DYGERT V. VERMONT LOAN & TRUST CO.
the plaintiff, is immaterial. The variation in details which is pointed out in the affidavit of one of the defendants is, when so pointed out, entirely obvious, but that an ordinary purchaser would be likely to mistake the one for the other seems to me to be evident. Moreover, no attempt has been made to satisfactorily account for the general resemblance of the two envelopes, which, notwithstanding minor differences, unquestionably exists; and, in the absence of intent to imitate the plaintiff's envelope, the striking similarity to it of that of the defendants would be quite inexplicable. Besides, the affidavit of John G. Sachs, from which it appears that the defendants in fact sent the affiant a package of the tissue in question, inclosed in one of their own envelopes, although he had asked for tissue of the plaintiff, has not been controverted, and is very persuasive as to the defendants' actual motive and design. ,In my opinion, a preliminary injunction to restrain the defendants from using the particular envelope complained of in the bill, or any other envelope made in imitation of that of the plaintiff, but to this extent only, ought now to be awarded, and it is so ordered.
DYGERT et ux. v. VERMOKT LOAN & TRUST CO. (Circuit Court of Appeals, Kinth Circuit. Xo. 501. 1.
USURy-WHAT LAW GOVERNS.
}lay 2, 1899.)
'Where a note executed in one state is made payable in another, under the laws of which it is not usurious, while it is usurious under the law of the state where made, the law of the state of performance will govern as to usury. The question whether a promissory note is governed, as to usury, by the law of the state where it was executed and in which suit is brought, or of the state in which it is made payable, in the absence of a state statute on the subject, is one of general law, upon which a federal court is not bound to follow the decisions of the supreme court of the state.
FEDERAL COURTS-}'OI,LOWING STATE DECISIO:"S.
USURy-PLEADING-BGRDEN OF PROOF.
The burden of alleging and proving usury in a note rests on the maker when sued thereon, and the plaintiff is not required to allege that the note, when payable in a different state, was so made for convenience and in good faith, and not for the purpose of evading the usury laws of the state where it was executed, and such an allegation, if made, need not be proved.
Appeal from the Circuit Court of the United States for the District of Idaho. S. C. Herren, for appellants. A. E. Gallagher, for appellee. Before GILBERT, ROSS, and }IORROW, Circuit Judges. GILBERT, Circuit Judge. On November 17, 1892, the appellants, Albert Dygert and Flora T. Dygert, his wife, executed to the appellee, the Vermont Loan & Trust Company, a promissory note, dated at Spokane, Wash., payable December 1, 1897, for $3,400, with interest after date at 6 per cent. per annum, both the principal and in!l4 F.-fi8
94 FEDERAL REPORTER.
terest at Spokane, Wash., interest ,payable annually according to the, six i<lilterest couponl\qtes made at the same time. The interest coupOn Dotes. provided for interest after maturity. To secure the paymenLof the notes, the appellants executed to the appellee a mortgage: .on ",real estate in Idaho. The. appellee brought suit to foreclose them()rtgage. The appellants answered the bill, alleging that affected by the usury laws of state of Idaho; that the lOan was fo,r $3,000, and that the $400 added. to the principal thereof wall a: commission for milking the loan; th\l.t said commission was chArged in violation of sections 1264-1266, C.' .10, Rev. St. Idaho, and is therefore void. Upon the pleadings and the proofs, a decree was rendered in, favor of apPellee. ' On itheappeal to this court, it is conceded that the contract is usurious if it is controlled by the laws of Idaho, but that it is not usurious if tested by the .law of, Washington, where the notes were made payable. The principal question, presented is, by the, law' of which··atate ',is thec<mt:rRet gOl1l'lrned? In Andrews v. :Pond, ,13 Pet. 78, Chief Justice Taney, speaking for the court,said: "The general principle in relation to contracts made in one place to be executed in another is well "liOettled. They are to be governed by the law of the place of performance; and, if the interest allowed by the laws Of the is higher than that permitthe, parties Jl+ay stipulate for the ted at higher interest, without'incurring the penalties 'of usury." The language so quoted was approved in Miller v. Tiffany, 1 Wall. 298,310, alfd again in Coghlan v. Railroad! Go., 142U. S.101, 110, 12 Sup. ct. 1l50. R. Co. v.AshlandBank, 12 Wall. 226, 229, the cOIu:tsaid: "With regard to question w1;lat law is to, ,decide whether a contract is or is not usurious, the general rule is the law of the place where the money is made Bigelow v. BUrtih.airii"'8,3Iowa,"120;49 N. W.l04, the supreme court of Iowa ma.de'in,one 'state, 'to be performed in anO,ther, a..nd;,in express pri,videsf,or a ra,te .Qfinterest lawful in one, but unlawful in the other, state, the.p3.1'ties will be presumed to. contract with reference to the:laws of th'l/' state wherein the 'rate,'of is 'Of .Peck 'Mayo,)'<i; .vt. 33; v.g..orman, 15 . .,. Law, 328; v. Potter, 22. iowa, 194; McA.1hster Y., Sllllth, ,1.7 .TIL 328; . 13utler v. EdgertoD,15 Ind. 15J: In which our attention has belTn has doctriJ;le been. help" except In, the case of Trust'bo. v. Hoffman,' 49 Pac.S1S, very r'ecentty deCided ,by ,the supreme court of Idaho. In that case the court said: "The other eontention of petitioner, that the notes whiehthe mortgage sought to be foreclosed in this case was given to ,secure were made payable in the state.bf 'Verm!:)nt,'and'that; therefore,tp,e.}cpcUtract must be eonstrued by the laws of that state, is not only utterly untenable, but not one'Jlling!e authority of the multih.de cited by ,cQunse!Jn, ;:Q.is peti· tion. supports, the, contention." . ,appellalltsirely, ,upon t:Q.e ruling 'of the c()lIrt in that case, UJ:;ld contend that it construes a statute of Idaho, and, a precedent which is binding the upon this:cQUrt. But the question involved in that cil,se did not
DYGERT V. VERMONT' LOAN & TRUST CO.
deFend upon the construction to be given to a statute of the state. It was purely a question of general law. The inquiry was, what
law shall govern a contract made in Idaho, but made payable in another state? It was not affected by any statute of Idaho. The f'tatutes of that state are silent upon the subject. While it is the diJtyof a federal court, in a case of doubt as to a doctrine of general law, to lean towards the decisions of the state court (Brown v. Furniture Co., 7 C. C. A. 225, 58 Fed. 286; Burgess v. S ligman, 107 U.. S; 20,' 2 Sup. Ct. 10; Farmers' Nat. Bank v.Sutton Mfg. Co., 3 C. C. A. 1, 52 Fed. 191),the decisions of the state court are not controlling, and will not be followed, when they are opposed to the underlying principles of the law and the clear weight of authority (Telegraph Co. v. Wood, 6 O. O. A. 437, 57 Fed. 471; Railroad C-o. v. Baugh; 149 U. S. 368, 13 Sup. Ot. 914). It is contended that the court erred in ruling that the complainant was not t;equired to prove the allegation of the bill that the notes were nlade"payable in tM state of Washington for its convenience in transacting its busineS$, and not for the purpose of evading the usury laws of Idaho. The bill contained that allegation. The answer met it with the allegation that the defendants had never "heard or been, informed, save by the complainant's said bill, whether said notes and were made payable at Spokane, Wash., for convenience to plaintiff in the transaction of its business, and not for the purpose and with the intent or design to avoid or evade any of the laws of the stateo! Idaho, and are therefore without sufficient information either to a,dmit or deny the same." The court held that, the allegation of the bill "not being denied by defendants, no evidence upon the subject was ever given or required, it must be concluded that therewMno bad faith in making the notes payable at Spokane. audit m,ust follow that they are not usurious." If it be conceded that the answer does not admit the truth of the averment of the bill, it does not follow that the court erred in ruling that there was no proof Of usury in the contract. The burden of proving usury was upon the defendants. 27 Am. & Eng. Enc. Law, 1045; Berdan v. Trustees, 47 N. J. Eq. 8, 21 At!. 40; Kihlholz v. Wolf, 103 Ill. 362; Valentine v. Conner, 40 N. Y. 248. It was unnecessary for the complainant to allege in its bill that the notes were made payable in Washington in good faith, and not for the purpose of evading the usury law of Idaho. It was for the defendants to make the plea of usury, and to allege the facts in which it consisted, and, if it was believed that the notes were made payable in the state of Washington in evasion of the usury laws of Idaho, the defendants should have averred and proven that fact. The allegation in the bill was superfluous and no proof of it was required upon the part of the complainant. We find no error for which the decree should be rev(lrsed. It is accordingly affirmed.
CITY OF HELENAv. MILJ"S. , (Olrcuit Oourt of Appeals, Ninth Circuit. May 2, 1899.) No. 510.
MUNICIPAJ,'CORPORATIONS,- CONSTITUTIONAL LIMITATION OF IliDEBTEDNESSCONTRACT FOR WA'l'ER SUPPLY.
Under the constitution of Montana, which limits the Indebtedness of municipal 'wrporatlons, and prpvidestba:t all obligations' in excess of the amount so limited shall be void, a city not authorized by. statute to levy and collect a Special tax for )Vater purposes, and which is already Indebted the constitutional limit, has no power to bind itself by a contract fora silpply of water to be furnished for municipal purposes;, and a claim accrned for water furnished under .such a contract Is ,Within theconstitutioWitprohibltlon, and cannot be enforced.
In Error to the Circuit Court of of Montaa'la.
United States for the District
It ISSQught by the writ of error In this case, to review a rendered by the cirCUit Court upon the pleadings In lin' action brougbt by tbe defendant inericir to recover for water furnlsbed to' the' City of Helena under a contract made in 'pursuance of an ordinance of the city approved by the mayor on August 17i ;],81i}7. ' : . Theord,inance provided, other tblIjlgs, that James H. Mills, as tbe receiver of tbeHelena Consolidate.d Water Company, should furnlsb un full, ample, sufficient supply of good, pure, wholesome and clear water through said plant and system and the bydrants thereto connected, to the city of Helena for fire, sewerage and other Illllnicipal purposes, for a peri<jdof five years from the fu:st day of August, A., D, 1897." The ordinance further provided that if, within 30 days after its passage, tbe receiver sbould file with the city clerk bis acceptance of its terms,ltsbould go into effect and operate as a contract between the parties. The receiver accepted the ordinance, and bas since supplied the. city witb water. Tn May, 1898, the city refused to pay tberefor. The complajnt alleged these facts,: and further stated that the water plant operated by the receiver is the one in the city of Helena, and was tp.e only one at the time of the passage of tbe ordinance; that no other person or corporation was able at the time when said ordinance was passed, or for a long time prior tbereto, or at any time since, to furniSb water to the city of Helena for the purposes specified inthe or4Inan.ce; that the city has since th.e passage of the .ordinance levied and. collected taxes sufficient to meet the amount provided for in the ordinance. answer admitted all of said facts, but alleged that at the time when the contract was entered into, and at all times since, the city of Helena could have entered into a contract with responsible parties to supply it with water within six Illonths from the making of such contract, and that within such period the city could have. been supplied with water from sources other than those controlled by the .defendant in error, and that the contract was entered into without advertising for bids, and that, had the city asked for bids, and offered to enter into a contract with tbe successful bidder to supply it with water within six months thereafter, responsible parties other than the defendant in error would have bid; that prior to the ordinance the receiver and the water company had for more than two years supplied the city with water without any express contract. The answer further alleged that the city is, and eyer since the passage of said ordinance.has been, indebted beyond the constitutl.onallimit; that during IJ,one of such time has the assessed value of property in the cityexceeded $12,656,783, nor the aggregate indebtedness been less than $559,704. A judgment was rendered upon the pleadings in favor of the plain"' tiff In the action. ,
T. J. Walsh and Edward Horsky, for plaintiff in error. Cla.rberg, Corbett & Gunn, for defendant in error.