Raleigh County Bank v. Poteet

• Citation: 82 S.E. 332,74 W.Va. 511
• Decision Date: 16 June 1914
• Docket Number: 2346.
• Parties: RALEIGH COUNTY BANK v. POTEET ET AL.
• Court: Supreme Court of West Virginia

82 S.E. 332

74 W.Va. 511

RALEIGH COUNTY BANK v. POTEET ET AL.

No. 2346.

Supreme Court of Appeals of West Virginia.

June 16, 1914

Syllabus by the Court.

A stipulation in a negotiable promissory note for the payment of "five per cent. collection fees" on the principal thereof, and in addition thereto "$10.00 attorney fee in addition to the attorney's fee taxed or allowed by law," is, in this state, forbidden by the policy of the law and void and unenforceable.

Chapter 81 of the Acts of 1907, chapter 98 A (secs. 4172-4368) of the Code, known as the negotiable instruments law, does not legalize contracts expressly condemned and declared void by the statutes of this state, nor those forbidden by the policy of its laws.

Error to Circuit Court, Raleigh County.

Action by Raleigh County Bank against J. H. Poteet and others. Judgment for plaintiff, and defendants bring error. Reversed and entered.

Miller P., and Williams, J., dissenting.

File & File and H. E. Stansbury, all of Beckley, for plaintiffs in error.

J. E Summerfield, of Beckley, for defendant in error.

POFFENBARGER J.

In this action on a note, a tender of the amount conceded to be due was made after the institution of the action. Coming too late, it was wholly unavailing and futile, stopping neither interest nor costs, since we have no statute on the subject, modifying the common law. 28 Am. & Eng. Ency. 21; 38 Cyc. 147, 149--both citing numerous authorities.

Professing to be in debt, the writ claimed damages in the sum of $2,500 and failed to specify the amount of the debt; wherefore it varied from the declaration claiming $2,200 as the principal of a note, $110 as commission for collection thereof, and $10 as an attorney's fee in addition to the fee allowed by law. To cure this defect, the plaintiff amended the writ, with leave of the court and over an objection by the defendants. The amendment was properly allowed. Code, c. 125, § 15 (sec. 4769); Ryan v. Coal & Coke Co., 69 W.Va. 692, 73 S.E. 330; Barnes v. Grafton, 61 W.Va. 410, 56 S.E. 608.

The inclusion in the judgment of the stipulated commission of 5 per cent., $110, is the basis of the principal complaint. Such notes have not been in common use in this state, and the validity of such a stipulation has never been passed upon by this court. An inference of a concensus of opinion among the members of the legal profession against it naturally arises from the absence of notes of that kind in the commercial paper of the state. Had it been regarded as legal and valid, no doubt they would have been abundant here as they are in other states in which such an addition is deemed valid; and our reports would afford many decisions affirming their validity and defining their operation, as do those of the states in which they have been sustained.

As to the validity of the stipulation, the authorities in the various jurisdictions are in conflict. The following decisions uphold it: Shelton v. Aultman, 82 Ala. 315, 8 So. 232; Telford v. Garrels, 132 Ill. 550, 24 N.E. 573; Loan and L. Co. v. Klovdahl, 55 Minn. 341, 56 N.W. 1119; Peyser v. Cole, 11 Or. 39, 4 P. 520, 50 Am.Rep. 451; Imler v. Imler, 94 Pa. 372; Parham v. Pulliam, 5 Cold. (Tenn.) 497; Krause v. Pope, 78 Tex 478, 14 S.W. 616; McIntire v. Cagley, 37 Iowa 676; Siegel v. Drumm, 21 La. Ann. 8; McCornick v. Swem, 36 Utah 6, 102 P. 626, 20 Ann.Cas. 1368; Bank v. Gay, 114 Mo. 203, 21 S.W. 479; Morgan v. Kiser, 105 Ga. 104, 31 S.E. 45; Alexander v. McDow, 108 Cal. 25, 41 P. 24; Cloud v. Rivord, 6 Wash. 555, 34 P. 136; Rinker v. Lauer, 13 Idaho 163, 88 P. 1057.

In the following cases, it is denounced as a cover for usurious interest and a means of exacting the same or as a mere unenforceable penalty: Witherspoon v. Musselman, 14 Bush (Ky.) 214, 29 Am.Rep. 404; Ohio v. Taylor, 10 Ohio 378; Bullock v. Taylor, 39 Mich. 137, 33 Am.Rep. 356; Dow v. Updike, 11 Neb. 95, 7 N.W. 857; Tinsley v. Haskins, 111 N.C. 340, 16 S.E. 325, 32 Am.St.Rep. 801; Rixey, Trustee, v. Pearre Bros., 89 Va. 113, 15 S.E. 498; Boozer v. Anderson, 42 Ark. 167.

By this collation, which does not include all the cases, by any means, but enough to disclose the attitudes of the various courts of last resort, a decided preponderance in number favoring the validity of the stipulation appears. But, in some of the states, it is authorized by statute. How many deed not be ascertained. It is in Iowa for one. Notwithstanding the admitted preponderance, the solution of the question is one of reason as well as of authority and we are under no duty to yield to the mere force of numbers. Besides, the policy of this state, as disclosed by its statutes relating to costs and interest, and the concensus of legal opinion as revealed by a settled and long-continued course of conduct in business, must be considered.

Impartial writers of recognized ability, after having considered both classes of cases and the reasoning upon which they stand, have unhesitatingly given their approval to those decisions which condemn the stipulation and refuse to enforce it. Mr. Daniel, in his work on negotiable instruments, expresses himself thus:

"Unless there be some statute under which such stipulations are permissive, it certainly tends to the oppression of debtors to sanction their incorporation in commercial instruments; and they are therefore against the policy of the law and void."

Judge Caldwell, in Banks v. Sevier (C. C.) 14 F. 662, quotes from 14 Am. Law Rev. 858, as follows:

"It seems to us to be more consistent with public policy to consider all such agreements as absolutely void. They can readily be used to cover usurious agreements, and excessive exactions may be made under the guise of an attorney fee."

Judge Cooley, of Michigan, a great author as well as an able judge, expressed himself thus in Bullock v. Taylor, 39 Mich. 137, 33 Am.Rep. 356:

"A stipulation for such a penalty, we think, must be held void. It is opposed to the policy of our laws concerning attorneys' fees, and it is susceptible of being made the instrument of the most grevious wrong and oppression. It would be idle to limit interest to a certain rate, if under another name forfeitures may be imposed to an amount without limit. The provision in those notes is as much void as it would have been had it called the sum imposed by its true name of forfeiture or penalty. There is no consideration * * * that can support it."

This suggestion of lack of consideration prompts the inquiry as to what the borrower gets in exchange for his promise, and discloses the necessity of resort, on the part of courts in which the agreement is held valid, to the theory of indemnity. The agreement to pay costs and attorneys' fees is obviously not an agreement to pay for any service to be rendered to the promisor, the maker of the note, for such services are always rendered to and for the promisee, the payee of the note. It is a promise to pay for something done against the promisor and to his material injury. He derives no benefit from it. The detriment to the other party, occasioned by the default in payment, is the only circumstance that could possibly constitute consideration for the promise. In that case, the injury is deprivation of the use of the money and the compensation for that is fixed and limited by the statutes, allowing only the legal rate of interest and the legal costs, including the attorney's fee, prescribed by law. Our statutes limit the interest to 6 per cent., fix the costs in court, and prescribe the amount to be included as an attorney's fee. Nothing more can be obtained by force of the law. At the common law costs or expenses of recovering a debt were not allowed at all, and they were never allowed eo nomine. In actions for damages, some sort of compensation for trouble or expense was included in the verdict. 3 Bl. Com. 399; 4 Minor's Inst. 699; Wilkinson v. Hoke, 39 W.Va. 403, 19 S.E. 520; Roberts v. Paul, 50 W.Va. 531, 40 S.E. 470; West v. Ferguson, 16 Grat. (Va.) 270. Whether inability to obtain relief from this defect by contract may be inferred from the resort to the Legislature for enabling statutes, it is unnecessary to inquire. It suffices to say the Legislature passed laws dealing fully and comprehensively with the subject and presumptively made what was deemed an adequate provision, wherefore, under a well-settled rule of construction, it is not in the power of the courts, by their judgments, or private persons, by their contracts, to extend or broaden it. If it be conceded that there was common law on the subject, these statutes necessarily repealed it by implication. By them, the Parliament in England substituted a system of statutory law for the common law, as to costs, covering the whole subject and omitting any supposed right to recover them by virtue of a stipulation in the contract; and that statutory system, as revised and extended by our Legislature, still omits it, and has actually provided against it.

"Whenever a statute undertakes to provide for a specific matter or thing already covered by a common-law rule, omissions in its provisions of certain portions of the rule may be taken as indicative of a legislative intent to repeal or abrogate the same. And this, though in all other respects the statute and common law are in exact conformity." In re Lord & Polk Chem. Co., 7 Del. Ch. 248, 44 A. 775.

To the same general effect, see Com. v. Cooley, 10 Pick. (Mass.) 37; Pearce v. Atwood, 13 Mass. 324; Com. v. Dennis, 105 Mass. 162.

On this principle, the Supreme Court of the United States held that wager of law, if it ever existed in this country as a mode of trial, had been abolished. Childress v. Emory, 8 Wheat, 642, 5 L.Ed. 705. See, also, 8 Cyc. 376, citing numerous other cases. Having specified what may be recovered,...