Case 112 — PETITION EQUITY —

February 15.

#### United States Savings & Loan Company v. Scott.

APPEAL PROM BOYD CIRCUIT COURT.

A FOREIGN BUILDING AND LOAN ASSOCIATION ENGAGED IN DOING BUSINESS' in Kentucky will be permitted to charge no higher rate of interest than is chargeable under the laws of this State; and while by the law of comity the charter of such a corporation will be recognized here as the law of its existence.it is the charter alone which is recognized, and not the general legislation of the country of its domicile with reference thereto, or the construction of its charter *696provisions by the foreign courts. Moreover, where such a corporation employs the usual agencies to solicit and transact business in this State and contracts for the payment of premiums and interest in excess of the rate authorized here, the transaction •will be denounced as an attempted evasion of our laws, whatever may be the nominal rate specified or artifice adapted; and this though it be specifically provided that the contract is made with reference to the laws of the foreign State, and though the loan be made payable in the foreign State.

F. H. EWING non at?i>ellaxt.

1. The contract in this case being solvable in Minnesota and made by the parties with express reference to the laws of Minnesota is a Minnesota contract.

Where a contract is made in one State to be executed in another State the contract can be enforced in reference to the rate of interest charged in either State, provided the terms so express it, without incurring the penalties of usury. (Hunt, executor, v. Hall, 37 Ala., 702; Andrews v. Pond, 13 Pet., 77, 78; Harrick v. Andrews, 9 Porter, 9; Cubbedge, &c., v. Napier, 62 Ala., 522; DeWolf v. Johnson *et al,*10 Wheat, 367; 1 Randolph on Commercial Paper, sec. 46; Goodrich *ei al,*v. G. W. Williams, 50 Ga., 425; Story on Promissory Notes, sec. 167; Tiedeman on Commercial Paper, sec. 511; Tyler on Usury, p. 79; Scott v. Perlee, 39 Ohio St., 63; Miller v. Tiffany, 1 Wall, 298; Chapman v. Robinson, 6 Paige, 627; Peck v. Mayo, 14 Vt., 33; Wiswall v. Campbell *et al,*93 U. S., 347; Story on Conflict of Lav/s, secs. 279, 280, 291 and cases cited ¡Cromwell v. County of Sac, 96 U. S., 62; 3 Am. and Eng. Enc. of Law, 543, 544 and cases cited.)

The appellant being a corporation organized under the laws of the State of Minnesota must make all its contracts with reference to those laws. (Canada Southern R. Co. v. Gebhard, 109 U. :S., 537, 538; Railroad v. fioontz, 104, U. S., 12; Rele v. Rundle, 103 U. S., 226; Paúl v. Virginia, 8 Wall, 168.)

The general rule is that contracts made in one place to be executed in another are to be governed by the laws of the place of performance. (Story on Conflict of Laws, sec. 280 and cases cited in note; *Idem,*sec. 291 and no'te; sec. 293 and cases cited; *Idem,*sec. 304; 2 Parsons on Contracts, pp. 583, 584; 2 Kent’s •Comm., secs. 459, 460; Lloyd v. Guilbert, 6 Best & S. 100; Central 'Trust Co. v. Burton, 74 Wis., 329; Robinson v. Viand, 1 W. B. U., ■ 234, 256, 258; 2 Burr, 1077, 1078; Panning v. Consequa; 17 Johns. Rep., 510; Chapman v. Robertson, 6 Paige, 627; Stevens v. Gregg, .12 S. W„ Rep., 775; Cox v. United States, 6 Pet., 72; Miller v. *697Tiffany, 1 Wall, 310; Arrington v. Gee, 5 Ired. Law, 594; Morris v. Hockaday, 94 N. C., 289; Jones on. Mortgages, 656; 1 Addison on Contracts, star page 197; North Hampton Live Stock Ins. Co. v. Tuttle, 40 N. J. Law, 476; Bell v. Packard, 69 Mo., 105; Townsend v. Riley, 46 N. H., 300; Kilgore v. Dempsey, 25 Ohio St., 413; Thornton v. Dean, 45 Am. Rep., 799; Brown v. Todd’s Adm’r, 16 Ky. Law Rep., 697.)

*2.*In cases of this sort it will make no difference that the due performance of the contract is secured by a mortgage or other security upon property situated in another country where the interest is lower. (Cope v. Alden, 52 Barb., 352; Mills v. Wilson, 88 Pa. St., 118; Chase v. Dow, 47 N. H., 405; Kavanaugh v. Day, 10 R. I„ 393; Story on Conflict of Laws, sec. 293; Boyle v. Zacherie, 6 Pet., 635; Story on Conflict of Laws, 287; Charter Oak Life Ins. Co. v. Sawyer, 44 Wis., 387; Central Trust Co. v. Buxton, 43 N. H., 141; 3 Kent’s Comm., 460; Cope v. Wheeler, 41 N. Y., 303; Newman v. Knight, 21 Wis., 339; Mills v. Wilson, 88 Pa,., 118.)

JOHN H. MASON o.v same side.

1. The contract was not in violation of the.statute prohibiting usury. (Endlich on Building Associations, Par., 93-98, 128-134, 152 *et seq.,*156, 169, 175, 326, 335, 337, 354, 356, 371, 374-5.)

2. The contract is to be construed and governed by the laws of the State of Minnesota which expressly sustain its legality and freedom from usury. (Perley’s Law of Interest, p. 187; Tyler on •Usury, p. 79; 3 Am. and Eng. Enc. of Law, 543, 544; Rawlings v. Lartin, 4 J. J. Mar., 238; Gordon v. Phelps, 7 J. J. Mar., 619; Thomas v. Beckman, 1 B. Mon., 29; Gray *ét al,*v. Briscoe, 6 Bush, 690; Stevens v. Gregg, 89 Ky., 461.)

The taking of foreign security does not alter the locality of the contract. (Tyler on Usury, 89; DeWolf v. Johnson, 10 Wheaton, 367.)

3. The plea of usury Is not encouraged, and all doubts should be resolved against it. (Tyler on Usury, p. 463; Perley’s Law of Interest, p. 278.)

L. T. EVERETT fob appellee.

1. The transaction in this case was usurious. (Herbert v. Kenton Building, &c. Association, 11 Bush, 296; Gordon v. Winchester Building Association, 12 Bush, 110; 2 Parsons on Contracts, star page 123; *Idem,*p. 385.)

2. It is not distinctly averred that the place of performance of the contract was elsewhere than in Kentucky where made. The omis*698sion of the answer to distinctly plead the fact is not cured by the omitted fact appearing in a.n exhibit.

JUDGE HAZELRIGG

delivered the opinion oe the court.

A foreign building and loan association engaged in doing business in Kentucky will be permitted to charge no higher rate of interest than is chargeable under the laws of this State; and, while by the law of comity the charter-of such a corporation will be recognized here as the law of its existence, it is the charter alone which is recognized, and not the general legislation of the country of its domicile with reference thereto, or the construction of its charter provisions by the foreign courts.

Moreover, where such a corporation employs the usual agencies to solicit and transact business in this State, and contracts for the payment of premiums and interest in excess of the rate authorized here, the transaction will be denounced as an attempted evasion of our laws, whatever may be the nominal rate specified or artifice adopted; and this, though it be specifically provided that the contract is made with reference to the laws of the foreign State. Such a provision only makes the intent to evade the more manifest.

The principles underlying these conclusions are fundamental and require no citation of authority.

In the case at hand, appellee, a resident of Boyd county, Ky., in November, 1890, applied for-admission and was accepted as a member of the appellant, a building and loan association having its situs in Minnesota, and also applied for a loan of $800. The loan was made in December of the year named and secured by a mortgage on redi estate in Boyd county. The note therefor was dated at St. Paul, was payable at the office of the company’s treasurer at Minneapolis, and contained the express provision: “This note is under*699stood to be made with reference to and under the laws of the State of Minnesota.”

To discharge this debt the appellee paid to the appellant in premiums, fines and interest, from the date of the loan to August 25,1892, the sum of $260, and upon that date the further sum of $806.38. or $186.38 more than the principal sum and six *per centum*interest per annum thereon.

To appellee’s suit to recover back this sum the appellant answered, first, that the contract was made with reference to the laws of Minnesota, where the collections of the premiums, interest, etc., exacted of the appellee were authorized by express statutory provision; and second, if it was not a Minnesota contract, but a Kentucky one, it was yet not usurious.

It is manifest that the first contention falls within the principles already announced, and the loan must be treated as a domestic one. (Morawetz Private Corp., second edition, sections 964 and 967; Hitchcock v. United States Bank, 7 Ala., 435; 8 Am. & Eng. Ency. Law, page 334, and cases there cited.) And when so regarded it must be held usurious under the decisions of the court construing such contracts prior to the statute now in force in the cases of Henderson B. & L. Ass’n v. Johnson, &c., 88 Ky., 191, and cases there cited.

The demurrer to the answer was properly sustained and the judgment is affirmed.