Jacobson v. McClanahan
| Decision Date | 27 November 1953 |
| Docket Number | No. 32556,32556 |
| Citation | 264 P.2d 253,43 Wn.2d 751 |
| Court | Washington Supreme Court |
| Parties | JACOBSON et al. v. McCLANAHAN et al. |
Orvin H. Messegee, David C. Hunter, Seattle, for appellants.
George R. Mosler, Charles H. Heighton, Maslan, Maslan & Hanan, Seattle, for respondents.
On May 21, 1951, the defendants McClanahan gave plaintiffs a promissory note for $13,500, payable in monthly installments of $300 on the twenty-first day of every month thereafter until paid. The note was sccured by a chattel mortgage on the 'Streamline Tavern' in the city of Seattle.
The note provided, inter alia:
'In case of default in the payment of any installment or any interest which may be due hereon, the aggregate amount of this note remaining unpaid and every installment thereof shall without notice or demand at once become due and collectible, at the option of the holder of this note.' (Italics ours.)
The mortgage contained an acceleration clause similar to that quoted above, and further provided:
'* * * if the mortgagee deems itself insecure, thereupon the mortgagee may, without notice, declare the whole sum of both principal and interest due and payable, * * *.'
The installment due June 21, 1951, was timely paid. The installment due July 21, 1951, was accepted by plaintiffs on August 13, 1951. In August, 1951, defendants McClanahan disposed of the tavern business to defendants Siegel. One Kaczor negotiated the transaction between plaintiffs and defendants McClanahan, and the transaction between defendants McClanahan and defendants Siegel. Kaczor procured the consent of plaintiffs to the transfer of the business and the assumption of the obligation of the McClanahans' note and mortgage by defendants Siegel. He made two copies of the instrument of assumption of the note and mortgage. On the copy given to plaintiffs, defendants Siegel were to pay the August, 1951, installment on August 21, 1951. The copy of the assumption agreement retained by Kaczor, upon which defendants Siegel relied in good faith, provided that the next payment on the note and mortgage would fall due on September 21, 1951. Kaczor was not the agent of plaintiffs, and had no authority to alter the Siegels' copy of the assumption-contract.
Defendants Siegel took possession of the business on or about August 14, 1951. The August installment was paid by defendants Siegel on September 17, 1951. The September installment was not paid on September 21, 1951, and, while still delinquent, plaintiffs gave notice, on October 5, 1951, of their election to accelerate maturity of the note and mortgage upon the grounds (1) that there was a default in payment under the terms of the note and mortgage, and (2) that they deemed themselves insecure. The notice stated that they would accept no further installments.
On October 23, 1951, defendants Siegel tendered the overdue September 21, 1951, installment, and attempted, on October 29, 1951, to pay all the installments in arrears, and thereafter tendered them in court.
Plaintiffs refused the installment tenders, and commenced this action for a decree accelerating the note, and, in default of payment of the judgment, for the foreclosure of their mortgage.
The plaintiffs gave notice of their election to accelerate the payments provided for in the instruments. It was not a notice of their intentiion to do so after a period of grace during which the defendants could bring their installment payments up to date.
The trial court felt that platintiffs having accepted late payments of installments, should have given notice of their intention, rather than their election, to accelerate the payments, and, accordingly, entered judgment for defendants. The plaintiffs appeal.
Equity abhors forfeitures and penalties, but an acceleration of payments on a mortgage is not a forfeiture or a penalty. In Seattle Title Trust Co. v. Beggs, 146 Wash. 435, 263 P. 598, 599, this court said:
'* * * Counsel invoke the general rule that forfeitures are not favored in law, and that the courts will, if possible, construe a contract so as to avoid forfeiture or rights thereunder; arguing that this default provision is, in effect, a forfeiture provision, and should accordingly be strictly construed in favor of apellant. We do not think it is in any sense a forfeiture or penalty provision. In the text of 19 R.C.L. 493, we read:
"The proposition is accepted without dispute that a stipulation in a mortgage providing that the whole debt secured thereby shall become due and payable upon failure of the mortgagor to pay the interest annually or to comply with any other condition of the mortgage is a legal, valid, and enforceable stipulation, and is not in the nature...
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