Interest is the price agreed to be paid for the use of money. Rent is the price agreed to be paid for the use of land. Hire is the price agreed to be paid for the use of a horse or other article of personal property.
Call it interest, rent or hire, it becomes a debt at the time the party promised to pay it, and from that time he is using the money of the creditor or of the landlord or of the bailor, and ought to pay for the use of it, unless he be allowed to take advantage of his own wrong in not making payment at the day.
A lessee is to pay $100 a year rent, payable on the first day of Januaryin each and every year. The rent is in arrear. The lessor may accept a promissory note of the lessee, which of course will bear interest, or he may sue and take judgment, and that will bear interest until paid. So when a horse is hired, the price to be paid at the end of each month; so when money is lent or there is a forbearance to sue for a debt upon an agreement that interest is to be paid annually, c.
The rule being that "when a certain sum of money is to be paid at a specified time, on failure to pay, the party is to be charged with interest." The price for the use of the money, like rent due for land or the hire of a horse, being the money of the one, which the other party is having the use of, and should pay for.
Mr. Haywood in a well-considered argument put this case: "Three years after date I promise to pay A. B. $1,000, with interest from date." The note is not paid until the expiration of five years; why should not interest be charged upon the interest due at the end of the three years? The reply is: The parties having by acquiescence extended the credit from three to five years, the interest, which is an incident of the debt, goes with it, and was not due at the end of three years *Page 92 and could not have been sued for as an independent debt. It is otherwise when the note contains an express promise to pay interest at specified times. At each time there is a certain sum of money due, for which an action lies.
On our part we will put this case: "Three years after date I promise to pay A. B. $1,000 with eight per cent. interest from date, the interest tobe paid on the 1st day of January in each and every year. The note is not paid until after the expiration of five years; why should eight per cent. interest instead of six be computed after the first three years?" The reply is: The parties having by acquiescence extended the credit from three to five years, the interest, as an incident of the debt, goes with it, so that the debtor is not only bound to pay eight instead of six per cent. for the last two years, but he is bound to pay eight per cent. interest upon each defered instalment of interest, the legal effect of the indulgence given by the creditor being only an extension of the time of credit upon the terms set out in the note. A lessee for years who holds over becomes a tenant at sufferance; is bound for the same rent, may be ejected at any time, and is chargeable with interest upon the defered instalments of rent.
In our opinion the doctrine that "when there is an agreement set out in the note for the payment of interest annually or semi-annually, the maker is chargeable with interest at the like rate upon each defered payment of interest in like manner as if he had given a promissory note for the same amount," is sound on principle. By this mode of computation compound interest is not given. But a middle course is taken between simple and compound interest.
In mediam viam tutissimus ibis. By computing interest in this way effect is given to the stipulation to pay interest at fixed times; whereas, if simple interest be computed no effect whatever is given to the stipulation in regard to *Page 93 interest, and the Court assumes the power to expunge it as surplusage, although it is manifest that the parties intended it to have some effect. Finding this doctrine settled by old cases in our State, Kennon v. Dickson, Con. Rep. 357, Taylor 231. We will not open the door for further agitation, although from the briefs of counsel, we see the cases are conflicting, and "much may be said on both sides."
There is error. Interest must be computed annually. Report of Clerk confirmed.
PER CURIAM. Order accordingly.