State ex rel. Squire v. Eubank

• Decision Date: 07 October 1940
• Docket Number: No. 102.,102.
• Citation: 295 Mich. 230,294 N.W. 166
• Parties: STATE OF OHIO ex rel. SQUIRE, Superintendent of Banks, v. EUBANK et al.
• Court: Michigan Supreme Court

295 Mich. 230

294 N.W. 166

STATE OF OHIO ex rel. SQUIRE, Superintendent of Banks,

v.EUBANK et al.

No. 102.

Supreme Court of Michigan.

Oct. 7, 1940.

Assumpsit by the State of Ohio, on the relation of S. H. Squire, Superintendent of Banks of the State of Ohio, in charge of the liquidation of the Commercial Banking & Trust Company of Sandusky, Ohio, against Frank F. Eubank, also Nown as F. F. Eubank, and others, on an Ohio judgment founded upon a promissory note executed in 1930 by defendants. From the judgment, the plaintiff appeals.

Reversed and new trial ordered.

Appeal from Circuit Court, Wayne County; Leonard D. Verdier, judge.

Argued before the Entire Bench.

Donald F. Hyde, of Detroit, for plaintiff and appellant.

Beaumont, Smith & Harris, of Detroit (Charles H. McIntyre, of Detroit, of counsel), for defendants and appellees.

BUTZEL, Justice.

The problem before us is the validity of a judgment confessed in Ohio by virtue of a purported warrant of attorney. The judgment must be respected if the warrant of attorney conferred the necessary jurisdiction on the Ohio court. First National Bank v. Garland, 109 Mich. 515, 67 N.W. 559,33 L.R.A. 83, 63 Am.St.Rep. 597;Acme Food Company v. Kirsch, 166 Mich. 433, 131 N.W. 1123, 38 L.R.A.,N.S., 814; Jones v. Turner, 249 Mich. 403, 228 N.W. 796;Gordon v. Heller, 271 Mich. 240, 260 N.W. 156;Carroll v. Gore, 106 Fla. 582, 143 So. 633, 89 A.L.R. 1495, 1503. Compare Egley v. T. B. Bennett & Co., 196 Ind. 50, 145 N.E. 830, 40 A.L.R. 436, 441.

Plaintiff brought assumpsit on an Ohio judgment founded upon a promissory note executed in 1930 by defendants. The note was the culmination of a series of renewals of an obligation originally incurred in 1924. The original transaction took place in Ohio where the defendants resided at the time. They moved to Michigan in 1925. The original obligation contained in the same instrument a power of attorney to confess judgment, conceded to be valid under Ohio law. Renewal notes mailed to them in Detroit were signed and returned by mail to the payee, an Ohio bank. The renewals were on the same form of instruments as the original obligation. Each time a renewal note was received, it was substituted in the files of the bank for the old, and an entry was made in the new loan ledger; generally the old note was mailed back to defendants in Detroit. The trial court granted a motion to dismiss on the ground that the note containing the power of attorney was executed in Michigan and the warrant was invalid to confer any authority to confess judgment because it was not in an instrument separate from that evidencing the demand (§ 14508, 3 Comp.Laws 1929, § 27.1434, Stat.Ann.; Jones v. Turner, 249 Mich. 403, 228 N.W. 796;Acme Food Co. v. Kirsch, 166 Mich. 433, 131 N.W. 1123, 38 L.R.A.,N.S., 814), from which it would follow that the judgment is ‘without the protection of full faith and credit.’ Gordon v. Heller, 271 Mich. 240, 260 N.W. 156, 157;U.S. Constitution Art. 4, § 1; 28 U.S.C.A. §§ 687, 688.

The case is controlled by the determination of the place of making of the renewal contract which embodied the purported authorization for the entry of judgment, for the validity of a contract is determined by the place of making. John A. Tolman Co. v. Reed, 115 Mich. 71, 72 N.W. 1104;Jones v. Turner, 249 Mich. 403, 228 N.W. 796;In re Estate of Lucas, 272 Mich. 1, 261 N.W. 117. If the warrant of attorney was made in Michigan, it failed to confer any jurisdiction on the Ohio court (Jones v. Turner, supra); if Ohio was the place of making, its validity is conceded. The determination of the place of making is termed by the authorities a question of ‘qualifications' (see Lorenzen, ‘The Theory of Qualifications and the Conflict of Laws,’ 20 Col.Law Rev. 274), and is a preliminary question governed by the law of the forum. State of Ohio ex rel. Fulton v. Purse, 273 Mich. 507, 263 N.W. 874; 2 Beale, Conflict of Laws, § 311.2; American Law Institute, Restatement of Conflict of Laws, § 311. Generally speaking, a contract is deemed to have been made in the State where the last act necessary to make it a binding agreement took place. Goodrich, Conflict of Laws, 1st Ed., p. 218; 2 Beale, Conflicts, p. 1045; 1 Williston on Contracts, Rev.Ed., § 97; American Law Institute, Restatement of the Law of Contracts, § 74; Holder v. Aultman, Miller & Co., 169 U.S. 81, 18 S.Ct. 269, 42 L.Ed. 669;Johnston v. Industrial Commission, 352 Ill. 74, 185 N.E. 191;Gannon v. Bronston, 246 Ky. 612, 55 S.W.2d 358. In the case of a promissory note, the place of contracting is where the note is first delivered for value. American Law Institute, Restatement of Conflict of Laws, § 320. In 2 Beale on Conflict of Laws, 1st Ed., p. 1047, it is said:

‘Delivery, however, is not the only requisite to the creation of a contract on a negotiable instrument. Value must be given, and until, therefore, there has been a delivery for value, the instrument cannot be said to have had any inception. * * *

‘It follows that the place of contracting of a contract on a negotiable instrument, be it the obligation of the maker, the drawer, or the endorser, is the place where, after the signature of the party in question, the instrument is first delivered for value. * * * Since no one is bound by the mere signature of the instrument, the place where it may have been dated, executed, or signed is immaterial.’

It is argued that the contract was completed when defendants deposited the renewal note in the mails of Michigan, and that thereby it became a Michigan contract. The principle of the law of contracts that an offer authorizing a reply by mail is transformed into a binding contract by posting an acceptance (Kutsche v. Ford, 222 Mich. 442, 192 N.W. 714;Burton v. United States, 202 U. S. 344, 26 S. Ct. 688, 50 L.Ed. 1057,6 Ann.Cas. 362; Adams v. Lindsell (1818), 1 Barn. & Ald. 681, 106 Eng.Rep. 250; Dunlop v. Higgins (1848), 1 H.L.C. 381, 9 Eng.Rep. 805) is inapplicable. We are dealing with a negotiable instrument, and delivery for value is the keynote of its inception. The principle is well expounded in 2 Beale, Conflicts, § 313.1, p. 1051, where it is said:

‘When a negotiable instrument is made in renewal of an earlier contract, the intention of the parties is that only one of the obligations shall be in force at one time. The new contract comes into existence, therefore, at the time when the old contract comes to an end, for the intention of the parties of course controls on this point. The usual case is that of a renewal note sent to a bank and placed by the bank in its files in place of the former note. The only value given by the creditor for the renewal instrument is the discharge of the old note

. He will ordinarily not be willing to release the debtor from his obligation on the old note until the new note has actually been received by him. Since the intention of...