Gordon v. Donovan

• Decision Date: 03 March 1930
• Citation: 111 Conn. 106,149 A. 397
• Court: Connecticut Supreme Court
• Parties: GORDON ET AL. v. DONOVAN.

149 A. 397

111 Conn. 106

GORDON ET AL. v. DONOVAN.

Supreme Court of Errors of Connecticut.

March 3, 1930

Appeal from Superior Court, New Haven County; Edwin C. Dickenson Judge.

Action by Israel Gordon, trustee, and another against Walter A Donovan, Elmer E. Keller, Woodruff, Sanderson, and Peck for foreclosure of a mortgage. Judgment for plaintiffs, and the last four named defendants appeal.

No error.

By his note dated April 8, 1927, Abraham Lander promised to pay to the order of Rose Glance, on and after July 1, 1937, $25,000 with interest at the rate of 12 per cent. per annum, payable monthly. The note contains the proviso that, if any payments of interest shall remain in arrears and unpaid for ten days after the same shall fall due, the principal of the note shall immediately thereafter, at the option of the holder thereof, become due and payable on demand. To secure this note he gave a mortgage on real estate in West Haven. On January 12, 1928, Rose Glance assigned the note and mortgage to Annie Lander, who, on January 17, 1928, assigned the same to Israel Gordon, trustee, as collateral security for a loan of $15,000, the assignment being conditioned for the payment of the note evidencing the indebtedness of Annie Lander to Gordon, trustee, payable one year after date, with interest at the rate of 9 per cent. per annum, payable monthly.

On January 14, 1928, Abraham Lander, the mortgagor and owner of the equity, conveyed the real estate to Walter Donovan, who expressly assumed and agreed to pay the mortgage in question as well as a first and prior mortgage for $35,000 on the same property. On January 16th following, Donovan conveyed by warranty deed, subject to these mortgages, to Woodruff Sanderson, and Peck, and on January 28th the last-mentioned grantees, by quitclaim deed, conveyed to Elmer E. Keller. Woodruff, Sanderson, and Peck are in possession of the real estate, and hold a mortgage thereon subsequent and subject to the mortgage in suit.

This action, in which both Annie Lander and Gordon, trustee, are plaintiffs, was brought by complaint dated April 18, 1928, and was predicated on two interest payments of $250 each, due February 8th and March 8th, and unpaid, and the substituted complaint expressly set up that the principal ($25,000) is not due or payable, as the plaintiffs have not exercised the option, contained in the note, to render the principal due and payable on demand, upon default in payments of interest. On April 9, 1929, the plaintiffs filed, against the objection of the defendants, a supplemental complaint alleging that interest was further unpaid on the note from April 8, 1928, to March 8, 1929, and claiming a foreclosure of the mortgage predicated on the overdue interest payments described in the supplemental complaint as well as in the substituted complaint, subject to the mortgage of the plaintiffs. The court decreed such foreclosure, in favor of both plaintiffs, finding the debt to be $3,500, the amount of the overdue interest payments, plus interest at 6 per cent., to date of judgment.

Robert J. Woodruff and John G. Confrey, both of New Haven, for appellants.

Joseph I. Sachs and Manuel S. Sachs, both of New Haven, for appellee.

Argued before WHEELER, C.J., and MALTBIE, HAINES, HINMAN, and BANKS, JJ.

HINMAN, J. (after stating the facts as above).

Assignments of error 7 and 8 question the right to decree foreclosure predicated upon interest payments due without foreclosure, also, of the principal of the note; assignment 6 questions the right to include in the judgment interest payments accruing after the date of the original complaint; assignments 2, 3, and 4 were intended to question the right to render judgment in favor of both of the plaintiffs.

As to the first question, the right to foreclose for overdue interest, where the principal is not yet due, is generally recognized. Butler v. Blackman, 45 Conn. 159; Boyer v. Chandler, 160 Ill. 394, 43 N.E. 803, 32 L.R.A. 113; Silverman v. Silverman, 189 Ill. 394, 59 N.E. 949; Morganstern v. Klees, 30 Ill. 422; Omaha Loan & Trust Co. v. Kitton, 58 Neb. 113, 78 N.W. 374; Dederick v. Barber, 44 Mich. 19, 5 N.W 1064; Central Trust Co. v. N.Y. City & Northern R. R., 33 Hun (N. Y.) 513. The existence of junior incumbrances or the fact that the mortgagor had assigned his interest in the premises before the interest became due does not afford reason for an exception to the rule. The appellants' principal contention appears to be that it was incumbent upon the plaintiffs to declare the principal due and foreclose upon that as well as the arrears of interest, or that the mortgagor or his successor in interest has, or should have, the right to accelerate the maturity of the principal. The settled rule is decisively to the contrary. " The whole debt is not due until the mortgagee or other holder has exercised his election; * * * [it] does not become due ipso facto upon the default but the mortgagee has a mere option which he may exercise or waive." 2 Jones on Mortgages (8th Ed.) § 1512. " A clause in a mortgage accelerating maturity of the entire indebtedness for nonpayment of interest or an installment of principal is solely for the benefit of the mortgagee or his assignee, who have the option to enforce it or not." 1 Wiltsie on Mortgage Foreclosure (4th Ed.) § 72; Richardson v. Warner (C. C.) 28 F. 343; Blakeslee v. Hoit, 116 Ill.App. 83; Cresco Realty Co. v. Clark, 128 A.D. 144, 112 N.Y.S. 550; Tibbetts v. Bush, etc., Piano Co., 111 Wash. 165, 189...