Westchester Mortg. Co. v. Grand Rapids & I.R. Co.
| Decision Date | 20 July 1927 |
| Citation | 246 N.Y. 194,158 N.E. 70 |
| Parties | WESTCHESTER MORTGAGE CO. v. GRAND RAPIDS & I. R. CO. et al. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Action by the Westchester Mortgage Company against the Grand Rapids & Ionia Railroad Company, John A. Van Rensselaer, and others. A judgment of the Special Term for defendant Van Rensselaer (126 Misc. Rep. 534, 213 N. Y. S. 593) was, on plaintiff's appeal, modified and affirmed by the Appellate Division, Second Department (219 App. Div. 733, 219 N. Y. S. 695), and plaintiff and defendant Van Rensselaer file cross-appeals.
Judgment modified, and, as modified, affirmed.
Jonathan Holden, of New York City, and Alphonso V. Brisson, of White Plains, for plaintiff.
Aaron H. Marx and Walter E. Godfrey, both of New York City, for Van Rensselaer.
Herbert Barry and Henry W. Proffitt, both of New York City, for Marian R. Kennedy et al., as executors.
Charles Rush, of New York City, for Florence H. Hurd et al., as executors.
In May, 1906, John A. Van Rensselaer executed and delivered to James J. Phelan a note payable at Newport Trust Company, Newport, R. I., one year after date, for the sum of $14,000, ‘with interest thereon at the rate of 10 per cent. per annum, payable quarterly, in advance, until said principal sum is paid whether at or after maturity, all installments to bear interest at the rate aforesaid until paid.’ As collateral security for the payment of the note Van Rensselaer assigned to the payee his interest in a trust fund established under the fifth clause of the will of Frances M. Hoyt, deceased. Under the terms of that will Van Rensselaer was entitled to the principal of that fund upon the death of his mother. Other assignments of his interest in this property have been made thereafter by the defendant Van Rensselaer to secure indebtedness to other persons. The principal of the note has never been paid, and no interest has been paid since September, 1907. It has been assigned to, and is in the possession of, the plaintiff. The plaintiff has brought this action in which it asks for a declaratory judgment that it has a prior and paramount lien upon the defendant Van Rensselaer's interest in the property in the trust fund for the sum of $14,000, with interest at 10 per cent. since September 1, 1907, compounded quarterly in accordance with the terms of the note made by Van Rensselaer. The plaintiff in its complaint also prayed for judgment of foreclosure of its alleged lien upon this property, but at the trial withdrew the prayer for such relief.
All parties who might have any claim to the note or to the interest of Van Rensselaer in the property, transferred as collateral security for the notes, were made parties defendants. In their answers the defendants also asked for a declaration of their rights in accordance with claims they set forth. Upon this appeal we need consider only the issues raised by the defendant Van Rensselaer, who asked for a declaration that the note and assignment are usurious and void and that any cause of action based on either of them is barred by the statute of limitations, under the laws both of New York and Rhode Island.
[1] After a trial of the issues, a judgment was rendered at Special Term declaring that the note is owned by the plaintiff, but that it is usurious and void. Unquestionably the note is usurious if it was made in the state of New York, and is governed by the laws of this state. The Appellate Division has made findings and conclusions to the effect that the note was made and delivered in Rhode Island, and its validity must be determined by the laws of that state. It also found that:
‘It is the law of Rhode Island that the legal rate of interest is 6 per cent., but any rate may be agreed upon, except the rate be unconscionable, in which case the agreement is unenforceable and will not be upheld except to the extent of enforcing the payment of the principal of the note in question with 6 per cent. simple interest thereon.’
The court thereupon adjudged that the promissory note and assignment executed by the defendant Van Rensselaer is a ‘good, valid and existing lien against the trust established by the fifth clause of the will of Frances M. Hoyt, deceased, to the extent of $14,000, with interest at the rate of 6 per cent. per annum.’ The defendant Van Rensselaer appeals from the decision that the note is not usurious and void. The plaintiff appeals from the decision that the note cannot be enforced according to its tenor, for the full amount of principal and stipulated interest.
The parties to the original loan have given unmistakable evidence that it was their intention that the transaction should be governed by the law of Rhode Island. All the instruments that passed between the parties were drawn by a Rhode Island lawyer. The note was dated in Newport. Before any moneys were paid to Van Rensselaer he made an affidavit before a notary public in Rhode Island, who also witnessed his signature to the assignment. The borrower received the proceeds of the note in the form of a check drawn on a Rhode Island bank, and the note was payable in Rhode Island. The property assigned to the lender as collateral security was situated in Rhode Island and subject to the Laws of that state and the jurisdiction of its courts. Since the essential provisions of the contract were to be performed in Rhode Island and enforced, if necessary by appeal to the courts of that state, the parties might make their contract with such reference to the laws of that state that the latter will govern its construction and effect. Manhattan Life Insurance Co. v. Johnson, 188 N. Y. 108, 80 N. E. 658,9 L. R. A. (N. S.) 1142,11 Ann. Cas. 223. Even if the terms of the loan had been agreed upon in New York before the written instruments were actually signed and delivered, no conclusive inference can be drawn from that fact, that the intent to have the law of Rhode Island govern the validity and effect of the contract was merely an intent to evade our statute of usury. Seeman v. Philadelphia Warehouse Co., 47 S. Ct. 626, 71 L. Ed. 1123. The intent to have the law of Rhode Island govern the construction and effect of a contract, which in many of its essential features was to be performed in that state, might well exist even if no statute of usury had existed here. It cannot be said here that the form in which the transaction was clothed was merely a means or subterfuge for the accomplishment of an illegal act. On this point we agree with the findings and conclusions of the Appellate Division.
[3] We are of the opinion that after the court decided that the construction and the legal effect of the note and the assignment, as collateral security, of the defendant Van Rensselaer's interest in the trust fund created under the will of Frances M. Hoyt are governed by the law of Rhode Island, and that the loan transaction is not rendered void by our statute against usury, it should not have made any further declaration of the extent to which the rights of the plaintiffs may be enforced in the state of Rhode Island. Section 473 of the Civil Practice Act provides that:
The ‘Supreme Court shall have power in any action or proceeding to declare rights and other...
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