Lewis v. Paschal's Administrator

Ogden, J. This suit was brought on the following instrument of writing:— “ Five years after date, I promise to pay to the order of Hat. “ Lewis, three thousand two hundred and seventy-seven dol- “ lars and twenty-nine cents, for value received, negotiable and “ payable without defalcation or discount, with interest at the “ rate of ten per cent, per annum, payable annually from date.” This note was dated San Antonio, April 9th, 1857, and signed I. A. Paschal. After the death of the maker, the note, duly authenticated, was presented to the administrator and allowed, and was approved as a legal claim against the estate of the deceased, and in 1869 and 1870 the face of the note with simple interest was paid. The interest had not been paid annually, according to the tenor and effect of the note, and the administrator refused to pay compound interest, or interest upon interest. This suit was brought in the District Court, asking an order compelling the administrator to pay the interest upon the interest, which had annually accrued; and this being refused, the petitioner has appealed. There seems to be quite a marked difference of opinion among ethical and legal writers upon the subject of usury and usurious interest. And there appears to be quite as great a diversity of opinion among elementary writers and jurists, whether compound interest, or interests with annual or periodical rests, expressly stipulated by the parties interested, could be considered usurious. The right to demand and recover interest for the use of money or credit, is the creature of and governed by statute, and it is not claimed by any respectable legal writer that the rate or amount of interest which may [319] be charged and collected, is not also properly governed by statute; and, therefore, it may with great propriety be claimed that the moral as well as the legal question of usury is to be determined by a reference to the statute. That compound interest is usurious, has been strenuously maintained by many respectable writers, and by the decisions of some of our ablest courts; while others of equal merit have held that interest for the use of money or credit, and especially compound interest, is as clearly the proper and legitimate object of contract as the wages for services rendered, or to be rendered. Parsons on Contracts, Vol. III., p. 150 says: “We are aware “ of no case, in England or this country, in which a contract to “ pay compound interest has been held usurious so as to be- “ come totally invalid; ” and again, on page 153 he says: “ And “ for the reason that this aversion of our law to allow money “ to beget money has of late years very much diminished, we “ do not think it absolutely certain that a bargain in advance “ for the payment of compound interest, in all its facts reason- “ able and free from suspicion of oppression, would not be en- “ forced at this day in some of our courts.” Our statute under which the note sued on was executed, has no provision for, or prohibition against, compound interest, but it provides that parties may stipulate for any rate of interest not exceeding twelve per cent, per annum. And under this law, Justice Wheeler, in delivering the opinion of this court in Andrews v. Hoxie, 5 Texas, 194, says, that “ an agreement to pay interest on interest is not usurious, is well settled; ” and in the case of De Cordova v. the City of Galveston, 4 Texas, 482, Chief Justice Hemphill says : “ The fact that the interest “ was payable annually cannot affect the question. The inter- “ est might have, perhaps, been recovered in a separate suit; or, “ if the action had been brought before the bar of tire statute, “ the plaintiffs would have been entitled to annual rests, and “ to interest upon the interest in computing the amount to be “ recovered.” And this certainly was no dictum of the Chief Justice, since the very questions there decided were distinctly [320] presented by the record and argued in the briefs of counsel, and we think it can hardly be questioned that he intended to decide that interest upon interest might be recovered, where there was an express stipulation for the purpose. That the maker of the note sued on, intended, and did bind himself to pay the interest annually, and in case of a default in so doing, to pay interest upon interest, to be computed annually, we think there can be no reasonable doubt. We are of the opinion that the cases here referred to have settled the questions raised by the record of this cause, arid the decisions therein composed a part of the laws of this Statb when the note was executed. We, therefore, are disinclined, Jespeeially since the constitutional abolition of all usury laws in this State, to question the wisdom of those decisions, or to disturb the law as by them settled. The judgment of the District Court is therefore reversed, and the cause remanded for farther proceedings, in accordance with this opinion. Reversed and remanded.