Lewis v. Paschal's Adm'r

• Decision Date: 01 January 1872
• Citation: 37 Tex. 315
• Parties: NAT. LEWIS v. PASCHAL'S ADMINISTRATOR.
• Court: Texas Supreme Court

37 Tex. 315

NAT. LEWIS

v.PASCHAL'S ADMINISTRATOR.

Supreme Court of Texas.

1872.

1. The right to demand and recover interest for the use of money or credit, is the creature of statute, and is to be governed by the statute; and questions of usury are to be determined only by a reference to the statute.

2. When a contract stipulates for the payment of interest annually, or for annual rests, interest runs on the annual interest, as it accrues.

3. See this case for the construction to be given to the case of De Cordova v. the City of Galveston, 4 Texas, 482.

APPEAL from Bexar. Tried below before the Hon. George H. Noonan.

The facts of the case are sufficiently stated in the opinion of the court.

S. G. Newton, for the appellant.

Wælder & Upson, for the appellee. We take the position--in which we are sustained, as we think, by the authorities--that the plaintiff cannot, under any circumstances, maintain his claim to compound interest. We are unable to discover such peculiarity in our statute as would authorize a different construction from that given to similar statutes in other States and in England. “Parties may agree to and stipulate for any premium or rate of interest not exceeding 12 per cent., * * and the same may be taken, ““recovered,' and allowed.” (Pas. Digest, Section 3941.)

Some stress seems to be laid on the terms of the statute, by appellant's counsel, that interest may be taken, “recovered,” and allowed. “Taken, recovered, and allowed”--how? Certainly, we think, in accordance with the principles of law, and the rules of construction governing in like cases.

“That an agreement to pay interest upon interest is not usurious,” we freely admit to be the settled doctrine. But that such interest is regarded as odious, and not favored by the courts, is as well established. Hence the older, as well as the most recent decisions have established, that while interest, payable annually, or at stipulated times, may be demanded, received, and recovered, as it falls due; yet, when such interest is not collected or demanded when due, the party to whom it is payable has waived his right, and cannot recover compound interest at the maturity of his principal.

Appellant's counsel relies, with some confidence, as it seems, upon a dictum of Chief Justice Hemphill, in the case of De Cordova v. the City of Galveston, where he says that “the interest might have, perhaps, been recovered in a separate suit; or, if the action had been brought before the bar of the statute the plaintiff would have been entitled (perhaps?) to annual rests, and to interest upon the interest, in computing the amount to be recovered.”

That the Chief Justice did not, when he used that language, intend to convey his own conviction that interest upon interest can be recovered in the manner claimed in the case at bar, need not be argued here. The authorities directly upon the point are overwhelmingly the other way, and we beg leave to refer to some of them.

In ascertaining the amount due on a note, made payable with interest annually, simple interest only is to be computed, and interest on the interest will not be allowed. But, if a new note is given for the interest, it is thereby converted into capital, and it may be given with interest. (Sedgwick, Meas. Dam., 404.)

The law does not allow interest upon interest accrued, even when a note is made payable with interest annually. (Chitty on Con., 561, note 3, referring to Greenl. 49; Hastings v. Wiswall, 8 Mass., 455;10 Leigh, 481; 19 Maine, 31.)

Interest upon interest not given. (Waring v. Cunliffe, 1 Vesey, jr., 99, and note a; also Morgan v. Mather, 2 Vesey, jr., 22, note 2.)

An original agreement to allow compound interest in future is not binding, because of the avaricious and usurious nature of such a contract. (Story on Con., Section 1033.)

Upon a note made payable in a certain number of years, with interest annually, judgment can be recovered only for simple interest on the principal sum. (Hastings v. Wiswall, 8 Mass., 455.)

Compound interest not allowed. (Dean v. Williams, 17 Mass., 417.)

The construction given by the appellant to the case of Wilcox v. Howland (23 Pick., 167), is not sustained. The court, in that case, say, that “interest will not be allowed on interest from the time it fell due, because it would savor of usury, and because the holder of the note, by forbearing to call for his interest when it became due, shall be deemed to have waived his right to have the interest converted into capital.”

The two following are the later cases in Massachusetts:

The payment of compound interest is never sanctioned, except by agreement of the parties; and it has been held, both in law and equity, that it cannot be lawfully demanded, except upon agreement made after the lawful interest has become due. (Von Hemert v. Porter, 11 Met., 218.)

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. (Ferry v. Ferry, 2 Cush., 98.)

Justice Parsons, in his work on Contracts, after reviewing the subject and the authorities, states his conclusions as follows:

“Upon the whole, although it seems to be well settled that compound interest cannot be recovered, as such, even if it be expressly promised, * * * courts will not lend their aid to enforce its payment, unless upon a promise of a debtor, made after the interest, upon which interest is demanded, has accrued; and this rule is adopted, not because such contracts are...