RHAWN vs. GRANT

RHAWN vs. GRANT. At Law. No. 7927. A note made in the State of Pennsylvania is not invalidated by the laws of that State, though more than the legal rate of interest is contracted for. The excess over such legal rate is recoverable by the debtor; and, therefore, a note given in this District, in part payment of the principal of such a note, is to be governed by the usury laws of that State, and as such principal is a valid indebtedness in Pennsylvania, the renewal note given for its consideration is equally binding here. STATEMENT OE THE CASE. This suit is brought on the following promissory note: $2,000.] Washington, D. C., April 1,1870. Twelve months after date I promise to pay, to the order of W. H. Rhawn, two thousand dollars, at the banking-house of Jay Cooke & Co., value received, with interest. A. GRANT. The defendant interposed the plea of usury, on which the plaintiff joined issue. The note in suit was given in part settlement of another note, dated Philadelphia, March 25, 1868, made by a firm of which the defendant, Grant, was the senior member, to the National Bank of Exchange, of Philadelphia, for $7,000, payable to the bank on demand. The defendant gave evidence which he claimed proved that on the 31st day of March he gave a check to the bank for $1,000, and that the same was paid as interest on said last-mentioned note, which made it usurious; and he contended that, as the note in suit was given in part payment thereof, it was affected with the same illegality, and void. By the law of this District at that time, the legal rate of interest was six per cent., and all contracts for a greater rate were declared to be utterly void, while by the laws of Pennsylvania the contract is not affected; but the penalty where more than legal interest is contracted for, is that the debtor shall not be required to pay the excess over such rate; and if he has voluntarily paid it, he can recover it back in an action to be commenced within six months after the time of such payment. The defendant asked the court to instruct the jury that if they should find that there was paid to said bank the sum of $1,000 on account of interest on said note of $7,000, and that' said $7,000 was the consideration of the note in suit, that •said $2,000 note was governed by the law of the District of Columbia, and void for usury; which the court refused, and held that the statute of Pennsylvania upon the subject of interest was the law of the contract; and the defendant ex. cepted, which exception the court allowed. Nathaniel Wilson for plaintiff: I. The bill of exceptions does not disclose any usurious contract or transaction. II. If there was any usury, it consisted in the payment of $1,000 as interest at the time the note for $7,000 was given. That payment was made in Pennsylvania. By the laws of Pennsylvania it did not, if made, invalidate or taint the note. The notes given in this District had no relation whatever to this $1,000 of alleged interest. They were for the payment of the principal of a note which was perfectly good by the laws of the place where it was made. III. All the interest alleged to be usurious having been paid, the new notes being only for a part of the principal, were perfectly valid. (2 Parsons on Notes and Bills, p. 420.) Riddle & Miller for defendant: It can make no difference where the indebtedness arises, when it comes to be paid the contract of payment must be governed by the laws of the place where it was made. In actions for the penalty incurred by the maker of a usurious contract, it has always been held that the offense was committed and the penalty incurred when and where the usurious payment was made. (See Pearson vs. McGowan, 3 B. and C., 700; same case, 5 Dowl. and R., 616; 2 Parsons on Contracts, 400-1.) [MAJORITY] By the Court : We are unanimously of opiuion that the ruling of the judge who tried the case must prevail. The note in suit is not invalid on its face by the laws against usury in force in this District at the time it was given,” and the only ground upon which it is sought to affect it with the quality of an illegal contract is, that it was given in part payment of the note made in Philadelphia. But if there was usury in that note according to the laws of Pennsylvania, it was not for that reason invalidated. The excess over the legal rate only was forfeited, and the contract for the payment of the principal and lawful interest was perfectly valid. The note here was given for a part of that principal, and was therefore received in consideration of another contract that was perfectly good at the place where it was entered into. There is no pretense that there was any shift or device, or even intention, to evade our statute. As we can see no error in the judgment below, it must be affirmed.