Ferry v. Ferry

56 Mass. 92 | Mass. | 1848

Shaw, C. J.

The direction to the jury, in the present case, was, in the opinion of this court, contrary to a settled rule of law, adopted in this commonwealth, and to a long course of practice on the subject of interest. It has been repeatedly decided, that compound interest is not allowed by law, and it makes no difference, "that by stipulation the interest is to be paid annually.^* The contract to pay interest at the expiration of each year is a valid contract, and may be enforced by action. Greenleaf v. Kellogg, 3 Mass. 568; Cooley v. Rose, 3 Mass. 221; Herries v. Jamieson, 5 T. R. 553. So, if a new note is given for the interest, it is thereby converted into capital, and may rightfully be given with interest. Wilcox v. Howland, 23 Pick. 167. Or, if after interest has become due, an account is stated, making rests, it is lawful. Eaton v. Bell, 5 Barn. & Aid. 34. So, where partial payments have been made, in cash, or by rents and profits, or otherwise, the payments are to be first applied to the satisfaction of the interest then due, and the balance only is to go towards the reduction of the principal. Dean v. Williams, 17 Mass. 417; Fay v. Bradley, 1 Pick. 167; Reed v. Reed, 10 Pick. 398. This principle gives the creditor the benefit of compound interest, where payments from time to time have been made, or where after the interest becomes due he obtains security for it, or resorts to an action to enforce the payment.

But where there has been no payment, demand, or adjustment, it has been repeatedly settled, that in ascertaining the amount due on a note, made payable with interest annually, simple interest only is to be computed. Hastings v. Wiswall, 8 Mass. 455; Dean v. Williams, 17 Mass. 417; Von Hemert v. Porter, 11 Met. 210. The same rule has been followed in Maine, in a case in which the reasons are very fully stated. Doe v. Warren, 7 Greenl. 48. The same tule is adopted in New York, in equity, and, we believe, at law. Connecticut v. Johnson, 1 Johns. C. 13; Van Benschooten v. Lawrence, 6 Johns. C. 313.

In support of the argument for allowing interest on inter est, from the time it becomes due, we are referred to the case of Dodge v. Perkins, 9 Pick. 368. There is some general statement in that case, that where the payment of money due is withheld unlawfully and against right, the law will allow Interest for it. Had this been a new question, depending on general principles, and not governed by precedent, the proposition stated in that case would have afforded some color to the plaintiff’s claim. But it is a proposition to be taken with its well established qualifications, as well settled as the rule itself. No question was raised in that case, as to the allowanee of interest on interest, and such interest was not there allowed. The only question was, whether, under the circumstances of that case, simple interest should be computed on the principal sum.

As to the first two years’ interest, we think that the action is not barred by the twenty years’ limitation (Rev. Sts. c. 120, § 7), because the interest stipulated to be paid is regarded as incident to the debt, and recoverable with it; and, although the creditor may recover for the interest which accrues before the principal becomes due, yet if he forbear to bring his action for that purpose, as he may, the interest remains incident to the debt, and may be recovered with it.

The case of Pierce v. Rowe, 1 N. H. 179, which was decided in 1818, is opposed to the rule adopted in this state. Whether it has since been followed in New Hampshire, we are not apprised. But, whether it has or not, we cannot find in it sufficient authority for changing what we must consider a settled rule here.

Exceptions sustained.

* See 1 Domat’s Civil Law (Am. ed.), § 1963