Case ID: misc_21/html/0084-01.html
Source: Caselaw Access Project
Author: {"author": "McAdam, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Nellie E. Peck, Respondent, v. The Granite State Provident Association, Appellant.
    (Supreme Court, Appellate Term,
    July, 1897.)
    1. Interest — Payment of principal bars interest.
    Interest, not payable by the terms of a contract, is recoverable only . as a damage -for the detention of the principal;, and ordinarily, in the case of such a contract, payment of the principal'bars an action for ' the interest. " ; '
    
      ■2. Same—Exception -— Payment “ on account.”
    -. Where, however, the drawee makes a payment “on account’-’ upon a draft, payable without interest and only upon the completion of a building, and the draft is not then surrendered by. the holder, but is retained by her as an evidence- of debt, the court .will infer that it was the intention of the parties that interest should be payable, and the holder may recover-interest from the date when-the drawee was first' notified that the building was completed, by a letter in- which the ■ secretary of the drawee acknowledged the receipt of a claim made upon it by the holder for the payment of the draft.
    Appeal by defendant' from judgment of .the- Second .District Court. "
    Lexow, Mackellar & Wells, for appellant.
    Holm & Smith, for respondent.
   McAdam, J.

The action is by the plaintiff as the transferee and holder of a draft accepted by the defendant to recover $72, as a balance due thereon. . The draft -is in these words:

“ Thé State Provident Association, please pay to the order of J. M. Peck’s Son & Company, two hundred dollars,. and charge the same to my account. Payable, on completion of the building.

“ Dated, New York, December 13, 1889. Rudolf Brasche.”

Across the face of the draft is written “Accepted by Granite State Provident Association. G. Percival Stewart, V. P.; ” and it is indorsed “ J. M. Peck’s -Son & Co.”

No notice to the defendant of completion of the building or demand on it for payment was proved further than what may be inferred from a letter written by the defendant’s secretary, June 20, 1892, in which he acknowledged the receipt of a claim made on the defendant for the payment of the draft. Thereafter, and on January 28, 1896, the assistant treasurer of the defendant wrote to the plaintiff’s attorneys, inclosing a check for $200, saying that it was “ on account of the draft.” The check was received, collected, and the proceeds credited “ on account ” as requested in the letter. The draft was not surrendered, but was apparently retained that the interest thereon might be adjusted, and the action on the draft is practically to collect such interest.

We are aware of the rule that where an instrument does not specify on its face that interest is to be paid, the payment of the principal is regarded as a bar to any action for the interest (5 Laws R. & R., § 2434; S. Cent. R. R. Co. v. Town, 61 Barb. 180; Tenth Nat. Bk. v. Mayor, 4 Hun, 429; Cutter v. Mayor, 92 N. Y. 166), for the reason that the interest .is allowed not as part of the contract, but as a mere incident to it, agreeably to the maxim accessorium non ducit, sed sequitur, suum principale. Broom’s Max. 491; Cooper v. Newland, 17 Abb. Pr. 342.

If the" $200 check had been accepted in payment of the draft, or 'if the draft had been surrendered on receiving the check (Middaugh v. City of Elmira, 23 Hun, 78), the interest would no longer have constituted a debt capable of a distinct claim, but would have been extinguished by the payment of the principal obligation. That is not this case. The giving of the check was not declared to be in payment, but “ on account ” of the draft, and was so accepted by the plaintiff, and possession of the draft was, therefore, retained by her as evidence of the debt. This seems to have been the intention of the parties. The payment was, consequently, but a partial one, and in such case it is. to be applied first to the interest then due, and if it exceeds the interest it is to be applied on the principal remaining due. 2 Cow. Tr. (Kingsley’s ed.), § 1527; 5 Laws R. & R., § 2445. In other words, the facts take the case out of the general rule mentioned in McCreery v. Day, 119 N. Y. 1, and bring it within the special rule therein referred to.

The question, therefore, resolves itself into what amount of interest the plaintiff was legally entitled to receive to extinguish the •claim.

As interest is not payable by the terms of the contract it is recoverable only as damages for the detention of the principal, and from such time as the defendant was placed in default. (1 Suth. Dam. 619, 620; in re Trustees, etc., 137 N. Y. 95.) This, on the evidence, was June 20, 1892,¡ and according to the computation of the plaintiff’s witness the interest from that date to the time of trial amounted to $54.81. This sum was the limit of the plaintiff’s recovery.

The trial judge allowed $72 as interest from March 13, 1890, the time the building was said to have been completed. This was error, in view of the fact that no notice of such completion was given to the defendant until the demand made on June 20, 1892.

• The judgment must, therefore, be. reversed, and a new trial ordered, with costs to the appellant to abide the event, unless within ten days the plaintiff stipulates to reduce the recovery to $54.81, ini which.case the judgment as modified will be affirmed, without.costs upon this appeal.

Daly, P. J., and Bischoff, J., concur.

Judgment reversed and new trial ordered, with costs-to appellant to abide the event, unless within ten days plaintiff stipulates to reduce the recovery, in which case judgment as modified affirmed, without costs up on-this appeal.