Case ID: mass_29/html/0593-01.html
Source: Caselaw Access Project
Author: {"author": "Shaw C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The President &c. of the Agricultural Bank versus Josiah Bissell et al.
    
    Taking interest for a portion of a year, computed on the principle that a year consists of 360 days, or 12 months of 30 days each, is not usurious, provided this principle is resorted to in good faith, as furnishing an easy and practicable mode of computation, and not as a cover for usury.
    The practice of banks, to take the interest in advance, upon making loans, is not usurious.
    Assumpsit for $ 2000 money had and received, &c. Plea, the general issue.
    At the trial before Morton J., the plaintiff gave in evidence a note signed by the defendants, for $ 2000, dated June 2, 1824, payable in sixty days from date. On the note were twenty-five endorsements, each for the sum of $21, made at intervals of about two months, in the following form : — “ Received $21, Aug. 6, 1824.”
    The defence was usury. The defendants called the cashier of the bank, who testified, that when the note was discounted the sum of $ 21 was deducted for the interest or discount for sixty-three days ; that when the several indorsements of $ 21 were made, the money was received by him upon the same computation of interest, and was credited on the books of the bank to the discount account; that the directors of the bank signed the discount sheet weekly, and had opportunities to see how the interest or discount was computed on this and other notes, but that they never gave him any directions how to compute interest in any case, nor complained of the manner in wl ich it was computed ; that he always made his computations of interest upon the principle adopted in Rowlett’s Tables, that is, to consider sixty days as two months, and that he was in the habit of using those tables ; that he knew that this principle would give a gain of five days in the year to the lender, but that he had no recollection that this occurred to him at any time when he was calculating the interest upon the note in suit; and that he never intended to take of the defendants more than the lawful interest.
    The plaintiffs offered to prove, that it was the custom of all the banks in this and the adjoining States, to use Rowlett’s Tables, and to compute interest or discount upon the same principle that was adopted in the present case. This was objected to by the defendants ; and with a view of bringing before the whole Court the questions arising in the case, the judge rejected the evidence.
    The defendants contended, that the fact of the receipt ol $ 21 as the interest of $ 2000 for sixty-three days, showed the note to be usurious and void ; and that it could not be explained by any of the evidence introduced or offered to be introduced ; and that all the above facts showed the note to be usurious. The plaintiffs contended, that the facts did not in themselves show the note to be usurious ; but that if they did, yet they might be explained by proof of the usage of other banks ; and at any rate, that the question whether there was any corrupt agreement, was one which must be tried by the jury, and that from the above evidence they might find that the excess of interest was taken by mistake.
    A nonsuit or default was to be ordered, according to the opinion of the whole Court upon the foregoing facts.
    
      Sept. 20th
    
    
      Dwight and Hubbard,, for the defendants,
    insisted that the
    statute of usury, of 1783, c. 55, which was repealed by St. 1825, c. 143, was revived as to this contract, by St. 1826, c 27 ; that whether it was revived or not, was however immaterial, for if this contract was usurious, it was void in its creation, the statute of 1783 being then in force, and any subsequent repeal or enactment of a statute could not give it validity ; that the taking of interest in advance, at the rate of six per cent, per annum, is usurious, and in this Commonwealth no decision to the contrary has ever been made ; and that the facts being proved or agreed, the law determines whether the intention was pure or corrupt; N. Y. Firemen Ins. Co. v Ely, 2 Cowen, 678; Bank of Utica v. Wager, ibid. 766, 769; Massa v. Dauling, 2 Str. 1243; Maine Bank v. Butts, 9 Mass. R. 49; Bartlett v. Williams, 1 Pick. 288; Simpson v. Warren, 15 Mass. R. 460 ; Tuttle v. Clark, 4 Connect. R. 153 ; that to take interest computed upon a principle which reduces the year to 360 days, is usurious ; Bank of Utica v. Wager, 2 Cowen, 712 ; 3 Dyer, 345 ; Catesby’s case, 6 Co. Rep. 62 ; and that a statute cannot he abrogated or modified by the custom or usage of a particular trade, corporation or individual; Bank of Utica v. Wager, 2 Cowen, 730.
    
      C. A. Dewey and Briggs, contra,
    
    argued that it is not usury to take the interest in advance; Maine Bank v. Butts, 9 Mass. R. 49 ; Bank of Utica v. Wager, 2 Cowen, 712; or upon a computation according to Rowlett’s Tables, unless it is done with an intention to evade the statute ; and that whether there was a corrupt motive, is a question for the jury. Lloyd v. Scott, 4 Peters’s Sup. C. Rep. 224; Bank of Burlington v. Durkee, 1 Vermont R. 399; Bank of St. Albans v. Scott, ibid. 426 ; Utica Ins. Co. v. Kip, 3 Wendell, 369 ; Hammett v. Yea, 1 Bos. & Pul. 156 ; Glasfurd v. Laing, 1 Campb. 149 ; Bartlett v. Williams, 1 Pick. 288 ; Stuart v. Mechanics fyc. Bank, 19 Johns. R. 508.
    
      May 1
   Shaw C. J.

drew up the opinion of the Court. This is an action on a promissory note, and the defence is that the plaintiffs have taken and received usurious interest, in consequence of which the note is void. We have not thought it necessary to consider the effect of the repeal of the statute of 1783, c. 55, by which usurious contracts are declared void, because we think that upon other grounds the defence of usury is not maintained. The fact on which it is founded is, that the plaintiffs, on discounting this note, took the interest in advanee, and that on the first discount of the note and at several subsequent renewals, the cashier received $21 as the interest of $ 2000 for 63 days.

That this sum a little exceeds six per cent, for one year, as fixed by the statute, is very obvious. If this were done with design, and with the intent of taking more than the lawful interest, or if done in pursuance of the adoption of a principle of computation, which would give more than the legal rate, we are not prepared to say that it would not be usurious, however small the excess over the legal rate.

But, as the statute prescribes the rate of interest for one year, and so at the same rate, for a longer or shorter time, it is obvious, that when the interest is to be computed in days or months, it is impossible to follow the prescribed rule precisely, without taking the fraction of a day ; and that this is not required, is now settled by the whole current of authorities. From the impossibility of executing the statute with literal exactness, has resulted the necessity of resorting to an execution cy pres, in many cases, where it is intended to conform to the intent and spirit of the statute. So it has been the practice to consider a contract for money payable in months, to be payable in calendar months, and tó consider a calendar month as the 12th part of a year, and compute interest accordingly, though they are of different lengths. A note given in February at two months will have 59 days to run and pay one per cent, interest, as for the sixth part of a year; but a note given in December at two months will have 62 days to run and pay the same rate of interest.

The same difficulty arises, in computing interest for a small number of days ; and' therefore some approximation, which can be made by an easy and practicable mode of computation, if made in good faith and without being intended as a cover for usury, has been considered allowable, without drawing after it the penalty of the statute. Such being the. universal practice of other persons, as well as banks, we think a jury would not be warranted, from the mere fact that the interest thus computed slightly exceeds the legal rate, to infer a corrupt and usurious agreement.

And we think the present case comes within this rule. The intent was, to compute and receive the interest for 60 days and grace. The grace is a regular portion of the time the note has to run, and the bank had a right to compute and receive interest for it. The period of 60 days is one sixth of a year, as nearly as can be computed without a fraction, and 3 days is the nearest approximation to the 10th part of a month, or the 120th part of a year, without fractions of a day. Upon this view of the case, we are of opinion, that it is not shown that usurious interest was taken contrary to the provisions of the statute, and that the defence is not sustained.

Upon the other point, that taking the interest in advance Is usurious, we think it too well settled by a series of decisions both in this, and other States, to be now questioned, that such practice is not a violation of the statute and does not render the contract usurious.

Defendants defaulted. 
      
       See Utica Ins. Co. v. Tillman, 1 Wend. 555.