But where a mortgagee insures the property by the authority of the mortgager, and charges him with the expense, then any insurance recovered should be accounted for. And if a mortgager covenants to insure, and fails to do so, the mortgagee can himself insure at the mortgager's expense.

One of the defendants testifies that "Stinchfield agreed to pay all taxes and insurance." He also says, "We have had the house, stable and mill insured, and have paid the insurance, $108." We think this is evidence of an insurance obtained by the mortgagees at the expense of the mortgager on account of his failure to keep his verbal covenant to insure, and renders it proper that the net proceeds of any insurance obtained should be allowed in the settlement between them.

But this cannot be, if the insurance was collected under a policy in which it is agreed between the insured and insurer that the company in case of loss should be subrogated to the right of the mortgagee. For in such case the insurance is not in fact on the mortgager's account, nor is it such an insurance as could be made available to him. Jones, Mort. (2d Ed.) § 420, and cases in note.

The complainant may redeem the whole property upon payment of whatever may be due upon the whole debt. Inasmuch as the complainant sets up a claim exceeding the equitable right, neither party to recover costs up to the entry of this order; and whether future costs shall be recovered by either side, to be reserved for decision when the proceedings are to be finally terminated. Another reason why complainant should not recover costs is, that when his bill was commenced the mortgage debt was not due. The mortgage could not be redeemed until 1880. The bill was commenced long before that time. But as the mortgage is now due, and no point is taken that the proceeding was premature, it will probably be for the interest of all the parties that their matters may be adjusted under this bill. For which purpose a master must be appointed, unless the parties can best determine the accounts between themselves. Decree accordingly.

APPLETON, C. J., WALTON, DANFORTH, VIRGIN, and LIBBEY, JJ.,

concur.

Walls,

Perf

X. Equity Acts in Personam 15

MASSIE v. WATTS.

(Supreme Court of the United States, 1810. 6 Cranch, 148, 3 L. Ed. 181.) This was an appeal from a decree of the circuit court of the United States, for the district of Kentucky, in a suit in equity brought by 15 For discussion of principles, see Eaton on Equity (2d Ed.) § 24.

Watts, a citizen of Virginia, against Massie, a citizen of Kentucky, to compel the latter to convey to the former 1,000 acres of land in the state of Ohio, the defendant having obtained the legal title with notice of the plaintiff's equitable title.

The material facts, so far as intelligible without a plat, are stated in the opinion of the court.

MARSHALL, C. J., delivered the opinion of the court.16

This suit having been originally instituted, in the court of Kentucky, for the purpose of obtaining a conveyance for lands lying in the state of Ohio, an objection is made by the plaintiff in error, who was the defendant below, to the jurisdiction of the court by which ,the decree was rendered.

Taking into view the character of the suit in chancery brought to establish a prior title originating under the land law of Virginia against a person claiming under a senior patent, considering it as a substitute for a caveat introduced by the peculiar circumstances attending those titles, this court is of opinion, that there is much reason for considering it as a local action, and for confining it to the court sitting within the state in which the lands lie. Was this cause, therefore, to be considered as involving a naked question of title, was it, for example, a contest between Watts and Powell, the jurisdiction of the circuit court of Kentucky would not be sustained. But where the question changes its character, where the defendant in the original action is liable to the plaintiff, either in consequence of contract, or as trustee, or as the holder of a legal title acquired by any species of mala fides practised on the plaintiff, the principles of equity give a court jurisdiction wherever the person may be found, and the circumstance, that a question of title may be involved in the inquiry, and may even constitute the essential point on which the case depends, does not seem sufficient to arrest that jurisdiction.

In the celebrated case of Penn v. Lord Baltimore, 1 Ves. Sr. 444, the chancellor of England decreed a specific performance of a contract respecting lands lying in North America. The objection to the jurisdiction of the court, in that case, as reported by Vesey, was not that the lands lay without the jurisdiction of the court, but that, in cases relating to boundaries between provinces, the jurisdiction was exclusively in the king and counsel. It is in reference to this objection, not to an objection that the lands were without his jurisdiction, that the chancellor says, "This court, therefore, has no original jurisdiction on the direct question of the original right of boundaries." The reason why it had no original jurisdiction on this direct question was, that the decision on the extent of those grants, including dominion and political power, as well as property, was exclusively reserved to the king in council.

10 The statement of facts is abridged and a portion of the opinion omitted.

In a subsequent part of the opinion, where he treats of the objection to the jurisdiction of the court, arising from its inability to enforce its decree in rem, he allows no weight to that argument. The strict primary decree of a court of equity is, he says, in personam, and may be enforced in all cases where the person is within its jurisdiction. In confirmation of this position he cites the practice of the courts to decree respecting lands lying in Ireland and in the colonies, if the person, against whom the decree was prayed, be found in England.

In the case of Arglasse v. Muschamp, 1 Vern. 75, the defendant, residing in England, having fraudulently obtained a rent-charge on lands lying in Ireland, a bill was brought in England to set it aside. To an objection made to the jurisdiction of the court the chancellor replied, "This is surely only a jest put upon the jurisdiction of this court by the common lawyers; for when you go about to bind the lands and grant a sequestration to execute a decree, then they readily tell you that the authority of this court is only to regulate a man's conscience, and ought not to affect the estate, but that this court must agree in personam only; and when, as in this case, you prosecute the person for a fraud, they tell you that you must not intermeddle here, because, the fraud, though committed here, concerns lands that lie in Ireland, which makes the jurisdiction local, and so wholly elude the jurisdiction of this court." The chancellor, in that case, sustained his jurisdiction on principle, and on the authority of Archer and Preston, in which case a contract made respecting lands in Ireland, the title to which depended on the act of settlement, was enforced in England, although the defendant was a resident of Ireland, and had only made a casual visit to England. On a rehearing before Lord Keeper North this decree was affirmed.

In the case of Earl of Kildare v. Sir Morrice Eustace, 1 Vern. 419, it was determined, that if the trustee live in England, the chancellor may enforce the trust although the lands lie in Ireland.

In the case of Toller v. Carteret, 2 Vern. 494, a bill was sustained for the foreclosure of a mortgage of lands lying out of the jurisdiction of the court, the person of the mortgagor being within it.

Subsequent to these decisions was the case of Penn against Lord. Baltimore, 1 Ves. Sr. 444, in which the specific performance of a contract for lands lying in North America, was decreed in England.

Upon the authority of these cases, and of others which are to be found in the books, as well as upon general principles, this court is of opinion that, in a case of fraud, of trust, or of contract, the jurisdiction of a court of chancery is sustainable wherever the person be found, although lands not within the jurisdiction of that court may be affected by the decree.

88

Diegiment for Pepp

PENALTIES AND FORFEITURES

PENALTIES AND FORFEITURES

I. Penalties 1

KUNKEL et al. v. WHERRY.

(Supreme Court of Pennsylvania, 1899. 189 Pa. 198, 42 Atl. 112, 69 Am. St. Rep. 802.)

Action by H. F. Kunkel and Conrad Jordan, partners doing business as Kunkel & Jordan, against James Wherry, to recover a balance alleged to be due on a contract for granite construction. Judgment for plaintiffs and defendant appeals.

FELL, J. The defendant was the contractor for the construction of a large 10-story building which he was required to complete in 11 months. By the terms of his contract with the owner, he was to receive $100 for each day less than the time limit, and to pay $1,000 for each day that he should exceed it, in the completion of the work. He entered into a contract with the plaintiffs for the stone and granite work. They agreed to furnish the materials, and to finish the work to the top of the second story, ready for the bricklayers, in six weeks' time after three stories of ironwork had been erected, and bound themselves "to pay the sum of $150 per day as a penalty for each and every day thereafter that the said work remains unfinished, as and for liquidated damages."

The learned judge held that this stipulation should be regarded as a penalty, and not as liquidated damages, and that the defendant could set off against the plaintiffs' claim such damages only as he proved to have been actually sustained by him because of the delay of the plaintiffs in completing the work.

The rule that in actions ex contractu, where the breach of an agreement admits of compensation, the recovery may be limited to the loss actually sustained, notwithstanding a stipulation for a penalty, is founded upon the principle that one party should not be allowed to profit by the default of the other, and that compensation, and not forfeiture, is the equitable rule. Equity will regard a penalty or forfeiture as intended to secure the fulfillment of a contract, and it may preclude the injured party from recovering more than a just compensation or from obtaining a collateral advantage. Notes to Peachy v. Duke of Somerset, 2 White & T. Lead. Cas. Eq. 2044; Bisp. Eq. 178. Whether a sum named as compensation for the breach of a contract is to be considered as a penalty to secure

1 For discussion of principles, see Eaton on Equity (2d Ed.) §§ 26–32.

ཏི

its fulfillment, from which equity will relieve, or as damages liquidated by the parties themselves, is a question which cannot be answered by the application of any general rule.

The question is always one of construction, and any rule upon the subject is a mere guide to the intention of the parties. The grounds on which each case is to be considered and determined are clearly stated by our Brother Mitchell in Keck v. Bieber, 148 Pa. 645, 24 Atl. 170, 33 Am. St. Rep. 846: "The general principle upon which the law awards damages is compensation for the loss suffered. The amount may be fixed by the parties in advance, but, where a lump sum is named by them, the court will always look into the question whether this is really liquidated damages, or only a penalty; the presumption being that it is the latter. The name by which it is called is of but slight weight; the controlling elements being the intent of the parties, and the special circumstances of the case." And he quotes with approval March v. Allabough, 103 Pa. 335: "The question * * is to be determined by the intention of the parties, drawn from the words of the whole contract, examined in the light of its subject-matter and its surroundings; and in this examination we must consider the relation which the sum stipulated bears to the injury which may be caused by the several breaches provided against, the ease or difficulty of measuring a breach in damages, and such other matters as are legally or necessarily inherent in the transaction."

From the nature of this case, the actual damages which would result from a breach of the contract would not readily be susceptible of ascertainment, and it seems to us that it was the manifest intention of the parties not to leave them to the uncertain estimate of a jury, but to fix them by express agreement. "Uncertainty as to the extent of the injuries which may ensue" was said in Powell v. Burroughs, 54 Pa. 329, and Coal Co. v. Schultz, 71 Pa. 180, "to be a criterion by which to determine whether it is a case of liquidated damages or a penalty." The damages named were for the breach of a single stipulation, and were not disproportionate to the loss which would probably result to the defendant from the failure of the plaintiffs to complete their work in time.

The fifth and seventh assignments of error are sustained, and the judgment is reversed, with a venire facias de novo.

CLOSE v. RIDDLE et al.

(Supreme Court of Oregon, 1902. 40 Or. 592, 67 Pac. 932, 91 Am. St. Rep. 580.)

Suit to foreclose mortgage by Charles M. Close against George W. Riddle and others. From a decree in favor of the plaintiff, the defendant W. S. Riddle appeals.