J. G. (Jabez Gridley) Sutherland.

A treatise on the law of damages : embracing an elementary exposition of the law, and also its application to particular subjects of contract and tort (Volume 1) online

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should not go into effect until the
1st of January, 1829. The action
was asumpsit, and commenced in
Hilary term, 1829. The debt was
then of more than six years' stand-
ing. In February, 1828, a declara-
tion was made by parol to pay, un
der instruction from the judge to
find upon that point. The judge
then nonsuited the plaintiff on the
ground that the promise should
have been in writing under the
statute. The court of common pleas
refused to set aside the nonsuit.
Two other cases were cited in tlie
judgment upon the same statute to
the same effect. One of them was
before Lord Tenterden, where tlie
action had been brought before tlie
statute went into effect, though not
tried until afterwards.

"I have carefully read the leading
cases in the courts of our own coun-
try upon the subject of retrospective
statutes, especially Dash v. Van
Kleeck, 7 Johns. 477, in which the
strength of the old supreme court
of our state was fully put forth.
I see nothing in the principles there

advocated or tlie decision there nuide
to cliange the result I have arrived
at. Calder v. Bull. .'< Hall. ."iHli. 1
L. ed. 648; Bedford v. Shilling,' 4
S. & R. 401, 8 Am. Dec. 718; Woart
V. Winnick. 3 N. IT. 473. 14 .\m.
Dec. 384; Ilackley v. Sprague, Id
Wend. 113; Sayre v. Wisner, S
Wend. 66." Stark v. Olney, 3 Ore.
88; Perrin v. Lyman, 32 Ind. 10:
Woodruff v. Scruggs, 27 .\rk. 2f'i.
11 Am. Rep. 777.

But see (ox v. .Marlatt, 3<) N. .1.
L. 389, 13 Am. Rep. 454. In this
case the court decided that the rate
of interest which a judgment will
bear immediately after its rendition
cannot lie cbaiigcd liy subse(|uent
legislation. Scu(bler, .(., said: "'Ibc
effect of a judgment is tn fix the
rights of the parties thereto liy tbc
solemn adjudication of a court bav-
ing jurisdiction. Ifow thes" rights
can be affected by subse(|Uent legis-
lation is not apiiarciit. This con-
tract of tlic liiglicst autliirity
cannot be distui-brd x) long a.-* it
remains unre\-ersed and unsatisfied.
Changing tlie rate of interest does
not affect (>xisting contracts or delits
due prior to such enactment, wheth-
er tliey be evidenced by stilt ute.
judgment or agreement of the par-
ties. Sucli lias been i\\>- uniform
course of decision in our courts.
... if it lie said tiiiit till' inter-
est is given as damages f<u- tlie dc -
tention of the del)t, aiul that the dam-
ages are greater when seven percent,
interest can be had than when only
six per cent, can be obtained, and
for such detention after the rate is
increased there should be additional
damages allowed, the answer is that
there can be no such second assess-
ment where the amount of the debt



[§ 369

which there is no interest euiitraet whatever. It is true that
some courts hohl that if the agreement is to pay the del)t, with
interest at a specified rate on a day certain and does not ex-
pressly stipulate the interest afterwards, the interest obligation
expires at the day fixed for payment, and the interest which the
debtor is obliged to pay while he detains the money after it is
due is only computed at the legal rate as damages.®^ In these
courts, on the doctrine that the interest agreement has no effect
after maturity, doubtless the interest after that time would be
computed at whate\'er might be the legal rate, changing the rate
in the computation as the legal rate may change. The rule,
however, as we have stated, is more generally to continue the
rate agreed on before maturity until the debt is paid or put in
judgment.^^ But there is yet another distinction: — courts
which concur in continuing the interest rate, if agreed on for
the period of credit, to payment or jiidg-ment difi"er in the
reasoning by which they reach that result ; and this difference
will naturally produce a divergence on the point we are now
discussing. When the agreement in respect to the rate of in-
terest before maturity is construed as tacitly continuing so long
as the debt remains in contract unpaid the interest after ma-
turity rests on a basis of contract and is not subject to he reduced
or altered by any law subsequently enacted.^^ But when the
continuance of the rate agreed on before maturity is not put
upon the ground that the agreement continues it, but upon the
theory that the rate which was agreed to before maturity as a
just compensation for the use must be deemed a just and proper
compensation afterwards for the detention of the money, then
the rate rests not upon the contract and is not so fixed as to be
beyond the effect of subsequent legislation Avhich is plainly in-
tended to modify it.

or liability has been once adjudged,
and the cause of action remains the
same. The interest is the measure
of damages for the detention, and
that must relate to the time wlien
the amount is fixed by the entry of
the judgment." See North Elver

Meadow Co. v. Shrewsbury Church,
22 N. J. L. 424, .53 Am. Dec. 258.

61 See § 309.

62 Id.; Farmer v. Mitchell, 128
111. App. 297 (verbal agreement).

63 Lee V. Davis, 1 A. K. Marsh.
397, 10 Am. Dec. 746; Association

leson, 60 How. Pr. 9.

§ 3G9] INTEREST. 1101

This distinction is illustrated by two cases in Connecticut.
In one of them ®* the action was brought upon a proinissorv
note, payable in that state, for a specitied sum, "witli taxes,
and interest at the rate of fifteen per cent, after maturity."
Here the contract in respect to interest after maturity was not
tacit, but express. The difference is immaterial so far as the
effect is concerned. A tacit agreement is as inviola])le as an
express contract. jSTotes Avliicli provide for iulcrest generally
and are construed to mean interest until paid, arc p(|uival<'iit
to the contract made in the case just mentioned. When that
note was made the law of Connecticut permitted parties to con-
tract for any rate of interest. But l)efore it matured an act
was passed which provided that no greater rate of interest than
seven per cent, should be reco\'ered for money loaned ''for the
time after the money loaned becomes due." It was lield that the
fifteen per cent, was to be regarded as interest recoverable under
the contract, and not as damages; tliat the* act was not intended
to apply to contracts in which there was an agreement as to the
rate of interest after maturity, and if it was intended to apply to
such contracts then existing it was so far iiiiconstitutional and
void as impairing their obligation. The other case ^^ was an
action upon a note made in 1869, and payable in Connecticut
in three years, with interest at seven and three-tenths per cent,
per annum. The statute in force when this note was nnulc pro-
vided that when interest was reserved at a higher rate than
six per cent, the contract should be void so far as related to
interest. In 1872 an act was passed "validating and confirm-
ing" usurious contracts, and providing that th(\v might be
enforced. It will be observed that this note contained a promise
of interest wliich was general as to time and in Connecticut
meant from date to maturity. If not affected l)y usury, nor
changed by subsequent legislation, the conventional rate would
be continued, not as an agreed rate, but as a just one, being
considered just after maturity because the parties had a<lopted

64 Hubbard v. Callahan, 42 Cunn. G5 l-'iist iM'clesiastical Sdc. v.

524, 19 Am. Rep. olU. Rco Ragoud T.i.oiiiis, 42 ("omi. r>70, approved in
V. Aikin, 57 Tex. 511. Iliiniiaii v. (Jix.dyear, 5(1 id. 210.


it during the period of credit.^^ In 1873 the A^alidating act of
1872 was repealed. It was held that the contract in this note
was validated by the act of 3872, and the repeal of it could not
annul the validating effect. The note, with the agreed interest
to maturity, was recoverable ; but the interest afterwards at the
conventional rate, not being secured by the contract, was un-
affected by these acts, and the conventional, being in excess
of the legal rate when the note was made, could not be deemed
a just rate.®'

It results from this brief review of the adjudications that
whenever interest after maturity of the debt is not fixed by an
agreement of the parties, binding for that purpose by the law
of the place of contract, it is competent for the legislature of
that jurisdiction to change the rate to be computed as damages ;
and by parity of reason it is fair to conclude also that a statute
enacted in another jurisdiction where the remedy is sought, ap-
plying the law of the i'orum to the computation of such interest
as damages, would be valid. On the other hand, if the interest
after maturity is fixed by contract, valid for that purpose by the
law of the place of contract, whether it be by a promise in ex-
press terms of interest after maturity at a specified rate or by a
promise of interest at a specified rate generally, it is as sacred
and secure against the impairing effect of subsequent legislation
as the agreement before maturity or for payment of the principal

§ 370. Same subject. The question has been considerably
discussed and differently decided by the courts whether a con-
tract for the payment of money which is subject to be avoided
either wholly or in part for usury can afterwards be validated
by legislation so as to deprive the debtor entirely of that de-
fense.®^ A usurious contract, although declared wholly or in

66 Beckwith v. Trustees of Hart- 69 See Mitchell v. Dopgett, ] Fla.
ford, etc. R., 29 Conn. 268, 76 Am. ^^^^ Springfield Bank v. Merrick,
Dec. 599. '

67 See Simpson v. Hall. 47 Conn. 14 Mass. 322; Wood v. Kennedy, 19

417. Iiid. 68; Pervin v. Lyman, 32 Ind.

68 Lee V. Davis, 1 A. K. Marsl
397, 10 Am. Dec. 746; Association
V. Eagleson, 60 How. Pr. 0. 313

16: jMorton v. Rutherford, 18 Wis.

§ 370] INTEREST. 119;3

part void, is not void in an absolute senso; it is onlv voidiiMc at
the election of the debtor. When he elects to avail himself of
the defense the effect of the law in discharging anv part of the
obligation to pav the principal of the debt and lawful interest
is a penalty, and is imposed not so much to benefit or relieve the
debtor as to maintain by this sanction the general policy of the
law of restricting interest transactions within what are deemed
reasonable limits, regard being had'for the general welfare. It
is even regarded as unconscientious and inequitable for him to
claim and accept such a discharge.'" It is, at all events, purely
statutory, and is not distinguishable in principle from penal
damages given in certain actions in which simple or actual
damages are allowed to be doubled or trebled. Although the
usurious contract may be so far void, if the debtor chooses to
set up the defense of usury, that the creditor may not be able to
sustain an action for the whole or even a part of the deiit for
reasons of policy, yet a moral obligation remaining to perform
the contract, it would be going very far to say that the legis-
lature may not, in furtherance of the original intention of the
parties, add a legal sanction to that obligation when those rea-
sons have ceased or such policy is abandoned ; '^ especially as
the repeal of a penalty provided by law would have this effect
and thereby establish matters in the condition in which it was
the intention of all concerned to place them.'^

The privilege of a debtor to repudiate his contract by plead-
ing usury or the privilege, by making an unconscionable de-

70 Curtis V. Leavitt, ir, X. Y. !). etc. Bank, 17 S. & R. 64, 17 Am.
An action for the original considcra- Dec. 635; Sattcrloe v. .Mnttliewson,
tion of a usurious contract, with 16 S. & R. 191 ; Menkes v. Wertnian,
legal interest thereon, is maintain- 1 Pa. 218; Woodruff v. Scruggs. 27
able without the aid of a curative Ark. 26, 11 Am. Rep. 777; Perrin v.
statute. Wallace v. Goodlett, 104 Lyman, 32 Ind. 16; Gibson y. Hib
Tenn. 670. bard, 13 Mich. 214; Welch v. Wads-

71 See Lewis v. McElvain, 16 worth, 30 Conn. 140, 79 Am. Dec.
Ohio, 347; Trustees v. McCaughy, 236; Woolley v. Alexander, 99 111.
2 Ohio St. 155; Johnson v. Bentley, 188.

16 Ohio 97; Boyce v. Sinclair, 3 72Hinman v. Goodyear, 56 Conn.

Bush 204; Hess v. Werts, 3 S. & R. 210; First Ecclesiastical Soc. v

361; Syracuse Bank v. Davis, 16 Loomis, 42 Conn. 570; Johnson v

Barb. 188; Bleakney v. Farmers,' Utley, 79 Ky. 72.




[§ 370

fense; to have the benefit of a penalty given by statute for a
violation of law is not a vested right. '^ Statutes which take
away the defense of usury in respect to existing contracts, or
produce the same effect by expressly validating and confirming
them, are generally, and by a decided weight of authority,
sustained.''* When they go no. farther than to bind a party by

73 Jenness v. Cutler, ]2 Kan.
500; Ayers v. Probasco, 14 id. J 75.

"But the legislature has no power
to substitute one jjenalty for an-
other except where that wliicli is
substituted is, as in the present
case, in effect a mere reduction or
modification of the original penalty,
and where a penalty is once released
or abrogated it ceases to be subject
to legislative control." VVoolley v.
Alexander, 99 111. 188. See Hardin
V. Trimmer, 27 S. C. 110; Maynard
V. Marshall, 91 Ga. 840.

74 Id.; Ilardway v. Lilly .(Tenn.
Ct. of Ch. App., affirmed orally by
the supreme court; see Wallace v.
Goodlett, 104 Tenn. 670, 076, which
is to the same effect) ; Pattison
V. .Jenkins, 33 Ind. 87 ; Andrews v.
Eussell, 7 Blackf. 474; Grimes v.
Doe, 8 id. 371; Thompson v. ]\Ior-
gan, 6 Minn. 292; Parmelee v. Law-
rence, 48 111. 331 ; Curtis v. Leavitt,
17 Barb. 309, 15 N. Y. 9; Wood v.
Kennedy, 19 Ind. 68; Eathbim v.
Wheeler, 29 Ind. 601; Washburn

. V. Franklin, 36 Barb. 599 ; Wilson v.
Hardesty, 1 Md. Ch. 66; Pollock v.
Glazier, 20 Ind. 262; Burns v. An-
derson, 68 id. 181; Sager v. Schne-
wind, 83 id. 204; Danville v. Pace,
25 Gr^tt. 1, 18 Am. Pvcp. 663;
Ewell V. Daggs, 108 U. S. 143, 27
L. ed. 682.

Mr. Justice Matthews, writing
the opinion in the case last cited,
said in reference to some of the
other cases referred to in this
note : "These decisions rest upon
solid ground. Independent of the

nature of the forfeiture as a penal-
ty, which is taken away by a repeal
of the act, tlie more general and
deeper principle on which they are
to lie supported is that the right of
a defendant to avoid his contract is
given to him by statute for purposes
of its own, and not because it
affects the merits of his obligation;
and that whatever the statute gives,
under such circumstances, as long
as it remains in fieri, and not
realized by having passed into a
completed transaction, may by a
subsequent statute be taken away.
It is a privilege that belongs to the
remedy, and forms no element in the
rights that inhere in the contract.
The benefit which he (the borrower)
has received as the consideration
of the contract, which, contrary to
law, he actually made, is just
ground for imposing upon him, by
subsequent legislation, the liability
which he intended to incur. That
principle has been repeatedly an-
nounced and acted upon by this
court. Read v. Plattsmouth, 107 U.
S. 568, 27 L. ed. 414, and see Lewis
v. McElvain, 16 Ohio 347; Johnson
v. Bentley, id. 87; Trustees v. Mc-
Caughy, 2 Ohio St. 152; Satterlee
V. Matthewson, 16 S. & R. 169, 2
Pet. 380, 7 L. ed. 458; Watson v.
Mercer, 8 Pet. 88, 8 L. ed. 876."

The Virginia code of 1873, ch. 15,
§ 13, provides that if by a new law,
repealing a former law, anv penal-
ty, forfeiture or punishment be
mitigated by any provision of the
new law, such provision may, with




a contract which he has attoinpted to enter into, hut wliidi was
invalid by reason of sonic personal inability on his part to make
it, or through neglect of some legal formality, or in conserpience
of some ingredient in the contract forbidden by law, the question
which they suggest is one of policy, and not of constitutional
power.'* The legislature has power to impose on all debtors
interest from the date of the enactment for delay in the payment
of money already due.'^

The repeal of a statute giving a judicial remedy ui)on con-
tracts usurious on their face does not defeat a suit brought,
under the repealed act, on such a contract and which was un-
decided in the appellate court when the reiaealing statute was
enacted, there being in effect a general statute declaring that
"the repeal of a statute does not affect any right which ac-
crued, any duty imposed, any penalty incurred, nor any pro-

the consent of the parties affected,
be applied to any judgment pro-
nounced after tlie new law takes
effect. Under this it has been ruled
that though the statute of usury in
force when a contract was made de-
clares it to be null and void, if at
the time a judgment is rendered on
the contract the statute has been
amended so as to avoid a usurious
contract only so far as the interest
is concerned, such statute should
govern. Mosby v. St. Louis JIut.
Ins. Co., 31 Gratt. 620; Bain v.
Savage, 76 Va. 90.5.

75 Cooley's Const. Lim., p. 374.
See Head v. Ward, 1 J. J. Marsh.
280; Outen v. Graves, 7 id. 020;
Cox V. Marlatt, 30 N. J. L. 3S!), 13
Am. Rep. 454; Pond v. Home, G.'j
X. C. 84: Williams v. Smitli, id.

It was held in Mucl<lar v. Cross,
32 N. J. L. 423, that a bond made
in 18G5, when the legal rate of in-
terest was six per cent., conditioned
for the payment of tlie primijinl
sum in five years after date, witli
lawful interest for the same, pay-

al)le annually, at such rate as then
was or thereafter might be fixed
upcm as the legal rate of interest
in tluit state by the legislature, did,
after the passage of the act of
March 1.5, 18GG, increasing tlie legal
rate of interest to seven per cent.,
carry interest at such increased rate
though that act in terms only ap-
plied to contracts made after its
passage; tlie increased rate of inter-
est being payable, not by virtue of
the statute, but by forci- of the
agieement of the parties.

In Drake v. Latham. '^0 111. 270.
suit was brought on a (en |n'r cfiit.
jiotc. 'I'll is note was made while the
law (if 1S4!) was in force, which only
ailnwcd six ])i'i' cent, to ln' contract-
ed for, and forfeited the excess.
The act of lHr)7 repealed all (lie
penalties; but it was held that the
enditur could not. as a men- efft-et
of tliat repeal, recover a larger rate
llian he might lawfully have con-
tracted for. Simpson \. Hall, 47
Conn. 417.

76 Dunne v. Masti<k. .'.O Cal. 244.



[§ 370

ceeding commenced under and by virtue of the statute re-
pealed." " Such statute inures to the benefit of a citizen of
another state who acquired the usurious obligation in the state
in which it was enacted and who sued in the state of his dom-
icile to enforce the lien given to secure the payment of the
sum loaned although his suit was brought before the law was
enacted, and the right thereby given was not affected because
of the repeal of the statute by reason of the provision saving
rights of action after its repeal.'^ A decree rendered prior to
the enactment of a statute authorizing the recovery of princi-
pal and legal interest on a note or other contract, notwith-
standing a stipulation on its face for an usurious rate of interest,
refusing foreclosure of a mortgage because of the disclosure
of such a stipulation is not an adjudication upon the merits
that will defeat a suit to enforce the same mortgage, to the
extent of the principal and legal interest due, brought after
such enactment.'^

Section 7.

interest as an incident to the principal.

§ 371. Interest due by agreement a debt. AVith a certain
propriety interest may be said always to be an incident to the
principal ; *° not only when it is a part of the contract, but also
when it is allowed as damages. In the former case it is, how-
ever, not strictly an incident; or rather, it is more than that.
There must be a principal sum ; but after interest has accrued
it is no longer dependent on the principal, it does not neces-
sarily follow it. Conventional interest is of itself a debt and
payment of the principal alone will not affect the right to re-
cover the interest ; ^^ and yet it is so allied to the principal that

77 Wallace v. Goodlett, 104 Tenn.

78 Kendrick v. Kyle, 78 Miss.

79 Wallace v. Goodlett, supra.

80 Leggatt V. Palmer, 30 Mont.

81 Alabama City, G. & A. R. Co.
V. City of Gadsden, 185 Ala. 263;
Curry v. La Fon, 155 Mo. App. 678;
Froment v. Oltarsli, 60 N. Y. Misc.
89; Bennett v. Federal C. & C. Co.,
70 W. Va. 456, 40 L.R.A.(N.S.) 588;
Central Bank & T. Co. v. State,

§ 371]



if it recovered without recovery of the interest, when the hit-
ter is not secured by a separate instrument, it is barred; not
because it cannot exist as a valid demand distinct from the prin-
cipal, but because demands arising upon one agreement for
principal and interest due to the same party at the same time
cannot be divided and each made the subject of a separate ac-
tion. In that respect there is no difference between principal
and interest;®^ an action brought for one woukl bar lx)th,

139 Ga. 54; Watts v. Garcia, 40
Barb. 656; Howe v. Bradley, 1!) Me.
31; Canfield v. Eleventh School
Diet., 19 Conn. 529; Still v. Mall,
20 Wend. 51 ; Stone v. Bennett, 8
Mo. 51. See Foster v. Harris, 10
Pa. 45.

Where the debt only was seized
and condemned by the enemy in
war, it was held that the interest
due might not be recovered by the
original creditor. Bordley v. Eden,
3 Plar. & McH. 1G7.

82 Central Bank & T. Co. v. State,
139 Ga. 54. In Doe v. Warren, 1
Me. 48, 10 Am. Dec. 25, suit was
brought on a note payable with in-
terest annually. The chief justice
says: "What is interest? It is an
accessory or incident to the ])rin-
cipal ; the accessory is a constantly
accruing one. The former is the
basis, or the substance, from which
the latter arises and on whicli it
rests." Merchants' Nat. Bank v.
Whitraer, 171 Mo. App. 352.

In Howe v. Bradley, 19 Me. 31,
Shepley, J., says: "The holder in
such cases may maintain a suit to
recover the interest payable before
the principal, but cannot have a
separate action for it after the prin-
cipal becomes due and while it
remains unpaid, because he may re-
cover it in an action for the princi-
pal." The question in tliis case was
whether an indorser of a note on
which interest became due before

the principal was payalilc was en-
titled to tiie same notici' in respect
to tlie interest as in regard to the
Ijrincipal, in order to l)e iield liable
for it. It was held he was not; that
if on the note becoming due it was
dishonored, and the indorser then
duly notified, he was fixed not only
for the principal and interest tlien
maturing, but also for interest
which was payable before and not

In Chinn v. Hamilton, Hemp. C.
('. 438, the court said: 'Tiie
to pay the debt and the promise to
pay the interest from the date of
the contract are two separate and
distinct promises or undertakings:
one may be performed witliout per-
forming the other. In declaring
upon a covenant or a parol contract
in writing containing various undiT-
takings the plaintiff has liis elec-
tion to complain of the breach of
one or of all of tlie covenants or
promi-ses. If he complains of tiie
breadi or non-perfornumce of one
only of the covenants or promises
he therel)y admits that the otliers
iiave lieen performed. Tiie intend-
ment is to be made moat strongly
against the pleader, and as he com-
plains of the breach of only one of
the covenants or obligations tlio
presumption arises that tlie others
have been performed.. It at all
events waives any right of action
upon tlieiii; for having sned upon



[§ 3Y1

whether included in the claim or recovery or not. If a claim
against an estate has been allowed by the administrator as pre-
sented, no interest being demanded, the claimant cannot there-
after collect interest on the sum allowed.^^ In England the
principle is said to be that though a mortgagee cannot be com-
pelled to take payment of interest for less than the stipulated
time yet, if he puts an end to the security by realization, or if
by the inteiwention of a third party under the interpleader rule,
the mortgagor's property is realized, from the moment the
principal money gets into the pocket of the lender, interest ought

Online LibraryJ. G. (Jabez Gridley) SutherlandA treatise on the law of damages : embracing an elementary exposition of the law, and also its application to particular subjects of contract and tort (Volume 1) → online text (page 137 of 144)