Case Name: E. Ford v. Vicksburg Waterworks Co.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1912-10
Citations: 102 Miss. 717
Docket Number: 
Parties: E. Ford v. Vicksburg Waterworks Co.
Judges: 
Reporter: Mississippi Reports
Volume: 102
Pages: 717–725

Head Matter:
E. Ford v. Vicksburg Waterworks Co.
[59 South. 880.]
1. Water Companies. Charges. Penalties. Forfeiture of interest. Code 1906, section 2678. XSsury.
A water company furnishing water to the public has no power to enforce a rule that, if the bills for water furnished during a month .are not paid by a certain day of the next month, ten per cent shall be added thereto, as the only damage which the law contemplates that a creditor will suffer by reason of the mere withholding of money due, is legal interest thereon.
2. Same.
The attempt of a water company to collect ten per cent damages upon overdue bills does not subject the company to a forfeiture of all interest under Code 1906, section 2678, as this, section of the Code covers only two classes of cases; first, where parties contract for a rate of interest in excess of that allowed by law; and second, where the creditor receives a rate.of interest greater than that allowed by law.
Appeal from the circuit court of Warren county,
Hon. H. C. Mounger, Judge.
Suit by the Vicksburg Waterworks Company against E. Ford.
The facts are fully stated in the opinion of the court.
Hudson & McKay, for appellant.
The first and principal error assigned and urged here is that the lower court erred in awarding and adjudging to the plaintiff below the admitted and confessed' penalty or usurious damages of ten per centum on each and all of the debit items or prices of the account sued on. It boldly but frankly appears undenied and confessed in the record that the rules, regulations and practice of the appellee water company are that, whenever a customer of the water company fails to pay a water bill within ten days after it becomes due, a penalty of ten per centum damages shall be and is added to the agreed price or rate or true compensation of and for the water furnished. This confessed penalty of ten per centum is boldly admitted to be no part of the price or compensation for the water furnished and it is further confessed that it is imposed without reference to time of delinquency in pajnment, except for the mentioned ten days of grace.
Now, we confidently take the position that this ten per centum damages, which makes up a valuable portion •of the judgment against the appellee, is an illegal penalty, pure and simple, or that it is unlawful and usurious damages imposed over and above and as no part of the'price or compensation for the water furnished. It is a bold, bald penalty and by that vei’y name, obnoxious to the law, called in the appellee’s rules and the testimony of the plaintiff as to the contract of the appellant. It is a heavy penalty inflicted for the mere failure to pay a sum of money by a given time. It is undeniably a contract for the simple payment of money. The law by express mandate measures the damages for withholding the payment of money by its statutory provision and these mandates are zealously guarded and enforced. This is not a case of cash and credit prices, but one of a usurious penalty. We deem our position to be so unquestionably sound as not to need the support of cited authorities; yet, for its confirmation, let us see how abundant and of one accord the authorities are. From 13 Cyc. 101, we quote: “Default in payment of money. 1. In general. As a general rule the doctrine of liquidated damages is not applicable to contracts for the payment of money alone; in such case the courts construe the damages as a penalty. In cases where the parties to a contract stipulate for the payment of a large sum of money as damages for the failure or nonpayment of a smaller sum at a given time, no matter what may be the language of the parties, the large sum agreed upon will be deemed a penalty, and not liquidated damages. 2. Usurious damages. Where liquidated damages are claimed for the nonpayment of a sum of money and such damages exceed the lawful rate of interest, they are necessarily in violation of the law of usury and will not be allowed.” From 2 Joyce on Damages, p. 1449, we quote: “A provision in a contract that in default of the payment of a certain sum of money, a designated sum much in excess of that shall become payable or be forfeited as liquidáted damages, will nevertheless be construed as a penalty. In such cases the measure of damages is generally the interest on the amount to be paid, which can be definitely ascertained, and to permit a sum named in excess of the debt to stand as liquidated damages would be to enable the parties to evade the usury laws.” From 19 Am. & Eng. Ency. of Law, p. 416, we quote: “In a contract for the payment of money,' a provision that in the event of default another and larger sum. shall be forfeited and paid as liquidated damages by the obliger to the obligee is generally hela, insofar as the latter sum exceeds legal interest, to be in the nature of a penalty and unenforceable.” From page 417 of the same, we quote: ‘ ‘ The rule in the case of contracts for the payment of money is not based on the doctrine that the stipulation for a larger sum on default was intended as. a penalty by the parties; the rule of liquidated damages is simply inapplicable to such contracts, irrespective of the intent of the parties or the language by which it is expressed. And the rule is the same although a creditor may suffer the most serious injury from the want of punctual payment for his debt, and though the payment of the principal and interest -may in fact afford a wholly inadequate compensation for his disappointment. The principle is that damages for the breach of contract for the payment are fixed and liquidated by law, and neither require nor are sucepti ble of liquidation by tbe parties, interest being tbe legal measure of damages in all sucb cases.” As specially applicable to the facts of tbe ease at bar we quote from page 418 of tbe same authority: “But where tbe lesser sum is in fact tbe debt, the larger is a penalty, and its payment will not be enforced, although the contract may provide in terms for tbe release of tbe latter upon payment of tbe former.” Just so in tbe instant case, the appellee testified in tbe court below that tbe real and actual price and compensation for tbe water furnished was forty-five cents per thousand gallons and that tbe added ten per centum damages was no part of tbe rate or price of tbe water, but was a penalty for tbe nonpayment of a sum of money. In 104 U. S. 771, C. J. Waite said: “It is sufficient to say that all damages for delay in tbe payment of money owing upon contracts are provided for in tbe allowance of interest, which is in tbe nature of damages for withholding money that is due. Tbe law assumes that interest is tbe measure of all sucb damages.” In support of each of tbe above quoted authorities may be found a long list of decisions from tbe leading courts. We refrain from citing’ them for we deem tbe proposition too well settled that only legal interest can be collected as damages for withholding tbe payment of money.
Our second assignment of error and contention is that tbe lower court erred in.awarding and adjudging to tbe plaintiff below tbe six per centum interest on tbe items sued on. This contention is made under and by virtue of tbe provisions of section 2678 of tbe Code of 1906 to tbe effect that where usurious damages or penalties taint a contract for tbe payment of money all interest shall be- forfeited. Tbe total amount that tbe plaintiff could by law recover of tbe defendant below was tbe sum of $142.66, instead of tbe much larger amount awarded by tbe lower court.
J. G. Bryson, for appellee.
Nowhere, as far as we have been able to find, has either the discount or penalty been treated as an interest charge or as discrimination.
In principle there can be no difference between, allowing a percentage discount and adding a per cent-age penalty. Neither is in the nature of interest. Interest is an allowance for the forbearance of a debt. It follows that there must be a fixed subsisting debt before an allowance can be made for its forbearance. Usury was defined in the case of Bass v. Patterson, 68 Miss. 310 to be “ the taking of more than the law allows for the forbearance of a debt.”
Tested by this definition the plaintiff’s charge does not fall within the condemnation of the law, because even with the fine of ten per cent added the total charge was only forty-nine and one-half cents per thousand gallons or within the price allowed by contract to the plaintiff for furnishing water.
We have not made an extensive review of the cases bearing upon the right to add a fine for the nonpayment of water rents when due we have found one case exactly in point, namely: Tacoma Hotel Go. v. Tacoma Land <& Water Go., 3 Wash. 316, 28 Am. St. Rep. 35'.
In that case the water company had a rule providing as follows:
“In case of nonpayment of rents within ten days after they are due, five per cent additional will be added, and .if the rents are not paid within fifteen days after they are due, the water will be shut off from the premises. ’ ’
The court sustained the rule and in speaking of it said: “We find as a matter of law that it is reasonable.’’
This court held in the case of Griffith v. Vicksburg Waterworks Go., 88 Miss. 371, that any charge made by the plaintiff company, at fifty cents per thousand gal- Ions, or under, was reasonable and lawful. Special Judge Edward Mates in rendering the opinion said:
“Granting that the company (plaintiff) is lawfully vested with authority to fix its rates, then such rates being so fixed by it within the maximum limit allowed by the charter, or allowed by the duly authorized ordinance, is by the courts presumed to be reasonable; and it is not permissible for each individual citizen, in every controversy that may arise, to have that question, once passed upon by the lawfully constituted public authorities charged with, power in the premises, reopened and litigated anew.”
We note that counsel for appellant in their brief say:
“This is not a case of cash and credit prices, but of a usurious penalty. We deem our position to be so unquestionably sound as not to need the support of cited authorities; yet, for it's confirmation, let us see how abundant and of one accord the authorities are.”
This statement is followed by quotations from Cyc. and the Ency. of Law and some other authorities .
Neither the texts quoted nor the case cited involve the right of a public service corporation to give a discount or to add damages for the nonpayment for services rendered when due. We have searched the books in vain to find any case or any text book or other authority holding that a public concern may not give a discount or demand damages for the nonpayment of dues when collectible.
Certainly none of the authorities cited by the learned counsel for the appellant support such contention.
We think the question involved is surely one of cash and credit sales. If the consumer fails to pay promptly he has ten per cent added to the cash price at which he could have settled.
This court held in the case of Bass v. Patterson, 68 Miss. 310, above referred to, that an agreement between a buyer and seller, that if the goods sold were not paid for within thirty days fifteen per cent should be added to the cash price, was a valid agreement and not tainted with usury.
We submit as a matter of law that that is exactly the point involved in the case at bar. If Ford had paid for his water on or before the tenth of the month he would liave received it at forty-five cents per thousand gallons, but failing to do so until after the tenth of the month he was charged a credit price of forty-nine and one-half cents. This price fell within the contract price permitted by the franchise and was therefore, under the Griffith case above referred to, presumed to be reasonable and being both legal and reasonable Fo.rd had no right to complain.
We submit further that this charge of damages is in the nature of a fine by á building and loan association for the nonpayment of dues and other charges when due.
This court in the case of Association v. Grant, 82 Miss. 424, sustained the- charging of fines by a building and loan association.
In that case the debtor claimed credit for fines and withdrawal fees chárged by the association against him. The chancellor held that the amount paid on the expense account and charges for fines and withdrawal fees should not be credited upon the principal debt. This court affirmed the case. Judge Whitfield, who rendered the opinion said:
“The chancellor correctly disallowed the credits claimed.”
We further cite upon this point, 4 Ency. of Law (2 Ed.), 1040:
“Fines may be defined as impositions upon members neglecting to pay to the association at the proper time any- money which is due to the latter from them. ’ ’
“Unless unreasonable in amount, they are viewed as liquidated damages and to be enforced by the courts, not as penalties against which equity will relieve.”
We submit that under the foregoing authorities it was allowable for the water company to demand and collect damages.

Opinion:
Smith, C. J.,
delivered the opinion of the court.
Appellee is a waterworks company, eng'aged in supplying water to the citizens of the city of Vicksburg, and one of the rules adopted by it for the conduct of its business provides that all water bills are payable at the office of the company on the 1st day of the month following that in which the service is rendered and, if not paid on or before the tenth day thereafter, ten per cent of the amount thereof will be added thereto. Appellant being-in arrears in his account with appellee for water furnished him, this suit was instituted to enforce the payment thereof.
His complaint here is that the court below rendered a judgment for appellee, not only for the amount actually due it for water furnished him, but also added to this amount, in addition to legal interest thereon, ten per cent thereof, in accordance with appellee's rule herein-before referred to. This adding of ten per cent thereof to consumers' bills provided for by appellee's rule is no part of the money due it for water furnished, but is simply a penalty, arbitrarily imposed by it, either for the purpose of enforcing the prompt payment of consumers' bills, or to indemnify it for'any damage it may suffer by reason of these bills not being promptly paid. In either event, appellee's claim therefor should not have been allowed. It has not been empowered by law to im pose upon and collect from its debtors fines for not paying their accounts promptly, and the only damage which the law contemplates that a creditor will suffer by reason of the mere withholding of money due him is legal interest thereon. The measure of all such damages is legal interest. .
Appellant also claims that this attempt of appellee to collect this penalty constitutes a violation of section 2678 of the Code, and therefore it must forfeit all interest on the account. In this appellant is in error. The penalty of forfeiture imposed by this section of the Code covers only two classes of cases: First, where parties contract for a rate of interest in excess of that allowed by law; and, second, where the creditor receives a rate of interest greater than that allowed by law. The case at bar falls within neither of these classes. The right of appellee to impose and collect this penalty is not res adjudicate by reason of anything contained in the decree of the United States Court for the Western Division of the Southern District of Mississippi, rendered in the case of Mayor and Aldermen of the City of Vicksburg v. Vicksburg Waterworks Co., a copy of which appears as an exhibit to the testimony of the witness Crumpler. See 206 U. S. 496, 27 Sup. Ct. 762, 51 L. Ed. 1155.
The judgment of the court below is reversed, and judgment here for only the amount due appellee for water furnished, together with legal interest.
Reversed.