Opinion ID: 1898067
Heading Depth: 2
Heading Rank: 3

Heading: usury and mississippi public policy

Text: The so-called New Jersey rule has tended to be adopted by states with a traditionally strong public policy against usury. The courts of these states have viewed anti-usury statutes as remedial legislation, to be given a liberal interpretation. New Jersey itself has noted the development of the New York rule, but rejected it in order that sympathetic sweep might be given to the state's policy against usury. In re Greenberg, 21 N.J. 213, 220, 121 A.2d 520, 524 (1956). Pennsylvania takes a hard line against the use of dummy corporations, a position also based on the state's strong public policy against usury. Walnut Discount Co. v. Weiss, 205 Pa.Super. 161, 166, 208 A.2d 26, 28 (1965). The point is significant because, until today, Mississippi also had a broad public policy against usury. Indeed, we have had an anti-usury statute since our territorial days. See An Act against Usury (passed March 1, 1805), Toulmin's Statutes of the Mississippi Territory 404-405 (1807). See also, An Act Regulating the Rate of Interest (passed January 25, 1822), Poindexter's Code ch. 105 at 460-61 (1823). (The distinction in interest rates between individual and corporate loans is of more recent origin. Act of June 15, 1966, ch. 317, 1966 Miss. Laws 618-19 (codified as MCA § 75-17-1 (1972)). The law's provisions are penal, and so a heavy burden of proof as to the fact has been required. E.g., Ranson v. Snyder, 222 Miss. 248, 254, 75 So.2d 738, 740 (1954); Yeager v. Ainsworth, 202 Miss. 747, 766, 32 So.2d 548, 555 (1947). But despite this pro-creditor rule of construction, this Court has heretofore had little patience with strategems to make loans at a higher rate than the statute allows. In an early case, we spoke in words that could have been well-used today: [T]he law against usury could easily be avoided and evaded if creditors, by resorting to the simple device of taking from the debtor a contract legal in form, for the performance of some obligation not prohibited by law could bar the courts from exploring the transaction to discover its real character. If, as the pleas state and the demurrers admit, the contract sued on was really a scheme and device to cover usurious interest, it is as incapable of supporting an action as though its true nature and purpose were written on its face. Grayson v. Brooks, Neely & Co., 64 Miss. 410, 416, 1 So. 482, 483 (1887). In a later case, we held that the public policy of this state condemns usury... . [C]ourts will look to and construe the transaction by its substance and effect, rather than its form, and will permit no scheme or device, however ingenious, to hide the face of usury. Richardson v. Cortner, 232 Miss. 885, 891, 100 So.2d 854, 857 (1958). Accord, Kennedy v. Porter, 176 Miss. 742, 748, 170 So. 286, 287 (1936). In view of the majority's holding today, it is not surprising that their opinion carefully avoids any discussion of our case law on usury.