100 So. 385 | Miss. | 1924
Lead Opinion
delivered the .opinion of the court.
Appellant sued appellees Rivers and Cox in the circuit court of Quitman county for a balance due on a certain promissory note executed by appellee Rivers to appellee Cox, and by the latter transferred to appellant, and recovered a judgment for the balance of the principal due on said note, the court having instructed the jury that interest could not be recovered because the interest stipulated for in said note was usurious, from which judgment appellant prosecutes this appeal.
The only question in the case is whether the note sued on provides for usurious interest under our statute.
The note is dated May 24, 1920, and is due December 1,1920, and draws interest at the ‘ ‘ rate of eight per cent per annum from date until paid, . . . interest payable semiannually and- the defaulting interest to draw same rate of interest as principal.” There is no claim that any hidden device was resorted to cover usury, but simply that the note provides on its face for usurious interest under our statute.
Section 2678, Code of 1906 (section 2075, Hemingway’s Code), provides, among other things, that contracts may be made, in writing, for the payment of interest for as great as eight per cent, per annum, but that if a greater
It will be observed that the note sued on provides for the payment of interest at eight per cent, per annum, the highest contract rate, and that the interest shall be payable semiannually, and if not paid when due compounded and become part of the principal.
It has been long settled in this state that interest at the highest contract rate cannot be reserved in advance; that to do so renders the contract usurious. Bank v. Nolan, 7 How. (Miss.) 508; Hyde v. Finley, 26 Miss. 468; Polkinghorne v. Hendricks, 61 Miss. 366; Hiller v. Elks, 72 Miss. 701, 18 So. 95, 41 L. R. A. 707.
In Polkinghorne v. Hendricks, Chief Justice Campbell, who wrote the opinion, said that interest paid in advance was payment of principal to that extent. "Where the contract provides for interest at the highest rate with rests at shorter periods than annual rests, and in default of payment of interest the latter to become principal and bear interest,at the same rate, is the contract usurious? We think so, because under the decisions of this court above referred to such a contract simply provides for the "payment of interest in advance. The statute provides that not more than eight per cent, per annum shall be contracted for or received. The statute contemplates annual rests and payment of interest at each rest. Payment before that time is payment in advance; it is tantamount to paying unearned interest. We cannot see any difference in taking out the interest at the time of the execution of the contract and taking it out at. any date less than a year from its execution. In either case it amounts in substance to reducing the principal'that much. To illustrate: A. lends B. one thousand dollars, due at a future day, with eight per cent, interest after maturity. But, instead of advancing B. one thousand dollars, the face of the note, A. takes out in advance the interest to accrue between the date of the note and its maturity. If
It is true, as contended by appellant, that under the authorities generally in other states this contract would not be usurious. 27 R. C. L., sections 26 and 30, pp. 225, 229, and 230. An examination of such authorities, however, so far as we have been able to pursue them, shows that they base their holding on the theory that taking interest in advance at the highest contract rate is not usurious, but legal. That is the fundamental difference between the law in this state and other states holding to the contrary. On that difference this case turns. Interest with less than annual rests is interest paid in advance. Interest in hand at any time before the period of annual rest has a present value in excess of its annual rest maturity value. It seems that a contrary view would practically nullify our statute. A calculation compounding the interest on a loan at the highest contract rate with monthly, weekly, or daily rests will demonstrate this.
Affirmed.
Dissenting Opinion
(dissenting).
I am of the opinion, in which Judges Cook and Sykes concur, that the interest here sought to be collected is not usurious. The opinion in chief rests on two grounds: First, that section 2678, Code of 1906 (section 2075, Hemingway’s Code) “contemplates annual rests and payment of interest at each rest;” and, second, that the payment of accrued interest at any time before an annual rest period is equivalent to the payment of interest in advance. Neither of these grounds, in my judgment, is tenable.
The statute provides that — ‘ ‘ The legal rate of interest on all notes, accounts and contracts shall be six per cent, per annum; but contracts may be made, in writing, for a payment of a rate of interest as great as eight per centum per annum.”
It is manifest from this language that the statute simply fixes the rate of interest that may be charged and not the length of time for which a loan must run before interest thereon can be collected. Bank v. Caston, 97 Miss. 309, 52 So. 633. Loans for less than a year at the highest legal rate of interest are of everyday occurrence, the validity of which, so far as I am aware, has never been, and I do not understand is here, challenged. The note here sued on runs for only six months and seven days. The payment of accrued interest on a loan of money before the maturity thereof is not a payment on the principal but simply of a sum of money to which the lender is then entitled for having made the loan.
The distinction between lawful and unlawful agreements to pay interest on interest is illustrated by the cases of Perkins v. Coleman, 51 Miss. 298, and Palm v. Fancher, 93 Miss. 785, 48 So. 818, 33 L. R. A. (N. S.) 295, as was pointed out in the latter, and is this: An agreement for the compounding of interest at stated intervals without the right in the debtor to pay the interest as it accrues and thus prevent the compounding of the interest, is usurious, and therefore unlawful, provided the ag
In the note to the case of Palm v. Fancher, 33 L. R. A. (N. S.) 295, quite an array of authorities are cited iu support of the statement that — “it is thoroughly settled that- a stipulation made before interest has become due, that unpaid interest shall itself bear interest, or shall from time to time become principal, and bear interest as such, does not, unless intended as a cover for usurious interest, taint the original obligation with usury.”
No authorities are cited in support of the opinion in chief, and I suspect that none can be that are in accord with Palm v. Fancher,
That interest may be made to become due in less than a year after the making of a loan, and if not then paid to thereafter bear interest at the same rate as the principal, was necessarily decided in Banh v. Caston, 97 Miss. 309, 52 So. 633. The opinion in that case in part is as follows:
“The only question in this case is whether this contract is usurious: Note for one thousand dollars loan, datel January 22, 1907, due July 22, 1907 (six months after date), with interest added in the face of the note at ten per cent, per annum from date until, due, making the note for one thousand and fifty dollars, and providing for interest on this amount at ten per cent, per annum from maturity until paid. Under the authority of Palm v. Fancher, 93 Miss. 785, 48 So. 818, we hold that it is not.”
There can be, of course, no difference between the legal effect of the note there sued on and one for the principal
In the case at bar the loan was for six months and seven days, interest payable at the end of the sixth month and again seven days thereafter; and there can be no rational distinction in so far as the question of usury is concerned between such a loan and one made by means of two notes, one due six months after its date, for which there is substituted on the maturity thereof a new note covering the principal thereof and interest due thereon, due seven days thereafter. The first of these loans is here held usurious while the second, under Bank v. Caston, could not be so held.
