Bros v. Stewart

• Decision Date: 30 October 1928
• Docket Number: (No. 6277.)
• Parties: CAMPEN BROS, et al. v. STEWART et al.
• Court: West Virginia Supreme Court

145 S.E. 381

CAMPEN BROS, et al.

v.STEWART et al.

(No. 6277.)

Supreme Court of Appeals of West Virginia.

Oct. 30, 1928.

(Syllabus by the Court.)

Appeal from Circuit Court, Mercer County.

Suit by Campen Bros., a corporation, against Sue Payne Stewart and others. From the decree, certain defendants appeal. Reversed and remanded.

Arthur F. Kingdon, of Bluefield, for appellants.

John Roberts, of Bluefield, for appellees State-Planters' Bank & Trust Company, Harris, and Hyde.

MAXWELL, J Under date of May 1, 1924, at Bluefield, W Va., C. L. Counts executed a series of five notes, one of which was in the sum of $3,200, and the others in the sum of $200 each, payable to bearer at stated periods at the office of the State & City Bank & Trust Company, Richmond, Va., (now changed to State-Planters' Banking & Trust Company). These notes were secured by a deed of trust of even date executed by the maker and his wife on certain property situated at Bluefield. On the 29th day of May, 1925, Counts and wife conveyed the said property to the Virginia Realty & Loan Company, under the terms of which conveyance, as part of the consideration therefor, the grantee assumed and agreed to pay off and discharge the unpaid balance of the indebtedness secured by the said trust. On the 12th. day of May, 1926, the Virginia Realty & Loan Company conveyed the said property to Sue Payne Stewart, who, as part of the consideration for the conveyance of the said property to her, assumed and agreed to discharge the balance of the said indebtedness.

This is a creditors' suit to subject the real estate of Mrs. Stewart to the satisfaction of her debts. The appeal is by certain judgment creditors and by the judgment debtor from a decree allowing to the State-Planters' Banking & Trust Company of Richmond, Va., an attorney's fee of $200, in addition to the principal and interest of the large note aforesaid, and of one of the smaller ones, both being owned by the trust company and secured by the trust aforesaid, and having priority over the judgment liens. The notes contain this provision:

"If this debt be collected by an attorney, or by legal proceedings, an attorney's fee of ten per cent., besides the expenses incident upon the collection, shall be added to the amount due hereon and collectible as a part hereof."

The fee allowed by the court was not 10 per centum of the amount due at the time of the decree, but was fixed on a more conservative basis.

It is the settled law of this commonwealth that a stipulation in a promissory note for the payment of collection fees, or attorney's fees, in addition to the principal of the note and interest thereon, is against the policy of the law, and is therefore void and unenforceable. Raleigh County Bank v. Po-teet et al., 74 W. Va. 511, 82 S. E. 332, L. R. A. 1915D, 928, Ann. Cas. 1917D, 359. Whileit is true that decision was by a divided court, and there is diversity of opinion among the courts of last resort of the several states on this proposition, We are of opinion that the principle laid down by the majority of the court in the Poteet Case is consonant with reason and justice, and should not be disturbed. A forceful statement of the justification of this rule is found in the case of Tinsley v. Hoskins, 111 N. C. 340, 16 S. E. 325, 32 Am. St. Rep. 801, quoting from Merchants' Nat. Bank v. Sevier et al. (C. C.) 14 P. 662:

"Such a provision is a stipulation for a penalty or forfeiture, tends to the oppression of the debtor and to encourage litigation, is a cover for usury, is without any valid consideration to support it, contrary to public policy and void."

The note at bar having been executed in West Virginia and payable in Virginia, the precise question presented for determination is whether the provision of the note for attorney's fees should be declared void in accordance with the law of this jurisdiction, or whether, under the rule of comity, it should be given effect under the Virginia law which validates such provisions in promissory notes. Oglesby Co. et al. v. Bank of New York, 114 Va. 663, 77 S. E. 468; Colley v. Summers Parrott Hardware Co., 119 Va. 439, 89 S. E. 906, Ann. Cas. 19171), 375, and cases cited.

The fact that the notesi in question were secured by a deed of trust on property in this state in nowise determines the lex loci solutionis. The place of the payment of the note is determinative of the place of performance of the contract. Freeman's Bank v. Ruck-man, 16 Grat. (Va.) 125; 5 R. C. L. 964, and many cases cited. The trust was merely supplemental to the principal agreement and incident thereto. 5 R. C. L. 982; Bank v. Doherty, 42 Wash. 317, 84 P. 872, 4 L. R. A. (N. S.) 1191, and note, 114 Am. St. Rep. 123.

It is a recognized rule of law that contracts made in one jurisdiction to be executed in another are to be governed by the laws of the place of performance. Wick v. Dawson, 42 W. Va. 43, 24 S. E. 587: 1 Daniel, Negotiable Instruments, § 865: Andrews v. Pond et al., 13 Pet. 65, 10 L. Ed. 61. This rule, however, Is subject to an exception which is as well recognized as the rule itself; namely, that no state or nation is bound to recognize or enforce any contracts...