McKay v. Belknap Savings Bank

Mr. Justice Goddard

delivered the opinion of the court.

The assignments of error present, and counsel for appellant discuss, but two propositions: First, that the court erred in admitting the note in evidence without sufficient proof of its execution; second, that it erred in allowing interest upon the note at the rate of twelve per cent per annum from date, as therein stipulated.

In support of the first proposition it is contended by counsel for appellant that sec. 3612, Gen. Stat. (sec. 4787 Mills’ Ann. Stats.), which provides the manner of exhibiting claiips against an estate in the county court, and which, inter alia, provides that “ formal pleadings shall in no case be required; but the issue shall be formed, heard and determined in the same manner as in actions before justices of the peace ” governs upon the trial of a contest of this kind on appeal to the district court; and the same rules of evidence apply as upon the trial in the county court; and that the claimant must prove the claim by such evidence as would be required to establish a case in a justice’s court. If this be admitted, then it is clear that under the law governing the admission of written instruments in evidence in actions before a justice of the peace, the note was admissible without any proof of its execution in the first instance; it being provided in section 2649, Mills’ Ann. Stats, that:

• “ No party to any suit before a justice shall be permitted to deny his or her signature to any written instrument upon which suit shall be founded, * * * unless the said denial be under the oath of the party so denying the signature.”

However this may be, and if it also be conceded that the testimony of the witness Crippen was insufficient to prove *54 that the note was signed by McKay, the fact that he had paid interest on the note was prima facie sufficient proof of its execution by him, and obviated the necessity of further proof of the genuineness of the signature. 2 Daniels on Negotiable Instruments sec. 1220; Walter v. Trustees, etc., 12 Ill. 63 .

In support of the second objection it is strenuously insisted by counsel for appellant that the additional interest provided in case of a default in payment of the coupons or the principal note, is a penalty imposed for the purpose of enforcing prompt payment, and therefore unenforcible in this proceeding. On the other hand, counsel for appellee contend that the agreement to pay an increased rate of interest in case of such default is a contract to pay a higher rate of interest on a contingency, or a contract for liquidated damages ; and that such an agreement, not being in contravention of any statute, or affected by actual fraud, or such circumstances as warrant the inference of undue advantage, is enforcible both at law and in equity. We think the latter view is correct. Sec. 2253, Mills’ Ann. Stats., provides that, “ the parties to any bond, bill or promissory note, or other instrument of writing, may stipulate therein for the payment of a greater or higher rate of interest than eight per cent per annum, and any such stipulation may be enforced in any court of competent jurisdiction in the state.”

Parties are at liberty, therefore, in this state, to stipulate for such rate of interest as they may see fit; and consequently may make the rate dependent upon the happening of a contingency, if they so elect; and the parties to this note unquestionably had the right to stipulate that a larger rate should be paid upon the failure to pay a smaller one when due; and such stipulation may be enforced in any court of competent jurisdiction.

“ If the parties go to the extent of making the agreement in clear and explicit terms to pay a certain sum on the nonperformance of a covenant to pay a smaller sum, it is impossible to avoid giving effect to such contract.” Lynde v. Thompson, 2 Allen, 456 : Galsworthy v. Strutt, 1 Ex. 659; *55 Finger v. McCaughey, 114 Cal. 64 ; Wilkinson v. Daniels, 1 Greene (Iowa), 179.

The ease of Finger v. MoOaughey was an action to foreclose a mortgage given to secure a note which contained a clause respecting interest, as follows:

“ With interest from date at the rate of ten per cent per annum, provided this note is paid at maturity, but, if not paid at maturity, then it shall bear interest at the rate of twelve per cent per annum from its date until paid.”

The contention there, as here, was that “ the attempt to increase the rate of interest on breach, and to have such increase relate back to the date of the note, is a penalty.” The court said : “ We differ with appellant; in this state the rate of interest agreed upon in writing must be allowed according to the terms of the agreement until the entry of judgment (Civ. Code, sec. 1918) ; and it is competent for the parties to agree upon an increased rate contingent upon nonpayment of either principal or interest when due.”

There are numerous cases which hold that a promissory-note which provides that upon failure to pay the principal when due, interest shall be payable from date of note, is a good contract, and the interest is recoverable. Among them are the following: Gully v. Remy, 1 Blackf. (Ind.) 69; .Horner v. Hunt, 1 Blackf. (Ind.) 213; M'Nairy v. Bell, 1 Yerg. (Tenn.) 502; Parvin v Hoope, 1 Morris (Iowa), 387; Alexander v. Troutman, 1 Kelly (Ga.), 469; Horn v. Nash, 1 Cole (Iowa), 204; Hackenberry v. Shaw, 11 Ind. 392 ; Fish v. Anderson, 25 la. 28; Reeves v. Stipp, 91 Ill. 609 ; Daggett v. Pratt, 15 Mass. 177 ; Satterwhite v. M'Kie, Harper’s Law Rep. 397; Rumsey v. Matthews, 1 Bibb. (Ky.) 242; Rogers v. Sample, 33 Miss. 310 .

We think, therefore, that the court properly allowed interest at the increased rate. Counsel for appellant, for the first time in their closing brief raise the question that, both principal and coupons being payable in Concord, New Hampshire, the law regarding interest in that state must govern; and therefore that no higher rate than six per cent is allowable, *56 The law upon this proposition is stated by Beach on Modem Law of Contr. vol. 1, § 606, as follows:

“ When, at the place of contract, the rate of interest differs from that of the place of payment, the parties may stipulate for either rate, and the contract will govern, the parties having the right of election as to the law of which place their contract is to be governed.”

The doctrine of the text is supported by the authorities. This objection, therefore, is without merit. Our conclusion is that the judgment of the court below is correct, and must be affirmed, which is accordingly done.

Affirmed.