Columbian B. & L. Ass'n v. Rice

This opinion was filed March 5th, but remittitur held up on petition for rehearing until

The opinion of the Court was delivered by

Mr. Justice Woods.

The defendants, trustees of Mount Olive African Methodist Episcopal Zion Church, subscribed to two shares of stock in The Columbian Building and Loan Association, a Virginia corporation, and as such subscribers borrowed money from the association, giving a mortgage on the church property toi secure the loan. They now plead usury as a defense to this action to foreclose the mortgage, and set up a counter-claim for the penalty of receiving usurious interest.

1 The first inquiry is whether the contract falls under the law of South Carolina or of Virginia, for it is conceded that if the law of this State is applicable, the transaction must be held usurious. The master and the Circuit Judge both held that the contract was to- be performed in the State of Virginia and construed in accordance with the laws of that State. It is incumbent upon the defendant to overturn this finding of fact by the preponderance of the evidence.

The mortgage provides that the payments shall be made to the association, “in the manner prescribed by its charter, by-laws, rules and regulations.” Section 7, article 6, of the by-laws requires: “All money due from the members of the association, or from it to the members, shall be payable at the home office in Richmond, Va.”

Provision is made in the by-laws for the organization of local boards in towns where sufficient stock is held to make such organization desirable. Section 4, of article 11, which relates to this subject, is as follows: “Members may, if they desire, make monthly payments on stock to> the local treasurer, but such local treasurer shall be the agent of the members, and not of the association.”

The defendants insist this is a mere subterfuge to- avoid the usury laws of the State, and even if it is not, the contract is, nevertheless, to be construed as a South Carolina-contract. A contrary view was taken by this Court in Pollock v. Association, 51 S. C., 420, 29 S. E., 77; Turner v. Association, 51 S. C., 37, 27 S. E., 947, and Tobin v. McNab, 53 S. C., 75, 30 S. E., 827. It is true, in Meares v. Finlayson, 55 S. C., 105, 32 S. E., 986, Chief Justice Mclver expressed dissatisfaction with the decision of Pollock v. Association, supra, but expressly said that the point we are now considering was not involved in the case he had under discussion. In the later case of Association v. Powell, 55 S. C., 320, 33 S. E., 355, the provisions of the mortgage and of the bylaws, so far as they relate to this question, were practically the same as those involved in this case; and it was there held by a unanimous Court that the contract was to be performed in Georgia, and the laws of that State must govern its validity and construction. The defendants rely upon the case of Mortgage Co. v. Bates, 58 S. C., 552, 36 S. E., 917, as holding a different doctrine; but in that case the facts were not the same as in this, and the Circuit Judge found as one of the facts that the parties had contracted with reference to the laws of this State. This finding was sustained as not being against the preponderance of the evidence. The finding of fact was the other way in this case, and, as we have seen, this Court has heretofore sustained the same finding on similar evidence. The rights of the parties to this contract must, therefore, be adjudicated under the laws of Virginia.

2 The plaintiff offered in evidence the statutes of Virginia and the decisions of the Court of Appeals of Virginia, from which it appeared that this contract would not be adjudged usurious in that State. Objection was made to this evidence on the ground that these statutes had not been pleaded. The general rule is that the existence and terms of the statute of another State cannot be proven unless alleged. Rosemand v. Ry. Co., 66 S. C., 98. It is true, usury is an affirmative defense, and it was not, therefore, necessary for the plaintiff to anticipate it and set up the Virginia statutes in his complaint; but when the counter-claim for usury was put in, the plaintiff was bound to set up in reply its defenses to that plea. Having failed to set out in reply the existence of Virginia statutes on this subject or their terms, evidence as to such statutes should have been excluded.

The case is to be considered, then, as if the Court had before it a contract whose validity and effect as to the plea of usury were to be considered under the laws of Virginia, without any pleadings or evidence as to' those laws.

3 In such case there is certainly no presumption that the law of usury is the same in that State as in this. Such a presumption would be altogether unreasonable, for some States have no statute law on the subject, and in the others the enactments are very diverse. Virginia having been once subject to the laws of England, in the absence of proof, the presumption is that the common law prevails, and that there is no legal limitation to the rate of interest in that State. Rosemand v. Ry. Co., supra; Brown v. Wright, 21 L. R. A., 471, note. This being so, the error in admitting proof of tire Virginia statutes was harmless.

4 In insisting that the statute law of this State must be applied, the defendant relies on Gist v. Telegraph Co., 45 S. C., 370, 23 S. E., 143, in which this language is used: “Again, it has been held in this State, in the case of Allen v. Watson, 2 Hill, 319, that the legality or illegality of a transaction depends on the law of the place where it transpires; but it is incumbent on those who would avail themselves of it, to show what that law is; and until that is done, our Courts must decide that question according to the laws of this State. The same doctrine seems to have been' held in Thatcher v. Morris, 11 N. Y., 437, which is represented in the New Jersey case above cited, as holding that: ‘Where contracts of a particular kind are forbidden by the law of the State in which they are sought to be enforced, and the party seeking to enforce them relies upon the fact that they were made in a foreign State, and are valid contracts by the lex loci contractus, it has been held elsewhere that he is bound to aver and prove those facts.’ Now, as there is no allegation in the complaint that the law in New York is otherwise than what it is in this State, the plaintiff cannot, in the absence of any such allegation, derive any benefit from the fact that the contract was made and was to be performed in New York.”

It will be observed that case involved a gambling transaction. Gambling contracts and some others so offend good morals and so contravene established public policy, that courts will presume that the laws of other States forbid them in consonance with the laws of their own State; and even if this presumption is rebutted by proof, they will recognize no claim of comity which would require them to- give countenance to such transactions. Numerous decisions in this State have held contracts to be free from usury because they fell under the laws of other States, when such contracts would have been usurious under the laws of this State. It is, therefore, clear that usury is not regarded as standing on the same plane with gambling and other intrinsically immoral practices. See, also, Bank v. Cook, 46 Am. St. Reps., 201, note. It is true, in the case of Meares v. Finlayson, 55 S. C., 121, 32 S. E., 986, it was held that when the contract was proved to be usurious under the laws of North Carolina, as well as those of this State, the penalties prescribed by the South Carolina statute would be enforced, even regarding the contract as a North Carolina contract. This was on the ground that our statute expressly forbids the collection of interest or costs in a suit on a usurious contract. . It is manifest, if the contract in that case had not been usurious under the laws of North Carolina, a very different question would have been presented, and the usury law of South Carolina would have been disregarded.

This is a Virginia contract. The common law, in the absence of proof to the contrary, is presumed to be of force in that State, and hence no usury statute can be applied.

The judgment of this Court is, that the judgment of the Circuit Court be affirmed.