Palm v. Fancher

• Decision Date: 29 March 1909
• Docket Number: 13,733
• Citation: 48 So. 818,93 Miss. 785
• Court: Mississippi Supreme Court
• Parties: ALEXANDER PALM ET AL. v. CHARLES C. FANCHER ET AL

48 So. 818

93 Miss. 785

ALEXANDER PALM ET AL. v. CHARLES C. FANCHER ET AL

No. 13,733

Supreme Court of Mississippi

March 29, 1909

FROM the chancery court of Attala county, HON. JAMES F. MCCOOL Chancellor.

Fancher and others, appellees, were complainants in the court below Palm and wife, appellants, were defendants there. From a decree in complainants' favor foreclosing a mortgage defendants appealed to the supreme court. The facts of the case so far as pertinent to the decision, are stated in the opinion of the court.

Affirmed.

J. G Smythe and Alexander & Alexander, for appellants.

The note stipulated for compound interest at the rate of ten per centum per annum. Such a contract is unlawful. This question is not an open one in this state since the decision in Perkins v. Coleman, 51 Miss. 298. It is true the opinion in that case does not denounce the contract as technically usurious. We are not quite sure whether the statement that it is settled that such contract is not usurious, appearing on page 303, is a misprint or not, since the court proceeded to hold the contract not enforceable because it contained a stipulation for compounding interest. It may be that the meaning of the court was that such a contract was not under the statute then in force enforceable in equity. Whatever may have been the views of the court as to whether the contract was technically usurious under the usual definition of usury, it is certain that it was held that the contract could not legally be made and enforced stipulating for compounding interest at the highest rate.

Counsel for appellee insist that there can be no difference in principle between a stipulation that after maturity interest shall bear interest and the making of a new contract at maturity by which principal and interest are brought into a new principal bearing interest. Reliance is placed upon the language of the text of Webb on Usury, where the author states his inability to see the distinction.

In Perkins v. Coleman, our court did see the distinction and declared it, and that ought to be sufficient. But, if the court is disposed to re-open the matter, it will find that the legality of such a Contract for compounding interest at the highest rate is denied both on reason and authority. It will be found that the criticisms of the author are not borne out by any considerable number of citations. Webb on Usury § 130. The only two states he lists as supporting the view of appellee are Texas and Georgia. On the other hand, he lists the states of Colorado, Illinois, Tennessee and North Carolina as holding that such contracts are usurious.

The decisions of the Texas supreme court have vacillated; the last case is Crider v. San Antonio R. Association, 13 Texas 299. But, if we look to the several cases on which the opinion rests, it will be found that several of them either do not support the opinion or announce a rule which has not been followed by subsequent decisions. The Texas court cites 124 Ill. 488, as supporting its view; whereas, as pointed out in Webb on Usury § 130, the later Illinois cases announce the directly opposite view. 134 Ill. 294; 151 Ill. 37.

Again, the Texas court cites Grider v. Driver, 46 Ark. 50, but, reference to that case will show that the decision was put on the construction of the Arkansas statute, which provided that parties might contract in writing for the payment of interest not exceeding ten per centum on money due or to become due, and that case in turn cites the earlier Arkansas case of Vaughn v. Kennon, 38 Ark. 114, which holds that under the statute one can stipulate that overdue interest could bear simple interest, but that it could not further be compounded.

The Texas case also relies on Hale v. Hale, 1 Cald. (Tenn.) 233, but that case has been overruled, or at least distinguished in Ward v. Brandon, 1 Heisk, 490, which holds that while a new contract can be made at maturity by which interest is brought into the principal a stipulation in advance for compounding is usurious.

In construing the decision in Perkins v. Coleman, we must bear in mind the language of the statute then in force, viz, chapter 50, Code 1857, page 370, which provides, that if a greater rate of interest than ten per cent shall be stipulated for in any case, such excess shall be forfeited. The present statute, § 2678, Code 1906, under which the present contract was made, provided that all excessive interest shall be forfeited. There is another change in that it is now unlawful either to stipulate or receive more than ten per centum; whereas, under the Code of 1857 the word "receive" did not appear.

Dodd & Dodd, and McWillie & Thompson, for appellees.

Bear in mind that a consideration of the usury question in this case is merely academic; the unpaid principal of the note is ample to support the trustee's sale and the decree. War is made on the special terms of the note providing that if interest is not paid annually, it should become as principal and bear interest as such. This we are told is a provision for compound interest, but in this counsel is mistaken; it is a provision for paying interest when it is due and a note is not usurious if prompt payment of all interest when due will not require more than the lawful rate; the provision is an agreement to do that which the parties might lawfully have done. Our statute does not prevent the renewal of notes carrying interest already due into a new note, and making it bear interest. Perkins v. Coleman, 51 Miss. 298. The terms of the note amounted to an executory obligation, binding appellants in case they failed to pay interest annually, to treat past due interest as principal. If this can be done by the execution of a new note it can be done in equity by an executory provision to that effect in the original one. A note payable when due as was the one in question in the amount loaned and legal interest is not usurious. A provision in a note that in case of the...