Smith v. Alvord

Morgan, J. 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 — 424 — posed of, so far as this court is concerned, against the views of the plaintiff. 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 — 425 — of Illinois. It is authorized by the legislature of that State to borrow money at ten per cent. It came to Syracuse, H. Y., and made its obligations, agreeing to pay ten per cent for money. The contract or loan was made in Syracuse. The money was borrowed, and the repayment of the loan and interest was to be made in Syracuse. This does not differ from the case of an individual authorized by the laws of the State of Illinois to borrow money at ten per cent, to be used in" some enterprise in the latter State. He may borrow the money in this State, or he may negotiate his obligations in England or Holland. If the payment is to-ibe enforced in the State where the person resides, and when the loan is authorized, there can be no difficulty in the case. The difficulty grows out of the fact that the contract is made in a State where the loan of money at a greater rate of interest than seven per cent is prohibited, and where the contract of the guarantor is to be enforced. The laws of Illinois have no binding force in this State, and this court does not sit to administer these laws, but our own. 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 — 426 — tional provisions. In the absence of legislative interference, it may, perhaps, be said with truth that laws of another State may have some operation in this State, when they do not conflict with the operation of .our own laws. 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 — 427 — authorities are cited to sustain the decision; although the chancellor says it is a well settled principle of law in relation to contracts regulating the rights of property consequent upon a marriage, so far, at least, as personal property is concerned, that if the parties marry with reference to the laws of a particular place or country as their future domicil, the law of that place or country is to govern as the place where the contract is to be carried into effect. This is but another illustration of the rule that in certain cases, the law of the place where the contract is to be performed, may be resorted to, to determine the rights of the parties, when the parties contract with reference to such a law. 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, — 428 — (33 N. Y. 665,) it was decided that the guarantor could not avail himself of the statute. The judgment must therefore be affirmed. Bacon, J., concurred.