Calhoun et al. vs. Marshall, trustee

Supreme Court of Georgia1878-08

61 Ga. 275

Summary · law.co

Holding. The court affirmed the judgment, holding that annual interest payments specified in promissory notes bear interest themselves under the applicable statute, since such payments constitute fixed and certain demands due at a specified time.

The court addressed whether annual interest payments specified in promissory notes themselves earn interest when the principal debt is finally settled. The defendant argued that interest should accrue only on the original principal amount, not on the annual interest installments that fell due each year but went unpaid. The court rejected this position, reasoning that the Code's provision making all fixed and certain demands bear interest applies equally to the promised annual interest payments. Since the debtor was contractually bound to pay interest on a specific date each year, those payments became fixed demands that should themselves accrue interest if not paid on time, just as they would if evidenced by separate notes.

The court drew support from prior Georgia precedent involving bond coupons and a similar contract case where interest on annual interest was deemed collectible. The court emphasized that there is no meaningful legal distinction between promising annual interest payments within a single note versus in separate documents—in both cases, the promise to pay is equally clear and certain, and failure to pay on the specified date should trigger interest on that unpaid sum.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether annual interest payments promised in notes bear compound interest if unpaid
Statutory interpretation of provisions making fixed and certain demands bear interest
Whether the form of the contract (single note versus separate notes) affects interest liability

Procedural posture

The case came before the court on the record raising the single question of whether compound interest was owed on annual interest installments under the notes.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Jackson, Justice.

The sole question made by this record is whether notes, the interest on which was made due and payable annually at a certain date each year, bore interest upon the annual interest so due, as well as upon the original principal on the final calculation of balance due on said notes.

Our Code, §2056, provides that “all liquidated demands, where, by agreement or otherwise, the sum to be paid is fixed or certain, bear interest from the time the party is liable and bound to pay them.” These annual sums for interest are fixed and certain, and the party was bound to pay them on the 15th of May each year; so that the liability for interest is within the words of the act. If notes for this annual interest had been separately given, they could have been sued for and recovered separately from the principal; and such notes would have borne interest. What difference can it make that the same contract is as clearly expressed in the same paper where the promise is also made to pay the principal debt at a time certain ? Suit could have been brought for the interest on the 15th of May of each year as well on these as on separate notes ; and the notes which contained a promise to pay the principal debt at a certain date, and this annual, interest in May, would have been evidence of the promise‘to pay the interest then, just as certain and complete as if promised in a separate note. There’ can be no difference in principle.

In Scott vs. Saffold, 37 Ga., 384, it was held in effect that a contract which contained the words, “ interest to be paid annually at 10 per cent, otherwise counted as principal ” was good, and that interest upon the annual interest arising under said contract was collectible.

That case is like this, except that the words “ otherwise counted as principal ” are not in the notes here sued on ; but the legal effect of the two contracts is the same. The promise to pay a sum certain at a certain time is as distinct in the one as in the other case, and the effect of that promise, to-wit: to bear interest if not paid, is as complete in the case at bar as in the case in the 37th.

A man might give another a note for ten thousand dollars payable at the end of ten years, with interest payable annually, and yet refuse to pay any interest at all as it fell due, would it be right, when the final accounting came, to let him profit by not keeping his promise to pay the interest annually % Gould not the payee sue for the interest every year and recover it ? And would not the payee be entitled to recover interest from the time each installment fell due, up to the time payment thereof was made. We think so. It stands upon the same principle, really, as coupons upon bonds; and as these fall due they are recoverable with interest on them for delay.

There seem to be two lines of authority in our sister states, and many cases have been cited by counsel on each side; but we rest our judgment upon our own statute, and the case in 37th Ga.

Judgment affirmed.