CHAPTER IX. INTEREST. 64. Interest as damages.-The discussion of the law relating to interest comes properly under the subject of damages, because originally interest was allowed as damages for failure to pay money when due. The courts now frequently refer to an allowance to plaintiff of a certain amount by way of damages because defendant delayed in compensating plaintiff. It is said to be given, not as interest, but somewhat in the nature of interest."1 In the early common law interest was not allowed, but on the other hand was prohibited. Yet as money is property, the use of which is valuable, it seemed unreasonable to prohibit taking compensation from one who borrowed it and was willing to pay for the advantage thus secured, and in 37 Hen. VIII c. 9, it was made lawful to take interest for money loaned.72 In this country statutes relating to interest are enacted not for the purpose of authorizing the collection of interest, but to limit the amount which may be collected. The rate fixed by statute not only limits the amount which one may legally contract to pay, but governs generally the measure of damages in breach of contract to pay money. It is not unusual for plaintiff to attempt to collect more 71 Richards v. The Citizens Natural Gas Co., 130 Pa. St. 37. 72 Lowe v. Waller, 2 Douglas 736 (Eng.). than the legal rate where defendant failed to pay promptly, by showing that if defendant had kept his contract plaintiff could have made large profits in advantageous investments, or could have prevented loss to himself. The courts have held evidence of this character inadmissible," not only because such profits are speculative and uncertain but also because the damage for failure to pay money is the legal rate of interest. 65. When interest payable.-Aside from contract interest is payable from the time a debt or claim is due and should be paid. It is immaterial whether or not the parties have in advance agreed upon the payment of interest. The law gives to the creditor interest for the use the debtor has had of his money, just as it would give compensation for the use of lands or chattels. 66. Liquidated demands. It is sometimes said that interest can be collected only on liquidated demands. But there grew up so many exceptions to this rule that the rule itself no longer states the law. If the amount can be ascertained by computation or by market values, or other facts readily obtainable, the debtor will not be excused from paying, but will be required to pay interest for his delay. And so although it may be difficult to determine the amount due, if this duty rests upon the debtor and he has failed to take the requisite steps to determine the amount he will be held for interest.74 73 Greene v. Goddard, 9 Met. 212 (Mass.). 74 Van Rensselaer v. Jewett, 2 N. Y. 141; McMahon v. New York and Erie Railroad, 20 N. Y. 463. 67. Demand, when necessary.-In many cases interest will not begin to run on a debt or obligation until a demand for payment has been made. If the debtor is not in default, but some condition precedent was required to be performed or some event happen before he was obliged to pay, then interest will run only from the performance of such condition or the occurrence of such event. A demand is a common precedent condition, in case no time is fixed for payment or in claims payable on demand, or where one has received money by mistake. The courts are divided on the question whether a note payable on demand bears interest before payment is demanded. It is said by some courts that such a note is due upon delivery and bears interest from date. Others hold that a demand is required to start interest on a note of this character. The former rule is probably more in accord with the intention of the parties, as interest is usually expected for money loaned, whether the debt is to continue a long or a short period of time. 68. Place of performance.-Interest on contracts to be performed in a place other than where the contract is made is counted at the rate at the place of performance. Where no place of performance is named the rate at the place of making the contract will govern; if suit is in a jurisdiction different from the place of making the contract and no interest is designated in the contract the legal rate where the contract was made will be adopted if proven. If not 75 Dailing v. Wooster, 9 O. St. 517; Hill v. Henry, 17 O. 9; Curtis v. Smith, 75 Conn. 429; Omohundro's Ex 'r v. Omohundro, 21 Gratt. 626 (Va.). proven it will be presumed to be the same as the rate in the place of trial. 69. Legal rate. By legal rate of interest is meant the rate which is fixed and allowed by law, where the parties have not agreed upon any rate. The statutes generally permit parties to contract for a rate higher than that designated the legal rate. But there is also a limit usually fixed beyond which parties may not contract; interest beyond this limit is usurious. 70. Rate after note matured.-Whether a note will bear the contract rate or the legal rate only, after maturity, where the parties have failed to indicate, is a mooted question. It is contended on the one hand that the legal rate governs after maturity as damages for failure to pay money when due,7 while on the other hand it is claimed that the contract rate continues as an implied part of the contract till the debt is paid. The weight of authority and the better reason seem to sustain this latter position." 71. Compound interest.-There has been much prejudice against compound interest or counting interest on interest. If the parties in their contract have not indicated in any way that interest is to be paid on past due interest, courts will allow simple interest only. But if in the contract it is clearly expressed that interest when past due shall bear interest, as in case of interest coupons attached to 76 Eaton v. Borssonnault, 67 Me. 540; Brewster v. Wakefield, 22 How. 118. 77 Miller v. Burroughs, 4 Johns. Ch. 436; Brannon v. Hursell, 112 Mass. 63; Monnett v. Sturges, 25 O. St. 384. bonds, most of the courts hold the contract valid and allow such interest. If, however, the contract simply states that interest is to be paid annually, a majority of the courts, it appears, refuse to permit interest to be collected on interest which is past due.78 But on the other side eminent authority and courts of recognized ability may be cited holding the other way, and permitting interest on an interest debt past due, as on any other debt.79 In no case will the interest upon interest be permitted to bear interest.80 72. The jury's discretion to allow interest in actions sounding in tort.-The rule which permits the recovery of interest only in the discretion of the jury probably had its origin in the English statute, 1 and 4 William IV, where the right to interest as part of the damages was first authorized to be given only in the discretion of the jury in actions of trover and trespass. In this country, in the absence of any statute bearing on the subject, courts began following the English decisions which were rendered under this statute and permitted interest in this class of cases to be given only in the jury's discretion.81 But the courts now generally divide actions sounding in tort into three classes relating to the matter of interest, namely, (1) those actions in which interest may not be collected, such as assault and battery, 78 Bowman v. Neely, 151 Ill. 37; McVicar et al. v. Denison et al., 81 Mich. 348. 79 Anketel and wife v. Converse et al., 17 O. St. 11; Rix v. Strauts, 59 Mich. 364; Lanahan v. Ward et al., 10 R. I. 299. 80 Anketel and wife v. Converse et al., 17 O. St. 11. 81 Hyde v. Stone, 7 Wend. 354; Bissell v. Hopkins, 4 Cow. 53 (N. Y.). |