188 N.Y. 108 | NY | 1907
This is a proceeding for the disposition of certain surplus moneys arising upon the sale of lands in the city of New York, made pursuant to a decree in foreclosure of the plaintiff's mortgage. The property had been deeded to Kellogg, this respondent, by Dewey, this appellant, as collateral *110 security for the payment of the latter's notes. The parties were residents of Springfield, Massachusetts, and the loans of moneys to Dewey were made upon his notes, which were dated and delivered there and made payable at a bank in that city. One of the notes thus given represented a bonus to Kellogg; but all claim upon it was expressly waived. When Dewey deeded to Kellogg the New York real estate to secure the payment of his notes, a stipulation was made between them, reciting the fact of the deed being security for the loans and providing that the property should be re-conveyed to Dewey upon the payment of the notes. Creditors of Dewey brought an action and procured it to be adjudged that, as between him and Kellogg, the deed was a mortgage and that Dewey was the legal owner of the property. Upon the sale had in foreclosure of the plaintiff's mortgage, subject to which the property had been conveyed to Kellogg, the portion of the surplus proceeds applicable upon Kellogg's interest as grantee, or mortgagee, was claimed by him in satisfaction of Dewey's unpaid notes; while Dewey, or his creditors, claimed them upon the ground that Kellogg's mortgage was tainted with usury and was void. The courts below have sustained Kellogg's claim; holding, in effect, that, as it was not shown that the agreement for the loan was usurious under the laws of Massachusetts, the validity of the deed to secure the loan could not be affected, because under the laws of New York the principal transaction would have been avoided for usury. No evidence was given as to the law of Massachusetts concerning usury and it was not attempted to prove the contract to be illegal in that state. The validity of the agreement between the parties, as determinable by the law of the place where made, is conceded; but the appellant insists that, while the notes for the moneys actually loaned may be, legally, indisputable, the deed by way of collateral security is, nevertheless, avoided under our usury law. His argument is founded upon the declaration of our Statute of Usury and upon the authority of the early case of Chapman v. Robertson, (6 Paige, 627). The provision of the Usury Law is, that "all bonds. *111 bills, notes, assurances, conveyances, all other contracts or securities whatsoever * * * whereupon or whereby there shall be reserved or taken, or secured, * * * any greater sum, or greater value, for the loan or forbearance of any money, goods or other things in action, than is above prescribed, shall be void." (2 R.S. 772, sec. 5, as amended by L. 1837, ch. 430).
I do not think that this statute has any bearing upon the case of a transaction, or agreement, between the parties, valid in the foreign jurisdiction where made. Under our law the deed by Dewey was perfectly valid on its face and conveyed a perfect title to Kellogg. To establish its invalidity, whether as a deed, or as a mortgage, it was necessary for the former, in order to defend against its operation, to set up and to prove that the instrument was given in pursuance of an agreement, which was usurious and, therefore, vitiated the conveyance. What we are asked to hold is that the law of the place, where the property happens to be, shall govern, rather than the law of the place where the loan was made, of which the conveyance was but an incident. In my opinion, the meaning, or intent, of our usury statute is that the validity of the conveyance, or mortgage, is determined by the validity of the agreement of the parties and I think the law of the place of its making governs as to that. As the defense of usury is a personal one, the conveyance was unassailable, until the defense was set up by the borrower and then the settlement of the issue was referable to the law of the place where the principal transaction was had. The giving of security was but an incident of the agreement of the parties; for it was but a means of securing what was agreed to be done. It did not affect the fulfillment of the agreement and if that is unassailable, how can the defense of usury in the agreement for the loan, or forbearance, of money be made out? Manifestly, it cannot be. The borrower could not show that the loan to him was so affected by usury that the repayment of the principal sum was unenforceable. The case of Chapman v. Robertson, (supra), if we assume that it *112
lays down the rule that the lex situs governs, as the appellant contends, is not controlling upon us as an authority. A resident of the state of New York had applied to a resident of Great Britain for a loan upon his bond, secured by mortgage upon New York real estate. In proceedings to foreclose the mortgage, the defense was interposed that by the English law the loan was usurious. Chancellor WALWORTH held that the mortgage "being valid by the lex situs, which is, also, the domicile of the mortgagor, it is the duty of the Court to give full effect to the security." That the case was, probably, regarded as exceptional in its facts appears from the statement by the chancellor that "it was a contract partly made in this State and partly in England. And being actually made in reference to our laws and to the rate of interest allowed here, it must be governed by them in the construction and effect of the contract as to its validity." It differs from this case in the respects of the agreement having been, partly, made in England and, partly, here by residents of the respective countries and, also, of the money being payable generally. In this transaction the agreement was, wholly, made in Massachusetts by residents of that state and the money was to be repaid there. The differences may be unimportant and may not be determining. The decision, however, has not escaped criticism, in holding that the contract was to be governed, in the enforcement of the security for its performance, by the lex situs and it has been regarded as irreconcilable with other cases. (Story on Conflict of Laws, sec. 293c; Cope v. McCraney, 53 Barb. 350;Dickinson v. Edwards,
The rule of law upon the facts of this case should be regarded as settled upon very precise authority. In Cope v. Wheeler,
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I think this case has been correctly decided and, as no other point demands our consideration, I advise the affirmance of the order appealed from, with costs.
EDWARD T. BARTLETT, HAIGHT, VANN, WERNER and CHASE JJ., concur; CULLEN, Ch. J., concurs in result.
Order affirmed.