Bank of Commerce v. Fuqua

11 Mont. 285 | Mont. | 1891

Harwood, J.

The bill of exchange sued on in this action was drawn for the principal sum of four thousand dollars, and provided for interest at six per centum per annum after maturity until paid, and that “the parties hereto agree to - pay all attorney’s fees in case of suit on this paper.” The defendants, one of whom is appellant, were, according to the allegations of the complaint, both acceptors and indorsers of said bill of exchange.

Judgment was rendered against appellant, G. W. Crutcher, one of the alleged acceptors and indorsers, for the said principal sum of four thousand dollars, together with four hundred dollars for attorney’s fees for services in prosecuting the action, and costs of suit. This appeal is from that portion of the judgment relating to attorney’s fees allowed in said action.

Respondent contends that an appeal from part of a judgment is not proper practice, and cites in support of his position the case of Barkley v. Logan, 2 Mont. 296, determined at the August term, 1875, and the case of Plaisted v. Nowlan, 2 Mont. 359, determined at the January term, 1876, of the Supreme Court of Montana, in which latter case the former was again considered on motion for rehearing, and affirmed. These cases would support respondent’s position but for the fact that since the determination of them the statute under which they were determined has been so amended as to provide for an appeal from the judgment, “or any part thereof.” The sections of the statute (369 and 380) referred to in the cases cited are as found in the Civil Practice Act, enacted by the seventh session of the legislative assembly, convened in 1871. Now, in 1877, about one year following the announcement of the decisions cited ■supra, the Code of Civil Procedure was revised by the legislative assembly at the tenth session thereof, and the same sections again appear in the Code as sections 408 and 431 (10th Sess. Laws), and in the latter section appears the additional words, “ or any part thereof,” making the section read: “ An appeal may be taken to the Supreme Court in the following cases s First, from a final judgment, or any part thereof, entered in an action or special proceeding commenced in those courts, or brought into those courts from other courts.” The statute has since remained in that form. We therefore hold that an appeal may be prosecuted from part of a judgment. (See In re Davis’ Estate, ante, p. 1.) In California, under statutes very similar, the practice is to entertain an appeal from part of a judgment. (Hayne on New Trial and Appeal, § 185, p. 562.)

Appellant, G. W. Crutcher, as a defendant in said action, appeared, and answered said complaint, and, among other averments, set forth two paragraphs as follows: —

“4. This defendant, for answer to the seventh paragraph of said plaintiff’s complaint, alleges that said attorney’s fees in said suit provided for were not due at the time this suit was filed.

“5. And for further answer to said seventh paragraph he alleges that the bill herein sued on was, as alleged in said complaint, made in the- State of Kentucky, and payable in that State, and said contract was to be wholly performed in that State, and that by the laws of the State of Kentucky the sum of two dollars and fifty cents, and no more, is provided for by the statutes of the said State of Kentucky in such cases, and that any contract for a greater sum as attorney’s fees is by the laws of said State of Kentucky illegal and void, and that no greater sum than two dollars and fifty cents can be recovered in said State under the contract set out in the complaint herein.”

These paragraphs plaintiff’s counsel moved the court to strike out of said answer, on the ground that the averments therein contained were sham and irrelevant allegations, and constituted no defense to plaintiff’s complaint. The court sustained said motion, and struck from the answer said paragraphs 4 and 5.

The said motion and order appear in the record, and the appellant complains that the court erred in said proceedings; but respondent interposes the objection that said proceedings of the court below are not properly before this court for review on appeal from the judgment, because, as he contends, said motion and the order of the court thereon are not part of the judgment roll. This objection leads into a region of practice much debated by the profession and bench in this jurisdiction, commencing with the case of Noteware v. Sterns, 1 Mont. 314, and running through a number of decisions, which discussion, perhaps, as intimated by the learned judge in Barber v. Briscoe, 8 Mont. 214, has tended rather to entangle and obscure the region than to trace plain paths through it. If this be true, it warns us to look well to our bearings from the stand-point of statute and principle when we enter here. It may have so appeared, with much reason for it, to Justice Liddell, in treating that case; but with the opinion in that case and the statute we do not view the point with so much embarrassment, nor need we dwell long upon it. In the opinion just cited, section 290 of the Code, which prescribed what matters shall be deemed excepted to — i. e., what proceedings of the court the law reserves an exception to in favor of the party desiring to have the same reviewed — was first considered. It is then observed: “When v^e come to examine the matters which are deemed excepted to it will be seen that there are two kinds — those orders, decrees, and rulings which appear upon the face of the pleadings; and the other is of that class where the decision, order, or ruling is based upon evidence dehors the pleadings.” And again: “ The mere fact that the law has reserved an exception will not avail a party any more than if he had not excepted, unless the grounds and reasons, with so much of the evidence as is necessary to explain the point, be embodied in a bill of exceptions properly settled and signed, as is required by the Code of Civil Procedure. .... We have two lines of authorities .... founded upon the distinction above stated, perfectly in accord with the strict letter of the statute, and in conformity with the California authorities on the same subject. The second paragraph of section 306 of the Code of Civil Procedure defines what shall constitute the judgment roll, specifying the summons, pleadings, verdict, or findings of the court, commissioner, or referee, all bills of exceptions taken and filed in said action, and copies of orders sustaining or overruling demurrers.” The Montana cases are then reviewed, and it is further said: “From these cases it appears that when the order, decision, ruling, or other matter deemed excepted to by law is apparent upon the face of the pleadings, no formal bill of exceptions is necessary in order to have the ruling reviewed on appeal based upon the judgment roll.”

The correct distinction upon this point of practice appears to be there expressed, and, in our view, that case goes far towards reconciling the two lines of Montana cases which are mentioned as being wholly at variance.

In the case at bar the judgment roll is brought here on appeal from the judgment, and we are asked to review an order striking out a portion of appellant’s answer. This order is deemed excepted to by the provisions of section 290 of the Code of Civil Procedure. It is provided by section 308 of the Code that the judgment roll shall include, among other papers, all pleadings and copies of orders sustaining or overruling demurrers. Now, a motion to strike out a portion of a pleading is in fact and in substance a demurrer to that portion attacked. This motion is used to trim off and cast out improper matter inserted in a pleading which contains proper averments, while the demurrer is made use of to root up and cast out the whole pleading at which it is directed. (Bliss on Code Pleading [2d ed.], § 423.) Such a motion being of the nature of a demurrer, which is part of the judgment roll, and the order sustaining the same being deemed excepted to, it is held reviewable on appeal from the judgment. In the case of Dodson v. Nevitt, 5 Mont. 518, a motion was made to strike out a counter-claim set up in the answer, and sustained. This proceeding was held ■ reviewable on an appeal from the judgment, on the ground that such motion was in the nature of a demurrer.

Was the action of the court in striking out said paragraphs 4 and 5 erroneous? As to paragraph No. 4, we unhesitatingly deem it sham, and without force as a defense. The language of the clause in the bill of exchange as to attorney’s fees is: “The parties hereto agree to pay all attorney’s fees in case of suit on this paper.” Appellant reasons that this is a promise of a certain sum upon the happening of a contingency, and until that contingency happens, and the attorney’s fee is earned, by prosecuting the action to judgment, there is nothing to pay, and that such fee cannot be recovered in the same action. It seems to us that the contingency for the employment of an attorney arose when default was made in the payment of said bill, at the time and place of payment expressed therein; and that the attorney’s fee, if lawful to be charged, was earned when judgment was obtained, and was proper to be allowed therein. It was incidental to the enforcement of said debt by suit, and was a proper part of the collection to be made in the same suit, if lawful at all. ,

Paragraph No. 5 of the answer is an attempt to plead a statute of the State of Kentucky, and also, as we are informed by appellant’s counsel, the construction of such statute by the courts of that State. Does that paragraph accomplish the purpose intended? It is a rule of the law relating to contracts, with but few exceptions, not applicable in this case, that, if a contract is void by reason of the laws of the place where the same is made and is performable, the same rule will be applied by the courts of another State where such contract is sought to be enforced, although such contract is not obnoxious to the laws of the latter jurisdiction. (2 Parsons on Contracts, 582; 2 Parsons on Notes and Bills, 317; Story on Bills, § 129; 1 Story on Contracts, § 802; Bishop on Contracts [enlarged ed.], § 1390.)

But in order to have such foreign law applied in another jurisdiction it must be brought to the attention of the court by setting out so much thereof as is applicable, and proving the same. This is the rule at common law (1 Chitty on Pleading, 239); and it does not appear to have been changed by the Codes. (Bliss on Code Pleading, 183, 184, 304.) The case of Throop v. Hatch, 3 Abb. Pr. 23, being directly in point, and the language so appropriate to this subject, we quote a few observations therefrom. The court, by Allen, J., says: “If the plaintiff is driven to the statute laws of the States of Ohio and Michigan to maintain this action, and bound to show that by the statutes of those States the trusts which he seeks to enforce are valid, he should have set out, at least substantially, the statutes upon which he relies. The laws themselves are to be averred and proved in the same manner as other facts, and their existence is to be proved by copies of the statutes, properly exemplified, as other documents are. The averment that the trusts are, by the laws of the States in which the lands are situated, valid and subsisting trusts, is therefore nothing more than an averment of the conclusion of the pleader, based (1) upon his knowledge of the existence of certain statutes; and (2) upon his construction of those statutes.” The following cases hold to the same effect: Phinney v. Phinney, 17 How. Pr. 197; Carey v. Cincinnati etc. R. R. Co. 5 Iowa, 357; Devoss v. Gray, 22 Ohio St. 159; Swank v. Hufnagle, 111 Ind. 453; Central Trust Co. v. Burton, 74 Wis. 329; Sells v. Haggard, 21 Neb. 357; McLeod v. Conn. etc. R. R. Co. 58 Vt. 727.) In the case at bar the pleader alleged that by the statute of Kentucky two dollars and fifty cents only is allowed as a fee to an attorney in such a case, and “that a contract for a greater sum as attorneys’ fees is by the laws of said State of Kentucky illegal and void.” This is an allegation of the pleader’s conclusion as to what the statute of Kentucky provides in this respect, but what that law is in terms is not set forth. The court, therefore, properly granted the motion to eliminate from the answer that averment. And the party, having failed to avail himself of the opportunity offered by the court to amend his pleading, has lost the benefit of the provision of the law of Kentucky (if there is such a law) applicable to the bill of exchange, which it appears was made there, and was by its terms payable there.

Independently of the question as to what the law of Kentucky is, and its effect upon the stipulation in said bill for the payment of attorney’s fee, appellant contends that said provision ought to be held invalid here, on the ground that such a stipulation in a contract is obnoxious to sound public policy, and in support of this position cites cases from certain States, and also the case of Merchants’ Nat. Bank v. Sevier, 14 Fed. Rep. 662, decided in the United States District Court for the eastern district of Arkansas, by Judge Caldwell, and concurred in by McCrary, J. Respondent meets this proposition by the citation of a line of cases from the courts of last resort in other States of the Union, and also finds support for his side of the proposition in the Federal Courts, in the case of Wilson S. M. Co. v. Moreno, 7 Fed. Rep. 806, decided by the Circuit Court for the district of Oregon, per Deady, J.; and also the case of Howestein v. Barnes, decided in United States Circuit Court, Kansas district, in 1879, per Foster, J., cited and commented on in note to Witherspoon v. Musselman, 29 Am. Rep. 406; also, the case of British Bank v. Ellis, 6 Sawy. 96, decided by Judge Deady in the Circuit Court, district of Oregon. We are also cited to 1 Randolph on Commercial Paper, § 205; 1 Daniel on Negotiable Instruments, § 62; the able notes by Mr. Hamilton, appended to the case of Merchants’ Nat. Bank v. Sevier, supra; and also the valuable note by Mr. Brown, reporter, appended to the case of Witherspoon v. Musselman, 29 Am. Rep. 406. We deem it unnecessary to cite the cases which can can be collected in support of the different views of this subject, because this has been ably done by the commentators, editors, and annotators referred to, whose works are readily accessible to those desiring to investigate the subject. It will be seen by a study of the cases that during the past twenty years a vigorous examination of this interesting question relating to commercial law has been going on in the courts of this country, which has resulted in no harmony of conclusions. The subject has been so critically and thoroughly treated from every point of view there remains very little original to be said thereon.

In the fourth edition of Daniel on Negotiable Instruments, published this year, the author divides the cases upon this subject into four classes, as follows: First, those which sustain the validity of the stipulation and the negotiability of the instrument. The second class of cases enforces the stipulation, but denies the negotiability of the instrument. The third class maintains the negotiability of the instrument, but denies validity to the stipulation, because, as those cases hold, it amounts to a penalty, tends to encourage litigation, is oppressive to debtors, and is against the policy of the law, and therefore void. The fourth class of cases holds that the stipulation renders the transaction usurious, and subjects the instrument to the operation of the statutes against usury.

Under each of these heads a group of cases will be found noted by the author.

We will briefly refer to the grounds upon which the stipulation in the bill before us would, under any group of such decisions, be held void, or held to otherwise affect the instrument as negotiable paper; and herein we commence with the fourth class, and follow in order back to the first, where it would be held valid, and in no way vitiate the character of the obligation as a negotiable instrument.

The fourth class treats the stipulation as a condition which renders the transaction usurious. While in this State there is at present no law which would be infringed on that particular ground, we do not subscribe to the reasoning whereby it is assumed that the stipulation is a device to evade the law against usurious interest. We are inclined. rather to adopt the reasoning of Judge Deady upon this point. He says: “The ruling that such stipulation makes the note usurious is founded upon the unauthorized assumption of fact that the sum agreed to be paid as an attorney’s fee in case the note is not paid at maturity is not what it purports to be, but illegal interest in the disguise thereof. Of course, where it appears that such is the real nature of the transaction, it should be treated accordingly. But the fact cannot be assumed, any more than that a like sum of the alleged principal is illegal interest in disguise. Accordingly, the tendency of the decisions hostile to this stipulation is to leave these untenable grounds, and hold it void upon the ground that it is a convenient device for usury, and tends to the oppression of the debtor.”

In the case at bar the stipulation is to pay attorney’s fees in the event of suit “ on this paper,” and from that point of view we are considering the objection that a court where usury laws prevail might assume that the provision was a device to evade such laws. Now, how would a creditor obtain, through such stipulation, a greater sum for the use of money than the law permits? The debtor in such a case may pay the amount of the principal and the lawful interest, and then the stipulation would be null, for no suit could be maintained on the obligation, and of course no sum collected from the debtor by way of attorney’s fee. But, in order to carry out the scheme to evade the law against usury, and enable the holder of the paper to collect more than the law allows for the use of money, the debtor must collude against his own interest in a case where he is in no way bound so to do, and default in the payment of the obligation, so as to give effect to the stipulation for attorney’s fees, and suffer such fees and other costs of suit to be enforced against him. Moreover, the creditor, in order to profit from this proceeding, must obtain from the attorney a portion of the fee allotted to him for his services, at the end of the suit; and, where the stipulation is such that reasonable compensation only is allowable, this method to avoid the law against usury involves the further proposition that the attorney will divide the reasonable fee allowed for his services with the would-be usurer. If that would be the practical working of this method to evade the laws against usury, the assumption that the stipulation is made for that purpose, or could be used for that purpose, involves the assumption that human nature is so changed that men will connive against their own interests, and aid and abet the perpetration of wrongs against themselves, without the slightest coercion, and voluntarily use the law which was made for their protection to work to their injury. It has been a maxim sanctioned by the experience of men from olden time that the presumption is that when a man acts voluntarily he will not act against what he knows to be his own interest. If the stipulation was for a certain sum or per centum for attorney’s fees, which was grossly out of proportion to the value of the services, it might well be looked upon with suspicion in connection with laws forbidding usurious charges for loan of money. But where a reasonable attorney’s fee is provided for, dependent on the event of suit for collection of the debt, and such fee is allowed for such services actually performed, where judgment is recovered, we cannot perceive how the usurer could profit by it. So in cases, where the stipulation is that the debtor will pay expenses of collection, without making it dependent on the event of a suit, the whole proposition is changed. Under such a condition demands might be put forth which a court might look upon as incompatible with the provisions of law against usury. But as remarked by Judge Deady, is it not an unauthorized assumption for a court to presume that the stipulation is made to evade the law against usury, without any showing to that effect? As he says, it would be as proper to presume that part of the principal is usury in disguise, without any showing to that effect. (Wilson S. M. Co. v. Moreno, supra.)

The third class of cases on this subject as classified by Mr. Daniel maintains the negotiability of the instrument, but holds that the stipulation is penal and void. This group of cases is closely allied to those cited under the fourth class, and the reasons affirmed in both are very much alike, except that some cases of the third class do not proceed upon the ground that statutes against usury are infringed by the stipulation, but without the aid or supposed aid of statutes declare it void on the ground that it encourages litigation, is oppressive to the debtor, and is therefore against the policy of the law. These, with other considerations, were summarized in the case of Merchants’ Nat. Bank v. Sevier, supra, as ground for holding the stipulation, on general principles, without reference to statute, void. In considering the question from this point of view, it should be borne in mind that it is a stipulation of contract between parties which the court is asked to declare void, and, as one ground therefor, the obligor urges that it is oppressive. Now, courts of equity, even, do not declare a contract void merely because it is inexpedient or improvident. (2 Pomeroy’s Equity Jurisprudence, § 928.) Nor do we find this provision of the instrument bearing a likeness to those contracts which the law generally condemns as against public policy (Bishop on Contracts [enlarged ed.], §§ 467-549), unless it be considered champertous, and we have-not seen that view seriously urged.

If this stipulation could be referred to any class of contracts which have been held contrary to public policy by a long line of decisions, and fit to the principle carried out in such cases, there would be more support to that view. It is not against public policy nor against the spirit of the law in these times that attorneys should receive just and reasonable compensation for services. Nor is it in principle unlawful for one to contract with another to re-imburse the latter for a lawful expenditure caused by the default or wrong committed by the promisor. If the main obligation is valid, and the obligor can pay it, without question he should do so at maturity; and it would seem merely stubborn denial of another’s right to compel the obligee to go into court to enforce payment, and suffer the delay, inconvenience, and expense of such proceeding. Now, the parties have provided for this condition of things in part by a stipulation in the instrument that in such event, if the obligee is driven into court by the default of the obligor, the latter shall pay a reasonable attorney’s fee for the prosecution of the action. This has been held void as against public policy, because it is oppressive to the debtor. We cannot see on what principle it should be so held. In such a case,as just stated,the oppression is the other way — it proceeds from the party who has borrowed the other’s money or got his goods, and refuses to pay for the same when he is able so to do. But it may be said that, in the event the debtor’s circumstances are such that he cannot repay the debt when due, it would be oppressive to have judgment recorded against him for the amount and attorney’s fees. In such a case a judgment against one, which cannot be enforced, will be poor satisfaction for what the obligor received in consideration for the note; and in such case he may offer to confess judgment without action, at the maturity of the note, and then it is not at' all likely judgment would be given for attorneys’ fees, if that was shown.

It is not uncommon to allow reasonable attorney’s fees in case of foreclosure of mortgage. (See cases cited in note to Merchants’ Nat. Bank v. Sevier, supra, to which we add the case of Clark v. Nichols, 3 Mont. 372.) And such a condition does not appear to have received the attacks upon it which have been aimed at the same condition in a negotiable obligation without mortgage. It is hard to see why, viewed from the stand-point of public policy, the stipulation is not as obnoxious in one kind of an obligation as another. Besides, the mortgage is only collateral to the obligation to insure the payment thereof; and its enforcement is sometimes more oppressive to the debtor than a naked promise to pay, because the mortgage often takes property otherwise exempt from execution.

But will the stipulation encourage litigation? Viewed from one side it will not.- The debtor will not do anything to encourage the bringing of an action against himself, which involves his payment of a greater sum than would be called for without action. He will discourage that result, and to do so lie will see that his obligation is satisfied or extended. Is there-any real motive for the creditor to unduly hasten into court with his note or bill of exchange, simply because his debtor would be required to pay the attorney’s fee — a matter from which the creditor could personally gain nothing? Would he decline to grant reasonable extension to a solvent debtor, who was at the time unprepared to meet his obligation, and hurry into court for the sole purpose of wrenching from the debtor an attorney’s fee? We do not believe that experience shows that these results follow. The bill before us found its way into court several months after its maturity, and the complaint avers that the payees had often been requested to pay the same, and this is not denied.

We come now to the second class of cases, which enforces the stipulation, but denies negotiability to the instrument. (See cases cited under this head in 1 Daniel on Negotiable Instruments, § 62.)

It is already perceived that those opposed to the stipulation are much divided among themselves in their views of its effect. The cases in this second class proceed upon the ground that, although the stipulation is valid as a condition, it is a condition incompatible with the nature of negotiable instruments, because it introduces an element of uncertainty as to the amount to be called for thereon. It has been pointed out by the commentators cited supra that, where the stipulation for an attorney’s fee is dependent on the event of an action to enforce payment, the amount demandable at maturity is not at all affected thereby; and that, when suit is brought, and it is sought to enforce the stipulation along with the principal and interest of the note or bill, it is past due, and has ceased to be a negotiable instrument,, in the full meaning of that term. This is readily perceived by every jurist, and this suggestion seems to take away much of the force of the idea that the stipulation introduces an element of uncertainty into the instrument, which, as a negotiable instrument, it is unable to carry. In the case of Merchants’ Nat. Bank v. Sevier, supra, Judge Caldwell, in touching upon this view of the stipulation, says: “If a stipulation for an attorney’s fee can be upheld upon the ground that it is a valid agreement upon sufficient consideration for the payment of a liquidated sum, it is not perceived why a stipulation to pay the taxes of the payee, or his office rent, or the salary of his collector, or all of these and as many more as the genius of a rapacious creditor may devise, should not be upheld and enforced by the same mode of reasoning. Mr. Justice Sharswood, in Woods v. North, 84 Pa. St. 407; 24 Am. Rep. 201, following Chief Justice Gibson, characterizes such a provision as ‘ luggage,’ which negotiable paper is unable to carry, and pertinently inquires: ‘If this collateral agreement may be introduced with impunity, what may not be?’ In Daniel on Negotiable Instruments, 49, it is said this inquiry is answered by the assertion that such provisions facilitate rather than encumber the circulation of such instruments; they are not ‘ luggage,’ but ballast. Mr. Daniel’s assertion is in the teeth of many adjudged cases, among which are well-considered judgments of such eminent jurists as Chief Justice Gibson, Mr. Justice Sharswood, and Mr. Justice Cooley.” With great deference to these able jurists, for whose opinion we entertain profound respect, we think there is a difference between the stipulation for attorney’s fee in the event of suit and a stipulation to pay taxes, office rent, collector’s salary, horse hire, etc. The first stipulation depends upon the event of a suit after default of payment, and after the paper has ceased to be currently negotiable. While the paper is negotiable, and up to the very moment of instituting suit the amount demandable thereon is exact and certain. The other class of demands mentioned would be of a character which in their nature would render uncertain the sum to be demanded by the holder at maturity, and therefore an instrument containing such stipulations, by reason of the uncertainty of the sum to be called for at maturity, may well be held not to be a negotiable instrument. But no such stipulations are in the instrument before us, nor did the instrument sued on in the case last cited contain them.

We think, on the whole consideration, that the cases cited in the first class by Mr. Daniel, which sustain the validity of a stipulation for attorney’s fee in the event of a suit and the negotiability of the instrument, are the most consistent with the principles of law in general, and with those special rules governing negotiable instruments. And we approve the view of Judge Deady, in Wilson S. M. Co. v. Moreno, supra, that the attorney’s fee, under such stipulation, in the event of suit, is incidental thereto, in the nature of costs, and as such is just and proper; and that the stipulation should be such as to leave the question of the reasonableness of the demand for services actually rendered within the supervision and control of the court.

Judgment is affirmed, with costs.

Affirmed.

Blake, C. J., and De Witt, J., concur.