decided: April 13, 1978.
THE MINISTERS AND MISSIONARIES BENEFIT BOARD OF THE AMERICAN BAPTIST CHURCHES
RAYMOND H. GOLDSWORTHY, APPELLANT, AND ELIZABETH GOLDSWORTHY, A/K/A ELIZABETH GOLDSWORTHY GORDON
Randy L. Sebastian, West Chester, for appellant.
Daniel M. Haug, Ambler, submitted a brief for appellee, Ministers and Missionaries Benefit Bd. of the Am. Baptist Churches.
No appearance entered nor brief submitted for appellee, Elizabeth Goldsworthy, a/k/a Elizabeth Goldsworthy Gordon.
Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Spaeth, J., files a concurring opinion. Watkins, former President Judge, did not participate in the consideration or decision of this case.
[ 253 Pa. Super. Page 325]
In this appeal,*fn1 we are asked to decide whether the Act of January 30, 1974, P.L. 13, No. 6, 41 P.S. § 101 et seq. or, more specifically, those sections which provide for notice of intention to foreclose*fn2 and the right to cure a
[ 253 Pa. Super. Page 326]
default,*fn3 may be applied in a case where the mortgage was executed prior to the effective date of the Act, but the default occurred subsequent to that date. The lower court here held that those provisions may not be so applied. We disagree. Nevertheless, for the reasons developed below, we affirm the order of the lower court dismissing appellant's preliminary objections.
[ 253 Pa. Super. Page 327]
The pertinent facts may be summarized as follows: On October 7, 1975, plaintiff-appellee, a nonprofit religious corporation, commenced an action in mortgage foreclosure against defendant-mortgagors, former husband and wife, alleging three separate grounds of default under the terms of a mortgage dated January 24, 1968.*fn4 Defendant-appellant
[ 253 Pa. Super. Page 328]
Raymond H. Goldsworthy filed preliminary objections to the complaint alleging, inter alia, appellee's failure to comply or to aver compliance with Act No. 6.*fn5 Appellee filed answers to appellant's preliminary objections and, by order dated August 12, 1976, the lower court dismissed those preliminary objections. However, on September 12, 1976, the lower court amended its prior order so as to permit appellant to file a petition for an interlocutory appeal. We granted appellant's petition on October 12, 1976, and, therefore, the issues raised by his preliminary objections are now properly before us.
At the outset, it must be noted that the validity and enforceability of "acceleration" clauses are not here questioned. Generally, a provision in a mortgage agreement according the mortgagee the option to accelerate the maturity
[ 253 Pa. Super. Page 329]
of the mortgage debt, under certain conditions or upon the happening of specified events, is regarded as a legitimate contractual stipulation. See 55 Am.Jur.2d, Mortgages, §§ 371-393. If a stated default exists and the option to accelerate is exercised by the mortgagee, the balance on the whole mortgage indebtedness is due and payable; foreclosure proceedings will, therefore, not be premature.
Before the enactment of Act No. 6, the effect of acceleration apparently could not be defeated by the mortgagor's willingness to cure the default; our attention has not been called to, nor does our research disclose, a Pennsylvania appellate decision wherein a mortgagor was permitted to tender only the delinquent payment or performance after the mortgagee declared the entire debt due and payable. Under Act No. 6, however, a mortgagee is precluded from accelerating the maturity date of the mortgage debt and commencing foreclosure proceedings, despite the existence of a default, until after the mortgagor is given notice of the default and his right to cure it.
There can be no doubt that an acceleration clause confers a right upon the mortgagee which, by constitutional provision, is immune to impairment by legislative action.*fn6 It becomes equally clear that Act No. 6 limits this right of a mortgagee to declare the entire debt due in the event of default. Accordingly, the question to be decided here is whether this change in law constituted an impairment of the obligation of a mortgage contracted prior to the passage of the Act.*fn7 We conclude, after careful consideration, that it did not.
[ 253 Pa. Super. Page 330]
In reaching this conclusion, we quote these enlightening comments of Mr. Justice (later Chief Justice) STERN:
"Any law which enlarges, abridges, or in any manner changes the intention of the parties as evidenced by their contract, imposing conditions not expressed therein or dispensing with the performance of those which are a part of it, impairs its obligation, whether the law affects the validity, construction, duration, or enforcement of the contract [citation omitted]. . . .
"The amount of impairment of the substantive obligation of a contract is immaterial. Any deviation from its terms, however slight, falls within the meaning of the constitution [citation omitted]. . . .
"The remedy, or means of enforcing a contract, is a part of its obligation which the Constitution protects. The Legislature has the power to formulate, alter, and suspend modes of procedure, even as to pre-existing contracts, provided that, under the guise of a procedural statute, it does not deprive a party of any substantial right under the contract [citations omitted]. Any change in procedure which does not supply an alternative remedy, equally adequate and efficacious, in place of that which existed when the contract was made, is violative of the constitutional prohibition. . . .
"[W]e must always bear in mind the distinction between legislation which merely postpones the legal vindication of rights and that which curtails or injuriously affects the rights themselves or the efficacy of the remedies provided for their enforcement. . . ."
[ 253 Pa. Super. Page 331]
If the only default averred was the failure to pay past due installments of principal and interest, we would agree with appellant that the notice was deficient in that respect. But appellant ignores the fact that appellee, in electing to declare the entire sum due and payable, alleged breaches of two other covenants of the mortgage agreement. There is no dispute that these breaches were independent of any alleged nonpayment and, in themselves, would have authorized appellee to invoke the acceleration clause. The question, therefore, is whether the existence of the additional allegations of default made inclusion of the omitted information unnecessary.
A principal function of Section 403 notice is to make the mortgagor aware of the existence of a default and his right to cure it; he is not to be cursed by an inadvertent delinquency. After receipt of this notice, the mortgagor can prevent foreclosure and avoid acceleration by tendering the appropriate amount or performance specified in Section 404(b). Once the default is cured, a necessary element permitting acceleration and foreclosure is no longer present.
This ability to prevent foreclosure and avoid acceleration, however, is distinctly delimited; it necessarily presupposes the existence of a default curable in the prescribed manner. Therefore, where acceleration is predicated upon a default
[ 253 Pa. Super. Page 333]
which cannot be cured, the reason for, and necessity of this information disappears.
Although Section 404 does not specify the type of default which may be cured, we agree with appellee that this section relates almost exclusively to monetary defaults. Thus to cure a default, subsection (b) directs that the mortgagor "pay or tender" all delinquent sums, together with reasonable fees and costs, and any late penalty, and that the mortgagor "perform any other obligation which he would have been bound to perform . . . ." Clearly, appellant could cure a default resulting from nonpayment of principal and interest. Equally clear, however, is the fact that appellant could not cure a default based on conveyance of the premises in violation of the mortgage agreement. And, if mortgagors have already transferred the premises, any information as to their right to transfer is unnecessary. Based on the foregoing, we conclude that appellee's letter of July 28, 1975 provided all of the information required to comply with Section 403.
One other point requires only brief discussion. Appellant argues that appellee's complaint failed to aver compliance with Act No. 6. In making this argument, however, appellant has overlooked Pa.R.C.P. 1147, which details the contents of a complaint in foreclosure. A note thereto, added September 22, 1975, provides as follows:
If the mortgage is a residential mortgage under Act No. 6 of 1974, 41 P.S. 101, the complaint should set forth an averment of compliance with the provisions of Section 403 of Act No. 6, 41 P.S. 403.
We agree with appellee that the foregoing provision is merely precatory. Moreover, appellee's compliance with the notice requirement of Section 403 was shown here by affidavit of service and, therefore, is a matter of record.
Accordingly, we affirm the lower court's order dismissing defendant-appellant's preliminary objections.
[ 253 Pa. Super. Page 334]
SPAETH, Judge, concurring:
The majority opinion concludes that appellee complied with Act No. 6 so far as pertinent to this case. I agree with that conclusion. Therefore, I do not reach the constitutional question.