Daly v. Maitland

• Decision Date: 17 March 1879
• Citation: 88 Pa. 384
• Court: Pennsylvania Supreme Court
• Parties: Daly <I>versus</I> Maitland.

88 Pa. 384

Daly versus Maitland.

Supreme Court of Pennsylvania.

January 16, 1879.

March 17, 1879.

January 16th 1879.

Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, WOODWARD, TRUNKEY, and STERRETT, JJ.

Error to the Court of Common Pleas, No. 2, of Philadelphia county: Of July Term 1878, No. 2 C. H. Gross and T. J. Barger, for plaintiffs in error.—The agreement of the mortgagor is to pay the five per cent. for a specific purpose, the compensation of counsel in the event of a suit, and only what is reasonable for that purpose should be allowed. Where the principal sum is large, as in this case, five per cent. is unreasonable. The amount fixed should be regarded as a penalty to secure the payment of a reasonable sum to be determined by a jury. The court evidently regarded the commissions in the nature of liquidated damages: Faulkner v. Wilson, 3 W. N. C. 339; Streeper v. Wilson 12 Wright 450. Woods v. North, 3 Norris 407, is directly in point.

J. Rodman Paul and A. Sidney Biddle, for defendant in error. —That these commissions are not a penalty, but in the name of liquidated damages is res adjudicata: Robinson v. Loomis, 1 P. F. Smith 78.

The result of reversing the judgment of the court below would be to destroy the value of the Affidavit of Defence Law as applied to mortgages; for it would always be in the defendant's power to insist that the jury should determine the amount of the attorney's commission for collection: Moller v. Ohse, 5 W. N. C. 510; Schmidt's Appeal, 1 Norris 524; Faulkner v. Wilson, supra.

Chief Justice SHARSWOOD delivered the opinion of the court, March 17th 1879.

In Huling v. Drexel, 7 Watts 126, it was decided by this court that a stipulation in a mortgage that in the event of the necessity of proceeding to recover the mortgage by suit, the mortgagee shall be entitled, in addition to the debt and interest, to damages for cost and expenses incident thereto, was not usurious, and might be enforced in the scire facias. In consequence of this decision, it has become common to insert a provision not only in mortgages, but notes and other instruments for the payment of money, that the creditor, in the event of being obliged to resort to a suit, shall recover a certain percentage as commissions to the attorney who is retained by him to collect the debt. This commission, it has been held, does not belong to the attorney, but to the creditor. It cannot be collected as costs, but must be included in the judgment: Mahoning County Bank's Appeal, 8 Casey 158; McAllister's Appeal, 9 P. F. Smith 204; Faulkner v. Wilson, 3 W. N. C. 339; Schmidt & Friday's Appeal, 1 Norris 524. In Robinson v. Loomis, 1 P. F. Smith 78, it was ruled that such commission was not a penalty, but an agreed compensation to the mortgagee for expenses incurred by the default of the mortgagor.

It is undoubtedly true that the parties to a contract may lawfully agree that the damages in case of a breach shall be liquidated at a certain amount. Equity will not relieve against such a contract, fairly entered into, unless it is evidently a penalty. This principle of liquidated damages is not applicable, however, to a contract for the loan of money — at least such stipulation is subject to the control of courts of equity. As in the days of Solomon, "the borrower is servant to the lender," and courts of equity, from the earliest period, have assumed the jurisdiction of relieving the borrower from unreasonable and oppressive stipulations, exacted from his necessities, altogether apart from the statutes against usury. Especially has this always been the case as to mortgages. Agreements embarrassing or restraining the equity of redemption have invariably been set aside. The stipulated commission for the attorney may be so far beyond the ordinary rate charged for such services as to require imperatively the interposition of the equitable powers of the court. Equity has always been a part of the law of Pennsylvania. In the administration of equitable principles, it is the court and not the jury who exercise the functions of the chancellor, even where the action is in the common-law form. The jury, like the same tribunal in an issue directed by the chancellor, decide disputed facts, but it is the court that must be satisfied and apply the equity on the facts found or undisputed. If they think an equitable title to relief not made out by the proofs, it is their duty so to direct the jury, and contra, if they think the equity has been established. These rules are so familiar and well settled that it would be a work of supererogation to cite the numerous cases which support them.

We think these principles apply to the questions raised upon this record. The lender of money on any species...