Sands v. Smith , 1 Neb. 108 ( 1871 )

Crounse, J.

From the pleadings as presented by the record, there is no question but that the agreement for the loan of money expressed in the note in suit, with its terms as to rate of interest, time and place of re-payment, was made in the State of New York, and the money there advanced. The circumstance that the note was made in Omaha, Nebraska, where, at the time, there was no limit to the amount of interest that might be agreed upon by the parties, is relied on to save the note from being declared void under the laws of New York relating to usury, as set out in the answer of the defendant in the court below. This, it is contended, makes it a case where the contract is entered into at one place to be performed in another, giving the parties liberty to contract for the highest rate of interest allowed by the laws of either.

The fallacy of this argument consists in compounding the contract with the note. It is distinctly charged that the note was executed in pursuance of the agreement made in New York. When that agreement was made, and the money there paid over, the rights and obligations of the respective parties attached ; the note was but evidence of the agreement. Had the note expressed but lawful interest of New York, with the understanding between the parties that the remaining fourteen per cent interest was to be paid ■ as fixed upon when the law was made, the note would be so related to the contract that because of the illegality of the original agreement, no action could be maintained in New York, -upon it. — Merrills v. Law, 9 Cow. 65 ; Macomber v. Dunham, 8 Wend, 550 ; 13 Wend, 505. So, on the other hand, had the agreement in New York, been for lawful interest, a note given subsequently, expressing a greater interest, would be declared void, while the original agreement would stand. — 2 Pars, on Cfon. 4:th ed. 392.

These illustrations are given to show that the original agreement is to be considered in the solution of questions of this character. The note is but an incident. In Hasford v. Nichols, 1 Paige, 220, where a contract for the sale- of land in New York was made between two citizens of New York, one of whom removed to Pennsylvania, where the contract was afterwards executed, by giving a deed, and taking a mortgage of the premises to secure the payment of the purchase money, in which mortgage the New York rate of interest was reserved, which was greater than that of Pennsylvania, it was held that the giving the deed and taking the mortgage was only a consummation of the original contract made in New York, and that the mortgage was not void for usury.

Here, then, we have a contract both made, and to be performed in the State of New York, and being void by the laws of that State, must bo so here.

The cases urged upon the attention of the court by the counsel for defendant in error, have no application.— Depeau v. Humphreys, 20 Mart. La. 1, is a case where a note was given in New Orleans, payable in NewYork, -with the legal interest of Louisiana, being ten - per cent, while that of New York is but seven. There it was held by the Supreme Court of Louisiana, that the contract being made in Louisiana, and to be performed in New York, the parties might stipulate for the interest of either State. This case is sustained by Pecks v. Mayo, 14 Vl. 33 ; and Chapman v. Robertson, 6 Paige, 627, while it has the disapproval of Justice Story. — Con/', of Laws, § 298.

Having concluded, that in the case under consideration, the contract was not made in Nebraska, it is unnecessary to consider the case just cited.

• The contract of the parties 'being void by the laws of ■ New York, no action will lie here on the note given under it.

The judgment of the court below must be reversed.