Planters' Bank v. Snodgrass

5 Miss. 573

• Court: Mississippi Supreme Court
• Decided: January 15, 1840
• Status: Published

Opinions

Mr. Justice Trotter

delivered the opinion Of the court.

Several questions have been presented for the determination of this court, by'the record in this case. The-first'i's; whether'the contract which is the- subject of the action is usurious, and I shall proceed to the examination of that inquiry; in the first place. The others' are' dependent Oh that, and need not be considered until that is' disposed of. This pause, and the'others which'are connected' with it, were examined and argued with much zeal and ability by the'counsel of both parties, who accompanied-their arguments With a critical review of the various and numerous' Cases which hav'e been decided on qhestionsof usury. By the aids thus afforded to the court, I have' been enabled the more readily to arrive' at what I trust will be regarded a satisfactory conclusion’. In the process of examination, by which I ha'v'e formed my' opinion; I have looked’solely to the law;- and have disregarded all extraneous considerations either of the necessity or policy of a decision either" way. With any. other question than what is the settled rule in reference to' the subject before me, I have no concern. And I shall always esteem myself fortunate, if I shall be able to make my min.d master of the law as it is written, or has been declared by authoritative judicial precedent, and make a just application of its principles to the case submitted for" my decision. I shall in all cases congratulate myself, if I can succeed in doing this, without troubling myself in hunting after or indulging in speculations Which belong to the other and co-ordinate departments of tfie government. My province is to ascertain what the law is, and not what it should be. And it shall ever be my study to do this, by a different and more enduring standard, than the power of one party and the weakness of the other, or the' equally fluctuating and uncertain criterion of comparative, actual, or im-, puted criminality of the one or innocence of the other. These questions and others of a similar character, can never have any just influence, and will always be discarded by the judge who feels it to be his duty to go no further in any case submitted for his investigation, than to inquire whether on the body of the evidence there is found the feature which receives or rejects the application of some general principle of law.

Having made these preliminary remarks, deemed not to be unsuited to the occasion, I shall at once dispose of the question before me. In order to constitute the offence of usury, there must be an agreement between the lender and the borrower of money, by which the latter knowingly gives or promises, and the former knowingly takes or reserves, a higher rate of interest than the statute allows, and with an intention to violate the statute. There must be an agreement, and this is in all questions of usury the first thing to be considered. Does the special verdict find any agreement between the parties in this suit, as to the rate of interest? It does not, but finds expressly that nothing was said by them on that subject. Is this necessary? It would seem essentially so, from the very character of the offence. All the cases proceed upon that ground. In the case of Smith v. Beach, 3 Day’s Cases, 26, more than lawful interest- was reserved by the lender, without the knowledge of the borrower, and it was held that the transaction was not usurious. “A corrupt agreement” say the court, “ is essential to constitute usury, and to form a corrupt agreement, as in all other contracts, the minds of the parties must meet. The assent of Beach, the borrower, was therefore as essential to the existence of an usurious agreement, as that of Bird.” In Price et al. v. Campbell, 2 Call’s Rep. 123, the court in Virginia assert the same doctrine. After commenting upon the other circumstances of the transaction, they say, “ although Braxton states, that it was the intention of Campbell to take usury, he does not say that he assented, which is necessary to form the contract.”

Our statute against usury is penal, since it inflicts a loss of the entire interest, legal as well as usurious, upon the lender. And it is not the less a penal law because it does not provide for the whole debt, or visit the offenders with fine and imprisonment.

The first section of the act of 1822, which regulates the rate of interest, enacts, that if it shall be ascertained upon the plea or answer of the defendant in any suit, that more than eight per cent, be taken or reserved in or by any such contract, fyc. no interest or premium whatever shall be allowed or recovered; but the principal sum only may be recovered. The second section allows ten per cent, on contracts for a bona fide loan of money, and annexes the like penalty for taking more. If this statute had made a usurious contract the subject of a penal prosecution, and the present proceeding were on that branch of the act, it is difficult to conceive how, under the proof before the court, either party to this transaction would be liable to a conviction. The defendant, however, has insisted upon a consequence of the alleged violation of this law, which is in its nature equally penal; that is, a forfeiture of the whole debt. And yet I apprehend the rule of construction is the same in the latter as it would be in the former case.

In the case of Hammet v. Yea, 1 Bos. & Puller, 144, which is one of the leading cases on the subject of usurious contracts, the action was defended on the ground of usury, and the judges held that the transaction was entitled to as favorable a construction as if it had been the subject of a proceeding on the other branch of the statute.

I conclude, then, that it is impossible to resolve a transaction into the form of a corrupt agreement, when the proof is that there was no agreement at all. But it has been argued, that the taking or reserving of more interest on this loan than the law allows, though done by the clerk of the Bank, is a violation of the law by the Bank, and is therefore, as to the Bank, as much the subject of legal animadversion as if there had been an express contract between the Bank and the defendant. In order, then, to respond fully to the question which has been raised in the argument, I will proceed to its investigation upon the position that it is in the same condition, so far as regards the plaintiffs, as if an express agreement had been made. It then remains to be seen whether this agreement was corruptly made, or, in other words, was entered into' with a full knowledge of the excess which would result, and with an intention to violate the law.— It is the intent, in all cases of this sort, which constitutes the offence, or renders the contract corrupt. But this' intent is a question, which in this, as in all cases where the intent is material, must be ascertained by a jury, upon a full view of all the circumstances of the transaction. This is the doctrine which is sanctioned in all the books. 2 Wm. Blac. Rep. 865; 1 Vesey, Jr. 533; 1 Bos. & Puller, 151; 9 Peters’ Rep. 400.

In the case of the Dank of the United States v. Waggoner et al. 9 Peters, 400, the supreme court of the United States held, that to constitute usury, there must be an intention knowingly to contract for, or take more than lawful interest. For, if neither party intend it, but act bona fide and innocently, the law will not infer a corrupt agreement. When, indeed, the contract upon its face imports usury, as by an express reservation of more than the legal rate of interest, there is no room for presumption. The intent is apparent. Res ipsa loquitur. But when the contract, on its face, is for legal interest only, then it must be proved, that there was some corrupt agreement, and that it was in the full contemplation of the parties. That case, as well as the others referred to, lays down the rule, that the quo animo, the contract was made, as well as the acts of the parties, becomes an important inquiry; and that this inquiry belongs to a jury. This determination of the Supreme Court of the United States is in exact accordance with the principle of the earlier cases in England, of Bolton v. Downham, Cro. Eliz. 642; Bedingfield v. Ashley, ib. 741; Roberts v. Tremayne, Cro. Jac. 507; and the more modern decisions in Murray v. Harding, 2 W. Black. 859; Floyer v. Edwards, 2 Cowp. 112; Hammet v. Yea, 1 Bos. & Pul. 144; Doe v. Gooch, 3 Barn. & Ald. 664, and Salorette v. Melville, 7 Barn. &. Cres. 431. The same doctrine was held in the case of the Bank v. Owen, 2 Peters’ Rep. 536. To the special plea, alleging a corrupt agreement in that case, the plaintiff demurred. Judge Johnson, who delivered the opinion of the court, observed that he had great difficulty, because the plea did not aver an intent to violate or evade the law, but he was content to unite with the three other-judges, who made the majority on that point. And he gives as a reason for this, that the demurrer, implied a confession of the quo animo, or intent. And he lays down this rule, on the. authority of the case I have already cited, of Bolton v. Downham. This I apprehend to be a full recognition of the doctrine that the intent of the agreement must be found, and that where it is not apparent on the record or face of the contract, it must be ascertained by a jury. And this is the more evident from what immediately after-wards fell from the judge. “ But if,” says he, “ the plaintiff had traversed the plea, then the question of intent would have been for the jury.” And he cites, in support of this position, the decision in Bedingfield v. Ashley, already quoted.

There is then, no other distinction in the two cases on this subject, decided by the Supreme Court of the United States, than what is to be found in the state of the pleadings. For in the case subsequent to that of the Bank v. Owens, I mean that of the Bank v. Waggener et al. Judge Story refers to the first, and remarks, that there is no distinction in the principle of the two decisions. “The demurrer in Owens’ case admitted the quo animo,” otherwise it must have been left to the jury. In Spurier v. Mayoss, 1 Ves. jr. 533, the court decide, “that to make the contract usurious, it must be apparent upon the face of it, or by evidence, that the intention of the parties in the creation of it, was by means of shift or device, to take more than legal interest.” In Hine v. Handy, 1 J. Ch. Rep. 6, it was held that the excess over the legal rate of interest should be made a condition of the loan. In Hammet v. Yea, Eyre, Chief Justice, says, “I repeat, in conclusion, that 1 cannot agree, that in usury more than in any other case, the whole transaction is not to be taken together. Whether more than 5 per cent, be intentionally taken, is a question of fact to be decided by the jury.” The principle which grows out of all these cases, I take to be that stated by Gould, J. in Murray v. Harding, “that the ground and foundation of all usurious contracts, is the corrupt agreement” And that the motives of the parties are to be found by the jury. There is one other case much later in point of time than most of those to which I have referred, which illustrates with such clearness and precision the true boundaries on questions of this character between the powers of the Court and those of the jury, that I cannot pass it over. It is the case of Steptoe’s adm’rs. v. Harney’s ex’ors. 5th Leigh’s Rep. The president of the court of appeals in giving his opinion observes, “that the (distinction arises out of the theoretical incapacity of the court to ascertain any fact, or to judge of any motive, and the power of the jury to ascertain every fact and ferret out every motive” A plea of usury should therefore present such facts with certainty to every intent, as in themselves distinctly amount to an agreement to receive more than lawful interest, or it must state the facts with such necessary averments of an intent to evade the statute, that a jury upon the trial might decide that the agreement was a contract for usurious interest.” What is here said in regard to the plea of usury, applies with equal force to a special verdict, and if the latter do not find that the contract was corrupt, the court surely cannot infer it. It is true that if the special verdict finds that there was an agreement by which the lender knowingly receives or takes illegal interest, the court may infer the intent to violate the law. But this can only be so when no other conclusion would be consistent with the facts found in the verdict. If then the verdict either negatives the corrupt motives, or finds other facts inconsistent with such motives, I know of no rule by which the court can fix the intention. In the case at bar, the record shows that the contract was to receive only 8 per eent. on the loan, which is the rate of interest allowed by the charier, on loans having more than one year to run: that the rule of computation adopted by the clerk did reserve to the bank a trifling excess over 8 per cent, and that he and the officers of the bank did know at the time that this mode would give such excess. Had the proof stopped here, the defendant might very properly assimilate it to the cases of the Bank v. Owens, in 2d Peters, and of Marsh v. Martindale, 3 Bos. & Pull. 153, and invoke the powers of the court to make an application of the doctrine there asserted. But I take it that the court is bound to connect the whole of the circumstances connected with the transaction, and thus ascertain whether the motives of the officers of the bank can be explained on any other hypothesis than a corrupt intention.

The verdict also finds that the mode of calculation has never been adopted by, or otherwise received the sanction of the directors or the stockholders of the bank, that it was adopted in this case because it had been uniformly used, it being the established custom of the bank to coinpute interest by Rowlett’s tables, and that there was no intention to violate the law; the object, and only object being the convenience and accuracy of the rule, and that there was no design to make or gain by it. It will thus be seen that the jury have found that there was no intention to violate the law, and it has already been shown from numerous decisions of the highest courts in this country and in England, that it is their peculiar prerogative to decide the question of intent. How then can this court be called on to infer what they have said did not exist? It is said that where the body of the evidence shows a taking of usurious interest with full knowledge of the fact, there is ho room for presumption; the corrupt agreement is made out. JRes ipsa loquitur; and that the court is bound to apply the law, even though the jury do find, that there was no intention to violate the law. That ignorance of the law wifi not excuse. This is true; and the proposition runs through the whole system of criminal jurisprudence.' When a’homicide' is proven, the law presumes it to be felonious. It is however a mere presumption and is open to explanation, and subject to be destroyed by proof. This I understand is the rule in all cases of usury. It is laid down to this extent, and no further, in the case of The Bank of Utica v. Wager, 2 Cowen, 763. And I apprehend that the difference between that case, and the others, which have been decided on this point, will be found to consist only, 'in’ different applications ¿f the same doctrine. ’ When therefore the judge remarks, that “receiving usurious interest intentionally, is sufficient evidence of a corrupt agreement;” he advanced no new doctrine. I entirely agree with' him. ’ 1 only'conclude that he gave it an application in that case, which I do not feel at liberty to give it in the case at bar. I am'not'willing to carry the interpretation of the usury laws to that extent. In this case it is manifest to me that there was no corrupt intention. That in calculating the interest, the only objec-t was convenience and accuracy, and that the sordid motive of avarice which controls and influences the usurer, had no share in the transaction. I come to this conclusion from two facts which are found by the verdict. 1. That the clerk acted in obedience to the 'uniform and long established custom of the Bank. And, 2. The' amount of the excess over the lawful interest, which is so trifling as not to be an object to any money lender. It has been argued that usage cannot excuse a wilful violation of the statute laws of the country, or furnish an apology for trampling thein down. This is unquestionably true. And yet custom may.'go a great way to explain a transaction and unfold the motives of the parties to it. As was determined by Lord Mansfield in the case of Floyer v. Edmonds, already cited. In this case the motive is the gravamen of the controversy. And surely the party who is sought to be charged on a corrupt motive, is-entitled to the benefit of every circumstance which in its nature is calculated to repel the imputation. For this purpose he may invoke the usage which influenced the obnoxious act, and ask to have it put in the balance and weighed in his favor. The argument it furnishes is, that it is not fair to impute a wicked intention, for doing an act, which is every day committed by almost every b^ink, merchant, broker and business man in the United States. ' An act sanctioned not only by inveterate usage, long continued, and generally diffused through the operations of the almost entire banking and commercial classes of the whole country; but by a solemn legislative enactment of Congress, and of several of the states of the Union. He may ask the benefit of the custom, for the same reason and for the same purpose, that the banker does, who takes the interest on his loans in advance. Its influence in the latter case has never been denied, but oh the contrary was admitted by Lord Mansfield in the case before noticed of Floyer v. Edmonds, when the question was of first impression. He held the transaction to be usurious upon its very face, yet as the interest was discounted in pursuance'of long usage in the regular course of trade and business, it would not do to hold it usurious. This decision has been acquiesced in ever since, and is now the settled doctrine in England and in this country. 2 Wm. Black. 792; 4 Term. R. 148, 153; 15 John. Rep. 162; Bank of Utica v. Wager, 2 Cowen, 768; Fleckner v. Bank of the United States, 8 Wheat. 354; 5 Rand. Rep. 132; 1 Stewart’s Ala. Rep. 469: And yet by the practice thus sanctioned as a universal rule, the banks receive on their loans $6, for every 94, when by the law they are entitled on that sum to $5 64, only. This secures to them on every loan of $100, thirty-six cents more than the legal interest. Whereas the rule of calculation in the present case produces a gain of 8 cents per centum only. And if remote consequences can have any just influence in questions of this sort, they will be found to be much moré alarming in the former than in the latter instance. For by taking the interest in advance, it will be found upon a nice calculation, that if a note for @100, is made payable 16 years and eight months after date, and is discounted on the day of its date, the discount will absorb the whole amount of the note, and the lender neither advances, nor does the borrower in such case reeeive one cent. Yet the courts have felt themselves bound to uphold the contract in this case. And why? On the simple ground of usage. It is a clear and palpable violation of the law. And so held to be in all the cases decided upon it. It was so held by Judge Savage, in the case of the Bank of Utica v. Wager, and he goes on to remark, that if the question were res integra, he should feel bound to hold that it was so far usurious as to avoid' the contract. But it had been settled and could not be overturned. When the question came before Lord Mansfield, in Floyer v. Edmonds, it was not res integra, and he sustained the contract üpoh the only ground on which it can be upheld by any consistent principle. And that was, that the usage being general amongst the banks, that fact explained the intent of the banker, and repelled the inference of a corrupt agreement. Why should not the same indulgence be extended to those who have in good faith acted in obedience to a custom equally as universal, much more harmless in its results, and believed to be also highly beneficial to the business part of mankind.

Banks have in most cases adopted the practice of including the day of payment fixed in the old note, in the new one upon a renewal ; by which they receive double interest for that day. On the day of the date of the renewal they get 12 per cent. Every bank knows this, they then in such cases knowingly take usurious interest. And are therefore clearly within the operation of the general rule laid down in the adjudged cases, and exactly within the pale of the one asserted by Judge Savage in the case of the Bank of Utica v. Wager, and held to be incontrovertible “ that the taking of usurious interest intentionally, was sufficient evidence of a corrupt agreement.” And yet in that very case he held that this practice of the bank was not affected with usury. He concluded, however, that as the practice of counting interest on 360 days for the year, had not then received a judicial sanction, and was res integra, that the reservation of an excess under it tainted the contract with usury. But I apprehend the principle of each case is identical — save that in the two former the sin is much more aggravated. In one, the bank takes 36 cents in every hundred^dollars more than the law allows; and in the other, when she includes the same day in the two notes, she gets exactly two-fold interest. Yet these transactions have been universally excused by the courts on the authority of custom. Why then disregard entirely a'custom by which only 8 cents per cent, is gained ? Why extend the voice of pardon, to the usurer who gets double wages for his iniquity, and put all the thunders and penalties of the violated law upon the head of him who receives by as good a title, the paltry “ division of the twentieth part of, one poor scruple” only? I can never consent to this discrimination ; when the only court in which it has been made, has furnished no better reason for it, than that the favored offenders have grown gray in the practice of their sins; or in other words, have sinned longer and sinned deeper. In several modern and some quite recent decisions upon this subject, in many of the States, this usage has been sanctioned on the analogy of the cases on the other classes. Thus, in the case of Lyon v. The Bank, 2 Stewart’s Ala. Rep. 469, the Supreme Court of Alabama decided against the same objection. The interest in that case was counted on the rule in Rowlett’s Tables, and it was urged on the authority of Wager’s case in New York, that for that reason the contract was usurious. But the court gave judgment for the Bank. In the case of The Bank v. Hunter, 1 Devereux’s Rep. 129, the Supreme Court of North Carolina had the same question before it. And they decided in favor of the Bank. The Supreme Court of Vermont as late as 1839, in the case of the Bank of Burlington v. Durkee et al. 1 Vermont Rep. has decided the same question in the same way. The court say they must sanction the usage of thirty years, and admit it to explain the quo animo of the parties. The usage and the small amount of the excess, they deemed sufficient to repel the inference of a corrupt design. In the subsequent cases, of the Bank of St. Albans v. Scott and Raymond, 1 Ibid. 429, and of the same Bank v. Stearns, Ibid. 432, the Judges in Vermont re-asserted the same ‘opinion, and gave the same judgment. It is proper to remark, also, that in each of these cases the case of Wager, in New York, was pressed upon the court, and its authority refused. The case of the Bank of North Carolina v. Cowen et al. was decided in the Court of Appeals of Virginia as late as 1837. In that, case the whole subject received a full and critical investigation by the court, and they held that there was no usury in the case. It is true that Judge Brockenborough remarked that his opinion had ahvays been opposed to the practice, and that it was a violation of the law, and that the case of the Bank of Utica v. Wager had greatly strengthened that impression. But he felt compelled to acquiesce in a contrary decision, And he gives a very consistent and satisfactory reason for it: “ Because,” he continues, in the case of Crump v. Nicholas et al. 5 Leigh’s Rep. 251, it had been decided that taking interest on 64 days in renewed notes was not usurious. That decision, he observed, was sustained on the ground of bank usage, and the great inconvenience and injury which would result from a contrary decision. He thought the analogy of that case required a similar decision. He therefore felt bound by the usage.”

Judge Tucker remarks, «that the idea was excellent, and the inventor of Rowlett’s tables is entitled to be looked upon as a public benefactor. Time, and the most worrying labor are saved; mistakes are prevented, and the most ordinary man is enabled* to make 'his calculations with unerring certainty. But,” he continues, “ these tables, unfortunately, are founded on the false postulate that the year consists of three hundred and sixty instead of three hundred and sixty-five days. A position adopted to simplify the calculations and avoid innumerable embarrassing fractional quantities.” After entering into a calculation which shows an excess of one cent and a fraction on $100 for sixty days, he says, “ it is impossible to consider this excess as usury.” i: It is not pretended, that this method of computation was used with any intent to commit usury.” The statute, he says, has always been held to aim at corrupt agreements. “ It is true that the taking of usurious interest is prima facie evidence of a corrupt agreement; but it is not conclusive. The excess was so minute, and obtained by a process of calculation sanctioned by so long and so general a usage of the Banks as to redeem the case from the sin of usury.” I concur entirely with this reasoning.

Having settled in this manner the main question raised by the argument, it is deemed wholly unnecessary to notice the collateral inquiries dependent on it. As the verdict finds that the $2500, included in the note for expenses, was voluntarily agreed to be paid by the defendant, and was not exacted as a condition of the loan by the Bank, it cannot affect the case with usury. I am therefore of opinion that the law arising on the facts in the special verdict is with the plaintiffs.

Let the judgment be reversed, and a judgment rendered in this court accordingly.

Judge Turner concurred.