Case ID: mass_17/html/0337-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James Dean versus Nathaniel Williams.
    In casting interest upon bonds, notes, &c., upon which partial payments have been made, every payment is to be first applied to keep down the interest; but the interest is never allowed to form a part of the principal, so as to carry interest
    This was a suit to foreclose a mortgage. The only question in the case was on the mode of computing the interest due on the note, to secure the payment of which the mortgage was made; and it was agreed by the parties, that if the Court should be of opinion that the amount due was not greater than a certain sum mentioned in the agreement, the plaintiff should discontinue his suit; but if a greater amount was due, the conditional judgment prescribed by the statute, should be entered for the excess, with costs.
    
      Morton, for the plaintiff.
    
      Cobb, for the defendant.
   By the Court.

—One of the methods of casting interest where partial payments have been made and endorsed on bonds, notes, or other securities for money, is to calculate the interest from the date of the security, or the time when the interest is to commence, to the time of the first payment endorsed, to add this to the principal, and from the sum to subtract the payment. On this remainder interest is cast to the time of the second endorsement, which is added to the remainder, and from the sum is subtracted the second endorsement. In like manner interest is cast from one payment to another, and to the time of the judgment. This method is correct, whenever the payment exceeds the amount of interest due at the time of payment; but is not to be used when the interest exceeds the payment; for the effect, in such case, would be to give compound interest, which the law does not allow.

To avoid this, the following rule has been adopted, by which every payment is first applied to keep down the interest ; * but the interest is never allowed to form a part [ * 418 ] of the principal, so as to carry interest.

Compute the interest on the principal sum, from the time when the interest commenced to the first time when a payment was made, which exceeds, either alone, or in conjunction with the preceding payments, if any, the interest at that time due; add that interest to the principal, and from the sum subtract the payment made at that time, together with the preceding payments, if any; and the remainder forms a new principal, on which compute and subtract the interest, as upon the first principal; and proceed in this manner to the time of the judgment.

By this rule the interest has been computed in the case before us; and the balance, found due, having been paid to the plaintiff, he has leave to discontinue, and no costs are to be taxed for the tenant . 
      
       [See the various decisions on this subject, Fay vs. Bradley, 1 Pick. 194.— Williams vs. Haughtaling, 3 Cowen, 87, and note to this case.—Tillotson vs. Preston, 3 Johns. 229.—Scarland & Al. vs. Houston, 5 Yergor, 310.—Meredith vs. Banks, 1 Halst. 408.—Lamott vs. Starrett, 1 H. & Johns. 42.—Bunn vs. Moore, 1 Hayw. 279. —Tracy vs. Wikoff, 1 Dall. 124.—Penrose vs. Hart, 1 Dall. 378.—State of Connecticut vs. Jackson, 1 Johns. Ch. C. 13.—Stoughton vs. Lynch, 2 Johns. Ch. 209.—Church vs. Norwich, Kirby, 140.—Lightfoot vs. Price, 4 H. M. 479.—Smiths vs. Shaw, 2 Wash. C. C. R. 167.—Doe vs. Warren & Al. 7 Greenl. 49.—Ed.]