Case ID: disney-ohio_2/html/0398-01.html
Source: Caselaw Access Project
Author: {"author": "Spencer, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Thomas Dunlap et al. v. Executor of John A. Wiseman et al.
    (No. 6,896.)
    1. When interest is payable by the terms of a contract, at stated periods, it becomes principal from the time of payment, and may be recovered as such, with interest from the time it became due; but at no higher rate than six per cent, per annum, although the interest-arising on the contract was at the rate of ten per centum per annum, under the statute. It would be otherwise, if under that statute,.the interest on the interest had been stipulated for, at the highest rate authorized.
    Special Term. — This is an action by Thomas Dunlap and others to foreclose a mortgage given by John A. Wiseman. Charles Stewart and Thomas Webb, executors, etc., of John Walker, deceased, are made parties, and they set up in their answer a mortgage on the same premises, from Wiseman to Walker.
    The question in the case is whether interest shall be allowed, and what shall be the rate of interest upon interest as it matured, on a promissory note, which reads as follows :
    “ $1,500. Cincinnati, April 14,1853.
    “ On or before the 14th day of Api’il, 1856, for value received, I promise to pay John Walker, or order, fifteen hundred dollars with 10 per cent, interest yearly from date, to be paid at the end of each six months.
    JOHN A. WISEMAN.”
    
      Clinton Kirby, for plaintiffs.
    
      W. B. Caldwell, for executor, etc., of Wiseman.
    
      Tilden & Rairden, for executors, etc., of Walker.
   Spencer, J.

It has been decided in the case of Watkinson v. Root, 4 Ohio, 373, that on a note drawn in this way, the interest would be allowed on the interest, as it matured from time to time; that was an action brought for the recovery of the interest alone, the principal not having yet become due, and it was held that where a note was drawn in that way, the interest, when it should be paid, becomes principal, and draws interest.

The present case falls within this ruling. The plaintiffs are entitled to interest on these installments of interest, as they matured, at the end of every six months. But where interest is thus made principal, the question is what rate of interest does it draw ? The statute provides that on all sums of money, after the same shall become due, the interest shall be allowed at the rate of six per cent, and no more. • By virtue of that provision, then, this installment of interest would only draw six per cent.; but it provides that parties may agree, in writing, to pay interest at a rate not exceeding ten per cent. ¥e are disposed to give that statute a strict construction. If the parties had agreed, by the terms of the contract, to pay interest at the rate of ten per cent, on the interest as it matured, it would be a contract for that sum; but they agreed to pay ten per cent, only on the principal sum, so that the contract, if the law were embodied into it, entitles the party to interest on the installments of interest, as they matured, at the rate of six per cent.

Decree accordingly.