Santoro v. Osman

• Decision Date: 31 October 1961
• Citation: 174 A.2d 800,149 Conn. 9
• Court: Connecticut Supreme Court
• Parties: Emma SANTORO v. Harris OSMAN et al. Supreme Court of Errors of Connecticut

Page 800

174 A.2d 800

149 Conn. 9

Emma SANTORO v. Harris OSMAN et al.

Supreme Court of Errors of Connecticut.

Oct. 31, 1961.

Gerald Kolinsky, Stamford, for appellant (plaintiff).

John F. Kearns, Elmwood, on the brief, was Bernard E. Francis, West Hartford, for appellees (defendants).

Before BALDWIN, C. J., KING and MURPHY, JJ., and ALOCRN and MacDONALD, Superior Court Judges, concurring.

KING, Associate Justice.

This case, in which recovery from the accommodation maker and the payee-endorser of a promissory note is sought, was tried on the admissions in the pleadings, implemented by a stipulation of facts. No evidence was presented. ¹ The only issue was the efficacy of the special defense, which read as follows: 'Said instrument on its face reflects [that] a usurious rate of interest was charged and * * * said rate of interest is against public policy in the State of Connecticut, as well as in violation of the criminal statutes of this State.'

On March 30, 1956, the defendant Harris Osman executed a promissory note in the amount of $5,000, payable to the order of the defendant Traffic Associates, Inc., one year after date, at The County Trust Company in Mount Vernon, New York. The face of the note made no mention of interest. On its reverse side, the note was endorsed by the defendant corporate payee to the order of the plaintiff 'with interest at 2% per month.' Following the typewritten name of the defendant corporation was the handwritten signature 'Richard M. McDonnell,' with 'Pres.,' in typewriting after it. Beneath appeared the typewritten word 'Approved:' followed by the handwritten signature 'Harris Osman.' In return for the note, the plaintiff gave a check for $5,000 to the defendant corporation, which deposited the check in a bank account which it then had in the Mount Vernon office of The County Trust Company. All of this took place on the day the note was executed.

The defendant corporation was at all times a Connecticut corporation with its principal office in Orange, Connecticut. The residence of Osman on the date of the transaction does not appear, but on July 2, 1958 (apparently the day after the return day of the action), he was a resident of Orange, Connecticut. The plaintiff on the date of execution was, and still is, a resident of Mount Vernon, New York.

The parties stipulated that subsection (1) of § 374 of the New York General Business Law provides: 'No corporation shall * * * interpose the defense of usury in any action. * * *' The note in suit was executed in the state of New York and was payable there. Therefore, under our own rule, the law of New York governs its validity as far as usury is concerned. This was early established in Rose v. Phillips, 33 Conn. 570, 576, a decision which was foreshadowed in Nichols v. Cosset, 1 Root 297, 295; in Philadelphia Loan Co. v. Towner, 13 Conn. 249, 257; and in Beadle v. Munson, 30 Conn. 175, 178. The modern general rule is even more liberal, in that the validity of a note, as far as usury is concerned, depends upon the law of the place where it is payable. 6 Corbin, Contracts, p. 959, citing, inter alia, Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, 407, 47 S.Ct. 626, 71 L.Ed. 1123. Under either rule, the law of New York governs the legality of the interest rate in the present instance, and it provides that usury is not a defense available to a corporation. Therefore, the note is collectible against the corporate defendant according to its terms. There is nothing in Ciampittiello v. Campitello, 134 Conn. 51, 54 A.2d 669, 173 A.L.R. 691, in which we refused to enforce a gambling contract legally entered into in Rhode Island, or in Catalano v. Catalano, 148 Conn. 288, 170 A.2d 726, in which we refused to recognize a marriage legally entered into in Italy but incestuous under our law, which in any way strengthens the defendants' position. On both authority and principle, it is unsound to claim that a note, valid where it was executed and was payable, but carrying a rate of interest which would be usurious had the note been executed and payable in Connecticut, 'contravenes the ancient and deeprooted public policy of this state.' See Ciampittiello v. Campitello, supra, 134 Conn. at page 56, 54 A.2d 669, 671. Such a claim would be directly opposed to our holding in Rose v. Phillips, supra, as well as to the settled law in other jurisdictions. The mere fact that a type of conduct is prohibited in Connecticut by a statute carrying a substantial criminal penalty (see General Statutes § 37-7) does not establish that such conduct is contrary to a 'deeprooted public policy' in this state.

Section 37-8 of the General Statutes provides that '[n]o action shall be brought to recover principal or interest, or any part...