
    Hester Mart Howard, plaintiff and appellant, vs. Terence Farley et al. defendants and respondents.
    1. The general rule that where, by a written contract, money is to be paid at a fixed day, and the contract is broken, interest should be allowed, ought to be applied to interest payable semi-annually, according to the condition of a bond; especially where payment has been demanded.
    2. If there is no evidence of a demand, before suit, in such a case, 'then interest can only be recovered from the commencement of the action.
    (Before Momcrief, Monell and McCunn, JJ.)
    Heard April 5, 1865;
    decided June 17, 1865.)
    The action was upon a bond conditioned to pay $3800, on the 21st of May, 1865, with interest payable semi-annually, on the 21st days of November and May, in each year. The plaintiff alleged the non-payment of the interest which became due and payable on the 21st day of May, 1863, and demanded judgment therefor, with interest thereon from said 21st of May, 1863. .
    The action was tried by a justice of this court, without a jury. The plaintiff requested the justice to find and decide that the plaintiff was entitled to judgment for the amount claimed, with interest thereon from the 21st of May, 1863. The justice refused so to decide, and the plaintiff excepted. The plaintiff further requested the justice to decide, that the plaintiff was entitled to judgment for the amount claimed, with interest thereon from the commencement of the suit. The justice refused so to decide, and the planitiff excepted. The justice decided that the plaintiff was entitled to, and directed judgment for the plaintiff for, the amount claimed, without interest. To this decision the plaintiff also excepted, and appealed from the judgment.
    . G. Tillotson, for the appellant.
    I. The plaintiff is entitled to recover interest from May 21, 1863, upon the installments of interest which became due at that time. It is a general principle that interest is recoverable on every sum of money from the time it becomes due ; because from that time the party owing is in default for pot paying, and the party to whom it is owed is injured by not receiving it. The allowance of interest by the court, as an' incident of the debt, is always founded on the agreement of the parties. This agreement may be expressed in writing, or by words, or it may be implied. Where the principal is to be paid at a specific time, the law has always implied an agreement to make good the loss arising from .a default, by the payment of interest. (2 Bur. 1866. 3 Cowen, 436. 5 id. 610.) The above rule would apply equally to an installment of interest falling due, as to an installment of principal, because the debtor is as much in default, and the creditor as much injured, in the one case as in the other. There is another reason why interest is allowable; because, from the time of default, the law presumes the debtor to have employed the money to his own profit, and this applies equally to principal and interest. In New Hampshire and Massachusetts the principle contended for by the plaintiff has been directly decided. In Pierce v. Rowe, (1 N. H. Rep. 179,) the action was upon a note payable with “ interest annually,” and interest on the annual interest was allowed. Woodbury, J. said : “ We have already perceived that by an express agreement of the parties, ‘ interest’ on the sum named in the note in this action became due 'annually,’ or at the end of each year. In this respect it resembled an installment of principal thus becoming due; and the decisions are numerous, that after the end of each year, an action could be sustained for the annual interest, as well as for an installment of principal. The debtor, therefore, was from that time culpable for not paying it, and must be presumed to have employed it, as well as the principal, to his own profit. Consequently, it is our duty to direct interest to be cast on the annual interest from the time the latter became due until judgment.” In both North and South Carolina it has been held that interest is recoverable upon the annual installments of interest upon a money bond. (Kennon v. Dickens, Cam. & Nor. Rep. 357. Gibbs v. Chisholm, 2 Nott & McCord, 38.) In Greenleaf v. Kellogg, (2 Mass. Rep. 568,) the suit was on a promissory note for $10,000, payable in eight years from date, “ with lawful interest therefor until the same should be paid ; the said interest to be paid yearly and at the end of each year, during said term.” After three years (no interest having been paid) the plaintiff brought suit for the interest, and the court gave judgment for the interest in arrear, and for the interest of each year’s interest from the day it was payable to the time of rendering the judgment.
    The Supreme Court of this district, at the general term in Nov. 1863, decided that interest is recoverable upon coupons for interest, by way of damages for non-payment. (Conn. Mu. Life Ins. Co. v. Cleveland R. R. Co., 41 Barb. 17, 22.)
    II. At all events, the plaintiff is entitled to recover interest from the commencement of the action. In Hastings v. Wiswall, (8 Mass. Rep. 455,) the action was on a promissory note, payable in five years from date, with interest annually. The plaintiff claimed that the interest due by the terms of the note, at the end of each year, should be added to the principal, and interest be cast on the aggregate of these two sums, and so from year to year, to the time of the judgment. The court denied the motion, observing that the plaintiff might have brought his action for the interest at the expiration of each year, and that by neglecting this he might be considered as waiving his claim to compound interest. In Doe v. Warren, (7 Greenl. 48,) the action was assumpsit on two promissory notes, papable in six and ■ seven years, with interest annually. No interest had been paid. The question was, whether the interest should be cast on the accruing interest of each year from the time it became due. Held that simple interest only could be recovered. But the court say, in addition: “ But although the law does not allow compound interest, it has not been inattentive to the rights of creditors. It does not permit the debtor to detain the interest he has promised to pay annually, but furnished a remedy, if not paid to the creditor at the end of each year, to recover it, if he chooses to exact it. The debtor then is sufficiently in his power, and if he is disposed to indulge him, he must be contented to receive simple interest.” (See also Ferry v. Ferry, 2 Cush. 92, per C. J. Shaw; State of Conn. v. Jackson, 1 John. Ch. 17.) These cases show the distinction between the claim for compound interest and the principle for which the plaintiff contends, and indicate clearly that the restriction imposed by the courts upon the recovery of interest upon arrears of interest is limited to those cases where the accumulation had been permitted by the creditor, and does not extend to those cases where he has taken steps to enforce his rights. And they show, further, that interest in such cases must begin to run from the commencement of the action, for otherwise the law would have no uniform operation; in one case judgment might be recovered immediately, in others, owing to the opposition of the creditor, or perhaps the error of a judge, it might be delayed for years, and the creditor would thus lose the benefit of the principle.
    III. The demand spoken of in the cases above cited, means the commencement of a suit. A mere request to pay, without a suit, would not be sufficient; because the law rewards only the vigilant creditor.
    
      M. L. Townsend, for the respondents.
    I. The rule is well settled in this state, by the decisions of the court of chancery, that interest upon interest, or compound interest, is not recoverable, except where there is a written agreement to pay it, made after the interest upon which it operates has fallen due. (State of Conn. v. Jackson, 1 John. Ch. 13. Van Benschooten v. Lawson, 6 id. 313. Mowry v. 
      Bishop, 5 Paige, 98. Quackenbush v. Leonard, 9 id. 334. Toll v. Hiller, 11 id. 228.)
    II. The same rule is recognized by the courts of law. (Kellogg v. Hickok, 1 Wend. R. 521. Jackson v. Campbell, 5 id. 562. Boyer v. Pack, 2 Denio, 107. Van Rensselaer v. Jones, 2 Barb. 666, &c. Forman v. Forman, 17 How. Pr. 255. Henderson v. Hamilton, 1 Hall’s N. Y. Sup’r Ct. 314.)
    III. There is no equity in the plaintiff’s demanding interest from the commencement of the suit. By the rule established by the above cases, the defendants tendered and offered to pay before the suit was commenced, all that they were bound to pay by the established rule of law and of equity. They could do no more, and it was the plaintiff’s own fault in not accepting the money tendered. This action would have been entirely unnecessary if the plaintiff had accepted the tender, which was all the law required the defendants to offer. Had the tender been followed by bringing the money into court with the answer, the plaintiff would not have been entitled even to the costs of commencing the action. Surely it would not be equity to compel the defendants to pay interest (by way of damages') from the commencement of this suit, when they did all that the law required of them before the suit was commenced. The demand of the summons (viz. interest from May 21st, 1863,) was improper, being for more than the law allowed.
   By the Court, Monell, J.

In the action of debt on bond, as it existed before the adoption of the Code of Procedure, the judgment was for the penalty, but execution issued to collect only the amount actually due. Since the Code, however, as I had occasion recently to decide, (Howard v. Farley, 18 Abb. Pr. 367,) the action must be for the recovery of the sum due, and not for the penalty.

In the case before us, the plaintiff sought to recover one year’s interest upon a bond, the principal sum secured not being due until two years thereafter, and the only question is whether the plaintiff is entitled to recover interest upon the sum demanded in her complaint; and if so, whether from the time it became due, or from the commencement of the suit.

It is well settled, both in equity and at law, that compound interest is not recoverable, without a special agreement to that effect. The parties, however, may agree that interest due may thereupon become principal, and bear interest. ( Van Benschooten v. Lawson, 6 John. Ch. 313.) At common law, interest was not recoverable in any case, either as an incident to the debt or otherwise. The rule has been greatly relaxed by statutes and adjudications, so that interest may now be recovered in all cases where the contract by its terms bears interest as an incident to the debt, or when it is allowed by way of damages.

On a contract to pay a given sum of money at a certain future day, with interest payable half yearly, an action may be maintained to recover an installment of interest, although the principal is not due. (Howard v. Farley, supra. Herries v. Jamieson, 5 T. R. 553.)

In the case before us, the interest was payable on the bond on the 21st days of November and May. The time of payment was fixed by the contract, and it became the right of the plaintiff, on each of those days, to demand its payment, If paid, it would have become principal in his hands, capable of earning interest, and if not paid, it would be difficult, I think, to find a reason for withholding interest from the time of the demand. In all the cases in equity or at law, the question has arisen under a different state of facts. In those cases the interest when due was not demanded, and in suits to recover the principal debt, interest was not allowed to be compounded. Hence, if the holder of a note or bond allowed the time to run by, without demanding interest, he could not afterwards, in an action on the note or bond, recover compound interest. (Connecticut v. Jackson, 1 John. Ch. 13. Van Benschooten v. Lawson, supra. In Lord Clancarty v. Latouche, 1 Ball & Beatty, 430,) Lord Oh. Manners says : “ It would be fair for the mortgagee to call for interest due at the end of the year, and if not paid, to insist on its becoming principal.”

Courts of law, as well as of equity, have discountenanced and disapproved of provisions in contracts that interest shall become principal, and have invariably treated such contracts as usurious and void. But I have not been able to find any case which holds that the parties may not agree, after the interest becomes due, that it shall bear interest. The chancellor, in Toll v. Hiller, (11 Paige, 231,) held that such an agreement could be made, and was valid.

In principle there is no difference, between the express and the implied agreement. Where a man agrees to pay the interest of a debt on a given fixed day, he ought to be held to the performance of his engagement; and in default should be liable in damages, for interest is always given as damages for the breach of the contract.

Lord Mansfield, in an early case, (Robinson v. Bland, 2 Burr. 1077,) said ; “ Where money is made payable by an agreement between parties, and a time given for the payment of it, this is a contract to pay the money at a given time, and to pay interest for it from the given day, in case of failure of payment at that day; so that the action is, in effect, to obtain a specific performance of the contract. For pecuniary damages, upon a contract for the payment of money, are, from the nature of the thing, a specific performance, and the relief is defective so far as all the money is not paid.” This language of an eminent jurist, although applied to the debt, equally applies to the interest, when the interest is payable at a fixed period. A specific performance of the contract to pay interest on a given day, would require the party to perform as of the day of failure, or to pay damages. Such damages would necessarily be the interest upon the interest defaulted.

In Pierce v. Rowe, (1 N. H. Rep. 179,) interest was allowed in an action to recover an installment of interest upon a note. The court say, that from the time the interest became due, the debtor was culpable for not paying it, and must be presumed to have employed it, as well as the principal to his own use.

In Greenleaf v. Kellogg, (2 Mass. R. 568,) a similar decision was made, and interest allowed. (See also Hastings v. Wiswall, 8 Mass. R. 455.)

In Connecticut Mutual Life Insurance Co. v. Cleveland &c. R. R. Co., (41 Barb. 9,) the action was to recover interest on coupons annexed to the bonds of the defendants. These coupons contained each a promise to pay, on a day certain, $35 interest due on that day ; and the court allowed interest to be recovered upon the coupons from the day of the default. Although some stress is laid, in the opinion of the court, upon the fact that the coupons could be cut off, and were negotiable by delivery, yet the decision really rested upon the principle that interest should be allowed by way of damages for the delay of payment. So that the analogy between that case and the one I am considering is striking.

I think the general rule ought to be applied to this case, that when by a written contract, money is to be paid at a fixed day, and the contract is broken, interest should be allowed. Especially so, where the creditor demands his due, and the debtor refuses or neglects to pay. In such a case there can be no application of the rule, as stated in Mowry v. Bishop, (5 Paige, 98,) that it was a rule of public policy to prevent an accumulation of compound interest in favor of negligent creditors, who do not call for the payment of their interest when due.”

If the interest is demanded when due, it becomes principal from that time, and interest upon it should be recoverable. If these views are correct, the refusal of the learned justice to allow some interest was erroneous.

There is no evidence of a demand before suit. Therefore, the recovery of interest can only be from the commencement of the action.

Unless the defendants consent in writing to allow the judgment to be amended, so as to include the interest from the commencement of the suit, the judgment must be reversed, and a new trial ordered, with costs to the appellant to abide the event. If the defendants consent to the amendment, then the judgment as amended will be affirmed, but without costs of the appeal to either party.  