the mortgage had a right to enter into. Noyes v. Anderson, 124 N. Y. 175, 180,26 N. E. 316,21 Am. St. Rep. 657;Graf v. Hope Building Corporation, 254 N. Y. 1, 171 N. E. 884, 70 A. L. R. 984. There is no claim that the contract was made as a result of fraud or mistake.

It is true that on July 15th, and until the plaintiff exercised his right to have the whole amount become due, there remained due only the installment of $166.66 of principal, and if the tender was made before the right of election was exercised, it could not be thereafter availed of by plaintiff. Cresco Realty Co. v. Clark, 128 App. Div. 144, 112 N. Y. S. 550. See, also, Brown v. Kennedy, 309 Mo. 335, 274 S. W. 357,41 A. L. R. 732, and note. No demand was necessary to enable plaintiff to elect to exercise his right to insist that the whole amount was due. Hothorn v. Louis, 52 App. Div. 218, 65 N. Y. S. 155, affirmed 170 N. Y. 576, 62 N. E. 1096;Northampton Nat. Bank v. Kidder, 106 N. Y. 221, 12 N. E. 577,60 Am. Rep. 443;New York Security & Trust Co. v. Saratoga Gas & Electric Light Co., 88 Hun, 569, 34 N. Y. S. 890, affirmed 157 N. Y. 689, 51 N. E. 1092.

The agreement does not provide what the holder of the mortgage must do to evidence its election to declare the whole amount due. Such a provision could have been embodied in the contract if the parties had so desired.

The trial court found as a fact that the plaintiff had elected that the whole of the principal should immediately become due and payable. Such finding was justified by the evidence. It is unnecessary to decide just what a holder of a mortgage must do to exercise the right of election, under an acceleration clause. We are satisfied, however, that the unequivocal overt act of the plaintiff in filing the summons and verified complaint and lis pendens constituted a valid election. It disclosed the choice of the plaintiff and constituted notice to all third parties of such choice. To elect is to choose. The fact...