80 Neb. 408 | Neb. | 1907
This was an action to foreclose a mortgage, and the defense was usury. There were several causes of action stated in the petition upon different instruments; but,' as the facts are similar, it will only be necessary to state in detail those from which arose the first cause of action. On the 16th day of March, 1885, the defendant obtained from the plaintiff a loan in the sum of $450, for which he executed his promissory note for that amount, payable in five, years from date, with interest at 10 per cent, per annum. Forty-five dollars, the first year’s interest, ivas deducted from the loan at the time it was made; and four notes for $45 each, maturing, respectively, on the 1st days of January, 1886, 1887, 1888 and 1889, were executed-and delivered for the subsequent instalments of interest. These interest notes were drawn to bear interest after maturity. On March 14, 1900, three of the coupon notes had been paid; and the defendant on that date executed in renewal of the principal and interest unpaid his promissory note for the sum of $1,295.25, payable October 1, 1900, with interest at 10 per cent, per annum. The amount of this note was ascertained by compounding the interest unpaid «on the original note annually. The mortgage sought to be foreclosed secured these notes. There ivas a trial upon the issues, and a finding by the judge of the
1. A contract to compound interest on an obligation bearing less than the maximum rate is valid, if, Avhen so computed, the interest does not exceed in amount simple interest computed at the maximum rate. Richardson v. Campbell, 34 Neb. 181. Such contract Avill not, however, be enforced beyond the limit of the highest rate allowed by law computed as simple interest. Mathews v. Toogood, 23 Neb. 536; Rose v. Munford, 36 Neb. 148. In neither case is the contract usurious, nor subject to the penalties of the statute against contracting for or receiving interest in excess of the amount limited by law. Hager v. Blake, 16 Neb. 12; Rose v. Munford, supra; Lewis Investment Co. v. Boyd, 48 Neb. 604. While the rule against alloAving compound interest in excess of the highest legal rate computed as simple interest is not universal, it is general, and has been fully adopted in this state. It does not rest upon the ground that the agreement is usurious, but rather upon the ground that it is against public policy. These decisions do not declare the instruments subject to the penalties of usury. They simply refuse to enforce the stipulation for interest upon interest.
We therefore conclude that the'amount of the renewal notes in excess of the principal and simple interest computed thereon at the rate of 10 per cent, per annum Avas Avithout consideration, but that they are valid obligations for the amount of principal and interest which the plaintiff Avas entitled to .recover at the date of their execution, and that there is noAv due to the plaintiff that amount AA'ith 10 per cent, interest from the date of the reneAval to the date of the decree.
We therefore recommend that the judgment of the district court be reversed and the cause remanded for a decree in accordance AATith this opinion.
By the Court: For the reasons stated in the foregoing
Reversed.
Our former opinion, ante, p. 408, contains a very full and accurate statement of the issues involved in this case. Defendants base their claim for reversal on the following grounds: “(1) That the alleged agreements between the debtor and creditor, after the interest became due, are not established by the evidence, and, if they were, they did not warrant the inclusion of this compound interest in the renewals. (2) The mortgages are usurious, but, even if they are not, the compound interest is not collectible, since the original obligations already drew the highest rate of interest allowed by law.”
Under the facts as thus found there is, Ave concede, 'some conflict in the authorities, but we think the ovenvhelming Aveight of authority sustains the conclusion of law reached by the trial court that the notes and mortgages in controversy were valid contracts Avhich plaintiffs were entitled to have enforced. In Connecticut v. Jackson, 1 Johns. Ch. (N. Y.) *13, and Van Benschooten v. Lawson, 6 Johns. Ch. (N. Y.) *313, that eminent jurist, Chancellor Kent, announced a contrary doctrine, but we think an examination of later decisions in all the states clearly indicates that, had it not been for the eminence of Chancellor Kent, his holding in those cases would have been entirely Avithout subsequent support. Notwithstanding his eminence, the doctrine announced by him has been repudiated in substantially every court of last resort in the land. The application of the principle announced by Mr. Chancellor Kent sustains our former opinion in this case; but a care
It is insisted that Mathews v. Toogood, 23 Neb. 536, sustains defendants’ contention; but we do not so understand that case. All that that case decides is that an agreement in advance to pay interest upon interest coupons after they are due, where the principal note draws the maximum interest, will not be enforced. That is not this case. The rule announced in that case is in harmony with the holdings of many eminent courts, and is in entire harmony with our holding in this case. That an agreement to pay compound interest does not render the contract usurious is well settled in this as well as in other courts. Weyrich v. Hobelman, 14 Neb. 432; Rose v. Munford, 36 Neb. 148; Steen v. Stretch, 50 Neb. 572; Otis v. Lindsey, 10 Me. 315; Hale v. Hale, 1 Cold. (Tenn.) 233. In the last case, the court say: “There can be no plainer legal proposition stated, than that compound interest is not usury. In the language of the court, in Kellogg v. Hickok, 1 Wend. (N. Y.) 521, ‘compound interest has nothing to do with the question of usury.’” In Fobes & Adams v. Canfield, 3 Ohio, 17, in a case similar to the one at bar, the court say : “A sum of money due for interest is as justly and fairly due as for any other consideration, and an agreement to pay interest upon it after it is due cannot be deemed usurious. * * * But if, when the interest is due and payable, and constitutes a then subsisting debt, the debtor ask to retain it, and pay interest upon the amount at the legal rate of interest, the agreement is not usurious. It is nothing more than an agreement to pay legal interest for the forbearance of enforcing the collection of a debt then actually due and demandable.” In Telford v. Garrels, 132 Ill. 550, it is said: “Where a debtor has agreed to pay
In addition to what has been said, we think section 3, ch. 44, Comp. St. 1907, settles this case adversely to the contention of defendants: “Any rate of interest which may be agreed upon, not exceeding ten dollars per year upon one hundred dollars, shall be valid upon any loan or forbearance of money, goods, or things in action; which rate of interest so agreed upon niay be taken yearly, or for any shorter period, or in advance, if so expressly agreed.” In
Another point is made that, even if the agreements were made as claimed, they were void, because the effect was s.o impose an additional burden on the homestead without ilie wife’s consent. This contention is also without merit, for the reason that the notes and mortgages were signed by both husband and wife, and duly acknowledged by them under circumstances which show no restraint or coercion on the part of the plaintiffs. In fact, the record nowhere shows any attempt at fraud, coercion, or deception on plaintiffs’ part.
The demanding of interest in advance, even though the highest rate allowed by law is being charged, is not usury in this state, as such a course is permitted by our statute. When money is due from A to B, and B, at the request of A, forbears enforcement of payment under an agreement that A will pay B interest during the period of such forbearance, it is clear that such forbearance on the part of B is a sufficient consideration for A’s promise to pay interest. If such forbearance is a sufficient consideration for A’s promise to pay interest, then, clearly, the contract is not against public policy or in any sense inequitable.
Our present holding that interest upon interest cannot' be stipulated for at the time of the loan or contract is not intended to be applied to cases where such stipulation for compound interest will not result in making such interest when so compounded exceed the maximum rate. As to such cases our former holdings are adhered to.
We recommend that the former judgment of this court be vacated and set aside, and that the judgment of the district court be in all things affirmed.
By the Court: For the reasons stated in the foregoing opinion, the former judgment of this court is vacated and set aside, and the judgment of the district court is in all things affirmed.
Judgment accordingly.