Heath v. Griswold

• Decision Date: 18 January 1881
• Citation: 5 F. 573
• Court: U.S. District Court — District of Vermont
• Parties: HEATH v. GRISWOLD.

5 F. 573

HEATH v. GRISWOLD.

United States Circuit Court, D. Vermont.

January 18, 1881

WHEELER D. J.

This cause was referred by consent of parties given by counsel in open court, and has now been heard upon questions submitted by the report of the referee. Some doubts have arisen as to whether the courts of the United States have power to try questions submitted by, and render judgments upon, such reports, as the statutes do not give the power in express terms. But it seems to be well settled that such power exists as incident to all courts in which trials of fact may be had. Newcomb v. Wood, 97 U.S. 581; Lumber Co. v. Brechtel, 101 U.S. 633. The action is assumpsit upon two promissory notes, indorsed with others by the defendant for the accommodation of William H Dickinson, both of New York, to William Dickinson, of Massachusetts, for whose benefit this suit is brought, in successive renewal of other notes upon which the defendant was accommodation indorser or surety for William H Dickinson, all of which were dated and signed and indorsed at New York, and some of them made payable there and sent to William Dickinson in Massachusetts, and discounted there by him, some at 12 per cent. interest, and the avails forwarded to the defendant and used for William H. Dickinson at New York. The notes were secured by corporation stock transferred by William H. Dickinson to William Dickinson, and by him to relatives, to avoid liability as a stockholder, knowing that the defendant was a mere accommodation indorser or surety. Two principal questions arise upon these facts. One is whether the law of New York which forfeited notes for usury or that of Massachusetts which at that time forfeited three times the amount of unlawful interest, should govern; and the other is as to what the effect of that disposition of the stock was upon the liability of the defendant.

Upon the first question it is apparent that the notes did not become operative until they were delivered to and accepted by William Dickinson, which was in Massachusetts. The contracts evidenced by them were made in that jurisdiction. The interest reserved upon the discount of the notes was taken there. As to what the rate of interest shall be where a note is made at a place where the law provides one rate, and it is payable at another place where the law provides a different rate, and all other questions arising out of which law the parties are presumed to have intended to contract with respect to, there seems to be no fair question but what the law of the place of payment is to govern. The authorities cited for the defendant abundantly show this. But this is not the question here. There is no question about what these parties intended. They all intended that on so much of the paper William Dickinson should receive 12 per cent. interest, and contracted so that the defendant might become liable to pay it. This, in New York, would be contrary to the law there, and would involve certain penal consequences, and in Massachusetts would involve other and different consequences. The law of neither state had any force in the other, or outside of its own territory. A wrong was done, in the eye of the law, by William Dickinson in reserving this interest. The question is, in which jurisdiction did he commit the offense, and by which law must it be redressed? He is not shown to have done anything in New York. All he did was done in Massachusetts. He closed the contract there; all he has received has been paid there. If the notes had been written with interest merely, and the question had been whether this meant the Massachusetts rate of 6 per cent. or the New York rate of 7, there would have been no fair question but that, when the place of payment was in New York, the New York rate of 7 was intended, and would have been lawful. But here there is no question about what was meant; it is about what was done, and what has been done has been done in Massachusetts. This distinction is clearly recognized in the authorities.

In Andrews v. Pond, 13 Pet. 65, Mr. Chief Justice Taney said, with reference to this question: 'The question is not which law is to govern in executing the contract, but which is to decide the fate of a security taken upon an usurious agreement which neither will execute? Unquestionably, it must be the law of the state where the agreement was made, and the instrument taken to secure its performance. A contract of this kind cannot stand on the same principles with a bona fide agreement made in one place to be...