Culbertson v. Lennon

Flandrau, J. By the Court Culberston loaned to Lennon $2,000 for six months at three per cent, per month; tbe interest for tbe six months was added to tbe principal, making $2,360, and a note was given for that amount payable in six months without interest, but with a clause that it should draw “ interest at tbe rate of five per cent per month after maturity until paid.” Tbe note was secured by mortgage on lands in Hennepin county. Tbe note not being paid, tbe Plaintiff foreclosed tbe mortgage, and on tbe 14th day of February, 1859, bid in tbe land at the sum of $3,668.30. Tbe Plaintiff computing bis note at five per cent, per month after maturity, claimed that at tbe date of tbe mortgage sale, there was due on it tbe sum of $4,897.00, which, after deducting tbe amount of bis bid, would leave a balance due him of $1,228.70. For this balance he brings this action. Tbe Defendant answers and admits everything stated in tbe complaint, save tbe amount due on tbe note, which be contests upon tbe ground that tbe clause for tbe payment of five per cent, per month after maturity is in tbe nature of a penalty to secure tbe payment of tbe principal, and cannot be recovered, and insists that there was due upon tbe note at tbe time of tbe [57] mortgage sale, only the face thereof, and seven per cent per annum after maturity to wit: the sum $2,608.26, deducting a payment of $60, which, he alleges to have been made. He then claims that the price bid at the sale by the Plaintiff was so much money had and received to the use of the Defendant, and being $1,060.04 more than sufficient to discharge the note according to the Defendant’s theory of computation, that amount remains in the hands of the Plaintiff as surplus money due the Defendant, and he asks j udgment for it. The case was tried by the Court, who sustained the Defendant’s theory, and rendered judgment in his favor for the sum claimed by him and interest. Erom this judgment the Plaintiff brings error. The Plaintiff makes a number of points in his brief, upon which he claims a reversal of the judgment, the decision of which we do not deem necessary under the view we take of the case. There are principles that defeat both the Plaintiff’s action, and the Defendant’s counter claim and upon these we will determine the matter. The action admits that the Plaintiff has received on the mortgage sale, the face of the note and a portion of the five per cent, per month that was stipulated to be paid after the maturity of the note, much greater in amount than seven per cent, per annum upon the face of the note from maturity to the commencement of the action, and seeks to enforce the collection of the balance of the five per cent, not paid. To this the Defendant answers that it is a penalty not recoverable. Had the Defendant stopped there, he would have defeated the Plaintiff’s recovery, under the principles laid down in the cases of Mason, Craig et al. vs. Calendar, Flint & Co., 2 Minn. R. 350, and Marston vs. Talcott decided at the December term of 1859. It was in the nature of a penalty and could not be enforced. The same defence would have obtained against the whole of the five per cent, clause if the Defendant had made it before the Plaintiff had collected it under his mortgage. He now for the first time objects to that recovery, and is too late. See Bidwell vs. Whitney, decided at this term. So much for the Plaintiff’s cause of action. The Defendant, however, is not content with defending him- ' self against any further recovery by the Plaintiff on the note, [58] but seeks to recover back by way of counter claim, the difference between the face of the note and seven per cent, per annum after maturity, and the sum bid by the Plaintiff at the mortgage sale. Any demand which can be recovered by way of set-off, or counter claim, can also be made the basis of an action. In other words, if the Defendant can maintain his counter claim against the Plaintiff, and obtain a judgment on it in this action, he could have also recovered it in an action brought by him against the present Plaintiff based on such demand. If, on the other hand, he could not have sustained an action upon it against the Plaintiff in this suit, it will not avail him anything here as a counter claim. This whole question was fully argued at the present term in the case of Ira Bidwell vs. Eliab Whitney, and we decided in that case, that where a party puts such a penal clause in a note, secures it by mortgage and power to sell on default, — suffers a foreclosure by advertisement to be made against him without objection, and the mortgagee purchases the land at the full amount, penalty and all, there is no possible view of the case that will authorize the mortgagor to recover back by an action at law, the sum bid beyond the principal claim and seven per cent, per annum. It is unnecessary to repeat the reasoning by which we sustained that decision, we adhere to it, and it disposes of the Defendant’s counter claim. He could not have maintained an action upon it against Culbertson, and he cannot recover upon it by way of counter claim. The judgment is reversed. Emmett, Chief Justice, dissents.