Court Opinion

ID: 6965782
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:53:39.989753+00
Date Added: 2024-06-11T16:08:36.608562
License: Public Domain

Mr. Justice Baker delivered the opinion of the Court: It appears that appellee’s judgment for $4,748.52 against appellant included the principal of the note for $3,481.31, less the proper deductions for the several payments, as of their respective dates, and interest calculated at the rate of ten per centum per annum, simple interest. The note provided, that interest should be paid on the principal at the rate of ten per cent per annum from date, and that it should be payable annually, and if not so paid, should become principal, and bear the same rate of interest as the original principal. Appellant contends that this provision in the note rendered the contract usurious, and that it was error to allow appellee any interest whatever, that the judgment should have been only for the principal of the note, less the amounts of the several payments endorsed thereon. In our opinion, the case at bar does not come within the purview of Sec. 6, Ch. 74, of Rev. St. of 1874. The decisions of this court bearing on this question maybe divided into two general classes: First, where a greater rate of interest is sought to be recovered than is allowed by law. This is usury, and, in such a case, the statute provides that the creditor shall forfeit his interest, and shall recover only the principal of the debt. And second, where interest upon interest, or compound interest, is sought to be reeovered; in that case, if no more than the legal rate of interest is charged, there is no usury, within the meaning of our statute. From motives of public policy, however, the law will not allow the recover}7 of compound interest. There are but two exceptions to this latter rule: First, in respect to interest-bearing coupons attached to bonds or other securities for the payment of money. Such coupons, when payable to bearer, have, by commercial usage, the legal effect of promissory notes, and possess the attributes of negotiable paper. They are contracts for the payment of a definite sum of money on a day named, and pass, by commercial usage, as negotiable paper. The interest on such bonds, however, is not compounded indefinitely, but is compounded once only. These are the reasons why they are excepted from the operation of the general rule. The second exception is in cases where, the interest having become due and remaining unpaid, the debtor then agrees to have the accrued interest added to the principal and become interest-bearing. Leonard v. Villars, 23 Ill. 377; Haworth v. Huling, 87 id. 23; Thayer v. Mining Company, 105 id. 553; Bank v. Davis et al., 108 id. 633; Gilmore v. Bissell, 124 id. 488; Bowman v. Neely, 137 id. 443. The case at bar, however, does not come within either of these exceptions to the general rule. Here, the payment of the interest was not secured by a separate and independent instrument, as in the case of coupons attached to bonds, but the payment of the principal and interest were secured by one and the same paper; and the payment of compound interest was here agreed upon in advance, and not after the interest had accrued. Appellee was entitled to recover the principal of the note here in controversy, he making proper deductions for all payments made, together with simple interest from the date thereof, at the rate of ten per cent per annum, the rate contracted for in the note, that being-lawful interest at the time the instrument was executed. We find no error in the record. The judgment is affirmed. Judgment affirmed.