A.R.S. Section 25-503 Interpretation
In Arizona, each child support installment vests as a final judgment as it becomes due and is enforceable by law. See Jarvis v. Jarvis, 27 Ariz. App. 266, 267-68, 553 P.2d 1251, 1252-53 (1976); see also A.R.S. 25-503 (Supp. 1999) (codifying the common law rule).
Under the generally prevailing "United States Rule," partial payments of a debt apply first to unpaid interest due and thereafter to the principal debt. See 47 C.J.S. Interest & Usury 74 (1982); 45 Am. Jur. 2d Interest and Usury 75 (1999).
That rule was established by the United States Supreme Court in Story v. Livingston, 38 U.S. (13 Pet.) 359, 371, 10 L. Ed. 200 (1839).
In Story v. Livingston, the United States Supreme Court stated:
The correct rule in general is that the creditor shall calculate interest whenever a payment is made. to this interest the payment is first to be applied; and if it exceed the interest due, the balance is to be applied to diminish the principal. If the payment fall short of the interest, the balance of interest is not to be added to the principal so as to produce interest. This rule is equally applicable, whether the debt be one which expressly draws interest, or on which interest is given in the name of damages. 38 U.S. (13 Pet.) 359, 371, 10 L. Ed. 200 (1839).
The Court adopted the United States Rule.
The purpose behind the rule is sound: allocating payments first to interest encourages debtors to pay the full balance due when both principal and interest are owing. See Morley v. Morley, 102 N.C. App. 713, 403 S.E.2d 574, 575 (N.C. Ct. App. 1991).