Contracts for compound interest are sometimes said to be usurious, but this may not be considered quite certain. We are aware of no case in England or in this country in which a contract to pay compound interest has been held usurious, so as to become totally invalid, or in which the actual reception of compound interest has been held to be a commission of the crime of usury, and punishable as such. Indeed, it is difficult to see, how this could be the case. If A lend to B one hundred dollars, for two years, at six per cent. legal interest, payable annually, and it is agreed, that, if A does not pay the interest at the end of the first year, it shall be considered as principal, and added to the amount of the loan from that time (which is a contract for compound interest); and the interest not being paid annually, A becomes entitled, at the end of two years, to receive, and does receive, under the agreement, one hundred and twelve dollars and thirty-six cents, instead of one hundred and twelve dollars, the principal and simple interest, - he does not receive more than after the rate of six dollars per year for the forbearance of one hundred, but has received exactly that sum, and six per cent. legal interest upon another sum which B was * under a legal obligation to pay him; for which B might have been sued, and for the forbearance of which he has agreed to pay its legal value. Accordingly, courts do not generally declare such contracts usurious; and the extent to which they have gone, is that of refusing to enforce a contract to pay interest thereafter to grow due; and they have done this, not upon the ground of usury, but rather as a "rule of public policy," because such agreements "savor of usury," and "lead to oppression." (z)1

(y) See Dunham v. Gould, 16 Johns. (yy) Fake v. Smith, 7 Abb. (v. s.) 367, Dry Dock Bank v. American Life 106. Ins. & Trust Co 3 Comst. 344.

On the other hand, if an agreement is made to convert interest already due into principal, or if accounts between parties are settled by rests, and therefore in effect upon the principle of compound interest, which may be done by an express accounting, (a) or under a custom of forwarding accounts quarterly, half yearly, or yearly, to the debtor, who acquiesces in them by his silence;(b) these transactions are valid, and sanctioned by the law; and such a method of computation is sometimes even directed by courts, (c) And the words, * the interest is to be paid annually," are held to entitle the creditor to interest on interest not paid.(cc) If compound interest has accrued, even under a prior bargain for it, and been actually paid, it cannot be recovered baek,(d) nor are the penalties affixed to the crime of usury annexed to such taking; and if a note be given for such payment, the note has a sufficient legal consideration to sustain an action upon it (e)

We are not sure that contracts to pay interest upon interest may not derive illustration from a comparison with those, upon which the law, as we have seen, is quite well settled, where one engages to pay money at a certain time, and then binds himself * to pay a further sum, exceeding interest, if the principal sum be not duly paid: this is certainly not usurious. One of the reasons for this rule is, that the penalty will be reduced,

(z) Ossulston v. Yarmouth, 2 Salk. 449, Waring v. Cunliffe, 1 Ves. Jr. 99; Chambers v. Goldwin, 9 Ves. 271; Dawes v Pinner, 2 Camp. 486; Doe v. Warren, 7 Greenl 48; Hastings v. Wiswall, 8 Mass. 455; Camp v. Bates, 11 Conn. 487; Mowry v Bishop, 5 Paige, 98; Childers v. Deane, 4 Rand. 406; Connecticut v. Jackson, 1 Johns. Ch. 13; Wilcox v. How-land, 23 Pick. 169; Stohely v. Thompson, 34 Pa. 210.

(a) Ossulston v. Yarmouth, 2 Salk. 449; Tarleton v. Backhouse, G. Cooper, Ch. 231; Mowry v. Bishop, 5 Paige, 98; Fobes v. Cantfield, 3 Ham. 18, Childers v. Deane, 4 Rand. 406.

(b) Caliot v. Walker, 2 Anst. 496, in equity, to the amount of the debt; but another, and as we think, the principal reason is, that the debtor may pay his debt when it is due, and thus avoid the contract which obliges him to pay a penalty; so that there is, in such case, no absolute contract for the payment of more than legal interest Now, one who promises to pay a debt at a certain time, and interest to be compounded as it falls due, can, by payment of the debt or of the interest when it falls due, always avoid the compounding.

Eaton v. Bell, 5B.& Ald. 34; Morgan v. Mather, 2 Ves. 15; Bruce v. Hunter, 3 Camp. 466; Moore v. Boughton, 1 Stark. 487; Bainbridge v. Wilcox, 1 Bald. 536. See also Pinhorn v. Tuckington, 3 Camp. 467.

(c) See ante, vol. i. p. * 122, n. (f).

(cc) Preston v. Walker, 26 la. 205.

(d) Dow v. Drew, 3 N. H. 40; Mowry v. Bishop, 5 Paige, 98.

(e) Otis v. Lindsey, 1 Fairf. 316; Wilcox v. Howland, 23 Pick. 169, Kellogg v. Hickok, 1 Wend. 521; Hill v. Mecker, 23 Conn. 592. But compound interest paid in error may be recovered back. Major p. Tardos, 14 La, An. 10.

1 The custom of stock-broken to debit and credit interest monthly, computing Interest on balances, and so calling for compound interest if the balances are not paid each month, does not necessarily involve usury. Hatch v. Douglas, 48 Conn. 116.

These differences between contracts for compound interest and usurious agreements, clearly establish that the former are not in their nature the same with the latter. If they were so, a contract to pay-compound interest might render the whole agreement into which it was introduced invalid, so that not even the principal nor simple interest could be recovered, and upon the actual payment of compound interest it could be recovered by the payer, and no subsequent agreement could give such a contract any validity or effect; all of which we have seen is not the case.

Upon the whole, although it seems to be well settled, that compound interest cannot be recovered, as such, even if it be expressly promised, (f) we are inclined to think, that the only rule of law against the allowance of compound interest is this: that courts will not lend their aid to enforce its payment, unless upon a promise of the debtor made after the interest upon which interest is demanded has accrued; and this rule is adopted * not because such contracts are usurious, or savor of usury, unless very remotely, but upon grounds of public policy, in order to avoid harsh and oppressive accumulations of interest And for the reason, that this aversion of our law to allow money to beget money has of late years very much diminished, we do not think it absolutely certain, that a bargain in advance for the payment of compound interest, in all its facts reasonable and free from suspicion of oppression, would not be enforced at this day in some of our courts.(g) It has, indeed, been held that an agreement to pay interest on accrued interest, is not invalid. (gg)