The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918. Page: 62
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250 FEDERAL REPORTER
making, is based upon expressions in Andrews v. Pond, 13 Pet. 75, 10
L. Ed. 61. This is not a proper inference from the cited case. The
language there is as follows:
"Now if this defense is true (that is, that usury was concealed under the
name of exchange, in order to evade the law), the question is not which law
is to govern in executing the contract (that is, the law of New York, where
the bill of exchange was drawn, or of Alabama, where it was to be paid), but
which is to decide the fate of a security taken upon an usurious agreement,
which neither will execute. Unquestionably it must be the law of the state
where the agreement was made and the instrument taken to secure its per-
formance. A contract of this kind stands on the same principles with a
bona fide agreement made in one place to be executed in another. In the
last-mentioned cases the agreements are permitted by the lex loci contractus,
and will even be enforced there if the party is found within its Jurisdiction.
But the same rule cannot be applied to contracts forbidden by its laws and
designed to evade them. In such cases the legal consequences of such an
agreement must be decided by the law of the place where the contract is
made. If void there, it is void everywhere; and the cases referred to in
Story's Conflict of Laws, 203, fully establish this doctrine."
It is manifest that if the agreement is void on account of the law
of the place where it is made, and not saved from illegality by the cir-
cumstance that it was the bona fide intention of the parties for the con-
tract to be performed elsewhere, or otherwise, it can have no effect as
a contract, and the consequence arises out of the law of the place of
making, and must have its effect everywhere. Frequently, however,
the laws with reference to usury present cases where, though the con-
tract may be in violation of the law of the state in which it is made,
and also in violation of the law of the state in which it is to be per-
formed, the contract cannot be said to be void in either state. It
merely has consequences different from those contemplated by the
parties. For instance, it is sometimes the case that the state in which
the contract is made will enforce the contract, except as to the exces-
sive interest; and that in the state in which the contract is to be per-
formed the law will enforce the contract as to the principal, but will
not permit the recovery of any part of the interest. In such a case the
reason upon which the rule in Andrews v. Pond is predicated does not
exist. The contract cannot be said to be void by the laws of the state
in which it was made; therefore the consequences which follow from
voidness do not result in that state nor elsewhere. The general prop-
osition is that if the note be given in one state, where it would be valid,
but is to be performed in another, where the contract would be usuri-
ous, it would be governed by the laws of the latter state. It would be
an absurd consequence to suggest that where the laws of the state
where the contract is made provide for a forfeiture of a part of the
contracted interest, that forfeiture would alone take place, and that the
larger forfeiture, resulting from the laws of the place of payment,
would not take place; but that, if the contract were entirely valid in
the state in which it is made, the larger forfeiture of the state in
which payment is to be made would result. In other words, the con-
sequences in the case assumed would be more serious if the contract
was made in a state where it would be entirely valid than in the state
where the laws would forfeit a part of the interest. A specific appli-
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The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918., legislative document, 1918; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38821/m1/77/: accessed July 27, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.