Rogers v. Rivers

100 So. 385, 135 Miss. 756, 37 A.L.R. 313, 1924 Miss. LEXIS 90

• Court: Mississippi Supreme Court
• Decided: June 9, 1924
• Docket: No. 24177
• Status: Published

Opinions

Anderson, J.,

delivered the .opinion of the court.

Appellant sued appellees Rivers and Cox in the circuit court of Quitman county for a balance due on a certain promissory note executed by appellee Rivers to appellee Cox, and by the latter transferred to appellant, and recovered a judgment for the balance of the principal due on said note, the court having instructed the jury that interest could not be recovered because the interest stipulated for in said note was usurious, from which judgment appellant prosecutes this appeal.

The only question in the case is whether the note sued on provides for usurious interest under our statute.

The note is dated May 24, 1920, and is due December 1,1920, and draws interest at the ‘ ‘ rate of eight per cent per annum from date until paid, . . . interest payable semiannually and- the defaulting interest to draw same rate of interest as principal.” There is no claim that any hidden device was resorted to cover usury, but simply that the note provides on its face for usurious interest under our statute.

Section 2678, Code of 1906 (section 2075, Hemingway’s Code), provides, among other things, that contracts may be made, in writing, for the payment of interest for as great as eight per cent, per annum, but that if a greater rate of interest than eight per cent, per annum shall he stipulated for or received all interest shall he forfeited and may be recovered back whether the contract be executed or executory.

It will be observed that the note sued on provides for the payment of interest at eight per cent, per annum, the highest contract rate, and that the interest shall be payable semiannually, and if not paid when due compounded and become part of the principal.

It has been long settled in this state that interest at the highest contract rate cannot be reserved in advance; that to do so renders the contract usurious. Bank v. Nolan, 7 How. (Miss.) 508; Hyde v. Finley, 26 Miss. 468; Polkinghorne v. Hendricks, 61 Miss. 366; Hiller v. Elks, 72 Miss. 701, 18 So. 95, 41 L. R. A. 707.

In Polkinghorne v. Hendricks, Chief Justice Campbell, who wrote the opinion, said that interest paid in advance was payment of principal to that extent. "Where the contract provides for interest at the highest rate with rests at shorter periods than annual rests, and in default of payment of interest the latter to become principal and bear interest,at the same rate, is the contract usurious? We think so, because under the decisions of this court above referred to such a contract simply provides for the "payment of interest in advance. The statute provides that not more than eight per cent, per annum shall be contracted for or received. The statute contemplates annual rests and payment of interest at each rest. Payment before that time is payment in advance; it is tantamount to paying unearned interest. We cannot see any difference in taking out the interest at the time of the execution of the contract and taking it out at. any date less than a year from its execution. In either case it amounts in substance to reducing the principal'that much. To illustrate: A. lends B. one thousand dollars, due at a future day, with eight per cent, interest after maturity. But, instead of advancing B. one thousand dollars, the face of the note, A. takes out in advance the interest to accrue between the date of the note and its maturity. If that period be six months A. takes out forty dollars leaving only nine hundred and sixty dollars principal. Still B. pays interest after maturity on the whole one thousand dollars. The borrower is deprived of that much principal for the balance of the year. If under the law there can be semi-annual rests at the highest contract rate with a provision that unpaid interest shall become principal and bear interest at the same rate, then clearly the same character of contract may be made providing for quarterly rests, monthly rests, weekly rests, daily rests — and why not hourly rests ? This would be interest compounded quarterly, monthly, weekly or daily. In either case a calculation will show that the interest received would be substantially more than eight per cent, per annum, and with weekly or daily rests, would be enormously more. The language of the statute, “eight per cent, per annum,” must be given its plain meaning; eight per cent, per annum means eight per cent, payable annually. It does not mean eight per cent, payable at any shorter rests.

It is true, as contended by appellant, that under the authorities generally in other states this contract would not be usurious. 27 R. C. L., sections 26 and 30, pp. 225, 229, and 230. An examination of such authorities, however, so far as we have been able to pursue them, shows that they base their holding on the theory that taking interest in advance at the highest contract rate is not usurious, but legal. That is the fundamental difference between the law in this state and other states holding to the contrary. On that difference this case turns. Interest with less than annual rests is interest paid in advance. Interest in hand at any time before the period of annual rest has a present value in excess of its annual rest maturity value. It seems that a contrary view would practically nullify our statute. A calculation compounding the interest on a loan at the highest contract rate with monthly, weekly, or daily rests will demonstrate this.

Affirmed.