Levens v. Briggs

StrahaN, C. J. Upon this appeal two questions were argued. The first was that the court erred in finding the amount due on said note and mortgage to he $4,130 instead of $3,531.23, and the second was that the court erred in allowing $400 or any sum as attorney fee. These questions will be separately considered. The only contention of the appellant on the first proposition is, that the court should not have computed interest upon interest after it annually became due and remained unpaid agreeably to the terms of the note. It was conceded upon the argument here that if the plaintiff was entitled to interest on the accrued interest after it became due and remained unpaid, then the amount of the decree is correct. On the other hand, it was conceded by the plaintiff’s counsel that if the plaintiff was not entitled to said interest on [337] the accrued interest after it became due, then the decree would have to be modified as claimed by appellant. In other words, the amount of interest upon overdue interest would have to be deducted from the amount found due by the lower court. The sole question, therefore, is whether or not it is lawful for parties to contract in the same writing evidencing the principal debt for interest upon interest after it shall become due and remain unpaid. The general trend and effect of all the earlier cases and authorities are against the validity of that part of such contract which attempts to provide for compounding the interest. Though not usurious, such contracts are said to be iniquitous, and will be enforced neither in courts of law nor equity. (Tyler on Usury, 241.) And Chancellor KENT said, in Van Bensehooten v. Lawson, 6 Johns. Ch. 313; 10 Am. Dec. 333, that an agreement made at the time of the original contract of loan, that interest shall begin and run upon the lawful interest from the period stipulated for its payment, is not valid. (Breckenridge v. Brooks, 2 Marsh. A. K. 335; 12 Am. Dec. 401; State v. Jackson, 1 Johns. Ch. 13; 7 Am. Dec. 471; 3 Rand. Com. Pap. § 1706; Bowman v. Neeley, Ill. May 11, 1891; 27 N. E. Rep. 758; Young v. Hill, 67 N. Y. 162; 23 Am. Rep. 99; Thayer v. Wilmington Mining Co. 105 Ill. 540; Stokely v. Thompson, 34 Pa. St. 210; Rose v. Bridgeport, 17 Conn. 243; Drury v. Wolfe, 134 Ill. 294; Perkins v. Coleman, 51 Miss. 298; Catlin v. Lyman, 16 Vt. 44.) On the other hand, a very respectable array of authorities holds the contrary rule. In Hale v. Hale, 1 Cold w. 233; 78 Am. Dec. 490, it was held that parties to a loan may lawfully agree when it is made, that if the interest be not paid at the time stipulated, it shall be treated as principal and bear interest. (Note to Calhoun v. Marshall, 34 Am. Rep. 101; Vaughan v. Kennan, 38 Ark. 114; Wood v. Whisler, 67 Iowa, 676; 5 Lawson’s R. & Rem. § 2443; Mueller v. McGregor, 28 Ohio St. 265; Bowen v. Barksdale, (S. C.) 11S. E. Rep. 640; Doig v. Barkley, 3 Rich. L. 125; 45 Am. Dec. 762; Talliaferro v. King’s Admr. 9 Dana, 331; 35 Am. Dec. 140; Bledsoe v. Nixon, 69 N. C. 89; 12 Am. Rep. 642; Pearce v. Hennessy, 10 R. I. 223; Peirce’s Exr. v. Rowe, 1 N. H. 179; Townsend v. Riley, 46 N. H. 300.) [338] There have been two cases in this court in which the question of compound interest was referred to. The first is Murray v. Oliver, 3 Or. 539; but the question in that case turned upon the construction of the statute of 1854. That statute expressly allowed interest to he compounded, but prohibited it oftener than once a year. In an action upon a note which provided for the payment of interest half-yearly, and to be compounded if not paid when due, the court held the contract severable, and enforced the note in all respects, except the interest was not compounded. Hathaway v. Meads, 11 Or. 66, was an action on a note given for interest upon interest after it had accrued and become due according to a previous agreement to pay it, and it was held that the claim to interest upon interest was regarded so far an equitable one that a note given for the payment of it would be sustained and enforced as founded upon a sufficient consideration. In the New England Security Co. v. Vader, 12 Saw. 62, it was held that a contract to pay interest on a coupon or interest note after maturity, would be enforced ; but the more stringent line of authorities upon the subject allow this as an exception. Looking at the policy of this state on the subject of usury and interest, as well as the general principles upon which the rule referred to is founded, we are led to follow the cases first cited in this opinion, and to hold that interest upon interest is not collectible when it is stipulated and provided for in the same instrument securing the principal debt. The remaining question is whether any attorney fee is collectible under this note. In Balfour v. Davis, 14 Or. 47, the parties contracted for a specified percentage in case of suit, and we refused to enforce it or to allow any attorney fee. Had the note provided for a reasonable attorney fee, to be ascertained by the court, as was done in Peyser v. Cole, 11 Or. 39, there could have been no legal objection; but where the parties stipulated for an oppressive and unconscionable amount, no court ought to enforce it; and because that method had grown into an oppressive abuse, and the [339] courts were being used to make it effectual, we thought best to announce the rule that no attorney fee would be allowed by the courts if the amount thereof be specified in the contract. The reasons are obvious. No one can know beforehand the value of legal services in enforcing collection until their extent is certainly known. If a stubborn defense were interposed, and the case should be carried to the highest court, certainly a somewhat more liberal amount ought to be paid than if the defendant made default. Besides, if it be conceded that the parties may specify the amount if it be reasonable, it is somewhat difficult on principle to say they shall not determine for themselves what is reasonable. This case falls within Balfour v. Davis, supra, and must be controlled by it. It therefore follows that there must be a foreclosure for the amount due upon the note and simple interest, and there will be no allowance for attorney fees. The decree appealed from will be modified according to this opinion.