Whitlock v. Cohn

• Decision Date: 02 January 1904
• Citation: 80 S.W. 141,72 Ark. 83
• Parties: WHITLOCK v. COHN
• Court: Arkansas Supreme Court

80 S.W. 141

72 Ark. 83

WHITLOCK v. COHN

Supreme Court of Arkansas

January 2, 1904

Appeal from Garland Chancery Court LELAND LEATHERMAN, Chancellor.

Suit by B. C. Whitlock against Henry Cohn, Charlotte Cohn, George Belding, Henry Belding and W. Mitchell, administrator of the estate of Albert Belding, deceased. Decree was for defendants, and plaintiff appeals. Modified.

Decree reversed and decree entered.

Geo. G Latta, for appellant.

Intent is an essential element of usury. 9 Ark. 258; 25 Ark. 258. This intent must be averred and proved. 25 Ark. 19. In equity the borrower alleging usury must pay or tender the principal with legal interest. 32 Ark. 346; 46 Ark. 50. Usury can be pleaded only by the borrower or his privies--never by the usurer. 36 Ark. 248. A bonus taken by an agent without the knowledge of the lender is not usury. 63 Ark. 86; 33 Am. Rep 140; 51 Ark. 548; 57 Ark. 256; 54 Ark. 578; 65 Ark. 313; 66 Ark. 13; 66 Ark. 389; 116 U.S. 98. As to what will constitute usury, see 63 Ark. 249. The proof of usury is on the defendants. 57 Ark. 251; 116 U.S. 98. Usury must be clearly proved. 57 Ark. 250. The contract is governed by the lex fori, and the Arkansas law as to interest applies. 19 So. Car, 583; s. c. 45 Am. Rep. 796; 84 Ga. 481. Where a note is made in one state, to be paid in another, the conventional rate of interest in the state where the contract was made may be reserved, although such a rate be disallowed at the place where payment is to be made. 8 Mart. N. S. (La.) 35; 12 La.Ann. 815; 3 Watts & S. 328. Extrinsic proof of intention as to what law and rate of interest shall govern is admissible. 9 Port. 1; 81 N.Y. 571, 572 In the absence of proof, the presumption is that the rate of interest at the place of the execution of a contract is the same as it is within the jurisdiction of the court. 24 Ill. 293, 651. In the absence of express agreement the law of the place of payment governs. 22 Barb. 118; 35 Ark. 53; 1 Wall. 298, 310; 60 F. 734; 11 Ia. 2; 22 Ia. 194; 90 Ia. 300; 1 Paige, 300; 6 Paige, 627; 2 Kent. Com. 60; 39 Oh. St. 7; 79 Ind. 172; 13 Wis. 221; 12 Wis. 692; 11 Wis. 333; 12 Wis. 779; 14 Vt. 38; 91 Ga. 507; 4 Cold. 31; 19 So. Car. 583; 38 S.W. 1065; Pars Merc. Law. 321; 2 Pars. Cont. 584; Bish. Cont. 1388; Dan. Neg. Inst. 922. Usury laws of another state not enforceable here. 88 F. 7; 60 F. 734; Bish. Cont. 1398, and cases cited Dan. Neg. Inst., § 922, and cases cited. Further, that in the absence of agreement the law of the place of payment governs, see: 2 Pars. Cont. 698, and cases cited; 35 U. S. S. C. Rep. (L. C. P. Ed.) 384, 408; 12 L. R. A. 93. The Beldings cannot plead usury in this case. 67 Ark. 252.

Cantrell & Loughborough, for appellee, Albert Belding.

Whitlock, as a privy of Cohn, is bound by the decision in Goode v. Gaines, 145 U.S. 541. 13 Ark. 220; 20 Ark. 85. Whitlock had constructive notice. Sand. & H. Dig., § 727; 22 Ark. 477; 35 Ark. 100. Whitlock had notice through his agent, Hay. 11 Wall. 367; 21 Ark. 22; 49 Ark. 336; 52 Ark. 11. The mortgage was merely collateral to the loan, and the law of the place where the property is situated does not control as to interest. 61 Ark. 329; 66 Ark. 77; 69 Ark. 352. The law of a place where a note or debt is payable governs as to interest. 14 Ark. 189; 18 Ark. 456; 26 Ark. 356; 33 Ark. 648; 60 Ark. 269; 69 Ark. 352; 35 Ark. 52; 44 Ark. 230; 49 Ark. 54; 61 Ark. 329; 66 Ark. 77; 69 Ark. 612. In the absence of stipulation to the contrary, the law of the place of performance of a contract governs. 95 Tenn. 585; 13 Pet. 77; 142 U.S. 116; 77 N.Y. 573; 91 Ga. 507; 14 Vt. 38; 19 S.C. 583; 9 Port. 1. As to the extraterritorial enforcement of the usury laws of Illinois forfeiting the interest, see: 22 Ark. 125; 60 Ark. 269; 69 Ark. 355. There is no personal liability on the Beldings. Forbearance to sue, without an agreement to so do, is not a sufficient consideration for a guaranty. 68 Ark. 276; Wood, Stat. Fr. 173; 8 Cush. 85; 62 Barb. 420; 83 Me. 80; 32 Pa.St. 10; 15 Tex.App. 273; 93 F. 171; 14 Am. & Eng. Enc. Law, 1137.

Chas. D. Greaves, for appellee, Geo. Belding, adopts brief of appellee, Albert Belding.

Wood & Henderson, for appellees, H. & C. Cohn.

The Beldings have no cause of action against the Cohns on account of payments made to Whitlock on the note. 2 Enc. Pl. & Pr. 1012; 37 Am. Rep. 794; 27 Am. Dec. 638; 43 F. 166; 22 Am. & Eng. Enc. Law (2nd Ed.) 537; 16 Ark. 656. No personal judgment can be rendered against Charlotte Cohn on the note because she was a married woman at the time of the making thereof. 48 Ark. 220; 43 Ark. 164; 29 Ark. 346; 66 Ark. 113; 64 Ark. 385.

OPINION

BUNN, C. J.

The appellant, B. C. Whitlock, a citizen of Warren, Illinois, through his agent, Dr. C. D. Hay, of the city of Hot Springs, Arkansas, on the 11th of September, 1882, loaned Henry Cohn and Charlotte Cohn the sum of $ 3,000, taking their joint and several promissory note for the same, a copy of which is as follows, to-wit:

"Hot Springs, Ark., September 11, 1882.

"Five years after date, for value received, we promise to pay to the order of Benjamin C. Whitlock the sum of three thousand dollars with interest at the rate of ten per cent. per annum from date until paid. Said interest payable quarterly, and in case of default in the payment of said interest for any quarter of said period then the whole of this note to become due and payable. This note is secured by a certain deed of trust of even date herewith. Interest and principal payable at Warren, Illinois."

The deed of trust referred to in said note was executed by Henry and Charlotte Cohn to James G. Allen, as trustee, on the lot in controversy, the same being then claimed by the said Charlotte Cohn.

The principal and controlling questions in this case are, first, as to the title of Charlotte Cohn to the lot, and, second, as to the usurious character of the transaction of the loan.

Prior to the execution of the deed of trust and note aforesaid, and before the United States government had taken any effective steps to settle questions arising between claimants by occupancy and the government concerning the Hot Springs reservation, W. H. Gaines, holding, for himself and the Beldings, occupant claims on several lots, among them that in controversy, namely, lot 7, in block 130, leased the lot in controversy to Henry Cohn, and he subsequently transferred this lease to his wife, Charlotte Cohn, and when, sometime afterwards, the United States government had appointed a commissioner to settle these claims. Charlotte Cohn presented her claim to him, not as a tenant of Gaines, but as the owner of the occupant rights, the United States commissioner awarded her the privilege of purchasing the lot at the stipulated price, which she then paid, and received the patent from the government. She thus held when she executed the deed of trust and note referred to above, no further steps having been taken up to that time to controvert her title thus determined, although other claimants were not barred of their rights to do so.

Some time afterwards Gaines and others instituted suit in the district federal court, setting up the facts against Charlotte Cohn, controverting her title thus acquired. This suit was appealed to the supreme court of the United States, and there decided against Charlotte Cohn, and in favor of Gaines. Whitlock was not made a party to this suit, and was, of course, not absolutely precluded by that proceeding. But the correctness of that decision is not questioned in this suit nor elsewhere by Whitlock, at least with any show of reason. The mortgage or deed of trust, it appears to us, was on property to which the said Charlotte had no title. But it is contended that by paying the interest on said note as it fell due the Beldings in some way obligated themselves to pay off said deed of trust, and were stopped from contesting plaintiff's right to enforce his mortgage security. The mere payment of the interest by the Beldings, and acquiescence for the time in the status quo of the parties until the rights of the parties could be finally settled, worked no estoppel against the Beldings, and created no obligation on their part to continue to pay on the mortgage debt until the same should be settled. Such an obligation was without consideration. The Beldings were claimants of the property, and afterwards successfully maintained this claim before the proper tribunal. They could not be deprived of the fruits of their litigation in this way. There is no disputing the fact that they are now the real owners of the lot. The contention, it appears to us is settled. Whether or not the debt secured by the deed of trust is usurious, requires further notice. There is nothing in the evidence going to show that the note, under the Arkansas laws, is usurious. The commissions charged by Bell were unknown to Whitlock. He was not Whitlock's agent, and the 3 per cent. charged by him as commissions seems to have been a matter independent of the interest, for which Whitlock was in nowise responsible.

It is contended, further, that the contract was and is an Illinois contract, since the principal and interest is made payable in that state, and that in that state contracts for more than 7 per cent. per annum are usurious and void as to the whole of the interest. Where the intention of the parties is not otherwise more directly and definitely expressed in the contract, nor can be otherwise inferred, the place of payment will determine the law with reference to which parties have contracted; but parties will not be presumed to have contracted with reference to a law which will have the effect of annulling their contract for illegality in its very making, where another intention can be gathered, unless it be found...