Close v. Riddle

67 P. 932 | Or. | 1902

Mr. Justice Moore,

after stating the facts, delivered the opinion of the court.

1. It is contended by appellant’s counsel that the stipulation in the bond and mortgage for the payment of eight per cent, interest after the maturity of the debt is a penalty designed to secure the payment of a lesser rate of interest, and, this being so, it should not be enforced in equity, and that the court erred in decreeing the recovery of more than six per cent,., and cites in support of the principle insisted upon the case of Mason v. Callender, 2 Minn. 350 (72 Am. Dec. 102), in which it was held by the Supreme Court of Minnesota that an agreement to pay a greater sum on default in the payment of a lesser was a penalty, and not liquidated damages, and could not be recovered, and that this rule applies to a stipulation in a note providing for an increased rate of interest after maturity upon both principal and interest. While the decisions upon this subject are not uniform, we think the great preponderance of authority supports the rule that, where a higher rate of interest is expressly reserved to be paid after maturity, the rate so stipulated is recoverable if not usurious: 2 Edwards, Bills & N. § 1005; 3 Randolph, Com. Paper (2 ed.), § 1713. The editors of the American and English Encyclopaedia of Law [vol. XYI (2 ed.), p. 1049], in discussing this question, say: “By the weight of authority a stipulation for a higher rate of interest after maturity is valid and enforceable, provided the increased rate which it is sought to recover does not exceed the highest rate allowed by law; and, in the absence of a statute limiting the rate which may be contracted for, or where the rate provided for after maturity is not unlawful, a stipulation for a higher rate after maturity will generally be considered as a liquidation of the damages, rather than as a penalty for a breach. ’ ’ The statute of this state permits the recovery of ten per cent, interest per annum by express agreement of the parties (Hill’s Ann. Laws, .§ 3587); so that the stipulation in the bond and mortgage to pay eight per cent, interest per annum after maturity is not usurious. Interest is compensation for the use or forbearance of money, or for withholding from or depriving a party of money: 16 Am. & Eng. Ency. Law (2 ed.), 990.

Interest proper would seem to be the compensation agreed to be paid by the borrower to the lender for the use of money to be paid at a future day, while the compensation 'awarded by law for the forbearance or withholding money is denominated “damages,” the measure of which is established at a given rate. The statute prescribing the rate of compensation by way of damages is as follows: ‘ ‘ The rate of interest in this state shall be six per centum per annum, and no more, on all moneys after the same become due; on judgments and decrees for the payment of money; on money received to the use of another and retained beyond a reasonable time without the owner’s consent, express or implied, or on money due upon the settlement of matured accounts from the day the balance is ascertained”: Hill’s Ann. Laws, § 3587, as amended October 14, 1898 (Laws, 1898, p. 15). It will be observed that the statute employs the word “interest” instead of “damages,” but the term so selected cannot change the character of the compensation awarded; for after the breach of a contract interest is never recoverable except as damages: Seton v. Hoyt, 34 Or. 266 (55 Pac. 967, 43 L. R. A. 634, 75 Am. St. Rep. 641); Mason v. Callender, 2 Minn. 350 (72 Am. Dec. 102); Jourolmon v. Ewing, 80 Fed. 604 (26 C. C. A. 23); Brainard v. Jones, 18 N. Y. 35. In the ease at bar, the makers of the bond having neglected to pay the sum due thereon at maturity, damages necessarily resulted, which should be measured, in the absence of any stipulation to the contrary, by the rate specified in the bond as compensation for the use of the money prior to the breach of the contract: Hill’s Ann. Laws, § 3591. Such damages, however, are properly anticipated and adjusted by the parties, and, if the rate thus agreed to be paid for the use of money after maturity does not exceed the highest rate prescribed by law, the agreement, by the great weight of authority, is for liquidated damages, and not in the nature of a penalty, and, the parties having agreed upon the payment of a rate recoverable by express contract, no error was committed in assessing the damages so agreed upon.

2. It is maintained that the appellant was entitled to the remainder of the proceeds arising from a sale of the mortgaged premises after satisfying the sum found to be due the plaintiff, and hence an error was committed in decreeing that such remainder should be deposited in court subject to its further order. It will be remembered that Samuel Parmley and wife owned a part of said land in fee, subject to plaintiff’s mortgage, Avhieh was decreed to be sold first. If the sum realized from such sale was more than sufficient to satisfy plaintiff’s decree, no necessity would exist for a resort to the appellant’s land, and the remainder of the proceeds, if any, would belong to Parmley and his wife; but, if insufficient for that purpose, and the sale of appellant’s land became necessary, any sum that remained after paying plaintiff the amount of his decree would belong to the appellant. A sale of real property under a decree of foreclosure is conducted in the same manner as a sale thereof under an execution in an action: Hill’s Ann. Laws, § 417. Upon a return of the execution the sheriff shall pay the proceeds of the sale to the clerk, who shall then apply the same, or so much thereof as may be necessary, to the satisfaction of the judgment; and, if any of the proceeds then remain, the clerk shall pay the same to the judgment debtor or his representative: Hill’s Ann. Laws, § 296, subds. 3, 5. It is quite probable that, if the decree had been silent in respect to the payment of such remainder after the satisfaction of plaintiff’s demand, the clerk would have been authorized to pay the same to the party entitled thereto. It would undoubtedly have been better practice if the decree had designated the party to whom it should be paid; but, as the undertaking on appeal did not stay the enforcement of the decree, it is possible that a sale of the premises may have been made, and, if so,, and any remainder exists, the necessity of securing the court’s order therefor, as prescribed in the decree, if erroneous, is not, in our judgment, so prejudicial as to require a modification thereof.

There are other errors alleged, but we do not consider them of sufficient importance to require consideration, and hence the decree is affirmed. Affirmed.