Daily Realty Co. v. Schmuck

On or about March 31, 1913, the defendant and the Benenson Realty Company, the plaintiff’s assignor, entered into an agreement for the exchange of certain properties. As part consideration for the exchange the defendant agreed to assign a second mortgage of $6,000, secured by premises Prospect avenue, having about three years to run. The contract is silent as to the rate of interest on this second mortgage. It appears, however, that the mortgage which by its terms was payable on the 1st day *632of March, 1916 bore interest at the rate of five per cent per annum. On May 1, 1913, the exchange was consummated and the parties then agreed that in consideration of the closing of title the defendant should ‘ ‘ pay to the Benenson Realty Company or its assigns upon the interest days set forth in the said mortgage one per cent of the said principal sum during the existence of the said mortgage from the date hereof.”

Thereafter and on August 1,1914, the mortgage was foreclosed for nonpayment of interest and the plaintiff thereupon began this action to recover from the defendant the sum of $170, being one per cent on the amount of the mortgage from May 1, 1913 till March 1, 1916, the date when the mortgage by its terms was to become due. At the time it was conceded that the defendant had paid interest till May 1, 1914, and she conceded that she owed the plaintiff one per cent interest, amounting to $25, from that date till August 1, 1914 when the mortgage was foreclosed. The learned trial justice, however, held that the defendant had agreed to pay one per cent interest on the amount secured by the mortgage untill March 1, 1916 regardless of whether or not the mortgage was previously foreclosed.

In my opinion the interpretation which the trial justice has placed upon the defendant’s obligation is not borne out by the written agreement. The defendant might have made a promise to pay one per cent interest till the due date of the mortgage but she did not do so. She agreed to pay the excess interest ‘ ‘ during the existence of the said mortgage,” and when the foreclosure was completed the mortgage ceased to exist and became merged in the judgment. Thereafter, no sums either of principal or interest were payable under the mortgage, but all rights of the parties to the mortgage became fixed by the judgment. Con*633sequently, by the plain terms of the defendant’s agreement her obligation to pay interest on the sum secured by the mortgage during its “ existence ” was terminated. This contract is not only plain on its face, but it apparently secured to the plaintiff’s assignor exactly what it intended to obtain. The parties evidently contemplated that the existing five per cent mortgage should in effect be changed to a six per cent mortgage, and the defendant should pay the additional one per cent. When, however, the plaintiff elected to declare the whole sum due for nonpayment of interest, then no further interest was payable under the mortgage, but interest at the rate of six per cent was payable under the judgment, and, consequently, thereafter, the plaintiff’s right to interest was not affected by the rate fixed in the mortgage.

Judgment modified by reducing the same to the sum of twenty-five dollars damages with appropriate costs in the court below, and, as thus modified, affirmed, with costs of appeal to the appellant; costs of appeal to be set off against the judgment.

Guy and Whitaker, JJ., concur.

Judgment modified, and, as thus modified, affirmed, with costs.