{ "id": 5400068, "name": "Melvin Mell, Plaintiff-Appellant-(Harold Z. Kaplan, Intervenor Plaintiff-Appellant), v. Goodbody & Co., Defendant-Appellee", "name_abbreviation": "Mell v. Goodbody & Co.", "decision_date": "1973-03-08", "docket_number": "No. 56022", "first_page": "809", "last_page": "814", "citations": [ { "type": "official", "cite": "10 Ill. App. 3d 809" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "274 U.S. 403", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 81213 ], "opinion_index": 0, "case_paths": [ "/us/274/0403-01" ] }, { "cite": "50 Ill. 370", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2606938 ], "opinion_index": 0, "case_paths": [ "/ill/50/0370-01" ] }, { "cite": "61 N.E.2d 29", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "390 Ill. 242", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2509245 ], "opinion_index": 0, "case_paths": [ "/ill/390/0242-01" ] }, { "cite": "17 Ill. 328", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2591019 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/ill/17/0328-01" ] } ], "analysis": { "cardinality": 556, "char_count": 10675, "ocr_confidence": 0.78, "pagerank": { "raw": 1.4805461011260384e-07, "percentile": 0.6610238666424182 }, "sha256": "3f0187f294c56a76707ef8d27f53bb974963c114be0250c6f72a6dd07d1759d3", "simhash": "1:e98813934c0d02a7", "word_count": 1766 }, "last_updated": "2023-07-14T20:49:00.166365+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "Melvin Mell, Plaintiff-Appellant\u2014(Harold Z. Kaplan, Intervenor Plaintiff-Appellant), v. Goodbody & Co., Defendant-Appellee." ], "opinions": [ { "text": "Mr. JUSTICE McNAMARA\ndelivered the opinion of the court:\nThis suit was brought against the defendant, a stock broker, on behalf of the named plaintiffs, stock margin account customers of defendant, and on behalf of a class. It was an action to recover interest and penalty pursuant to the Interest Act (Ill. Rev. Stat. 1967, ch. 74, par. 4), for interest charged in excess of the amount permitted by the Interest Act, as it applies to stock margin accounts with a debit balance of less than $5,000. After considering affidavits filed by defendant, defendant\u2019s answers to plaintiffs\u2019 interrogatories, and argument by counsel, the trial court granted defendant\u2019s motion for summary judgment, and plaintiffs appeal. The affidavits and answers to interrogatories disclose the following facts.\nMargin account customers such as plaintiffs are permitted to purchase securities without making payment in full. Such customers pay a certain portion of the purchase price which dining the period in question was set at 80% by Federal regulations. The customers pledge collateral to the broker to secure the remainder. The broker pays the full price for the security and customarily makes a charge to the customer for the loan.\nDefendant\u2019s charge for the loan of the unpaid 20% of the purchase price was designated as \u201cinterest\u201d on its bills to customers. This amount exceeded 7% per annum between August 12, 1966 and April 19, 1968, and exceeded 8% per annum between April 19, 1968 and the time of the suit on the outstanding balance on margin accounts of less than $10,000.\nDefendant is a limited partnership organized under the laws of the State of New York and dealing in the security brokerage business. It is a member of all principal security exchanges. Its principal offices are located in New York, but it has three branch offices in the City of Chicago.\nDuring the period in question defendant made a yearly profit of $85,000 from its one thousand to fifteen hundred Illinois margin account customers. A form agreement was signed by each of these customers establishing the margin account relationship. That agreement provided in part:\n\u201c8. This agreement and its enforcement and performance shall inure to the benefit of yourselves, your successors and assigns, shall be binding upon my personal representatives, shall apply to all such accounts now or hereafter open or reopened, shall be governed by the laws of the State of New York, and shall be subject to all applicable Federal and state statutes and regulations thereunder; #\nAll purchases for margin account customers of securities on the New York and American exchanges were made in New York, as were most purchases of over-the-counter securities. Principal responsibility for the supervision of margin accounts was in the New York office; central books and records regarding such accounts also were located in New York. Defendant borrowed money from six Illinois banks, but principal borrowings to cover margin accounts were made in New York. Margin customers\u2019 collateral was also kept in New York. Monthly customer statements, although verified in Illinois, were mailed directly from New York.\nDefendant had both Illinois and Chicago broker\u2019s licenses, and, contrary to its written agreement with customers, received payments in Illinois on its margin accounts.\nAt the time in question, the Illinois Interest Act (Ill. Rev. Stat. 1967, ch. 74, par. 4), provided in part:\n\u201cIn all written contracts it shall be lawful for the parties to stipulate or agree that 7% per annum, or any less sum of interest, shall be taken and paid upon every $100 of money loaned or in any manner due and owing from any person to any other person or corporation in the state, and after that rate for a greater or less sum, or for a longer or shorter time, except as herein provided.\u201d\nThe Act went on to exempt certain transactions from the interest limitations. And in 1969 the Act was amended, explicitly exempting from its application interest charged upon margin accounts; however, this subsequent amendment was not in effect during the instant period.\nDefendant\u2019s motion for summary judgment was based upon five separate and independent grounds: (1) that the transactions were governed by the laws of the State of New York, under which they clearly were not usurious; (2) that even if Illinois law did govern, the transactions were essentially a lending credit and, therefore, not within the purview of the Illinois Interest Act; (3) that even if the Illinois Interest Act did govern, the transactions were business loans, and, therefore, not usurious; (4) that the right to recover for usury could not be the subject of a class action; and (5) that plaintiff\u2019s complaint failed to state a cause of action upon which relief could be granted.\nThe trial judge found for defendant on all five grounds and allowed its motion for summary judgment. We believe that the transactions in question were governed by the laws of the State of New York, and that the court correctly awarded summary judgment on that basis. We therefore find it unnecessary to consider the other independent grounds for the allowance of judgment.\nThe securities involved in the instant transactions came within tire purview of the Illinois Uniform Commercial Code. (Ill. Rev. Stat. 1967, ch. 26, par. 8 \u2014 102(1) (a).) Article I, section 105(1) of the Illinois Code, entitled \u201cTerritorial Application of the Act; Parties\u2019 Power to Choose Applicable Law,\u201d provides:\n\u201c(1) Except as provided hereafter in this Section, when a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of such other state or nation shall govern their rights and duties. Failing such agreement this Act applies to transactions bearing an appropriate relation to this State.\nThe Code Comment following this Section defines the test for a \u201creasonable relationship\u201d to a State as \u201ca significant enough portion of the making or performance of the contract is to occur or occurs [there].\u201d\nLong before the adoption of the Code, these conflict of laws principles had been recognized in Illinois. In McAllister v. Smith, 17 Ill. 328, our Supreme Court stated at p. 334:\n\u201cBut the parties may substitute the laws of another place or country, than that where the contract is entered into, both, in relation to the legality and the extent of tire original obligation, and in relation to the respective rights of the parties, for a breach or violation of its terms.\u201d\nAnd in Reighley v. Continental Illinois Nat. Bank and Trust Co., 390 Ill. 242, 61 N.E.2d 29, the court, at p. 249, observed:\n\u201c* * * it is permissible for the parties to agree, subject to certain limitation, that the construction of a contract and the validity of the same may be governed and controlled by a law agreed upon between the parties.\u201d\nIn the instant case the brokerage arrangements between the parties bore a \u201creasonable relationship\u201d to the State of New York, and a \u201csignificant enough portion\u201d of the performance occurred there that the choice of law provision in the brokerage agreements was valid and should be given effect. Defendant\u2019s primary place of business is in New York; it is there that the major portion of the securities under the contracts were purchased and sold on the major exchanges. Plaintiffs\u2019 collateral was kept in New York; defendant\u2019s central records of all its margin accounts were kept in New York; bills on margin accounts were made in New York; and it was in New York that defendant made its principal borrowings to cover its margin accounts. All of this is not to say that there were not also very substantial relationships with Illinois in these brokerage agreements. Yet the numerous and significant contacts with New York clearly satisfy tire \u201creasonable relationship\u201d test applicable in this choice of law situation.\nPlaintiffs, however, contend that giving effect to New York law and particularly to the New York usury statute, which permits an interest rate higher than that allowed in Illinois, would violate Illinois public policy.\nIt is a well recognized principle in conflict of laws that states will give effect to a foreign law only where such is \u201cnot dangerous, inconvenient, immoral, nor contrary to the public policy of the local government.\u201d (McAllister v. Smith, 17 Ill. 328.) In that case, after noting the above public policy exception, the court, at pp. 334-335, stated:\n\u201cAny rate per cent sanctioned by the laws of the place where tire contract is made, or by the substituted laws of the place where it is to be performed, or paid, will be recognized and enforced in the courts of other governments, whose laws would make such rate usurious.\u201d\nAnd in Mumford v. Canty, 50 Ill. 370, the court stated at p. 375:\n\u201c* * * a contract entered into in another State, and in conformity to their laws, may be enforced, and the rate of interest collected under the contract, according to the laws of that State, although it may be larger than the rate allowed by our laws.\u201d\nAdditionally, the Code Comment following Article I, section 1 \u2014 105(1) of the Illinois Uniform Commercial Code makes reference to the United States Supreme Court case of Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, as a useful guideline. In that case, the court permitted reference to the law of another State allowing a higher rate of interest than the forum State, and, quoting Wharton\u2019s Conflict of Laws, stated at p. 408:\n\u201cAssuming that their real, bona fide intention was to fix the situs of the contract at a certain place which has a natural and vital connection with the transaction, the fact that they were actuated in doing so by an intention to obtain a higher rate of interest than is allowable by the situs of some other elements of the transaction does not prevent the application of the law allowing the higher rate.\u201d\nWe therefore hold that the application of New York\u2019s usury laws in the instant case would not be violative of Illinois public policy, and that the trial court properly found that the transactions in question were governed by the laws of the State of New York. The court correctly granted summary judgment.\nFor the reasons stated, the judgment of the circuit court is affirmed.\nJudgment affirmed.\nDEMPSEY, P. J., and McGLOON, J., concur.", "type": "majority", "author": "Mr. JUSTICE McNAMARA" } ], "attorneys": [ "L. Louis Karton, and Lieb & Rotche, both of Chicago, for appellants.", "Petit, Safeblade, Littlejohn & Glass, of Chicago, (Edward Atlas, of counsel,) for appellee." ], "corrections": "", "head_matter": "Melvin Mell, Plaintiff-Appellant\u2014(Harold Z. Kaplan, Intervenor Plaintiff-Appellant), v. Goodbody & Co., Defendant-Appellee.\n(No. 56022;\nFirst District (3rd Division)\nMarch 8, 1973.\nL. Louis Karton, and Lieb & Rotche, both of Chicago, for appellants.\nPetit, Safeblade, Littlejohn & Glass, of Chicago, (Edward Atlas, of counsel,) for appellee." }, "file_name": "0809-01", "first_page_order": 833, "last_page_order": 838 }