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The Maine Bank v. Butts, 9 Mass, 49, a mortgage was executed to secure the payment of one note for $4,000, in two years, another for $6,000, in three years, and eight other potes for smaller sums, payable at sundry times, respectively within three years. The latter were claimed to be usurious, for one reason : because given for the interest on the larger sums, made payable in advance. And in M Gill v. Ware, 4 Seam. 21, there was a loan on mortgage for five years, and notes executed for the payment of the interest yearly, in advance. The reservation or taking of interest in advance, in two of those cases, was expressly held to be legal, and in the other, it was impliedly sanctioned. It is a question, however, worthy of serious consideration, whether there has been such an extension of the course of trade, with regard to the discounting of negotiable instruments, as will include transactions of this character, and whether they can otherwise be sustained."
The second general question on this subject relates to the legality of computing interest according to the rule, that 30 days make a month, and 360 days a year. There seems to have been some difficulty in arriving at a rule, for fractional parts of a year, combining the requisites of accuracy and convenience. The calculation of interest by days will secure the first requisite, but the second, to a certain extent, is wanting. This fact has given rise to the practice of computing interest by months, when the time was so expressed-whether it consisted of whole months only, or contained the frac
parts of a month-each month being regarded as the twelfth part of a year. But when the fraction of a month was stated in days, the question again occurred as to the manner of disposing of the days; and the difficulty was overcome by treating the days, in this case, as the fraction of a month of 30 days, which produced but a trifling variation from the result obtained by calculating interest on them as days.
This rule, however, was afterwards carried farther. The time, when expressed in days, was, for convenience sake, converted into months; and the year was thus regarded, as containing twelve months of 30 days, or 360
But this rule has still been extended in practice. Not only has the time, when expressed in days, been reduced to months, according to the arbitrary standard of allowing 30 days to each month, but, when originally given in calendar months, it has first been converted into days, by ascertaining the exact number of days it contains, and that number afterwards divided into months of 30 days, with a view to calculate interest in the manner first
Of these three forms, the first has been claimed to be entirely legal; the third and last mentioned, clearly cannot be sustained by any satisfactory or even plausible reason ; the second is very generally, though not universally, employed by business men. Although admitted to be slightly inaccurate, it has been sustained by judicial decisions, and affords room for more serious controversy. : The question as to the legality of this rule, may arise in three different cases, namely: first, upon an instrument bearing interest, in which the time is expressed in days; second, upon an instrument bearing interest, in which the time is expressed in months, or in months and the fraction of a month the latter being stated either in the form of a fraction, or as so many days; and third, where interest is to be computed from one fixed day to another, as upon an instrument in which the time of payment is specified by a particular day, or upon any sum of money remaining unpaid after it has become due, from the time it becomes due to the time of payment.
But our limits will not permit us to follow this splendid article in " Bartlett's Tables," through the consideration of these points. The decisions of the courts upon them, as they have come up, and the arguments offered, are all alluded to; and to this we must refer the reader, assuring him, especially if he is a member of the legal profession, he will be most amply rewarded for his pains.
The next leading point of the subject, and probably the most important and embarrassing of all, relates to interest where partial payments have been made. The decisions of the courts upon it, are very numerous, and they have presented it in different forms and under a variety of circumstances, These, however, appear to serve rather to bewilder the mind than to throw any clear and reliable light upon the subject.
With some few peculiar exceptions, the decisions arrange themselves into two classes, in which opposite rules are laid down for the calculation of interest, where partial payments have been made, or upon running accounts with mutual credits. This has given rise to what is called the legal and the mercantile method of computing interest, in such cases.
The legal method has finally assumed the form stated by Chancellor Kent, in the case of The State of Connecticut v. Jackson, in which he says: -"The rule for casting interest, when partial payments have been made, is to apply the payment, in the first place, to the discharge of the interest then due. If the payment exceeds the interest, the surplus goes toward discharging the principal, and the subsequent interest is to be computed on the balance of principal remaining due. If the payment be less than the interest, the surplus of interest must not be taken to augment the principal ; but interest continues on the former principal until the period when the payments, taken together, exceed the interest due, and then the surplus is to be applied towards discharging the principal; and interest is to be computed on the balance of principal, as aforesaid.”
The mercantile method, on the other hand, which derives its name from the fact that it has, by custom, long been used amongst merchants in keeping their accounts, is this :-Cast interest on each item of debt, from the time it became due to the time of settlement, and add the principal and interest together; compute interest on the several items of credit, in like manner, and add the principal and interest together ; deduct the one sum from the other, and carry the remainder to the new account; and proceed in this manner whenever the account is balanced, until the final settlement.
One essential feature of this method is, that rests are generally, once a year or oftener, made in the account, and the balance of principal and interest struck, which is carried to a new account.
In the able article before us, in " Bartlett's Tables," the several law cases are examined which relate to either method, respectively. One or two cases are there noted, in which, under peculiar circumstances, a rule different from either was adopted. The inquiry is then presented, as to how far the law upon this question can be regarded as settled by authority ; and the attempt is then made, to investigate the principles by which it is governed, and the propriety of the rules that have been established.
It does not concern us here to notice more than one of these points : it is that which considers how far the law upon this question can be regarded as settled.
In looking over the decisions in reference to the legal method, it is observable, that there is not a single English case in which it has been adopted
or recognized, in the form it has assumed in this country. It will be noticed, also, that the line of separation between the two cases, relating to the two methods, is clear and well defined. Those in which the legal inethod is established, bave, with few, if any, exceptions, arisen from transactions in which partial payments were made upon notes, bonds, &c.; and those, on the other hand, in which the mercantile method was employed, have as uniformly related to dealings with bankers, or between merchants, where there were running accounts and mutual credits.
It appears, also, that in a number of instances, the legal method has been adopted by the courts of the several states, as a rule of practice, merely, and apparently from the consideration that, as some rule must be resorted to in such cases, and as there was no principle involved which, of itself, pointed out one rule rather than another, as the only true and correct rule, they were at liberty to adopt such an one as to them seemed just and equitable.
With reference to the mercantile method of computing interest, it may be considered as settled, that it is not usurious, but may be employed by merchants and bankers in making up their accounts; and that interest so charged, can be recovered where there is either an express or implied contract to pay it ;--that such a contract will be implied by law, first, where accounts made up in this manner have, from time to time, been rendered and received, without objection; and secondly, where there is a well established usage of trade sanctioning such a mode of making up accounts ;-that receiving and assenting to an account, in which interest is charged in this manner, will amount to an express contract to pay it, which will afterwards be enforced. And that, although in other cases it is not allowable before interest becomes due, to agree that, when due, it shall be converted into principal, and carry interest; yet, in case of running accounts, where there are mutual credits and a fluctuating balance, it is lawful to contract a priori that interest shall be computed in this manner.
Our limits will not permit us to notice that portion of this examination, in which an investigation is made of the principles by which this branch of the law is governed, and the propriety of the rules that have been established in connection therewith. We presume there is no professional man who will fail to procure the work; this article alone is worth, to such, many times its cost.
We cannot, bowever, pass from this subject without noticing a few suggestions which are offered, on the relative merits of the legal and mercantile methods of computing interest.
The legal method discourages prompt and rapid payment on the part of the debtor. At each payment a rest is made, and the oftener he pays, the oftener the interest will be compounded against him. Every payment, therefore, being the occasion of a new compounding of interest, it is evidently to his advantage to delay the payments as long, and make them as seldom, as possible. By the mercantile method, on the other hand, the time of compounding does not depend upon the time when the payments are made, but occurs at regular intervals, without regard to them.
The mercantile method has been uniformly employed almost from time immemorial, by that class in the community who are more interested than any other in establishing a correct rule for computing interest, where partial payments are made-who have more frequent occasion to use such a rule in practice, and therefore have better opportunities of judging of its convenience and justice. Yet, this method is not so favorable to them as the legal method, where payments are made oftener than once a year. The latter produces a greater accumulation of interest, and would be to the advantage of a person keeping an interest account.
We cannot close this article without some more explicit reference to the great work in which our subject is discussed, and which we regard as the most important and masterly one, of the kind, ever offered to the commercial world. We have before spoken of " Bartlett's Commercial and Banking Tables,” but, in that instance, we had only a proof-sheet edition before us; now it is issued complete.
. It contains tables adapted to every class of commercial calculations, and all the important legal ones; not only every variety of the calculations of interest and exchange, which ever arise in practice, but discount tables, account current, time and averaging tables, income tables, annuity tables, &c., &c., adapted to all currencies of the world. For accuracy and ease in the application, they have received the unlimited approbation of eminent commercial bodies and distinguished bankers and business men.
Now, a moment's reflection must satisfy every one, that here is a standard in conformity with which all the commercial calculations of the civilized world can be made. Such a uniform standard would at once produce har mony in all accounts; questions of accuracy could be solved at once; the diminution of labor among accountants would be immense; while employers would be far better served than at present.
It is this point which we regard of sufficient importance to press it upon the attention of commercial men. The work before us is amply worthy of such high distinction. It is a quarto, of nearly four hundred pages. The law of interest is only one of numerous commercial points explained in it. We say the work is worthy of this high honor, and we might quote, in proof of the correctness of our assertion, the words of some of the most eminent bankers of our country :—“The work is original in every particular, worthy of unlimited confidence, and richly merits universal patronage.” But our object is not to extol the work; we desire to awaken the interest of those who have not seen or examined it, and to assure them it is a matter highly worthy of their investigation, and which will certainly afford them much satisfaction, if it does not in the end become a source of advantage or profit.
Art. IV. OUR METALLIC CURRENCY.
PHILADELPHIA, June 15, 1852. FREEMAN Hunt, Esq., Conductor of the Merchants' Magazine, etc.
Dear Sir :-Some views on the currency having been lately put forth by a writer in the National Intelligencer, of Washington, which appeared to me at once plausible and erroneous, I thought it best to answer them in that journal; but as my speculations on this subject have been frequently given to your Magazine, I wish these also to find a place there, for which purpose I now inclose you a copy, with some small corrections and additions. Whether they shall be verified or contradicted by time, I wish them to be there recorded.
The remaining numbers of your Magazine, from the tenth volume, I should be glad to get. As a work of reference on American statistics it is invaluable, and our coun: try affords no substitute for it. I am, very sincerely, yours,
OUR METALLIC CURRENCY.
Among the speculations which have lately appeared in the public journals on the subject of our metallic currency, it is gratifying to find that they nearly all agree in recommending a single standard ; a conclusion to which all the best reasoners on the subject of money had arrived for more than a century, though few nations have acted on it, from a mistaken apprehension that if either metal was not a legal tender it would cease to circulate as, currency.
This is a great point gained in the advancement of sound theory on the complicated and much-mooted subject of money. But, supposing we adopt a single measure of value, which shall it be, silver or gold?
Though the reasoning on this question is not quite as conclusive as on that of a single or double standard, there appears to me to be a great preponderance of argument in favor of silver.
Besides that the silver dollar is the general money of account, and is the popular standard by which the value of gold and of everything else is measured, gold seems far more likely to alter in value. This metal was once thought to be less liable to fluctuation than silver, for the discovery of America had reduced its value only to one-third, while it had reduced that of silver to one-fourth ; but now we have every reason to believe that it is destined to a more rapid depreciation than either metal ever before experienced.
In the early part of this century, before the Russian mines yielded much gold, the whole quantity of that metal annually produced in America and Europe was not supposed to exceed fifteen millions of dollars. Nor was the average annual product of all Spanish and Portuguese America, at any period, according to Baron Humboldt, more than twelve millions. But the Russian, Californian, and Australian mines now yield six or seven times as much as America and Europe produced thirty years ago, and bid fair to yield ten times that quantity.
There is in every civilized community a large class of contracts which endure for a long series of years, and as to these it would be desirable, for the sake of doing justice to both parties, to have an unvarying standard of value; but this, from the unceasing fluctuations of supply and demand in the precious metals, as well as everything else, is impossible ; yet we should come as near to it as we can. Gold and silver bave been universally preferred for this purpose, because their changes are slower and more gradual than those of other commodities; and, for the same reason that they have been thus used, we should select the one as the standard which is least likely to change.
If gold should so depreciate as to reach the proportion which it bore to silver before the discovery of America, and had held for more than two thousand years, that is, at about ten to one, then the holders of perpetual ground rents, of public debts, and of all fixed dues in money, would lose one-third of what they had contracted to receive.
Some may be disposed to doubt this depreciation of gold, since the great