Kennon v. Dickens, 1 N.C. 231, 1 Tay. 231 (1801)

Dec. 1801 · North Carolina Superior Court

1 N.C. 231, 1 Tay. 231

Kennon versus Dickens.

THE bill stated, that the complainant, on the 15th September, 1771, contracted with the defendant for the purchase of several tracts of land ; and that the intention and understanding of the parties was, that one thousand pounds, Virginia money, was to be the price of the land, to bear interest from the first of December 1771 : that there was to be a credit of fifteen years for the payment of the principal sum, but the interest, computed at six per cent. was to be paid annually, and if, at any time, the complainant should pay a larger sum than the interest due, the excess should be applied to the extinguishment of the principal.

Interest will sometimes be allowed on the whole sum due, tho' it is partly composed of interest accrued.

The complainant gave his bond, dated 30 September 1771, in the penalty of two thousand pounds, Virginia money, with Lewis as his security, to which was annexed the following condition. “ The “ condition of the above obligation is such, that if “ the above bound Charles Kennon and Howel Lew- " is, do and shall, well and truly, pay unto the said “ Robert Dickens, &c. the just sum of sixty pounds “ current money of Virginia, annually, for the “ term of fifteen years, on or before the fifth day “ of December in every year, and after the expi- " ration of the term of fifteen years, viz, on or be- " fore the fifth day of October in the year 1786, the “ further sum of one thousand pounds, current mo- " ney as aforesaid, then the above obligation to be “ void &c. Memorandum, that if any part of the “ within principal shall be paid before the expira- " tion of the fifteen years, in that case, the part “ paid to carry interest no longer, than to the time “ the same was paid.” The bill then stated, that on the 10th of December 1771, the complainant paid the sum of one hundred and eighty four pounds, six shillings and sixpence, which after deducting the interest of the ten days due, left a balance of one hundred and eighty one pounds, eleven shillings and three penee, that ought to have been applied to the discharge of the principal, and that afterwards various other payments, which are specified in an account annexed to the bill, were made, and which, if properly applied, discharged the whole of the debt : instead of which, an execution has issued for the sum of one hundred and fifty pounds, by reason of the defendant’s charging interest on the sixty pounds payable annually, which being itself the interest of the thousand pounds, ought not to bear interest. The complainant alledged that this is usurious , and directly against the intention of the parties, as well as the memorandum annexed to the bond.

The defendant in his answer affirmed that be intended the price of the land to be nineteen hundred pounds, Virginia money, payable in fifteen annual instalments, at sixty pounds each, and the last payment to be one thousand pounds ; and he understood that if default was made in the payment of any of the instalments, that they should bear interest from the time they respectively became due. He conceives that the condition of the bond, furnishes evidence of this, by arranging the payment at different and distant days. He believes the intention of annexing the memorandum to the bond was, that if the complainant should pay any part of the money before the time it became due, that such payment should bear interest until the next day of payment. He admits the payment on the join of December 1771, but insists that the first instalment of sixty pounds, as well as the ten days interest, were then due. He likewise admits the other payment charged in the bill, and says that their application, according to the true intent of the contract, left a balance due, on the 20th April 1792, of one hundred and fourteen pounds and ten pence, for which he has taken out execution.

Norwood, for the defendant.

Supposing the

purchase money to have been one thousand pounds, and the instalments, the interest of that sum, according to the complainant’s allegation ; yet the case comes expressly within the exceptions to the general rule, that interest shall not bear interest. These exceptions have been extended to the following cases : judgments at law bear interest upon the accumulated sum of principal and interest ; 1 Bl. Rep. 267. A master’s report ; 1 P. W. 653 : so with the assignee of a mortgage ; 1 Ca. Ch. 258. The parties, by agreement, may make interest principal ; 4 Term Rep. 613, 1 Vez. jun. 451. And where a mortgage deed contained a special clause of redemption, by which it was agreed, that the debtor should pay one thousand pounds at a future, period, and sixty pounds interest in the mean time, by half yearly payments ; it was decreed that the interest reserved in the deed, should be reckoned principal ; 1 Vern. 190. An annuity also, though it is the nature of interest, shall carry interest ; 2 Eq. Cas. Abr. 530.

But the defendant positively answers, that the fifteen annual payments are principal, as well as the last payment ; and the memorandum refers to the within principal. The bond must therefore be examined, to ascertain the intention of the parties, and upon the face of this, it appears, that all the instalments form principal. Upon the complainant’s own principles, however, his statement is erroneous. The first annual instalment was due the 1st December 1771 ; the first payment made by the complainant, was on the tenth of that month ; yet he deducts the whole of that payment from the thousand pounds, which he is pleased to call principal, without regarding the sixty pounds then due.

By

the Court.^*

According to the complainants allegation, the parties understood the purchase money to be, one thousand pounds, Virginia currency, to bear interest at six per cent, payable annually, with a credit of fifteen years for the payment of the principal sum. On the other hand it is affirmed by the defendant, that the price of the land, as intended and understood by him, was nineteen hundred pounds, Virginia currency, payable by instalments, according to the terms of the bond ; the condition of which, as far as it has any weight, in explaining the original transaction, gives countenance to this statement. If it be adopted, as the ground on which the case is to be decided, no doubt can be entertained, that the instalments bear interest from the time they respectively became due ; for being principal debts, and secured by specialty, such a consequence follows of course. But even if the complainant’s statement were assumed, as a true representation of the contract, and these instalments of sixty pounds considered the interest of the principal purchase money, still the authorities cited go a great length towards shewing that a court of Equity might justly sanction the recovery of interest, upon a failure in payment according to the agreement of the parties. As a general rule, interest upon interest is not allowable. But, when the sum is ascertained, and the annual payment of it, forms a part of the contract ; where it is so specific, that an action of debt may be sustained, and interest recovered by way of damages for the detention and particularly, where the payment of a principal sum is postponed to a very distant period, upon the faith of a regular and punctual discharge of the interest, it ought in justice to be allowed. To such a case, the principle upon which interest is generally allowed seems to apply with strict propriety, viz. to supply the place of prompt payment and indemnify the creditor for his forbearance.

Injunction dissolved.

* Johnston, Macay and Taylor.