Boswell v. Big Vein Pocahontas Coal Co.

• Decision Date: 03 November 1914
• Citation: 217 F. 822
• Parties: BOSWELL et al. v. BIG VEIN POCAHONTAS COAL CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

217 F. 822

BOSWELL et al. v. BIG VEIN POCAHONTAS COAL CO. et al.

United States District Court, W.D. Virginia.

November 3, 1914

Keech Wright & Lord, of Baltimore, Md., and Geo. W. St. Clair, of Tazewell, Va., for complainants.

Jackson & Henson, of Roanoke, Va., and R. B. Tippett, of Baltimore Md., for Mrs. Browning.

McDOWELL District Judge.

By a deed dated March 12, 1909, Mrs. O. H. Browning, inter alia leased to one Boswell a tract of coal-bearing land lying near Pocahontas, in this district. In addition to certain royalties, the consideration for the lease was a so-called 'bonus' of $200,000. A part thereof was to be paid by April 1, 1909, and the balance was payable in three annual installments, due, respectively, in one, two, and three years. These installments were evidenced by notes, made at Pocahontas and payable there. The first of the notes, so far as is now material, reads as follows:

'$50,000.00.

Pocahontas, Va. April 1, 1909.

'One year after date I promise to pay to the order of Ollie H. Browning fifty thousand dollars, without offset, with interest from date at the rate of five per cent. per annum. For value received, negotiable and payable at First National Bank, Pocahontas, Va.

Thos. T. Boswell.'

The two remaining notes are identical with the foregoing, except as to the time for payment. In the lease the provision in respect to the notes reads:

'Payable on the respective days aforesaid, with interest at the rate of 5 per cent. per annum from date until paid.'

The notes were not paid, and a question has been made as to whether the sums thus in default bear interest at 5 per cent. until the maturity of the notes, until judgment, or until payment.

The legal rate of interest for the loan or forbearance of money in this state is 6 per cent. per annum. Code 1904, Sec. 2817. The questions here are to be decided in accordance with the local law. Ohio v. Frank, 103 U.S. 697, 698, 26 L.Ed. 531; Holden v. Trust Co., 100 U.S. 72, 74, 25 L.Ed. 567; Mass. Ass'n v. Miles, 137 U.S. 689, 691, 11 Sup.Ct. 234, 34 L.Ed. 834; New Orleans v. Warner, 175 U.S. 120, 147, 20 Sup.Ct. 44, 44 L.Ed. 96; Cromwell v. County, 96 U.S. 51, 61, 24 L.Ed. 681; Sherwood v. Moore (C.C.) 35 F. 109; Bolles v. Town (C.C.) 45 F. 168, 169; Bond v. John V. Farwell Co., 172 F. 58, 65, 96 C.C.A. 546.

Under the rule laid down in Cecil v. Hicks, 29 Grat. (70 Va.) 1, 6, 26 Am.Rep. 391, and in Evans v. Rice, 96 Va. 50, 56, 30 S.E. 463, the notes, if read without reference to the lease, are to be construed as meaning interest at 5 per cent. until payment. In the former case the bond read:

'Six months after date, we promise and bind ourselves * * * to pay to John F. Hicks, or order, the sum of $7,000, with interest at the rate of 12 per centum per annum from date.'

The opinion reads:

'It was as competent for these parties to agree upon 12 as upon 6 per centum per annum, as the rate of interest upon the debt until its payment; and we are of opinion that they did agree upon 12 and not upon 6 per centum per annum as the rate in this case. We think their contract ought to be construed precisely as if the words 'till paid' had been inserted therein after the words 'from date,' and that such was their obvious meaning.'

In Evans v. Rice, supra, the bond read: 'With interest at the rate of 8 per cent. per annum, payable annually. ' It was held that this rate prevailed until payment.

But, even if there were room for doubt as to the proper construction of the notes in the case at bar, the wording of the lease (the formal and fully expressed contract of the parties) removes, as it seems to me, all possibility of even a plausible contention that the contract is otherwise than for 5 per cent. per annum until payment.

It is further contended in behalf of Mrs. Browning that a decree rendered in this cause in January, 1912, directed the payment to her of the 'bonus,' and that, at least since the entry of that decree, the sum due her should bear interest at 6 per cent. That decree cannot be properly so construed. The clause relied upon reads:

' * * * It is further decreed that Ollie H. Browning * * * shall have and be entitled to a first and prior lien upon the lands * * * for the true and lawful balance remaining unpaid upon the bonus payment of $200,000 in said lease mentioned, * * * and all interest due and to become due thereon, the amount of such principal and interest, respectively, to be ascertained and reported by the master appointed in these proceedings.'

Notwithstanding the facts above set out, it is urgently contended that the debt should bear interest at 6 per cent., at least from the date of the judgment rendered in this cause on October 27, 1914. My own opinion is that the unquestionable contract right of the debtor to have the interest run at 5 per cent. until payment makes argument unnecessary. In Roberts v. Cocke, 28 Grat. (69 Va.) 207, 218, it is said:

'Wherever there is a contract, express or implied, for the payment of legal interest, the obligation of the contract extends as well to the payment of the interest as it does to the payment of the principal sum, and neither the courts nor the juries ever had the arbitrary power to dispense with the performance of such contract, either in whole or in part.'

In Strayer v. Long, 83 Va. 715, 722, 3 S.E. 372, 376, it is said:

'The next assignment of error is as to the allowance of 10 per centum interest on the Long debt. The contract is for 10 per centum per annum, which was a legal rate of interest in this state at that time, if expressly contracted for. But it is argued that in this case the court should reduce the rate of interest to 6 per centum from the time when the lands of the defendant were taken out of his control and put in the hands of a receiver of the court, thus depriving him of the means of paying the debt. * * * But he is bound by his contract as he made it, the same not appearing to be unlawful, nor otherwise invalid. The courts cannot make another contract for the parties.'

I think of no sound reason for ruling that, while a creditor is entitled to have a validly agreed upon rate, higher than the regular rate, prevail until payment, the debtor is not entitled to have a validly agreed upon rate, less than the regular rate, prevail to the time agreed upon. In either event we have a clear contract right, and I know of no principle of law which authorizes the courts to make a new contract for the parties. In 6 Va.Law Reg. 658, relied upon by counsel for Mrs. Browning, it is said:

'If a contract is made for interest at the lower rate 'until paid,' of course such express agreement would prevail.'

And it is at least doubtful if the editorial in 5 Va.Law.Reg. 113, was intended to present a different contention.

It should be added that there are at least two Virginia decisions which indicate that the foregoing has been the Virginia rule since a very early date. In Brooke v. Roane, 1 Call (5 Va.) 205 (1798), at a time when the statutory rate of interest in this state was 5 per cent., a judgment bearing interest at such rate was rendered against Brooke. When levy of execution thereon was made, the statutory rate of interest having been in the meantime increased to 6 per cent., Brooke executed a forthcoming bond. This bond was forfeited, and the judgment rendered on the forthcoming bond was for the debt, with interest at 6 per cent. until paid. The appellate court (page 206) reversed this judgment and directed the entry of judgment for the debt, 'with interest after the rate of 5 per cent. per annum, from the 18th day of July, 1797, till payment, and the costs. ' In Whitehorn v. Hines, 1 Munf. (15 Va.) 557, 589, Judge Fleming said:

'It seems to me, therefore, that an account ought to be taken, and that the legatees of John Glanton pay their ratable proportion of the money due, for hire of negroes, and on the sales of the land, with interest at 5 per centum per annum, on the latter from the death of William Howell to the time of payment.'

This case was also apparently decided on common-law principles. The bill was filed in July, 1800, to set aside a conveyance made in 1783.

However, for the sake of complete consideration, I shall discuss as briefly as may be section 3391, Code 1904, as it may be contended that this statute gives the court a discretion to make the debt bear 6 per cent., at least from judgment. From such study as I have made of this statute, and of the Virginia decisions rendered since the enactment of apparently its earliest prototype, I think that the statute gives no discretion, in cases where interest is allowed, as to the rate or the time to which interest runs, and that, at least in a case such as the one before us, there is no discretion whatever given by the statute. I am quite satisfied that this statute should be as implicitly followed by this court in a chancery case as in a civil common-law cause, if it applies at all. Holden v. Trust Co., supra, 100 U.S. 72, 74, 25 L.Ed. 567, in which it is said that 'the question is always one of local law,' was an equity cause. So, also, was New Orleans v. Warner, supra, 175 U.S. 120, 147, 20 Sup.Ct. 44, 55 (44 L.Ed. 96) in which it is said: '* * * If the local law be different, this court will follow it. ' See, also, Coltrane v. Blake (C.C.A.4th Cir.) 113 F. 785, 791, 51 C.C.A. 457, an equity case, in which the local law is held to govern, and Trust Co. v. Krumseig, 172 U.S. 351, 19 Sup.Ct. 179, 43 L.Ed. 474.

The statute in question reads as follows:

'In any suit in equity, or in an action founded on contract where no jury is impaneled, judgment or decree may be rendered for interest on the principal sum recovered, until such judgment be paid; and where there is a jury,...