Case Name: E. & J. F. Broderick vs. Smith
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1858-02-01
Citations: 26 Barb. 539
Docket Number: 
Parties: E. & J. F. Broderick vs. Smith.
Judges: 
Reporter: Barbour's Supreme Court Reports
Volume: 26
Pages: 539–556

Head Matter:
E. & J. F. Broderick vs. Smith.
A court of equity will refuse its aid where plaintiffs seek its interposition to enforce a remedy, under circumstances which it considers Unconscionable.
It will afford protection to a mortgagor, against oppressive and unreasonable conduct on the part of the mortgagees.
Thus where a bond and mortgage, given for the purchase money of land, dated June 27th, 1855, and payable on the 27th of June, 1860, with interest half yearly, contained a provision that should any default be made in the payment of the interest when due, and the same should remain unpaid for twenty days, that then the principal sum should, at the option of the mortgagees, become payable immediately; the mortgagor, at the time of executing the mortgage, receiving from the mortgagees a written agreement that they would, within ninety days, cause a judgment which was a lien on the premises to be canceled, &c.; and the same was canceled, on the 81st of December, 1855, but no notice thereof was given to the mortgagor, and the latter, under the impression that the judgment was still a lien upon the premises, omitted to pay the half year’s interest which was due on the 27th of December, 1855; and the twenty days mentioned in the bond having ex* pired, without the interest being paid, or demanded, the mortgagor was, on the 24th of January, 1856, required by the mortgagees to pay the principal and interest on his bond and mortgage, they claiming the whole to be due; and the mortgagees, after refusing to accept a tender of the interest dud, with interest théreon, commenced a suit to foreclose the mortgage; Held that the conduct of the mortgagees in attempting to enforce the forfeiture, instead of apprising the mortgagor' of the discharge of the judgment, and in due time, before the expiration of the twenty days, claiming the payment of the interest, was unreasonable and oppressive, and their complaint waS dismissed. Sutherland, J., dissented.
APPEAL from a judgment entered at a special term, after a trial at the circuit. The case presented the following facts: On or about the 27th of September, 1855, the plaintiffs agreed with the defendant that they would, on the 2d of November following, convey certain premises to him, on receiving (in addition to $1500 which they had already received as part of the purchase money) the sum of $500 and his bond and mortgage (containing the usual twenty days interest clause) on the premises for $4000, payable on the 27th day of June, 1860, with interest half yearly; such conveyance, bond and mortgage, to bear date 27th June, 1855. They also agreed that in case of their neglect or refusal to make such conveyance, they Would pay back to him the said sum of $1500 so already received by them. On the 2d of November, 1855, the defendant was ready and offered to perform the agreement on his part¿ but the plaintiffs were then unable to give an unincumbered title to the premises, by reason of a judgment for $518.18, which had been obtained against them and docketed in July previous, and which remained uncanceled and was a lien on the premises. The defendant, at the solicitation of the plaintiffs, consented to waive his right to rescind the agreement and to receive back the $1500, and was induced by them to accept a conveyance from them of the premises, and "to pay the additional $500, and to give his bond and mortgage, containing the twenty days interest clause, for #4000, on receiving from them a written agreement that they would, within ninety days from that time, cause the lien of the judgment for #518.18 to be canceled, or deposit the amount of such judgment in his hands, to be held until the same should be discharged. The first half year’s interest on the bond became due on the 27th of December, 1855. The plaintiffs procured the judgment against them to be canceled on the 31st of January) 1855, but no notice or information was given to the defendant, nor had he any knowledge of such cancelment until the 25th of January, 1856. The twenty days mentioned in the bond expired on the 17th day of January, 1856; the interest which became due on the 27th December not having been paid by the defendant before such expiration. On the 24th January, 1856, the defendant was required by the plaintiffs’ attorneys to pay the principal and interest on his bond and mortgage. He thereupon caused the interest to the 27th of December, 1855, with interest upon such interest to that date, to he tendered to the plaintiffs and to their attorneys, which tenders were refused, and this action for the foreclosure of the mortgage commenced. On the 5th March, 1856, after the commencement of this suit, the defendant’s attorney offered the said interest, with interest thereon, together with the costs of the plaintiffs then incurred, to one of their attorneys, to the end that the complaint might he dismissed without prejudice to the rights of the plaintiffs on any subsequent failure of the defendant to pay thé interest on the bond and mortgage; which offer was declined, and the money so offered was then paid into court in this action.
The judge at special term dismissed the complaint; and the plaintiffs appealed.
A. C. Bradley, for the appellants.
I. Whether the bond and the undertaking concerning the judgment are considered as parts of the same transaction or different transactions, and whether they are considered, as the same of as different instruments, the effect is the same. By the one the defendant undertook to pay interest on the 27th of December; by the other the plaintiffs undertook to remove the judgment by the 1st of February, or to deposit the amount of it in the defendant’s hands. Neither of these papers separately, nor both together, made the payment of interest conditional upon the removal of the judgment. The payment was to be made absolutely, and, at all events, at an early period. The removal of the judgment remained optional until a later period. The "defendant’s debt was certain to fall due on the 27th December. It was not certain that the debt of the plaintiffs (the amount of the judgment in default of its removal) would ever be due, and if it should ever become due, that event could by no possibility occur before the first of February ; and, in point of fact, it never did fall due at all—the judgment having been removed on 31st December,' a month before the option expired. Of course, if the payment of interest was not dependent upon the removal of the judgment, the plaintiffs were not bound to give notice of the removal in order to entitle them to payment.
II. By the non-payment of the interest within twenty days after it fell due, the whole amount of principal became due. If the plaintiffs and the defendant had the right to buy and sell the land, they had the corresponding right to determine the time of payment, or the duration of credit. They had the right to make that term either absolute or dependent on conditions, or make it absolute for a certain period and conditional for a certain other period beyond, or make it four years, with a proviso that on the sooner happening of any specified event, the credit should terminate. What that event should be, was just as much within their jurisdiction as the amount of price, or any other act of free agency. It may be selected by reason or by caprice. If they had the capacity to contract at all, they had the capacity of making the time of the final performance of the contract depend upon the omission to pay interest.
A principle which cannot he denied without denying to men who are sui juris the right of contracting, does not depend on adjudged cases, though adjudged cases may illustrate it. (State v. Bradford, 4 Taunt. 227. James v. Thomas, 5 B. & Adol. 40. Noyes v. Clark, 7 Paige, 179. Norton v. Wood, 1 Russ & Myl. 178. 18 Vesey, 56, 58, 59 and 62. 14 id. 140. 16 id. 405. 13 id. 433, &c. 4 How. Pr. Rep. 576.) Now this right, which the plaintiffs and defendants possessed, they undoubtedly meant to exercise. The provision for the twenty days clause was inserted in Parfitt’s contract. When the defendant bought him out, he had it inserted in his own. And when that came to be performed, the clause was inserted in both the bond and mortgage, in language the most explicit. Both parties meant to agree, and agreed, that the interest should be punctually paid, or that the loan should end. (Hepwell v. Knight, 1 Younge & Coll. 415. Hale v. Gouverneur, 4 Edw. Ch. 207. Dimon v. Dunn, 15 N. Y. Rep. 498.)
III. The plaintiffs, in insisting on the letter, insist on its spirit also. They are not exacting a forfeiture, but enforcing a just contract. Millions of money are lent on mortgage in full reliance on punctual payment of interest. And it is for the good of society, that when debtors fail to pay interest, creditors should have the right to terminate the loan. And when debtor and creditor have, in just and fair terms, agreed how far punctuality shall extend the loan, and how far the want of it shall abridge it, it is for the still greater good of society that the courts abstain alike from altering the terms of the contract and from impairing the rights of parties under it.
IV. As to the defendant being thrown off his guard, his answer is not evidence, and there is no proof on the subject. The arrangement about the judgment was perfectly plain and simple. The plaintiffs were to remove it in 90 days from the 2d of November, or pay the amount of it into his hands. So, too, the arrangement about the interest was perfectly plain and simple. The arrangement was to pay it in twenty days after the 27th of December, or the whole principal would become due, and the loan would terminate. A man who understands any thing can understand both. And there is nothing in either singly, or in both together, sufficient to have thrown the defendant off his guard. If that allegation had not been found in his answer, there is nothing in any fact proved which would even suggest the possibility of such a thing.
R. Emmett, for the respondent.
I. The object of the twenty days clause was to induce punctuality in the payment of the interest, not to make a new contract for the payment of the principal at an earlier day. The punctual payment of the interest was the actual purpose of the condition; the liability consequent on its non-performance was the mere accessory. The demand, therefore, for principal, on failure to pay the interest within twenty days, is the exaction of a forfeiture or penalty: it is not a demand for the performance of a contract. In all oases where the payment of money appears to have been intended only to secure the performance of the main object of the agreement, the law views it as a penalty. (Sloman v. Walter, 1 Bro. Ch. 418. Graham v. Bickham, 4 Dall. 149. Merrill v. Merrill, 15 Mass. 488. Skinner v. Dayton, 2 John. Ch. R. 535. Sanders v. Pope, 12 Ves. 282. Davis v. West, Id. 475.)
II. The twenty days clause is in this respect within the principle that covenants to pay a larger sum as liquidated damages on failure, &c. shall be held to he merely penalties. “If the instrument provides that a larger sum shall be paid on the failure of the party to pay a less sum in the manner prescribed, the larger sum is a penalty, whatever may be the language used in describing it.” (Per Sandford, J. Beale v. Hayes, 5 Sandf. 640. 2 Parsons on Cont. 440, note, and cases cited. Id. 22, note.)
TIT Courts will relieve even against express covenants, where the enforcement would operate as penalties; and where they have been introduced merely to make more certain the due performance of the actual contract between the parties, and are mere accessories, therefore, to such contract; and where the thing claimed cannot be supported as an independent covenant, divested of any operation as a penalty, relief will always be granted against its execution. (Marquis of Halifax v. Higgins, 2 Vern. 134. Hollis v. Wyse, Id. 289. Shode v. Parker, Id. 316. Nicholl v. Maynard, 3 Atk. 519. Bonaface v. Rigbot, 3 Burr. 374.)
IV. The twenty days clause is analogous to a clause for re-entry in a lease, for non-payment of rent. If the tenant, at any time before trial, pays or tenders all the arrears of rent, with the costs, the proceedings in ejectment shall cease. (Roe v. Davis, 7 East, 363. Downes v. Turner, Salk. 597. Philips v. Doolittle, 8 Mod. 345. Smith v. Parks, 10 id. 383. 2 John. Ch. 535.)
V. The case comes also within the principles of equity on which relief against forfeitures is granted as between mortgagor and mortgagee. (See 4 Kent’s Com. 157-162, and cases cited; Story’s Eq. Jur. §§ 1313, 14, 16, 21; also §§ 775, 776, and cases there cited!)
YI. But whether the twenty days clause be viewed in the light of a penalty or of a strict contract, the peculiar circumstances of this case entitle the defendants to relief. And those circumstances—such as the subject matter of the contract, the situation of the parties, the usages to which they may be understood to have referred, and all other facts and circumstances of then: conduct—may be looked into and should be considered. (Perkins v. Lyman, 11 Mass. Rep. 76, 81.) The contracts must be construed together. (2 Pars, on Cont. 15, note a, and cases cited!)
YII. The plaintiffs, on the 2d November, 1855, undertook, in writing, that within ninety days they would do. one of two things; either have the lien of the judgment removed, or de-* posit the amount of it in the defendant’s hands. This was a contract on their part for the performance of either alternative, of which they reserved to themselves a space of time extending thirty-five days beyond the day when the interest would become due by the terms of the bond, and fifteen days beyond the succeeding twenty days. They had the option to do either of those things, and were therefore bound to give notice to the defendant as to which they elected to do; or, having actually elected to cancel the judgment, they were bound to inform the defendant of such election. “Where any option at all remains to be exercised on the part of the plaintiff, notice of his having determined that option, ought to be given, &c.” (By Baron Parke, in Vyse v. Wakefield, 6 Mees, & Wels. 442. S. C., 7 id. 126. 2 Parsons on Cont. 182, note 5.)
VIII. The canceling of the judgment, (which was their election,) being an act which they alone could do, they were bound to give notice of it to the defendant, when done. The doing of it lay not only within their exclusive power, but within their peculiar knowledge. ■ It is a general rule that when the happening of an event which calls for the performance of a duty by one party to another, lies more properly within the knowledge of the latter than of the former, notice from the party having such knowledge, to the other, is necessary. (Per Lord Abinger, in Vyse v. Wakefield, ut supra. 2 Parsons on Cont. 183, note. 2 Saund. 62 a, note 4.)
IX. If the plaintiffs’ undertaking to cancel the judgment or deposit the amount of it within ninety days, and the defendant’s undertaking to pay interest on his bond, are to be viewed as independent covenants; neither being conditioned upon the other, it makes the case stronger in equity for the defendant. If the ninety days had expired without the lien being removed or the amount deposited with the defendant, and the plaintiffs (refusing to do either,) had sued on the bond ■ and mortgage, no court, exercising equitable powers, would •refuse to grant an injunction against such suit, on a com plaint by the defendant to compel a specific performance of the plaintiffs’ agreement. The equity of the case would necessarily embrace the rights and claims of both parties growing out of the same transaction; and the fact that the lien had actually been removed before the expiration of the ninety days, does' not weaken the defendant’s equity in this case, because the plaintiffs kept him in ignorance of that fact. Be non existentibus et non apparentibus eaderrt est ratio. Covenants originally independent may become- dependent by the acts of the parties under them. (Beecher v. Conradt, 3 Kern. 108.)
X. The case shows surprise and hardship on the defendant, from the course pursued by the plaintiffs; and on that ground the decision of the special term should be affirmed.

Opinion:
Clerke, J.
This is an action to foreclose a mortgage under the following circumstancesffn September, 1855, the plaintiffs agreed with the defendant that they would convey certain premises to him on the second of November following, on receiving from him five hundred dollars, in addition to fifteen hundred dollars, which they had already received from him. It was also agreed, that he should give them his bond for four thousand dollars—the remainder of the purchase money—to be secured by a mortgage on the premises, payable on the 27th day of- June, 1860, with interest payable half yearly. The conveyance, bond and mortgage were to bear date 27th of June, 1855. The bond and mortgage contained a clause, that should any default be made in the payment of the interest, or any part thereof, on any day when the same was made payable, and should the same remain unpaid for twenty days, that then the principal sum ($4000) should, at the option of the plaintiffs, become payable immediately thereafter. On the 2d of November, 1855, the defendant was ready and offered to perform the agreement on his part; but the plaintiffs were unable to give an unincumbered title to the premises by reason of a judgment, which had been docketed against them in July previous; and which remained uncam» celed, and was a lien on the premises. The defendant con» sented, at the solicitation of the plaintiffs, to waive his right to rescind the agreement and receive hack the $1500, and was induced by them to accept a conveyance of the premises, to pay the additional $500, and to give his bond and mortgage for the $4000, containing the above mentioned clause. He, at the same time, received from them a written agreement^ that they would, within ninety days., cause the judgment to be canceled, or would deposit the amount of said judgment in his hands, until it should be discharged. This arrangement was made on the said 2d day of November, 1855. The first half year's interest, according to the terms of the bond, be» came due on the 27th of December, 1855 ; the plaintiffs pro» cured the judgment against them to be canceled on the 31st of December, 1855, but no notice was given to the defendant of the cancelment, nor had he any knowledge of it until the 25th of January, 1856. The twenty days mentioned in the bond expired on the 17th of January, 1856; on the 24th of January, the defendant was required by the plaintiffs' attorneys, without, any previous intimation from the plaintiffs or any other person, to pay the principal and interest on his bond and mortgage. He, thereupon, caused the interest to the 27th of December, 1855, with interest upon that interest to date of tender, to he tendered to the plaintiffs and their attorneys. The tender was refused; and this action was commenced, to foreclose the equity of redemption in the premises.
It will be seen, from this statement, that the defendant allowed the twenty days for payment of interest to elapse, under the impression that the plaintiffs had not procured the judgment, which was a lien on the premises, to be canceled. When the interest became due, on the 27th of December, 1855, the judgment remained uncanceled; after it was canceled, no notification of it was given to the defendant; and no demand of interest was made, or the slightest intimation given, that payment of it would be required, according to the Strict terms of the bond. Usually, when no stratagem is intended, the obligee calls or sends for this interest. But, the plaintiffs allowed the twenty days to elapse without uttering a hint; when they supposed that the default was irrevocable, and that they were entitled to exact prompt payment of the whole principal and interest; and on failure of this, to foreclose the defendant's equity of redemption. Nothing was more natural, under these circumstances, than for the defendant to suppose that the plaintiffs would not require the payment of the interest ($140) until the lien on his property (for $518.18) shotild be canceled; and, I think, it was contrary to all equitable dealing for the plaintiffs to take advantage of these circumstances, instead of apprising the defendants of the cancelment, and in due time, before the expiration of the twenty days, claiming the payment of the interest. This was oppressive and unreasonable conduct on the part of the plaintiffs ; and one of the principal and benign functions of a court of equity is to afford protection against such conduct, when a suitor attempts to avail himself of it by the instrumentality of a strict legal right. And more especially in a case like the present, when the plaintiffs seek the interposition of a court of equity to enforce a remedy, under circumstances which no court can avoid considering unconscionable, it will refuse to give its aid and countenance for such a purpose.
If there is any one action more than another pre-eminently the subject of jealous supervision by courts of equity, it is the action now under consideration. All transactions between mortgagor and mortgagee, have been always closely scrutinized by them; and, when the latter has taken advantage in any way of the former, or where there has been any detriment or hardship resulting from the inequality of their relative positions, and when there has been a mistake, injurious to the former, of which the latter ought in conscience to have apprised Mm, a court of equity so far from lending its assistance to consummate the wrong, will interpose to repair it. This is not an arbitrary interference with the substantial and essential provisions of a contract; it is shielding innocent or unfortunate persons against the unscrupulous perversion of them; it is interposing to prevent the employment of legal forms for purposes, which legal forms were never designed to promote. The action to foreclose an equity of 'redemption, and indeed permitting an equity of redemption to exist, by courts of equity, is a proof of this. It was instituted for the express purpose of mitigating the hardship of a strict legal right. By the terms of Ihe mortgage, if the day limited should pass without payment of the debt and interest, the estate, as we all know, would absolutely vest in the mortgagee, to the extent to which it is conveyed, free from the claims of the mortgagor. Courts of equity, seeing that it might perhaps be forfeited, according to the letter of the instrument, for a sum equivalent to a small portion of its actual value, interposed, and ordained that the mortgagor must have a further opportunity of paying what is due, and of redeeming the land. Now, this is sanctioned and regulated by statute; and the mortgagee so far from being entitled to the ownership of the land, as provided in the contract, is only entitled to have it sold after due notice, and a considerable lapse of time; and, if it bring more than the debt, the mortgagor is entitled to the surplus. If the court, then, has power to interpose, so as to change the whole character and effect of the instrument, it assuredly has power to mollify the effect of a single clause of it, relating to the period limited for the payment of interest. All that the mortgagee in either case ought to require is, that he should be secured against injury, and that he should derive all the benefit, that natural justice demands.
The judgment of the special term should be affirmed with costs.
Davies, J., concurred,