Scottish-American Mortgage Co. v. Wilson

Foster, J. Had the agreement between the contracting parties stipulated for 12 per cent, interest on default of any covenant in the mortgage, commencing from the date of such default, and not relating back to the date of the contract, there could hardly be a doubt but it 312 would have been a valid contract, and not in the nature of a penalty. I can see no objection to parties entering into an agreement that on failure of payment or other covenant the whole debt shall become due at the election of the creditor, and shall then and thereafter draw a greater rate of interest. The master reports and the complainant asks for the increased rate of interest only from the time the mortgagee declared its election to make the whole debt due, which was some time after default by the mortgagor. Is this contract sufficient to sustain that claim, or must it stand or fall as a whole ? Assuming that so much of the contract as provides for computing the increased rate of interest from the date of the note until default is in the nature of a penalty, does it present a case materially different from a suit on a penal bond ? In such cases courts do not apply such a rule as the whole or nothing. The uniform rule is to remit the penalty, and give judgment for the amount actually and equitably due. Contracts for penalties on a failure to. perform agreements are not .necessarily and absolutely void in toto. They are not considered repugnant to public policy or good morals, although courts may consider it against good conscience to enforce them according to their terms. This mortgage provides that, in ease of default by the mortgagor in any of the covenants therein contained, the principal debt should draw interest at 12 per cent, per annum, instead of 7 per cent., to be computed from the date of the note until the money is actually paid. Of course, those periods of time cover and include the date from which this interest has been computed; i.e., from the time default was declared by the mortgagee. There are quite a number of reported cases which hold that a greater rate of interest may be contracted for, contingent on default, commencing from the date of the note, and it seems to me the weight oí authority in law, if not in equity, is to that effect. Satterwhite v. McKie, Harp. 397; Daggett v. Pratt, 15 Mass. 177; Horner v. Hunt, 1 Blackf. 213; Gully v. Remy, Id. 69; Rumsey v. Matthews, 1 Bibb. (Ky.) 242; Jasper Co. v. Tavis, 76 Mo. 13; Reeves v. Stipp, 91 Ill. 609; Per contra Waller v. Long, 6 Mumf. (Va.) 71; Tierman v. Hinman, 16 Ill. 400; Shiell v. McNitt, 9 Paige, 101. The exceptions to master’s report must be overruled; and it is so ordered.