Court Opinion

ID: 6593048
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:59:34.924737+00
Date Added: 2024-06-11T15:57:43.316293
License: Public Domain

Green, Judge:
Whatever diversity of opinion there may have been as to the circumstances under which compound interest or interest upon interest can he collected, there is one thing which must be regarded as definitely settled in Virginia and in this State, viz: That an agreement to pay interest upon interest is valid, if made after the interest, which is to bear interest, has become due. (Craig v. McCulloch et al, 20 W. Va. 154; Genin v. Ingersoll, 11 W. Va. 549; Pendall v. Bank of Marietta, 10 Leigh 481; Childers v. Dean, 4 Rand. 406; Fully v. Davis, 26 Gratt. 903-911). This is settled law with us; and, it seems to me, it has been correctly settled. If it were an open question, which it is not, I should reach the same conclusion on reason. When interest has become due, it is a debt which the creditor has a right to collect; and an action-had to recover it, even though the debt, on which the interest has accrued, may not then be due. If instead ofbpaying it the debtor wishes to retain this interest and to pay interest on it as any other debt, while it is due, and agrees to do so, I can see no reason why he should not be bound by such agreement — It is nothing more than an agreement to pay interest for the forbearance of the enforcing of the collection of a debt then actually due and demandable. There is much authority which sustains these views. (Greenleaf v. Kellogg, 2 Mass. 568; Young v. Hill, 67 N. Y. 162; Tyler v. Yates, 3 Barb. 222; Fitzhugh v. McPherson, 3 Gill 408).
On these authorities it is clear that Rebecca Hindman could on May 22, 1872, when she settled with Nicholas Stansbury, have legally calculated the interest due upon the note of two thousand and five dollars, which she held to that date and could have taken from him a new note for this interest, which after allowing previous payments would have been about one thousand three hundred and fifty-six dollars, and seventy-three cents, and could have secured this interest represented by this note of one thousand three hundred and fifty-six dollars and seventy-three cents by a deed of trust, and could have enforced payment of the same. This it is true would have been the equivalent of compounding the interest due on the original debt on May 22, 1872; and this according to the Virginia and West Virginia cases would have been entirely legitimate, *639as the contract to compound the interest due on May 22, 1872, was not made till this interest became due and payable. But the contract made on May 22, 1872, was materially different from this, inasmuch as it was a contract to pay a sum with the interest thereon from that time, not for a debt then due with the interest which the creditor had a right to enforce then, hut for a sum four hundred and ninety-four dollars and thirty-three cents more than the debts then due, that is, the interest then due on the original debt. This excess of four hundred and ninety-four dollars and thirty-three cents was found by calculating the interest on the original debt compounding it annually from the time the original debt was -contracted. But the creditor, when this contract was made (May 22, 1872), had no right to recover on the original debt compound interest but only the debt and the simple interest which had not been previously paid. • For the giving of this note on May 22, 1872, for four hundred and ninety-four dollars and thirty-three cents more than the simple interest then due and unpaid there was no consideration whatever except the forbearance of the creditor to enforce his debt then due; and as his whole debt was still to bear interest, this four hundred and ninety-four dollars and thirty-three cents can only be regarded as a premium over six per cent given by the debtor for this forbearance, which made the transaction, it seems to me, obviously usurious. This conclusion is in accord with the Virginia and West Virginia cases and seems to me to be a necessary conclusion from the principles laid down in these cases. It is true that there are decisions in other courts in conflict with this conclusion; but it seems to me that they cannot be followed Avithout infringing on the statute against usury. (See Wilcox v. Howland, 23 Pick. 167; and perhaps Kellogg v. Hickop, 1 Wend. 521, may conflict with my views). Miles v. Commissioners, 8 Blatchf. 158, is also relied on by appellant’s counsel, but it does not seem to me to be in conflict Avith the conclusion I have reached.
It is true this four hundred and ninety-four dollars and thirty-three cents was not then paid, and we do not know when it Avas paid, but Ave do know, that when it Avas paid, it Avas paid Avith interest from May 22,1872, as the note taken at that time for one thousand eight hundred and fifty-one dol*640lars and six cents bore interest from that time, and this four hundred and ninety-four dollars and thirty-three cents constituted a part of it, and was paid off with interest from May 22,1872, when this note for one thousand eight hundred and fifty-one dollars and six cents with interest was paid. Exact justice would therefore be done by crediting this four hundred and ninety-four dollars and thirty-three cents as paid on May 22, 1872, as well as all the interest on the original debt of two thousand and five dollars to that date. This would reduce the principal of the debt on May 22, 1872, to one thousand five hundred and ten dollars and sixty-seven cents. The interest on this to March 5, 1881, when the decree appealed from was rendered, would be seven hundred» and ninety-six dollars and thirfy-scven cents making the debt and interest to March 5, 1881, two thousand three hundred and seven dollars and four cents, less the four dollars and twenty-five cents paid March 25, 1879, or two thousand three hundred and two dollars and seventy-nine cents. While the circuit court in the decree of Mar’ch 5, 1881, appealed from, appears to have adopted the views above expressed by sustaining the exceptions of Bebecca Hindman to the commissioner’s report, yet in calculating the amount due to her on this mode of calculation, some error appears to have been committed, as this decree fixes the amount due to her at two thousand five hundred and fifty-six dollars and fifty-six cents, as of that date, which according to my calculation is an error in her favor of two hundred and fifty-three dollars and seventy-seven cents. Iiow such a mistake has occurred it is difficult to tell.
But it is claimed, that Nicholas Stansbury voluntarily paid this compound interest, and that he cannot in effect recover what he has thus voluntarily paid; for though the courts do not in general allow compound interest, yet they do not refuse to allow it, because it is illegal. To sustain this position couusol refer to Dow et al. v. Drew, 3 N. H. 40. This case does sustain this position. But I deem it unnecessary to consider whether the law is correctly laid down in this case or not. Eor admitting this to be the law as claimed by the appellant’s counsel, it seems to me to be entirely inapplicable to the ease before us. The debtor here did not vol*641untarily pay this tour hundred and ninety-three dollars and twenty-three cents the difference between the simple and compound interest; for when he-paid it, the creditor not only had his obligation for it, but also had a deed of trust on his home-farm to secure its payment. It is true, he voluntarily gave Ms obligation including this four hundred and ninety-three dollars and twenty-three cents, and ho voluntarily gave the deed of trust to secure it; but when he gave it, he did so to secure the forbearance of the creditor in enforcing her debt; and though he may have declared, that he regarded it right to pay this compound interest, and willingly gave this note and deed of trust to secure the same, yet, as the taking of this note for an amount in excess of what ivas due designedly by the creditor rendered the transaction usurious, the willingness of the debtor to give this usurious note and secure it by a deed of trust would not purge the transaction of the usury. His subsequent payment of this note so given was voluntary only in the sense, in which every payment of a usurious debt is voluntary; and all admit that usurious interest when paid may be recovered back.
It is also claimed by counsel for the appellant, that it is not illegal to stipulate for compound interest, or that interest, as it becomes due, shall be converted into principal and carry interest; and some authorities are cited for this position. I apprehend, that this position is not well taken, and that the weight of reason and authority is opposed to it including the Virginia and West Virginia cases; but I do not deem it at all necessary to consider this question, for there is not a pre-tence, that, when this debt was contracted, there was any stipulation that it should bear compound interest. The note given for the debt originally simply called for interest from its date-; and the interest was not to be paid annually. It was a simple note payable in six months for two thousand five hundred and five dollars with interest from the date of the note. There was, when this original note was given, no special contract of any kind with reference, to the interest; and in fact no special contract of any kind with reference to the interest was made according to the evidence, as I understand it, till May 22, 1872, when the debtor under a contract not with his original creditor but with an assignee of the *642original noto, Rebecca Iiindman, stipulated, not to pay compound interest in the future, but to pay compound interest for the time which had then elapsed since the original note was given. This contract, we have seen, was usurious and, as I understand it, was the only special contract with reference to the interest. It is true Samuel Hindman does depose that “ there was an agreement, by which he (Nicholas Stans-bury) was to pay interest on interest, if she (Rebecca Hind-man) would wait upon him- for the principal, and they both carried out that agreement.” In saying they carried out that agreement the witness evidently refers to the transactions of May 22, 1872, of which he was speaking. These transactions were, we have seen, usurious. The agreement of which he speaks, I understand, was a mere preliminary and verbal agreement made just prior to May’ 22, 1872, and which was on that day carried out, and was therefore a usurious agreement. I conclude, that this was the meaning of the witness, because he gives no other date to this agreement, and because it was carried out on May 22, 1872, and was with Rebecca Hindman, the assignee. She did not own this debt, till many years after the original note was given to her husband; and most probably she became the owner of it but a short time prior to May 22, 1872. In her answer she says, that this original note was transferred to her prior to 1872 as and for a part of her distributive share of the estate of her husband, to whom the original note was payable. My conclusion therefore is, that the only agreement ever made by Nicholas Stansbury with reference to this debt was the one he made with Rebecca Hindman, the assignee of this note, and that this agreement was to pay compound interest on the debt not in the future but for the time, which had elapsed, when this agreement was made; and this verbal agreement was a mere preliminary one, which was reduced to writing and carried out on May 22,1872, which agreement was, as we have seen, usurious.
The decree of the circuit court of March 5, 1881, in so far as there is an error in the calculation of the amount due, which I have pointed out, must be corrected, and then this decree must be affirmed, and the appellees must recover of the appellant their costs in this Court expended and $80 damages.
Corrected and Affirmed.