Mucklar v. Cross

32 N.J.L. 423

• Court: Supreme Court of New Jersey
• Decided: February 15, 1868
• Status: Published

Opinion

The opinion of the court was delivered by

Depue, J.

At the time of the making of this bond, the legal interest was fixed by statute at the rate of six per cent, per annum, and all contracts on which a higher rate of interest was reserved were declared to be void. By a subsequent act, passed on the fifteenth of March, 1866, it was enacted that upon all contracts thereafter made for the loan of, or the forbearance or giving day of payment for, any money, &c., it should be lawful to take the value of seven dollars for the forbearance of one hundred dollars for a year, and after that rate for a greater or less sum, or for a longer or shorter period, and that when interest is allowable by law, the legal rate should be seven per centum.

By the demurrer, the question is raised as to the rate of interest the plaintiff is entitled to receive on his bond, after the passage of the act of March 15th, 1866.

The contract was not an usurious contract under the act concerning usury, which was in force when the bond was made. It did not expressly reserve a rate of interest beyond what was then allowable, nor was it a device to evade the statute. Nor is there anything illegal in a contract to vary the rate of interest, or make it fluctuate with the fluctuations of standards that the parties may agree upon.

The question, then, is simply one of construction. It is manifest from the terms of the condition of the bond, that the parties contracted with the idea that a change might be made in the rate of interest allowed by law, and with the intention to have their rights affected by such change, if any should be made, and they have used appropriate language to give effect to such intention. But it is said that the act of 1866 only applies to contracts made after its passage. That is undoubtedly true. But the increased interest is not payable by virtue of the statute, but by force of the agreement of the parties.

The agreement of the parties, taken in connection with the act of March 15th, 1866, is, in effect, that the plaintiff should be entitled to interest on his money, after that date, at the rate of seven per cent. That agreement is not contrary to any positive statutory prohibition, or against public policy ■ and the plaintiff, after the act of 1866 went into effect, is entitled to interest at the rate of seven per centum. The demurrer must be overruled.

This result is only reached because of the express agreement of the parties, that interest should be payable in accordance with the fluctuations in the rate of legal interest. Obviously, a different result would have been arrived at, if the stipulation had been for interest payable according to law, or for lawful interest. In that case the agreement would have been, that the interest should be such as was lawful when the contract was made. And it would have been unaffected by the act of 1866.

Demurrer overruled.

Beasley, C. J., and Justices Vredenburgh and Woodhull concurred.