#### Frederick Klein, Respondent, *v.*The East River Electric Light Co. et al., Appellants.

(Supreme Court, Appellate Term,

January, 1901.)

Interest — When recoverable on past due coupons of a bond.

Interest is not collectible upon past due coupons while they are held by the owner of the bond which they accompany, and, although an exception to the rule exists where the coupons have become separate and independent instruments, interest will not be allowed unless the claimant pleads and proves circumstances which will bring the case within the exception.

Klein v. East River Electric Light Co., 32 Misc. Rep. 774, reversed.

Appeal from a judgment and order of the General Term of the City Court of the city of New York, affirming a judgment of the City Court in favor of the plaintiff.

Beardsley & Hemmens (Samuel A. Beardsley and Henry J. Hemmens, of counsel), for appellants.

Dittenhoefer, Gerber & James (A. J. Dittenhoefer and David Gerber, of counsel), for respondent.

*Per Curiam.*

The plaintiff sues as the owner of five interest coupons, formerly attached to bonds issued by the East River Electric Company. These coupons, for thirty dollars each, are upon their face payable at the office of the treasurer of the company in the city of New York, on the 1st day of September, 1888.

The defendant, the Manhattan Electric Company, as the successor of the East River Electric Light Company, admits its lia*597bility and, at some time before the trial, made an offer of judgment for the face of the bonds, with costs, to the date of the offer. It does not appear whether or not the plaintiff is the owner of the bonds to which the coupons were originally attached, nor does it appear when the coupons were detached from said bonds, nor whether they came into plaintiff’s ownership before or after such detachment.

The sole question litigated between the parties was as to the liability of the defendants for interest upon the amount represented by the coupons, from the due date to the date of trial. The question of the liability of an obligor to pay interest upon past due coupons has been much discussed. It would be profitless to follow the discussion in the Federal courts and the courts of sister States. In our own courts the question has been apparently well settled. It arose in *Williamsburgh Savings Bank*v. *Town of Solon,*136 N. Y. 465-481, and the court said: “Interest, as a rule, follows the principal without becoming principal, and cannot be compounded by force merely of the contract; but that general rule has been modified somewhat by an exception growing out of the character and purpose of interest coupons. They may become separate and independent instruments. When they do the exception is for the first time needed and for the first time applies. Until they do the, promise is merely to pay interest and. is governed by the usual rule. They do not become separate and independent instruments until they are utilized as such. Before that occurs and while they remain in the hands of the holder of the bonds the occasion for the exception has not arisen and the exception does not apply.” In Clokey v. Evansville & T. H. R. R. Co., 16 App. Div. 304, the Appellate Division in the first department pointed out the distinction which has been established as to the liability of the obligor upon interest coupons remaining on the bonds, and when detached therefrom and transferred to a person other than the owner of the bonds; saying: “ When such coupons are held by the owner of the bond they remain simply vouchers for the payment of the interest by which such interest can be collected without the presentation of the bond itself. It is quite clear that they acquire in the hands of the owner of the bond no independent character and impose upon the obligor no other or further liability than that imposed by the bond itself, and by which the obligor agrees to pay the holder of *598the bond a sum. of money on a particular day as interest upon the amount of the bond.” It will be noticed that the Court of Appeals lays down, as to interest coupons, the rule that interest follows the principal and cannot be compounded unless there are circumstances which create an exception to the general rule. In order to avail himself of such an exception, it is incumbent upon the plaintiff to plead and prove the circumstances which entitle him to avail himself of the exception. The plaintiff here has done neither and consequently the judgment in his favor, so far as it allows interest upon the sums represented by the coupons, is unauthorized. ’

Judgment reversed and new trial granted, with costs to appellants to abide the event.

Present: Truax, P. J., Scott and Dugro, JJ.

Judgment reversed and new trial granted, with costs to appellants to abide event.