proposition was assented to. The company afterwards insisted upon a modi:ijcation of the agreement so far as to make the amount of the loan $1,000 instead of $2,000; but it is, I think, clear from the proof that no loan of any amount would have been made if the respondent had refused to take the insurance and permit the premium ($285) to be retained in advance from the sum loaned. It is eq,ually clear that the respondent would have deolined to take the insurance but for the offer with it, and asa part of' the same transaction, of a loan. Indeed, it is manifest that the insurance was demanded as an additional consideration, alld more or less valuable, for the loan. This being tlw case, clearly, within the rule above stated, the complainant is entitled only to decree for balance due on the principal of the debt, and must pay the costs.
Co. v. MORENO and others.
August 18, 1879.)
(Oircuit Court, D. Oregon.
STIPm.ATIoN FOR AN ATTORNEY FEE.
A stipulation to pay a reasonable attorney fee to the plaintiff in case a promissory note or other contract is not performed according to its terms, and the party entitled to demand such performance is compelled to enforce it by law, is just and valid.
Motion for Judgment. Gyru8 Dolph, for plaintiff. Thomas N. Strong, for defendants. DEADY, D. J. On September 1,1877, the defendant Moreno, with four others as his sureties, executed and delivered a bond to the plaintiff in the penal sum of $1,000, conditioned for the payment of all indebtedness on the part of Moreno to the plaintiff; and on November 23, 1877, said Moreno, with two others as his sureties, executed and delivered another bond of the like amount and condition to the plaintiff. These actions are brought upon these two bonds to recover an amount alleged to be due from said Moreno for goods, wares,
WILSON SEWING MAOIDNE 00. V. MOBENO.
and sold and delivered to the plaintiff; and it is agreed that the amount due the plaintiff on such accoun.t is on promissory notes $741.74, and upon an open account $629.70; in all, the sum of $1,371.44.. Each bond contains a stipulation to the effect that in case suit is brought upon the same the obligors therein will pay, in addition to the penalty thereof, the sum of $100 fees." The plaintiff now moves for judgment upon the complaint tor admitted to be due, and for $100 in each action . as an attorney's fee therein. This latter part of the motion the defendant resists upon the ground that the provision in the bond for the payment of such fee, in addition to the penalty thereof, is void. It appears from the books that the question raised upon this motion is comparatively a new and vexed one. It has mostly arisen in actions upon promissory notes containing a stipulation for the payment of a fixed sum or percentage as an attorney fee to the plaintiff, in case an action is brought to collect the same. And the objection to the stipulation usually 'is that the amount which may be collected upon the note being thereby rendered uncertain, it IS ttnnegotiable, and not valid as against an indorser, or that· such stipulation makes it usurious, and therefore void in whole or in part. have gone further, and But in some few instances the held that such !L stipulation is absolutely void as contrary to the policy of the law, and tending to the oppression of the debtor. In Bullock v. Taylor, 7 Cent. L. J. 217, decided by the supreme court of Michigan in 1878, a stipulation in a note for the payment of a certain sum as an attorney fee Over and above all taxable costs, tn case the same was sued upon, was held void as opposed to the policy of the law upon the sub. ject of attorney fees, and susceptible of being made the instru.'. , ment of oppression. In Woods v. North, 84 Pa. St. 409, it was held that a similar stipulation in a note rendered the instrument nonnegotiable, and thereby relieved the indorser from liability thereon.
FEDEnA.L.. REPORTER ·
. In Witherspoon v. Musselman, 8 Cent. L. J.\4, decided by Kentucky court ·of appeals in 1878,according to the brief abstract in the Cent. L. J. supra, it was held that such a stipulation in a note was void because it tended to the oppression of the debtor and the encouragement of litigation. On the contrary, in Smith v. Silvers, 32 Ind. 321" it was held that a stipulation "whereby the debtor agrees to be liable for reasonable fees, in the event that his failure tppay the debt shall compel the creditor to resort to legal proceedings to collect his demand, is not only not usurious, but is so eminently just that there should be no hesitation in enforcing it." . IIi Wyant v. PottorJ, 37 Ind. 512, a stipulation in a note for a reasonable attorney fee was impliedly sustained, though it was held that there be proof of what is a reasonable . .. In Nickerson v. Shelden, 33 Ill. 372, it was held that Ii stipulation for an attorney fee did not the negotiability of tpe note, but the fee was not claimed in the action. In Clawson v. Munson, .55 Ill. 394, a stipulation in a mortgage to secure a note for an attorney fee. to be paid as part of the costs of collection was held valid-the court citing Dunn v. Rogers, 43 Ill. 260, in which a similar stipulation in a mortgage was upon the question of hardship said that the defendants had expressly provided in the mortgage for the consequences in default of payment, which they might have avoided "by paying the notes at maturity." In Gar v. Louisville Banking Co. 11 Bush, 189, it was held that a stipulation in a note for an attorney fee was not usurious, but an agreement to pay a penalty in default of prompt payment of the notes, and valid. In Howenstein v. Barnes, 9 Cent. L. J. 48, decided by the United States circuit court for the district of Kansas, it was held that a stipulation for an attorney fee is valid; that it did not affect the negotiability of the paper. The ruling that such a stipulation makes the amount payable upon the note uncertain, and it is therefore non-negotiaable, is extremely technical and I think unsound. The prin-
WILSON SEWING MA.CHINE CO. V. MORENO.
cipal and interest is the sum due upon the note at maturity, and by the payment thereof it will be fully satisfied. And it is only in case of default in such payment and after the note is overdue, and has therefore its character of negotiabil. ity, that the penalty or attorney fee can be claimed or col. in lected at all. In fact, the stipulation, although the note, is, strictly and properly speaking, no part of it, but a distinct contract, collateral thereto, as much as if it was written on a separate piece of paper. ruling that such stipulation makes the note usurious is founded upon the unauthorized assumption of fact that sum agreed to be paid as an attorney fee th'e note is not paid at maturity is not what it purports to be, but illegal interest In the' guise thereof. Of course, where it appears that such is real nature of the transaction it should be treated acpordingly. But the fact cannot be assumed a,ny more than that i'ike sum of the alleged principal is illegal interest in disguise. Accordingly, the tendency of the decisioils hostile to this stipUlation is to leave these untenable grounds, and hold it void upon the ground that it is a convenient device for usury and tends to the oppression of the debtor. And it may be admitted that this suggestion is not without force, particularly in cases where the amount provided is largely in excess of what such collection could ordinarily be made for. But a court assumes to make the law rather than declare it, when it pronounces such a contract void; not because it is prohibited or intrinsically wrong, but because it may be used as a cover for usury, and a means of oppressing the debtor. An agreement by a debtor to pay a reasonable attorney fee in case his creditor is compelled to incur the expense of an action to collect 'the debt, is only an agreement to so far re-imburse the creditor the loss which he may sustilin by re,asonof the debtor's failure to perform his contract to pay h'is debt. In justice and fairness it stands on as high ground as the right to recover damages for the non-performance of as to deliver grain or goods at a certain time any and place. If A. loans B. $1,000 for the period of one year for the sum
of $100, and by ,reason of the failure of A. to perform' his contract B. is put to the expense of paying an attorney $50 to collect the same by action, no reason can be given why A. should not make good this loss; and if so, why may he not agree to do so in advance?; As it is, the law compels A. to, repay the fees which B. is required to pay the officers of the Qourt in the prosecution of his action, including a nominal attorney fee of not more than $20. Rev. St. §§ 824, 983. The provision in section 824, 8upra, allowing the prevailing party to tax an attorney fee of from $5 to $20, is not in my judgment exclusive, but only applies in cases where the contract of the parties is silent on the subject. In such cases the law allows tb,e fee prescribed and no more. But this does not prohibit, the 'parties from contracting that a greater or less one shall be p!tid. A statute which simply provides that a plaintiff may recover interest on money overdue, at a cer· tain rate, does not preclude parties from agreeing that a differEmt rate may be recovered under like circumstances; and if the borrower and lender, in the absence of any statute to the contrary, may agree upon any rate of interest for the use or detention of the loan, it is not apparent why they may not agree upon the payment of an attorney fee in case tho latter is required to collect the same by law. But where the fee is sO large as to suggest that it is a mere device to a.ecure illegal interest sqme unconscionable advantage, the court should be slow to enforce the payment of it, alld ought probably, upon slight additional evidence to that effect,' to refuse to allow it, or reduce it to a reasonable sum. Borro)iVers and lenders seldom deal on equal terms, and the necessities of the former often constrain them to accede to terms and conditions which are oppressive, in the vain hope that they will be able to meet their engagements promptly, and thereby avoid the payment of the charges and penalties stipulated for in case of failure.' It would then be better if stipulations were not made for a fixed sum or percentage, but rather for such sums .as the court, under all the circumstances, might judge reasonable and right. In this way regard might be had to the nature and value of the
, :" '.,' ," ",I _'.
services aCtually by the attorney.' Where itlte' judgment is obtained without opposition oJ? the part'of the debtor, as is often the case, the fee should be lesa than where it is opposition. But after all' right Of obtained the parties, in the absence of any statute to the contrary, ,to contract for the payment of a reasonable attorney fee by the debtor, in case his creditot is put to the expense of collecting his debt by law, rests upontlle"saJ;lle ground as the right to make any other contract not prohibited by law or contra bonos
Assuming, then, what has not been questioned, and upon which I express no opinion, that $100 is no more than: a reaBonable fee in each of these cases, the stipullltion is both just and valid, and therefore ought to, be enforce,d. There' must be j udgment accordingly.
Go, Adm'r, etc., v.
Jus: and others.
(Circuit Oourt, D. Oregon. Murcb 18, 1881.)
1. SURETIES IN A1'l' UNDERTAKING FOR
AN ATTACHMENT""-LIABILITY 011'. The sureties in an undertaking for an under the Oregon Civil Code, f 144, in case the. plaintiff fails to obtain judgment in tbe action, are liable to tbedefendantfcir alrthe costs'and disbursements that may be adjudged 'to him, whether the latter are made in the action or upon the attachment.
John M. Gearin and Byron C. for plaintiff. John H. Woodward <t Charles H. WOOdward, for defendants.
DEADY, D. J. This actiol;'-, W(tS comlllenced in the circuit court for the county of Multnomah.' The defendants appeared and caused it to be removed' to this court. It is brought upon the undertaliing of the, defendants for an attachment given in the action of Ah Jim v. A1l. Kow, then the circuit court for the of Clatsop, in November, 1879. The complaint ,that in pursuance of said undertaking, and the affidavit of Ah Jim, a of attachment was issued in said action, upon which the prop-