Case ID: tenn_39/html/0441-01.html
Source: Caselaw Access Project
Author: {"author": "Caruthers, J,,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Wm. H. Thompson v. Collins, Kellogg & Kirby.
    1. Contract. Illegal. Effect of. Nbte. A contract containing on its face an illegal stipulation, cannot be enforced either at law or in equity. Therefore, no suit can he maintained in the Courts of Tennessee on a note executed in this State stipulating on itsfa.ee for usurious interest, if no other place of payment is designated where a greater rate of interest is allowed.
    2. Same. Same. Plea. If a note puroorts on its face to have been executed beyond the limits of the State, and the declaration avers that fact, and contains a stipulation for the payment of temper cent, if not paid at maturity, it is competent for the defendant to put in issue, by a proper plea, the fact as to whether it was executed in Tennessee, or not. If executed in Tennessee, it would be illegal on its face, and the plaintiff would be repelled from the Court.
    PROM HENRY.
    On motion of the plaintiff’s counsel the plea that the note sued on was executed in Tennessee and not in Missouri, was stricken out, and judgment rendered at the September Term, 1858, for the plaintiffs, Fitzgerald, J., presiding. The defendant appealed.
    McAmpbell, for the plaintiff in error.
    Where a contract is made in one place to be executed in another, it is to be governed, as to usury, by the law of the place of performance, and not by the law of the place where it is made. So that if the transaction is hona fide, and the law of the place of performance allows a higher rate of interest than that permitted at' the place of the contract, the parties may lawfully stipulate for the higher interest. Story’s Conflict of Laws, § 304-5,
    The law of the place where the contract is made is to determine the rate of interest, where th.e contract specifically gives interest, and this will he the case, though the loan he secured . by the mortgage of lands in another State, unless there be circumstances to show that the parties had in view the law of the latter place in respect to interest; when that is the case, the rate of interest of the place of payment is to govern. 2 Kent Com., 460, 461, 3d ed.
    The rule is that the law of the place where a contract is made governs its construction, unless it be to be performed in a different place — in which case the law of the place of performance governs. If, therefore, a contract stipulate for a rate of interest which is illegal at the place where it is made, it will be void for usury, unless its terms contemplate the performance thereof at a different place, where the rate of interest secured is legal. Story on Contracts, § 539, 2d ed., 5-1.
    
    Where a contract is made in one place, to bo executed in another, it is to be governed, as to usury, by the law of the place of performance, and not by the law of the place where it is made. 13 Peters, 65, 77, 78.
    A- contract to .pay more than six per cent, per an-num. is illegal, and a Court will not lend its aid to enforce it. 6 Hum., 277.
    The note declared upon is illegal, and cannot be recovered without the averment that it was executed in St. Louis, Mo. This is a material and necessary averment to make it a legal contract. The plea denies the averment, and presents the issue upon which the validity of the contract depends.
    Dunlap & Porter, for the defendants in error.
   Caruthers, J,,

delivered the opinion of the Court.

This is an action of debt brought in the Circuit Court of ITenry, upon a promissory note, for $1,314.67, by the defendants against the plaintiff in error. The declaration alleges that the note was made in St. Louis, Missouri. The note is dated, “ Saint Louis, May 13, 1859,” and due six months after date. It contains this stipulation on its face; “if not paid at maturity, with interest at ten per cent, per annum.” There are two pleas in defence.

1. That the note sued upon was not made in Saint Louis, Missouri, but in Paris, Tennessee.

2. Payment.

The plaintiffs took issue upon the last plea, but moved the Court to strike out the first. This motion was sustained, and verdict and judgment on the other for the plaintiffs below.

The only question here is, whether there was error in the action of the Court in striking out the first plea. If it was a perfect defence to the action, if true: it was a good plea, and issue should have been taken upon it.

It is not controverted in the argument that by the law of Missouri ten per cent, interest by contract is allowed, and may be reserved and taken. But in Tennessee, such a contract is illegal and usurious; it is an indictable offence by our law to take more than six per cent. A contract containing on its face this, or any other illegal stipulation, cannot be enforced in a court of law or equity. No court will give its active aid upon such a contract. Isler v. Brunson, 6 Hum., 278, applies this universal principle to contracts stipulating for usurious interest on their face. Then it cannot he controverted if this note were made in Tennessee, and no other place of payment designated where a greater rate of interest is allowed, no suit could be maintained upon it in our courts.

But it is averred in the declaration that it was made in Missouri, and must be governed by the law of that State, and consequently they have not only a right to sue upon it here, but to recover the ten per cent. That is certainly true if the fact be so, as the law of the place where the contract is made, unless some other place is fixed for its porformance, must govern on this question. Story on Con. of L., § 804-5; 2 Kent Com., 460, 461; 13 Peters, 65, 77, 78; 2 Parsons on Con., .96.

This being the law, why is it not material, in view of the question, not so much of usury, but to test the legality of the contract, to ascertain where it was made? If in Missouri, it could be enforced here as well as there, but if in Tennessee, it is illegal on its face, and the plaintiffs would be repelled from our courts. It is averred to have been executed in Missouri. May not that averment be met by plea, and an issue made up to try the fact? It is certainly an important fact. If the plea he found true the action is barred and defeated. It is clearly, then, a good and effectual de-fence. Upon what principle, then, can it be rejected, and its benefit denied to the defendants?

It is most likely that the plea is not true, and was only put in for delay. But this we cannot know. If that be the case, it will be easy for the plaintiffs to take issue upon it, and appeal to the proof.

The conclusion is that the court erred in striking out the plea in question, and for this the judgment must be reversed, and the cause remanded for further proceedings.