Vermont State Bank v. Porter

Swift, J. Tills is an action on a note given to the Fcr-■non!. State Bank, and executed in that stale. The defence is, that since the commencement of the suit, tire defendant has paid the debt in the hills of that bank, pursuant to a law of that state, enabling the promissor of a note to the bank, if sued in that state, to pay it in hills of flic same, and plead such payment by way of set-otf to the debt. — 319 — ii has been contended, for the defendant, that the act of the legislature of Ferment incorporating this bank, is opposed (o that clause in the constitution, which forbids a state to emit bills of credit, on the ground that the redemption of the bills depends on the faith and credit of the state of Vermont. The object of the framers of the constitution in inserting this restriction upon the ¡towers of the state goverments, was to prevent them from making a paper currency, which had been productive of much inconvenience at that period ; but it was not intended to prevent them from establishing banking institutions for their own benefit. Though in this instance, there are no permanent funds for the payment of the bills, nor any compulsory process to enable the holders to obtain payment; yet the notes received by the president and directors for bills issued and loaned, are a fund to redeem them. The bank does not rest on the sole faith and credit of the state ; and the establishment is not repugnant to the constitution of the United Slates. It has been contended, on the part of the plaintiffs, that the plea of the defendant is bad, because a sufficient sum in bills has not been offered, as it appears by a calculation of interest, at six per cent, on the principal sum secured in the note, there will be considerable deficiency; but the defendant has alleged that he offered a certain sum in full of the debt. This allegation was traversable ; if, therefore, the sum was insufficient, an issue might have been joined on that point; and it does not appear from the record what is the rate of interest in Vermont, or that payments have not been made : of course, there are no data by which the court, under a demurrer, can say, that the sum was insufficient. It has been argued by the plaintiffs, that the act of the legislature of Vermont, enabling debtors of the bank to pay tlieir notes in bills, is repugnant to that clause in the constitution of the United States, which forbids states to make anything a tender in payment of debts,except gold and silver coin, or to pass any laws impairing the obligation of contracts : but this does not prohibit states from enacting laws for the set-off of mutual debts. This act of Vermont is a law — 320 — of that description, passed by the real plaintiffs in this case, and may not only be considered as a law authorising the defendant to make this set-off; but as an agreement, on their part to receive their own bills in payment of debts due to them. But the principal question is, whether the payment in this state, as set forth in in the plea, is a bar to this note, by the laws of the state of Vermont, where the contract was executed ? The general rule of law is, that contracts made in one state, and valid by its laws, shall be deemed valid in every other state; provided, that the state, before whose courts the contract is attempted to be enforced, or its citizens, shall not suffer any inconvenience by it ; and that the consideration be not immoral; or that giving the contract effect, will not have a bad tendency. The laws of the place, however, apply only to the nature, validity and construction of contracts : and not to the form of the action, the course of judicial proceeding, and the time when the action may be commenced. These must be according to the laws of the place where the action is brought. It is contended on the part of the plaintiffs, that this payment by the defendant, as pleaded, relates to the remedy on the contract, and must, therefore, be governed by the laws of the state where the action is brought; and as such payment is not warranted by the laws of this slate, it constitutes no defence to the action. It is, certainly, proper, that the form of the action, and the course of judicial proceedings, should be according to the laws of the place where the action is brought; for the forms of trial are very different in different countries; and it would be extremely inconvenient to introduce the practice of the courts of one country into those of another. But this relates merely to the form of the action, the mode of pleading, of trial, and of awarding execution. For instance, in countries where the civil law prevails, trials of issues in fact must be by the judges ; in countries where the common law prevails, by the jury. The question, whether a set-off shall be made of mutual debts, does not relate to the form of proceeding, — 321 — Out goes Í» (lie merits oí'I he ease ; anil shews, that no recovery ought to he hail. So tar from relating to the form of the remedy, it shews there ought to bo no remedy. But it has been said, that, the plea of set-off is unknown to our laws, and therefore, cannot ho made. It is true, we have no statute authorising a set-off of mutual debts ; but the general rules of the common law enable a defendant to plead any matter in bar, which destroys the plaintiff’s right to recover : and if a set-oif can be made by law so as to avoid the claim of the plaintiff, the common law will supply a form for pleading it: for though the forms of proceeding are different in different jurisdictions, yet the substantial principles of justice ought to be equally regarded in all. It has been said, that this plea of set-off, is analogous to the plea of the statute of limitations, and that courts will not regard the acts of limitation respecting contracts made in another jurisdiction ; but statutes of limitation do not relate to the nature or validity of the contract. The reason why they have not been allowed is, that it would encroach upon the authority of courts, to permit the laws of another state to conlroul their proceedings. A statute of set-off is founded on those principles of justice, which ought to be respected in all countries. Instead of avoiding a just claim, by length of time, it interposes a mutual debt, which must always be a just ground of defence. There is, therefore, no analogy between the statutes. It has been further contended, that admitting such tender might have been good, if made in Vermont, yet being made in Connecticut, it cannot be good, because the laws of Vermont cannot extend beyond the limits of that state, so as to enable the party to do an act which constitutes a defence. This is assuming the principle, that where a contract is made in one state, and the contracting parties live in another, where the law respecting the performance of such contract is different, the parly whose duty it is to perform such contract, cannot avail himself of the law where the contract was made, but must conform to the law of the place where he performs the contract. — 322 — To support this position i he case of Burrows v. Jemino. 2 Stra. Rep. 733. and Inglis & al. v. Usherwood, 1 East's Rep. 515. are relied on. llut these cases do not warrant this doctrine. In the first, the only point decided was, that in a suit against the acceptor oí' a bill of exchange, in Leghorn. the local laws of the place where the bill was negoeiated, should govern, and not the law of England. In the other case, the point decided was, that on a sale of goods, in Russia, the right to stop them in transitu, should be according to the law of Russia, and not according to the law of England. Thesé cases establish the principle only, that contracts shall be construed, and take effect, according to the law of the place where they are made. I apprehend, then, that the true doctrine is, that the law of the place decides the right and the duty of the contracting parties in the performance of a contract ; and that where a contract, made in one country, is performed in another, the performance must be according to the law of the place where the contract was made. This is the necessary consequence of the doctrine, that the law of the place where contracts are made, shall govern them; otherwise, a contract may be essentially changed, by the removal of the parties. It has ever been considerd, in practice, that contracts must be performed according to the law of the place where made, to enable the parties to defend against a demand upon them. Suppose a note is given in the state of New-York, for lawful interest, and the parties remove into this state, the promissor must tender seven per cent, interest, being the lawful interest of the state of New-York; though by our law, six per cent, is the lawful rate of interest. Suppose a note should be given in Great-Britain, for lawful interest, and the parties should remove into this state, the promissor might tender five per cent, interest, which is the lawful interest of that country ; and this would be a performance of the contract. In this case, he would do an act in this state, not conformable to our laws,, but to the laws of England, which would constitute a defence against an action on the note* — 323 — it also, appears to me, to be a sound principle, supported by analogy, and uncontradicted by any authority, that whatever is a good defence upon the merits of the case, in the country where the contract was made, is a good defence in the country where the action is brought. This necessarily results from the rule, that contracts are to be governed by the laws of the place where made ; for there is the same reason, that the defendant should have advantage of local laws in his defence, as that the plaintiff should have such privilege, in supporting his claim. It would be highly unreasonable to determine, that the plaintiff, by virtue of the laws of the state of Vermont, can, upon a contract there executed, maintain an action in the courts of this state, and then refuse the defendant the privilege, allowed by the laws of Vermemt, of pleading a set-off of a mutual debt, because a set-off is not known to our laws. As the plea states a meritorious defence by the laws of Vcrmmt, I am of opinion, that the plaintiffs are not entitled to recover ; and that the judgment of the Superior Court be affirmed. The other Judges concurred in this opinion ; and Rf.eve, J. went further, holding the establishment of the Vermont State Bank, to be contrary to the constitution of the Vnilcd States, which prohibits the emission of a paper currency. Judgment affirmed.