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.
Page 79 U. S. 227
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,
Page 79 U. S. 228
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
Page 79 U. S. 229
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.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
Unless this case has become embarrassed by the pleadings, the
facts as found by the court present a clear case in favor of the
plaintiff. If they could have been given in evidence under the
common count, we should have felt no hesitation in sustaining the
judgment on that count alone, disregarding the special counts and
the pleadings thereto. But it has been held that an agreement under
seal for the payment of money cannot be received to support the
common money counts. It will be necessary, therefore, to examine
the case with reference to the defenses set up in the special
pleas. In all of them, usury and want of authority in the original
parties to make the negotiation are the points of defense relied
on.
With regard to the question what law is to decide whether a
contract is or is not usurious, the general rule is the law of the
place where the money is made payable, although it is also held
that the parties may stipulate in accordance with the law of the
place where the contract is made. In this case, it is conceded by
all the pleas, and shown by the special finding of the court, that
the place of payment of the bonds in question was the City of New
York. By the law of that state, passed April 6, 1850 (of which the
circuit court had a right to take judicial notice),
* no corporation is
allowed to interpose the defense of usury. None of the special
pleas allege that the place of payment mentioned in the bonds was
adopted as a shift or device to avoid the statute of usury. The
device complained of was a pretended sale of
Page 79 U. S. 230
the bonds, when the transaction was really a loan. Admitting
that it was a loan, it is not denied that it was made
bona
fide payable in New York. Hence the pleas cannot stand as
pleas of usury, properly so called. They must stand, if at all, on
the allegation that one or both of the contracting parties was
prohibited by law from making such a contract.
It is certain, however, that no such prohibition exists in the
case of the defendant. By the supplement to its charter passed by
the Legislature of Indiana January 29, 1851, it was authorized to
borrow money or sell its securities at any rate of interest or
price it might deem proper. The courts in Indiana are authorized by
the constitution of that state to take judicial notice of all its
laws; and, therefore, the circuit court could take judicial notice
of this law. By the law of Ohio passed December 15, 1852, any
railroad company authorized to borrow money and execute bonds or
promissory notes therefor was authorized to sell such bonds or
notes at such times and in such places, either within or without
the state, and at such rates, and for such prices as in the opinion
of the directors might best advance the interests of the company.
This is tantamount to a repeal of the usury laws as to such
companies. And although this law had primary reference to the
railroad companies of Ohio, yet the supreme court of the state, in
a very sensible and judicious opinion, has decided that it extends
by comity to railroad companies of other states borrowing money in
Ohio. Indeed, the second special plea sets forth a statute of Ohio,
in relation to this very defendant, which makes it a corporation of
Ohio as well as Indiana and authorizes it to perform any act within
the State of Ohio the same as if it had originally been
incorporated therein. This act, it seems to us, rendered the
exercise of comity hardly necessary to bring the defendant within
the privileges of the Ohio act of 1852.
It must be conceded, therefore,
first that the
transaction in question, if a loan at all, was not a usurious loan
by the law of the place which governed the contract, and
secondly that the defendant had a perfect right to make
it. This observation
Page 79 U. S. 231
is applicable to all the special pleas, and disposes entirely of
the second of them, in which the defendant relies on its own
disability to borrow money at a higher rate of interest than seven
percent, and also disposes of the third of said pleas, in which the
statute of usury of the state of New York is pleaded. There
remains, then, only the first plea, in which the point is taken
that the Ohio Life Insurance & Trust Company was, by its
charter, prohibited from taking more than seven percent interest.
This point is fully presented in the last plea on which issue was
taken, and the defendant can therefore receive no harm though the
demurrer to its first plea was wrongly sustained. It still had the
benefit of that defense under the last plea, and the result is
presented to us in the finding of the court. That finding is that
the transaction was not a loan at all, but only a sale of the
bonds, and it is not pretended that the Ohio Life & Trust
Company might not purchase securities of this sort at any price it
might deem expedient. But the defendant contends that this was a
conclusion of law on the part of the court, and that it was
erroneous. Surely the question whether a negotiation of bonds was a
sale or a loan is ordinarily and
prima facie a question of
fact. To make it a question of law, some fact must be admitted or
proved which is irreconcilable with one conclusion or the other.
What fact in this case is irreconcilable with the conclusion that
this negotiation was a sale? The defendant contends that the fact
that the bonds were its own obligations is such a fact, and alleges
that in law a party cannot sell its own obligations to pay money.
But it certainly may do this if authorized by law to do it, and it
is shown that this very thing was authorized by the laws of Ohio,
to the benefit of which the defendant was expressly as well as by
comity entitled.
Again, the defendant alleges that the exaction of collateral
security for the payment of the bonds was a fact wholly
irreconcilable with a sale. We do not think so. Once concede that
the obligor may sell its own bonds, what difference can it make how
fully and strongly they may be secured?
Page 79 U. S. 232
The requirement of guaranties can only amount to evidence of
intention, at most, the weight of which, in connection with all the
circumstances of the case, is to be judged of by the tribunal to
which the facts are submitted. This has been fairly done in the
present case, and the decision is against the defendant.
In this view of the case we do not decide whether the demurrer
to the first plea was or was not well taken. We are disposed to
think that it was, but do not deem it necessary to encumber the
case with the discussion of that question.
Judgment affirmed.
*
<|9 Pet. 625|>Owings v. Hall, 9 Pet. 625.
