Walsh v. Henel

Crosby, J.

Defendants Henel gave plaintiff a mortgage upon real property which the Henels owned and afterward conveyed to the defendant Lutz, the latter assuming and agreeing to pay the mortgage. Lutz defaulted in payment of an installment of interest coming due upon the mortgage. There was an acceleration clause in the mortgage which enabled plaintiff, if he so elected, to declare the whole amount of the mortgage due. Plaintiff filed a summons and complaint and lis pendens in the county clerk’s office, but in the complaint stated no election to have the whole amount of the mortgage become due; indeed the complaint did not state a cause of action at all for it did not allege that there was any default, even in interest payments. Even in the demand for judgment the complaint demanded only that plaintiff may be paid ” out of the proceeds of the sale; but did not state whether payment of the interest or of the whole mortgage was desired. Plaintiff never served the summons upon any defendant. The action was, therefore, never commenced. (Civ. Prac. Act,. § 218J Plaintiff never served any written or other notice that he elected to have the amount of the mortgage come due. Plaintiff refused a tender of the past due interest saying that he had started a foreclosure action; *200and plaintiff under cross-examination upon the trial in the present action stated, in substance, that he had elected, in his own mind, to declare the whole mortgage indebtedness become due at the time that he filed his summons, complaint and lis pendens.

Finally plaintiff accepted the payment of the past due interest together with ten dollars toward the expense of continuing the search and filing his papers in the clerk’s office, and consented to let the mortgage run in accordance with the original terms of payment. Upon a subsequent default in payment of interest as it became due, plaintiff started the present foreclosure action and demanded a deficiency judgment against all the defendants. The defendants Henel contended, and the learned trial court decided, that they were released from their liability for the mortgage debt, upon the ground that plaintiff, having made an election that the whole amount of the mortgage was to become due, and having thereafter extended the time of payment, had thereby released the defendants Henel. It is true that the Henels stand in the relation of surety to Lutz who is the principal debtor. And it is also true that any extension of the time of payment granted to the principal debtor will have the effect of releasing the surety from obligation to pay the debt. (Calvo v. Davies, 73 N. Y. 211; Germania Life Ins. Co. v. Casey, No. 1, 98 App. Div. 88.)

But plaintiff did not follow up his mental determination to have the whole mortgage debt become due by any action amounting to an election such as would be binding upon Lutz; and if there were no such election as would be binding upon Lutz, there was no election for any purpose. Plaintiff commenced no action, served no notice of his intention to have the whole amount become due, and, even in the complaint that was filed, expressed no election to have the whole sum become due and payable. Plaintiff never in any way communicated to Lutz his mental “ election,” so called; and never did anything clearly evidencing his election. Had plaintiff himself sought to have gone ahead with his original foreclosure action, he could have been successfully met with the defense that up to the time the tender of interest was made to him, he had done nothing upon which he could have successfully based a claim of election to have the whole debt become due; and the tender, of course, forestalled any election thereafter. (Cresco Realty Co. v. Clark, 128 App. Div. 144; Matusak v. Bakiorzynski, 128 Misc. 375.)

The right in a mortgagee to elect to have the whole mortgage debt become due, upon default in the payment of an installment of interest, is in the nature of an option which, in order to become effective, must be communicated by some means equiva*201lent to a notice to the grantor of the option.. An option cannot be exercised by a mere operation of the mind.

Under these circumstances the whole mortgage never became due, and plaintiff, in permitting Lutz to make payments on the mortgage in accordance with its terms, did not extend the terms of payment so as to release the surety.

The judgment entered herein, which was to the effect that the complaint herein should be dismissed in so far as it demands a deficiency judgment against the Henels, should be reversed upon the law, and judgment given to plaintiff to the effect that the defendants Henel shall be liable for the deficiency, if any.

All concur, except Edgcomb and Thompson, JJ., who dissent and vote for affirmance in an opinion by Edgcomb, J. Present —■ Sears, P. J., Crouch, Edgcomb, Thompson and Crosby, JJ.