This action involves eight mortgages or deeds of trust, and the debts they were made to secure. They are attacked on the ground of usury. The following are substantially the facts of the case, as we find them:
First. Some time in 1883 Lanier saw an advertisement of A. W. Ocobock in a newspaper published at Memphis, Tenn., in which he claimed to represent capitalists who proposed to make loans on improved lands in Arkansas. Lanier called at his office in Memphis, and made arrangements to secure a loan1 through him. He executed a note for $8,600 to the American Freehold Land Mortgage Company, of London, the lender, dated February 10, 1883, and payable five years from date at the office of the Corbin Banking Company, in the city of New, York. To this note five coupons were attached for interest on the same at eight per cent, per annum, payable on the first of January, 1884, 1885, 1886 and 1887, and on the 15th of February, 1888, respectively, the first for $611, the second, third and fourth for $688 each, and the last for $784.84. To secure the payment of the principal note and coupons, Lanier executed to J. K. O. Sherwood, as trustee, a deed of trust conveying lands in Mississippi county, in this state, and, after delivery of the papers to the lender, received from Ocobock a check on the Union & Planters’ Bank, of Memphis, for $6,780. The difference between the amount received and the sum specified in the note, to-wit: $1,820, was retained by Ocobock for commissions and expense. The commission was $1,720, which was twenty per cent, on the face of the loan. The expense was $100, which was for looking at the land as he passed by it on a steamboat, and for examining-title. The deed of trust provides: “The contents embodied in this conveyance, and the notes secured hereby, shall in all other respects be construed according to the laws of the state of Arkansas, where the same is made.”
Lanier relies on various circumstances to show that the persons through whom he secured the loan were agents of the lender, and that it knew its agents collected usurious interest on the money loaned. But it is unnecessary to mention these circumstances, for reasons hereafter appearing.
. Second. Owing to misfortune in business, Lanier was unable to pay the interest on the $8,600 which was due and payable in 1884 and 1885. He was a planter, and needed money to enable him to cultivate his plantation. On account of his financial embarrassment, he made contracts at various times with the Corbin Banking Company, a New York firm engaged in banking and brokerage, to advance to him money and supplies. An estimate of the amount needed by him in each year was made, and he executed a note for the same at 10 per cent, per annum interest thereon from date, payable to F. W. Dunton, a member of said company, at the office of the banking company, in the city of New York, and at the same time executed a deed of trust, in which W. G. Wheeler was trustee, to secure the payment of the note. In each deed of trust it was stipulated that it and the note secured thereby, except as therein otherwise provided, should “be .construed according to the laws of the State of Arkansas, where the same is made.” The money or supplies were advanced as Lanier requested, and were charged to him, together with 10 per cent, per annum interest thereon from the date of the same, on account. In their dealings after the execution of the deed of trust, it seems, no attention was paid to the notes, but the parties were governed by the account in ascertaining the amount of Lanier’s indebtedness to the bank.
In the manner indicated, notes and deeds of trust were executed by Lanier as follows: On the 15th of April, 1885, a note for $1,500, with a coupon for $106.25 for interest attached; on the 5th of March, 1885, three notes for $2,400 each, payable on December 1, 1886, 1887 and 1888, respectively; on the 26th of May, 1887, a note for $2,500; on the 10th of April, 1888, a note for $3,000; and on the 3d of March, 1890, a note for $3,000; and on the day of the execution of each of these notes a deed of trust was executed by him to secure the payment of the note or notes made on that day.
In November, 1890, Alma C. Sherman held two notes for $1,660.49 each, and interest from date, which were executed by Lanier to her at Memphis, Tenn., on the 1st of September, 1882, and secured by a deed of trust of same date. On the 8th of November, 1890, the Corbin Banking Company, at the request of Lanier, purchased the notes and deed for its own benefit. On the 19th of March, 1891, Lanier was also indebted to Hirsch Brothers in the sum of $10,898.62, and this, too, was secured by a deed of trust, and was purchased by the banking company, at the request of Lanier, for its own benefit. All these claims were transferred to William J. Kelley for the use and benefit of the banking company, although it was not so stated in the assignment.
On the 26th of March, 1891, Lanier was indebted to the Corbin Banking Company as follows:
On account of the Sherman debt...................$ 5,000 00
On account of the Hirsch Brothers’ claim.......... 10,892 52
On account of moneys and supplies advanced....... 14,995 3?
Making in the-aggregate .....................$30,887 90
Third. In February or March, 1891, a statement of the account of Lanier with the Corbin Banking Company, together with the original vouchers for the moneys charged, were submitted to Lanier for the purpose of ascertaining and adjusting his indebtedness on that account. After examining them, he objected to the items of profits on the amounts paid for supplies purchased for him, and these items were- eliminated from the account, which left him owing the $14,995.38. About this time, or soon after, the banking company, through its attorney, J. H. Watson, a lawyer of Memphis, proposed to him that it would negotiate a loan of a sum of money on five years’ time, sufficient to pay his indebtedness of $30,887.90 to it and the amount he was owing to the American Freehold Land Mortgage Company, if he would secure the loan by a deed of trust upon his property! After considering the proposition for several weeks, he accepted it. Upon being informed of that fact the banking company forwarded to its attorney at Memphis papers of the following description: five blank notes bearing date the 26th of March, 1891, for the aggregate sum of $41,792.84. and payable to the real estate mortgage company, of the county of Cumberland, in the state of Maine; a blank deed of trust, of the same date, containing a statement that the contracts embodied therein, and the notes secured thereby, except as therein otherwise provided, “shall be construed according to the laws of Arkansas, where the same is made,” to secure the same; a statement showing the amount due it from Lanier on account of advances, with the profits on supplies and merchandise eliminated; and a statement showing the amount due the Freehold Company, including interest to the 26th of March, 1891, to be $10,904.94. After receiving these papers, the attorney submitted to Lanier the statement showing the amount due on account of advances. After many weeks’ deliberation, Lanier executed the notes and deed of trust in the form they were forwarded by the banking company to its attorney (the notes being for the sum total of the $30,887.90 due the banking company and the $10,904.94 due the Freehold Company), with the agreement and understanding by the parties that the securities which belonged to the banking company should be “kept alive,” and should be held by the owner of the five notes for the purpose of protecting him against prior liens.
James H. Watson, to whom these notes and the deed of trust were delivered, then gave Lanier a sight draft on the Real Estate Mortgage Company for $41,792.84, and Lanier transferred it to the banking company, with instructions to collect it and apply the proceeds to the payment of the debts for the payment of which the new loan was to be made. Watson, who was also the attorney of the Freehold Company, and held Lanier’s note to it for collection, thereupon accepted the settlements, and offered to surrender the note and the deed of trust which secured the same, together with a release to Lanier by the trustee therein, or hold the same for him. Whether the check was paid or not is not positively shown by any competent evidence. The five notes were, however, transferred to tbe Union Mortgage & Trust Company, of London, by tbe Real Estate Mortgage Company, without recourse. Lanier states in bis brief tbat George H. Bullock, tbe secretary of tbe Union Mortgage & Trust Company, a competent witness, testified tbat tbe last mentioned company purchased these notes from tbe Corbin Banking Company on tbe 25th of June, 1891, and paid therefor $41,792.84, upon its (banking company’s) written guaranty of tbe collection of tbe entire principal of tbe five notes, and at least 7 per cent, per annum interest thereon. (We rely upon tbe brief because we are not referred to tbe pages of tbe very voluminous transcript in this case upon which this statement can be found, and because no one denies tbat tbe witness, Bullock, testified to tbat effect). This testimony is not contradicted, and we take it to be true. No creditors of Lanier complains of Corbin failing to negotiate tbe loan and appropriate it as be was instructed to do. Watson still bolds for Lanier tbe deed of trust in favor of tbe Freehold Company, tbe note secured thereby, and tbe release of tbe trustee. Tbe strong presumption is, tbe Freehold Company has been paid.
Fourth. On tbe 26th of May, 1891, Austin Corbin loaned to Lanier, at bis request, tbe sum of $1,5.00 to enable him to cultivate a crop during tbe year 1891, and took bis note for tbat sum, bearing ten per cent, per annum interest from date, payable at the office of tbe Corbin Banking Company, in tbe city of New York, on tbe first day of December, 1891. Tbe note was secured by a deed of trust, containing tbe following clause: “Tbe contract embodied in this conveyance, and tbe note secured hereby, are made with reference to tbe laws of tbe state of Arkansas, where tbe said party of tbe first part (Lanier) resides, and shall be in all respeets construed according to said laws.” Watson, tbe attorney of tbe Corbin Banking Company, was, prior to this time, notified of tbe agreement to loan, and requested to prepare tbe note and deed of trust, and to say to Lanier tbat tbe money would be advanced through Watson. Tbe money, however, was placed to Lanier’s credit at tbe date of tbe note, and was paid out at intervals, from May 26th to July 27, 1891, on drafts drawn by him in favor of Watson and indorsed by said payee.
Upon the foregoing facts the circuit court found that the five notes bearing date the 26th day of March, 1891, were executed by Lanier in consideration of the sum of $41,792.84 loaned to him by the Real Estate Mortgage Company, “and that the same were transferred before maturity, to-wit: on the 25th day of June, 1891, to the said Union Mortgage, Banking & Trust Company by the said Real Estate Mortgage Company, in good faith and for a valuable consideration,” and rendered judgment .against Lanier in favor of the Union Mortgage, Banking & Trust Company for the sum of $52,352.44, the amount of principal and interest1 due on the five notes at the date of the judgment; and decreed that the deed of trust executed to secure the same should be foreclosed; and Lanier appealed.
Appellant contends that the notes dated March 26, 1891, and the debts which constitute the consideration thereof, were confessed to be usurious by the failure of the Union Mortgage Banking & Trust Company to answer or deny certain allegations in his complaint. The allegations are: “Defendant, Lanier, here specifically states and charges that the notes of date March 26, 1891, and all prior notes merged into them, were and are payable at the office of the Corbin Banking Company, in the city and State of New York. That under the laws of the State of New York, as they then and now exist, all contracts whereby a greater rate of interest is reserved or charged for forbearance in excess of seven per cent, per annum are declared usurious and void, and the penalty for an infraction of the law is total forfeiture of principal and interest, and defendant, Lanier, as well by answer as cross-complaint, inasmuch as New York is designated as the place of performance, here specifically and specially pleads the laws of the state of New York in discharge of the usurious and void (notes) under said laws of the place of performance.” But in these allegations there is no averment of a fact which shows that the notes referred to were governed by the laws of New York. If, however, they be interpreted as meaning to say as much, then they state a conclusion of law based on the fact that the notes were payable in the city of New York, a conclusion which is by no means correct because the fact on which it is based is time. . But it is not within the province of Lanier to allege in his complaint conclusions of law, or the duty of the Union Mortgage, Banking & Trust Company to admit or deny them in its answer because they were alleged. It was their privilege to state facts, and the duty of the court to determine the law, and it was not bound to accept the conclusion of law of one of the parties as true, because it was not contradicted by the other, but on the contrary should disregard it.
In other portions of the same complaint it was repeatedly alleged that the notes and deeds of trust were void for usury because in violation of the constitution of the State of Arkansas, which is inconsistent with any allegation that might have been made to the effect that they were made with reference to, or were to be governed by, the laws of New York.
The parties to these contracts were citizens of different states,—Lanier of this state, and the others, respectively, of New York, Maine and England. At the time they were entered into and reduced to writing in the form of notes and deeds of trust, and signed, Lanier was temporarily in Memphis, Tenn., for that purpose. The lands mortgaged to secure the payment of the notes are in this state, where Lanier resided. Having the right, under these circumstances, to contract with reference to the laws of one of two or more states, they agreed that the notes and deeds, except as therein otherwise provided, should be construed according to the laws of Arkansas, and were made in this state,—that is to say, were made with reference to the laws of this state, and should be governed thereby,—and incorporated the stipulation in each deed of trust, evidently intending that the laws of Arkansas should govern as to interest. As an evidence of this fact, the notes were made to bear 10 per cent, per annum interest—the highest rate of conventional interest allowed in this state—and Lanier alleges in his complaint: “Each and every one of the trust conveyanoes mentioned in this complaint is usurious and void under the constitution and laws of Arkansas, which are. as much a part of each and every one of the said several mortgages (deeds of trust) as if set out in haec verba in the body thereof.”
The effect of the stipulation referred to is the first subject for consideration in the decision of the questions presented by this appeal. It is well settled that parties, in making a contract in one state to perform in another, may stipulate that it shall be governed and controlled by the laws of one or the other. As this is true, why is not the stipulation in this case valid ?
In Kellogg v. Miller, 18 Fed. Rep. 198, the contract in question was for the loan of money to a resident and citizen of Nebraska, and was secured by a mortgage on lands of the borrower in that state. Judge McCrary, in delivering the opinion of the court, said: “But it is not necessary to place the decision of the case upon the ground that the contract was to be performed in Nebraska. It is now well settled by authority, as it is certainly well supported by reason, that a citizen of one state may loan money to a citizen of another state, and contract for the rate of interest allowed by the law of the latter, especially in a case like the present, where the money is to be used in the latter state, and is secured by a mortgage upon lands located there ; and this notwithstanding the place of payment may be elsewhere. This doctrine constitutes an exception to the general rule that the law of the place where the contract is made is to govern in enforcing and expounding it. Thus, in the case of Arnold v. Potter, 22 Iowa, 194, it was held that it was competent for citizens of different states, who are parties to a promissory note, to contract in good faith for the rate of interest, and with reference to the law of the state where the maker resides, and where the property mortgaged to secure the note is situated, although the note is in terms payable in a state different from the residence of either, and the rate of interest reserved is greater than the legal rate of the state where the note is made, or where by its terms it is payable. In that case Wright, J., said: ‘The general rule is well settled that the law of a place where a contract is made is to govern in enforcing or expounding it, unless the parties provide for its execution elsewhere, in which case it is to be governed by the law of the latter place. The parties may, however, if it is made in one place to be executed in another, stipulate that it shall be governed by one or the other.’ And again: ‘Nor do we hold that a citizen of one state could make his note in another to a resident there, payable in a third, with interest as allowed in a fourth. But what we do hold is that if A, of Iowa, in good faith borrows money of B, of Illinois, gives security on land in Iowa, and they in good faith agree that the law of Iowa shall govern, that a note given in pursuance of said contract in Illinois, bearing the interest allowed by our laws, would not be usurious.’ * * * In applying this, rule in this ease, there is but a single question of fact to be considered, and that is the question of good faith. Did the parties in good faith agree that this loan should be made according to, and to be governed by, the law of Nebraska?”
In Dugan v. Lewis, 79 Texas, 246, Dugan, “who at the time was a resident citizen of the State of Texas, acting through an agent in the State of New York, borrowed from the American Freehold, Land & Mortgage Company, of London, England, the sum of $5,000. .Dugan executed 'his note in favor of the mortgage company for said sum, payable at the office of the Corbin Banking Company in New York city five years after date, with interest from date at the rate of eight per cent, per annum, for which five coupon notes were attached to said note. * * * * Dugan, to secure said note, executed a deed of trust upon land in Texas, in which one Sherwood, the agent in New York of the lender, was made trustee. The agreement to lend the money was made in the State of New York, and the deed of trust and the note were delivered to the lender in that state. The $5,000 were paid to Dugan’s agent in the State of New York. The note and coupons and the deed of trust were dated and signed by Dugan in the State of Texas. The deed of trust contained the following clause: * * * ‘The contracts embraced in this conveyance, and the notes secured hereby, shall in all other respects be construed according to the laws of the State of Texas, where the same is made.’ At the date of these transactions the rate of interest in the State of New York was six per cent., and the reservation of a greater interest rendered the contract void,” but in the State of Texas it was valid. After, a review of the authorities upon the question, the court upheld the contract. To the same effect, see Jackson v. American Mortgage Co. 88 Ga. 756. See, also, Chapman v. Robertson, 6 Paige, 627; Bullard v. Thompson, 35 Texas, 313; and 1 Randolph, Commercial Paper, p. 23.
- We think that the stipulation in question, -under the circumstances mentioned, if entered into in good faith, is binding upon the parties. There is no good reason why it should not be. ’ Lanier being a resident of this state, and the property mortgaged located here, it does not appear that the collection of the notes through the means provided for that purpose in the deeds of trust could be enforced in any state except the State of Arkansas. To hold that it is void would compel our courts in all such cases to enforce the laws of other states against parties, and impose upon them their penalties and consequences, when they have contracted in good faith with our resident citizens, and in respect to lands located here, in conformity to our laws, and agreed to be governed by them.
The next subject for consideration is a question in respect to the admissibility of evidence. Lanier propounded written interrogatories to adverse parties in this action, and they filed their answers. The question is, to what extent can these answers be used as evidence! The statute upon this subject provides that in actions by equitable proceedings either party may propound written interrogatories to any one or more of the adverse parties “concerning any of the material matters in issue in the action; the answers to which, on oath, may be read by either party, as a deposition between the party interrogating and the party answering.” (Sand. & H. Dig., § 5778.) Their use is expressly limited by the statute. They can be read as depositions for or against the party interrogating or the party answering; and to this extent, and no farther, they are admissible as evidence.
The decree appealed from rests upon the validity of the five notes which were executed to the Real Estate Mortgage Company, of the county of Cumberland and State of Maine, and were dated the 26th of March, 1891. Were they void for usury under the constitution and laws of Arkansas! Their consideration, as before stated, was for money borrowed to pay the following debts:
The Sherman debt................................ .$ 5,000 00
The Hirsch Brothers’ claim....................... 10,893 52
The American Freehold Land Mortgage Co. note.... 10,904 94
The notes for moneys and supplies advanced........ 14,995 38
The first two debts were not controverted; the other two are attacked on the ground of usury. As to the note in favor of the American Freehold Land Mortgage Company, it is not necessary to inquire whether it was infected with usury. It is not denied that it was given for a loan by the company to which it was executed. The presumption, for reasons before indicated, is, it has been paid by moneys advanced on the five notes of March 26, 1891. The moneys with which it was paid were not advanced by or for the American Freehold Land Mortgage Company. This being true, so much of the five notes as covered the amount so paid thereon was not void on account of any usury that might have been in the note thereby paid. Such moneys were advanced at the request of Lanier, who executed the five notes, and there is no agreement to pay exceeding ten per cent, per annum interest for the loan' of the same. That being true, the five notes cannot be affected by usury as to that portion of their consideration which was used in the, payment of the American Freehold Land Mortgage Company note. The two transactions are distinct; the considerations are different; and one.is not affected by usury in the other Cottrell v. Southwick, 71 Iowa, 50; Vaught v. Rider, 83 Va. 659; Coffman v. Miller, 26 Gratt. 698; Drake v. Chandler, 18 Gratt. 909.
The seven notes executed to F. W. Dunton for moneys and supplies to be advanced, and which were furnished, to Lanier by the Corbin Banking Company, remain to be considered. Appellant, Lanier, insists that these notes are void for usury—first, because they bear interest at the highest lawful rate from their dates, when the money for which they were given was not paid to the borrower until long afterwards; and, second, because, instead of paying to the borrower the amount of his loans in money, the bank furnished him with supplies, upon which it secretly charged a large profit, for the corrupt purpose of thereby realizing more than ten per cent, per annum for the use of its money. .
These notes were executed to Dunton in consideration of the promises of the Corbin Banking Company to furnish and advance to Lanier, in each year in which they were, respectively, given, moneys and supplies needed by him in the eultivation. and improvement of his farm in this state. There was no agreement to give or receive more than ten per cent, per annum interest on the moneys and supplies advanced. If there was any failure on the part of the bank to furnish any part of the moneys and supplies in consideration of which the notes were, respectively, given, there was a partial failure of consideration, and no usury. The notes and deeds of trust were valid securities for so much as was advanced by the bank, to the extent of the amount for which they were given. Pillow v. Sentelle, 49 Ark. 430; Forsyth v. Preer, 62 Ala. 443; Huckaba v. Abbott, 87 Ala. 409; Louisville Banking Co. v. Leonard, 13 S. W. Rep. 521; Fisher v. Otis, 3 Pin. (Wis.), 78; Lawrence v. Tucker, 23 How. 14; 1 Jones, Mortgages (5th Ed.), § 374.
The charging Lanier with profits on supplies furnished, in addition to ten per cent, per annum interest on the amount paid for the same, did not stamp the taint of usury upon the notes and deeds of trust. There was no agreement to pay profits, and consequently more than ten per cent, per- annum interest was "not reserved, taken, or secured by contract in any form. Moreover, there was a settlement between Lanier and the bank, in which these profits were eliminated from the account against Lanier; and the five notes executed to the Real Estate Mortgage Company were not made to procure a loan to pay the seven notes, but the amount actually due for money and supplies and lawful interest. So the five notes are not infected by reason of usury therein, or in the seven notes.
But appellant says he does not owe the $14,995.38 with which he was charged by the Corbin Banking Company for advances, and that in the statement of the account in which this amount was claimed to be owing by him there are many overcharges and omissions to give him proper credits; and insists that these errors should be corrected. This impeachment of the account is too late. It was submitted to him for examination. He testifies that he was aware it contained every item that the bank claimed to be owing by him. He had ample opportunities to examine it. After, several weeks’ deliberation, he signed and delivered the five notes of March 26, 1891, and the deed of trust to secure the same, notwithstanding he now testifies that he knew at the time the account was largely in excess of what he was owing. It could have been corrected between the parties to the same only for fraud or mistake (Weed v. Dyer, 53 Ark. 155; Lawrence v. Ellsworth, 41 Ark. 502), and none is shown. And if it was, he could not set it up as a defense against the notes, as they belong to a bona fide purchaser, which acquired them before maturity.
As to the note for $1,500, dated the 26th of May, 1891, and payable to Austin Corbin, and secured by deed of trust, there was no adjudication or judgment rendered by the circuit court. It was entirely disconnected from, independent of, and subsequent to, the five notes of date the 26th of March, 1891, and payable and belonging to a different party. The adjudication as to one has no influence or bearing upon the other. The result is, it is not affected by the appeal in this cause, and no question in respect to the same is presented to us for decision. Walker v. Pritchard, 121 Ill. 221; Union Trust Co. v. Trumbull, 137 Ill. 146.
Decree affirmed.
Riddick, J., was disqualified.