When a contract for the payment of money at a future day, with
interest meanwhile payable semiannually, is made in one place and
is to be performed in another both as to interest and principal,
and the interest before maturity is payable according to the legal
rate in the place of performance, the presumption is, in the
absence of attendant circumstances to show the contrary, that the
principal bears interest after maturity at the same rate.
The report of the master in a suit in equity to foreclose a
railroad mortgage, to whom it had been referred to take proof of
the claims, found as to a bondholder that his bonds were due and
unpaid, that certain coupons had been paid, and that certain other
subsequent coupons had been paid, but made no mention of the
intervening coupons. No exception was taken to this report.
Held that it was a reasonable inference that the claimant
did not offer these coupons in proof, and that the failure to find
as to them could not be urged as an objection to the final
decree.
Page 142 U. S. 102
The Court stated the case as follows:
By an Act of the general assembly of South Carolina of December
19, 1835, the Cincinnati and Charleston Railroad Company was
incorporated with power to construct a railroad from Charleston,
South Carolina, to Cincinnati, Ohio. 8 Stats.S.C. 409.
See
also 8 Stats.S.C. 354, 355, 380, 384, 406. Subsequently,
December 21, 1836, the name of that company was changed to that of
the Louisville, Cincinnati and Charleston Railroad Company. 8
Stats.S.C. 96. By a later act, passed December 19, 1843, the name
of the latter company was changed to that of the South Carolina
Railroad Company, which acquired, subject to certain conditions,
the rights, privileges, and property of the South Carolina Canal
and Railroad Company, incorporated December 19, 1827, 11 Stats.S.C.
273.
The Louisville, Cincinnati and Charleston Railroad Company,
before its change of name and by virtue of an Act of December 20,
1837, and an act amendatory thereof, passed December 19, 1838, 6
Stats.S.C. 571, 604, issued its bonds for the sum of about
�450,000 sterling, redeemable on the first day of January,
1866, and bearing interest at the rate of five per cent. per annum,
some in denominations of �500, others of �250. The
�500 bonds were in the following form:
"�500 st'g. �500 st'g."
"
United States of America, State of South
Carolina."
"
Five Per Cent. Loan"
"The Louisville, Cincinnati and Charleston Railroad Company,
under the guaranty of the State of South Carolina, promise to pay
to bearer five hundred pounds sterling, redeemable on the first day
of January, one thousand eight hundred and sixty-six, and not
before without the consent of the holder of this certificate, with
interest thereon at the rate of five percent per annum from the
date hereof, the said interest to be paid semiannually, on the
first days of January and July, on presenting the proper coupons
for the same at the house of
Page 142 U. S. 103
Palmers, Mackillop, Dent & Co., London, where the principal
will also be redeemed on the surrender of this certificate."
"In witness whereof, the said company has caused its corporate
seal to be hereunto affixed at Charleston, this 31st day of
December, 1838."
"ROB'T Y. HAYNE,
President"
"E. H. EDWARDS,
Sec'y & Treas'r [Seal]"
To each bond a warrant or coupon was attached in this form:
"Louisville, Cincinnati and Charleston Railroad Company, warrant
No. 49, for �12.10s., being half-yearly interest on bond C.
No. 18, payable January first, 1863. E. H. EDWARDS, Treas'r."
These warrants were endorsed: "Payable at Messrs. Palmers,
Mackillop, Dent & Co."
The �250 bonds were in the same form as the ones of
larger amount, the coupons or warrants calling only for
�6.5s. interest.
Upon the back of each bond was endorsed the above act of
December 20, 1837, in these words:
"An act to lend the credit of the state to secure any loan which
may be made by the Louisville, Cincinnati and Charleston Railroad
Company, and for other purposes."
"
Be it enacted by the Senate and House of
Representatives, now met and sitting in general assembly, and by
the authority of the same, that the faith and funds of the State of
South Carolina be, and the same are hereby, pledged to secure the
punctual payment of any contract which shall be made for borrowing
money by the Louisville, Cincinnati and Charleston Railroad Company
from any person or persons, company or companies, corporation or
corporations, to any amount not exceeding two millions of dollars,
either in the United States or in Europe, and when such contract or
contracts shall be made by bond or bonds, certificate or
certificates, or other instrument or instruments, signed by the
president of the said company, under its seal, and countersigned by
the secretary thereof, it shall be the duty of the comptroller
general of this state to endorse thereon that the faith and funds
of the State
Page 142 U. S. 104
of South Carolina are pledged to the faithful performance of the
said contract or contracts both as it respects the punctual payment
of the principal and of the interest, according to the terms of the
said contract or contracts,
provided that the interest to
be received thereby and made payable thereon shall not exceed the
rate of five percent per annum,
and provided also that the
comptroller general shall not endorse any such contract until five
hundred thousand dollars shall be paid to the company on the stock
thereof, in which event he shall pledge the funds and faith of the
state for one million of dollars, and when five hundred thousand
dollars more shall be paid to the company on the stock thereof, the
comptroller general shall pledge the funds and faith of the state
for one other million of dollars."
Immediately following this copy of the act on each bond was this
guaranty:
"The condition of the above act having been faithfully complied
with, I do hereby, for and in behalf of the State of South
Carolina, endorse her guaranty on this bond for the payment and
redemption of the principal and interest of the same. Wm. Ed.
Hayne, Comptroller."
The appellant, being the owner of six of the �500 bonds,
and of twelve of the �250 bonds, with seven semiannual
coupons attached to each, and also some odd coupons, brought this
suit, April 4, 1881, in one of the courts of the state of South
Carolina, against the South Carolina Railroad Company and others,
and prayed that the property covered by the mortgage created by the
Act of December 20, 1837 -- which mortgage the state had failed to
foreclose, and could not be compelled by suit to foreclose -- be
sold, and the proceeds applied first, to the expenses of the suit
and then to the payment of the bonds held by the plaintiff and
other creditors of the same class, with interest up to the time of
payment, and exchange on London.
The suit was removed into the Circuit Court of the United States
for the District of South Carolina, a receiver of which court held
possession of the property under an order made September 19, 1878,
in the case of
Claflin v. South Carolina Railroad
Company.
Page 142 U. S. 105
It is stated in an opinion of the court below that after the
bonds matured, in 1866, various plans to arrange the debt were
suggested, adopted, and abandoned; that finally the railroad
company offered to settle past-due sterling bonds by issuing in
exchange first mortgage bonds, not guaranteed by the state, so that
for each sterling bond of �250, and the interest due
thereon, the holder would get a first mortgage bond of �300,
and for each bond of �500 and interest, a first mortgage
bond of �600; that the proposed new bonds were dated July 1,
1868, called for semiannual interest at five percent, and were made
payable, as were the guaranteed bonds, in London; and that Coghlan
declined to exchange his bonds for the new ones, but consented to
receive, and in fact received, payment of semiannual installments
of interest, precisely as if he had made the exchange -- that is,
he received interest on his �500 and �250 bonds as if
they were, respectively, for �600 and �300.
By a decree entered December 15, 1883, it was adjudged that the
plaintiff's recovery for bonds held and proved by him should be as
follows: upon each bond for �500 and �250,
respectively, and past-due coupons attached, so held and proved,
the sums of �600 and �300, respectively, with
interest thereon from first July, 1868 at the rate of five percent
per annum, payable semiannually, as if said bonds had on the latter
date been exchanged for new bonds for �600 and �300,
respectively, dated first July, 1868, less all amounts that may
have been paid on account of the same by the South Carolina
Railroad Company, or the receiver thereof, as semiannual
interest.
The cause was referred to a special master to take an account of
the amount due on the bonds and coupons held by Coghlan. From that
decree Coghlan took an appeal, which was, upon his motion,
dismissed by this court, May 27, 1887, for the reason, no doubt,
that the decree appealed from was only interlocutory. 122 U.S. 649.
Upon the return of the cause the master reported the amount due him
up to July 1, 1887, upon the bonds, as if exchanged, calculating
the interest at five percent with semiannual rests, and giving
interest
Page 142 U. S. 106
upon interest at the same rate, was �10,620; and up to
February 28, 1883, upon the same basis, was �8,625 20/100.
He reported also that on the date last named, a tender was made to
the plaintiff's then attorney of $44,600. In making his
calculations, the master reported that the pound sterling in all
payments was to be estimated at $4.44 4/9.
By the final decree, passed November 2, 1887, it was adjudged
that the amount due the appellant was �10,798.19 9/100, the
principal and interest on the bonds held by him calculated
according to the principles of the master's report; and, rating the
pound at $4.44 4/9, the above amount was equivalent to $47,995.28;
the interest, after the decree, to be at the rate of seven percent
per annum.
[This sum did not include the coupons for January and July,
1867, and January and July, 1867, and January, 1868. The record was
silent as to the reason for the omission.]
Page 142 U. S. 109
MR. JUSTICE HARLAN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
We have seen that the bonds in suit were redeemable on the first
day of January, 1866, and not before without the consent of the
holder, and were payable in pounds sterling, with interest at the
rate of five percent per annum from date, the interest to be paid
semiannually on named days,
"on presenting the proper coupons for the same at the house of
Palmers, Mackillop, Dent & Co., London, where the principal
will also be redeemed on the surrender of this certificate."
The contract, therefore, was one which in all its parts was to
be performed in England. Nevertheless it is contended that the
principal sum agreed to be paid should bear interest at the rate,
seven percent, fixed by the laws of South Carolina. The only basis
for this contention is the mere fact that the bonds purport to have
been made in that state. But that fact is not conclusive. All the
terms of the contract must be examined in connection with the
attendant circumstances to ascertain what law was in the view of
the parties when the contract was executed. For, as said by Chief
Justice Marshall in
Wayman v.
Southard, 10 Wheat. 1,
23 U. S. 48, it is
a principle universally recognized that "in every forum a contract
is governed by the law with a view to which it was made." And by
Lord Mansfield, in
Robinson v. Bland, 2 Burrows 1077,
1078:
"The parties had a view to the law of England. The law of the
place can never be the rule when the transaction is entered into
with an express view to the law of another country as the rule by
which it is to be governed. Now here the payment is to be in
England; it is an English security, and so intended by the
parties."
Referring to these and many other cases, this Court, speaking by
Mr. Justice Matthews, held, upon full consideration, in
Pritchard v. Norton, 106 U. S. 124,
106 U. S. 136,
that the law upon which the nature, interpretation, and validity of
a contract depended was that which the parties, either expressly or
presumptively, incorporated into it as constituting its
Page 142 U. S. 110
obligation. This doctrine was reaffirmed in
Liverpool
&c. Steam Co. v. Phenix Ins. Co., 129 U.
S. 397,
129 U. S. 458,
where it was said that, according to the great preponderance if not
the uniform concurrence of authority, the general rule was
"that the nature, the obligation, and the interpretation of a
contract are to be governed by the law of the place where it is
made unless the parties at the time of making it have some other
law in view."
The elaborate and careful review of the adjudged cases, American
and English, in the two cases last cited leaves nothing to be said
upon the general subject.
What law, then, did the parties have in view as determining the
legal consequences resulting from the nonperformance of the
contract between them? Presumptively, the law of England, where the
contract was to be entirely performed. The bonds and coupons were
to be presented and paid there, and not elsewhere. They were to be
paid in pounds sterling at a designated house in London. The fair
inference is that the railroad company negotiated the bonds abroad,
and made them payable in that city in order to facilitate a sale of
them to foreign buyers. Every circumstance connected with the
contract tends to show that the parties intended that all questions
in respect to performance, or the legal consequences of a failure
to perform, were to be determined by the law of the place, and the
only place, where the obligation to make payment could be
discharged, and where the breach of that obligation would occur if
payment was not made at the appointed time and place. In this view
of the contract, the rate of interest, after the maturity of the
obligations, was not determinable by the law of South Carolina.
This is abundantly established by the authorities.
In
De Wolf v.
Johnson, 10 Wheat. 367,
23 U. S. 383,
the Court said:
"The legal fulfillment of a contract of loan on the part of the
borrower is repayment of the money, and the security given is but
the means of securing what he has contracted for, which, in the eye
of the law, is to pay where he borrows, unless another place of
payment be expressly designated by the contract."
In
Andrews v.
Pond, 13 Pet. 65,
38 U. S. 77,
Chief Justice Taney, speaking for the Court, said:
"The general
Page 142 U. S. 111
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 the place of performance, and if the interest allowed by the
laws of the place of performance is higher than that permitted at
the place of the contract, the parties may stipulate for the higher
interest without incurring the penalties of usury."
So, in
Carnegie v. Morrison, 2 Met. 381, 397, Chief
Justice Shaw, after stating the general rule to be that the
lex
loci contractus determines the nature and legal quality of the
act done, whether it constitutes a contract, etc., said:
"But a contract made in one country may contemplate the
execution of deeds or other contracts, making payments, or doing
other legal acts in another, in regard to which the law of the
foreign country where the act is to be done will govern the
contract."
In
Cooper v. Earl of Waldegrave, 2 Beav. 282, 284,
which was an action against the acceptor of bills of exchange drawn
in Paris, where the drawer and acceptor were at the time resident,
and made payable in London, the bills, on their face, did not state
any particular rate of interest. Lord Langdale, M.R., after
observing that the law of the country where a contract, merely
personal, is made determines its validity and interpretation, while
the law of the forum regulates the mode of suing and the time
within which suit must be brought for nonperformance, said:
"The contract of the acceptor, which alone is now to be
considered, is to pay in England. The nonpayment of the money when
the bill becomes due is a breach in England of the contract which
was to be performed in England. Upon the breach, the right to
damages or interest immediately accrues; interest is given as
compensation for the nonpayment in England and for the delay of
payment suffered in England; and I think that the law of England --
that is, the law of the place where the default has happened --
must govern the allowance of interest which arises out of that
default."
See also Boyce v.
Edwards, 4 Pet. 111,
29 U. S. 123;
Miller v.
Tiffany, 1 Wall. 298,
68 U. S. 310;
Scudder v. Union National Bank, 91 U. S.
406,
91 U. S. 412;
Scotland County v. Hill, 132 U. S. 107,
132 U. S. 116;
Story's Conflict of Laws § 291; 2 Kent Com. 459, 460-461;
Scofield
Page 142 U. S. 112
v. Day, 20 Johns. 101;
Dickinson v. Edwards,
77 N.Y. 573;
Freese v. Brownell, 35 N.J.Law 285, 287;
Peck v. Mayo, 14 Vt. 33, 38;
Ex parte Heidelback,
2 Lowell 526, 530;
Hunt's Executor v. Hall, 37 Ala. 702,
704;
Arnold v. Potter, 22 Ia. 194, 198.
The cases of
Tilden v.
Blair, 21 Wall. 241,
88 U. S. 247,
and
Equitable Trust Co. v. Fowler, 141 U.
S. 384, are in entire harmony with these principles.
Tilden v. Blair was an action by the holder of a bill
drawn at Chicago, Illinois, upon parties in New York, and accepted
payable at a bank in New York. The defense was usury, and the
question was presented as to whether the contract was a New York or
an Illinois contract. If a New York contract, there could have been
no recovery, for, by the law of that state, if a contract was
usurious, it was void, and no recovery could have been had of
principal or interest. The Court held it to be an Illinois
contract, and its validity determinable by the laws of that state
for the reason that before the acceptance had any operation, before
it became a bill, the acceptors, for whose accommodation the bill
was drawn, sent it to Illinois to be there negotiated, and by that
act indicated a purpose to create an Illinois bill. The court also
based its judgment in part upon an Illinois statute providing that
when any contract or loan is made in that state, or between its
citizens and the citizens of any other state or country, bearing
interest at a rate that was legal in Illinois, it should be lawful
to make the principal and interest payable in any other state or
territory, or in London, in which case the contract or loan should
be deemed and considered as governed by the laws of Illinois, and
not be affected by the laws of the place where it was to be
performed. Rev.Stats.Illinois 1874, p. 615, c. 74.
It was because of that statute that a note given in Illinois by
a citizen of that state to a Connecticut corporation, payable in
New York, for money loaned by the latter to the former, and secured
by mortgage upon real estate in Illinois, was held, in
Equitable Trust Co. v. Fowler, not to be a New York
contract in respect to the interest that might be taken, but to be,
in that regard, governed by the laws of Illinois.
Page 142 U. S. 113
The presumption arising from the face of the bonds that the
legal consequences of a failure to pay them according to their
terms were to be determined by the law of the place of performance,
is strengthened by the practical construction the parties put upon
the contract after the bonds matured. Seven coupons, with the
installment of interest for July 1, 1866, all held by appellant,
were "capitalized" upon the basis of treating the �500 bonds
as bonds for �600, and the �250 bonds as bonds for
�300. The appellant refused to surrender his bonds for fear
that by so doing he would lose the benefit of the state's guaranty
of them, yet he received interest from time to time as if they had
been exchanged. On the 13th of April, 1869, a payment was made to
him of interest due July 1, 1868, which was endorsed on his bonds
in this form: "Paid on this bond �15, half-yearly dividend
due first July, 1868, as if it had been exchanged for a new bond."
A similar endorsement was made on his bonds for each half-year's
dividend or interest up to July 1, 1880. When the receiver in
Claflin v. South Carolina Railroad Company, made payments
of interest, such payments were stamped upon the bonds in this
form: "Paid �30 sterling, interest due July first, 1878, and
January first, 1879." For the interest paid to him for July 1,
1879, appellant executed a receipt, in this form:
"Received of Baring Brothers and Co., as agents of John H.
Fisher, receiver of the South Carolina Railroad Company, ninety
pounds sterling, being interest due July first, 1879, on bonds of
the Louisville, Cincinnati and Charleston Railroad Company, of
�500 each, with eight coupons attached, representing 600
pounds sterling, and numbered, respectively, as follows: 18, 19,
20, 22, 23."
Receipts of the same kind were given for him, by his London
bankers, for the interest due January 1, 1880. Similar payments of
interest were made and endorsed throughout the whole period from
July 1, 1868, to July 1, 1880, on the twelve original �250
bonds, differing from the others only in showing that the
half-yearly interest paid on those bonds was �7.10s. The
receipts or endorsements on both series of bonds show that,
commencing regularly with the interest due July 1, 1868, but
including the installment due July 1, 1886, Coghlan received
interest at the rate of five percent
Page 142 U. S. 114
per annum, upon the �500 and �250 bonds,
respectively, as if exchanged for �600 and �300
bonds. He admits in his deposition that the only demand ever made
by or on his behalf of interest at the rate of seven percent on the
bonds was by his original complaint in this suit, filed August 28,
1880. These facts make it clear that the claim of interest, after
the maturity of the bonds at the rate of seven percent instead of
the rate of five percent, was an afterthought upon his part.
In what has been said, we have assumed that the allowance of
interest at the rate of five percent per annum was in conformity
with the law of the place of payment. The court was not informed by
the pleadings or proof as to what that law was, and judicial notice
could not, therefore, be taken of it.
Liverpool &c. Steam
Co. v. Phenix Ins. Co., 129 U. S. 397,
129 U. S. 445,
and authorities there cited. The railroad company makes no
complaint of the allowance that was made of interest, and the
appellant does not claim that a larger allowance was required by
the law of the place of performance. He insists only that he was
entitled of right, after the maturity of the bonds and the
respective coupons, to interest at the rate, seven percent, fixed
by the laws of South Carolina, and this notwithstanding the
guaranty by the state of the faithful performance of the contract
of loan was upon the condition that "the interest to be received
thereby and made payable thereon" should not exceed the rate of
five percent per annum. For the reasons already stated, we are of
opinion that the law of that state did not determine the rate of
interest, and that this interpretation of the contract, if it were
doubtful, is sustained by the practical construction placed upon it
by the conduct of the parties.
One other question in the case requires notice at our hands. The
railroad company did not prove payment of the installments of
interest due January and July, 1867, and January, 1868, although
the evidence shows payment of the interest due July 1, 1866, and
the interest accruing on and after July 1, 1868, up to July 1,
1880. A reversal is asked upon the ground, among the others already
examined, that the court erred in
Page 142 U. S. 115
not requiring the interest due on the above dates, respectively,
to be paid with interest after maturity to the date of the final
decree. No mention is made in the special master's report of May 5,
1882, or in the interlocutory decree of 1883, or in the master's
report of 1887, or in the final decree of 1887, of the interest due
January and July, 1867, and January, 1868. There was no exception
to the reports of 1882 and 1887 upon the ground that they did not
include interest for those three periods of six months. The
reasonable inference is that the appellant did not produce before
the master and prove the interest coupons for those periods, or did
not ask that they be included in the report as to the amount due
upon the basis fixed in the interlocutory decree of 1883. Having
failed to except to the report upon the ground that it did not
include them, we do not think that the appellant should be now
heard to urge this as an objection to the final decree. Besides, as
by the evidence the interest due July 1, 1866, was included with
the interest due July 1, 1868, in the capitalization, whereby the
�500 and �250 bonds were treated as if exchanged for
�600 and �300 bonds, it would be strange if the
installment of interest due for the intermediate periods of January
and July 1867, and January, 1868, were not embraced by that
arrangement. There is no explanation of this in the record. It is
not an unreasonable presumption, in view of all the circumstances,
that in some way not disclosed by the evidence, those coupons were
settled, or treated as settled, when the railroad company commenced
in 1869 to pay, and the appellant received, interest on the bonds
as if exchanged for new bonds of �600 and �300. Be
this as it may, we are not inclined to disturb the decree upon the
ground that it does not make provision for the interest coupons due
January and July, 1867, and January, 1868.
Decree affirmed.
MR. JUSTICE GRAY did not hear the argument, and took no part in
the decision of this case.
