Rose v. City of Bridgeport

| Conn. | Jun 15, 1845

Church, J.

The subject of compound interest has been so recently and so fully discussed in this court, in the case of Camp v. Bates, 11 Conn. R. 487., that the particular views there expressed need not be here repeated. That a contract for the payment of compound interest, made before interest has accrued, is, to that extent, void, and will not, unless in special cases, be enforced, either in law or equity, may now be considered as the law of this state. And the special cases referred to are well enumerated, in the opinion there given. But unless in such special cases, the law will never imply an obligation to pay such interest. To stipulate for the payment of compound interest a priori, although sometimes regarded as tending to usury, has never been holden to be really usurious. Such a stipulation may perhaps be considered as somewhat inconsistent with the phraseology of our statute, which prohibits the taking of more than six per cent, per annum, directly or indirectly; and the English statute of Henry 8., is of the same import. It is equally well understood, as we suppose, that a promise to pay interest upon arrears of interest due, being founded upon a moral consideration, is good. Eaton & al. v. Bell & al. 5 B. & Ald. 34. (7 E. C. L. 13.) State of Connecticut v. Jackson, 1 Johns. Ch. R. 13. Schieffelin v. Stewart, Id. 620. Van Benschooten v. Lawson, 6 Johns. Ch. R. 313. Mowry v. Bishop, 5 Paige, 98. Ord on Usury, 37. Lord Ossulston v. Yarmouth, 2 Salk. 449. Hastings v. Wiswall, 8 Mass. R. 455. Barclay & Co. v. Kennedy & Co. 3 Wash. C. C. Rep. 350. Denniston v. Imbrie, Id. 396. Smith v. Shaw’s adm’x, 2 Wash. C. C. Rep. 196. Bainbridge v. Wilcocks, 1 Bald. C. C. Rep. 536. 540. Forbes & al. v. Canfield, 3 Hamm. R. 17. Wilcox v. Howland, 23 Pick. 167.

If, therefore, the plaintiff had instituted an action upon the bond to which the coupon in question was attached, for the recovery of the semi-annual interest, which had become due, he could not have recovered any interest upon such interest. This' action is essentially of that character. It is not founded upon any contract expressed in or implied from the coupon itself; but upon one arising out of the terms of the bond. r ° ,ii stipulating the payment of semi-annual interest upon the bond. The coupon contains no contract at all independent of the ^l()nc* It is a mere certificate or acknowledgment, by the city, that a half year’s interest will become due on the bond, at the times therein specified. The bond refers to the coupons, and the coupons to the bond, not as separate obligations, but as parts of one contract. The only obligation to pay either principal or interest, arises from the bond. Suppose the bond in this case had fallen due, and none of the interest instalments had been paid ; would not the entire amount, both of principal and interest, be recoverable, by an action on the bond 1 Could it be claimed, in such case, that after this, a suit could be sustained upon these coupons as upon distinct contracts ? And yet if they are separate and independent contracts, bearing interest in the hands of third persons, we see not how a judgment upon the bond covering the whole interest, could bar a recovery upon them.

It is indeed true, that the interest, by the tenor of the coupons, is payable to bearer; but this arrangement is only one of convenience, to prevent the necessity of the frequent presentation of the bond at the place of payment, and the multiplied indorsements of interest upon it. A new species of negotiable paper is not thus created. The coupon, in this form, operates only as an order or letter from the obligee, requesting the interest upon the bond to be paid to another.

We have been informed of a recent case in the circuit court of the United States for the district of Michigan, which arose upon a bond and coupon issued by the city of Detroit,, bearing an interest of six per cent., in which it is said, that a different opinion from the one we express, has been advanced-We regret, that we have not been able to see and examine that case, and the reasons which governed its decision. In some of our sister states, interest' upon interest has been considered as recoverable. It may be so in Michigan. Indeed, it would not be strange, under the modern notions which prevail on the subject of regulating interest by law, and under the influences produced by a different moral sense regarding the propriety of demanding interest, from that heretofore prevailing, that different views on this subject should be entertained, as well by courts as individuals, from such as have before governed legal decisions.

We place our decision upon what we suppose to be the law of our own state regarding the reservation and recovery of compound interest, derived, as we believe, from the authority of the English courts, irrespective of the opinions which the courts of other states have expressed on the same subject.

We shall therefore advise, that no interest be allowed upon these coupons.

In this opinion the other Judges concurred.

Judgment for defendants.