First National Bank of Brownsville v. Fleitmann

McLaughlin, J.: The complaint alleges that defendant Fleitmann’s intestate and Walter 0. Shaw, on the 1st of August, 1913, at the city of Brownsville, Tex., for value received, made and delivered to the plaintiff their promissory note in writing, dated on that day, by which they promised to pay to the plaintiff or its order, at its office in the city of Brownsville, Tex., $13,076.40 on the 1st day of November, 1913, with interest at the rate of ten per cent per annum until paid, and in addition thereto, if default were made in the payment of the note at maturity and the same placed in the hands of an attorney for collection, ten per cent of the principal and interest thereof as collection fee; that when the note fell due it was duly presented for payment, which was refused, whereupon the note was protested and notice given to the defendants that the protest fees amounted to four dollars; that thereafter the plaintiff placed the note in the hands of an attorney for collection, agreeing to pay him a fee amounting to ten per cent of the principal and interest thereof, and that at the time the note was given, and at all times thereafter, it was and is the law of the State of Texas that parties to a promissory note or other negotiable instrument may stipulate and agree therein that in the event that default be made in the payment thereof at maturity and the same placed in the hands of an attorney for collection, the makers or other persons liable thereon will pay an additional amount of ten per cent of the principal and interest of said instrument as attorney’s fees. The answer of Fleitmann’s intestate set up two separate and two partial defenses, to which the plaintiff demurred on the ground that each was insufficient upon the face thereof. The demurrer to the first and second defense and the second partial defense was sustained and overruled as to the first partial [77] defense. The plaintiff appeals from so much of the order as overruled the demurrer and the defendant appeals from so much of the order as sustained the demurrer. The order appealed from recites that after hearing “ counsel for the plaintiff, in support of said demurrer, and no one appearing in opposition thereto,” it is ordered, etc. Subsequently the defendant made a motion to resettle the order by having a provision inserted therein to the effect that her counsel did appear and was heard. The motion was denied, and on appeal the order was affirmed. (169 App. Div. —.) The order appealed from, therefore, so far as the defendant is concerned, was made upon her default, and by reason of that fact she is not in a position to question its validity. (Matter of Hotchkiss, No. 2,138 App. Div. 877; Matter of Radam Microbe Killer Co., 114 id. 199; Matter of Peekamose Fishing Club, No. 1, 5 id. 283; appeal dismissed, 151 N. Y. 511; Code Civ. Proc. § 1294.) The appeal of the defendant, therefore, must be dismissed. This leads to a consideration of the question presented by plaintiff’s appeal. As indicated, it appeals from so much of the order as overruled its demurrer to the first partial defense. This defense admits that the defendant Fleitmann’s intestate “made and executed the promissory note in the form as alleged in paragraph Second ’ of the plaintiff’s complaint, to which reference is hereby made, and which is a part of this answer.” Then follows an allegation to the effect that the note contained a provision in case default were made in its payment at maturity, and the same were placed in the hands of an attorney for collection, defendant would pay to the plaintiff, or its order, an additional amount of ten per cent on the principal and interest as collection fees; that the provision for the payment of the additional amount of ten per cent as collection fees “is illegal and is opposed to the public policy of the State of New York, and is unenforceable in this State and in the courts thereof.” The facts thus pleaded show that the promissory note upon which a recovery is sought is a Texas contract, and the validity of the provision for the collection fee must be determined by the laws of that State. The defendant does not raise an issue as to the validity of such a provision under the laws of Texas; on the contrary, such validity is [78] admitted, at least impliedly, by defendant’s failure to deny the allegation of paragraph 4 of the amended complaint, which sets forth the validity of such a provision under the laws of that State. All he asserts is that such a provision is unenforcible in the State of New York since it is opposed to the public policy of the State. If the provision is valid in the State of Texas it is valid here, and will be enforced. There are numerous decisions to the effect that such a provision in a promissory note is valid, and will be enforced under the laws of Texas. (Elmore v. Rugely, 107 S. W. Rep. 151; Childs v. Juenger, 162 id. 474.) The facts pleaded, therefore, do not constitute a partial defense to the cause of action set out in the complaint. It follows that the order, in so far as appealed from by the plaintiff, should be reversed, with ten dollars costs and disbursements, and the demurrer sustained, with ten dollars costs, with leave to the defendant to serve an amended answer upon payment of costs in this court and in the court below, and the appeal by the defendant dismissed, with ten dollars costs. Ingraham, P. J., Laughlin, Dowling and Hotchkiss, JJ., concurred. Order reversed, with ten dollars costs and disbursements, and demurrer sustained, with ten dollars costs, with leave to defendant to serve an amended answer on payment of costs in this court and in the court below, and appeal of defendant dismissed, with ten dollars costs.