Shannon v. Georgia State Building & Loan Ass'n

Whitfield, C. J., delivered the opinion of the court. It is thoroughly settled in this state, under facts like those in this record, that the appellant can recover the whole of the interest. McAllister v. Jerman, 32 Miss., 142; Chaffe v. Wilson, 59 Miss., 42. The appellant stood as a substituted debtor and had all the rights the original debtor had. The premium in this case was fixed, and the contract was, therefore, usurious. See the cases of Sokoloski and Crofton, 77 Miss., 155-166. The chief point of contention is whether this is a Georgia or a Mississippi contract.. It is true the notes were payable in Georgia, but the mortgage was on land in Mississippi and the debtor lived in Mississippi, where alone the mortgage could have been enforced. All the payments, through a series of years, were actually made in Mississippi, instead of Georgia, to the local treasurer here, and it is manifest it was intended they should be made here. This foreign corporation had the power to organize local boards throughout Georgia and other states. It did organize a local board, thoroughly officered, at Ellisville, in this state, and to the local secretary and treasurer of this board all payments were made by the appellant and his vendor, and by other members of this association, through a series of years. It is obvious that this foreign corporation has thus localized — 965 — its Mississippi business within the State of Mississippi. It is not a case of a nonresident money-lender, or a foreign corporation, in a few isolated cases, dealing with our citizens and taking notes payable in the state of the domicile of such person or corporation. It is the case of a localization within this state of a large business done by a foreign corporation on the faith of mortgages on land in this state, the payments to be made to the secretary and treasurer of their respective local boards scattered throughout the state. Wherever, under circumstances such as these, the foreign corporation, thus localizing its business within this state, has the payments made to the secretary or treasurer of a local board, the real intention of the parties is that the payments shall be made in this state, and the only purpose of reciting the contrary in the notes is to evade the usury laws of this state. The contract is a Mississippi contract according to the real facts and the real intention of the parties. Courts look through all disguises to the real case made by the actual facts. This proposition is abundantly supported by the authorities. In the precisely parallel case of Building & Loan Association v. Griffin, 90 Texas, at page 488, the court says: ‘ ‘ It, therefore, became domiciled in the state the same as an individual would, who came here for the purpose of doing a like business and yet retained his citizenship in the state from which he came. The borrower lived in Texas; all of the property that he owned, so far as we know, was situated in this state; at least there is nothing to indicate that he owned property in the territory of Dakota. To secure the payment of the debt a deed of trust was taken upon property situated in this state. Upon these facts the question is to be determined whether or not the contract, under the evidence and surrounding circumstances, was really intended to be performed in the territory of Dakota or in the state of Texas. ‘ ‘ The general rule of law contended for by the loan company, that a contract which is to be performed in a state other than that in which it is made, may reserve interest, according — 966 — to the laws of either state, is too well settled to require discussion, or the citation of authority ; but the law looks to the substance of the contract, and will not tolerate any contrivance by which it is intended to evade the laws of a state in which the contract is made, or sought to be enforced. The fact that the contract expresses that the money borrowed is to be paid in the Territory of Dakota, is met by the real substantional provisions for its enforcement, and the circumstances under which the business was transacted, with such overwhelming force, that we are brought to the conclusion that the contract, in so far as it provided, by its terms, for payment of the money in the Territory of Dakota, was simply a device to evade the laws of this state, and that these facts are so manifest from the face of the papers themselves, that it ceases to be a question of fact, but becomes a matter of law, to be determined from the undisputed evidence that is thus furnished. The contract having been made with a view to its enforcement in the State of Texas, and not in the Territory of Dakota, the agreement expressed in it, that it should be paid in the Territory of Dakota, was intended to enable the loan company to do business in Texas, by authority of the laws of this state, and set our laws at defiance with impunity, and it cannot be enforced by the courts of this state. (Tyler on Usury, p. 83 ; Miller v. Tiffiany, 1 Wall., 298 ; Falls v. U. S. S. L. & B. Co., 97 Ala., 417 ; Meroney v. Atlanta B. & L. Ass'n, 47 Am. St. Rep., 841; s.c. 116 N. C., 882 ; Martin v. Johnson, 84 Gra., 481 ; Fowler v. Bell, 37 S. W. Rep., 1058; s.c. 90 Texas, 150.)” In Meroney v. Loan Ass'n, 116 N. C., 882, the court say, at p. 887 : ‘‘ It is important that foreign capital invested within our borders shall have, to the very utmost, its just dues, and that it shall find our courts ready now, as they have always been, to protect its interest and enforce all its lawful rights. But it is important also, that the settled policy of the state should be upheld by its courts, and that schemes, which to them seem manifestly adopted merely to evade its usury laws, should not — 967 — be allowed to bring about a virtual abrogation of those statutes. “If a foreign bank or other lender of money may establish local branches or offices in this state, and through its agents solicit and take application for loans on mortgages'of land here, to be sent .to the home office to be passed upon and allowed there; and if, because of such arrangement, and the insertion of a statement, put in the note or mortgage, that the contract is ‘solvable’ in the foreign jurisdiction and is made ‘with reference to its laws, ’ the courts of this state are required to enforce such contracts, and decree a foreclosure of the mortgage and a sale of the land, that the foreign usurer may have his usury; then, surely will it have come to pass that it is no longer true that there is no ‘ cover or device ’ by which the wholesome restraints put upon the money lenders by our statutes may be escaped. “Upon this subject there is in Martin v. Johnson, 84 Ga., 481, a most emphatic declaration from the highest court of the state that is the domicile of the defendant corporation. A loan of money had been made by a citizen of Massachusetts, through an agent in Georgia, to a citizen of the latter state, secured by mortgage on land there, but payable in the former state. It was contended that the rights of the mortgagee were not to be governed by the laws of Georgia in respect to usury because the note was payable in Massachusetts. The court said: ‘ If this court should hold that a note made in this state, but payable in the state of Massachsetts, for money advanced by the agent of a person who resides in Massachusetts, could be collected notwithstanding it contained sixteen per centum usurious and unlawful interest, then the law of this state as to usury would be inoperative and useless; the money lenders of those states that have no usury laws, but which allow to be collected any rate of interest contracted for, could flood this state with their agents and by the loan of money exact the highest rate of interest, even a hundred per centum. — 968 — “It seems, therefore, that the principle for which the defendant corporation contends is denied in the courts of its own domicile — that a foreign money lender, loaning money in Georgia on mortgage on Georgia land, must be content in a foreclosure proceeding to have the amount due determined by Georgia law. 11 The reasons that support the rule there are val.id here. The rule of comity requires us to allow foreign corporations a standing in our courts to enforce the valid contracts they may have made with our citizens, and all such liens upon property situated within this state as they have lawfully acquired. But that comity does not require that we should allow foreign corporations to enforce contracts here, if such enforcement would be in conflict with our laws, and, being thus in conflict, the enforcement thereof would work against our own citizens and give to the foreigner an advantage which the resident has not. Walters v. Whitlock, 9 Fla., 86, (s.c. 76 Am. Dec., 607). Much less does it require that we should allow a Georgia corporation to enforce a mortgage loan which is illegal and void by our laws (Ward v. Sugg, 113 N. C., 189), while in that state the rule is as stated in Martin v. Johnson, supra. “ It is well settled, so well settled that authorities need not be cited, that a purely personal contract, made in one place to be executed in another, is to be governed by the laws of the place of performance. This general rule is subject to the qualification that the parties act in good faith, and that the form of the transaction is not adopted to disguise its real character. Tyler on Usury. “ Now, it seems very manifest to us, considering all the facts and circumstances, that this Georgia corporation required the plaintiff, a citizen and resident of this state, to declare, in the obligation given by him to it for the money loaned him, that the contract was solvable in that state and was made with reference to its laws, not because it was contemplated by either of the parties that the money would be paid there, or that the — 969 — parties would enforce their respective rights under the contract in the courts of that state, but because this money lender desired to escape the restraints of the laws of this state, and, by this formal declaration inserted in the contract, compel the courts of this state, in a suit for the foreclosure of the mortgage, to adjust the rights of the parties according to the laws of Georgia and the decisions of its courts, and in disregard of the laws of this state and the decisions of this court. ’ ’ In Fletcher v. New York Life Ins. Co., 13 Fed. Rep., 528, 'Judge Teat says: ‘ ‘ The defendant company was doing business in Missouri, with the privileges granted to it here, when said insurance was effected. It may be that the formal acceptance of the proposed contract was, by the letter of the contract, to be consummated in New York. The broad proposition, however, remains, no artifice to avoid which can be upheld. The statutes of Missouri, for salutary reasons, permit foreign corporations to do business in the state on prescribed conditions. If, despite such conditions, they can, by the insertion of clauses in their’ policy, withdraw themselves from the limitations of the Missouri statutes, while obtaining all the advantages of its license, then a foreign corporation can, by special contract, upset the statutes of the state and become exempt from the positive requirements of law. Such a proposition is not to be countenanced. The defendant corporation chose to embark in business within this state, under the terms and conditions named in the statute. It could not by paper contrivances, however specious, withdraw itself from the operation of the laws, by the force of which it could alone do business within the state. To hold otherwise would be subversive of the right of a state to decide on what terms, by comity, a foreign corporation should be admitted to do business, or be recognized therefor, within the state jurisdiction. Each state can decide for itself whether a foreign corporation shall be recognized by it, and on what terms. Primarily a corporation has no existence beyond the territorial limits of the state creating it, and when — 970 — it undertakes business beyond, it does so only by comity. The defendant corporation, having been permitted to do business in Missouri, under the statutes of the latter, was bound by all the provisions of those statutes, and could not, by the insertion of any of the many clauses in its forms of application, etc., withdraw itself from the obligatory force of the statute. The contract of insurance, therefore, is a Missouri contract and subject to the local law. ’ ’ This last utterance is in exact accord with the holding of this court in Western Assurance Co. v. Phelps, 77 Miss., 625. See, also, Southern B. & L. Asso. v. Atkinson, 20 Tex. Civ. App., 516, and 100 Tenn., 607. See especially the very recent case in 76 Am. St. Rep. And it is immaterial whether the foreign corporation is doing business under a license here or has, without such license, localized its business and domesticated itself here as to such business. And the acts of 1890, p. 10, places “each branch office” and ‘ ‘ each agency ’ ’ on the same footing exactly, treating each as a separate and distinct building and loan association, and taxes each as such. The general doctrine is, of course, well settled that the law of a place where the contract is to be performed, governs the contract; and the presumption that this contract was to be performed according to the laws of Georgia, simply because the notes were payable in Georgia, is, at last, nothing but a mere presumption to that effect, subject to be overcome by proof that, in truth and in fact, they intended the money to be paid in Mississippi. When all there is, in a case like this, to show that the intention was to perform the contract in a foreign state, is a mere specious paper recital in the notes, and over against this, and contrary to this, are all the other facts in the case, and the whole course of dealing between the parties, it would be an abdication of common sense on the part of any court, to find the real intention of the parties in the paper recital, instead of in the real facts of the case. — 971 — It must be remembered that the state has the power to prescribe the terms on which foreign corporations may do business. It is declared in § 849 of the code of 1892, last clause, ‘ ‘ such foreign corporations shall not do or commit any act in this state contrary to the laws or policy thereof, and shall not be allowed to recover on any contract made in violation of law or public policy.” This is the plain mandate of our law, which must be rigidly enforced by the courts. And the code otherwise provides that (§ 2348) domestic building and loan associations are excluded from the operation of the usury laws, but foreign building and loan associations are subject to them, and to enforce this public policy, thus declared by the statute, is not to give extra territorial operation to our statutes. On the contrary, this corporation has come into the state, localized its business here, through local boards scattered all over the state, and must submit such business thus localized to the opération of the laws of the state. To hold otherwise, would operate the grossest injustice to our citizens and would virtually abrogate our statutes against usury. It may be further remarked that we announce, as to this foreign building and loan association the identical doctrine which the state of Georgia, through its supreme court, has announced (Martin v. Johnson, 84 Ga., 481) in an exactly similar case. We append, for convenience, a few of the authorities supporting our views, whose reasoning we approve, so far as relates to the question under discussion: U. S. B. & L. Assn. v. Scott, 34 S. W. Rep., 235, decided in 1896, the court saying: “A foreign building and loan association engaged in doing-business in Kentucky will be permitted to charge no higher rate of interest than is chargeable under the laws of this state; and while, by the laws of comity, the charter of such a corporation will be recognized here as the law of its existence, it is the charter alone which is recognized, and not the general legislation of the country of its domicile with reference thereto, — 972 — or the construction of its charter provisions by the foreign courts. Moreover, when such a corporation employs the usual agencies to solicit and transact business in this state, and contracts for the payment of premiums and interest in excess of the rate authorized here, the transaction will be denounced as an attempted evasion of our laws, whatever may be the nominal rate specified or artifice adopted; and this, though it be specifically provided that the contract is made with reference to the laws of the foreign state. Such a provision only makes the intent to evade the more manifest.” Pryne v. People’s B. & L. Ass’n, 41 S. W. Rep., 574, decided in 1897, these two being Kentucky cases, Nat. L. & Investment Co. v. Stone, 46 S. W. Rep., 67, decided in 1898, a Texas case. It was held therein that it was immaterial whether the association had obtained a permit or license to do business in Texas, if, in fact, it had localized its business there. In such latter case the contract was a Texas contract as well as in the former. Holman v. Hart, 53 S. W. Rep., 310, a Tennessee case, decided in 1899; 88 Ga., 756, 85 Ind., 414; 4 Am. & Eng. Enc. Law (2d ed.), p. 1072, and note 5. Crippen v. Leighton, 76 Am. St. Rep., at pp. 196-7, where the court says: “In the case of contracts the common law enforces the contract made by the parties, but not the lex loci, except in so far as they have made it a part of the contract. The doctrine that contracts are to be interpreted according to the law of the place where they are made or to be performed, is merely a rule for finding the intention of the parties, Peninsular, etc., Co. v. Shand, 3 Moore, P. C. C., N. S., 272; Anstruther v. Adair, 2 Mylne & K., 513. “A different decision would totally defeat the intention of the contracting parties,” Di Sora v. Phillips, 10 H. L. Cas., 624, 638, 639. The only purpose of the proof of the foreign law is to determine the meaning of the language used by the parties for the same reason precisely that evidence is heard of the signification of technical terms, Prentiss v. Savage, 13 Mass., 20, 23; — 973 — Koster v. Merritt, 32 Conn., 246; Dyke v. Erie Ry. Co., 45 N. Y., 113, 118, 6 Am. Rep., 43. The foreign law, as such and ex proprio vigore, has no effect. Effect is. given to the agreement of the parties only. The court looks into the lex loci so far, and only so far, as may be necessary to determine what the contract is, and whether it shall be enforced, if at all, according to the intention of the parties. This is not a matter of courtesy or favor, either to the country where the contract was made or to the parties. It is the right of the parties, it is as if the foreign law were in terms expressed in the contract. The principle ‘ ‘ loosely called comity (Schibsby v. Westenholz, L. R. S. Q. B., 155, 159) is not of courts, but of nations.” Story’s Conflict of Laws, secs. 37, 38; Bank of Augusta v. Earle, 13 Pet., 519, 589.” ‘ ‘ The question of the enforcement of the laws of a foreign state is not a question of comity to that state, but of the power of the courts of the forum. The organic, or statute, or common law of no state in the union has conferred upon its courts authority to put into active operative effect, efficient per se, the statutes of another state. There is a wide difference between putting a foreign statute in active operation and treating a transaction of which the court has jurisdiction as it is modified, affected, or characterized by the law that operated upon it where it took place. To enforce a liability created solely by the statute of a foreign land, is to give that statute precisely the same force and effect as if it were a statute of the forum. ’ ’ Falls v. U. S., etc., L. Co., 97 Ala., 417, s.c. Am. St. Rep., 194; Phœnix Ins. Co. v. Commonwealth, 96 Am. Dec., 331. In the cases in 46 S. W. and 34 S. W. Rep., supra, there was no local board, as in this and the Sokolosky cases, but the foreign corporation had local offices and local agents, and had thus localized its business, and the same rule above announced was applied — a point not here presented. The principle is much like that of Jahier v. Rascoe, §2 Miss., 699. Rorer on Interstate Law, p. 48, quoted in 85 Ind., 420, 421. It seems — 974 — that in 1898, carrying out the doctrine of these cases, where foreign corporations localized their business in other states, the state of South Carolina actually passed a law providing that all contracts secured by mortgage of real estate - situated within this state shall be subject to and construed by the laws of this state regulating the rate of interest allowed, and in all other respects, without regard to the place named for the performance of the same.” 22 S. C. Stat., 747, and the supreme court of that state, in Tobin v. McNab, 53 S. C., at page 76, pronounced this a wise law. ’ ’ . Foreign corporations wishing to do business with our citizens, and localizing that business within our state through local boards, must comply with the laws of this state. They cannot, under such circumstances, enforce here stipulations in contracts allowed by the law of the state which created them if these stipulations violate our laws or our public policy. Such laws of such foreign states can have, ex -proprio vigore, no extra territorial effect, and it is not competent for a foreign corporation, whose business has been localized in this state, or the borrower, or both, to abrogate, by attempted contract, stipulations whose purpose it is to evade our laws against usury, the laws of this state on that subject. This holding in no way interferes with the right of a foreign corporation whose businéss has not been localized here to make contracts with borrowers, .to be governed by the laws of the state of their domicile, if there be no purpose therein to evade the usury laws of this state. Such liberty of contracting, exercised in good faith, is not herein interfered with. The authorities cited to that point by counsel for appellee are not pertinent to cases like the one before us. All the cases are admirably collected in a note to Bank of Newport v. Cook, 46 Am. St. Rep., 171. In that note the learned editor points out, on page 202, the distinction to be observed, saying: “The proper answer to this argument is, that mere shams and evasions are not permitted to counteract and annul the law, and — 975 — where it appears that the purpose of the parties in making the obligation payable in another state was to evade the law against usury of the state in which it was executed, it will be regarded as infected with usury. Pratt v. Adams, 7 Paige, 615; Railroad Co. v. Bank of Ashland, 12 Wall, 226; Andrews v. Ponds, 13 Pet., 65.” Our decision is rested upon the two distinct grounds, first, that where a foreign money-lending corporation has localized its business within this state, through local boards, doing here regularly and continuously for years the business of the corporation, it has thus voluntarily domesticated itself within this state and subjected its business and contracts to the operation of our laws, and, second, that where, in such case, all the facts, fairly weighed, show that the only purpose of a mere stipulation in the notes or mortgages for payment in the foreign state must have been to evade our laws on the subject of usury, no device or disguise or contrivance will prevent the court from stripping off the mask and pronouncing the judgment of the law on the real case made by the actual facts. The proposition that the local secretary and treasurer is the agent, not of the lending corporation, whose secretary and treasurer he was, but of the borrowing debtor, is utterly unfounded. Murphy v. Sons and Daughters of Jacob of Am., 77 Miss., 830. The facts of the case make Natchez B. & L. Asso. v Shields, 71 Miss., 630, and B. & L. Asso. of Jackson v. Leonard, 74 Miss., 810, wholly inapplicable. It is noteworthy that no dividends or profits are allowed by the by-laws of this association where the stock is surrendered before maturity. The appellant, so far from deriving any profits, actually lost $19.50. The judgment is reversed and cause remanded.