Pyle v. Gentry , 127 Miss. 784 ( 1921 )

Smith, C. J.,

delivered the opinion of tbe court.

This is an appeal to settle the principles of the case from a decree overruling a demurrer and dissolving an injunction.

The bill of complaint filed by J. T. Gentry, H. H. Mc-Divitt, and Anna Leslie alleges, in substance, that Anna Leslie and her husband, now deceased, executed and delivered to J. T. Gentry their four promissory notes due and payable respectively as follows: The first for three hundred and fifteen dollars, due November 1, 1918; the second for two hundred ninety-two dollars and fifty cents, due November 1, 1914; the third for two hundred and seventy dollars, due November 1, 1915; and the fourth for two hundred forty-seven dollars and fifty cents, due November 1, 1916 — each bearing interest at the rate of 6 per cent, per annum after, maturity and secured by a deed of trust on certain land. The deed of trust is in the usual form, but contains this stipulation: “If the said Ed Leslie and wife failed to meet either of their said notes, they shall pay one hundred and fifty dollars rent.”

These notes were indorsed by Gentry to McDivitt and by McDivitt to Pyle. In December, 1916, the trustee in the deed of trust executed by the Leslies to secure the payment of these notes sold the land in accordance with the terms of the deed of trust and paid the proceeds thereof, amounting to three hundred ninety-eight dollars and ten cents, to Pyle, Avho, after crediting the same on the amount due on the notes, sued and recovered a judgment by default against Gentry and McDivitt in the circuit court of Pontotoc county for the balance due thereon, including interest. The bill further alleges, .in substance, that the defendants in the action at law filed several pleas to the declaration therein after the lapse of two terms of the court from the filing of the declaration, which pleas on motion of the plaintiff were ordered by the court to be stricken from the files; that the reason these pleas were not filed at the time required by law was that the parties were negotiating for a settlement of the controversy between them, and the attorneys representing them agreed that the pleas need not be filed at the return term, which agreement counsel for the defendants presumed would hold good until the negotiations were closed. The record in the action at law, including the evidence heard on the motion to strike the pleas from the files, was made an exhibit to the bill. The bill further alleges that one hundred and fifty dollars for each of the years 1914, 1915, and 1916, making a total of four hundred and fifty dollars, was paid by the Leslies to the appellant under the rent clause in the deed of trust, and that they were entitled to a credit therefor on the notes, and that the reason they did not avail themselves of the right to such a credit in the action at law was: First, they were misled by the agreement of counsel with reference to the filing of the pleas; and, second, that a plea setting forth their claim thereto would not have been entertained for the reason that their right to the credit was of such an equitable character as not -to be cognizable in a court of law.. Three pleas were filed or offered by the defendants in the action at law, but neither of them set up or referred to the payment or set-off here in question. The prayer of the bill is for an injunction against the sheriff and the appellant restraining them from proceeding with the execution of the judgment unless they shall credit thereon the four hundred and fifty dollars, herein before referred to, with interest thereon. On this bill a temporary injunction was issued, and the cause Avas heard on demurrer and motion to dissolve, both of which AArere overruled.

In answer to the appellees’ contention that their failure to plead the payment or set-off here in question in the suit at law was caused by the agreement of counsel herein before referred to, it will be sufficient to say that they made no attempt to file any such plea, for the pleas there filed or offered as herein before set forth relate to other matters entirely.

It does not clearly appear from the brief of counsel for the appellees on what ground they base their contention that any right that the appellees may have to a credit on the notes on which the judgment here in question was rendered of the four hundred and fifty dollars paid the appellant under the rent clause of the deed of trust could not have been availed of in the action at law if seasonably pleaded, and we are not aware of any reason why it could not have been.

Leaving out of view whether the designation of the one hundred and fifty dollars in this agreement as rent would have given, if valid, the holder of the notes a lien therefor on the crops growing on the land under the rule announced in Maynard v. Cocke, 71 Miss. 493, 15 So. 788, the payment thus provided for could have been intended only as liquidated damages or as a penalty. If as liquidated damages, the agreement is void, for the only damages allowed by law for the payment of money when due is legal interest thereon. Section 2678, Code of 1906 (section 2075, Hemingway’s Code) ; Hughes v. Fisher, Walk. 516; Building & Loan Ass’n v. McElveen, 100 Miss. 16, 56 So. 187. If it was intended as a penalty, the same result would follow, for the agreement could only be enforced to the extent of the actual damages sustained, to-wit, interest on the debt due.

It is true that the ancient common law strictly enforced conventional penalties, but since the enactment of St. 8 & 9, Wm. Ill, c. 11, the equitable doctrine restricting suitors in actions for penalties to the collection of the actual damages sustained has been accepted as the settled rule at law (17 Corpus Juris, 933; 1 Pomeroy’s Equity (3 Ed.), section 73; Sun Printing & Pub. Ass’n v. Moore, 183 U. S. 642, 22 Sup. Ct. 240, 46 L. Ed. 366), and has been uniformly adhered to by this court. It will thus be seen that whatever right the appellees may have had under the rent agreement was legal, and not equitable, from which it follows that, if the appellees had any right to set-off the payments made by the Leslies, though voluntarily, under the rent clause of the deed of trust, as to wbicb we express no opinion, it could have been availed of in the action at law.

One other contention of the appellees is that Anna Leslie is entitled to the relief here sought for the reason that she was not a party to the action at law, but that nevertheless she will be liable as one of the makers of the notes to reimburse Gentry and McDivitt for any amount they may be compelled to pay the appellant on the notes. As she was not a party to this judgment, she will, of course, not be bound thereby, and will be liable to Gentry and McDivitt for the amount only that was actually due the appellant on the notes.

Reversed and remanded.