Case Name: Dickey v. Bank of Clarksdale
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1938-11-07
Citations: 183 Miss. 748
Docket Number: No. 33207
Parties: Dickey v. Bank of Clarksdale.
Judges: 
Reporter: Mississippi Reports
Volume: 183
Pages: 748–779

Head Matter:
Dickey v. Bank of Clarksdale.
(In Banc.
Nov. 7, 1938.)
[184 So. 314.
No. 33207.]
G. Edw. Williams, of Clarksdale, for appellant.
Brewer & Montgomery and Chas. A. Sisson, all of Clarksdale, for appellee.
W. F. Gee, of Clarksdale, for appellee.
Argued orally by G. Edw. Williams, for appellant, and by Fred Montgomery, for appellee.

Opinion:
Griffith, J.,
delivered the opinion of the court.
Appellee sued appellant on two- notes, one for $65 and the other for $1,000, dated, respectively, June 15, 1935 and December 5, 1935, both of which were upon tneir faces due at the time of suit. Appellee recovered judgment for substantially the full amount sued for, with interest.
These notes represented the alleged balances of a continuous and unbroken series or succession of renewals which, for the purposes of this case, may be taken as beginning with a note for $1,500, dated December 1, 1926 and due December 1, 1927, with interest at 8% per annum from date until paid. The interest on this note was paid, as hereinafter mentioned, in cash on the due date, and the note was on said date renewed for the principal sum of $1,500' for another year.
Oin the due date of the note first aforesaid, that is to say, on December 1, 1927, the bank collected as interest $121.67, calculating the year as 360 days plus 5 days, instead of $120, which would have been the amount of interest due for a calendar year, strictly speaking, at 8%. The first question is thus presented — whether the collection of $1.67 more than $120 renders the transaction usurious.
In Cox v. Timlake, 169 Miss. 568, 573, 153 So. 794, this court held that, in view of the early case, Planters' Bank v. Snodgrass, 4 How. 573, a proper way to compute interest for fractional parts of a year is to treat the year as being composed of 360 days. If then the note had been made for 180' days, 4% interest could have been lawfully collected on the completion of the 180 days, and a renewal taken for another 180 days, at the end of which time another 4% interest could have been lawfully collected, making 8% or $120' at the end of 360> days; and then the note could have been renewed for 5 days and $1.67 in interest could have been collected, making the total interest $121.67 for the 365' days, which was the amount of interest for the 365 days collected by the bank in the case now before us.
Or the bank could have taken the note for 350 days and calculated the interest upon the basis of 360 days to the year, and then renewed it for 15 days, calculating the interest on the same basis, so that the total interest for the 365 days would have been $121.67. Or the note could have been taken for 364 days, and then renewed for one day and the same result reached. And in this last connection it is at once apparent that unless the view we adopt herein be correct, a. note for 364 days will yield more interest than a note for a full calendar year or 365 days. And the further result would be that the only due date for which the straight 8%. for a calendar year would be requisite would be a note of an even year, or of 365 days as the due date, and that for all the remainder of the 364 days of the year the interest may be lawfully calculated upon the basis of 360 days to the year. It would mean that by any succession of two or more notes aggregating 365 days the interest could be calculated upon the basis of 360 days to the year, while if only one note be taken and that note for one year, the 360-day basis cannot be used, — so that the mere form of the transaction would work a difference in legal rights; form would be allowed to control and substance would be put aside.
It is evident, therefore, that the cited cases would 'have to be overruled if the result contended for by appellant is to be reached, else the anomalous legal sitúa tions above presented and illustrated would be brought into the law, which we think would be most awkward, to say the least of it. The majority of the Court, in view of the long reliance of the commercial world upon the rule, upon the statutory interpretation laid down in the cited cases, has declined to overrule them; hence by way of reconciliation we must hold that the transaction above mentioned was not usurious, — that the rule which holds as good for 364 days in the year must be good also for the 365th day; that a year, so far as the law dealing with usury is concerned, is to be considered as 360 days. This is the construction or interpretation which has prevailed for approximately a hundred years, with the usury statutes always using the same language, that is to say, "per annum," and with no change in that specific statute, no change throughout all subsequent revisions of the usury statute even down to this day, which would expressly abrogate the judicial interpretation above mentioned.
On April 5, 1932 the original obligation or debt had been paid down to a balance of $1,300. On that date the entire amount last aforesaid was renewed by one note for $1,150, due November 1, 1932, with S% interest from date, and by six notes for $25' each, due, respectively, in a series of one to six months after date, and instead of interest eo nomine on the smaller notes, a service charge of $1 for each of said small notes was made and was collected at their stated maturities.
Three questions rise in connection with said smaller notes, and the first is: Did the said service charge render the transaction usurious?
Eight per cent interest on a note for $25 for one month is approximately 16 cents. If the dollar service charge be counted as interest, then the interest would, as to the two first small notes, exceed 20% interest, and as to all the others would, of course, exceed 8%. Whatever may be its euphony, a service charge is something which the bank requires the borrower to pay in order to have the loan or accommodation, and, therefore, it is interest under another name; and when more than 8% per annum is thereby taken or stipulated, it is usurious.
It is said that on small loans, banks everywhere are making these service charges, — that it has become the universal custom, justified by the fact that the expense of making- these small loans cannot be covered by the legal rate of interest; and that unless these service charges are allowed, small loans cannot be made and will have to be discontinued. Whether the small borrower should be required to pay more interest than those who are to receive larger accommodations, is a question to be addressed to the legislative department, since our province is only to declare what the law is, in which connection we must further declare that no custom or asserted business necessity can override the statutes as interpreted by the courts or in any manner displace them.
The second question is: Since the service charge rendered the six smaller notes usurious, does the usury affect only the said twenty-five dollar notes, or does it infect with usury the entire renewal transaction of $1300- in the aggregate. As already stated, the debt which was renewed was $1300. The several notes taken in renewal evidenced that one debt, not several distinct debts. If, instead of taking the large note and the six smaller notes, as was done, one note for the $1300 had been taken, with 8% interest from date until paid, but with stipulations therein for installment payments, $25 to be paid in one month, $25 in two months, and so on for six months, and with the provision or an agreement that one dollar service charge would be made on each of the smaller installment payments, we would have the exact equivalent in substance of what was actually done, and it would have rendered the entire renewal transaction usurious.
Early in our judicial history it was said that it is well settled that where the transaction is one entire contract, and it is usurious as to part, it is illegal as to the whole, so far as the interest is concerned. Brown v. Nevitt, 27 Miss. 801, 822; and in a late case, Kennedy v. Porter, 176 Miss. 742, 748, 170 So. 286, it was held thát in usury cases courts will look through the form to the substance, and that the real facts in the latter respect will control. Inasmuch as each of these renewal notes made on April 5, 1932 was a part of the same transaction, rested on the identical previous consideration (compare Jones v. Brewer, 146 Miss. 142, 110 So. 115), the answer to the second question is, therefore, that the interest on the $1150 note, as well as each of the smaller notes, was forfeit. It is immaterial that the holder of one of the smaller notes may have been able to maintain an action on it after its due date; this could be done as well for a past-due installment on an installment note, such as has above been mentioned by way of illustration.
The third question is this: The service charge on the smaller notes made the interest on the first two of them usurious to the extent of more than twenty per cent, so that, if separately considered, the principal as well as the interest in those two notes would become forfeit. Does the forfeiture on the said renewal transaction of April 5, 1932 include the principal of the said two small notes, as well as the interest on the entire $1300?
Recurring to the illustration previously used, i. e., if the transaction had been embraced' in one note for $1300 with installment payments, and the service charge of one dollar for each of the six small installments had been made, this would not have amounted to twenty per cent on the real amount evidenced by the note, and the principal of the installments which were only a part of the actual debt would not be forfeited. So here, although in form several notes were taken, the interest, including the service charge, must be referred to the whole actual debt, —to the substance of the transaction rather than to the mere form by which it was evidenced; wherefore, the principal of the debt evidenced by the two small notes was not forfeit.
On November 1,1932, the small notes aforesaid with all interest and service charge theréon having been paid, together with the charged interest on the $1159 note, the transaction was again renewed, without deducting therefrom or crediting thereon the said usurious interest. Payments of usurious interest are by operation of law payments on the principal of the balance of the debt due. Brewer v. Jones, 131 Miss. 545, 559, 95 So. 519. And notes given for a greater sum than was legally due are usurious, if the interest on the real debt exceeds eight per cent. Hyde v. Finley, 26 Miss. 468; Burt v. Brashears, 118 Miss. 339, 79 So. 182. When the taint of usury has attached, all subsequent payments of interest or for service charges are credited by law to the principal throughout all subsequent renewals so long as the identity of the subject matter is preserved or is traceable as belonging to the original debt. Hardin v. Grenada Bank, Miss., 180 So. 805, 811. It follows that all payments of interest and service charges since April 5,1932 down to and including the last of such payments in the entire of the succeeding series in this transaction are to be credited on the principal of $1300 as that principal existed on that date.
There remains to- be noticed two other contentions: Appellee bank says that in making the service charges which we have heretofore mentioned,- — -and there were others of such charges, sometimes of one dollar and sometimes fifty cents, later in the- course of the chain of renewals,— there was no wilful or intentional design to violate the law and, therefore, that no penalty of forfeiture of a.11 interest thereupon and thereafter should be visited upon it. Good faith and the absence of unlawful intention is conceded by appellant; but there is no denial that the bank intended to make the service charge. The effect of the statute is to prohibit such a charge; and it was not necessary that, in doing what it intended to do, the bank should have known that the law was being thereby transgressed. All persons in doing what they intend to do are held to the legal consequences of the act intended. Neither law nor government could function upon any other basis. Chandler v. Cooke, 163 Miss. 147, 137 So. 496.
Finally, appellee says that the trifling sum of one dollar or sometimes fifty cents added as a service charge should be disregarded by the court under the maxim de minimis non curat lex. If these charges are so trifling that the court should close its eyes to them, they are so trifling that banks should not insist upon them as conditions of making small loans to the worthy citizen entitled by character and standing to the needed accommodations of such loans. We do not fail to recognize that the contention is that to each separate borrower of these small amounts the service charges are not large, but that the aggregate of such charges on a considerable number of such loans produces an amount which prevents loss to the bank on them. At the same time, the aggregate to the bank is the same aggregate of loss to all the borrowers, and a legal wrong can be no less a wrong merely because its effect is diffused among several instead of falling upon one alone.
Reversed and remanded.