Ritter v. . Phillips ( 1873 )

The sole appellant is the defendant Thaule. He is a subsequent grantee by intermediate conveyances from Philips, the mortgagor. He purchased the premises subject to the mortgage, and assumed, by the provisions of the deed to him, to pay off this mortgage as a part of the consideration money. It is to be gathered from the case, that the amount thus assumed by Thaule was the sum of $4,000 of principal, and the interest thereon from the first day of May, 1870. As by the judgment of foreclosure and sale the amount due and payable and unpaid upon the mortgage is declared to be but $4,000 of principal, and the interest thereon at the rate of but six per cent per annum from that date, it does not appear how he is damnified, nor what interest he has in contesting the question as to the amount. He is not compelled by the judgment to pay more than he agreed to. (See Freeman v. Auld, 44 N.Y., 50.)

Nor is the defendant aided by the tender made. That was done on the 6th day of July, 1870. There was then accrued interest upon the mortgage for two months and five days, at the rate of six per cent per annum, amounting to forty-three dollars and thirty-three cents, and the principal sum was $4,000. The defendant offered but $4,025. It was not enough. Nor was it brought into court, nor otherwise kept within the power of the testator or the plaintiff to obtain it (Brown v. Ferguson, 2 Denio, 196), though this was unnecessary within the rule laid down in Kortright v.Cady (21 N.Y., 343).

Nor was the excess, which was at different times paid for interest, over the amount due and payable at the rate of six per centum per annum, applicable as a payment of so much upon the principal. It is shown that the additional rate of one per centum per annum was paid as a consideration for forbearance by the mortgagee or his assignee to exact the payment of the principal, which was, by the terms of the mortgage, then due and payable. It has been held in this State, that where, by the terms of the agreement, interest was reserved at the rate of six per cent, the rate remained the same until the agreement became merged in a judgment, and did not increase to the legal rate upon the principal money becoming due and payable by the terms of the agreement. (Miller v. Burroughs, 4 J.C.R., 436, cited and approved inVan Beuren v. Van Gaasbeck, 4 Cow., 496.) This has been somewhat shaken in U.S. Bank v. Chapin (9 Wend., 471), where it was held that when a bank was, by its charter, limited to the rate of six per cent in its discounts, yet that it could recover at the rate of seven per cent, from the time the notes it had discounted became payable. And to the same effect is Macomber v. Dunham (8 Wend., 550). See also Ludwick v. Huntzinger (5 Watts Serg., 51), Brewster v. Wakefield (22 How. U.S., 118) and Haggerty v. Allaire Works (5 Sandf., 230). It is not necessary now to determine which of these sets of cases declares the law correctly. There is another rule which disposes of the question adversely to the defendant. For even if the mortgagee may not exact interest at the legal rate, after the principal becomes payable, and even if an executory agreement to pay the increased rate would not be enforced, yet, where the agreement to pay the enhanced rate was legal, and was founded upon a good consideration, and has been performed, the transaction will not be disturbed, nor will the excess of interest paid be applied as a payment on the principal. It is like an executed agreement to pay interest upon interest accrued. This is compound interest. An agreement to pay interest on interest thereafter to accrue, will not be enforced. But after it has been paid, it cannot be recovered back (Mowry v. Bishop, 5 Paige, 98), and by parity of reason it will not be applied as a payment upon principal. (See N.Y. Life Ins. Trust Co. v. Manning, 3 Sandf. Ch., 58, which is directly in point.)

The judgment appealed from must be affirmed, with costs to the respondent.

All concur, except CHURCH, Ch. J., not voting.

Judgment affirmed.