Court Opinion

ID: 5462541
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:40:53.388363+00
Date Added: 2024-06-11T08:32:56.962566
License: Public Domain

Mullin, J., (dissenting.)
I cannot agree with the respondent’s counsel that because corporations are forbidden to set up usury as a defense, therefore the usury laws are, as to them, repealed, and that, not only is the benefit of the defense taken from the corporation, but also from all persons who are parties to their contracts. My reasons for this opinion are,
1st. That the statute does not, in terms or by fair implication, extend the prohibition beyond corporations.
2d. The reasons which induced the enactment of the law do not require the prohibition to be extended to individuals.
3d. Every argument in favor of the adoption of laws against usury, requires the enforcement of those laws in cases where individuals are sued, who are parties to corporate contracts.
Experience has shown that corporations cannot borrow money on as favorable terms as individuals. This results, in part at least, from the neglect of the officers and agents, in the care and management of their affairs, and a want, of attention to the prompt collection of debts due to, and the prompt payment of debts from, corporations, so that a greater risk is assumed in loaning to them than to individuals, and this risk must be compensated by a higher rate of interest. Again; while corporations may, and doubtless do, suffer from the effects of usury, yet it is not attended by the same results as in the case of individuals. The one suffers in purse, the other in both mind and purse. While both may become poor, the corporation is not made a slave; it has no children to clamor for bread; no visions *429of alms houses invade its sleep, or haunt the imagination when awake. There is a difference, a vast difference, in the mischief resulting from grinding the face of a poor corporation and of a poor man. The former has neither heart nor soul; the latter has both, and other hearts besides his own, for which be is bound to care and feel. If it be true that the credit of a corporation is not equal to that of individuals with an equal amount of capital, it must pay higher interest or go without money. The interests of society are so interwoven with corporations, they have become so essential to the business of every community, that they cannot be dispensed with. To make it necessary that private credit should be added to that of the corporation, in order to secure the lender and induce him to loan, necessarily involves all persons who may thus lend their credit in the affairs of the corporation, thereby increasing the extent of the misfortunes resulting from failure of the corporation, or subjects its stockholders to the payment of exorbitant demands for commission's paid to such sureties. These consequences are, to a considerable extent, avoided by enabling corporations to go into the market, and sell their paper at what it may be worth, without exposing the purchaser to the penalties of usury.
If, notwithstanding this law, corporations are unable to borrow money without calling in sureties, the very end and aim of the 'statute is defeated. The usurer, in his demand of security for a loan, is as ravenous as the hungry wolf. Like the daughter of the horse leech, his cry is give, give. If it be true that the statute has not only taken from the corporation the right to plead usury, but from all who may have become parties to its contracts, the usurer has achieved a triumph that, I trust, the legislature did not anticipate, or intend, to secure to him. For myself, I never can be induced to believe that the legislature contemplated any such shameful results. But whatever *430our opinion may be on this subject, this court, in at least two cases, has held that the prohibition does not extend beyond the corporations. (Hungerford Bank v. Dodge, 30 Barb. 626. Rosa v. Butterfield et al., not reported.)
2d. I agree with the respondents’s counsel, that the contract should be regarded as made in Illinois, and in reference to its laws, so far as the laws of that State regulate the power of the corporation to contract, or the manner of executing contracts. (Bard v. Poole, 2 Kern. 495.) A corporation created in Illinois and authorized by its charter to loan or borrow money, may make the contract in any other State which permits foreign corporations to enter into such contracts within its jurisdiction, and the contracts made in the foreign State, if they are to be performed there, will be governed by its laws, and not by the laws of Illinois. But if the contract is one which, by its charter, the corporation cannot make, it is utterly void, notwithstanding it may be lawful in the State in which it is made. (Bard v. Poole, supra.) In a certain sense, therefore, every contract made by a foreign corporation in this State, which is to be performed here, is made in reference to the laws of the State creating the corporation. In other words, the law creating the corporation must be resorted to, everywhere, to ascertain the powers conferred upon it. But though the act of incorporation- may prescribe the rate of interest which the corporation may charge, yet in a contract made in another State, and to be performed there, a different rate of interest may lawfully be contracted for.
3d. There is no doubt but that the contract' in this case was actually made in this State, and was to be performed here. In Curtis v. Leavitt, (15 N. Y. 9,) part of the bonds, which were the subject of the contract in that suit, were delivered in England, payable in English currency; the interest was to be paid there, and certain persons residing there were appointed to act in reference to them, and the *431agreement to take the bonds in advance of their delivery was made in England. These circumstances were relied upon by the Court of Appeals, as establishing the fact that the contracts were English, and not Hew York contracts, where the corporation was created and transacted its business. Within the principle of the case"of Curtis v. Leavitt, this was a Hew York contract, and governed by its laws, and not those of Illinois.
4th,' It is settled, beyond all room for argument, that contracts are governed by the laws of the country where they are made, unless they are, by their terms, to be performed in some other country, in which event the laws of the latter country apply. (Pomeroy v. Ainsworth, 22 Barb. 118. Jacks v. Nichols, 1 Seld. 178. Bard v. Poole, 2 Kern. 495. Davis v. Carr, 2 Seld. 124 ) This rule is clear, comprehensive, and easily applied, and governs this case, unless there is some modification of, or exception to it, which is so authoritatively established that we are not at liberty to disregard it.
The modification or exception insisted upon is, that where a contract is made in one State or country, to be performed in another, in which the rate of interest is not the same, the parties may agree for the payment of either, and the contract is not usurious in the State whose laws forbid the taking of the rate of interest provided for in,the contract, and declare the agreement for such interest to be usurious and void. This doctrine rests, so far as I can find, upon two decisions of the chancellor of this State, one case in Louisiana, and an elementary work of Parsons, being his treatise on Contracts. If there is any other case or dicta supporting the exception, I have not been able to find it.
In Chapman v. Robertson, (6 Paige, 627,) the question was, whether a mortgage was usurious under the law of England, given on property in this State, to secure a loan made in England, and which was to be repaid in England, *432the rate of interest being seven per cent, while the rate in England was five." The chancellor held that the mortgage being given on property in this State, was governed by the laws of this State, and hence, seven per cent being the lawful rate of interest here, the mortgage was valid. •
While the principle thus asserted may be assented to; without overruling or qualifying the general rule that the law of the place designated by a Contract for its performance governs its construction, yet I cannot yield my assent to the doctrine. The general rule of law is so simple, comprehensive, and easy of application, that it should not be abandoned nor modified, nor should exceptions to it be admitted, unless the ends of justice imperatively require it. The interests of business men are much better secured by courts establishing and enforcing rules that are easily understood and applied to the daily affairs of life, than by attempting to attain perfect justice by the multiplication of exceptions to, and qualifications of, them. The moment it is left in doubt whether a contract is to be governed by the laws of the State where it is made, or where it is to be performed, no man knows what law will be applied in any given case, and litigation and contention are introduced without the slightest benefit to any person. In the case cited, the loan was made in England, and, as the chancellor concedes, it was to be performed there. It was undoubtedly an English contract, and as it provided for s^ven instead of five per cent, it was, by the laws of England, usurious and void. Now the principal contract drew after it the collaterals; they were part and parcel of the contract for the loan, and stood or fell with.it. It is not denied but that the mortgage, as to its form, manner of execution; and the nature and extent of the lien, and as to the remedies by which it might be enforced, was governed by the laws of New York, where the land lay. But this was the whole extent of the operation of these laws. So far as the validity of the mortgage depended on *433the validity of the contract of loan, it was governed by the laws of England, and if the original contract was usurious and void, the collaterals were also void. The chancellor did not intend to overturn this principle, which has been so long and so well established.
In Dewar v. Span (3 T. R. 425,) it was held that a bond given in England, payable in England, reserving a greater interest than was allowed in England, was usurious. The bond was given to secure the purchase money of land in the West Indies. Counsel insisted that it was valid under the statute 14 George 3, chap. 79, which provided that mortgages and other securities respecting lands in Ireland and the West Indies, reserving interest allowed in those countries, should be valid though executed in England. The court held that the statute did not apply to personal contracts. While the case itself is an application of the general rule for which I contend, the act to which the counsel and court refer, is a parliamentary adjudication that without the statute mortgages and other securities on land in Ireland and the West Indies would have been void for usury, where more than the English rate of interest was reserved. If such was the law, the remark of Lord Kenyon, in the case cited, that if the present attempt were to succeed it would sap the foundation of the statutes of usury, was strikingly forcible and just. Statutes like the one referred to are never passed by the British Parliament until there is a necessity for them, and then only after the terms of the law have been approved by eminent lawyers, who know what the law is, and who fully understand what change or alteration is required. It was for these reasons that a law changing the common law, becomes high evidence of what the common law was before the alteration was made.
In Stapleton v. Conway (3 Atk. 727) it was held that a mortgage on land in the colonies, if executed in England and connected with a bond or other personal covenant for the *434payment of mpre than seven per cent interest, was usurious. This case is in direct conflict with Chapman v. Robertson. The two cases cannot be reconciled.
I submit, in view of these authorities, it is incumbent on those who seek to make an exception to the general rule, to furnish some reason why it is attempted to be made. They should show that the exception ought not to be, and in justice cannot be, reasonably and fairly within the general rule. But not a reason is assigned, nor argument furnished, why an exception should be made.
In Pratt v. Adams (7 Paige 615, 631) the facts were, that drafts were drawn by Rathbun on Jones, payable in the city of Rew York, one at sixty, and the other at ninety days, and accepted by Jones. These were discounted in Ohio for the benefit of Rathbun. One objection to their payment was that they were usurious. The usury consisted in the bank, by which the drafts were discounted, reserving six per cent discount, and Rathbun agreed to keep the bills in circulation until the maturitj'- of the drafts, but if not, then he was to furnish the funds to pay them. If these were Ohio contracts, they were void if the rate of interest was only six per cent, as by the contract the bank was to receive, not only its interest, but the benefit of the circulation of the bills paid out on discounting, the bills, in addition thereto. Such a benefit in addition to lawful interest, was usury. Under the general rules relating to the construction of contracts, the bills were not governed by the laws of Ohio, but by those of Rew York, where they were payable. This disposed of the question of usury, so far as Rathbun was concerned. It was wholly unnecessary for the chancellor to go further and express an opinion on a question not before him. Indeed he clearly shows that if the contract was to be deemed to be an Ohio contract, there was not sufficient proof before him to enable him to pronounce it usurious; so that in no view of the case was he called on to give an opinion-on *435the question whether the rate of interest of either Ohio or New York might have been agreed upon without rendering the contract usurious. But if the question was before him, he does not discuss it, but refers to the decision in Louisiana, and expresses his concurrence in it, without assigning any reason why he concurred. In neither of the eases cited has the question been decided, and we are at liberty to dispose óf the question unembarrassed by any authoritative decision. But when so learned and able a jurist as Chancellor Walworth has examined a question of law and declared his opinion upon it, every judge will hesitate long before he will differ from him; much longer before he will overrule Mm. But believing as I do that he was in error, I cannot yield to a mere dictum, while I would concur in his decision of a question of law, though I might not be convinced of its correctness. The learned chancellor rests himself upon Depeau v. Humphreys (20 Martin, 1.) That case I have not seen, but taking the statement of it given by the chancellor and by Judge Story in his Conflict of Laws, the precise question now under consideration, was there examined and decided. Story dissents from the doctrine of that case, and it is not supported by a single decision in any common law court of this country or of England. The reasons why it should not be followed are elaborately stated in the Conflict of Laws, and I will not attempt to add to the arguments there presented.
I have' referred to 2 Pars. on Cont., as an authority in support of the position of the chancellor. But as no reason is furnished in support of the author’s opinion, we have added only the weight of the dictum of a very distinguished jurist, whose opinion commands the highest respect of the profession, both at home and abroad. The question is not one of opinion merely. It is one in regard to which the reason must be convinced; as, if established, the usury laws will be, in an important class of cases, re*436pealed, and doubt thrown upon the construction of contracts which the safety and convenience.of business men require should be left undisturbed.- It is folly to suppose that the law against usury will be preserved by enabling parties alleging usury to show, as is suggested by Chancellor Walworth, that the contract was made with intent to evade the usury laws of the State whose usury laws have been violated. The difficulty is, the burthen of proof is thrown upon the wrong party. The agreement should be held presumptively usurious, and require the party asserting its validity to prove the facts that would make it so. There has rarely been a case in which an agreement or course of dealing has been held presumptively valid, but the right was given to show that it was intended as an evasion of the statutes against usury, but in a short time, it ripened into an established right, and the poor privilege of proving that the agreement was entered into with intent to evade the laws against usury, afforded no protection to the victim of the usury.
[Onondaga General Term,
January 2, 1866.
I am constrained to vote for reversing the judgment, and granting a new trial, with costs to abide the event.
Judgment affirmed.
Mullin, Morgan and Bacon, Justices.]