Case ID: ohio-st_15/html/0068-01.html
Source: Caselaw Access Project
Author: {"author": "Ranney, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Niagara County Bank v. William Baker, et al.
    1. The existence, construction, and legal effect of foreign statutes, are rather matters of fact than of law, and when they have received an authoritative construction where they are enacted, no inquiry into the correctness of such construction is allowable.
    2. A power given to a corporation by a statute of the State of New York, " tc carry on the business of banking by discounting bills, notes and other evidences of debt,” is not a power to buy promissory notes, but to loan money upon the paper described $ and a transaction of that character is within the usury laws of that state.
    S, To discount paper, as understood in the business of banking,(< is only a mode of loaning money,” with the right to take the interest allowed by law in advance.
    4. Evidence of a usage with other banks organized under the same law, to discount more than the legal rate of interest, upon the acquisition of business paper, is not admissible.
    Error to the court of common pleas of Lucas county. Reserved in the district court.
    On December 23,1859, the plaintiff in error, the Niagara County Bank, situated at Loekport, in the State of New York, filed a petition in the court of common pleas of Lucas county, Ohio, in the usual form, against William Baker and George Walbridge as indorsers of six several promissory notes for $2500 each, made by Williams & Brother, of Chicago, Illinois, dated February 16,1857, payable respectively at Chicago, with interest from date, at the rate of ten per cent, per annum, October 10, October 20, December 10, December 20, 1857, and February 10, and February 20, 1858, to the order of Harmon & Huntoon of Chicago, and by them indorsed and delivered to the defendants, Baker and Walbridge, and by Baker and Walbridge to the plaintiff. The notes were dishonored and protested.
    The answer of Baker and Walbridge sets up two defenses to the petition:
    1. “ That by the laws of the State of New York it is enacted as follows: ‘ The rate of interest upon the loan or forbearance of any money, goods, or things in action, shall continue to be seven dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time;’ and it is further provided that ‘No person or corporation shall directly or indirectly take or receive, in money, goods, or things in action, or in any other way, any greater sum or greater value, for the loan or forbearanee of any money, goods, or things in action, than is above prescribed.’
    “And it is further provided, that all bonds, bills, notes, assurances, conveyances, and all other contracts or securities whatsoever, except bottomry and respondentia bonds and contracts, and all deposits of goods or things whatsoever, whereupon or whereby there shall be reserved or taken, or secured, or agreed to be reserved or taken, any greater sum or greater value for the loan or forbearance of any money, goods, or things in action, than is above prescribed, shall be void; but this act shall not affect such paper as has been made and transferred previous to the time it shall take effect.”
    2. “ That the only powers granted to the plaintiff by the laws of the State of New York, under which the plaintiff is incorporated and made capable of transacting business, are the following : ‘ Such association shall have power to carry on the business of banking by discounting bills, notes and other evidences of debt; by receiving deposits ; by buying and selling gold and silver bullion, foreign coins and bills of exchange, in the manner specified in their articles of association for the purposes authorized by this act; by loaning money on real and personal security; and by exercising such incidental powers as shall be necessary to carry on such business; to choose one of their number as president of such association, and to appoint a cashier and such other officers and agents as their business may require, and to remove such president, cashier, officers and agents at pleasure, and appoint others in their places.”
    “And these defendants further say, that on or about the second day of March, 1857, at Lockport, in the State of New York, it was then and there agreed by and between the plaintiff and said defendant, Gfeorge Walbridge, that said plaintiff should lend and advance to said Walbridge a certain sum of money, to-wit: the amount of the principal sum of the several notes'in the petition set forth, deducting therefrom interest-at the rate of twenty per cent, per annum, and that said notes, bo made by said Williams & Brother and indorsed by Harmon & Hnntoon, should be indorsed by said Baker and Walbridge; and these defendants say that, in pursuance of said agreement, said plaintiff did discount to said Walbridge said several notes, and did, then and there, charge, reserve, and retain as discount or interest on said notes as follows,” etc. The answer then gives a computation, for the purpose of showing that the plaintiff discounted from the principal sum of each note at the rate of twenty per cent, per annum, and concludes with the following allegations: “ And the defendants say that the several sums so taken and reserved by the plaintiff, and paid by said defendant Walbridge for such loan, discount and forbearance, as aforesaid, exceeds the rate of seven dollars for the forbearance of one hundred dollars for a year, contrary to the statute of the State of'New York, as aforesaid, in such ease made and provided; whereby and by force said statute the said several notes in the hands of the plaintiff, as against these defendants, were, and are wholly void, and the plaintiff had no power to enter into the contract set forth.”
    To this answer the plaintiff demurred. The demurrer was overruled and exception taken, and leave to reply.
    The plaintiff’s reply contains the following allegations: “ Plaintiff, for reply to defendant’s answer, denies that it was agreed between the plaintiff and said Greorge Walbridge, at the time, in said answer named, or between the plaintiff and either of said defendants, at any time, that the plaintiff should lend or advance to the said defendants, or to either of them, the said sum of money, or any part thereof; but plaintiff says it did discount to said defendants said several notes in the petition described, in the usual course of banking business; that there was discounted from the face of said notes the several sums in said answer named, but plaintiff denies that said sums, or any part of them, were reserved as interest, or for the loan or forbearance of money, goods, or things. But plaintiff says that said notes were received, taken and discounted by it in the usual course of banking business, as the same is carried on and conducted in the State of New York, under the statutes and laws regulating this plaintiff, and other banking corporations within said state, and that this plaintiff is fully authorized and empowered to enforce, prosecute, and collect the same against said defendants.”
    The cause was tried in the common pleas upon these pleadings and the evidence produced by the parties.
    Upon the trial the defendants objected to so much of the testimony offered by the plaintiff as sought to establish a custom among banks in the State of New York in reference to discounting paper, which objection was sustained by the court and the testimony ruled out, to which the plaintiff excepted. Defendants also objected to the introduction of the statute of New York, known as the safety fund act, but the court overruled that .objection.
    The plaintiff asked the court to render judgment in its favor and against the defendants upon the pleadings and testimony f but the court refused; and, on the contrary, held that the notes sued upon' were void in the hands of the plaintiff, as against Baker and Walbridge, and that they could not be made liable on the same, or held for the payment of the same or any part thereof, and gave judgment for the defendants. Plaintiff excepted, and moved to set aside the judgment, and for a new trial, for the reason that the judgment was contrary to law, and not supported by the evidence. The court overruled the motion, and the plaintiff again excepted and procured a bill of exceptions containing all the evidence.
    To reverse the judgment of the common pleas, the plaintiff filed a petition in error in the district court, insisting that the common pleas erred:
    1. In overruling the demurrer of the plaintiff to the defendant’s answer.
    2. In holding'the notes sued upon void in the hands of the plaintiff as against the defendants, and that plaintiff could not recover on the same against the defendants.
    3. In giving judgment in favor of the defendants and not in favor of the plaintiff.
    
      4. In refusing to set aside the judgment and in refusing to grant a new trial.
    The cause was reserved in the district court to this court fcr decision.
    The case made by the pleadings and evidence is concisely stated in the opinion of the court.
    
      Hill § Pratt, for plaintiff in error:
    This case is to be determined in accordance with the statutes and decisions of the State of New York. The whole transaction between the parties was had at Lockport, in that state, at the banking house of the plaintiff.
    1. There is no question here as to the validity of the notes sued upon, in their inception. They were given by Williams & Brother, to Baker and Walbridge, for a Iona fide valuable consideration; were in their hands in the strictest sense of the term “business paper.” In the hands of Baker and Walbridge (composing the firm of Geo. Walbridge & Co.), they were valid and binding obligations against both the makers and Harmon & Huntoon, the indorsers, and these makers and prior indorsers being thus liable to Baker and Walbridge, would become liable to any person to whom they should transfer the title to the notes. The only defense they could make as against this plaintiff, or any other holder of the notes, would be one of ownership. They could not defend on the ground of usury in the transfer of the notes. Usury can never be set up in defense of a note, good in its inception, no matter what the nature of the transaction by which it was afterward transferred. It is enough for the maker that he received a lawful and valuable consideration for the nraking of the note, and he can not be allowed to escape on the ground that some one else received an inadequate consideration for its transfer. This was clearly established as long ago as the year 1818, in the case of Munn v. Commission Co., 15 Johns. 43, and has ever since been the law, both of New York and other states. It is recognized by the cases hereafter cited, and is supported by the uniform current of authorities
    
      2. We say next, that where the holder of a note, valid in its inception, has transferred the same to a third party, and in so transferring the same has indorsed it, and upon nonpayment, suit is instituted by such holder against such in* dorser, usury can not be pleaded by him in defense. He is just as effectually estopped as is the maker of the note, and can not plead it when he (the maker) could not. The amount of money actually paid for the note may be proven in such case, but only for the purpose of reducing the amount of recovery, the holder being entitled to recover only the actual amount by him paid to the indorser with the interest thereon. Braman v. Hess, 13 Johns. 52; Wiffin v. Roberts, 1 Esp. Cas. 261; Brown v. Mot, 7 Johns. 361; Livingston v. Hastie and Patrick, 2 Cain’s Rep. 248; Munn v. Commission Co., 15 Johns. 43; Powell v. Waters, 8 Cowen, 669, 17 Johns. 176; Rice v. Mather, 3 Wend. 62; Crane v. Hendricks, 7 Wend. 569; Mazuzan v. Mead, 21 Wend. 285; The Dry Dock Bank v. American Life Insurance and Trust Co., 3 Comst. 344; Ingalls v. Lee & King, 9 Barb. 647; Clark et al. v. Sisson et al., 22 N. Y. 312; Durant v. Bantee et al., 3 Dutcher, 624; Nicholas v. Fearson et al., 7 Pet. 103; Corcoran Riggs v. Powers et al., 6 Ohio St. Rep. 37; Dunkle v. Rennick, Ib. 535.
    3. This transaction was none other than such an ordinary discount in the usual course of banking, of valid and legitimate business paper, as is, by all the decisions which we have cited, construed and held to be a sale of the paper, and not an usurious loan of money. The terms purchase and discount, when used in reference to the transfer of negotiable paper, are used, not only in the above case, but all through the books as correlative terms. The literal meaning of “discount” is “to take from” — “to count out.” The legal meaning varies according to the transaction to which it is applied. When an accommodation -note or bill, made for the sole purpose of raising money, is discounted for that purpose, and with knowledge on the part of the party discounting it that it was made for that purpose only, the cases call that a loan and hold it subject to the usury laws, so that discount is in that case but another way of loaning money, and is often so spoken of, both in every-day transactions and in the books. It is very often so spoken of and defined loosely and without stating the distinction which is made when the test established by legal decisions is applied. But by this test, when a piece of business paper— a valid and subsisting obligation — held and owned by one person, is discounted by another at any rate, whether that fixed as the legal interest or at a rate either greater or less, such discounting is held to be a purchase of the paper, and is so spoken of and treated in all the cases. It is then such a transaction as is held, in the cases already cited, not within the usury laws, because it is not u a loan or forbearance of money,” but the purchase of a chose in action, and is called sometimes a discount, and sometimes & purchase of the paper — - sometimes a purchase at a discount. The term “ discount,” we thus perceive, includes both a loan and a purchase, and is the one or the other, according- to the connection in which used, or the nature of the transaction referred to, and the facts attending it. The conclusion to us seems to be irresistible, that this is not a case where the plea of usury can be sustained, and that the first defense in the answer must fall.
    4. The second defense set up in the answer is, that “the plaintiff had no power to enter into the contracts set forth.” This question of power depends, of course, upon the statute under which the plaintiff was organized. This statute was passed in 1838, and is called “An act to authorize the business of banking.” The portion of this act set forth in the answer gives, as we claim, express power to do just what the plaintiff has done in this case. “ Such association shall have power to carry on the business of banking by discounting bills, notes, and other evidences of debt.” This power is given without any limitation as to the rate of discount to be taken. It simply gives the association the power to do a certain thing, and thus puts it upon the same footing as to that, as a natural person. In this respect the statute of New York is different from the statutes of Ohio. Our banking statutes contain within themselves usury laws, to which the banks are subject, and which can be pleaded in a suit by a bank, but which have no application to a natural person. So, too, the “ Safety Fund Act,” so called, passed in New York in 1829, limited the rate at which the banks subject to that act might discount bills or notes, to the legal rate of -interest, and on notes or bills not having more than sixty days to run, to six per cent, in advance. This provision was not inserted in the act of 1838, and it has been repeatedly held in New York that associations under the act of 1838 are not subject to the provisions of the safety fund act. Leavitt v. Blatchford, 17 N. Y. 521.
    No plea of usury could, therefore, be framed upon any banking act to which the plaintiff was subject. But for anything in the act of 1838, any association formed under it could discount bills or notes, or loan money, at any rate without restriction. The plea of usury, then, set up in this case is the same that could be set up in a suit brought by an individual. The act set forth in the answer is the general usury act of the state, applicable alike to persons, associations, and bodies corporate. Given — the power to discount without restriction, so far as the act granting that power is concerned, and the association or corporation may discount, subject to the same rules .of law applicable to natural persons, and with the same rights, restrictions, and liabilities. The usury laws of the state apply to these with the same and with no- greater or different force or effect. It may be said the power to buy and sell promissory notes is not given in the statute, but that a following clause gives the power to buy and sell bills of exchange, thus making a distinction. This second clause refers to entirely another branch of banking business. It is intended to cover transactions in exchange between different places or countries — exchange on New York city, exchange on London or Paris, for instance. This kind of bills of exchange are usually at sight, and only a means of transmitting money, and usually at a premium instead of a discount.
    But the position referred to would prove too much; because if the bank had no power to become the purchaser of these notes, it had no power to purchase them at any price. They would have just as little power to purchase at a discount of six as at a discount of twenty per eent. If the power to discount means, under the laws and decisions of New York, when applied to such paper, the power to purchase, then it is a purchase, the same as by an individual, at any price agreed upon, for the rate is not limited or in any way mentioned; if it does not mean that, then there is no power to purchase at any price, and if the bank had paid for this paper its full face, and then sued the makers of the paper, this answer could just as effectually have been interposed by them, as it can be by these defendants here.
    But it is useless to argue so absurd a proposition; for the power to discount is given, and it is given without limitation as to rates.
    It is a fact that, whether wisely or unwisely, the tendency of legislation has been to throw open the business of banking, cut off its exclusive privileges, and leave it to be followed aa other business, only guarded in such respects as has been deemed necessary to protect the holders of circulating notes. In accordance with this idea it was that the act of 1838 was made a general act, under which any body of persons might carry on the business, who should comply with certain provisions. It was emphatically, as it title denotes, “An Act to authorize the business of banking.” We have the authority of Mr. Justice Harris, in the case of Leavitt v. Blatchford, 17 N. Y. 526, 527, for saying that it was not the legislative intent, in passing this act, to create corporations. He says: “Hitherto the business of banking had been confined to chartered monopolies. Now it was intended that all individuals and voluntary associations of individuals, might alike and upon equal terms exercise this privilege.”
    
    We think this question of power to become the purchaser of these notes is, in principle, sustained in the case of The Oneida Bank v. The Ontario Bank, 21 N. Y. Rep. 490.
    5. It has always seemed to us that the testimony which was offered by the plaintiff, to show the usual course of banking business in the State of New York, and which was ruled out by the court, should have some bearing upon the case, and that it ought to have been admitted. We are under the necessity, in determining this case, of construing the statutes of' another state. Those statutes were, of course, made with reference to the customs of the particular business to which they applied, and when construed by their courts would necessarily and naturally be construed in reference to those customs.
    6. We say further, that the $9200 of indebtedness of Baker and Walbridge to the plaintiff, furnished a sufficient consideration for the transfer of these notes by them to the plaintiff, and the plaintiff had a perfect right, under the incidental powers of banking, to take this paper for the purpose of securing that debt. Dunkle v. Rennick, 6 Ohio St. Rep. 527.
    7. The plea of usury is not to be favored. When a contract is susceptible of two constructions, one of which shall bring it within, and the other without the statute of usury, the latter should be adopted. Cram v. Hendricks, 7 Wend. 610, 612; Archibald v. Thomas, 3 Conn. 284. The defense here interposed has no equity to recommend it to the consideration of the court.
    
      M. M. ‡ JR. Waite, for defendants in error:
    On the part of the defendants we claim—
    
      First — That if the transaction between Walbridge and the bank was a loan of money by the bank to Walbridge, the contract of indorsement is void for usury.
    
      Second — If it was a purchase by the bank of the notes of Williams & Brother, it is void for want of power .in the bank to make it.
    I. We admit, 1 — That the notes of Williams & Brother were valid in their inception; 2 — That being such, they might be sold and indorsed by Walbridge and Baker to a party legally competent to purchase, at a discount greater than the legal rate of interest, and the contract would not be usurious; 3 — That if default was made by the makers in the payment of the notes, Walbridge and Baker would, as indorsers, be liable to the purchaser for the purchase money advanced and the interest.
    These principles are well settled in New York and in this state.
    But to relieve the parties from the imputation of usury, the transaction must be in fact a sale and purchase of the paper, and not a loan of money upon it as security. If the transaction is a sale and purchase, it is valid. If a loan, it is usurious and void. Cram v. Hendricks, 7 Wend. 569, 613, 632; Lloyd v. Keach, 2 Conn. 175; Dunkle v. Rennick, 6 Ohio St. Rep. 535; Corcoran v. Powers, 6 Ohio St. Rep. 37.
    We do not understand that this principle is disputed by the counsel for the plaintiff. Neither is it denied, that banks in New York are subject to the usury laws in that state.
    But the effort on the part of counsel is to show that, in this case, the bank was a purchaser of the notes, and as such entitled to the benefit of the decisions applicable to purchasers.
    We may admit for the purpose of this argument that if the parties to this transaction had all been natural persons, the evidence would, under the rules established by the court as applicable to such cases, justify a finding that it was a sale. But the plaintiff is a corporation, having only such powers as are expressly granted to it by law, or such-as are necessary to carry into effect those which are granted.
    As such corporation it has’not the power to become a purchaser of the paper. It may make a loan upon the paper but can not buy it. If this transaction was a loan, and within the corporate powers of the plaintiff, then it was usurious and void. But if a purchase, it is without its corporate powers, and equally invalid.
    The plaintiff is authorized to carry on the business of banking by discounting notes and bills, buying bills of exchange, and lending money on real or personal security.
    The plaintiff is a banking corporation. The act, under which it is organized, is an act to authorize the business of banking. It is not an a-ct for any other purpose. As a bank can, the plaintiff may discount notes. Talmadge v. Pell, 3 Seld. 340.
    The legitimate business of a bank is to loan money, receive deposits and issue notes for'circulation. Bouvier, in his Dictionary, title “Bank,” defines a bank to be an institution authorized to receive deposits of money, to lend money, and to issue promissory notes. Banks are of three kinds: discount, deposit, and circulation.
    Banking is defined by Webster to “ be the business of establishing a common fund for lending money, discounting notes, issuing bills,” etc.
    But it is claimed by the'counsel for the plaintiff that the power to discount notes includes, and is synonymous with, the power to purchase — in fact, that discount and purchase are correlative terms.
    This we deny. The term discount, when used in connection with banking business, means the loaning of money on notes or bills, and taking the interest in advance. When not applied to banking business, it may signify, as is claimed by the counsel for the plaintiff, “ counting off,” and may include the term purchase. Dunkle v. Rennick, 6 Ohio St. Rep. 534; McLean v. Lafayette Bank, 3 McLean, 597; Talmadge v. Pell, 3 Seld. 343; Fleckner v. Bank U. S., 8 Wheat. 338; Philadelphia Loan Co. v. Towner, 13 Conn. 259; Bouv. Law. Dic. Title Discount.
    The charter of the plaintiff, itself, evidently makes a distinction between the power to discount and the power to purchase. Power is given to discount bills, notes, and other evidences of debt. If the power to discount includes the power to buy, there was no necessity for granting expressly,’in the subsequent clause, the power to buy bills of exchange. In putting a construction upon any statute, every part should be regarded, and it should be so expounded as, if possible, to give some effect to every part of it. Commonwealth v. Alger, 7 Cush. 89.
    The power to buy bills of exchange is given in terms distinct from, and additional to, the power to discount. It must mean something different from the power to discount, or it can have no effect.
    But the power of purchase is confined to bills of exchange. Notes and bills may be discounted, but bills only can be bought. This fact can not be overlooked. It must have a meaning. It can have none unless it prohibits the purchase of notes as a necessary consequence of the express grant of power to purchase bills, omitting notes.
    Again : Counsel say if the principle contended for is correct, the bank has no power to purchase at any price. In reply to this we have only to quote again from Flecker v. Bank U. S., “ if the discount be a purchase, it is a purchase by discount and permitted.”
    II. Again it is claimed by the counsel for the plaintiff, “ that the $9200 indebtedness of Walbridge and Baker to the bank, furnished a sufficient consideration for the transfer of these notes by them to the plaintiff, and that the plaintiff had a perfect right, under the incidental powers of banking, to take this paper for the purpose of securing that debt.”
    We admit to the fullest extent the doctrine of the case of Dunkle v. Rennick, 6 Ohio St. Rep. 527, that if a bank receives from its debtor, in good faith, and in payment of a pre-existing debt, but at a rate of interest greater than six per cent, per annum, the negotiable note of a third party, the same being bona fide business paper, such transaction is not usurious, nor beyond the corporate capacity of the bank.
    But to obtain the benefit of this principle, it lies upon the plaintiff to establish, by proof, that it did, in good faith, take these notes in payment of the $9200 debt. It is not enough to show, that by agreement, the $9200 was to be paid out of the proceeds of the discount, but it must be shown that the notes wore actually, and in good faith themselves, taken in payment of the old debt. The sale must not be colorable to disguise a lean, but the transaction must be in form a payment by Walbridge, and a purchase by the bank for this purpose,, and this alone.
    The question then becomes one of fact. Did the plaintiff take these notes in payment of its debt, or did it discount the notes and pay the debt out of the proceeds ?
    Looking to the case as made by the pleadings, there can he no difficulty in determining this question — for in the reply the plaintiff says: “ It did discount to said defendants said several notes in the petition mentioned in the usual course of banicing business.”
    
    Certainly if it was a discount in the regular course of business, it could not be an exchange of these securities for those then held by the bank.
    This question is one of fact. The court below found against the plaintiff upon the issue made, and said by its judgment, the notes were not taken in payment of the debt. This court is now called upon to review that finding, upon a motion for a new trial. Can it be said that it is manifestly erroneous ?
    III. The only remaining question is as to the admissibility ■of the rejected testimony, to show the custom of the banks, an the State of New York, as to the rate of interest charged, ;and by which “ they managed ” to get about twelve per cent, ¡per annum, .and “ as they (the banks) did not want to be con•sidered as shaving/’ the witness shows how they contrived •“ to smooth the matter over.”
    The point is to ascertain what the bank has a right to do, mot what it managed to do, or how it smooths over its illegal 'transactions.
    There is no ambiguity in the terms used in the charter of •■the plaintiff. They all have a known and significant meaning. Custom can not change them.
    
      W. A. Collins, also, for defendants in error,
    argued the cause and reviewed the authorities cited by counsel for plaintiff in error.
   Ranney, J.

In the opinion of the court, all the questions raised in this case, and very thoroughly argued, are resolved, ¡when a proper construction is placed upon a single section of the general banking law of the. State of New York, under which the plaintiff was organized, and from which it derives all its corporate powers.

The existence, construction, and legal effect of the statutes of other states, are rather matters of fact than of law, when they become material to the decision of cases arising in our courts. If a statute of another state has received an authoritative construction there, no inquiry into its correctness is allowable; it must be received as an established fad, and it is only in the absence of such an authoritative exposition, that we are permitted to construe the statute as we would one of our own. Unfortunately, we are not advised, that the precise question, upon which the decision of this case depends, has been settled in New York; and we are, therefore, reduced to the necessity of so construing the statute, in the light of principles established by judicial decisions in that state, as shall seem most conformable to the intentions of the legislature which enacted it.

Erom the pleadings and evidence it appears that on the 2d of March, 1857, the defendants were the holders and owners of ten negotiable promissory notes, made and indorsed by parties residing in Chicago, Illinois, amounting in the aggregate to the sum of $25,000, and payable, with ten per cent, interest at that place, within less than one year from that time. The notes were regular business paper, given by the makers to the defendants upon a sale of lumber. At the date above mentioned, one of the defendants presented these notes, at the banking house of the plaintiff, for discount, and after negotiation, they were taken by the plaintiff at a rate of discount, including the interest accruing upon the notes, of about twenty per cent. They were then regularly indorsed by the defendants, and upon that contract of indorsement, on a part of the notes, this action is brought.

At the time the discount was made, the defendants were indebted to the plaintiff, on paper then about to mature, in the sum of $9200, and it was agreed that the proceeds of the discount should be applied by the bank to the payment of this> paper as it matured, and the balance be paid over to the defendants when called for.

We think the court below was right, both upon the state of the pleadings and the weight of the evidence, in finding that the Chicago paper was not taken, either as security for or in payment of the previous indebtedness of the defendants to the bank; and we see nothing in the evidence on either side to change the legal rights of the parties, from that arising upon the face of the transaction itself. Existing promissory notes were discounted by the plaintiff, and if it had the corporate capacity to purchase such paper, and if, in the absence of evidence to the contrary, such a transaction imports a purchase, there is nothing in the case to deprive it of the benefits of that position. But if such a discount, made by a bank organized under the act referred to, necessarily imports a loan upon the paper, and it is made at a usurious rate of discount, or if the bank has been given no corporate capacity to purchase and hold such paper, it is clear there is nothing in the case to remove the taint of illegality from the transaction, or to invest the bank with a capacity which the statute has not conferred, and it can not recover.

The general statute against usury, to which, it is conceded, this institution is subject, provides: “that the rate of interest upon the loan or forbearance of any money, goods or things in action, shall continue to be seven dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time, and that no person or corporation shall, directly or indirectly, take or receive in money, goods or things in action, or in any other way, any greater sum or value for the loan or forbearance of any money, goods or things in action, than is above prescribed; and that all 'bonds, bills, notes, assurances, conveyances and all other contracts or securities whatsoever, except bottomry and respondentia bonds and contracts, and all deposits of goods or things whatsoever, whereupon or whereby there shall be reserved or taken or secured, or agreed to be reserved or taken any greater sum, or greater value, for the loan or forbearance of any money, goods or things in action than is above prescribed shall be void.”

In the construction of this statute, it has been settled by a long line of decisions, that the statute only extends to a loan of money, and that a sale and purchase of an existing and complete chose in action of any kind, when not used as a mere cover for usury, at any rate of discount agreed upon by the parties, is not a loan within the meaning of the statute, and may be lawfully made; and that, although the seller indorses or guaranties the paper upon Us transfer to the purchaser. This last proposition is not universally acquiesced in, but it is certainly established by the general current of authority in that state.

It is also undeniably clear, that the term discount, when used in a general sense, is equally applicable to either business or accommodation paper, and is appropriately applied, either to loans or sales by way of discount, when a sum is counted off, or taken from the face or amount of the paper, at the time the money is advanced upon it, whether that sum is taken for interest upon a loan, or as the price agreed upon a sale. ,

In respect to accommodation paper, it is fully settled, that every transaction by which it is acquired, is to be deemed a loan and within the statute, although the party taking it is ignorant of its true character, and supposes it to be business paper. Clark v. Sisson, 22 N. Y. 312. It is perhaps not going too far, on the other hand, to say that, in general, a transfer of business paper, is prima facie a sale, and that it lies upon those who question its validity to show that it was really a loan disguised under the form of a sale.

And this brings us to the precise question upon which the decision of this case depends — was this bank empowered to discount, by way of purchase, promissory notes ? Or must all such discounts be deemed loans, and thus be brought within the purview of the usury law ?

Its powei s are expressed in these words :

“Such association shall have power to carry on the business of banicing, by discounting bills, notes, and other evidences of debt; by receiving deposits; by buying and selling gold and silver bullion, foreign coins and bills of exchange, in the manner specified in their articles of-association, for the purposes authorized by this act, by loaning money on real and personal security, and by exercising such incidental powers as shall be necessary to. carry on such business; to-choose one of their number as president of such association, and to appoint a cashier and such other officers and agents as their business may require, and to remove such president, cashier, officers, and agents at pleasure, and appoint others in their places.”

As connected with the present inquiry, three substantive powers are expressed — to discount, to buy and sell, and to loan. It may discount bills, notes, and other evidences of debt; it may buy and sell, among other things, bills of exchange; and it may loan money on real and personal security.

As we understand the plaintiff’s counsel, they insist that, under the first of these powers, this bank may buy promissory notes, without any restriction as to the rate at which they may be purchased, while the loans it may make under the third, are necessarily restricted to seven per cent. And it is argued, that to adopt any other construction is to encounter the absurdity of making both clauses mean the same thing. They certainly do not mean the same thing, nor does the opposite construction lead to that result. By the first, the power is expressly given to take the interest in advance, and without that it would not be a discount, and it is confined to the acquisition of bills, notes, and other evidences of debt; while in the last, the interest need not be taken in advance, and the money may be advanced upon either real or personal security. A discount may be a loan, but every loan is not a discount; and there is nothing inconsistent in the fact, that the bank was expressly authorized to make loans in either way. But the naked power to discount paper is not given; it is the “power to carry on the business of banicing by ” (among other things) discounting bills, notes, and other evidences of debt.” And the question is, what is discounting paper, as understood in the business of banking ?

McCulloch in his Commercial Dictionary (vol. 1, p. 63), under the word Banking, says: “ Banks are establishments intended to serve for the safe custody of money; to facilitate its payment by one individual to another; and sometimes for the accommodation of the public with loans.” In all the American systems of banking, with which we have any acquaintance, the furnishing of loans, at fixed rates of interest, to facilitate the business and commerce' of the country, has been made a cardinal feature in the institution of banks, and in giving them extensive corporate privileges; and in almost every instance, they have been allowed to take the stipulated interest by way of discount, or in advance.

But we are not without light as to the judicial understanding of this term, when applied to the business of banking. In Flecker v. The Bank of the United States, 8 Wheat. R. 338, Judge Story says : “ Nothing can be clearer than that by the language of the commercial world, and the settled practice of the banks, a discount by a bank means, ex vi termini, a deduction or drawback made upon advances or loans of money on negotiable paper, or other evidences of debt, payable at a future day, which are transferred to the 'bank. We suppose the legislature used the language in this its appropriate sense.”

The case of Talmadge v. Pell, 3 Seld. R. 328, is entitled to especial consideration, not only because it is a New York case, decided by the court of last resort, upon very full consideration, but because it involved an examination of the powers of one of the banks organized under the act which we are now considering. In that case, the bank had attempted to purchase a large amount of the bonds of the State of Ohio to sell again, giving therefor its certificates of deposit payable at a future day, and assigning mortgages held by it as collateral security. In denying the power of the corporation to make such a purchase, and in giving their reasons for holding the assignment of the securities illegal and void, the court say: u The subjects pertaining to the business of banking are designated, and the express powers of the association are limited to them, and to such incidental powers as may be necessary to transact the business thus defined by the legislature.” In answer to the position taken in argument, that the transaction might be regarded as a discounting of the bonds of the state by the bank, the court say: “ They did not discount the bonds of Ohio, as was intimated in the argument, for this in hanking is only a mode of loaning money.”

It is quite unnecessary to cite from our own reports and those of other states, similar language employed in reference to the meaning of this term, when applied to the business of banking. If the eminent judges of the court of appeals were justified in saying, in reference to this very law, and to the very power under consideration, that it only provided for “a mode of loaning money,” it can hardly be expected, that either there or elsewhere, transactions falling within its provisions should be relieved from the operation of the usury law, which extends to all loans, in whatever form made, or however artfully they may be covered up or disguised. If the bank had no power to purchase state bonds because not authorized by its charter, it is equally decisive against its power to purchase promissory notes — the one being no less “ evidences of debt ” than the other; and if discounting them in the exercise of its banicing powers, is but a mode of loaning its money upon the paper, it is very clear that it could not reserve more than seven per cent, interest for the time the paper had to run.

I know it is said that the very object of the act of 1838, was to authorize free banking, and to place the associations formed for that purpose, very much upon the footing of natural persons. This may be so; but free banking is one thing, and an unlimited right to acquire paper at any rate of discount, is quite another; and we find it very difiScult to believe, that the past experience of the people of the State of New y ork, has so impressed them with the beneficent character of the latter business, that they thought it necessary and expe'dient to aggregate wealth for its prosecution, or to increase its power and facilitate its operations by investing it with the privileges and immunities of corporate existence. It seems much more consonant to reason, and consistent with what has been done everywhere else, that they should have authorized institutions for the legitimate purpose of providing safe places of deposit, of aiding the business community by loans at fixed and living rates of interest, and of transmitting money to other points through the agency of the bill of exchange; and, notwithstanding the difficulties we encounter in construing a foreign statute, such, we think, was the intention of those who enacted the law in question.

Without undertaking to say what may be the legal bearings of this transaction, in other directions, we are of the opinion that the contract of indorsement was made upon a usurious consideration, and can not be enforced.

2. A question of evidence was raised at the trial, which wo find no difficulty in saying was correctly decided. The plaintiff offered evidence tending to show a custom and usage of a number of the banks organized under this law, in accordance with what had been done in this instance, which was rejected by the court. '

The courts of New York have settled this question. In the case of N. Y. Firemen's Ins. Co. v. Ely, 2 Cow., at page 707, Sutherland, J., says, upon the question of usury : “ That the principle of calculation adopted by the plaintiff, was the one in general or universal usage among banks, can not alter the law of the case. A statute can not be abrogated by custom or usage of a particular trade. The money lenders of the country might as well set up a usage of their own, and then plead it in bar of the statute.” Chancellor Kent, also, in his opinion in the case of Dunham v. Gould, 16 Johns. 367, 374, says: “ The plaintiff offered to show upon the trial, that the charge of a commission of two and a half per cent, upon the exchange of notes was within the understanding, usage, and custom of merchants, and this evidence was overruled as immaterial and useless. The question of the competency of this evidence appears to be the only point in the case..... It is perfectly idle to talk of a custom of merchants to take a commission above the legal rate of interest, on the exchange of notes. The custom of merchants is not applicable to the case,” etc.

These cases are also substantially in accordance with the ruling of this court, in Protection Insurance Co. v. Harmer, 2 Ohio St. Rep. 452.

We do not find any error in the proceedings of the court of common pleas, and its judgment is therefore affirmed.

Brinkerhoee, C.J., and Scott, Wilder and White, JJ., concurred.