Court Opinion

ID: 3866082
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:59:54.246949+00
Date Added: 2024-06-11T13:51:35.131843
License: Public Domain

Interest upon a contract for the payment of money, where it is payable as interest by the terms of the contract, *Page 400 
is to be paid according to the law of the place where the contract is made, unless it is elsewhere to be performed. The bonds, secured by the mortgage here in suit, were made in New York, between parties resident there, and, as they make no provision for payment elsewhere, were presumably to be paid in New York. Accordingly interest on them, if payable as interest, would have to be paid at the legal rate in New York, — the fact that they are secured by a mortgage of real estate in Rhode Island being ineffectual to vary the rule. De Wolf v.Johnson, 10 Wheat. 337; Lockwood v. Mitchell, 7 Ohio State, 387; Varick's Ex'r. v. Crane, 3 Green Ch. 128; Dolman v.Cook, 14 N.J. 56; Cotheal v. Blydenburgh. 1 Halst. 17;Stapleton v. Conway, 3 Atk. 727.
The interest, however, is payable not as interest, there being no stipulation for interest in the bonds, but as damages for the non-payment of the bonds at their maturity; and the counsel for the defendants contends that, where interest is to be paid as damages, it is to be computed at the rate established by the law of the place where the suit is brought, and not at the rate established by the law of the place where the contract was made or to be performed. The cases cited show that such is the rule in Massachusetts. Ayer v. Tilden, 15 Gray, 178; Ives
v. Farmers Bank, 2 Allen, 236. The case of Cooper v.Waldegrave, 2 Beav. 282, does not show that such is the rule in England. In that case, the question was at what rate of interest was stated to be bills of exchange, drawn in Paris and there accepted, but payable in London. No particular rate of interest was stated to be payable on the face of the bills. The holder of the bills, in a suit in England against the acceptor, claimed interest at six per cent., the legal rate in France. The court decided that English interest, at the rate of five per cent., should be paid. The reason given for the decision was, that interest was given as compensation for non-payment in England and for the delay suffered there, and that the law of the place where the default happened must govern the allowance of interest arising out of the default. The inference is, that if the default had happened in another place, the interest would have been allowed at the rate established by the law of such other place.
In Gibbs v. Fremont, 9 Exch. 24, a bill of exchange, on the *Page 401 
face of which no interest was reserved, was drawn in California upon a drawee at Washington, and protested for non-acceptance. In an action by the indorsee against the drawee, in the Court of Exchequer in England, the plaintiff recovered interest, by way of damages, at the rate of twenty-five per cent., being the rate payable in California. The question considered was whether the plaintiff should have interest at the rate current in Washington or in California, no claim even being advanced that only the much lower English rate was to be paid. The court followed the decision in Allen v. Kemble, 6 Moore P.C. 314, in which it was said that the drawer of a bill of exchange "is liable for payment of the bill, not where the bill was to be paid by the drawee, but where he, the drawer, made his contract, with such interest, damages, and costs as the law of the country where he contracted may allow." See also Ekins v. East India Company,
1 P. Wms. 395, and 1 Eq. Ca. Abr. 288 (E).
In Pecks v. Mayo, 14 Vt. 33, the defendants were sued in Vermont as indorsers of a promissory note, drawn in Canada, indorsed in Vermont, and payable in New York, at a day certain, without interest reserved. The court held that interest was recoverable as damages at the rate of seven per cent., being the New York rate, and one per cent. higher than the rate in Vermont or Canada. The ground of the decision was that the defendants had made default in New York, the view of the court differing in that respect from the view which was taken in Gibbs v. Fremont.
The language used by Justice Redfield, in delivering the opinion of the court, was, that on a contract to pay money at a certain time and place, where no interest is reserved, and there is a delay of payment, "interest, by way of damages, shall be allowed according to the law of the place of payment, where the money may be supposed to have been required by the creditor for use, and where he might be supposed to have borrowed money to supply the deficiency thus occurring, and to have paid the rate of interest of that country." This view is supported by many other cases.Foden v. Sharp, 4 Johns. 183; Beckwith v. Trustees ofHartford, Providence  Fishkill Railroad, 29 Conn. 268; Cowqua
v. Lauderbrun, 1 Wn. C.C. 521; Jaffray v. Dennes, 2 Ibid. 253; Evans v. White, Hemp. 296; Pauska v. Daus, 31 Tex. 67, 73; McAllister v. Smith, 17 Ill. 328. *Page 402 
We think the rule which allows interest according to the law of the place where default is made, in a case where interest is recoverable as damages, is the more reasonable rule, and the rule which is best supported by authority; and that, where no special rate is reserved, there is no distinction which can justly affect the rate to be recovered, between interest recoverable as interest and interest recoverable as damages.
The exception is overruled.