Mason v. Luce

California Supreme Court Mar 10, 1897 No. L. A. No. 116Published

Before: Belcher

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Holding. The court held that a mortgage acceleration clause triggered by interest default is a penalty for the creditor's benefit, and that a stipulation for attorney's fees in a note is valid and may be included in a foreclosure action.

Issues

Whether the statute of limitations began to run upon the first default in interest payment or at the maturity of the note.
Whether a stipulation for attorney's fees in a promissory note is void.
Whether attorney's fees not secured by a mortgage may be recovered in a foreclosure action.

Disposition. affirmed

Quotations verified verbatim against the opinion

“the cause of action, within the true meaning of the statute, accrued at the expiration of the credit fixed by the note”

“by accepting the payment of the interest after default has been made, the creditor waives all benefit from the default”

Synopsis

Foreclosure of Mortgage — Statute of Limitations — Maturity of Note—Stipulation in Mortgage—Default in Interest—Penalty —Waiver.—The statute of limitations does not begin to run against the foreclosure of a mortgage until the maturity of the note secured thereby, notwithstanding a stipulation in the mortgage that if default be made in payment of the interest, or any part thereof, according to the tenor of the note, then the whole principal and interest shall become immediately due, and the mortgagee may proceed to foreclose and sell the mortgaged premises in the manner provided bylaw, such stipulation being in the nature of a penalty inserted for the benefit of the creditor, who waives all benefits from the default by accepting payment of interest after the default.

Id.—Stipulation in Note fob Attorney’s Fees—Personal Judgment.— A stipulation in a note secured by mortgage for the payment of five per cent of the amount due and unpaid, as attorney’s fees, renders the note non-negotiable, but is not invalid or void; and, where the mortgage only secures the principal and interest of the note, it is proper, in an action to foreclose the mortgage, to render a personal judgment against the mortgagor pursuant to the terms of the note for the attorney’s fees therein stipulated.

Belcher, C. The plaintiff commenced this action on January 29, 1895, to foreclose a mortgage executed by the defendants, M. A. Luce and Adelaide M. Luce, on February 18, 1890, to secure payment of their promissory note for $4,000, made on the same day, and due one year after date. The note bore interest at the rate of thirteen per cent per annum, payable quarterly, and, if not so paid, then to become part of the principal, and bear a like rate of interest. It also contained the following clause: “And we further agree that, in the event of suit being brought against us, then there shall be added to any judgment against us rendered in said suit, as counsel fees, an additional sum of five per centum, in like gold coin, upon the amount of the principal and interest thereof accrued at the time of the [235]entry of such judgment; or, if paid before judgment, and after action commenced, then on the amount at the date of payment.”

The mortgage stated that it was given to secure the payment of the principal and interest of the said promissory note, a copy of which was set out, and then contained the following clause: “And the mortgagor hereby covenants with the mortgagee that if default be made in the payment of the interest, or any part thereof, according to the tenor of said note, then the whole sum of principal and interest shall become immediately due, and the mortgagee may proceed with suit of foreclosure, and sell the mortgaged premises in the manner provided by law.”

The answer of defendants alleged: 1. That the provision in the note in regard to counsel fees “ was in the nature of a penalty imposed upon said defendants in case they should fail to pay the note when the same should become due,” and that five per cent was not a reasonable counsel fee, or any other sum over and above $50; and 2. It set up the provision above quoted from the mortgage, and alleged “ that on November 18, 1890, there was due and payable upon said note a quarter of a year’s interest, but that said defendants failed to pay the same at that time, and made default in the payment of the interest provided in said note and mortgage, and that the same thereupon became due.” It then alleged that the cause of action stated in the complaint was barred by the provisions of section 337 of the Code of Civil Procedure.

To the second defense set up in the answer the plaintiff interposed a general demurrer, and the same was sustained.

Subsequently the case came on for trial, and was submitted. The court found that all the allegations of the complaint were true, and all the denials and allegations of the answers were untrue; that there was due and owing to the plaintiff from the defendants the sum of $5,632.47 for principal and interest of the said promis

Mason v. Luce

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