Court Opinion

ID: 6122190
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:05:05.856285+00
Date Added: 2024-06-11T08:23:44.848461
License: Public Domain

Per Curiam,:

Compound interest, it is well settled in this State, is not recoverable, except upon a special agreement to pay interest upon interest after the latter has become due. This is the rule as stated by Chancellor Walworth in Toll v. Hiller (11 Paige, 228). Chancellor Kent states the rule more strictly, and held that it could only be recovered upon a written agreement, made after the interest upon which the agreement operates has fallen due. (Van Ben Schooten v. Lawson, 6 Johns. Ch., 314; Connecticut v. Jackson, 1 id., 13.)
Legal interest is recoverable where, after a principal sum drawing interest is due, and where interest is payable upon a bond or other obligation annually, it is justly and equitably due at the end of the year; and if the debtor, instead of paying it, gives his note or bond for it, the note or bond is clearly valid. (Kellogg v. Hickok, 1 Wend., 521; Stewart v. Petree, 55 N. Y., 621.)
The action must be brought upon the new agreement to pay the compound interest, and the moral obligation of the debtor to make remuneration for the loss of interest when the principal is forborne, is a sufficient consideration to support the new agreement. (Mowry v. Bishop, 5 Paige, 103.)
The learned judge at the Special Term held, in this case, that the compound interest embraced in the account stated and settled by Mr. Fellows, was not recoverable as upon a new and special agreement within the rule of the cases in this State, and that such stated account was nothing more than a mere admission of the correctness of the account.
Generally, as a question of evidence as between merchants and traders, an account stated or settled by acquiescence, without objection to it, is deemed and treated as prima facie correct, and is conclusive upon both parties till impeached for error, mistake, or fraud. (Lockwood v. Thorne, 18 N. Y., 292 ; Towsley v. Denison, 45 Barb., 490.)
In such case, from the admission of indebtedness involved in the settlement of such account by acquiescence, in all mercantile or *618ordinary business transactions, an obligation to pay sucb indebtedness would universally be implied.
But since the cases require a special agreement to pay compound interest made after the simple interest has fallen due, it is insisted that such agreement cannot be implied from a mere account stated, but must be distinctly and expressly proved in writing, separately from such account stated.
But we think the account, in this case, has other and greater force than that of a mere admission of the correctness of the items embraced in it.
Upon its face, if not an express agreement by Mr. Fellows, it is evidence, we think, of an express agreement by him to pay interest upon the interest, after the interest fell due, annually on his bond.
Instead of remitting to the obligee, in his bond, the principal and interest as they fell due, Mr. Fellows, it appears, added the interest at the expiration of each year to the principal, and struck a balance, and treated such balance as a new principal sum upon interest, and being himself in possession of said bond as trustee and agent for Mr. Pulteney, he annexed to said bond, and sent to Mr. Pulteney, a stated account, from year to year, charging himself with interest upon interest — thus compounding.
In his final account, made by himself, including an account with the bond in question, and signed by him, bearing date the 8th of December, 1870, he wrote and signed a statement at the foot of said account, as follows: “ The foregoing accounts and amounts have been liquidated and settled, and the balance due to Bev. Bichard F. F. Pulteney is $70,463.52, subject to correction of errors and omissions which may thereafter be found therein.”
This is more than an account stated. It is a “ settled and liquidated” account, made, not by the creditor and settled by mere acquiescence, or the omission for a long time to make objection to it, but made out by the debtor himself, and expressly asserting, upon its face, that it is settled and liquidated, and that the sum of $70,463.52 is the balance due to Mr. Pulteney. This is, in legal effect, an agreement, or involves an agreement, to pay such balance, as much as if he had written, in the shape of a promissory note, to Mr. Pulteney, that the amount specified was due to him.
It is in the nature of a new agreement to pay the compound *619interest embraced in such stated balance. In Holmes v. De Camp (1 Johns., 34), Chief Justice Spencer said that “ the stating of an account is regarded as a consideration for the promise, and it is in the nature of a new promise;” and in 2 Greenleaf’s Evidence, section 127, the author says that “the stating of the account alters the nature of the debt, and is, in this nature, a new promise.”
But, independently of the consideration that an account stated and settled becomes, in effect, and is a new agreement or evidence of a new agreement, such agreement, we think, may be implied to pay interest upon interest from an account stated, as much as such agreement can be implied in other cases.
There is no ground or warrant for the distinction between this class of agreements and other contracts, requiring, that this particular agreement must be in writing. (Howard v. Farley, 3 Robertson, 314.)
In Barclay v. Kennedy (3 Washington C. C., 352), the learned judge, speqking of agreements to pay compound interest, said: “If such an arrangement may be legally made by express agreement, it may be by an implied one, and accounts regularly stated and balanced, and interest added to the balance, received by the debtor and acquiesced in without objection, may fairly be considered as evidence of such agreement.”
Chancellor Kent held or admitted this in principle in the leading case of Connecticut v. Jackson (1 Johns. Ch., 13), where he says that “ there are cases in which interest is considered as charged to principal and permitted to carry interest, as where a settlement of accounts takes place after interest has become due.”
The same principle that, where an account has been stated and a balance struck, including interest upon interest, such an account may be regarded as evidence of an agreement to pay the compound interest included in it, according to the terms and effect of the account, is asserted in Ex parte Bevan (9 Vesey, 224); Rufford v. Bishop (5 Russel, 353); Eaton v. Bell (7 Eng. C. L., 34); Bainbridge v. Wilcocks (Baldwin, 539), and in Lord Clancarty v. Latouche (1 Ball & Beatty, 429), where the lord chancellor said : “ From the acquiescence of Mr. Conoly (the debtor), I ought to presume an agreement, at the end of every year, that the interest then due should become principal and carry interest.”
*620It would obviously be a very unsafe and mischievous doctrine to hold in respect to the numerous savings and other banks in this-country, which receive deposits for accumulation, and customarily cast interest on their accounts, making annual or semi-annual rests, and striking a new balance, including the interest accrued, that they are not liable to pay the interest thus compounded and entered in the pass-books of their depositors, unless, in each case, an independent express agreement, in writing, was made to pay such balance, inclusive of the accumulated interest.
The pass-book of each depositor, in such case, would contain, in the entries therein made, an account stated by the bank and binding upon it, as an express agreement, to pay the balance thus struck. And such we regard the effect of the annual statement of' the accounts rendered by Mr. Fellows to . his creditor, from year to year, intermediate the final account.
The fact that the result of this accumulation of interest unpaid, added to the principal, makes the debt amount to a large sum at the expiration of fifty years, cannot affect the question. It is, doubtless, true, as suggested by Chancellor Kent in Connecticut v. Jackson (1 Johns. Ch., supra), and by Chancellor Walworth in Mowry v. Bishop (5 Paige, 102), that, from motives of public policy, to prevent an accumulation of compound interest in favor of negligent creditors who do not call for the payment of interest as it becomes due, courts have been reluctant to allow compound interest, and yet where the contract calls for annual interest, as is the case with the bond of Mr. Fellows, it is held but just and equitable, as Chancellor Walworth says in Toll v. Hiller (supra), to recover interest on such interest from the time it was payable. If, as a general rule, it tends to harshness and oppression to exact such interest, as Chancellor Kent suggests in the case of Connecticut v. Jackson (supra), yet there are two sides to the question, and the creditor is entitled to his rights, and they cannot be denied to him upon mere considerations of sentiment. If, in this case, the account could be taken of the profits made by Mr. Fellows in the use of the money of his principal for the fifty years he withheld it, and used it for his own benefit, I think it is quite doubtful whether he would be obnoxious to the censure, bestowed by the Savior upon the servant, to whose care his Lord intrusted the one talent which *621he hid in the ground, that “ he ought to have put his money to the exchangers that he might receive his own when he came for it, with usury.” If Mr. Fellows had deposited this money in the savings banks of this country, and received six per cent thereon semiannually, or invested it in some of the public stocks or bonds of this State or country, where he might have received dividends from seven to ten per cent semi-annually, it is quite apparent that he would have derived and retained to himself very large profits from the use of the money, and could well afford to keep it, paying to his creditor only six per cent annually, as above stated.
It was error, we think, to strike out from the account made up by Mr. Fellows, and signed by him, the items for amount due on the Fellows & McNab bond of $39,432.73.
As this is the only item in dispute, and there can be probably no further proof given in respect to it, I think the judgment may be amended by adding that sum to the amount of the recovery, as of the date of March 1, 1875, the date of the report of the judge at Special Term, and as thus amended the judgment should be affirmed, with costs of the appeal.
Present — Mullin, P. J., Smith and Gilbert, JJ.
Judgment amended and modified by adding thereto the item stricken from the account rendered by Mr. Fillmore, of $39,432.73, as of the date of March 1, 1875, the date of the finding o’f the judge at Special Term, and as thus amended affirmed, with costs.