Dyar v. Slingerland

Gileillan, C. J. The only question in the case is this: Is interest to be allowed on the interest stipulated in a contract after default in the payment of such stipulated interest ? Although the weight of authorities is decidedly against allowing interest upon interest, yet if the question might be considered open in this state, we could see no satisfactory reason, based either on principle or public policy, why it [268] might not be allowed. But this court decided in Mason v. Callender, 2 Minn. 302, (350,) that interest on interest cannot be allowed. After referring to and approving of the decision of Chancellor Kent, in the case of the State v. Jackson, 1 John. Oh. 13, in which he, upon a review of all the authorities to that time, disallowed such interest, and affirmed that a prior agreement to pay interest on interest to become due would be void, but that an agreement made after interest became due, that it should bear interest, might be sustained, this court said: “There is no limit to the authorities on this point. The principle established is, that a contract to pay interest on interest, which is not due, is inequitable and will not be enforced; while, on the other hand, if the interest is due, it may be added to the principal, and a contract to pay interest on such new principal will be enforced. ” The case of Mason v. Callender was an action upon a note which, by its terms, was to bear interest till due, at the rate of three per cent, per month, and after due, interest on the principal and interest at the rate of fiv.e per cent, per month. The court below allowed the increased rate of interest after maturity on both principal and interest. The questions before this court were not only what rate should be allowed after maturity, but whether that rate should be allowed on interest as well as on principal, and both were decided. Although the rule as to the rate was, in Talcott v. Marston, 3 Minn. 238, (339,) varied, the decision of the former case upon all other points was in the latter case affirmed. Id. 243, (344.) The rule thus laid down and approved has not since been questioned in this state, and it may be regarded here as the rule; certainly where, as in this case, the creditor has made no demand for the interest. Whether a demand would justify the allowance of interest on the interest demanded we do not decide. Judgment affirmed.