Firestone v. Dellenbaugh

10 Ohio C.C. (n.s.) 153

• Court: Ohio Circuit Courts
• Decided: April 15, 1907
• Status: Published

Opinion

Burrows, J.

I desire briefly to give the reasons that have induced me to decide in favor of a reversal of the judgment of the court below. I have been brought to the conclusion that the notes in suit are not usurious against my preconceived notions and prejudices. I had the impression that a contract wherein interest in excess of eight per cent, per annum is stipulated for was usurious; especially where such excess was the result of allowing interest upon interest to bear interest. These notes according to their express terms contain the stipulation that after maturity interest upon principal and interest shall bear interest at eight per cent., to be paid semi-annually.

If these notes do not provide for the compounding of interest semi-annually after maturity it is difficult to conceive what language could be used to accomplish that purpose.

Counsel for 'plaintiff in error contend that they do not so provide; and contend further, that a contract to pay more than eight per cent, per annum for a loan of money,'and for the payment semi-annually at the same rate of interest upon accrue*! interest overdue, is not usurious in this state; and in support of their contention they cite Cook v. Courtwright, 40 O. S., 248, and Taylor et al v. Hiestand & Co., 46 O. S., 345.

Section 3379, Revised Statutes, provides:

“The parties to a bond, bill, promissory note or other instmment in writing for the forbearance of payment of money at any future time, may stipulate therein for the payment of 0interest upon the amount thereof at any rate not exceeding "eight per centum per annum payable annually.”

In Cook v. Courtwright, it is held by the Supreme Court Commission that it is not usurious to stipulate in a promissory note, due one year after date, for the payment of interest semiannually, whereby the .holder of the note would be entitled at it? maturity to. eight .per cent, interest on the sum loaned for twelve months and also six per cent, interest for six months on the semi-annual installment of interest.

It is plain that the holder of an eight per cent, promissory-note given “for the forbearance or payment of money at any future time” will receive more than eight per cent, per annum for the use of his money if any part of said interest is paid or to be paid prior to the expiration of said ‘ ‘ future time, ’ ’ except, of course, where the interest is payable annually.

It is idle to attempt to criticize the validity of the reasoning upon which Cook v. Courtwright is grounded, as that decision seven years later was approved by the Supreme Court on the ground that ‘ ‘ it had become a rule of property. ’ ’

In the case of Taylor et al v. Hiestand & Co., the question of the validity of a stipulation ta pay interest at eight per cent., semi-annually, on a note payable three years after date, with interest at the same rate on installments of interest overdue, was fully considered, and a precise and comprehensive rule established for such cases.

It is there held that whatever stipulations may legally be put into a new contract between the parties, made after any installment of interest has been paid in respect thereof, may be made in advance and in the original promissory note.

This rule and the reason for it are given at page 348:

“Take another view of the subject. If the first installment had been paid it is clear that a new loan could have been made between the parties of the money at the rate of eight per cent, per annum. If it was not paid, a right of action to recover would at once accrue to the payee; and we think it clear the parties would be clothed with full power, under the 'statute, to stipulate for its payment at a future day with interest at eight per cent, per annum. If this can be done after default in the payment of an installment, no reason is apparent why the parties in the first instance might not anticipate and provide in advance for the contingency of a default. This we think may be done, and is what the parties to the note in fact did in the case before us.”

Under this rule no good reason can be given why parties may not stipulate in a promissory note payable at a future time that interest upon interest may be made to bear interest indefinitely with such periodic rests as may be agreed upon, for surely they could so stipulate in a new contract as to sirch interest in case the same had been paid. If we understand this rule correctly, the ease we have in hand is easy of solution.

Potts & Wells, for plaintiff in error. - J. R. Carey and Y. T. Farrell, for defendants in error.

The claim that more than eight per cent, interest per annum was agreed to be paid, and that interest upon interest is to bear interest to be computed with semi-annual rests, become immaterial incidents, so long as only an eight per cent, interest rate is applied and reapplied to the interest upon interest as it periodical^ falls due.

It is of no importance that we think this rule of decision indefensible, and that it virtually ignores the evident intent of Section ,3179, which in terms permits an eight per cent, rate of interest per annum to be received and no more on the sum loaned from the date of the loan till the time the loan is paid. Nor is it important that we think that a provision for compounding the interest on a loan was not contemplated by the Legislature in passing this or any other statute relating to interest; but we must adopt and apply the interpretation placed upon the statute by the Supreme Court; ,and this interpretation, as we understand it, leads the majority of the court to hold that the notes in suit are not usurious.

J. H. McMahin and E. H. Williams, for plaintiff in error. Brink c& Deasy, for defendant in error.