Opinion
No. 29784.
April 3, 1933.
1. USURY. Notes covering loan negotiated in Louisiana, notwithstanding notes and trust deed securing loan from Louisiana corporation were executed in Mississippi, held governed by Louisiana law relating to usury ( Revised Civil Code, Louisiana article 2924).
Borrower of money was Louisianan corporation. At time all its active officers were residents of Louisiana where negotiations were begun, conducted, and concluded. Notes and trust deed securing loan were executed, and money paid over in Mississippi. The notes were payable to, and at the office of, a Louisiana corporation, with its office in Louisiana.
2. CORPORATIONS. Louisiana corporation which loaned money pursuant to negotiations through office in Louisiana, though loans were secured by Mississippi realty, held not doing business in Mississippi so as to preclude foreclosure of trust deed without compliance with statute ( Code 1930, section 4140).
Louisiana corporation, which loaned money secured by trust deed, had its office and principal place of business in Louisiana. It was engaged in the mortgage loan business, and made loan secured by mortgage on land located in Mississippi, but it had no officers or agents within the state, and did not solicit through agents loans in Mississippi.
APPEAL from chancery court of Harrison county. HON. D.M. RUSSELL, Chancellor.
Ford, White Morse and J.L. Taylor, all of Gulfport, for appellant.
Appellant contends that more than twenty per cent interest was charged and the contract was void and unenforceable.
When the appellee actually loaned twelve thousand, five hundred dollars and received a contract for fifteen thousand dollars this was exactly twenty per cent of the principal amount to say nothing of the interest contracted to be paid; but figuring it as first set out in detail and worked out according to the contract it appears to be more than twenty per cent.
A lender of money at extortionate rate of interest under contract void as against public policy cannot maintain a suit in equity against one placed in charge of the business for an accounting where he must call in directly or indirectly the aid of the illegal contracts to make out his case.
Woodson v. Hopkins, 85 Miss. 171; sec. 1946, Code 1930.
There can be no question that appellant had the legal right to bring the suit for she had foreclosed her vendor's lien, and was the purchaser and thus had an interest in the subject-matter.
McAllister v. Jerman, 32 Miss. 142, 59 Miss. 42 and 62 Miss. 536.
Under chapter 90, Laws of 1928, in force at the time the loan complained of was made, the appellant, being a foreign corporation had not domesticated or been authorized to do business in the state of Mississippi, was not permitted to bring or maintain any action or suit in any of the courts of this state. But it did, in a quasi-judicial proceeding, foreclose or attempted to make a foreclosure sale, invoking the laws of the state of Mississippi in so doing.
If the contract be an illegal contract and void, and the appellee, being a foreign corporation not having complied with Chapter 90, Laws of 1928, and the appellant having filed a bill asking that the proceedings be enjoined and the contract be declared illegal and void, and the deed of trust and trustee's deed cancelled, then there was before the court the question of an illegal contract and it became necessary for the court to determine whether or not it was a legal contract; and if an illegal contract and void, then to have granted the relief prayed for by the appellant.
Supply Company v. Bluenfield, 125 So. 548.
In the case of M. Levy Sons et al. v. Jeffords, 141 Miss. 818, 105 So. 1, it was held that the rights and obligations of parties were governed by the laws of the state where the borrower lived, and the question of usury was controlled by the law of that state.
It has been held that a contract for lease of building in Mississippi for theatre purposes was governed by Mississippi laws though rental notes were made payable in Louisiana.
Plaza Amusement Co. et al. v. Rothenberg et al., 131 So. 350. J.L. Taylor, of Gulfport, and Brady, Dean Hobbs, of Brookhaven, for appellant.
We submit that it is not even debatable that the interest contracted for by the appellee and Fairview, Inc., exceeded twenty per cent. There is equally no question that appellant has full right to claim the benefit of the statute which as between Fairview, Inc., and appellee would not only work a forfeiture of principal as well as interest, but would entitle Fairview, Inc., to recover every cent paid by it on this oppressive contract.
McAllister v. Jerman, 32 Miss. 142; Chaffe v. Wilson, 59 Miss. 42; Boyd v. Warmack, 62 Miss. 536; Wilczinski v. Smith, 110 Miss. 251, 70 So. 347.
Of course it is true that isolated transactions do not constitute doing business.
Long Beach Canning Co. v. Clark, 141 Miss. 177, 106 So. 646; Commercial Bank v. Auze, 74 Miss. 609, 21 So. 754.
But the record here shows a course of dealing extending over several years, involving at least twenty-seven wholly separate Mississippi transactions, in addition to sixteen others. It was functioning in its corporate powers in the state, within the rule laid down in Peterman Construction Supply Company v. Blumenthal, 125 So. 548.
Appellee was doing business in Mississippi. It was offered opportunity to accept another item. It now claims to own the property then offered as security. Every intermediate step between offer and foreclosure was a step to acquiring that property. Each of those steps was a Mississippi transaction, without reference to where planned.
Donaldson v. Thousand Springs Power Co., 29 Ida. 735, 162 P. 334; Lowenmeyer v. National Lumber Co. (Ind.), 125 N.E. 67; Moore v. Racine Rubber Co., 238 S.W. 381; Dahl Implement Lumber Co. v. Campbell, 178 N.W. 197.
Fairview, Inc., was incorporated for the purpose of marketing the property purchased from appellee and which bore the same name, and although the corporation of Fairview, Inc., took out a Louisiana charter, it domesticated in Mississippi, and was in its purpose, operations and in effect a Mississippi corporation. Appellee was likewise operating extensively in Mississippi. The sale by appellant to Fairview, Inc., with retention of vendor's lien, was a Mississippi transaction. The lien was in danger of being foreclosed in Mississippi. The officers of Fairview, Inc., sought assistance from a company operating in Mississippi. The deal was closed in Mississippi by a Mississippi attorney.
Rushing Guice, of Biloxi, for appellees.
The judgment of the court below should be sustained because the facts before the court did not show that the contract attacked was a contract for interest in excess of twenty per cent.
Section 1946 of the Code of 1930, being a highly penal statute, must be strictly construed and, unless proof of its violation was with clearness and certainty, that more than twenty per cent was either contracted for or received then a bill of the nature of the bill in this case was properly dismissed.
Byrd v. Newcombe Lumber Co., 118 Miss. 179, 79 So. 100; Morgan v. King, 91 So. 30; Beck v. Tucker, 113 So. 209; Bond v. Jones, 8 S. M. 368; Kimbrough et al. v. Carter et al., 92 So. 228; Chaffee et al. v. Wilson et al., 59 Miss. 42; Boyd v. Womack, 62 Miss. 536; Wilczinski v. Smith et al., 70 So. 347.
In the case at bar, the chancellor found, as a matter of fact, that the interest contracted for did not exceed twenty per cent.
The evidence wholly failed to show that there was any violation of the law to the extent that the whole of the principal should be forfeited, and, unless this be true, the appellant could not succeed in her bill because the bill did not carry with it an offer to do equity or a tender of the amount of principal really due less any excess interest that had been paid.
Rush v. Pearson, 45 So. 723; American Freehold Land and Mortgage Co. v. Jefferson et al., 12 So. 464; Purvis v. Woodward, 78 Miss. 922, 29 So. 917; Crittenden v. Reagan, 89 Miss. 185, 42 So. 281; Lewis v. Bogue Chitto, 76 Miss. 356, 24 So. 875.
The judgment of the court below should be sustained because the facts before the court, uncontested and admitted, showed that the contract was a Louisiana contract, which, under the provision of article IV, section 1, of the Constitution of the United States of America, should be decided under the laws of Louisiana.
Full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state.
Article 4, Section 1, of the Constitution of the United States.
With respect to mortgages of land, though the mortgage itself must be such as will constitute a transfer of title under the lex situs, the question as to whether the debt secured thereby (if contracted in another state) is a valid consideration to support the mortgage (for instance, whether it is usurious) is to be determined by the law which properly governs the validity of the debt.
Minor, in his Conflict of Laws, Section 11, page 31; Fessenden v. Taft, 65 N.H. 39, 17 A. 713, 714; Klinck v. Price, 4 W. Va. 4, 6 Am. Rep. 268; Bowles v. Field, 78 Fed. 742; 39 Cyc. 905.
Usury inheres in the loan, and not in the security given to insure its payment. The loan being separate and independent from the security given for its payment, the situs of the property given in security cannot determine the situs of the loan transaction. Hence, although an obligation may be secured by a mortgage upon land in one state, yet if the loan contract, is properly referable to another state in accordance with the general rules already stated, the existence of usury in the transaction is determined by the law of the latter state.
39 Cyc. 905; Commercial Bank v. Auze, 74 Miss. 609, 21 So. 754; Armistead v. Blythe, 20 So. 298; American Freehold Land Co. v. Jefferson, 69 Miss. 770, 12 So. 464, 30 Am. St. Rep. 587; Armistead v. Blythe, 20 So. 298; N.Y. Central Trust Co. v. Burton, 74 Wisc. 329, 43 N.W. 141; Kendrick v. Kyle, 28 So. 951.
Under the laws of this state as heretofore pronounced by the Supreme Court, as well as under the decisions of every state in the Union rendered on this subject, the facts in the case at bar showed that the contract was a Louisiana contract. If so, the appellee is entitled to the presumption that it was to be construed according to the laws of Louisiana and these laws do not penalize the taker of usurious interest to the extent of the Mississippi laws, nor make invalid the contract entered into.
Martin, Aiken, et al. v. Martin, Pleasants Co., 1 S. M. 176, Robb v. Halsey, 11 S. M. 140; Smithsonian Institute v. St. John, 29 Supp. Ct. 601; Chicago A.R. Co. v. Wiggins Ferry Co., 7 Sup. Ct. 398.
This court had judicial knowledge of the law of Louisiana, and the law having been pleaded, was before the court.
Section 1598, Code of 1930; Hancock National Bank v. Farnum, 176 U.S. 640, 642, 44 L.Ed. 619, 620, 20 Sup. Ct. 506.
This was a contract between two Louisiana corporations, whose officers resided in Louisiana, that all of the negotiations looking towards the making of this contract took place in Louisiana, that the notes were dated at New Orleans and payable in New Orleans, and the only instance to the transaction was the ownership of certain property in Mississippi by a Louisiana corporation which was pledged as security to another Louisiana corporation.
To hold that a mortgage company has to domicile in Mississippi in order to make loans that are negotiated outside of this state would deprive the owners of property in this state of the value of their property to a very large extent.
Argued orally by W.L. Guice, for appellee.
On July 8, 1926, the appellant sold and conveyed certain real property located in Harrison county, Miss., to Fairview, Inc., a Louisiana corporation, for a consideration of ninety thousand dollars and twenty-two thousand, five hundred dollars of which was paid in cash, while the balance was evidenced by promissory notes secured by a vendor's lien reserved in the deed conveying the property. On June 22, 1928, Fairview, Inc., negotiated a loan from the appellee, Pyramid Securities Company, Inc., also a Louisiana corporation, of fifteen thousand dollars, evidenced by three notes of five thousand dollars each, payable respectively in one, two, and three years, with six per cent, interest from date, payable semiannually, and secured by a deed of trust on the greater part of the land on which the appellant held a vendor's lien. The appellant permitted this deed of trust to become the first lien on said land by subordinating her lien thereto. Of the proceeds of this loan of fifteen thousand dollars the appellee retained two thousand, five hundred dollars as a bonus, and twelve thousand dollars of the remainder was paid by Fairview, Inc., to the appellant for credit on its indebtedness to her.
Fairview, Inc., having defaulted in further payments to the appellant, she afterwards foreclosed her vendor's lien, subject, however, to the prior lien of the appellee, and purchased the property at said foreclosure sale. She afterwards made certain interest payments to the appellee, and also paid to it a bonus of four hundred dollars for an extension of part of its indebtedness. Thereafter the appellee began proceedings in pais to foreclose its deed of trust. The appellant thereupon filed a bill in the chancery court seeking to enjoin the sale on the ground that the notes secured by said deed of trust were usurious, in that more than twenty per cent interest was contracted for and received, thereby forfeiting the principal of said loan and all interest. A preliminary injunction was denied, and the sale was thereupon consummated and the property purchased by appellee.
Thereafter an amendment to the bill of complaint in the nature of a supplemental bill was filed, showing that the said sale had been consummated and a trustee's deed conveying the property to appellee had been executed, and praying that the said deed of trust be declared to be null and void and be cancelled of record, that the said trustee's deed be canceled, and that the appellant be decreed to be the sole legal and equitable owner of the property therein described, free from any lien or incumbrance in favor of appellee. Upon the conclusion of the evidence offered at the trial of the cause, the chancellor entered a decree dismissing the bill of complaint, and, from this decree, this appeal was prosecuted.
Extensive arguments are made by counsel for the respective parties upon the point as to whether or not more than twenty per cest interest was contracted for or received on the loan from appellee to Fairview, Inc. Applying the rule announced in Hyde v. Finley, 26 Miss. 468, for determining the actual principal of a loan for the purpose of calculating interest, it may be that, including bonus paid, more than 20 per cent interest was in fact exacted, but this becomes immaterial in view of the fact that we have reached the conclusion that the notes involved are governed by the laws of the state of Louisiana.
Fairview, Inc., was a corporation organized under the laws of the state of Louisiana. At the time the loan in question was negotiated, Col. George S. Dodds, husband of appellant, and a resident of the state of Mississippi, was, nominally, its president, but all the active officers of the corporation were residents of Louisiana. The negotiations were begun, conducted, and concluded in the state of Louisiana, although the notes and deed of trust were executed, and the money paid over, at Biloxi, Miss. The notes in question were dated at New Orleans, La., and they are payable to, and at the office of, a Louisiana corporation, with its office at New Orleans, La. Upon these facts, applying the doctrine announced in the case of Greenlee v. Hardin, 157 Miss. 229, 127 So. 777, 71 A.L.R. 741, it is clear that the notes are governed by the laws of Louisiana under which they are valid and collectible. Merrick's Revised Civil Code of Louisiana, art. 2924.
It is contended, however, that the appellee was doing business in the state of Mississippi without having complied with section 11, chapter 90, Laws of 1928 (section 4140, Code of 1930), and therefore it was not permitted to invoke the laws of this state to foreclose its deed of trust on lands in this state.
The proof shows that the appellee corporation had not qualified or been authorized to do business in this state, and consequently it becomes material to consider whether or not it was doing business in this state within the meaning of its laws. The appellee was organized under the laws of the state of Louisiana, and had its office and principal place of business in New Orleans, La. It was engaged in the mortgage loan business, and made a number of loans which were secured by mortgages on lands located in this state. It had no office or agents in this state. It did not solicit through agents' loans in this state, and such loans as it made that were secured by property located in this state were negotiated at or through its office in New Orleans. We do not think this constituted doing business in Mississippi within the purview and meaning of the statutes of this state.
It follows from the views herein expressed that the decree of the court below dismissing the bill of complaint was correct, and therefore it will be affirmed.
Affirmed.