DYGERT et ux. v. VERMONT LOAN & TRUST CO., 94 F. 913

GILBERT, Circuit Judge. On November 17, 1.892, the appellants, Albert Dygert and Flora T. Dygert, his wife, executed to the appel-lee, the Vermont Loan & Trust Company, a promissory note, dated at Spokane, Wash., payable December 1, 1897, for $3,400, with interest after date at 6 per cent, per a nnum, both the principal and interest payable at Spokane, Wash., interest payable annually according to tbe six interest coupon notes made at tbe same time. Tbe interest coupon notes provided for interest after maturity.

To secure tbe payment of tbe notes, tbe appellants executed to tbe appellee a mortgage on real estate in, Idaho. Tbe appellee brought suit to foreclose the mortgage. Tbe appellants answered tbe bill, alleging that tbe loan was affected by tbe usury laws of tbe state of Idaho; that the loan was for $3,000, and that tbe $400 added to tbe principal thereof was a commission for making the loan; that said commission was charged in violation of sections 1264-1266, c. 10, Rev. St. Idaho, and is therefore void. Upon the pleadings and tbe proofs, a decree was rendered in favor of tbe appellee.

On tbe appeal to this court, it is conceded that tbe contract is usurious if it is controlled by the laws of' Idaho, but that it is not usurious if tested by tbe law of Washington, where tbe notes were made payable. Tbe principal question presented is, by the law of which state is tbe contract governed? In Andrews v. Pond, 13 Pet. 78, Chief Justice Taney, speaking for tbe court, said: “Tbe general principle in relation to contracts made in one place to be executed in another is well ■ settled.

They are to be governed by the law of tbe place of performance; and, if tbe interest allowed by tbe laws of the place of performance is higher than that permitted at tbe place of tbe contract, tbe parties may stipulate for the higher interest, without incurring tbe penalties of usury.” Tbe language so quoted was approved in Miller v. Tiffany, 1 Wall. 298, 310, and again in Coghlan v. Railroad Co., 142 U. S. 101, 110, 12 Sup. Ct. 150. In Junction R. Co. v.

Ashland Bank, 12 Wall. 226, 229, the court said: “With regard to tbe question what law is to decide whether a contract is or is not usurious, the general rule is tbe law of tbe place where tbe money is made payable.” In Bigelow v. Burnham, 83 Iowa, 120, 49 N.

W. 104, tbe supreme court of Iowa said: “When a contract is made in one state, to be performed in another, and. id express terms provides for a rate of interest lawful in one, but unlawful in tbe other, state, tbe parties will be presumed to contract with reference to tbe laws of tbe state wherein1 tbe stipulated rate of interest is lawful.” Of similar import are Peck v. Mayo, 14 Vt. 33; Healy v. Gorman, 15 N. J. Law, 328; Arnold v. Potter, 22 Iowa, 194; McAllister v. Smith, 17 Ill. 328; Butler v. Edgerton, 15 Ind. 15.

In no decision to which our attention has been directed has a different doctrine been held, except in tbe case of Trust Co. v. Hoffman, 49 Pac. 318, very recently decided by tbe supreme court of Idaho.

In that cas%,tbe court said: “Tbe other contention of petitioner, that tbe notes which tbe mortgage sought to be foreclosed in this case was given to secure were made payable in tbe state of Vermont, and that, therefore, tbe contract must be construed by tbe laws of that state, is not only utterly untenable, but not one single authority of tbe multitude cited by counsel in bis petition supports tbe contention.” Tbe appellants rely upon tbe 'ruling of tbe court in that case, and contend that it construes a statute of tbe state of Idaho, and therefore creates a precedent which is binding upon this court.

But tbe question involved in that case did not depend upon the construction to be given to a statute o£ tbe state. It was purely a question of general law. The inquiry was, what law shall govern a contract made in Idaho, but made payable in another state? It was not affected by any statute of Idaho. The statutes of that state are silent upon the subject. While it is the duty of a federal court, in a case of doubt as to a doctrine of general law, to lean towards the decisions of the state court (Brown v. Furniture Co., 7 C. C. A. 225, 58 Fed. 286; Burgess v. Seligman, 107 U. S. 20, 2 Sup. Ct. 10; Farmers’ Nat.

Bank v. Sutton Mfg. Co., 3 C. C. A. 1, 52 Fed. 191), the decisions of the state court are not controlling, and will not be followed, when they are opposed to the underlying principles of the law and the clear weight of authority (Telegraph Co. v. Wood, 6 C. C. A. 437, 57 Fed. 471; Railroad Co. v. Baugh, 149 U. S. 368, 13 Sup. Ct. 914).

It is contended that the court erred in ruling that the complainant was not required to prove the allegation of the bill that the notes were made payable in the state of Washington for its convenience in transacting its business, and not for- the purpose of evading the usury law's of Idaho. The bill contained that allegation.

The answer met it with the allegation that the defendants had never “heard or been informed, save by the complainant's said bill, whether said notes and mortgage were made payable at Spokane, Wash., for convenience to plaintiff in the transaction of its business, and not for the purpose and with the intent or design to avoid or evade any of the laws of the state of Idaho, and are therefore without sufficient information .either to admit or deny the same.” The court held that, the allegation of the bill “not being denied by defendants, no evidence upon the subject was ever given or required, it must be concluded that there was no bad faith in making the notes payable at Spokane, and it must follow that they are not usurious.” If it be conceded that the answer does not admit the truth of the averment of the bill, it does not follow that the court erred in ruling that thex-e was no proof of usury in the contract.

The burden of proving usury was upon the defendants. 27 Am. & Eng. Enc. Law, 1045; Berdan v. Trustees, 47 N. J. Eq. 8, 21 Atl. 40; Kihlholz v. Wolf, 103 Ill. 362; Valentine v. Conner, 40 N. Y. 248. It was. unnecessary for the complainant to allege in its bill that the notes were made payable in Washington in good faith, and not for the purpose of evading the usury law of Idaho.

It was for the defendants to- make the plea of usury, and to allege the facts in which it consisted, and, if it was-bolieved that the notes were made payable in the state of Washington in evasion of the usury laws of Idaho, the defendants should have averred and proven that fact. The allegation in the bill was superfluous and no proof of it was required upon the part of the complainant. We find no error for which the decree should be reversed. It is accordingly affirmed.