Wilmington journal. [volume] (Wilmington, N.C.) 1844-1895, 1875-06-25
From the Charlotte Observer.
From the Charlotte Observer.
Opinion Of Hon. ID. Schenck, Judge
of the Ninth Judicial District,
Upon the USury Law, as Appli-
cable to National Banks.

From the Charlotte Observer
Opinion of Hon. ID. Schenck, Judge
of the Ninth Judicial District,
Upon the Usury Law, as AppIi-
cable to National hanks.
Merchants and Farmers National
Bank, as. w R. Myers-This case
presents the question whether a Ma
tional Bank, organized under the Act
of Congress-, june Sd, 1874, is subject
TO the provisions of the statute, en-
titled, can Act to regulate the rate of
interest and to prevent usury," or not.
The question is not a novel ole; it
has been discussed with MucR learn
ing and ability in the Supreme Courts
of three of our sister States.
| In the Supreme Court of Ohio, in
the case of the First National Bank of
Columbus VS.. Clearinghouse, % Ohio,
p, 1872, and in the Supreme Court of
Massachusetts, in the Central National
Bank VS.. Pratt, 115 Mass, Reports, it
was held. ''That the laws imposing
penalties (other than those provided
| by act of Congress) for taking usury
While the Court of Appeals i'll the
State Of New York. in Lamb VS..
The First National Bank" of White
hall, held that they do apply to the
National Banks.
The ground on which the Supreme
Courts of Ohio and Massa-
chusetts base their opinion is: ''That
a National Bank is convenient, USE
full and essential instrument in the
prosecution of the fiscal operations of
the Federal Government: that they
were created for national purposes and
endowed with such faculties as were
necessary to enable them to effect this
object: That being SO created, for
this object, the State has no power to
defeat it by the enactment of usury
laws, or in their own words: "That
the power of creating such banks, be-
ing vested in Congress, is inconsistent
with a power in any State or Territory
to fix penalties on the bank for TAX
ing unlawful interest" Mccullough VS..
Maryland, 4 Wheaton, p. 316. is re-
lied on to sustain this position.
The Court of Appeals in New York,
assumes the opposite ground: 'That |
the Federal Government has no con-
Germ with the business operations of |
the Bank. That they may be |
selected as repositories of the public |
money or financial agents of the gov
eminent, but in so far as their business
does not assume to place them on any
different footing from natural persons
selected by the Government for the
of some special function"
That National Banks do not bear the
same relation to the Federal Govern
ment, thnt the United States Bank
did, and therefore, that the principles
decided in "MeCullogh VS.. Maryland"
supra, and "Osborne VS.. United
States Bank" 8 Wheaton, p. 73S, do
not apply to them.
So that, SO far as this question can
be settled by the Supreme Court of
North Carolina, it will, most probably,
depend on the view it takes of the OBJ
iects and purposes for which National
Banks are created; whether they were
created to effect national purposes, or
like other bank corporations,
hey were established directly for pri-
7ate profit and gain and indirectly "as
vehicles for the issue and circulation |
If currency based on the credit of
he Federal Government
This Court being subordinate in it's
character, it is its duty, ..if possible, to
the view of the Supreme
COURT of North Carolina, on this ques- {
ion, and to follow it.
This question was directly involved
n the opinion of the Court in ''Ruffin
IS. The Commissioners of Orange"
% N. G. Reports, p. SO, decided in
1878. It arose t. the dicussion of the .
light of the State to tax National /
Bank bills, Justice Reade in the opin
on says: {
"The power of the State to tax the
REGULATION of National Banks, depends
lpon whether they are for the use of ,
he United States Government or for 9
rivate profit. 1t is there they were |.
by Congress as currency
and useful for circulation,
ust as State bank bills are authorized
y the State. But in neither case have 4
hey necessarily any connection with I
National Banks, imposed
tax on their circulation of two per =
ent. and surely that would not have i,
cen done if they had been regarded .
8 part of the government. The =;
ruth is, the United States Govern
lent has no interest in National
;anks. It authorizes them, in order
D provide a currency, rot for the gov
rnment but for the people"
The discussion is clear and unequl- &
ocal. and its conclusion Chat the
tate may tax National Bank bills) is,
4 my opinion, correct and fully sus-
aimed by authority and reason.
But it seems that, even, If the Ma :
onal Banks were created for the
Sc of the United Stat es Government"
nat our statue does not defeat this oh
ect or obstruct the legitimate opera
ions of the National Banks.
" It is only where the State law in !
apacitates the banks from discharging
heir duties to the government that it
ecomes unconstitutional.
National Bank VS.. Common
7ealth,"9 Wallace, p. 1862. Now, it
annot be assumed that taking more
lterest than the State allows is q
duty that the National Banks owe to
ne government" and by this rule,
ne statute of our State cannot be I'M
Constitutional. g
The State law is not in conflict with n
ne act of Congress-; it only imposes Il
reater penalty or an additional pen a
lty. Both laws prohibit the taking 81
f usury. The policy of the Federal b
as appears by the Both 81
ection of the act of Congress, was to 81
revent the banks from taking more p
lterest than the State in which they n
ere located allowed; this policy is u
ndorsed, sustained and enforced by IL
ne State law. g.
Penalties are pauaishD1cnts for Ii
rong. not prices. The Federal Gov G.
rnment did not intend to say to the W
ational Banks, if you pay the price,
forestalling interest, when demand N
j, that you may take as much usury u
.om others as you wish? If it had 81
aid SO, then, indeed, might the banks b
omplain that this understanding was a.
iolated by increasing the price for tt
liking usury, and they might ask the O
eneral government to enforce this I'M it
But VIII n the penalty Il
viewed rs Il punishment, the rule Of IL
Nv is settled. The State may make
ne same act punishable by State law. II
nat is punished by Federal law. Fer 81
lustration by act Of Congress, the n