22 Iowa 194 | Iowa | 1867
The parties differ upon the question whether, this was an Iowa contract and to be governed in its enforcement by our laws, or whether the laws of Massachusetts or New York apply. There is also the further point, that if the Massachusetts statute governs, then that it affixes a penalty for taking or receiving usurious interest, which penalty the courts of this State will not enforce.
The questions made are' important, and not free from difficulty. A careful examination of the entire record and an attentive consideration of the full and able oral and printed arguments of counsel, have brought us to the conclusion that the law of the case was correctly given to
The general rule is well settled that the law of the place where the contract is made is to govern in enforcing and expounding it, unless the parties provide for its execution elsewhere, in which case it is to be governed by the law of the latter place.
Plaintiff' claims that the parties in good faith contracted with reference to the laws of this State, intending to make this an Iowa contract. And upon this subject the court instructed as follows: “ If defendant went to Boston and urged the loan and promised ten per cent under the laws of Iowa, and all the arrangements and contracts were made as to the laws of Iowa in good faith, and no more than ten per cent was contracted for, then the defense fails .and plaintiff can recoverand also, “if the parties in good faith loaned and borrowed the money sued for, with a full understanding that the law of Iowa was to govern as to the interest, then the laws of New York and Massachusetts can have no influence here, but the understanding of’the parties must prevail.”
These instructions were based, of course, upon the facts claimed, as above set forth; and now the question is, do they contain the law '<
Our opinion is that, if the parties acted in good faith,
While parties will not be allowed to evade the law, the question after all is, was the course adopted as a cover for usury ?
' The intention of the parties is always, an important element, and should never be disregai’ded. To what place did the parties in good faith have reference, in negotiating the loan, may always be shown. We concede the proposition that, if the contract is made between the citizen of one State and the citizen of another, in the former, without any agreement or understanding, it is to be governed by the law of the place where made, or where it is to be executed, if still in another State. Story’s Conflict of Laws, § 299; Smith v. Meade, 3 Conn., 253: Jacks v. Nichols, 5 Barb., 38.
Now, we do not controvert appellee’s proposition that our courts will not enforce the penal statutes of another State. The error is in the conclusion based upon such proposition, that, therefore, this statute of Massachusetts will not be enforced, if the contract falls within its provisions. Some cases are relied upon by counsel to which wo first direct attention. Gale v. Eastman (7 Met., 14) was expressly ruled upon the ground that the law of New Hampshire, where the contract was made, peculiarly related to the remedy, and could not be enforced in Massachusetts. But, aside from the proposition that the remedy provided could only extend to suits brought in New Hampshire, there is nothing remotely bearing upon the question now before us.
There is no intimation that the court refused to act, because the law of the place of the contract was penal; and the same remark is applicable to Wright v. Bartlett (43 N.H. 548). Scoville v. Canfield (14 John., 338) decides nothing more, except so far as it states the admitted
But a more conclusive answer to the case is found in Barnes v. Whitaker (22 Ill., 606), where the Supreme Court of that State enforced the statute of this State upon a contract made here, so far as it declares that plaintiff shall have judgment for the principal sum, without either interest or costs. They refused, of course, to adjudge the penalty of ten per cent to the school fund; bnt the right of the defendant to insist upon the enforce
“Thedistinction in the two cases is not only without reason, but is against all reason, and all sound law and the philosophy of the law.”
Now, upon principle, why is not this case in point? Our law says plaintiff shall have judgment for the principal sum without interest or costs. The Massachusetts statute is, that he shall have judgment for the balance only, which shall remain after dedncti/ng the threefold amount. In neither case is there a criminal law to enforce, a penal statute having operation beyond the limits of the state enacting it. The legal effect of the contracts could not be different in different States, and it is according to this legal effect that all courts are bound to enforce them.
If the law affixed a penalty, and the defendant was in this case seeking to collect it, or if, as under our statute, the defendant forfeited a certain amount to the school or other fund, and we were asked to declare the same, we would have cases to which the instructions in question would apply. Is forfeiture the same as penalty in this connection ? This is easily answered. If the law attaches a penalty, as the .consequence of an act, it may be sued for and recovered; but it will be enforced alone in the State declaring the same. If, on the other hand, a person’s property may be forfeited or lost by some fault or offense, the forfeiture is not enforced except in the prosecution for the fault or offense; and, if the party guilty of the fault seeks to enforce the contract which he has obtained as the fruits of such offense, he can take no part of the forfeiture.
But take still other illustrations: a stockholder fails to comply with the terms of the articles in the payment of his stock, and these articles declare that for such non-compliance his share shall become forfeited. Will any one pretend that this is a penalty within the meaning of the law? Then, again, equity recognizes the distinction, when it is said that a party will always be relieved from a penalty, if compensation can be made because it is deemed as a mere security, and yet, though compensation can be made, relief will not always be given against forfeiture. So, again, we speak of a forfeiture in case of a breach of covenant, but never of it as a penalty. So of a penalty as contradistinguished from liquidated damages, but never of forfeiture in the same connection. Then, again, of forfeiture as a recompense to an injured party for the wrongful or illegal act of another, by which the latter loses his interest in the thing. But penalty
Our conclusion, therefore, is, that the court below erred in giving the instructions above quoted.
The testimony is not all before us. We cannot, as a consequence, hold that the jury necessarily found that this was an Iowa contract. If they believed it was a Massachusetts contract, then, from the law given to them by the court, they must still have found for plaintiff; and as we do not know but the testimony justified such conclusion, the judgment is reversed and remanded.
Reversed.