## Facts

- Executors of an estate held two consolidated mortgages constituting a single lien on real property owned by Hope Building Corporation.
- The principal was due in 1935, but the mortgage provided that the entire debt would become due if any interest installment remained unpaid for 20 days.
- The corporation’s president and controlling stockholder was the only person authorized to sign checks; he left for Europe in June 1927.
- Before leaving, he signed an interest check calculated by a clerical employee; the calculation was wrong, and the check was short by about \$401.87.
- Before the interest due date, the employee discovered the error, informed the mortgagee of the shortage, and sent the short check, which the mortgagee deposited and collected.
- The president returned shortly after the due date, but office staff did not inform him of the short payment; the shortage was not cured within the 20-day period.
- After 21 days, the mortgagees commenced foreclosure, refused a tender of the deficiency, and elected to accelerate the mortgage debt.

## Issues

1. Whether equity should prevent enforcement of a mortgage acceleration clause when an interest default resulted from the mortgagor’s internal mistake and negligence and the mortgagee engaged in no unconscionable conduct.
2. Whether the mortgagee’s acceptance and collection of a knowingly short interest check waived the right to accelerate after the contractual default period elapsed.

## Decision

- The Court of Appeals reversed the lower courts and granted the mortgagees the relief demanded, permitting foreclosure and enforcement of acceleration.
- The court held the acceleration clause was a valid covenant and was enforceable according to its terms.
- The court declined to grant equitable relief because the default stemmed from the mortgagor’s own errors and omissions, not from fraud, bad faith, or oppressive conduct by the mortgagee.
- The court rejected waiver based on the mortgagee’s collection of the short payment where the contractual 20-day default period ran without full payment.
- Cardozo, C.J., with two other judges, dissented.

## Legal Principles

- A mortgage acceleration clause that is fair on its face and agreed to by the parties is enforceable as written.
- Equity will not relieve a mortgagor from acceleration based solely on hardship or a default caused by the mortgagor’s negligence; relief generally requires misconduct by the mortgagee that a court can treat as unconscionable.
- Courts will not rewrite clear contractual terms under the guise of interpretation to avoid consequences of a party’s default.
- Acceptance of an installment that is less than the amount due does not, by itself, bar acceleration when the contract provides a defined grace period and full payment is not made within that period.

## Conclusion

The court enforced the mortgage’s acceleration clause after a small interest shortfall went uncured past the contractual default period, holding that equitable relief is unavailable where the default is self-inflicted and the mortgagee has not acted in a manner warranting judicial intervention.


Graf v. Hope Bldg. Corp., 254 N.Y. 1, 171 N.E. 884 (N.Y. 1930)