In Graham v. Norfolk Nat. Bank (84 N.Y. 393, 400) the court stated: "This question of capacity, of the rights and powers flowing from the marriage relation, is dependent upon the law of the domicile, and utterly unaffected by the foreign law, and the former must, therefore, dictate and measure the authority and power of the husband and the right of the wife.Summary of this case from Ross v. Ross
Argued February 11, 1881
Decided March 1, 1881
Malcolm Campbell for appellants. Francis C. Barlow for respondents.
The ownership of one hundred and ninety-six shares of stock, which stood upon the books of the Norfolk Bank, in the name of Eliza A. Graham, must be deemed vested in her, whether the purchase-price was paid by her or by her husband, and notwithstanding the evident control of it, for his own purposes, by the latter. No creditors of the husband intervene to affect the question, and, as between Mrs. Graham and the bank, her right as owner must be admitted. The dividends declared during such ownership belonged to and were payable to her; and, assuming for the present that her assignment to plaintiffs was effective to transfer such right to them, there remain for discussion only the two questions: whether the Norfolk Bank did, in fact, pay the dividends sued for to the husband of Mrs. Graham; and whether, by such payment to him, the liability of the bank to her was discharged. The referee has found that such payments were, in fact, made to James Graham, the husband. At the time of these transactions he appears to have been the cashier of the Elkton National Bank, and of the Farmers and Merchants' Bank, of Elkton, in both of which he was largely interested, and the principal and controlling agent, and both of which banks were situate in the State of Maryland, in which State he and his wife resided. The evidence tends to prove that the dividends in question were, in fact, paid to James Graham, cashier, and, therefore, to the Elkton or Farmers and Merchants' Bank. Two of the dividends are proved to have been so paid, with his assent and by his direction given at the time, and one of them with his subsequent approval and ratification. The larger dividend of the three was paid by the delivery, to the Elkton Bank, of the amount in its own bills, and the others by a credit of their respective sums to Graham, as cashier. While it is claimed that, at the date of these credits, there was nothing due from the Elkton Bank to the Bank of Norfolk, and, therefore, no debt upon which the credit could apply, it is yet uncertain, upon the evidence, how the accounts actually stood, and the credit to Graham, as cashier, by his direction, or with his assent and approval, at a time when he conceded the existence of a large indebtedness which he was interested to reduce, was a good payment to him, and an application of the debt of the bank to his wife to the liability of one or both of the Elkton banks, upon which the respective parties appear to have acted by a settlement between the banks, and the benefit of which, as against the Elkton banks, Graham must be presumed to have had. While the facts are not free from difficulty, a careful examination has satisfied us that there was sufficient evidence to warrant the finding of the referee, and to make it conclusive on this appeal.
The question of law, however, remains, whether the payment by the bank to James Graham was a good payment to his wife in whose name the stock stood upon the books of the bank. The Norfolk Bank was located and transacted business in the State of Virginia. It is proved that in that State the common law prevails as it respects the relation of husband and wife, and that within that jurisdiction the husband has the absolute right to reduce to his own possession, and use for his own benefit, the personal property of the wife. The contract out of which grew the right to the dividends was both made and to be performed in Virginia, and if the payment by the Bank of Norfolk to James Graham is to be tested and measured by the law of that State, it is conceded to have been good and an effective discharge of the liability to the wife. It is denied, however, that the law of Virginia applies, and it is argued that the law of Maryland, the lex domicilii, governs and controls the capacity of the parties to receive payment, and the duty of the bank in making it. The general subject of a conflict between the law of the domicile and that of the place of contract has been fully discussed by Story and Wharton in their respective treatises. (Story on Conflict of Laws, § 374 et seq.; Wharton, § 393, etc.) Whatever is useful in the learning of the continental jurists, or the decisions of the English courts, has been made tributary to conclusions which we may safely follow where, at least, they are in harmony with the ruling of our own tribunals. It must, then, be granted that movables or personal property, by a fiction of the law, are deemed attached to the person of the owner, and so, present at his domicile, whatever their actual situation may be. The law of the domicile, therefore, naturally governs their transfer by the owner, and their disposition and distribution in case of his death. So far the authorities substantially agree, differing only in the reasons upon which the rule is founded, and by which it is to be justified. When, however, the question passes beyond the disposition of the personal property by the party, or the act of the law, within the jurisdiction of the domicile, and busies itself with the inherent character of the property, and of the contracts which both create and constitute it, elements of discord arise, and the authorities are not easily to be reconciled. It is readily seen that the inherent character of the contract must usually be the product of the jurisdiction in which it originates, and hence it follows, and has been justly held, that the construction, nature and effect of a contract are to be determined by the lex loci contractus. (Story on Conflict of Laws, § 321.) But no such question is here. There is no dispute about the construction of the contract to pay dividends. All are agreed upon that. There is no trouble as to the nature of the contract or its effect. Its validity, and the duty of payment to the stockholders, is conceded on all sides. The real question is over the performance of the contract, or its discharge by payment; and that involves the capacity of the husband to receive and discharge the debt, represented by the dividends, jure mariti. On the one hand it is argued that this question of capacity, of the rights and powers flowing from the marriage relation, is dependent upon the law of the domicile, and utterly unaffected by the foreign law, and the former must, therefore, dictate and measure the authority and power of the husband and the right of the wife. That is, in general, true as between themselves, and relatively to each other. It does not follow that it is true as between them and a debtor in another State, whose contract was made there, and is there to be performed. Such a fact introduces a new element into the problem. It would scarcely be endurable if a railroad or insurance company declaring dividends in this State should be bound to pay stockholders in other States according to the foreign laws, and in accordance with different and varying codes. Observing the evil result we must remember that, in a case like the present, it is a legal fiction which attaches the property to the domicile, and the actual fact may be otherwise. Judge COMSTOCK, in Hoyt v. The Commissioners of Taxes ( 23 N.Y. 228), well says, "that the fiction or maxim, mobilia personam sequuntur, is by no means of universal application. Like other fictions it has its special uses. It may be resorted to when convenience and justice so require. In other circumstances the truth and not the fiction affords, as it plainly ought to afford, the rule of action." And Judge STORY says that the legal fiction "yields whenever it is necessary for the purposes of justice, that the actual situs of the thing should be examined." (Confl. of Laws, § 550.) And hence has been very steadily sustained the general rule that a contract made in one State and to be performed there is governed by the law of that State, and the further rule, which is a logical result, that a defense or discharge, good by the law of the place where the contract is made or to be performed, is to be held, in most cases, of equal validity elsewhere. (Story on Confl. of Laws, § 331; Thompson v. Ketcham, 8 Johns. 189; Bartsch v. Atwater, 1 Conn. 409; Smith v. Smith, 2 Johns. 235; Hicks v. Brown, 12 id. 142; Sherrill v. Hopkins, 1 Cow. 103; Peck v. Hibbard, 26 Vt. 702; Bowen v. Newell, 13 N.Y. 290; Cutler v. Wright, 22 id. 472; Waldron v. Ritchings, 3 Daly, 288; Jewell v. Wright, 30 N.Y. 259; Willitts v. Waite, 25 id. 577.) In these cases the fiction yields to the fact; the situs attached theoretically to the person of the owner, and, therefore, to his domicile surrenders to the actual situs where justice and convenience demand it. The illustrations are various, but founded upon a common reason and justification. For the purpose of taxation the actual situs controls and the fiction which carries the personal property to the domicile of the owner is disregarded. As to days of grace affecting the maturity of a contract and determining when it becomes due, the lex loci is applied. The defense of infancy is to be sustained or denied according to the rule of the place of contract and performance. So, also, as to the disability of coverture, and the rate and legality of interest. And even an assignment, in invitum, compelled by the local law, will transfer property in another State where suitors in the courts of the latter are not thereby prejudiced. These rulings and others of the like character have been modified and moulded in their application by the influence of varied circumstances, but concur in the general principle upon which the lex loci has been applied. The point pressed here is that while it controls the construction and validity of the contract it does not settle the capacity of the non-resident parties. But to found a ruling upon such a test would involve us in an ambiguity. Capacity may affect the power of transfer and the direction and details of distribution. In that respect it is often shaped and settled by the law of the domicile. But it also affects the validity of a contract and the mode and manner of its dissolution or discharge. In that respect it is generally governed by the law of the place of contract. Story concludes, after a full and learned review of the insuperable difficulties which attend an effort to extend the capacity or incapacity created by the law of the place of domicile to foreign States, that the true rule is that "the capacity, state and condition of persons according to the law of their domicile will generally be regarded as to acts done, rights acquired and contracts made in the place of their domicile, touching property situate therein," but as to acts done, etc., elsewhere the lex loci contractus will govern in respect to capacity and condition. We cannot make, therefore, the law of the domicile in and of itself a solvent of the doubts and difficulties likely to arise even as to questions of capacity. In the present case the contract was made in Virginia and to be performed there. The dividends were there declared and payable. They were paid to the husband who could lawfully receive and appropriate them, by the law of Virginia, to his own use and benefit. The payment was, therefore, valid and effectual and discharged the bank from its liability. The rights of the wife after such payment, as between herself and her husband under the law of Maryland, might prove to be a very different question. It is sufficient for the purposes of this case that the payment, which the referee finds was in fact made to the husband, discharged the liability of the bank and furnished a defense to the action.
The judgment should be affirmed, with costs.
All concur, except RAPALLO, J., absent.