Junction Railroad Company v. Bank of Ashland - 79 U.S. 226 (1870)
U.S. Supreme Court
Junction Railroad Company v. Bank of Ashland, 79 U.S. 12 Wall. 226 226 (1870)
Junction Railroad Company v. Bank of Ashland
79 U.S. (12 Wall.) 226
1. If a bond be not usurious by the law of the place where payable, a plea of usury cannot be sustained in an action thereon unless it alleges that the place of payment was inserted as a shift or device to evade the law of the place where the bond was made.
2. Where a plea is erroneously overruled on demurrer and issue is joined on another plea under which the same defense might be made, the judgment will not be disturbed after verdict.
3. A prohibition against lending money at a higher rate of interest than the law allows will not prevent the purchase of securities at any price which the parties may agree upon.
4. Whether a negotiation of securities is a purchase or a loan is ordinarily a question of fact, and does net become a question of law until some fact be proven irreconcilable with one or the other conclusion.
5. Though the negotiation of one's own bond or note is ordinarily a loan in law, yet if a sale thereof be authorized by an act of the legislature, it becomes a question of fact whether such negotiation was a loan or a sale.
6. The requiring or giving of collateral security for the payment of a bond when negotiated is not inconsistent with the transaction's being a sale.
7. The law of Ohio authorizing railroad companies to sell their own bonds and notes at such prices as they may deem expedient is extended by comity to the companies of other states authorized to transact business in Ohio.
8. A corporation cannot plead usury to a bond payable in New York. Statute law there prevents it.
9. The courts of the United States will take judicial notice of the public laws of the several states, and, in Indiana, of the private as well as public laws of that state.
This was an action of debt brought by the Bank of Ashland, a corporation of Kentucky, against the Junction Railroad Company, a corporation of Indiana, to recover the amount of nine bonds of the latter company for one thousand dollars each, with interest coupons attached. The bonds bore date the 1st day of July, 1853, and were payable to Caleb Jones or bearer at the office of the Ohio Life Insurance & Trust Company in the City of New York on the 1st day of July, 1863, with interest at the rate of ten percent per annum, payable half-yearly. The declaration contained twenty special counts on the bonds and coupons and one common count for money lent, paid, had and received, and account stated. To the last count there was a plea of nil debet, and to the twenty special counts the defendant filed four special pleas, the substance of which was that the bonds were obtained by the plaintiff from the Ohio Life Insurance & Trust Company and that they were originally negotiated by the defendant to that company in Cincinnati at par under the pretense of a sale of the bonds, but in truth by way of a loan of money from the Ohio Trust Company to the defendant, upon interest at the rate of ten percent per annum -- a rate which, as stated in the first special plea, the Ohio Company, by its charter, was prohibited from taking, and which, as stated in the second of said pleas, the defendant, by the law which authorized it to do business in Ohio, was prohibited from paying, and which, as stated in the third plea, was forbidden by the usury laws of New York, where the bonds were made payable. The pleas alleged that the plaintiff took the bonds which notice of the usurious consideration. These pleas being demurred to and overruled, the defendant filed a fourth special plea to the same counts setting forth substantially the same facts as in the first plea,
with a more specific averment of a corrupt and usurious agreement. To this plea the plaintiff replied that the bonds were purchased from the defendant by the Ohio Life & Trust Company in good faith, and that the plaintiff received them in good faith with the assurance and belief that they had been so purchased and had not been received as security for a loan.
A jury being waived, the cause was tried by the court, which made a special finding of the facts, the substance of which was that the bonds declared on were, as alleged in the pleas, originally negotiated by the defendant below to the Ohio Life Insurance & Trust Company at its office in Cincinnati, Ohio, at par, being parcel of one hundred and twenty-five bonds negotiated together; that the defendant proposed to sell the bonds to the Trust Company, but the latter refused to take them unless some persons other than the defendant would guarantee their payment, which was done; whereupon the negotiation was consummated; that said negotiation did not amount to a loan of money, but to a sale of the bonds, and that the transaction involved nothing usurious; that in 1857,, the Trust Company transferred the bonds to the plaintiff below in payment of a debt, and that the plaintiff took them in good faith, without any notice of the fact of usury or of illegality in the issuing of the bonds, but had notice of the guaranty. Upon these facts, the court below gave the plaintiff judgment for the full amount of the bonds and interest, and the defendant brought the case here.
To enable the reader the better to judge at this point of the case whether the judgment below was rightly or not rightly given, it should be mentioned that in New York, by a statute enacted April 6, 1850, a defense of usury cannot be set up by corporations; that by a supplement to its charter dated January 29, 1851, the Junction Railroad Company was empowered to borrow money or sell its securities at any rate of interest; and that by statute of Ohio passed December 15, 1852, any railroad company authorized to borrow money and issue bonds for it may sell its bonds when, where, and at such rate and price as the directors
deem most advantageous to the road; and finally, that by a second statute of the same state, the Junction Railroad Company was made a corporation of Ohio and authorized to perform any act as if originally incorporated therein.