each case the security was contaminated by a transaction which the chancellor declared a mere shift to cover usury.

In The State of Connecticut v. Jackson, 1 Johns. Ch. 13, Chancellor Kent examined the subject of compound interest as regarded in equity, and laid down the principles by which our courts have since been guided in their consideration of this subject. The question was upon the confirmation of the report of a master to whom it had been referred to compute the amount due upon a bond and mortgage; the report contained a computation and account allowing interest upon the installments of interest due and unpaid. He examines the principles and decisions bearing upon the subject in an opinion unusually lucid and learned even for our great chancellor, and declares that compound interest has never been allowed except under special circumstances.

It appears that the question of allowing compound interest was raised in Chancery as early as 4 Car. I. At that early period it was laid down as the rule that interest upon interest was not allowed. An exception was afterward (Car. II) allowed in favor of the assignee of a mortgage, and the amount of the principal and interest really and bona fide due and paid by him was allowed to carry interest. But this case was overruled by Lord Chancellor Shaftesbury, who allowed interest on the principal sum only. Afterward the Lord Keeper said such an allowance of interest upon interest to the assignee was reasonable and just, although he appears to have followed the precedent just mentioned. Subsequently, in Gladman v. Heuchman, 2 Vernon, 135, such interest was allowed to the assignee. The cases on this point are loose and contradictory and even on the general question of the allowance of compound interest the dicta up to 1688 are both ways. But since the revolution the general rule that interest upon interest is not allowed except under peculiar circumstances, has been well established, although the rights of an assignee of a mortgage may still be in doubt. In our own reports we are not without at least dicta upon this subject. The case of Jackson v. Campbell, 5 Wend. 572, although decided upon another point, touches this question. It is there laid down that "where a mortgage is assigned with the concurrence of the mortgagor, the assignee shall be entitled to interest upon the interest paid by him, as well as upon the principal of the mortgage; but if the assignment is made without the privity of the mortgagor it does not carry interest. This does not seem to go quite as far as the anonymous case in Banbury's Reports, 41, where it is said that if the mortgagee had applied to the mortgagor before the assignment and demanded his money and required him to join in the assignment, if the mortgagor refuses either to pay or join, the assignee shall recover interest both on the principal and interest. This case would

seem to be sound on principle, for all the later cases hold that interest may be recovered upon interest from the time payment is demanded, and as the assignee stands in every respect in the shoes of his assignor he ought to be able to avail himself of the demand as his assignor might.

Lord Thurlow, although he expressed the opinion that there was nothing unjust in allowing interest upon interest, said that he would have to overturn all the proceedings of the Court of Chancery if he allowed it generally. In certain cases it has always been allowed, as where there is a settlement of an account between the parties after interest has become due; where there is an agreement to allow it after it has become due or where the master's report computing the sum due for principal and interest has been confirmed, for it is then in the nature of a judgment.

While such special circumstances may turn interest already due into principal, and permit interest to accrue upon it, an agreement to pay interest upon the interest that may thereafter accrue, if it is not paid punctually at the stated times, will not be enforced. The first case upon this point found in the books, is Sir Thomas Meers' Case, cited by Lord Chancellor Talbot in Bosanquett v. Dashwood, Ca. Temp. Talb. 40, and followed in succeeding cases.

Sir Thomas Meers had inserted a covenant in some mortgages that if the interest was not paid punctually at the day, it should from that time, and so on from time to time be turned into principal. Lord Chancellor Harcourt relieved the mortgagors from the covenant as unjust and oppressive. This established principle of English jurisprudence has never been questioned in this State. But it would appear that the rule, in its strictness, applied to landed security only, for as appears from the observations of Lord Thurlow and Lords Commissioners Mather and Ashurst, compound interest might be allowed between the parties to mere personal agreements, upon the ground of a contract to allow it, either express or to be inferred from circumstances. But while our judges have noticed this distinction, they seem to have inclined to extend the rule to debts on simple contract. While such an agreement will not be enforced, it is not to be regarded as usurious, and will not contaminate and avoid the rest of the contract.

In Stewart v. Petrie, 55 N. Y. 621, ten years' interest was due on a mortgage, and foreclosure proceedings were discontinued on a note being given for arrears and interest; suit was brought on the note, and the defense of usury was interposed. In the opinion of the court, per Allen, J., it is said: "The receiving of interest upon interest is not a violation of the Statute of Usury, as no more than seven per cent is in such cases taken or received. It is true that an agreement in advance for the payment of interest upon interest, as the same shall accrue, cannot be enforced, not because it is usurious

as

but for the reason that such an agreement is regarded in this State as against public policy one that may be made oppressive to the debtorbut a prospective agreement after the interest has accrued, to pay interest thereon, is valid. So, too, a security for interest upon interest, given after it has accumulated, and in the absence of any prior undertaking to pay it, is valid, and supported by a good consideration." The learned judge does not say what this good consideration is, but it is undoubtedly the moral duty to recompense the creditor for the delay. For in equity a moral obligation is considered to be a sufficient consideration to uphold an express agreement to fulfill it.

And in the case of Mowry v. Bishop, 5 Paige, 103, we find this moral obligation is the consideration assigned to support the agreement. In the course of the same opinion, the learned judge refers to the case of Van Benschoten v. Lawson, 6 Johns. Ch. 313, wherein Chancellor Kent said that such an agreement must not only refer to interest then due, but must be prospective, and that if the contract be that interest shall be paid upon interest from some previous time when it became due, it will not be enforced. He does not examine the foundation for this opinion, but simply states that the doctrine that such contracts will be enforced, whether retrospective or prospective, is now too well settled by authority in this State to be questioned.

In the case of Thornhill v. Evans, supra, Lord Hardwicke directed the master to inquire what arrears of interest were agreed, from time to time in writing, to be turned into principal.

In Van Benschoten v. Lawson, Chancellor Kent adopted this rule, and said that the agreement to pay interest upon interest must be in writing. Later the rule requiring a writing was approved by Justice Balcom in the case of Forman v. Forman, 17 How. 257.

However, many cases take the view that a demand is all that is necessary to turn interest into principal, and make it bear interest from the date of that demand. Connecticut v. Jackson, 1 Johns. Ch. 16.

In the case of Howard v. Farley, 19 Abb. Pr. 129, Judge Monell says: "If the interest is demanded when due, it becomes principal from that time, and interest upon it should be recoverable."

These and the later cases, generally, are evidently inconsistent with the rule requiring a writing, which may probably be regarded as abandoned at least as to prospective contracts.

From the foregoing cases, and the principles that are a necessary deduction from them, it is evident that where interest is paid upon interest, the transaction is not usurious. It must be equally clear, and it is certainly quite as well settled, that money paid for compound interest cannot be recovered back. Stewart v. Petrie, 55 N. Y. 621. The case of Boyer v. Pack, 2 Denio, 107, seems to have been

cited in some cases as sustaining the position that it can be recovered, but that case was expressly decided upon the ground of a mistake of fact. The present law of the State upon the subject of compound interest, then seems to be:

I. As a general rule interest is not allowed upon interest.

II. That a provision in a contract for interest upon future installments of interest which remain unpaid, will not be enforced, but it will not contam

inate the rest of the contract so as to render it usurious or void.

III. That a contract to pay interest upon interest due at the time is upon a sufficient consideration and valid, and may be retrospective in its action, and provide for the payment of interest from a time then past.

IV. That from the time payment of it is demanded, interest bears interest.

V. That if interest is paid upon interest, it cannot be recovered back, although the law would not have compelled the debtor to pay it.

R. R. H.

THE RELATIONS OF THE UNITED STATES TO EACH OTHER, AS MODIFIED BY THE WAR AND THE CONSTITUTIONAL AMENDMENTS. (Continued.)

III. CONFEDERATION ERA.

THE articles of confederation were the first step to a

Constitutional Union of the free and independent States of America. They passed in Congress November 15, 1777. 3 Jour. Cong. 396.

Our analysis of this political association will be easy because it was constituted by the written articles of confederation.

During the discussion of them in Congress, it was again and again proposed to change the rule, under the proposed articles, by which in Congress each State had one vote, but the proposition was uniformly defeated; and for cases, which by the articles could only be passed by nine States, an amendment was proposed in these words: "Provided, that the niue States so assenting shall comprehend a majority of the people of the United States, excluding negroes and Indians." It was rejected-ayes, one State; nays, nine States. 3 Jour. Cong. 366. Now when (taking the census of 1790 as an index) nine States, with a population of only 1,600,000, could thus control four States with 2,100,000; when in other cases, where a majority of States could pass a measure, States with a population of 1,000,000 could thus out vote a majority of States with 2,800,000; when the power of a majority of the people of the United States was denied by a vote of nine to one in Congress; it would seem that the idea of a paramount and sovereign body politic, called the United States, was derisively ignored and repudiated even in Congress itself. Nor let it be forgotten, that in the Congress before the articles were adopted, a majority of States always decided action; and thus if 1,000,000 voted for a measure (seven States), and 2,800,000 against it (six States), it passed; or if 2,800,000 (six States) voted for, and the 1,000,000 (seven States) voted against a measure, it failed.

Does not this fact show that States, not men, were represented in the Congress prior to 1781, and afterward in that under the confederation?

The anxious desire of Congress, as well as of all patriots, was to increase the power of Congress by adopting the articles. But what was the obstruction to their adoption from November, 1777, to March, 1781? Congress, knowing the source of its authority, and that no increase could come but by the united voice of all the separate States; that none could come from a majority vote in Congress, or from a majority of the people of the United States, aggregated as one body politic, passed this order: "These articles shall be proposed to the legislatures of all the United States, to be considered, and if approved by them, they are advised to authorize their delegates to ratify the same in the Congress of the United States, which being done, the same shall become conclusive." 3 Jour. 401. Twelve States had adopted them for some years, but Maryland declining, they had no effect; and thus one-thirteenth of the whole population of the United States, obstructed action deemed almost essential to the safety of the whole.

I shall note the contents of these articles succinctly. 3 Jour. 396.

1. They are called: "Articles of confederation and perpetual Union between the States of New Hampshire," etc. (all named).

The parties between whom it is made are not men, but States. It is a confederation and perpetual Union between States.

2. Its first article declares: "The style of this confederacy shall be the United States of America." That was the name of this confederacy between States baptized in revolutionary blood.

3. The second article declares: "Each State retains its sovereignty, freedom and independence, and every power, jurisdiction and right which is not by this confederation expressly delegated to the United States in Congress assembled.

Observe, each State retains - holds back that is, it had previously possessed, what by these articles it retains. It retains its sovereignty, freedom and independence. Then it had these previously. But how is this, if the paramount sovereignty was in the good people of the United States represented as one people in Congress?

Again, note the distinction between the totality of sovereignty, freedom and independence retained, and the division between the powers, jurisdiction and rights delegated or retained. The former, which inhere in the civil body politic, are not impaired by a league or confederation to which a part of the sovereign powers, etc., may be delegated, while another part is reserved.

And further, note the guard against implication of powers in the word "expressly."

4. In the third article it is declared: "The said States hereby severally enter into a firm league of friendship," etc.

5. By the fourth article to secure intercourse among the people of the different States, an inter-communication of the rights of citizenship, mutual extradition of criminals, and reciprocal faith to public acts of each State, are stipulated.

6. Delegates to Congress are provided for. Each State to elect, and re-call at pleasure, her own delegates, to support them, and each State to have but one vote.

7. Mutual limitations are agreed to, upon the powers of the States as to foreign intercourse, or between themselves, or as to war, or forces-military or naval. 8. The powers vested in Congress were important, but were very restricted. Congress could lay no tax, and raise no money but by loans and bills of credit, except by requisitions on the States, but with no power to enforce its requisition. It could call on the States for soldiers, and of those so raised, all of and under the rank of colonel were appointed by the States. The regulation of commerce was left to the States. Congress could build and equip a navy. The treaty making power was in Congress, and the power of war. 9. The articles could be amended by Congress, to be confirmed by the legislature of every State. The articles were to be inviolably observed by every State, and the Union to be perpetual.

Such is a compendium of these celebrated articles. In a letter sent by Congress with them to the several States, a few things may be noticed. The difficulty of a general sytem between "so many sovereign and independent communities" into which the continent is divided, is dwelt upon, and it is recommended to each respective legislature to invest its delegates with competent powers ultimately in the name and behalf of the State to subscribe articles, etc. 3 Jour. 404. This was done finally by the signature of the delegates, "On the part and behalf of the State of 7 Jour. 43.

As already noticed, after this date Congress passed ordinances, "Be it ordained," etc.

Let me call attention now to the influence of these facts connected with these articles upon the question of the relations of the States prior to their adoption.

In the letter of Congress just referred to, the ratification is urged upon the States, "As essential to our very existence as a free people, and without it we may soon be constrained to bid adieu to independence, to liberty and safety." Is this the language of a paramount sovereign to his dependent vassals? of a Congress exercising (as Judge Story asserts) de facto and de jure a sovereign authority? If it was sovereign, how was its demand of more power so eager, and yet so long disregarded? And if these articles are the greater powers, so much prayed for, what becomes of its previous sovereignty so confidently asserted? If, as Judge Story assumes, this central sovereignty, represented by Congress, gave being to the States, by its inherent power, how does this creator of commonwealths come on bended knee to beg of these, its creatures, only enough power to save itself from extinction? These questions, so pertinent to these facts, must be resolved in one answer: that Congress was, and had ever been, the delegated agent of all the States, each of which had always, since the moment of its self-assumed independence, been possessed of that, which, under these articles, they still retained, its sovereignty, freedom and independence, and of every power, jurisdiction and right, it had not by its own will delegated to the Congress or abridged by treaty or compact with some other civil body politic.

Congress made the treaty of peace with Great Britain, at the close of the war, in which His Britannic Majesty acknowledges the said United States, viz.: New Hampshire (naming all), to be free, sovereign and independent States; that he treats with them as such; and for himself, his heirs and successors relinquishes all claims to the government, proprietory

and territorial rights of the same and every part thereof. 9 Jour. 20.

One other act during the confederation era remains to be noted.

Virginia, by deed dated March, 1784, executed by her delegates in Congress under her authority, conveyed her domain in the northwest (now five States, containing nearly ten millions of people) to the United States in Congress assembled, as well of soil as jurisdiction, for the benefit of said States, upon condition that the territory be laid out into States; "that the States so formed shall be distinct Republican States, and admitted members of the Federal Union, having the same rights of sovereignty, freedom and independence as the other States;" that the lands so ceded shall be considered "as a common fund for the use and benefit of such of the United States as have become and shall become members of the Confederation or Federal alliance of the said States, Virginia inclusive," etc. 9 Jour. 47. Congress unanimously accepted this deed of cession.

This deed, and Congress is estopped to deny it, proves

1. That Virginia, and not Congress, had exclusive right of soil and jurisdiction to the territory thus ceded.

2. It was to be laid out into distinct States.

3. They were to be admitted into a Federal Union. 4. They were to have, as the others had, freedom, sovereignty and independence.

5. The tie between the States was a confederation or federal alliance.

6. Each State, as such, had a separate claim on the fund.

7. Congress, under the present Constitution, has recognized this by the bill for the distribution of the proceeds of the sale of these public lands among the several States.

In Gibbons v. Ogden, 9 Wheat. 187, Marshall, C. J., in speaking of the argument at the bar, as to the relations of the States prior to the present Constitution, by one comprehensive statement may conclude all comment on the foregoing facts:

"It has been said that they (the States) were sovereign, were completely independent, and were connected with each other by a league. This is true." In this language he spoke the opinion of the whole court. And if this was true under the articles of confederation, a fortiori it was true before their adoption in 1781.

In Wheeler v. Smith, 9 How. 78, Mr. Justice McLean, speaking for the whole court, said:

"When this country achieved its independence, the prerogatives of the crown devolved upon the people of the States, and this power still remains with them, except so far as they have delegated a portion of it to the Federal government. The State as a sovereign is the parens patriæ."

Thus, at the close of the Confederation, we find the States related to each other, as free, sovereign and independent States, united for common benefit by a league, confederation and federal alliance; whose name and style was "The United States of America;' a confederacy, whose units were States; and not one civil body politic, whose units were men.

IV. CONSTITUTIONAL ERA FROM 1789 TO 1861. I propound the following problems for solution: First. Who ordained the Constitution, and what is it?

Second. What the relations of the States to the Government thereby established, and inter se ? Is the Union organic or functional? Is it Staaten-bund or bundes-Staat? Is a new civil body politic created? If so, are its units, States or men?

1. In answer to the first question, I aver that the States, as free, sovereign and independent civil bodies politic, ordained the Constitution; and that it is a Federal compact between the States, by which a government has been established, which is a DemocraticRepublican and a Federal government; supreme within the limits of the delegated powers, over the constitutions and laws of the several States, and binding and operating upon the citizens of all the States; and by the terms of which, certain rights and privileges of the citizens of each are inter-communicated to those of every other.

The confederation had two leading vices, in the opinion of those who advocated its substitution by the present Constitution.

First. In the principle of LEGISLATION for STATES or GOVERNMENTS, in their corporate or collective capacities, and as contradistinguished from the INDIVIDUALS of whom they consist" (Hamilton, No. 15, of Federalist).

Second. "It has not a little contributed to the infirmities of the existing federal system, that it never had a ratification by the PEOPLE. Resting on no better foundation than the consent of the several legislatures, it has been exposed to frequent and intricate questions concerning the validity of its powers; and has, in some instances, given birth to the enormous doctrine of a right of legislative repeal. Owing its ratification to the law of a State, it has been contended that the same authority might repeal the law by which it was ratified. However gross a heresy it may be to maintain that a party to a compact has a right to revoke that compact, the doctrine itself has had respectable advocates. The possibility of a question of this nature proves the necessity of laying the foundation of our National Government deeper than the mere sanction of delegated authority. The fabric of the American Empire ought to rest on the solid basis of THE CONSENT OF THE PEOPLE." (Hamilton, No. 22, Federalist).

This latter vice is that with which we have now to deal. The confederation was ratified by the delegated authority, the legislature of each State. The Constitution of each State rests upon the will of the people of the State, as the sovereign civil body politic. This defect in the confederation would be cured by making the new Constitution rest on the same basis as the State Constitution, viz.: the consent of the people of each State. That this is the meaning of Mr. Hamilton in the passage just quoted, will be obvious from the language of the other authors of the Federalist.

Mr. Madison, in the 39th number of that great series of papers (written to induce New York to ratify the Constitution, and therefore a co-temporaneous exposition, which, leading to the adoption of the Constitution, has always had great weight in its construction), says: "This assent and ratification is to be given by the people, not as individuals composing one entire nation, but as composing the distinct and independent States to which they" (the people) "respectively belong" * * * "That it will be a federal and not a national act, the act of the people, as forming so many independent States, not as forming one aggregate nation, is obvious from the single consideration, that it is to

result neither from the decision of a majority of the people of the Union, nor from that of a majority of the States. It must result from the unanimous assent of the several States that are parties to it, differing no otherwise from their ordinary assent, than its being expressed, not by the legislative authority, but by that of the people themselves. Were the people regarded in this transaction as forming one nation, the will of the majority of the whole people of the United States would bind the minority; in the same manner as the majority in each State must bind the minority. * ** Each State in ratifying the Constitution is considered as a sovereign body, independent of all others, and only to be bound by its own voluntary act."

In the Virginia Convention, called to consider the Federal Constitution in June, 1788, when confronted by the question of Patrick Henry, why the preamble said, " we, the people," and not "we, the States," (Mr. Henry was not a member of the Federal Convention), Mr. Madison replied, "Who are parties to it? The people, but not the people as composing one great body, but the people as composing thirteen sovereignties. Were it, as the gentleman asserts, a consolidated government, the assent of a majority of the people would be sufficient for its establishment, and as a majority have adopted it already, the remaining States would be bound by the act of the majority." * **"It would be now binding on the people of this State without having had the privilege of debating upon it; but, sir, no State is bound by it, as it is, without its own consent." (Virginia Debates in Convention of 1788, p. 76.) He then proceeds to show that as the confederation rested on the consent of the State Legislatures, the Constitution was to rest on the authority of the people of each State.

After this reply, this objection of Mr. Henry was not again advanced.

But we are not left to rely upon authority. The facts are conclusive.

Mr. Hamilton had very early suggested a change in the system of the confederation, and others united in his views; and in 1786, a convention of five States at Annapolis proposed another convention to meet at Philadelphia in May, 1787.

Congress passed a resolution, that it was expedient to hold "a convention of delegates who shall have been appointed by the several States for purposes named therein; and hereafter to be referred to (12 Jour. 13, 14). The action of said convention was to be reported to Congress and the several legislatures," and to be "agreed to in Congress and confirmed by the States."

It met May 14, 1787. I refer to its official journal, called the Journal of the Federal Convention. (Jour. 59.)

It states that "in virtue of appointments from their respective States, sundry deputies to the Federal Convention appeared: but a majority of the States not being represented," there was an adjournment until 25th of September, "when, in virtue of said appointments, appeared from the States of Massachusetts, Rufus King; New York, Robert Yates and Alexander Hamilton, etc., etc.

The election of General Washington as its president was made by States.

The credentials were read. (Jour. 17 to 58.) The credentials were from the State legislatures of every State but Rhode Island, which was never present in the convention. They all authorized a conference

to revise the existing system, but all required report to the State for confirmation.

The rules adopted gave each State one vote onlyconstituted seven States a quorum, etc. (Jour. 62, etc.; 2 Mad. Pap. 724, etc.)

On the vote upon the Constitution, the Journal states: (p. 388), "It passed in the affirmative, all the States concurring."

Upon the attestation of the act (p. 389) which was in this form: "Done in convention, by the unanimous consent of the States present," etc.; "all the States answered aye."

Governor Morris moved to refer "the plan to one general convention chosen and authorized by the people, to consider, amend and establish the same." This looked more to the action of the people in the aggregate, as one people, than any other proposition ever offered. It was not even seconded. (Mad. Pap. p. 1184.)

Mr. Hamilton proposed to submit the plan to Congress, and if "agreed to by them, it may be communioated to the legislatures of the several States," to be finally ratified by "a convention of delegates in each State, to be chosen by the people thereof." Because it conditioned the plan on the will of Congress at all, it was rejected. Ayes, 1 State; noes, 10 States. A renewal of the proposition to require the approval of Congress was rejected-nem. con. (3 Mad. Pap. 15391540-1541; Jour. 349-50.)

The resolution finally adopted was, that the Constitution be laid before Congress, and be "submitted to a convention of delegates chosen in each State by the people thereof, under the recommendation of its legislature, for their assent and ratification ;" and that each convention notify its action to Congress. (3 Mad. Pap. 1570-71.)

Pursuant to this resolution, Congress, on the 28th September, 1787, sent a copy of the Constitution "to the several legislatures, in order to be submitted to a convention of delegates chosen in each State by the people thereof," etc. (Jour. Cong. 160.)

The ratifications by the several States may be found in the Journal of Fed. Conv. 392 et seq. I give speci