Source: http://supreme.nolo.com/us/251/108/case.html
Timestamp: 2019-05-20 17:45:44
Document Index: 450944081

Matched Legal Cases: ['§ 5133', '§ 5136', '§ 5197', '§ 5197', '§ 5197', '§ 3426', '§ 3427', '§ 5197', '§ 5198', '§ 5197']

EVANS V. NATIONAL BANK OF SAVANNAH, 251 U. S. 108 - Volume 251 - 1919 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 251 > EVANS V. NATIONAL BANK OF SAVANNAH, 251 U. S. 108 (1919) > Full Text
EVANS V. NATIONAL BANK OF SAVANNAH, 251 U. S. 108 (1919)
Whether a transaction by a national bank is usurious, and the penalties therefor, must be ascertained from the National Banking Act. P. 251 U. S. 109.
That act adopts the usury laws of the states only insofar as they severally fix the rate of interest. P. 251 U. S. 111.
such banks, in discounting short-time notes in the ordinary course of business, may retain an advance charge at the highest rate allowed for interest by the state law, even though such advance taking would be usurious under the state law in the cases to which it applies. P. 251 U. S. 112.
To discount, ex v termini, implies reservation of interest in advance. P. 251 U. S. 114.
Respondent is a national bank. Its powers in respect of discounts, whether transactions by it are usurious, and the consequent penalties therefor, must be ascertained upon a consideration of the National Bank Act. Act June 3, 1864, c. 106, 13 Stat. 99, 101, 108; Rev.Stats. § 5133 et seq.; Farmers' & Mechanics' Bank v. Dearing, 91 U. S. 29; Barnet v. National Bank, 98 U. S. 555, 98 U. S. 558; Haseltine v. Central Bank of Springfield, 183 U. S. 132, 183 U. S. 134. Section 8 declares:
Section 30, printed in the margin, [Footnote 1] contains regulations
All these provisions were carried into §§ 5136, 5197, and 5198, Revised Statutes, set out below. [Footnote 2]
The National Bank Act establishes a system of general regulations. It adopts usury laws of the states only insofar as they severally fix the rate of interest. Farmers' & Mechanics' Bank v. Dearing, supra; National Bank v. Johnson, 104 U. S. 271; Haseltine v. Central Bank of Springfield, supra.
Construing these sections in Loganville Banking Co. v. Forrester (1915), 143 Ga. 302, 305, the Georgia Supreme Court held that charges reserved in advance by a state bank at the highest permitted rate of interest on a loan, whether short or long time, constitute usury, and said:
Earlier opinions by the court express a different view of the same sections. In Mackenzie v. Flannery (1892), 90 Ga. 590, 599, it is said:
See also Union Savings Bank v. Dottenheim, 107 Ga. 606, 614; McCall v. Herring, 116 Ga. 235, 243.
In Fleckner v. Bank, 8 Wheat. 338, 21 U. S. 349, 21 U. S. 354, the charter of the Bank of the United States inhibited it from taking interest "more than at the rate of six percentum," and plaintiff claimed that, by deducting interest at the rate of six percentum from the amount of a discounted note, the bank received usury. Replying to that point, this Court, through Mr. Justice Story, said:
See also McCarthy v. First National Bank, 223 U. S. 493, 223 U. S. 499.
This view has been generally adopted. Many supporting cases are collected in a note to Bank of Newport v. Cook, 60 Ark. 288, and in 39 Cyclopedia of Law and Procedure 948 et seq.
Associations organized under the National Bank Act are plainly empowered to discount promissory notes in the ordinary course of business. To discount, ex vi termini, implies reservation of interest in advance, and, under the ancient and commonly accepted doctrine, when dealing with short-time paper, such a reservation at the highest interest rate allowed by law is not usurious. Recognizing prevailing practice in business and the above stated doctrine concerning usury, we think Congress intended to endow national banks with the power, which banks generally exercise, of discounting notes reserving charges at the highest rate permitted for interest. To carry out this purpose, the National Bank Act provides that associations organized under it may reserve on any discount interest at the rate allowed by the state, and only when there is reservation at a rate greater than the one specified does the transaction become usurious.
"Sec. 30. That every association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of the state or territory where the bank is located, and no more, except that, where by the laws of any state a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized in any such state under this act. And when no rate is fixed by the laws of the state or territory, the bank may take, receive, reserve, or charge a rate not exceeding seven percentum, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run. And the knowingly taking, receiving, reserving, or charging a rate of interest greater than aforesaid shall be held and adjudged a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. And in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back, in any action of debt, twice the amount of the interest thus paid from the association taking or receiving the same: Provided, that such action is commenced within two years from the time the usurious transaction occurred. But the purchase, discount, or sale of a bona fide bill of exchange, payable at another place than the place of such purchase, discount, or sale at not more than the current rate of exchange for sight drafts in addition to the interest shall not be considered as taking or receiving a greater rate of interest."
"Rev.Stats. § 5197. Any association may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange of other evidences of debt, interest at the rate allowed by the laws of the state, territory, or district where the bank is located, and no more, except that, where by the laws of any state a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized or existing in any such state under this title. When no rate is fixed by the laws of the state, or territory, or district, the bank may take, receive, reserve, or charge a rate not exceeding seven percentum, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run. And the purchase, discount, or sale of a bona fide bill of exchange, payable at another place than the place of such purchase, discount, or sale at not more than the current rate of exchange for sight drafts in addition to the interest, shall not be considered as taking or receiving a greater rate of interest."
I agree that this question is to be determined by the provisions of § 5197, but, so far as it depends upon ascertaining the local rate of interest, we must determine it according to the law of the State of Georgia, because the cited sections make that law the criterion. It is settled that, although the consequences of acceptance of usurious interest by a national bank and the penalties to be enforced are to be determined by the provisions of the National Banking Act, the ascertainment of the rate of interest allowable is to be according to the state law. Farmers' & Mechanics' National Bank v. Dearing, 91 U. S. 29, 91 U. S. 32; Union National Bank v. Louisville, &c. Railway, 163 U. S. 325, 163 U. S. 331; Haseltine v. Central Bank of Springfield, 183 U. S. 132, 183 U. S. 134.
I agree that, under the decisions of this Court and the general current of authority, the discounting of short-term notes with a reservation of interest in advance at the highest rate allowed by statute is permissible in the absence of special restriction. Fleckner v. United States Bank, 8 Wheat. 338, 21 U. S. 349, 21 U. S. 354.
And I understand it to have been permitted in Georgia prior to the recent decision by the Supreme Court of that state in Loganville Banking Co. v. Forrester, 143
Ga. 302. See Mackenzie v. Flannery, 90 Ga. 590, 599; Union Savings Bank v. Dottenheim, 107 Ga. 606, 614; McCall v. Herring, 116 Ga. 235, 243.
As to these later transactions, with great respect for the views of my Brethren, I am constrained to dissent from the opinion and judgment of the Court because convinced that there is error in holding without qualification that, since the decision of the Forrester case 8 percent is the rate of interest allowed and limited for state banks of issue by the laws of the state of Georgia. It seems to me erroneous to regard that decision as merely defining usury, and thus settling what lawfully may be done by state banks in respect of taking interest in advance, and to ignore its effect, in combination with the quoted sections of the Code, as constituting the law of the state which fixes the maximum rate of interest for such banks and therefore, under § 5197 Rev.Stats., establishes the limit for national banks located in that state. Plainly, I think, the purpose of Congress was
concerning which this Court has more than once held that a law requiring that one class shall be taxed at the "same rate of taxation" paid by another requires that not only the percentage of the rate, but the basis of the valuation, shall be the same. Cummings v. National Bank, 101 U. S. 153, 101 U. S. 158, 101 U. S. 162-163; Greene v. Louisville & Interurban R. Co., 244 U. S. 499, 244 U. S. 515.
The laws of Georgia do not prohibit the taking of interest in advance by a state bank, and they permit it to be charged according to the usual course of banking, with this qualification -- that, if reserved in advance at the highest percentage, or at any percentage that has the effect of yielding to the lender more than at the rate of 8 percentum per annum upon the amount actually loaned, it is usurious. This qualification, which since the decision of the Forrester case must be deemed to be the law of Georgia, has precisely the same effect as if it had been inserted by way of an amending proviso to § 3426 of the Code. That it happens to arise from the construction and application of that section together with §§ 3427 and 3436 by the state court of last resort can make no difference for present purposes.
The case before us comes squarely within the principle of Citizens' National Bank v. Donnell, 195 U. S. 369, 195 U. S. 373-374. There, the question was whether a national bank in Missouri had taken usury, contrary to §§ 5197 and 5198 Rev.Stats. in taking interest computed at a percentage less than the highest rate allowed by the state law, if agreed upon in writing, but at the same time violating a state prohibition against compounding interest oftener than once a year. This Court held that the prohibition against frequent compounding affected the "rate of interest" within the meaning of those words in § 5198, and that this section was violated because the local prohibition was violated. I quote from the opinion (p. 195 U. S. 374):
he is allowed to compound than when he is not, the other elements in the case being the same. Even if the compounded interest is less than might be charged directly without compounding, a statute may forbid enlarging the rate in that way, whatever may be the rules of the common law. The Supreme Court of Missouri holds that that is what the Missouri statute has done. On that point, and on the question whether what was done amounted to compounding within the meaning of the Missouri statute, we follow the state court. Union National Bank v. Louisville, New Albany & Chicago Ry., 163 U. S. 325, 163 U. S. 331. Therefore, since the interest charged and received by the plaintiff was compounded more than once a year, it was at a rate greater than was allowed by Rev.Stats. § 5197, and it was forfeited."
For these reasons, I am convinced that the respondent national bank, in knowingly discounting notes and reserving interest at the rate of 8 percentum per annum upon the face of the notes, in violation of the limitation imposed by the quoted sections of the Georgia Code as construed by the Supreme Court of that state in the Forrester case, charged more than "interest at the rate allowed by the laws of the state," and that therefore the judgment in its favor ought to be reversed.
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