63 Barb. 415 | N.Y. Sup. Ct. | 1866
Lead Opinion
I had doubts, at first, whether the corporation could exercise its functions within the limits of this State. In Merrick v. Br dinar d and others, decided by this court in January, 1860, (38 Barb. 574,) it was held that a corporation created by the laws of Connecticut could not make a valid contract in this State, when it appeared, from the evidence, that, except in the formal election of its officers, its principal business was transacted in this State. (Reversed on appeal, 34 N. Y. 208.) I did not concur in that decision; nor do I think it necessarily controls the case at bar; for the evidence here shows that the business of the Rock Island Coal and Coke Company is transacted in Illinois, except that the meetings of its directors are sometimes held in this State. It is undoubtedly true that the State of Illinois cannot create a corporation within this State, but it is no objection to the corporate acts of a foreign corporation in this State, that they are authorized by a meeting of directors held in this State, when the acts authorized by the directors are not repugnant to the policy of our own laws. (Angell & Ames on Corp. 250, et seq. McCall v. Byram Manuf. Co., 6 Conn. 428.)
Assuming that the Rock Island Coal and Coke Company duly authorized the issuing of the bonds in question, by a resolution of the directors at a meeting held at the city of Syracuse in this State, and that they are valid by the laws of Illinois, where the company is located, the first question is, whether the defendant, who guarantied their payment, is in a position to defend upon the ground of usury.
It is claimed that this question has already been dis
By the laws of this State, (Sess. Laws of 1850, p. 334,) a corporation'cannot plead usury to avoid its contracts; and this applies to foreign as well as domestic corporations. (Southern Life Ins. Co. v. Packer, 17 N. Y. 51.) It was decided in this court, in the case of The Hungerford Bank v. Dodge, (30 Bart. 626,) that indorsers of a promissory note made by a corporation were "not within the act, and might interpose the defense of usury, though the principal could not. That decision was made by a divided court, but the case was well considered by the learned justice who delivered the prevailing opinion, and is entitled to our respect as authority, until it is overruled by a higher tribunal. The reasoning in the cases of Curtis v. Leavitt, (15 N. Y. 9,) and Butterworth v. O'Brien, (23 id. 275,) seems to conflict, somewhat with the authority of Hungerford Bank v. Dodge ; but the case itself has twice been decided in this court, and I am inclined to follow it, unless the judge who concurred in the decision is of opinion that the principles upon which it was decided are overruled by the Court of Appeals. It may be difficult to reconcile it with the reasoning of the judges in the cases above referred to in the Court of Appeals; but it is apparent, I think, that a statute which estops a corporation from pleading usury, is not necessarily to be construed so' as to include those who indorse its paper or guaranty the payment of its loans. If is a question of construction, and this court having adopted a certain rule in reference to the statute of 1850, I am not inclined to depart from it, until a higher court shall have decided the other way, or the judge who concurred in it, shall express a desire to reconsider the question.
The next and principal question is whether the contract is usurious. Let us state the case briefly before citing the authorities. The Rock Island Coal and Coke Company is an artificial being, having its residence in the State
It is said that the contract was made in Illinois. This position is not sound. The corporation, so to speak, came into this State and made the contract here, and agreed to repay the borrowed money here.
It is therefore as much a Hew York contract as though an individual of another State came here and borrowed money of one of our citizens, agreeing to repay the same at some of our banking institutions in this State. It is said that all contracts which are to he construed within the State in which they are made, must be construed according to the laws of that State. (2 Pars. 82.) And the same thing is true in general, when contracts are construed in a place other than that in which they are made. (Id.) This is the general rule; but there are exceptions. It is also said that foreign laws may have a qualified force within a State, by the comity of nations, or by constitu
As to the validity of contracts, the general rule is that a contract which is valid where it is made, is to be held valid anywhere. And on the other hand, if void or illegal by the laws of the place where made, it is void everywhere. (2 Pars. 82, and note, and authorities there cited.) It is, however, claimed that although contracts are generally to be construed according to the laws of the place where they are made, still there is an exception to this rule when the contract is made in reference to a foreign law. There is no principle upon which such an exception can be supported. It would, in effect, give to a foreign law a power to control and supercede our own laws, upon the same subject matter. This principle cannot be admitted.
If the bonds in question had been made payable in Illinois, there are authorities which hold that the laws of Illinois might be applied to them. But these bonds, being made expressly payable in this State,.where they were executed, the laws of this State must, upon all the authorities, be applied to them. (2 Pars. 95.)
The appellant’s counsel cites the case of Le Breton v. Miles (8 Paige, 261) as an authority for a different rule. That was the case of an ante-nuptial contract entered into in this State by two natives of France, relative to their future interests in property which they had at the time of the marriage, or which they should acquire during coverture. It was made in reference to the laws of France, where the parties expected to reside. The chancellor held, that as France was their intended domicil, the laws of France must be resorted to, to determine their rights to personal property, as affected by the ante-nuptial contract. Ho
The cases of Pomeroy v. Ainsworth, (22 Barb. 119,) and Cutler v. Wright, (22 N. Y. 472,) belong to the same class, and do not invalidate the general rule above referred to.
If I am right in these views, the result is, that the bonds are void for usury as to the defendant, who guarantied their payment.
It is proper to add, as I have already intimated, that I do not concur in the former decision of this court, which permits the guarantor to set up a defense which the corporation is prohibited from interposing to the same bonds. If my brethren are of opinion that the case of Hungerford Bank v. Dodge is open to review, in consequence of the later decisions in the Court of Appeals, which have been supposed to hold a contrary doctrine, I shall be willing to unite in affirming the judgment on this appeal, upon the ground that there is no usury in the bonds of the corporation, the statutes of this State having repealed the usury laws, as to corporations.
And I am unable to discover the principle upon which the contract of the guarantor is to be held void for usury, when there is no usury in the obligation which is guarantied.
Since writing the foregoing opinion, it is announced that in the case of Rosa v. Butterfield, in the Court of Appeals,
Bacon, J., concurred.
Dissenting Opinion
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
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
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
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,
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
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
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
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
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.]
