cover the interest; and yet it is so allied to the principal that if it is recovered without recovery of the interest when the latter is not secured by a separate instrument, it is barred; not because [676] it cannot exist as a valid demand distinct from the principal, but because demands arising upon one agreement for principal and interest due to the same party at the same time cannot be divided and each made the subject of a separate action. In that respect there is no difference between princi[677] pal and interest; an action brought for one would bar 2 1 Watts v. Garcia, 40 Barb. 656; Howe v. Bradley, 19 Me. 31; Canfield v. Eleventh School Dist., 19 Conn. 529; Still v. Hall, 20 Wend. 51; Stone v. Bennett, 8 Mo. 51. See Foster v. Harris, 10 Pa. St. 45. Where the debt only was seized and condemned by the enemy in war, it was held that the interest due might not be recovered by the original creditor. Bordley v. Eden, 3 Har. & McH. 167. 2 In Doe v. Warren, 1 Me. 48, suit was brought on a promissory note payable with interest annually. The chief justice says: "What is interest? It is an accessory or incident to the principal; the accessory is a constantly accruing one. The former is the basis, or the substance, from which the latter arises, and on which it rests." be held liable for it. It was held he was not; that if on the note becoming due it was dishonored, and the indorser then duly notified, he was fixed not only for the principal and interest then maturing, but also for interest which was payable before and not paid. In Chinn v. Hamilton, Hemp. C. C. 438, the court said: "The promise to pay the debt, and the promise to pay the interest from the date of the contract, are two separate and distinct promises or undertakings; one may be performed without performing the other. In declaring upon a covenant or a parol contract in writing containing various undertakings, the plaintiff has his election to complain of the breach of one or of all of the covenants or promises. If he complains of the breach or non-perIn Howe v. Bradley, 19 Me. 31, formance of one only of the coveShepley, J., says: "The holder in nants or promises, he thereby admits such cases may maintain a suit to that the others have been performed. recover the interest payable before The intendment is to be made most the principal, but cannot have a sep- strongly against the pleader, and as arate action for it after the principal he complains of the breach of only becomes due and while it remains un- one of the covenants or obligations, paid, because he may recover it in the presumption arises that the an action for the principal." The others have been performed. It at question in this case was whether an all events waives any right of action indorser of a note on which interest upon them; for having sued upon became due before the principal was the contract once he is forever payable was entitled to the same no- barred from suing again [in respect tice in respect to the interest as in to any cause that existed at the regard to the principal, in order to time of that suit and which might both, whether included in the claim or recovery or not. But such interest made payable before the principal is due may be sued for alone before the latter becomes due.1 ་ § 372. Interest as damages accessory to principal. Interest which is allowed as damages, and which is not liquidated, nor covered by any contract to pay it, is strictly incidental to the debt. It cannot exist after the debt ceases by payment or otherwise. Being accessory and incidental to the principal, it adheres to and follows it; ownership of the fund on which the interest accrues includes the interest. Where attached property becomes by process of law changed into money in the officer's hands, and is invested by him so as to produce interest, the accretion does not belong to the officer, but to the party entitled to the money. A specific legacy carries interest from the death of the testator; it becomes then the property of the legatee.* have been included in it]. It will This language must be understood as referring to the facts then before the court to a contract for principal and for interest, both due. It is broad, but is obviously not used in so general a sense as to be applicable to a contract requiring a series of acts to be performed at different times. A suit for a breach in respect to the first would not necessarily involve the whole contract, and the judgment would not merge it so far as it contained other executory provisions. For instance, a note or other instrument may provide for instalments of principal or interest. Undoubtedly successive actions could be brought for their recovery. Yet it is quite as clear that all instalments of either interest or principal or both, due at the time of bringing action, must be declared for in one action; at all events the judgment will be a bar in respect to all. 1 Ibid.; Greenleaf v. Kellogg, 2 Mass. 568; Cooley v. Rose, 3 id. 221; Catlin v. Lyman, 16 Vt. 44; Hastings v. Wiswall, 8 Mass. 455; Estabrook v. Moulton, 9 id. 258. 2 Moore v. Fuller, 2 Jones' L. 205; Tillotson v. Preston, 3 Johns. 229; Burr v. Burch, 5 Cranch C. C. 506; Jacot v. Emmett, 11 Paige, 142; Consequa v. Fanning, 3 Johns. Ch. 587; Gillespie v. Mayor, 3 Edw. 512; Southern C. R. Co. v. Moravia. 61 Barb. 180; Potomac Co. v. Union Bank, 3 Cranch C. C. 101; Dixon v. Parkes, 1 Esq. 110; Fake v. Eddy's Ex'r, 15 Wend. 76; Johnston v. Brannan, 5 Johns. 268; Williams v. Houghtaling, 5 Cow. 36; People v. County of N. Y., 5 Cow. 331; Stevens v. Barringer, 13 Wend. 639; American Bible Society v. Wells, 68 Me. 572; Cutter v. Mayor, 92 N. Y. 166. 3 Richmond v. Collamer, 38 Vt. 68; Jackson v. Smith, 52 N. H. 9; Farley v. Moore, 21 id. 146; Chase v. Monroe, 30 id. 427. 4 See Ingraham v. Postell's Ex'r, 1 McCord Ch. 94; Hilyard's Estate, 5 SECTION 8. INTEREST UPON INTEREST. [678] 373. Compound interest. Strictly, all interest which is computed upon interest is compound interest. But that which is commonly denominated such is interest annually or at other successive periods added to the principal to bear interest for the next interest period; in other words, interest computed with annual rests, or rests at the end of the longer or shorter interest periods, regularly adding the interest for the preceding period to the principal, thenceforth to bear interest. Compound interest in this latter sense is never computed by way of damages except against persons acting in a fiduciary capacity,' who grossly abuse their trust in respect to money. Nor will a contract in advance to pay such interest generally be enforced at law or in equity. But after simple interest has accrued an agreement that it shall thereafter bear interest is valid. Such interest, when contracted for at the W. & S. 30; Angerstein v. Martin, 1 Turn. & Russ. 232; Hewett v. Morris, id. 241; Jones v. Ward, 10 Yerg. 160; Huston's Appeal, 9 Watts, 472; Beal v. Crafton, 5 Ga. 301; Stephenson v. Axson, Bailey's Eq. 274; Graybill v. Warren, 4 Ga. 528; Yandt's Appeal, 13 Pa. St. 575; Darden v. Orgain, 5 Cold. 211. A. received $6,000 from B. and in consideration thereof executed a bond by which he bound himself to pay the interest on that sum, or so much thereof as might be necessary for B.'s support to B. for life, and at her death to pay the principal and what might remain unexpended of the interest to C. A. was held liable for interest at the legal rate, six per cent., according to the legal effect of the bond; and not the interest received by him from his investment of the money. Granger v. Pierce, 112 Mass. 244. See Cory v. Leonard, 56 N. Y. 494. 1 The assignee of a mortgage in possession has no right to cast interest to the time he took possession and make that a new principal upon which to calculate interest. Lewis v. Small, 75 Me. 323. 2 See ante, § 353. 3 Such contracts are valid in Oregon, New England Mortgage Co. v. Vader, 28 Fed. Rep. 265; in Dakota, Hovey v. Edmison, 3 Dak. 449; and South Carolina, Bowen v. Barksdale, 33 S. C. 142. 4 Young v. Hill, 67 N. Y. 162; Fitzhugh v. McPherson, 3 Gill, 408; Gunn v. Head, 21 Mo. 432; Grimes v. Blake, 16 Ind. 160; Niles v. Board of Com'rs, 8 Blackf. 158; Forman v. Forman, 17 How. Pr. 255; Van Benschooten v. Lawson, 6 Johns. Ch. 313; State v. Jackson, 1 id. 13; Toll v. Hiller, 11 Paige, 228; Barrow v. Rhinelander, 1 Johns. Ch. 550; Leonard v. Villars, 23 Ill. 377; Henderson v. Hamilton, 1 Hall, 314; Baker v. Scott, 62 Ill. 86; time the debt accrues or the loan is made, is refused on grounds of policy as tending to usury and oppression. But after interest is due, no matter at how short intervals it is payable, the creditor may sue for it; or the parties by a new agreement may put it upon interest. It has, moreover, been [679] decided that there is a moral obligation to pay interest on interest for the time it has been in arrears; and that a subsequent promise to pay it for the time already elapsed is binding.1 Accounts may be judicially stated by computing interest according to the practice of the parties, both as to charging it on the items on each side from their dates, and also as to periodical rests.2 $ 374. Instances of interest on interest. When a demand consisting of principal and interest passes into a judgment or decree, as a general rule, it bears interest because the original claim is merged therein. It is thenceforth a demand of a different nature. The principal and interest are blended together and adjudged to the creditor for immediate payment, or to be at once collected. Where strict foreclosure was stipulated for in the mortgage, and six months given to pay the debt, with interest at the rate of ten per cent., the legal rate being six, it was held that inasmuch as the complainant was entitled to strict foreclosure it was not error to require a higher rate than is provided for by the statute upon the extension of the time of payment.* In a suit for specific performance by the vendee after he has made default in the payment of purchase-money on which interest was payable annually, the purchase-money to be paid on a decree in his favor should include interest on the instalments of interest from the time they became due. In such a case the court said: "We express no opinion whether interest upon such instalments of interest could have been recov Doe v. Warren, 7 Me. 48; Cox v. 1 Rose v. Bridgeport, 17 Conn. 247; Camp v. Bates, 11 Conn. 497. 2 Emerson v. Atwater, 12 Mich. 314; Carpenter v. Welch, 40 Vt. 251; Schieffelin v. Stewart, 1 Johns. Ch. 620; Backus v. Minor, 3 Cal. 231. 3 See Stevens v. Coffeen, 39 Ill. 148; State v. Jackson, 1 Johns. Ch. 13. 4 Bissell v. Marine Co., 55 Ill. 165. 5 Morris v. Hoyt, 11 Mich. 1. ered by the vendor in a suit for damages, or on a bill for specific performance brought by him. But the complainant comes into court acknowledging his default in making the payments when due, and asks specific performance on making the payments now. As he asks equity he must do equity, and [680] put the vendor in the same condition as if the payments had been made when agreed. Had this money been paid when due it would have earned interest from that time." It was held that interest should be computed on the several instalments of interest from the time they respectively became due.1 § 375. Interest on instalments of interest. The question on which the court in the preceding case refrained from expressing an opinion is one upon which the American courts are divided. Where the principal is payable on long time, and interest is payable annually, or at shorter periods, and the latter is not paid when due, according to the older cases, and as the law seems to be settled in a majority of the states, no interest can be collected upon such arrears of interest.2 In 1 Morris v. Hoyt, 11 Mich. 1; Pujol v. McKinlay, 42 Cal. 559. 2 Leonard v. Villars, 23 Ill. 377; Smith v. Luse, 30 Ill. App. 37; Broughton v. Mitchell, 64 Ala. 210; Young v. Hill, 67 N. Y. 162 (except in mercantile transactions upon a contract implied from the course of dealing or from custom); Dyar v. Slingerland, 24 Minn. 267; Mason v. Callender, 2 id. 302; Stokely v. Thompson, 34 Pa. St. 210; Ferry v. Ferry, 2 Cush. 92; Doe v. Vallejo, 29 Cal. 285; Ackerman v. Emott, 4 Barb. 626. "Interest upon interest which has accrued upon contracts upon which interest is by their terms payable at stated periods before the principal becomes due is never allowed in making up judgments in suits thereon. This has often been determined, and must now be considered as the settled law in this commonwealth." Shaw v. Norfolk County R. Co., 16 Gray, 407, 416; citing Hastings v. In Pindall's Ex'r v. Bank of Marietta, 10 Leigh, 481, a debtor owing a debt consisting of principal and interest, it was agreed between him and his creditor that he should, in the first place, pay off the principal, and that the interest might for a time remain unpaid. The creditor received money from the debtor, and applied it in satisfaction of the principal. Many years elapsed without payment of the interest. It was held that the creditor was only entitled to the interest due at the time the principal was paid, and not to interest on the interest, there having been no agreement to pay it. Tooke v. Bonds, 29 Tex. 419, is to the same effect. Interest cannot be compounded without statutory authority. Hoyle |