Cope v. Alden , 37 How. Pr. 181 ( 1867 )

By the Court, Mason, J.

The only important question in this case is whether the bond and mortgage, executed by the plaintiff, Elizabeth McCraney, to the defendant, on the 22d day of November, 1858, for $1000, was usurious or not. At the time of the execution of the said bond and mortgage both Mrs. McCraney and the defendant resided at Oneonta, in the county of Otsego, in this state, where both the agreements to loan the money were made, the bond and mortgage were executed and delivered, and the money was paid thereon. The mortgage was upon lands in Grant county, in the state of Wisconsin; neither the bond nor the mortgage designated any place of payment. The agreement between the parties was, at the time, that the plaintiff, Mrs. McCraney, should give to the defendant a bond and a mortgage on these lands in Wisconsin for $1000; that the defendant should advance to her $900, and the $100 should be given as a bonus for the loan, which was done accordingly. The question presented for our decision is whether this is a contract to be governed by the laws of the state of New York or those of Wisconsin, and I entertain no doubt but that it must be regarded as a Hew York contract, where the lex loci contractus controls. Every concomitant to make it a Hew York contract seems to exist in the case. The parties reside here; the loan was made here ; the securities were executed here; the money is certainly payable here, where the parties reside. Upon such a state of facts I am not able to discover any principle of law upon which this can be pronounced a Wisconsin contract; and no adjudged case has been referred to upon the argument, nor have I been able to find any which would hold it such. On the contrary, the very reverse was held by the Supreme Court of the United States in the case of De Wolf v. Johnson, (10 Wheat. 383,) where it is expressly decided that the lex loci contratus must govern in a question of usury, although by the terms of the agreement the debt was to be secured by a mortgage on real property in another state. The case is cited with approbation in the case of Anderson v. Pond, (13 Peters, 78.) The case of Newman v. Kerson, (10 Wis. R. 333,) is directly in point, and decides the very question presented in this case. The suit was brought in that case to foreclose a mortgage in Wisconsin ; the parties both resided in Hew York where the "loan was made, and the bond and mortgage was executed on lands in Wisconsin, and Chief Justice Dixon, in giving the opinion of the court, says: “We have no doubt that this contract is to be governed by the laws of Hew York,” (See page 340.) He adds : “In this ease the parties all resided in Hew York; the loan was made there; was to be repaid there; and the laws of that state must govern the contract as to its validity and effect.” (See gage 344.)

The principle of these cases is affirmed by Chancellor Kent in his Commentaries. (3 Pent’s Com. 460, 3d ed.) He says : “ The general doctrine is that the law of the place where the contract is made is to determine the rate of interest where the contract gives, specifically, interest, and this will be the case though the loan be secured by a mortgage on lands in another state, unless there are circumstances to show that the parties had in view the laws of the latter state in respect to interest.” And judge Story affirms the rule to be the same. He says: “ Whether a contract is usurious or not depends not upon the rate of interest allowed, but upon the validity of that interest in the country where the contract was to be made and is to be executed.” (Story’s Conflict of Laws, § 292, 5th ed.) And he adds: “In cases of this sort it will make no difference that the due performance of the contract is secured on other security, situated in another country where the interest is lower.” (§ 293.) In section 287 he declares • the rule to be that where a loan is made in one state and security is' to be given therefor in another state by way of mortgage, the law of the place where the loan is made is to govern; for the taking of a foreign security does not necessarily alter the locality of the contract. Taking security does not necessarily draw after it the consequence that the contract is to be fulfilled where the security is given.

The legal fulfillment of a contract of loan on the part of the bondsman is the re-payment of the money, and the security given is but the means of securing what he has contracted for, which, in the eye of the law, is to pay where he borrows, unless another place of payment be expressly designated by the contract, (Story’s Conflict of Laws, § 287,) which is a mere reiteration of what was said .by the court in De Wolf v. Johnson, (10 Wheat. 367.)

This doctrine has never been overruled in any case which I have been able to find. The ease of Chapman v. Robertson, (6 Paige, 627,) is relied on by the defendant in this case, but in that case the contract was made between a citizen in this state and a British subject in England. The bond and mortgage were executed by Robertson here, recorded here, and forwarded to Chapman in England, who advanced the money upon them by depositing the same with Bobertson’s banker for his use. The Chancellor holds that as the payee resided in England at the time of the making of the contract, the bond and mortgage naming, no place of payment, the legal construction of the contract is that the money must be paid where the obligee resides, &c. Whatever may be thought of this case—audits soundness has been questioned by Chancellor Kent in his Commentaries and by Judge Story—it decides nothing in the case before us. It is evident from the opinion of Chancellor Walworth, in the case, that he excepts this case, and indeed seems to hold this contract usurious. After citing Stapleton v. Conway, (3 Atk. 727,) where Lord Hardwick held that a mortgage upon land in the- colonies, if executed in England, and connected with a bond or other personal covenant for the payment of more than five per cent interest, was usurious and void, &c. Chancellor Walworth Says, on page 632, “ Doubts will exist as to the validity of laws made in England upon such securities where both parties resided there, especially if the money was not loaned for the purpose of being used in the colony where the mortgaged premises were situated, as the giving of such a security might be a very convenient mode of evading the statute of usury.”

This meets the very case before us. The case of Balme v. Wombough, 38 Barb. 352,) relied upon by the defendant’s counsel, decides nothing in the case at bar. All that case decides is that promissory notes made and dated in Minnesota, for money there loaned and advanced, payable at a bank in the state of New York, with interest at twenty-five and a half per cent per annum, and secured by mortgage on land in Minnesota, will not be declared void by the courts of this state, or directed to be surrendered and canceled. The case holds just what has been decided in a good many other cases, that the general rule that the validity of the contract is to be decided by the laws of the place where the contract is to be performed does not apply to cases involving the rate of interest, where it is stipulated in the contract at the place where the loan is made in conformity with the law of the place, that a higher rate of interest shall be paid than is allowed by the place of performance, but that the lex loci contractus governs. o (1 Paige, 220. 20 Martin’s Lou. R. 1. 6 Paige 627. 7 id. 632. 22 Barb. 121. 20 Eng. Law and Eq. 555. 2 Kent’s Com. 460. 2 Pars, on Cont. 95; also n. E.) And it is this class of cases upon which the -defendant’s counsel seems mainly to rely in this case. It is not" necessary to consider the soundness of the rule laid down in these cases, as they decide no principle involved in the case under consideration ; but as I understand the case of Lee v. Selleck, 33 N. Y. Rep. 615,) the Court of Appeals there decides that the liability of a maker on a promissory note executed in Yew York and payable in Illinois is controlled by the laws of Illinois, the state in which his engagement is to be performed ; and whether that court will allov/ the symmetry of the law to be marred by making the question of usury in a case like the present an exception to this certainly general rule remains to be seen.

The doctrine laid down in 9 Allen, 78, and many other cases, holding that the laws of the state where the lands are situated, must control as to the form of the mortgage or deed,its manner of execution and acknowledgment, &c. have nothing to do with the question in this case. It is true that in all these respects the law of the state where . the lands are situated must control; but that does not touch the question of usury in the case.

It is said that this contract was entered into by these parties upon the. understanding and with the intent to bring it under the laws of Wisconsin and not those of Yew York. ■ I have sought in vain for any evidence of this, in the case. They make the contract here, in this state; the parties reside here; the money is advanced here; the bond and mortgage were executed and delivered here; the payment was to be made here; and the whole thing was done and to be done under the laws of this state, excepting the mortgage as a security for the loan was upon lands in Wisconsin, and had, of course, to be recorded there. Xs a general proposition it cannot be denied that contracts, as to their validity, are to be tested by the laws of the state where they are made, and are to be executed; and it was held in the case of Jewell v. Wright, 30 N. Y. Rep. 259,) that where a note made and dated in this state and payable at a bank here was negotiated in another state, the laws of Yew York are to control as to the defense of usury. This is upon the ground that the law regards the contract as coming under, and consequently governed by the law of the state.

In the case at bar it seems to me very clear that the court should have held this bond and mortgage controlled by the laws of this state, and consequently usurious, without submitting any fact to the jury. And in any view which can be taken of the case upon the facts, it is certainly usurious if made to avoid the usury laws of this state. (Chapman v. Robertson, 6 Paige, 632.) If there was any doubt upon this subject it should have been submittted to the jury to determine, but I do not think the case upon the undisputed facts, can be brought under the laws of Wisconsin, but must be held to be a Yew York contract.

As the $1000 mortgage went into and formed a part of the consideration of the $1669 mortgage, the latter is also usurious, as is held in all the cases, (Price v. The Lyons Bank, 33 N. Y. Rep. 55; Jacks v. Nichols, 1 Seld. 178; 35 Barb. 96; 20 John. 285; 6 Cowen, 647; 21 Wend. 103;) and the mortgage is void as to the whole. (17 Barb. 397. 21 id. 361.)

If I am right in the views above expressed, it follows that the defendant cannot hold these surplus moneys on this mortgage, for the same, being usurious, gave him no valid lien upon the premises. A new trial must begranted, costs to abide the event of the action.

[Broome General Term, July 9, 1867.

Mason, Makom and jBoarémn

Justices.]