#### Daniel C. Sands, Respondent, *v.*Thomas Gilleran and Millett Realty Company, Appellants, Impleaded with Moses Jaffe and Others, Defendants.

Second Department,

November 7, 1913.

Mortgage — rate of interest after maturity — contract —consideration — authority of assignor or pledgor to make contract altering terms of bond or mortgage.

Where, under the provisions of a bond secured by a mortgage, interest is to be computed at a stated rate until maturity, thereafter interest should be computed as damages, according to the rate prescribed by law, and not according to the amount stated in the contract.

Hence, a promise by a mortgagor to pay interest at six per cent, the rate prescribed by law, after the maturity of such a bond and mortgage, is a promise to do that which the promisor is already under legal obligation to do, and affords no consideration for a corresponding promise to extend the time for the payment of the principal of the bond and mortgage.

A pledgor of a bond and mortgage has no authority alone to enter into an agreement altering the terms thereof.

Appeal by the defendants, Thomas Gilleran and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Westchester on the 7th day of January, 1913, upon the decision of the court after a trial at the Westchester Special Term.

*Robert H. Wilson,*for the appellants.

*George H. Hyde,*for the respondent.

Burr, J.:

On July 15, 1907, Moses Jaffe and Thomas Gilleran executed their bond to the L. D. Garrett Company, the condition of which was that they should pay to it the sum of $18,000 on July 15, 1910, “and the interest thereon, to be computed from the fifteenth day of July, 1907, at the rate of five (5%) per cent per annum, and to be paid semiannually, on the fifteenth days of July and January in each year.” This bond was secured by a mortgage upon certain real property situated in the city of Yonkers. By various mesne assignments the record title to said bond and mortgage on or about February *381, 1911, became vested in plaintiff, who, on March 20, 1912, began this action to foreclose said mortgage and to enforce liability upon said bond. From a judgment in his favor Thomas Gilleran, liable upon the bond, and the Millett Realty Company, the present owner of the premises described in said mortgage, appeal.

The defense interposed is that on or about July 19, 1910, the then owners of the property entered into an agreement with the then holders of said mortgage, whereby the time for the payment of the principal thereof was extended for three years from July 19, 1910, and the rate of interest was increased from five per cent to six per cent per annum. The learned court at Special Term has found that plaintiff is the sole and absolute owner of said bond and mortgage, and that there is due thereon the sum of $18,000 of principal, with interest at the rate of six per cent per annum from July 15, 1911; and one of the grounds upon which appellants seek a reversal of such judgment is that it awards to plaintiff interest at the rate of six per cent per annum upon the amount found due for principal, but ignores and disregards so much of an alleged agreement as provides for an extension of the time for the payment of the principal. If plaintiff’s right to demand the increased rate of interest depended upon such an agreement, and it had been made, there would be force in the contention. *(New York Life Ins. Co.*v. *Casey,*178 N. Y. 381.) But it does not. In the case cited the bond expressly provided that the interest should be payable at five per cent per annum “until the principal sum be paid.” In this case there is no such provision. “When the contract provides that the interest shall be ata specified rate until the principal shall be paid, then the contract rate governs until payment of the principal, or until the contract is merged in a judgment.” “Where one contracts to pay a principal sum at a certain future time with interest, the interest prior to the maturity of the contract is payable by virtue of the contract, and thereafter as damages for the breach of the contract,” and “after the maturity of such a contract, the interest is to be computed as damages according to the rate prescribed by the law, and not according to that prescribed in the contract if that be more or less. * * * When *39a man’s obligation to pay interest is simply that which the law implies, he discharges that obligation by paying what the law exacts.” *(O’Brien*v. *Young,*95 N. Y. 428; *Taylor*v. *Wing,*84 id. 471; *Sanders*v. *Lake Shore & Michigan Southern R. Co.,*94 id. 641; *Ferris*v. *Hard,*135 id. 354; *Pryor*v. *City of Buffalo,*197 id. 123.) On July 15, 1910, the contract to pay interest at the rate of five per cent matured. Subsequent, to that date plaintiff was entitled to interest at the statutory rate of six per cent. A promise to do that which the promisor is already under a legal obligation to do affords no consideration for a corresponding promise to extend the time for the payment of the principal of the bond and mortgage if such had been made. But was there any such agreement? If it exists it must be found in an instrument executed in duplicate on July 19,1910, by W. R. Oglesby and Thomas Gilleran respectively, which reads as follows: “Will agree to extend for 3 yrs from date. Int to be six per cent — Mtge not to be foreclosed if taxes and not less than half the interest is paid as & when due. Other half Int may stand until end of three yrs.”

If Oglesby had at that time been the owner of the bond and mortgage it is at least doubtful whether such an agreement would have been enforcible. *(Olmstead*v. *Latimer,*158 N. Y. 313.) But the court has refused to find that at that time he was such owner, and the evidence fully sustains such refusal. Construing it most favorably for the appellants, the bond and mortgage had at that time been assigned to one Thomas M. Waller by an assignment absolute in form, but which in fact was held as collateral security for a loan of $15,000 made by Waller to Oglesby, or to some one in his behalf. If Oglesby at that time had any interest in the proceeds of such bond and mortgage after his debt was paid, the legal title thereto was vested in Waller, who had a right against the owner of the property to enforce the same without making Oglesby a party. (2 Jones Mort. [6th ed.] §§ 1374, 1375a; *Matter of Gilbert,*104 N. Y. 200; *Norton*v. *Warner,*3 Edw. Ch. 106.) If the property sold for more than sufficient to pay the debt to secure which it was assigned, the assignor would be entitled to the surplus over and above such indebtedness. (2 Jones Mort. [6th ed.] § 1375.) Or, if the assignee purchased the land, the assignor would be *40entitled upon the payment of his debt to a conveyance thereof. *(Matter of Gilbert, supra.)*But the assignor or pledgor has no such title to the bond or the mortgage for which it was given as security as would enable him alone to enter into á valid and enforcible agreement altering the terms thereof. The court has likewise found that subsequently thereto plaintiff became the absolute owner of the entire bond and mortgage, and the evidence sustains such finding.

It follows that the judgment appealed from must be affirmed, with costs.

Jenks, P. J., Thomas and Carr, JJ., concurred; Putnam, J., not voting.

Judgment affirmed, with costs.