Germania Life Insurance v. Casey

Laughlin, J.: The action is brought to foreclose a mortgage executed by the defendant John Casey and his wife on the 20th day of September, 1895, to secure the payment of $20,000 on the 1st day of August, 1898, according to the terms of his bond given therewith and bearing interest at the rate of five per cent per annum payable on the first days of February and August of each year. On the 24th day of February, 1896, Casey conveyed the premises subject to the mortgage which his grantee assumed and agreed to pay. The plaintiff sought to hold Casey for any deficiency and the complaint was dismissed on the ground that on the 31st day of January, 1899, the mortgagee, with knowledge that Casey had conveyed the premises, and that his grantee had assumed the payment of the mortgage, and [90] that the premises were then worth more than the amount of the mortgage and interest, accepted payment of the interest for six months which was not due until the day following. This payment of interest was made without the knowledge or consent of the respondent and the theory of his learned counsel is that its acceptance constituted an extension of time of one day for the payment of the mortgage debt. There can be no doubt, I think, that the mortgagee, by. accepting the interest as such before the same became due, precluded itself from foreclosing the mortgage until the expiration of the period for which the interest was accepted. After the conveyance by Casey his liability became that of a surety; and if there was any extension of time for the payment of the mortgage debt without his knowledge or consent he was relieved from all liability upon the bond. In New York Life Ins. Co. v. Casey (178 N. Y. 381) the Court of Appeals held that the receipt of interest upon a mortgage indebtedness in advance of the time that the same became due is prima facie evidence of an agreement on the part of the mortgagee to extend the time of payment until the expiration of the period for which the interest was received, which, however, may be rebutted by proof of facts and circumstances showing that such agreement was not made. In the case at bar no facts or circumstances are shown to rebut the presumption arising from the receipt and acceptance of the interest in advance, and consecpiently the inference that an agreement was made for the extension of time of payment is justified by the evidence. It is, however, insisted that the court has failed'to find that such an agreement was made. The case contains all of the evidence, and there being no conflict therein on this point we are at liberty, for the purpose of sustaining the judgment, to indulge in the assumption that the trial judge is deemed to have found every material fact established by the evidence and essential to sustain the judgment. (Ogden v. Alexander, 140 N. Y. 356; First National Bank v. Chalmers, 144 id. 432 ; Marvin v. Brewster Iron Mining Co., 55 id. 538; Murray v. Marshall, 94 id. 611.) Moreover the trial justice found the payment and acceptance of the interest one day in advance; and although he does not specifically find that it was done pursuant to an agreement" for an extension, yet he finds in the second conclusion of law that by the [91] payment of the interest a day before the same became due the plaintiff and Casey’s grantee “ entered into an agreement for a valuable consideration without the knowledge or assent of the defendant John Casey, extending the time for the payment of the principal sum secured by the said mortgage under foreclosure in this action to and including the 1st day of February, 1899.” This conclusion of law may, for the purpose of sustaining the judgment, be treated as a finding of fact since the evidence is all in the record and undisputed. (Adams v. Fitzpatrick, 125 N. Y. 124 ; Parker v. Baxter, 86 id. 586.) We are aware that this is a new application of a well-settled rule of law and that it is important that it should be well understood by those dealing in securities. It is often a convenience to a person primarily liable on a mortgage to pay the interest a day or a few days in advance; and, in a sense, it is to the interest of the mortgagor that it should be accepted when tendered, for if payment should be deferred it might not be made at all. The effect of this decision is not that interest cannot be accepted in advance without discharging the sureties. It only applies in any event to cases where the principal has become due and payable. Payments of interest in advance even when the principal has become due may still be accepted by the mortgagee without releasing the sureties, provided that he expressly reserved the right at any time to return the surplus of interest or apply the same upon the principal and enforce payment of the balance, which agreement may, for greater security, be incorporated in the receipt or otherwise reduced to writing. It follows, therefore, that the judgment should be affirmed, with costs. Patterson and O’Brien, JJ., concurred; Van Brunt, P. J., concurred in result; Hatch, J., dissented. Judgment affirmed, with costs.