518 , . other 2 were "appropriated"'as a'bonus for the loan evidenced by the note. The noteipurports to be ina.de at New York, is dated September 24, 1884; is signed by,thecomplainant, and reads as follows: "On or befure September 24, '1.886. and upon the return of securities pledged, I promise to pay to my own order, at the office of the American Loan & Trust Company, Ne,w York, ten thousand dollars, for value received, with interest at the rate ofsbe per cent. per annum.from date, having deposited with the holder therElof, as collateral security, twenty first-mortgage bonds, 'of the Toledo &i Indianapolis Railway Company, for 1,000 each, with coupons for 'April 1, 1885, with authority to sell the same, or other securities subsequently substituted at the board of brokers, or at publid 'or private sale,'at holder's option, on the non-performance of this promise, and without further notice; applyinK the net proceeds to the payment of this note, including interest, !lnd aC(',(lunting ·to me for the surplUS, iiany.In case of deficiency, the maker promises to pay to tIle holders thereof the amount thereof forthwith after such sale, with legal interest." ,t; On the twenty-fourth day of September, 1884, the plaintiffsigned and delivered to the president of the finance company, at Providence, Rhode Island, a number of notes of the same tenor, for the aggregate amount of $325,000.! ,. This note was one of the series. They were made to secure the payment of a loan to that amount which Mason and Jillson had consented to make to the complainant upon the conditions expressed in the tripartite agreement. By that ag'reement Mason and Jillson promised to loan $325,000 to complainant upon his notes, to be made in form approved by them, with mortgage bonds of the Toledo & Indianapolis Railway Company in double the amount as collateral. For making the loan they were to receive a large bonus in excess of interest at the rate of 6 per cent. per annum. The negotiations leading to the,contract were closed at Providence, Rhode Island, that being the domicile of Mason and Jillson,and the contract was formally executed there. After the contract was signed, the notes were delivered there by plaintiff to Mason and Jillson. The bonds to be put up as collateral were not delivered. It was understood between the parties that the complainant did not then have the bonds, but that they were to be acquired subsequently, and that the money to be loaned by Mason and Jillson was to be remitted by them to the finance company in New York city, to be used by that company for the purpose of acquiring the bonds. The bonds at that time were in the hands of variouseorporations and individuals, who had supplied matel"ials for furnishing and equipping the railway which had been recently constrncted by the Toledo & Indianapolis Railway Company. One Dowling had been the contractor for building the railway, and under his contract with the railway company' became entitled to all the bonds ($800,000 in amount) and capital stock of the railway company upon payment of the claims ofihose to whom the bonds had been pledged. The complainant had acquired Dowling's rights, and had applied to the finance company to assist him in raising, money to pay up the claims of those to whom the bonds were pledged, and the other claims against' the railway company, his intention being to acquire all the capital stock' and mortgage bonds of the railway company, and to
organize a new corporation. The comphlinant and the finance company had entered into an agreement bearing date April 14, 1884, by which the latter, for certain commissions; undertook to raise the necessary means for the complainant to effect this object. As has been stated, the tripartite agreement was understood by all the parties to it to be supplementary to the April agreement between the complainant and the finance company, and was entered into in order to enable the finance company to carry out the terms of the April agreement with the complainant, so far as new conditions were not substituted in the new contract. The parties contemplated that the finance company should occupy the relation of an intermediary or trustee sub modo between the complainant and Mason and Jillson, for the protection of the rights of all, and it was understood that Mason and· Jillson should remit moneys to the finance company fI!orn time to time, when necessary'to enable that company to settlewith'tbe creditors of the Toledo & Indianapolis Railway Company, and acquire -their claims and the bonds, and that the finance company should hold the claims asa trust fund, and cancel them upon the payment of the loan, Apparently, by the scheme contemplated, the finance company was to hold all the bonds acquired until they were exchanged for bonds of the new corporation which was to be created, unless it should be found desirable to negotiate the complainant's notes, or some ofthem, with the bonds, as oollateral to enable Mason and Jillson to make advatl.ces, or unless in the mean time the complainant might desireto sell his portion of them, and use the proceeds for the payment of the loan. It is conceded by counsel for both parties that the loan was made upon a usurious consideration, if the agreement was a New York contract; that is, ifits legality is to be tested by the law of New York. The agreement was not usurious if it was a Rhode Island contract. The argument for the plaintiff is that it is a New York contract,because the notes were payable in'New York, and because New York is the place of the substantinJ. performance of the controllinp; provisions of the tripartite agreement. The argument for the defendant is that it is a Rhode Island contract, because the notes and contract were made in Rhode Island, and the notes were negotiated there. There was no purpose on the part of any of the parties in making the contract in'Rhodelsland to evade the usury laws of New York. The complainant was a citizen of Ohio, and came to Pro\Tidence because the defendants lived 'here.. The negotiations were closed and the instrument formally executed there, and the notes were delivered there as a matter of 'business convenience. It does not seem to be necessary to enter upon a discussion of the subject of the lex loci contractus, as determined by the place of the making or the place of the contemplated performance of a contract. The general rules which control, 'their exceptions, are familiar, but the books are full of conflicting illustrations of their application to the particular case. The primaryhile is that the validity of a contract is to be determined by the law of the state in which it is made. If it isvaJid there, it is deemed valid everywhere, and will sustain an ac. tion in the co'Urts of a state whose, laws do not permit such a contract.
Scudder v. Union Nat. Bam.k, 91 U. S. 406. If the contract is not in itself immoral, although it is expressly prohibited by the statutes of the state in which the suit is brought, the courts administering the comity of that state will not refuse to enforce such a contract, made by one of its own citizens in a state the laws of which permit the contract. Greenwood v. Curtis, 6 Mass. 358; McIntyre v. Parks, 3 Meto. 207; Akers v. Demond, 103 Mass. 318. The principal exception to the rule that a contract is to be governed as to its interpretation, its nature, and obligation, by the law of the place where it is made, is that the law, of the place where it is to be performed will goVern the mode of performance, because it is presumed that the parties had this law in contemplation when they entered into the contract. InasU1Uch as this exception rests upon the presumed intention of the parties to conform to the rule of the local law in carrying the. contract into effect, it seems strange that it should ever have been treated as the criterion by which to ascertain whether the obligation is void for illegality. Phillimore says that, as it. rests upon ,the presumption that the obligor has voluntarily submitted himself to a particular local law, "that presumption may be rebutted, by the fact that the either by an express declaration 'to the contrary, obligation is illegal by that particular law, though legal by another. The parties cannot be presumed to have contemplated a law which would defeat their engagement." 4 Int. Law, § 654, p. 471. Generally the place of performance of a contract, when the contract is a promise to pay money, is the place where the payment is to be made; yet this is not always controlling, and, in some cases, the courts which have looked to the place of performance as the place of the contract treat the place of payment as an incidental circumstance, and look behind the written instrument to ascertain what place the parties had in mind as the place of the contract. Wayne Co. Sav. Bank v. Low, 81 N. Y. 566; Western 'l'ranlfP. & Coal Co. v. Kilderhouse, 87 N. Y. 430. In both of these cases the state where the parties agreed upon the terms of a loan was held the place of the contract, when the legality of an agreement to pay interest would have been usurious by the law of the state in which the note evidencing the loan was made payable. Without pursuing the general subject further. it suffices that, when the question is whether a contract is void for usury or not, the weight of authority is now decidedly to the effect that the parties to a loan who contract in one state, and provide for payment in another, may lawfully stipulate for interest according to the law of either state,-that where the contract is made, or that where the money loaned is to be repaid,-as they may in good faith agree. Depau v. Hwmphreys,8 Mart. (N. S.) 1; Chapman v. Robertson, 6 Paige, 627; Peck v. Mayo, 14 Vt. 33; Townsend v. Riley, 46 N. H. 300; Kilgore v. Dennpsey, 25 Ohio St: 413; Arnold v. Potter, 22 Iowa, 200. In Miller v. Tiffany, 1 Wall. 298,310, Mr. Justice SWAYNE, delivering the opinion, uses this language: '''fhe general plincipJe in relation to :contracts made in one place, to be performed in another, is well settled. They are to be governed by the law of the '
M'ARTHUR 'lJ. SCOTT.
place of performance, and, if the interest allowed by tIle place of performance is higher than that permitted at the place of contract, the parties may stipulate forthe higher interest without incurring the penalties of usury. 'fhe converse of this proposition is also well settled. If the rate of interest be higher at the place of contract than at the place of performance, the parties may lawfully contract in that case also for the higher rate. These rules are subject to the qualification that. the parties act in good faith, and that the form of the transaction is not adopted to disguise its real character."
Adopting these deciBions aB controlling in the preBent caBe, it must be held that the contract here, being valid by the law of Rhode IBland, where it was made, is not affected by the fact that the notes evidf'ncing tpeloan were made payable in New York city. The motion is therefore denied.
McARTHUR and others v.
8. D. Ohio, W. D. June 22, 1887.)
)lORTGAQB<,-Co·TENANCY-CLAnt: FOR RENTS AND PnOFITS-PmORITY.
The lien of a mortgage executed by one co·tenant pdor to the institutJ()Dof a suiUor partition, and for the recovery of rents and profits, is superior to . the claim for rents and profits decreed in such suit.
Lawrence Maxwell, for complainants. Selden S. Cook, for respondents.
JACKSON, J. For the rents and profits charged against the defendant Crookham herein the C?mplainants claim a lien upon the land assigned to him under the partition prior to the lien of certain mortgages made before the institution of thiB suit. In June, 1871, and June, 1873, Lawrence Crookham was possessed of about 600 acres of the McArthur lands in Pickaway county, including 205 acres purchaBed in 1880 by George L. Crookham; and, while so possessed of Baidland, borrowed of Richard Dempsey $3,000 in June, 1871, and $3,000 in J1,lne, 1873, and to secure Baid BUmBg&ve said Dempsey at the date of each loan a mortgage upon the whole of said 600 acres. After Dempsey's death, in 1880, the mortgage debts being unpaid, his executors, under the power conferred upon them by section 6181), Rev. St. Ohio, transferred and assigned said claimB and mortgages to Jane Cooke, a legatee under the will, who has since held and owned the sa.me. The balance remaining due and unpaid . '. thereon was over In the partition proceedings had herein there was allotted, in 1886, to George L. Crookham 54 acres, and to Lawrence Crookham 73 .acreB, of said land, by metes and bounds. It iB well settled the mortgageB of 1871 and 1873 attached to this land BO allotted or assigned to said Crookham. On the nineteenth of January, 1887, this court, by the decree of that date, found that George L.CrMkham was indebted to the complainants and cross--complainants ·for rents and profits from August, 1885, tq.Q9"