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U.S. Supreme Court

Missouri, Kansas & Texas Trust Co. v. Krumseig, 172 U.S. 351 (1899)

Missouri, Kansas & Texas Trust Co. v. Krumseig

No. 66

Argued December 2, 1898

Decided January 8, 1899

172 U.S. 351


Usury is a statutory offense, and federal courts, in dealing with such a question, must look to the laws of the state where the transaction took place, and follow the construction put upon such laws by the state courts.

When a state thinks that the evils of usury are best prevented by making usurious contracts void and by giving a right to the borrowers to have such contracts unconditionally nullified and cancelled by the courts, as in this case, such a view of public policy, in respect to contracts made within the state and sought to be enforced therein, is obligatory on the federal courts, whether acting in equity or at law, and the local law, consisting of the applicable statutes, as construed by the supreme court of the state, furnishes the rule of decision.

Page 172 U. S. 352

These views are not applicable to cases arising out of interstate commerce, where the policy to be enforced is federal.

Whether the contract between the parties in this case was, as a contract of life insurance, void because the defendant had not complied with the statutes of Minnesota, has not been considered by the court.

In May, 1894, Theodore M. Krumseig and Louise Krumseig filed in the District Court of the Eleventh Judicial District of Minnesota a bill of complaint against the Missouri, Kansas & Texas Trust Company, a corporation of the State of Missouri, praying that, for reasons alleged in the bill, a certain mortgage made by complainants on the 5th day of September, 1890, and delivered to the defendant, and by it recorded, and certain notes therein mentioned, might be cancelled, and the defendant be permanently enjoined from enforcing the same. The defendant thereupon, by due proceedings, removed the cause to the Circuit Court of the United States for the District of Minnesota, where the Union Trust Company of Philadelphia was made a codefendant, and the case was so proceeded in that, on October 22, 1895, a final decree was entered, granting the prayers of the complainants, declaring the said mortgage and notes to be void, and enjoining the defendants from ever taking any action or proceeding for their enforcement. 71 F.3d 0.

From this decree an appeal was taken to the Circuit Court of Appeals for the Eighth Circuit, where, on November 5, 1896, the decree of the circuit court was affirmed. 77 F. 32. On March 20, 1897, on petition of the Missouri, Kansas & Texas Trust Company, a writ of certiorari was awarded whereby the record and proceedings in said cause were brought for review into this Court.

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