Mirgon v. Sherk

• Decision Date: 16 November 1938
• Docket Number: 27205.
• Citation: 84 P.2d 362,196 Wash. 690
• Parties: MIRGON v. SHERK et al.
• Court: Washington Supreme Court

84 P.2d 362

196 Wash. 690

MIRGON v. SHERK et al.

No. 27205.

Supreme Court of Washington

November 16, 1938

Department 2.

Action by C. Mirgon against Harvey R. Sherk and another to collect balance due on a note and to foreclose a chattel mortgage given to secure its payment. From a judgment in favor of the named defendant, the plaintiff appeals.

Affirmed.

Appeal from Superior Court, Clark County; Charles W. Hall, judge.

Edgar M. Swan, of Vancouver, for appellant.

Robert W. Garver, of Camas, for respondent.

Sugg &amp Mason and P.J. Kirwin, all of Vancouver, amici curiae.

SIMPSON Justice.

This action was begun to collect the balance due upon a promissory note and to foreclose a chattel mortgage given to secure its payment.

Subsequent to the execution of the promissory note and mortgage hereinafter referred to, the respondent obtained a divorce from the defendant. She did not answer, and the respondent appeared solely on his own behalf, admitted the making of the note and mortgage, and alleged that the interest charged was usurious.

After a trial to the court judgment was rendered in favor of the respondent. The appellant urges that the court erred in holding that the interest charged upon the note amounted to usury.

The undisputed facts show that the Baldy Finance Company is an Oregon corporation having its principal place of business at Portland, Oregon. It is authorized under the laws of that state to charge interest at the rate of three per cent per month on deferred unpaid balances, as provided by the 'Small Loan Act.' Code Supp.Or.1935, § 22-2701 et seq. It has branch offices at Seattle, Spokane, Bellingham Everett, Olympia, Longview, and Vancouver in the state of Washington, and in Billings, Helena, and Missoula, Montana. The record shows that in at least some of the branch offices in this state the company charges the same rate of interest mentioned in the note sued upon. It also advertises its business in a Vancouver newspaper, and from a Portland, Oregon, broadcasting station.

July 18, 1932, respondent applied at the Vancouver office of the finance company for a loan, and at that time executed the note in question for $280, payable to the Baldy Finance Company at its office in Portland, Oregon, in twenty equal installments, with interest on unpaid balances at the rate of three per cent per month, as provided by the 'Small Loan Act' of the state of Oregon. The note was secured by a chattel mortgage upon personal property situated in Washington. After its execution, the note was forwarded to the Baldy Finance Company's office in Portland, Oregon and retained at that place. Thereafter respondent made some payments at the Vancouver office which were regularly deposited in the Vancouver bank, and later transmitted to the Portland office. Respondent failed to make the payments provided for in the note and a collector employed by the company called on him and made certain collections. The note and mortgage in question were assigned to appellant by the Baldy Finance Company, the original holder. At the time of the trial there was an admitted balance due of $168, with interest thereon from September 28, 1933.

Under the laws of this state a rate of interest in excess of twelve per cent per annum is usurious. Rem.Rev.Stat. § 7300; Jason v. Sandros, 168 Wash. 87, 10 P.2d 995; Edwards v. Surety Finance Co., 176 Wash. 534, 30 P.2d 225; Tacoma Hotel, Inc. v. Morrison & Co., Inc., 193 Wash. 134, 74 P.2d 1003.

Appellant contends, however, that because the Baldy Finance Company is an Oregon corporation, organized under the laws of that state and authorized by its laws to charge the rate of interest named in the note, and that the place of performance was in Portland, Oregon, the legality of the note must be construed in accordance with the laws of that state.

It is the general rule that a contract must be construed in accordance with the laws of the place of performance. 2 Beale, The Conflict of Laws, 1935 Ed., 1271, §§ 365.1 and 366.1. This rule rests upon a comity which exists between the states of the Union. A doctrine of comity, however, does not require that any sister state shall enforce contracts to be performed in another which are so contrary to the laws of the state in which they are sought to be enforced as to work a serious interference with its own policy or laws.

'The doctrine of comity must yield to the positive law of the land. Hence, the foreign law must give way when in conflict with the statutes of the forum or the settled current of its judicial decisions.

'Foreign laws will not be given effect when to do so would be contrary to the settled public policy of the forum. Applications of this principle are frequent in the case of gaming contracts, lotteries, contracts exacting usurious rates of interest, * * *'. 12 C.J. 438, §§ 14 and 15.

The views of this court concerning the rule of comity are expressed in Carstens Packing Co. v. Southern Pacific Co., 58 Wash. 239, 108 P. 613, 27 L.R.A.,N.S., 975, as follows [page 617]:

'Are not these considerations sufficient to show that no rule of comity requires us to ignore the declared public policy of our state, in order that the terms of a contract made in another state shall be recognized as valid here, simply because such terms are valid where made? Is it not as much our right and duty to withhold the aid of our courts from the enforcement of such a provision, as if it were made part of a contract entered into here? Is not the state of Washington as much a sovereign as the nation as to the matter here involved? We see no more reason for yielding our public policy to the end that this attempted limitation upon appellant's liability may be enforced here than there would be for the highest court of the nation overriding a rule of public policy to the end that a contract made in a foreign country might be enforced here. We are of the opinion that the provisions of this contract sought to be invoked as a defense by the appellant are clearly in violation of the public policy of our state, and should not be recognized as valid here although admitting it is valid and enforceable in the state where it [the contract] was made.'

This rule was followed in Farley v. Fair, 144 Wash. 101, 256 P. 1031, in which we refused to enforce a contract relating to a commission for selling real estate situated in Washington, which contract was legally made in Oregon between parties resident therein.

We have declared the public policy of this state as opposed to the collection of interest in excess of twelve per cent per annum.

In Motor Contract Co. v. Van Der Volgen, 162 Wash. 449, 298 P. 705, 79 A.L.R. 29, the court said [page 706]:

'* * * The Usury Act (section 7304, Rem.Comp.Stat.) provides that, if a greater rate of interest than is legal shall be contracted for or received, the...