Old Republic Insurance Co. v. Lee

Brief Fact Summary. The Lees, (Appellees), failed to make two loan payments on their second mortgage. Old Republic Insurance Co., (Appellant), the mortgage holder, notified Appellees that the mortgage was being declared in default and the unpaid balance was being accelerated. Appellant filed suit to foreclose but the court granted Appellees motion to reinstate.

Synopsis of Rule of Law. Once the mortgage holder has exercised his option to accelerate, the right of the mortgagor to tender only the arrears is terminated.

Facts. Appellant notified Appellees that they were in default on their second mortgage and the principal balance was being accelerated. Appellees sent Appellant a certified check for the two overdue payments and the next payment due. Appellant returned the check and filed suit to foreclose. Appellees moved to reinstate the mortgage. The court granted this motion finding that there was substantial equity in the property, the first mortgage was current, and the second mortgage would be paid from the proceeds of the Appellees’ proposed sale of the property.

Issue. Whether the mortgagor had the right to prevent the mortgage holder from exercising his option to accelerate by tendering the arrears due.

Held. No. This right terminates once the mortgage holder has exercised his option to accelerate.

Discussion. The mortgagor upon the occurrence of a default may tender the arrears due and thereby prevent the mortgage holder form exercising his option to accelerate. However, once the mortgage holder has exercised his option to accelerate, the right of the mortgagor to tender only the arrears is terminated.