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Berrinkott vs. Traphagen and another, impleaded.

the pleadings and proofs and the findings of the circuit judge.

The court rendered the usual judgment of foreclosure and for the sale of the mortgaged premises, and the payment to the plaintiff, out of the proceeds of such sale, of the said sum of $464, with arrears of interest thereon, together with the interest subsequently accruing, and costs. This appeal is from such judgment.

B. J. Stevens, for appellants:

1. If the plaintiff had a right to declare the whole sum due on the bond and mortgage, such right should have been exercised at the time an installment became due, or immediately after. Hall v. Delaplaine, 5 Wis., 206. 2. The plaintiff, having notice that the defendants had purchased the equity of redemption on foreclosure of a second mortgage, should have served on them notice of his election to have the whole sum become due. 3. The principal sum was not made payable to the plaintiff, and not secured by the mortgage. She has only a life interest in the principal. If the court of equity would compel the purchasers of the equity of redemption to pay the principal sum, it should only be for the purpose of having the same invested, and the annual interest thereof paid to the plaintiff. 4. Equity will relieve against conditions subsequent, whenever compensation can be made. In this case interest would be full compensation; hence the judgment should have been only for the installments of interest due, and costs of suit up to the time of the offer to pay. Rogan v. Walker, 1 Wis., 527; 4 Kent's Com., 129. Penalties and forfeitures are not favored in the law, and equity will generally relieve from them when compensation can be made. Hagar v. Buck, 44 Vt., 285; Grigg v. Landis, 21 N. J. Eq., 494.

Vilas & Bryant, for respondent:

1. No exceptions to the finding were filed within the time prescribed by statute. This court will therefore only look into the case to see whether the pleadings and finding sustain

Berrinkott vs. Traphagen and another, impleaded.

the judgment. Wis. Imp. Co. v. Lyons, 30 Wis., 61; Blossom v. Ferguson, 13 id., 84; Geekie v. Wells, 37 id., 362; Haney v. Clark, 1 Pin., 301; Doty v. Strong, id., 313. 2. This case does not come within the rule that "equity will relieve against a forfeiture." It is of a class of contracts constantly enforced in equity. Basse v. Gallegger, 7 Wis., 442; Marine Bank v. Int. Bank, 9 id., 57; Schoonmaker v. Taylor, 14 id., 313; Rosseel v. Jarvis, 15 id., 571; Gulden v. O'Byrne, 7 Phila., 93; Schooley v. Romain, 31 Md., 574; Robinson v. Loomis, 51 Pa. St., 78; Valentine v. Van Wagner, 37 Barb., 60; Kramer v. Rebman, 9 Iowa, 114. In determining whether a provision in a contract is in the nature of a penalty, courts will consider the circumstances of the case, the situation of the parties, and the consideration. Hodges v. King, 7 Met., 582; Green v. Price, 13 M. & W., 675; Gulsworthy v. Slintt, 14 id., 187; Rawlinson v. Clark, 1 Exch., 659; Atkins v. Kennier, 4 id., 776; Hardee v. Howard, 33 Ga., 533; Sutton v. Howard, id., 536; Baldwin v. Van Vorst, 1 Stockt. Ch., 577; Gulden v. O'Byrne, supra. Applying these tests to the evidence in this case, equity ought not to interfere with the bond. 3. The appellants have not shown that they will be injured by the judgment; they have not shown that the land is an insufficient security for the plaintiff's judgment and their own. Boyd v. Sumner, 10 Wis., 41; Jamison v. Gjemenson, id., 411; Mann v. Thayer, 18 id., 479; Young v. Schenck, 22 id., 560. At the time of the trial below it did not appear but that the premises would be redeemed from appellants' foreclosure sale. Nor did the appellants show that Mausbach was insolvent. 4. The appellants had no right to notice of option to deem all due. Schoonmaker v. Taylor, 14 Wis., 313.

LYON, J. It is claimed on behalf of the plaintiff, that no exceptions to the findings of fact were filed within the time prescribed by statute, and hence that such findings cannot be

Berrinkott vs. Traphagen and another, impleaded.

reviewed on this appeal. We do not find it necessary to determine whether this position is well taken, for the testimony has been examined, and we are satisfied that it sustains all of the material findings of fact.

We think also that the notice to the obligor that the plaintiff exercised the option reserved to her in the bond, was given in due time. A payment of $32.48 became due September 18, 1874, and the thirty days mentioned in the bond before such option could be declared, expired on the 16th of October. On the 25th of November, 1874, the plaintiff caused to be served on the obligor, at his residence in the state of Nebraska, a notice in writing of her election that the whole sum of $464, and the arrears of interest thereon, should become due and payable immediately; payment of which was demanded. Although there were previous defaults, we cannot doubt that it was competent for the plaintiff to exercise her option within a reasonable time after any default; and when it is considered that the obligor had removed to a distant state, a period of less than six weeks in which to find and procure service of the proper notice upon him, does not seem to be an unreasonable time.

It is clear that the plaintiff is entitled to a judgment of foreclosure; and the only remaining question, and the most important one in the case is, What sum is due upon the bond which the mortgage in suit was given to secure? The learned circuit judge held that the parties to the bond had therein liquidated the sum which the obligor should pay upon default (if the plaintiff chose to declare her option) at $464, and arrears of interest thereon, and that the case is a proper one for the enforcement of a covenant to pay stipulated damages for a breach of the condition of the bond; and the judgment is upon that basis. But it is contended on behalf of the appellants, that this is error; that the gross sum to which the plaintiff is entitled is not $464, but only the value of a life annuity of $32.48 at the time the plaintiff declared her option, at which time she was fifty-two or fifty-three years of age.

Berrinkott vs. Traphagen and another, impleaded.

Such value, computed by the Northampton tables, was then a little less than $300.

So

The form of the covenant is, that in case of default in making any annual payment the whole debt or obligation should become due and payable at once, at the option of the plaintiff; and if it should become so payable, the covenant fixed the amount thereof at $464, and arrears of interest thereon. far as form is concerned, the penalty of the bond is $900, and the stipulated damages, in case of a breach of its conditions, are $164. Fletcher v. Dycke, 2 Term, 32; Astley v. Weldon, 2 Bos. & Pul., 346.

But it by no means follows, because the covenant is in form. for the payment of a stipulated sum, that the plaintiff must necessarily recover that sum. In many cases the sum named in such covenants has been held to be only a penalty. Should it be so held in this case, then, clearly, the measure of the plaintiff's recovery would be the gross value of the annuity when she declared her option, and arrears of interest. In Yenner v. Hammond, 36 Wis., 277, the chief justice says: "Whatever words are used in a covenant providing a sum for damages upon breach, the mere words are not conclusive, and courts ought, in the language of C. J. ABBOTT, to look into the whole of the agreement in order to ascertain whether the sum was intended to be a penalty or liquidated damages. Davis v. Penton, 6 Barn. & Cress., 216; Sedgwick on Damages, 421, and cases cited." In 3 Parsons on Con., 156, we find this language: "The law will permit parties to determine by an agreement which enters into the contract, what shall be the damages which he who violates the contract shall pay to the other; but it does not always sanction or enforce the bargain they may make on this subject. Damages thus agreed upon beforehand, when sanctioned by the law, are called liquidated damages. Where the parties make this agreement, but not in such wise that the law adopts it, then the damages thus agreed upon are a penalty, or in the nature of a penalty."

VOL. XXXIX.-15

Berrinkott vs. Traphagen and another, impleaded.

The question remains, therefore, notwithstanding the form of the covenant, whether the $464 named therein is to be treated as liquidated damages, or considered as a penalty, or in the nature of a penalty. The rules by which this question is to be determined, are thus stated by Mr. Sedgwick: 1. If the sum be evidently fixed to evade the usury laws or any other statutory provisions, or to cloak oppression, the courts will relieve by treating it as a penalty. Consequently, whenever the sum stipulated is to be paid on nonpayment of a less sum made payable by the same instrument, it will be held a penalty. 2. Where independently of the stipulation the damages would be wholly uncertain, and incapable or very difficult of being ascertained except by mere conjecture, there the damages will usually be considered liquidated, if they are so denominated in the instrument. These rules received the approval of this court in Pierce v. Jung, 10 Wis., 30. See also Fitzpatrick v. Cottingham, 14 id., 219; Ryan v. Martin, 16 id., 57; Laubenheimer v. Mann, 19 id., 519.

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The same rules are stated in another form in Bagley v. Peddie, 5 Sandf., 192, by SANDFORD, J., as follows: "1. If the instrument provide that a larger sum shall be paid on the failure of the party to pay a less sum in the manner prescribed, the larger sum is a penalty, whatever may be the language used in describing it. 2. When the covenant is for the formance of a single act, or several acts, or the abstaining from doing some particular act or acts, which are not measurable by any exact pecuniary standard, and it is agreed that the party covenanting shall pay a stipulated sum as damages for a violation of any such covenants, the sum is to be deemed liquidated damages, and not a penalty. The cases of Reilly v. Jones, 1 Bing., 302; Smith v. Smith, 4 Wend., 468; Knapp v. Maltby, 13 id., 587; Dakin v. Williams, 17 id., 447; S. C. in error, 22 id., 201, were of this class."

To the same general doctrine we cite the following late cases: Powell v. Burroughs, 54 Pa. St., 329; Wolf Creek Co.

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