Western Transportation & Coal Co. of Michigan v. Kilderhouse

As the plaintiff had judgment on the issues, and the findings of fact by the trial judge were not disturbed by the General Term, the order of reversal must stand, if at all, upon some error of law committed by him. (Code of Civil Procedure, § 1338.) The first ground of defense has been fully met by the finding that the notes were not tainted with usury, and this is clearly so, if, as is also found, they were given in execution of a contract made, not in Buffalo, but in Michigan, and with reference and subject to the laws of that State.

It is very well settled that penal laws have no extra-territorial force (Charles v. The People, 1 N. Y. 180 ; Ormes v. Dauchy, 82 id. 443); and the statute of Hew York, regulating the rate of interest, is merely a penal law. It is not claimed that the law of Michigan invalidates the contract. It is also well to observe that the defendant was bound, not only to set up the usurious contract in his answer, specifying its terms and the particular facts relied upon to bring it within the prohibition of the

To see what the contract was, and between what parties entered into, and how the plaintiff is affected by.it, we must resort to the words of the trial judge. From them, we find that the plaintiff is a corporation under the laws of Michigan, there doing business; that the $7,000 note and the mortgage were made to it as above stated; but we also learn that before the note matured, both were assigned to the People’s Saving Bank of Detroit, and continued to be owned by it; that after the maturity of the note, and between August 20 and 25, Ingram went to Detroit, sought the plaintiff, and of it requested an extension. He was then informed of the fact of the transfer of the note to the People’s Bank, and to it renewed his application “ for a further period of time for payment.” In reply, the bank stated, “ that the rate of interest it charged and demanded upon loans and for the forbearance of moneys due upon notes like that in question was ten per cent per annum; that provided it could obtain the consent thereto of the indorsers of the $7,000 note, and he, Ingram, would give a new note or notes for the amount, indorsed to the satisfaction of said bank, to be held by the bank as further and additional security, and pay ten per cent per annum, the bank would upon these terms extend the time of payment so that the amount could be paid in installments, not exceeding for any part a longer period than three months.” He assented to these terms, and promised the bank to make and deliver new notes for the amount of the past-due note, payable in installments within three months, and pay

In pursuance of this agreement, the bank procured the consent of the indorsers of the note, then past due, to the extension of the time of payment, as requested by Ingram, and afterward sent one Monaghan with the note and mortgage to Buffalo. "On the 11th of September, 1875, he there saw Ingram, informed him that he had been sent by the bank and that his directions were at once to foreclose the mortgage “unless the amount of said past-due note should forthwith be paid, or the arrangement he (Ingram) had made at Detroit for the extension of his time of payment should be carried out.” Ingram on the same day procured and gave to Monaghan the notes m suit and two other notes indorsed by one Clark, the four notes making the full amount of the past-due note, and interest and notary’s fees thereon. He also paid to Monaghan ■a sum equal to the difference of interest called for by the new notes, and that charged by the bank from the time of maturity of the old note until the new notes would by their terms become due. Monaghan delivered to the bank at Detroit the money and the notes, and “ they accepted the same and extended the time of payment of the amount secured by the said past-due note according to the times the said new notes were made payable.” They were not paid, and after maturity the bank foreclosed the mortgage; the vessel was bid in by the plaintiff for a sum so much less than the amount secured by it, that no portion applied upon the $7,000 note, and it being paid by the plaintiff, was with the" notes in suit transferred and assigned to it.

Upon these findings it seems to me, both upon principle and authority, that the construction of the trial judge must be .affirmed. Interest is the creation of positive law. The capacity to reserve it is conferred .by the law of the place where the •creditor becomes such, that is, where he loans money, or forbears a chose in action — in this case a debt already due ■—■ and to this point the various and far-reaching arguments of the

But the finding is otherwise,. and shows that what Ingram did was indeed in performance of an agreement, but it was one already made. He responded to the demand of Monaghan, that he should carry out the Michigan agreement. He did not discuss the terms with him. '

The respondent says, however, that “ the contract in Detroit was incomplete,” as to the number of notes to be given, the actual time of 'extension, place of payment and the indorsers. It does not seem altogether so. Payment by installments at such time as would not exceed three months for any one of them was agreed upon, and that was the material term. The place of payment was immaterial, for the notes were merely collateral, and the principal debt then past due could be paid only to the creditor at its residence in Detroit, and as to the

We have, then, an agreement made in Michigan, performed according to the understanding of one party in Buffalo, and acceptance of that performance by the other in Michigan as a fulfillment of the agreement. If before that event the agreement of August was revocable by either party, this acceptance of the money and securities consummated the contract. After that it cannot be maintained that the bank could, until default made in payment of the new notes, have enforced the principal debt or its security. (McIntyre v. Parks, 3 Metc. 207 ; Merchant v. Chapman, 4 Allen, 362 .)

The case, therefore, is brought directly within ’the general rule of law, which makes the validity of a contract depend upon the law of the place in which it is made, and when broken furnishes a cause of action to he enforced by judicial proceedings in any State, although the contract, if made where the remedy is sought, might by the law of the forum be invalid. I think also, that the plaintiffs have brought a case here, to which, as its counsel insists, our decision in Wayne County Bank v. Low, ( 81 N. Y. 566 ) applies. In that case, as in this, an agreement for extension or forbearance of a debt was made in a foreign State. In both, the note, or' obligation in fulfillment of it, was executed here; in one it was sent to the creditor by mail; in this it was delivered to the agent of the creditor appointed to receive and convey it — in the one, therefore, to a public, in the other to a private agent; but that fact, or the mode of transmission, can make no difference. (Milliken v. Pratt, 125 Mass. 374 .)

Many cases are cited by the learned counsel for the respondent in support of his argument. Some of them were con

The order of the General Term should, therefore, be reversed, and the judgment rendered by the Special Term affirmed, with costs.

All concur.

Judgment affirmed.