Kellogg v. Hickok

1 Wend. 521

• Court: New York Supreme Court
• Decided: October 15, 1828
• Status: Published

Opinion

By the Court,

Sutherland, J.

The simple question is, whether notes given for the balance of an account, on which account interest has been cast annually, and added to the principal, are usurious.

Compound interest has nothing to do with the question of usury. It is illegal upon a different principle. Interest an. nually compounded, and added to the principal, does not give the creditor more than seven per cent, per annum for his money; and unless a rate of interest greater than that be taken, there is no usury.

In Ord on Usury, 36, it is said, that it is not illegal to stipulate for compound interest, or that interest, as it becomes due, shall be converted into principal, and carry interest, though, by the civil law, this was not allowed ; and Chancellor Kent, in Connecticut v. Jackson, (1 Johns. Ch. R. 14,) though he says that such an agreement would not be enforced, admits that it would not amount to usury, so as to render the contract connected with it illegal and void at law. This position is clearly established by the case of Le Grange v. Hamilton, (4 T. R. 613. 2 H. Black. 144.) Interest is justly and equitably due at the end of each year, if payable annually; and if the debtor, instead of paying it, gives his note or bond for it, there is no legal objection to enforcing its payment. If the interest is carried into an account-current, and the debtor gives his note for the balance of the account, it stands in principle upon the same footing.

New trial granted, costs to abide the event.