Foulke v. Hatfield Fair Grounds Bazaar, Inc.

• Decision Date: 12 September 1961
• Citation: 196 Pa.Super. 155,173 A.2d 703
• Parties: Kirk FOULKE, Kathryn R. Foulke v. HATFIELD FAIR GROUNDS BAZAAR, INC., Appellant.
• Court: Pennsylvania Superior Court

173 A.2d 703

196 Pa.Super. 155

Kirk FOULKE, Kathryn R. Foulke v. HATFIELD FAIR GROUNDS BAZAAR, INC., Appellant.

Superior Court of Pennsylvania.

September 12, 1961.

Calvin D. Spitler, Lebanon, for appellant.

Siegrist Koller & Siegrist, James R. Koller, Lebanon, for appellees.

Before ERVIN, Acting P. J., and WRIGHT WOODSIDE, WATKINS, MONTGOMERY and FLOOD, JJ.

WRIGHT, Judge.

This case arises as the result of a rule, granted upon petition of a mortgagor, to show cause why an execution issued upon a judgment entered on a mortgage bond should not be satisfied of record without the payment of any or all of the sum of $3,691.41, representing an attorney's commission of five percent for collection. The court below discharged the rule and this appeal by the mortgagor followed.

On May 26 1959, the Hatfield Fair Grounds Bazaar, Inc., hereinafter referred to as Hatfield, purchased from Kirk Foulke and his wife, Kathryn R. Foulke, a farm premises located in Heidelberg Township, Lebanon County, together with farm equipment, a large number of pigs, and other personal property which included a garbage disposal contract with the City of Reading. The total purchase price was $100,000, set up for accounting purpose as $80,000 for real estate and $20,000 for personal property. The sum of $29,000 was paid in cash, and a purchase-money mortgage was given to the Foulkes in the amount of $71,000 payable $35,000 on June 1, 1960, and $36,000 on June 1, 1961. The mortgage bore interest at the rate of three percent per annum and provided for an attorney's commission of five percent for collection in the event of default. ^[1]

During April, 1960, Hatfield commenced to dump unconsumed garbage on the mortgaged premises. Shortly thereafter, the Foulkes learned that the State Department of Health was complaining about the condition of the farm and about July 29, 1960, they received a letter from the Department pertaining to this condition. In July or August of 1960, Hatfield received an official notice from the Department of Health complaining that the unconsumed garbage was causing stream pollution. No action was taken by Hatfield to correct this situation.

Also during April, 1960, the Foulkes learned that Hatfield would default in its payment of principal and interest due on June 1, 1960. They then contacted their attorney and were in constant touch with him thereafter, consulting him either in the office or by telephone two or three times a week. On July 11, 1960, the attorney sent a letter to Hatfield demanding that payment of the amount due June 1, 1960, be made no later than July 19, 1960. However, Hatfield never paid or offered to pay any of the interest or principal. On August 5, 1960, a judgment in the amount of $7,800 was entered against Hatfield by a third party. On August 7, 1960, the Foulkes learned that arrangements had been made to remove all of the pigs from the mortgaged premises. Accordingly, on August 8, 1960, the Foulkes directed their attorney to enter judgment on the bond accompanying the mortgage, and to issue execution. By virtue of this writ, the Sheriff levied upon the mortgaged real estate, the farm equipment, and approximately 3000 pigs. At the sheriff's sale the Foulkes purchased most of the pigs and all of the farm machinery except one manure spreader. The proceeds of the sale amounted to $78,080. The costs on the writ were $479, and the debt and interest totaled $73,828.17. The Sheriff paid into court the attorney's commission of $3,691.41, and returned the balance of $81.42 to Hatfield. Following the granting of the rule to show cause, the Foulkes filed an answer. A hearing was held at which Hatfield's president (John K. Geyer) and Kirk Foulke testified. Upon discharging the rule, the lower court directed that the money paid into court by the Sheriff should be turned over to the Foulkes.

Hatfield's sole contention on this appeal is thus stated in its brief: 'The lower court erred in the exercise of its discretion in failing to reduce the attorney's commission for collection to a reasonable amount'. Relying primarily on Daly v. Maitland, 88 Pa. 384, Hatfield takes the position that the attorney's fee for collection must be limited to 'the legal expense of employing counsel to handle the execution and not any other expenses which the mortgagee may have incurred either before or after the sheriff's sale'. In the cited case the attorney's commission was reduced from five percent to two percent. Hatfield quotes a footnote in Ladner on Conveyancing in Pennsylvania, Third Edition (page 241) to the effect that on large mortgages the customary five percent attorney's commission is usually reduced to three, or even one percent. Also cited is the case of Providence Association v. Wrobel, 77 Montg. Co. Law Rep'r 53, in which an attorney's commission of $1,317.01 was reduced to $700.

In view of the fact that the attorney's commission for collection concededly belongs to the creditor rather than to the attorney ^[2] , we are not in accord with the restricted construction for which Hatfield contends. The history of the allowance of an attorney's commission in addition to the mortgage principal and interest reveals that our appellate courts have never limited the term to mean solely the actual fee to be paid the creditor's attorney. The early case of Huling v. Drexell, 7 Watts 126, recognized the principle that the attorney's commission covers extra incidental charges in the nature of costs and expenses made necessary because the borrower failed to meet the terms of his obligation. In McAllister's Appeal, 59 Pa. 204, Mr. Justice (later Chief Justice) Sharswood, who later wrote the opinion in Daly v. Maitland, supra, 88 Pa. 384, made the following statement:

'It ought to be considered as firmly settled by the former decisions of this court, that a creditor, in taking a security from his debtor, whether mortgage, judgment-bond or note, may lawfully include a stipulation that in the event of his being compelled to resort to legal proceedings to collect his debt, he shall be entitled to recover also with it the reasonable expenses to which he may be subjected, or a reasonable sum or commission on the amount to cover such expenses'.

Subsequently in Johnston v. Speer, 92 Pa. 227, Mr. Justice Gordon reaffirmed this proposition in the following language: 'If there is anything positively settled with reference to an agreement, in a bond, mortgage or note, for the payment of a fixed sum as attorney's commissions, it is that the sum so...