Phila. & Read. R. R. Co. v. Smith

• Decision Date: 06 October 1884
• Citation: 105 Pa. 195
• Parties: Philadelphia and Reading Railroad Company <I>versus</I> Smith.
• Court: Pennsylvania Supreme Court

Page 195

105 Pa. 195

Philadelphia and Reading Railroad Company versus Smith.

Supreme Court of Pennsylvania.

January 28, 1884.

October 6, 1884.

January 28, 1884.

Before MERCUR, C. J., GORDON, PAXSON, TRUNKEY, STERRETT, GREEN and CLARK, JJ.

ERROR to the Court of Common Pleas No. 3, of Philadelphia county: Of July Term, 1883, No. 196.

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Thomas Hart, Jr. (Francis 1. Gowen with him), for the plaintiff in error.—In the absence of a specific agreement to pay compound interest, it is never recoverable in Pennsylvania by suit. Sparks v. Garrigues, 1 Binn., 152; Stokely v. Thompson, 10 Cas., 210; Roberts' Appeal, 11 Norris, 421. The contract in the certificates to pay interest on the principal thereof, was not annulled, enlarged, or affected by the cumulative promise to pay interest thereon at particular dates evidenced by the coupons; the promise in the latter is subordinate to and not independent of the former, so long as the coupons remain attached to the bond, and in the hands of the owner of the bond. As between the maker and the holder in such case there is but one contract, and the holder could not bring separate suits on the bond and on each coupon. Jones on Railroad Securities, § 317; Clark v. Iowa City, 20 Wall., 589; City v. Lamson, 9 Id., 477; Burton v. Town, &c., 4 Fed. Rep., 373; Jackson v. R. R. Co., 48 Maine, 156. The decisions in County of Beaver v. Armstrong, 8 Wr., 63, and N. Pa. R. R. Co. v. Adams, 4 P. F. S., 94, are not opposed to this view, as those cases were actions by the holders of detached coupons, and the ownership of the bonds did not appear. The interest warrants, detached from the bonds, are not the subject of an action. They contain no promise to pay any sum of money to any person or holder, but are simply acknowledgments of sums due at a particular time upon the instrument to which they were attached. Scott v. Fields, 7 Watts, 360; Fidelity Co. v. Miller, 8 Norris, 26; Crosby v. R. R. Co., 26 Conn., 121; Wright v. R. R. Co., 1 Disney's Rep., 465; Jackson v. R. R. Co., 48 Me., 147; Jones on Railroad Securities, § 338; Evertson v. Bank, 66 N. Y., 14. It is true that in the case of North Penna. R. R. Co. v. Adams, supra, a recovery was had upon such interest warrants, but a reference to that case will show that the defence here urged was not made, or considered by this court, nor by the court below, as the affidavit of defence related solely to the question of the allowance of interest, and the assignments of error were "to the allowance of interest on the coupons, and forty dollars and eighty-nine cents counsel fees."

M. Hampton Todd, for the defendant in error.—Coupons attached to railroad bonds, payable to bearer, are negotiable instruments, the subject of a separate action by the holder, and interest is recoverable thereon. Beaver Co. v. Armstrong, 8 Wr., 63; N. Pa. R. R. Co. v. Adams, 4 P. F. S., 94.

The "interest warrants" are substantially "coupons," and the same rule applies to them. N. Pa. R. R. Co. v. Adams, supra; Woods v. Lawrence Co., 1 Black, 390; Johnson v. Stark Co., 24 Ill., 75; Smith v. Clark Co., 54 Mo., 58; McCoy v. Washington Co., 3 Wall. Jr., 381. This doctrine is in accord with universal commercial usage since such obligations have come into general use and circulation, and to deny it now would cripple the credit of corporations, as well as work injustice to their creditors holding such securities.

Chief Justice MERCUR delivered the opinion of the court, October 6, 1884.

This contention is whether the holder of certain coupons and interest warrants, can recover interest thereon from the time they became due and payable.

Each was given to furnish security for the prompt payment of the interest on bonds issued by the plaintiff in error. The one class of coupons was expressly made payable to bearer at the several times therein specified. They provided for the payment of the interest before the principal debt became due. They were designed to be severed from the bonds. They were intended to pass from hand to hand by delivery. They were payable in money, and at certain times designated. Their form and nature stamped them as the representatives of money. Each successive holder might well conclude that they were thrown on the market as negotiable paper to draw interest from maturity. It must be conceded as a general rule that interest upon interest cannot be enforced. As, however, interest is but hire for the use of money, there is nothing inequitable in a debtor agreeing to pay interest on it when wrongfully withheld. Rent is hire for the use of land, and interest on rent may be recovered. Obermyer v. Nichols, 6 Binn., 160; McQuesney v. Hiester, 9 Casey, 435; Newman v. Keffer, Id., 442 in note. Whenever equity requires the payment of interest on interest, an agreement to so pay it may be enforced. Pawling v. Pawling, 4 Yeates, 220. While it has been held that compound interest as a compensation merely for the detention of money cannot be allowed in Pennsylvania, yet if there be a special agreement to so pay, and in such form as to be valid, it may be recovered. Stokely v. Thompson, 10 Casey, 210; Robert's...