Case ID: ohio-st_85/html/0186-01.html
Source: Caselaw Access Project
Author: {"author": "Shauck, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Miller et al., Executors, v. Kyle et al.
    
      Stipulations in promissory notes — For attorney’s fees, void, whenI —Negotiability of note not destroyed — Sections 8106 and 8107, General Code.
    
    1. It is the settled law of this state that stipulations incorporated in promissory notes for the payment of attorney fees, if the principal and interest be not paid at maturity, are contrary to public policy and void.
    2. Sections 8106 and 8107 of the General Code do not give validity to such stipulations but provide only that they shall not destroy the negotiable character of instruments in which they are incorporated.
    (No. 12356 —
    Decided December 12, 1911.)
    Error to the Circuit Court of Franklin county.
    The plaintiffs in error were plaintiffs in the court of common pleas. Their suit was upon a note and mortgage for $15,000, for which sum with interest judgment was awarded them. In both the note and the mortgage there was a stipulation for the payment of attorney fees if the maker should default in the payment of the principal sum. The court though finding the default, and further finding that $550 would be a reasonable fee for the services of counsel for the plaintiffs toward the collection of the debt, refused to render judgment in any amount on account of such services. On petition in error the circuit court affirmed the judgment of the court of common pleas.
    
      Messrs. Crum, Raymund & Hedges, for plaintiffs in error.
    
      The determination of the questions before the court requires the consideration of the statute commonly known as -the Negotiable Instruments Code, see Bates’ Annotated Statutes, Chapter 2, and a construction of parts of Sections 3171, 3171a and possibly 3178c, Revised Statutes (Sections 8106 and 8300, General Code).
    The legal principles to be applied to the construction of the negotiable instruments code seem to us to be elementary. Our only excuse for calling the attention of this court to a few of the authorities is the- fact that the lower courts seem to have misconstrued, or ignored, some of the fundamental principles of construction. Probasco v. Raine, 50 Ohio St., 378; In re Will of Hathaway, 4 Ohio St., 385; Hough v. Mfg. Co., 66 Ohio St., 436; Johnson v. Life Assn. Co., 125 S. W. Rep., 1075; Senior v. Ratterman, 44 Ohio St., 674; Bridge Co. v. Bowman, 41 Ohio St., 52; Insurance Co. v. Talbot, 113 Ind., 373, 3 Am. St. Rep., 655; Redell v. Moores, 63 Neb., 219, 93 Am. St. Rep., 431; In re McCreight, 6 O. N. P., 480; 23 Am. & Eng. Ency. Law (1 ed.), 311: Pancoast v. Ruffin, 1 Ohio (pt. 2), 385; Harris v. State, 57 Ohio St., 94; Grocery Co. v. Armstrong, 8 O. C. C., 492; Sutherland on Statutory Construction (2 ed.), Secs. 254, 270, 271; Bartlett v. King, 12 Mass., 545.
    If a revision of the law of itself and without express words, operates to repeal former inconsistent statutes, it follows that such revision must render ineffective judicial decisions based upon or construing such repealed statutes.
    
      The authorities we have cited seem to us to establish the following propositions: first, the legislature has the right and power to declare what is public policy, and the courts have no right or power to nullify a statute on the ground that it is against natural justice or public policy; second, the language used in a statute must receive its usual and ordinary meaning, and courts have no power to restrict or enlarge its operation beyond the expressed meaning; third, where the words of a statute are clear and .unequivocal the courts will not under pretense of construction vary from the meaning of the words of the statute; fourth, in construing a statute effect must be given to every part; fifth, in construing a statute the courts will look to contemporaneous history; sixth, the courts will look to the title of an act as an aid in determining the purpose and intent of the legislature; seventh, a statute intended by the legislature to be a complete revision or code of the law upon any subject-matter will change any prior law or laws even without direct reference to such prior laws.
    Prior to the adoption of the negotiable instruments code each state had its own law of negotiable instruments made partly by statutory and partly by judicial determination. In no two states of the Union was the law of negotiable instruments exactly the same on all points.
    The law as enforced in the various jurisdictions probably varied more than in any other respect in the decisions in regard to provisions in promissory notes by which the maker obligated himself, upon default in payment at maturity, to pay exchange, costs of collection, or attorneys’ fees expended by the holder in enforcing payment.
    The confusion in the authorities is discussed in an elaborate note to the case of Kittermaster v. Brossard, 55 Am. St. Rep., 438.
    It cannot be doubted, in the light of the existing conditions, with which the law will presume the legislature was familiar, that the purpose and intent of the legislature was to enact a code which should be uniform with the laws of other states upon the same subject.
    But we have additional and, it seems to us conclusive, proof of the legislative intent in the title of the act, “An act to establish a law uniform with the laws of other states on negotiable instruments.” 95 O. L., 162.
    The negotiable instruments code and its effect upon the prior decisions has been considered and discussed in the case of Savings Bank Co. v. Pottery Co., 5 O. N. P., N. S., 73.
    The supreme court of Ohio, upon the same line of reasoning, arrived at the same conclusion in Rockfield v. Bank, 77 Ohio St., 311.
    This court has again applied the same principle of construction to the negotiable instruments act in the case of Richards v. Bank, 81 Ohio St., 348.
    Before the adoption of the code a stipulation in a note that the maker upon default will pay costs and attorney fees in collection was held by Ohio courts to be against public policy and therefore void. The plain words of the statute has changed the law and rendered such a stipulation valid. Bank v. Lumber Co., 102 Pac. Rep., 685; Mackintosh v. Gibbs, 74 Atl. Rep., 709; Bradley v. Hey-
      
      burn, 106 Pac. Rep., 171; Gibbs v. Guaraglia, 67 Atl. Rep., 81; Wirt v. Stubblefield, 17 App. Cas. D. C., 283; Richards v. Bank, 81 Ohio St., 348.
    The great majority of the decisions in which the application of the negotiable instruments law or code have been discussed have, it is true, arisen upon questions other than the attorneys’ fee clause. But in all these cases the courts have followed the course we ask the court to follow here, that is, that the law must be taken to mean what the words of the act say; and that where the act, as so construed, differs from the law as formerly declared, the act must be construed as changing the law. Gibbs v. Guaraglia, 67 Atl. Rep., 81; Baumeister v. Kuntz, 53 Fla., 340; Toole v. Crafts, 193 Mass., 110; McLean v. Bryer, 24 R. I., 599; Klar v. Kostiuk, 119 N. Y. Supp., 684.
    The question before the court here' has been decided in at least two courts of last resort and in each the negotiable instruments act has been held to have changed the law and rendered the attorneys’ fees clause in promissory notes valid although held invalid prior to the act. Bank v. Miller, 120 N. W. Rep., 820; McCornick v. Swem, 102 Pac. Rep., 626.
    
      Messrs. Vorys, Sater, Seymour & Pease and Mr. Fred C. Rector, for defendants.
    This action is based upon the provision which is contained in the note, and which is also contained in the mortgage, which recites that the signer of the note and mortgage will pay the costs of collection and an attorney’s fee in case payment shall not be made at maturity.
    
      The policy of the state of Ohio from the beginning has been that such a provision in a note or mortgage is against public policy, and void. This policy was first announced in 1841, in the case of State v. Taylor, 10 Ohio, 378. Whatever was the reasoning which may be argued pro and con upon this question, the policy of the state of Ohio then and there became well settled. This doctrine is reaffirmed in the case of Shelton v. Gill, 11 Ohio, 417; again in the case of Martin v. Bank, 13 Ohio, 250. So well settled did this
    doctrine become that it remained uniformly unchallenged until 1893, when we find the case of Leavans v. Bank, 50 Ohio St., 591, where the parties specifically agreed in the mortgage that if the same was foreclosed, the court should fix the reasonable fee for the attorneys. So well settled Avas this doctrine deemed by the court that the case is disposed of by an opinion of one sentence, that such a provision “is against public policy and void.”
    By Section 3171a the intention is to specifically state what is a sum certain. It is provided that the sum payable is a sum certain, even though it, to-wit, the sum, is to be paid with costs of collection or an attorney’s fee. We cannot conceive that the legislature intended to go further than this. That is to say, that it simply declared such a note to be negotiable, notwithstanding the presence of that clause, leaving to the state to determine for itself whether or not that particular part of the note would be enforced.
    It has been the universal custom of the banks and merchants of the state of Ohio to use such notes, and we fail to find a single case where the court has held the presence of such a clause to affect the negotiability of the note. So far as Ohio, therefore, is concerned, this Section 3171a, like nearly all the rest of that code, is simply declaratory of the law as it already existed. .In other words, as we conceive this statute, it simply was intended to provide that the provisions in a note for costs of collection or attorneys’ fees, does not impair the negotiability of the instrument.
   Shauck, J.

Whether the courts below erred in adjudging that the plaintiffs were not entitled to recover the fees of their counsel on the stipulation of the maker to be liable therefor, if default should be made in payment of the principal and interest, is the only question presented by the record.

In this state it has been firmly established, and long and consistently maintained, that such contracts for the payment of counsel fees upon default in payment of a debt will not be enforced. In State for the Use of the Commissioners v. Taylor et al., 10 Ohio, 378, that conclusion was reached, and it was said that the enforcement of such contracts would result in evasions of the usury laws. The same conclusion was reached in. Shelton et al. v. Gill et al., 11 Ohio, 417; in Martin v. The Trustees, 13 Ohio, 250, and in Leavans v. Bank, 50 Ohio St., 591. In all of these cases the contracts were denounced as contrary to public policy. The conclusion is well sustained by the obvious tendency of such contracts to encourage suits.

Counsel for the plaintiffs admit the authority of these cases and their effect to establish the common law rule of this state as contrary to the view upon which they insist, but they assert that that rule has now been abrogated by Sections 8106 and 8107 of the General Code, which were enacted as Sections 3171 and 3171a of an act entitled “An act to establish a law uniform with the laws of other states on negotiable instruments,” passed April 17, 1902, volume 95 O. L., 162. The former of these sections prescribes the requisites for a negotiable instrument, among which requisites is, that the instrument “must contain an unconditional promise or order to pay a sum certain in money.” . The latter relates to the required certainty, and it provides that “the sum payable is a sum certain within the meaning of this chapter, although it is to be paid * * * 5. With costs of collection or an attorney’s fee in case payment shall not be made at maturity.” These sections will be at once recognized as a part of the negotiable instruments act recently enacted with but slight differences in many of the states. Counsel for the plaintiff assert with confidence, and no one seems to doubt, that the general assembly may by legislative enactment change the common law policy of the state with respect to a subject of the character of this. Proceeding with the contention that the legislature of this state has exercised that power by enacting the sections referred to, they call attention to the wide diversity of decisions in the different states respecting the validity of such stipulations for the payment' of attorney fees, and suggest that if there had been no intention to change the law of this state upon that subject the fiffh paragraph of Section 8107 would have been omitted. A diversity of decision to which that paragraph has obvious reference was not with respect to the validity of stipulations for the payment of attorney fees, but whether the insertion of such a stipulation in an instrument destroyed its negotiable character. One writer on the subject of the act says: “The courts in the various states have been nearly evenly divided on the question of the negotiability of instruments with such provisions.” Sell-over, pp. 59-60. We are not advised that any court of this state has ever been called upon to determine that question. But whether by the common law of the state, a stipulation for the payment of attorney fees destroyed the negotiable character of an instrument in which it was incorporated, or whether that question was undetermined, there was, in either case, an important purpose to be accomplished by the fifth paragraph of the section without assuming that it was intended to give validity to stipulations which were previously invalid. To preserve the negotiable character of an instrument notwithstanding the incorporation of a stipulation for the payment' of attorney fees .the language of the section is entirely appropriate. It contains no language indicative of an intention to change the rule of the common law with respect to the validity of the stipulation.

It is suggested that the general assembly must be presumed to know the common law of the state, and that every section of a statute should be regarded as evincing an intention to . change it. That would indeed be a novel rule of interpretation, and in the days of the codifier it would reach resiilts most confounding. Its impracticability' as a rule of interpretation will at once appear if an attempt be made to apply it to the act of which these two sections form a part. That act has been in force in this state for more than nine years, and to the present' time our attention has been called to but one respect in which- it changes the common law of' the state upon the subject of negotiable instruments. Quite different from the rule suggested is the rule which the wisdom of generations has established: That statutes in derogation of the common law shall not by construction receive a meaning beyond that of the terms which they employ. Certainly this does not mean that such statutes are to be construed in a spirit of hostility, but in its application to the present case it cannot mean less than that the legislative act, which contains language appropriate. only to saving the negotiable character of instruments which contain stipulations for the payment of attorney fees, should not be construed to impart validity to' such stipulations notwithstanding an established rule of the common law to the contrary. It seems to be conclusive of this subject that if, seeking uniformity upon a subject not suggested by the terms of the statute, we should adopt the view urged by counsel for the plaintiffs, the desired result would not be attained, for in some of the states there has been added to the clause which constitutes the fifth paragraph of Section 8107 in our statute, the express provision that it shall not be so construed as to give validity to stipulations for the payment of attorney fees.

Judgment affirmed.

Spear, C. J., Price, Johnson and Donahue, JJ., concur.