Bennett v. Cook — 9 N.Y. Sup. Ct. 526

Majority

p. 526

November, 1874.

GREEN BENNETT and CHARLES U. BENNETT, Respondents v. ELBERT W. COOK and others, Appellants.

Headnote

Mortgagee in possession—moneys received by— Compound interest—when allowed Annual rests. .

Upon an accounting to determine the amount due to one who has been in possession of lands as a mortgagee, moneys received by him, as damages for land taken for railroad purposes, and by the State, should be applied in payment of the interest due on his demands, and it is error to charge him with such sums, together with interest thereon from the time of their receipt to the time of the accounting.

Annual rests should not be made, where interest on the debt is in arrear at the time when the mortgagee takes possession, nor until the principal is entirely paid off.

Compound interest is only allowed in case of gross delinquency, or of intentional violation of duty.

Lansing v. Lansing ( 45 Barb., 191 ) and Garniss v. Gardiner ( 1 Edw. Ch., 128 ) followed.

Appeal from a judgment entered upon the report of a referee. This case has already been before the Court of Appeals, and is reported in 45 New York, at page 268, where the facts are very fully stated.

J. McGuire, for the appellants.

N. A. Halbert, for the respondents.

The rights of the parties in this action, on all the principal issues, were definitely settled by the decision of the Court of Appeals, reported in 45 Hew York, 268. That decision left nothing open for further examination, except such questions as should arise on the accounting, which had then been directed; and which direction for the accounting was sanctioned by that court. It was then decided that the plaintiffs were entitled to subrogation ; and judgment absolute was directed for the plaintiffs, in accordance with the report of Referee Bradley, before whom the action had been fully tried on the merits. He held that the plaintiffs were entitled to be subrogated to the rights of Charles Cook, deceased, in the premises described in the complaint, to the extent declared in his report, and directed a sale of the premises, to satisfy such amount as should be found due to the plaintiffs on an accounting; and, with a view to fix and determine such amount, an accounting was ordered. The decision of the referee, including his direction for the taking of the account, was affirmed by the Court of Appeals; whereupon, the case having been remitted to this court, an order was entered, referring it to Mr. Comstock, as referee, to take the account. Pursuant to such order, he proceeded with the accounting, and made his report; and final judgment was entered, as sanctioned and directed by the Court of Appeals. It thus appears that there are no questions in the case, undetermined by the Court of Appeals, except such as have arisen on the taking of the account. As to all questions other than those arising on the accounting, we are concluded by the decision of that court. But the proceedings before the referee, in taking the account, having occurred since that decision was made, with a view to carry it into effect, are still open to review. This proceeding will now be considered.

The order of reference, made on the filing of the remittitur from the Court of Appeals, as to the taking of the account, was as follows : That either party be at liberty to proceed with the accounting herein, to ascertain the rents and profits of the premises, also, the value or proceeds which Charles Cook, deceased, and defendants have received on account of sales of any part of the same, or of damages thereto; or from awards made by the State, or any per

p. 528

sons or corporations, for damages; or for parts of the premises taken for public or private purposes, as alleged in the pleadings; and to ascertain the amount due plaintiffs and defendants, respectively, as directed in the referee’s report theretofore made. Subsequently, Mr. Comstock was appointed referee, to carry out the provisions of this order. He heard the proofs submitted by the parties, and made his report; by which he found due, at the date thereof, to the plaintiffs, $14,632.53; and to the defendants, $5,463.52; to satisfy which sums the premises were held to be liable, according to the judgment sanctioned by the Court of Appeals. The question now is in regard to the correctness of these sums found by the referee.

The referee found and stated the aggregate amount in favor of Cook, for the claims presented, to be $12,207.47. From this amount he made deductions, as follows :

Amount of damages received from railroad company.. $150 00-

Interest from April 1st, 1850...................... 237 48

Amount of damages received from State........... 900 00

Interest from April 1st, 1855...................... 1,109 82

For use of premises from April 1st, 1850, to April 1st,

1872, less $433.25, incurred for repairs............ 4,406 75

$6,803 95

This sum of $6,803.95 deducted from $12,267.47, leaves $5,463.52, the amount stated by the referee.

Now, it is not suggested that there was any error in the making up of the allowance to Cook of the aggregate sum of $12,267.47, above given. As regards this amount, the statement of the account stands unchallenged. Nor is any objection urged by the defendants’ counsel to the items of $150 and $900, received by Cook for land damages. But it is insisted, that, in stating the account, these sums should have been applied on interest due Cook at the time they were respectively received by him; hence that the interest on them, amounting to $1,347.30, was erroneously included in the deduction made by the referee. I should regard this ground of error in the statement of the account well taken, were it not obviated by the agreement or stipulation made by the counsel for the

p. 529

respective parties on the hearing before the referee. According to the case, it was agreed by the counsel, on the hearing, that these items of $150 and $900, “ and vnterest on same,” should be allowed by way of deduction. The defendants cannot allege error against their express stipulation, made on the hearing. It appears that the agreement embraced several important matters in the accounting other than this one in regard to the allowance of interest on those items. For aught that appears, mutual concessions were made by the parties in their agreement; and the stipulation to allow interest to be computed on those items, may have had an equivalent, or at least what was deemed an equivalent, in some other subject embraced therein. But be this as it may, the stipulation was made on the hearing, and the parties must he held to be concluded by it.

Without such stipulation, I am of the opinion that interest on those items should not have been allowed. Cook held the position of mortgagee as to those premises, for the several sums stated by the referee in the account; hence those items received by him for the land damages, should be deemed as payments to him ; and the ordinary rule of computation of interest, applicable to mortgagor and mortgagee, where payments have been made, should have been adopted. The rule of computation in such case, is laid down in Williams v. Houghtaling,^[6] and in Jencks v. Alexander;^[7] also in the following cases: Connecticut v. Jackson,^[3] French v. Kennedy,^[4] Stone v. Seymour.^[5] But this ease must be held to be controlled by the stipulation entered into by the parties on the hearing.

2. It is further urged, that the defendants were improperly charged, as to amount, for the rents and profits of the premises. But the sum settled on by the referee, seems to be abundantly sustained by the admissions and proof submitted. The amount to be allowed for rents and profits, was a question of fact on the evidence ; and it is not made to appear that the referee erred in his findings in that regard.

3. It is further urged, that the referee should have made annual rests in his computation. As a general rule, annual rests are not to he made on an accounting, unless the judgment or order of the

‡ ‡ 1 John. Ch. R., 17.

§ § 7 Barb., 452 .

|| || 15 Wend., 19 -24.

p. 530

court so directs. Such direction was not given in this case. The making of annual rests would have charged the party with compound interest. This is not admissible in a case like the present. Cook, like a mortgagee in possession, was accountable for the rents and profits of the premises; but the court will not require annual rests to be made, where interest on the debt is in arrear at the time when the mortgagee takes possession, nor until the principal mortgage debt is entirely paid off.^[6] Compound interest is only allowable in case of gross delinquency, or of intentional violation of duty.^[7] The question as to the allowance of compound interest, was examined at considerable length in the case last cited,-and the rule is recognized, that compound interest should be allowed only in those cases where common justice requires it, and when great injustice would otherwise be done. In the case at bar, its allowance, in the way proposed, through annual rests, would, I think, be very manifestly inequitable. There was no delinquency or violation of duty shown; and at the time Cook became chargeable with the rents and profits, and during all the time he was charged with them, interest was due him on his claims secured by the premises, to an amount exceeding their value, as found by the referee. In equity and justice he was entitled to have such interest satisfied, not to speak of the claims themselves, which were also due; and the value of the rents and profits with which he was charged, should be so applied as to meet his just demands. In my judgment, this is not a case for annual rests in stating the account.

No point of error is alleged against the account, as regards the plaintiffs’ claim. The amount certified in their favor, $14,632.53, stands unchallenged. All the objections urged on this appeal, as to the taking and stating of the account, have been above considered; and our conclusion is, that no error exists in that regard, calling for a reversal of the judgment. All other questions in the case are supposed to have been heretofore settled by the decision of the Court of Appeals.

The judgment appealed from should be affirmed;- and the respondents are entitled to the costs of appeal.

* 2 Story’s Eq., § 1016-a.

† † Lansing v. Lansing, 45 Barb., 191 ; Garniss v. Gardiner, 1 Edw. Ch., 128 .

p. 531

It seems that the costs of former appeals were directed to be paid out of the proceeds of the sale of the premises. But it does not appear just, that those proceeds should be further diminished, to the possible injury of the plaintiffs, by the payment therefrom of the costs of an unsuccessful appeal on the part of the defendants. I am of the opinion that the costs of this appeal should be awarded to the respondents against the appellants personally. In this way their payment will fall upon the heirs at law and next of kin of Charles Cook, deceased, for whose personal benefit the appeal was taken, and who are personally on the record as defendants.

Miller, P. J., and Boardman, J., concurred.

Judgment affirmed, with costs of appeal against the appellants personally.

Footnotes

* 3 Cow., 86 .
† † 11 Paige, 625.