Case Name: Samuel M. Rathbone and Eva E. Rathbone, Respondents, v. David Forsyth and Frances B. Forsyth, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1916-01-05
Citations: 171 A.D. 26
Docket Number: 
Parties: Samuel M. Rathbone and Eva E. Rathbone, Respondents, v. David Forsyth and Frances B. Forsyth, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 171
Pages: 26–31

Head Matter:
Samuel M. Rathbone and Eva E. Rathbone, Respondents, v. David Forsyth and Frances B. Forsyth, Appellants.
Third Department,
January 5, 1916.
Mortgage — election to declare whole debt due for failure to pay installment of principal — effect of acceptance of interest before the same is due — equitable rights of mortgagee — application of payments to prevent forfeiture — duty of mortgagor intending to enforce forfeiture.
A mortgagee cannot elect to declare the whole mortgage due for a default in the payment of an installment of the principal, where he has accepted two payments of interest made by the mortgagor, knowing that they were not then due, and said payments together with moneys paid to the mortgagee which resulted from the sale of timber, taken together constitute due payment upon the mortgage had they been credited to principal instead of interest, and there is evidence that in consideration of the payment of the timber money the mortgagor agreed that the next installment of principal need not be paid when due.
While a clause for the acceleration of the due date of a mortgage on account of default in payment of installments will be enforced by the courts, equity requires that it be fairly enforced and that an unconscionable advantage be not taken.
The acceptance of a payment by a mortgagor, after the right to a forfeiture exists, prevents an election to take advantage of the default, unless timely notice is subsequently given that strict performance of the terms of the contract will be required. Hence, by accepting interest before it was due, time ceased to be of the essence of the contract, so far as it related to the right to declare the whole amount due until a notice of a contrary intention was given.
Woodward, J., dissented, with opinion.
Appeal by the defendants, David Forsyth and another, from a judgment of the County Court of Chenango county in favor of the plaintiffs, entered in the office of the clerk of the county of Chenango on the 15 th day of July, 1915, upon the decision of the court decreeing a foreclosure and sale, a jury having been waived.
William J. Hogan [H. C. Stratton of counsel], for the appellants.
Fred E. Page [Hubert L. Brown of counsel], for the respondents.

Opinion:
Kellogg, P. J.:
The mortgage, dated March 1, 1913, was given to secure $7,500, payable $150 of the principal March 1, 1914, and the same amount annually thereafter until the 1st day of March, 1923, on which day all the unpaid principal becomes due, with the right to make greater payments. Interest was payable annually, with the right to declare the whole mortgage due in case default was made in any payment. The foreclosure for the whole amount proceeded upon the theory that the $150 principal payable March 1, 1914, remained unpaid for more than thirty days thereafter and under the terms of the mortgage the plaintiffs had elected to declare the whole amount due. In September, 1913, the appellants paid six months' interest, which the plaintiffs accepted knowing it was not due. In February, 1914, $1,700 worth of timber was sold from the premises with the consent of the mortgagee, which by the terms of the mortgage was to be applied thereon, and the appellants claim that in consideration of said payment, and as a condition of the sale, it was agreed that the payment to become due March 1,1914, need not be paid. The plaintiffs deny such agreement, but the facts tend to corroborate the appellants. March 7, 1914, the appellants paid the interest which became due March 1, and on September 1, 1914, the appellants paid to Mrs. Rathbone, one of the plaintiffs, six months' interest upon the mortgage. No interest was then due, but the appellants swear that Mrs. Rathbone inquired if it was to apply on the $150 payment and they said no, it is on the interest — that her husband agreed to let the $150 go and that she replied " all right." We quote from Mrs. Rathbone's testimony: "Q. You was somewhat surprised when they came to make a payment of interest ? A. Why no; they said they wanted to pay the money, as she had it. Mrs. Forsyth said if she had the money she would like to pay it. Q. When they did pay the first of September, 1914, you asked them if that payment was upon the principal? A. I asked them — they said that was the interest and I says ' no — you know this wants to be paid on the back principal due; do you mean this to go towards the back principal' —and they both said no." If the appellants understood that principal was due, it is unreasonable that they would insist on paying interest when no interest was in fact due.
A clause in a mortgage for the acceleration of the due date on account of default in paying an installment is not unconscion • able or unreasonable, and the courts will enforce it, but will see, however, that it is fairly enforced and that an unconscionable advantage is not taken. The mortgagees had the right, after thirty days from March first, to declare the whole amount of the mortgage due ; but if they intended to exercise that right they must act consistently and must do nothing to mislead the mortgagors or throw them off their guard. When the appellants wanted to pay the interest in September, if the plaintiffs intended to claim the whole amount was due they should have notified the defendants. If they had done so the installment of principal would have been paid or the appellants would have kept their money. If plaintiffs insisted upon payment of the principal, they should have required that the payment then made should apply upon the principal and not upon the interest not then due. We find that the defendants paid interest in September, 1913, six months before it was due, and again in September, 1914, six months before it was due, and the plaintiffs are seeking to foreclose the mortgage for non-payment when in fact the appellants have paid substantially all that the mortgage required them to pay. The defendants, if they lose their farm, will lose it simply because they stated that they were making a payment of interest which was not due instead of applying it on principal which was due. The proposition is so inequitable and unfair that the court cannot approve of it. If the defendants are allowed interest on the payment made September, 1913, until it was due, they would be entitled to a credit of $3.63, which added to the payment of $145 made in September, 1914, would make $148.63. If the payment in 1914 is applied upon the mortgage principal there would be only a balance of $1.37 unpaid—a sum too trivial to need serious consideration. The plaintiffs, seeking to take from the defendants their farm for such a trivial matter, cannot expect favorable consideration from the courts. Under the circumstances the payment in September, 1914, may be so far treated a payment of principal that the defendants were not then in default.
A citation of cases is unnecessary to show that where a party intends to insist upon a forfeiture he must do no act inconsistent with that right, and that if the forfeiture is to be enforced on account of a non-payment of money, an acceptance of money after a right to the forfeiture exists prevents the election to take advantage of the default until timely notice is given that strict performance is required. If the plaintiffs wished to elect to declare the mortgage due, after the acceptance of the interest in September, 1914, it was necessary for them to give timely notice that in case the same was not paid they would declare the whole amount due. We have recently held that where there was a right to rescind a contract the acceptance of a part performance after the right accrued was a waiver. (Sturges & Burn Mfg. Co. v. American Separator Co., 144 App. Div. 872.) By accepting the interest in September, 1914, the plaintiffs set the time running, and time ceased to be of the essence of the contract so far as relates to the right to declare the whole amount due until a notice of a contrary intention was given.
French v. Bow (77 Hun, 380) considers a somewhat similar case. We quote from page 385: " Again, where by the terms of a contract for the sale of land, the purchase money is to be paid in installments with annual interest, and the vendor reserves to himself the right to forfeit the contract if the vendee makes default in any of the payments, and after default the vendor continues to receive parts of the purchase money, it has been uniformly held in this State that such a vendor, by receiving payments after default, had so far waived the forfeiture that he could not insist upon it, without giving the purchaser notice to pay the arrears or he would exercise the right of forfeiture, and that a vendor who has waived a forfeiture for non-payment by receiving partial payments from the vendee, after the time of payment prescribed in the contract, cannot suddenly stop short, and insist on a forfeiture for the non-payment of the arrears, without previous notice of his intention to do so if the arrears are not paid. "
In the sale of a piano upon conditional sale the same holding was made. (Cunningham v. Hedge, 12 App. Div. 212.)
It was, therefore, impossible under the circumstances of this case to declare the whole amount of the mortgage due, even though the plaintiffs did not agree that the payment of March, 1914, need not be made. But the circumstances show clearly that it was the understanding of the parties that the payment due March 1, 1914, was waived. The judgment should, therefore, be reversed.
All concurred, Oochrane, J., in result, except Woodward, J., who dissented in opinion.