Deaton v. Vise

Decision Date03 May 1948
Citation210 S.W.2d 665,186 Tenn. 364
PartiesDEATON v. VISE et al.
CourtTennessee Supreme Court

Appeal from Chancery Court, Shelby County; L. D. Bejach, Chancellor.

Suit by Mrs. E. L. Deaton against J. K. Vise and others, as ancillary to a suit pending in Arkansas, to have certain mortgage notes declared void as usurious. From a decree sustaining the demurrer of named defendant to bill, complainant appeals.

Affirmed.

NEIL Chief Justice.

This cause is ancillary to what might be termed a companion cause in the chancery court in the State of Arkansas. The Arkansas suit is in reality the original cause and the one now before us was instituted to secure certain equitable relief only in the event complainant was successful in her suit in the State of Arkansas.

The complainant filed her original bill in the chancery court in Crittenden County, Arkansas, against J. K Vise, in which it is alleged that in September, 1945, she negotiated with defendant for a loan of $8,000 to be secured by a mortgage upon property situated in said State and County. She executed the mortgage in question and a series of notes to Vise, the first for $200.00 and 56 others for $150.00, all bearing interest at six per cent per annum. It was further alleged that 36 of the notes remain unpaid 'aggregating the principal sum of $5,400.00.'

The bill further alleges that Vise took advantage of her strained financial circumstances and practiced a fraud upon her, that the contract provided for the payment of usury, that is, at a rate in excess of ten per cent, contrary to the laws of Arkansas. The Arkansas bill prays that J. K. Vise be enjoined from collecting the notes or from negotiating the same and that they be cancelled and declared void ab initio.

Two days after the filing of the original bill in Arkansas, the complainant filed her original injunction bill in the Shelby County chancery court, naming as defendants J. K. Vise, Garnet L. Shoaf and wife, Mary G. Shoaf. The bill made specific reference to the Arkansas lawsuit and alleged that the notes in question are made payable to the Citizens Bank at Marion, Arkansas, thus showing conclusively that it was an Arkansas contract. That in addition to the mortgage on the Arkansas property, the complainant, in compliance with the damand of J. K. Vise, executed a second mortgage upon property of the complainant situated in Shelby County, Tennessee; that since the inception of the transaction complainant sold the Shelby County property to Mr. and Mrs. Shoaf, who assumed the payment of the second mortgage indebtedness held by Vise.

The bill alleges that the contract is void because of an exaction of usury, as aforesaid. The defendants Shoaf and wife were enjoined from paying any of the notes to Vise 'until the rights of the parties could be declared.'

The principal point at issue is whether or not the contract in question is an Arkansas contract and that it should be held to be void ab initio for exacting usury, the same being denounced by the statute of Arkansas.

The Shoafs made no defense to this suit, but defendant Vise filed a lengthy demurrer to the bill. It could well be characterized as a speaking demurrer in that it argues some controversial questions.

Contention is made in said demurrer (1) that there is no equity on the face of the bill; (2) that the bill and exhibits 'show that there was no usury on the face of the instruments'; (3) that there is no allegation that execution of the notes was an Arkansas contract, and (4) 'the bill and exhibits specifically show that even if the original matter was an Arkansas contract, the contract of sale of 1827 South Trezevant Street, Memphis, Tennessee, was a Tennessee contract and that all the parties are residents of Tennessee; and that the matter now involved is wholly a Tennessee contract.'

The complainant was permitted to file an amended bill which contains a detailed calculation of interest on 56 notes in order to show that said contract was usurious. The demurrer was refiled (or at least it was so considered) to both the original and the amended bill.

The chancellor in sustaining the demurrer held that the laws of Tennessee, and 'not those of Arkansas control the rights of the defendant herein.' It was also held that 'less than ten per cent interest per annum was charged on the contract and hence it was not usurious.'

The complainant appealed to this Court and assigned as error the action of the chancellor in overruling the demurrer. The case presents a rather novel controversy. We are asked to withhold any decision in the instant case, as was the chancellor, until the courts of Arkansas decide whether or not the contract involved was an Arkansas contract and that it was void for usury. It is insisted that 'the matter cannot be disposed of until all the proof is in and the Arkansas courts have acted and a proper determination is made as to whether or not these notes (the evidence of the indebtedness) constitute an Arkansas contract.'

It is contended that if the Arkansas courts should hold the contract void for usury, the courts in Tennessee might be embarrassed in not giving full faith and credit to said decree. In response to this unusual insistence it should be said that the courts of Arkansas might be embarrassed in the event this Court should hold that the contract is a Tennessee contract, and that it was not usurious. We can not decide the question upon any suggestion of a possible difference of opinion and consequent embarrassment to one or the other. We know of no rule of law, or principle of equity, which requires us to await the advice of the courts of another State before deciding a similar question which involves the title and interest to lands located in this State, as well as the personal liability of the defendants.

The object of the original Arkansas suit was for a decree adjudging the contract void ab initio, the effect being to wipe out the mortgage on the Arkansas property by canceling the mortgage debt of $5,400.00. The complainant's bill in the instant case seeks to enjoin Mr. and Mrs. Shoaf from paying J. K. Vise any of the notes and to compel them (in the event the Arkansas courts declare the contract void) to execute new notes to complainant in the same amount. Counsel admit on their brief that such a decree could not be entered at present, but that it should be held in abeyance until the Arkansas courts have heard proof and decided that complainant's property in Crittenden County, Arkansas, is exonerated of any and all mortgage indebtedness because of usury.

The foregoing insistence is based upon the unqualified assumption that the rights of the parties must and will be determined solely by the laws of Arkansas; that the courts of that State will so declare and also decide as a matter of fact that the contract is usurious. We cannot delay our decision based upon these uncertainties and improbabilities.

Did the chancellor err in holding that the rights of the parties under the contract was controlled by the laws of Tennessee and not by the laws of Arkansas? We are here confronted with a legal problem which has vexed the courts since the days of Lord Mansfield and it seems to be no nearer solution now than it was in Robinson v. Bland, 1 W. Bal. 234 (1760).

Does the law of the place where a contract is made control or the law of the place of performance? Before giving consideration to the question it is important that we state facts which are by the demurrer admitted to be true. All of the parties to this transaction were residents of Tennessee. The contract was executed in Tennessee. The complainant, at the same time, executed a mortgage on lnads, both in Arkansas and in Tennessee, to secure the payment of the loan. It is insisted for complainant that it is an Arkansas contract, while defendant argues to the contrary.

The courts have always looked to the intention of the parties in determining their contractual rights and obligations. Our cases are too numerous on this point to require citation.

In Williston on Contracts, Vol. 6, § 1792, it is said: 'The usury cases have developed their own special rule whereby in the absence of circumstances indicating a contrary intent, the parties are presumed to have chosen the law which will uphold the legality of the bargain.'

The law, as first stated by the English courts, was that everything connected with the contract is governed by the law of the place where the contract was made (Beale on Conflict of Laws, Vol. 2, p. 1082), and this general rule has been followed as appears in many State and Federal Court decis...

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