Court Opinion

ID: 7895242
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:52:05.966186+00
Date Added: 2024-06-11T16:32:03.289346
License: Public Domain

Alvey, J.,
delivered the following dissenting opinion.
I cannot agree with the majority of the Court in their conclusion as to the want of power in the Bank to acquire title to the note of $5000, obtained from Winchester & Son. . That note was made and endorsed by Lazear Brothers, and was negotiated by Winchester & Son as agents of the makers, long before the note matured. Whether the Bank knew at the time of the negotiation that the money advanced upon the note was for the makers *127and endorsers of the paper, is a question, I think, quite immaterial. If Lazear Brothers had presented the paper in person and obtained the money upon the terms upon which the brokers obtained it, there would then have been no question as to the legality of the title acquired by the Bank; that, it is conceded, would have been a discount. But it is contended, and it is so held in the opinion of the majority of this Court, that, as the note was obtained from Winchester & Son, hill brokers, without disclosure at the time from them that the money was for the benefit of the makers of the note, therefore it was a purchase of the note, as contradistinguished from a discount, and that the transaction was ultra vires, and consequently no title to the note was transferred to the Bank. To this proposition I cannot assent.
This question, of course, depends upon the jn’oper construction of certain provisions of the Rational Bank Act, under which the appellee was organized. The general purpose of its organization was “for carrying on the business of hanking.” By the terms of the Rational Bank Act, (U. S. Rev. St., sec. 5136,) the Bank is clothed with all the powers, except such as are expressly prohibited, usually given to and exercised by hanking corporations. It is expressly authorized to exercise “ all such incidental powers as shall he necessary to carry on the business of hanking; by discounting and negotiating promissory notes, drafts, hills of exchange, and other evidences of debt; by receiving deposits ; by buying and selling exchange, coin and bullion ; by loaning money on personal security, and by obtaining, issuing and circulating notes.” Besides the things thus enumerated which the Bank is in terms authorized to do, there are many other things that it may do, under the general power to carry on the business of hanking. There is no express power given, for instance, to certify checks, or to collect notes, checks, or hills of exchange, for account of customers or correspondents ; and *128jet we know that such transactions constitute a large portion of the legitimate business of banking. It does not follow, therefore, that everything is prohibited that is not expressly authorized. By sec. 5197, U. S. Rev. Sts., it is provided that any banking 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, etc., where the Bank is located, and no more,” etc. This latter provision is under the title, “ Regulation of the Banking Business.”
Now, without invoking the aid of any implied power possessed by the Bank, to enable it to carry on the banking business, it is expressly authorized, as we have seen, to discount and negotiate promissory notes. What, then, is the meaning of the word “ negotiate,” according to its ordinary acceptation among business men ? According to the most approved lexicographers, its meaning is “ to transfer, to sell, to pass, to procure by mutual intercourse and agreement with another, to arrange for, to settle by dealing and management.” Webster’s Die.; Worcester’s Die. This term would seem to be comprehensive enough for all the requirements of the case; but, by allowing the full meaning to the more exact and important term, “ discount,” all doubt whatever would seem to be removed. To discount is to deduct a sum of money from the debt in consideration of its being paid before the usual or stipulated time for payment. In the case of Fleckner vs. Bank U. S., 8 Wheat., 350, Judge Story, in delivering the opinion of the Court, having occasion to define a discount by the Bank, said: “ Nothing can be clearer than that, by the language of the commercial world, and the settled practice of Banks, a discount by a Bank means, ex vi termini, a deduction or drawback made upon its advances or loans of money, upon negotiable paper, or other evidences of debt, payable at a future day, which are transferred to the *129Rank. We must suppose that the Legislature used the language in this, its appropriate sense ; and if we depart from this settled construction, there is none other which can be adopted, which would not defeat the great objects for which the charter was granted, and make it, as to the stockholders, a mere mockery.” Purchase may be by way of discount, equally as a loan may be made by that means. When the party receiving the proceeds of the paper discounted is himself either maker or endorser, and the discount is made on his responsibility, he receives the money as a loan, for he is bound to return it; but if he is in no way bound on the paper, he receives the money as an advance, and as a consideration for the transfer of the paper. Both transactions are, according to the established practice and usage of Banks, discounts, though the latter is in effect a purchase by the Bank. The act of discounting simply has reference to the deduction from the face amount of the paper for the time it has to run to maturity, and the rate of that deduction; but whether the transaction amounts to a loan or to a purchase on the part of the Bank, depends upon other facts and condition of things. This idea of restricting the pow.er of discounting to a transaction in which money is actually loaned upon the credit of the party passing the paper, it seems to me, is novel, and, I am sure, is contrary to the received understanding of the commercial community, and the established practice and usage of Banks. Suppose the payee of a promissory note payable to order takes it to a Bank and procures the money on it, less the rate of discount, upon endorsement without recourse; would that not be strictly a discount within the meaning of the law, notwithstanding it would not be a loan upon the responsibility of the party obtaining the money? Such a transaction would not be a loan at all, according to the correct meaning of the term; and yet if it be a discount, according to the modes and usages of banking, why should not any third *130party holding paper payable to bearer, or endorsed in blank, be able to negotiate that paper -with the Bank, by way of' discount, and transfer a good title to the Bank, notwithstanding his name might not appear upon the paper, or he incur any liability in respect to it ? I cannot, I must confess,' perceive the reason for the distinction that has been made in this case. It should he recollected that it is not. the rate of discount, with reference to which the parties deal, that determines the question of the validity of the transfer of the paper, or the title of the Bank, though the latter may have exacted and received more than the lawful rate of discount. All the business of the National Banks is done under the restrictions prescribed by the Act of Congress; and the rate of discount is expressly prescribed, among the various regulations contained in the Act for the government of the banking business ; and for taking, receiving, or charging any greater rate of interest or discount than is by the Act allowed, the Bank subjects itself to the penalties prescribed by see. 5198, of the Revised' Statutes ; hut the title to the paper is not thereby affected. However the transaction here involved might be characterized if it were between individuals—whether it be called shaving or otherwise—as a bank transaction, if the Bank exacted a greater deduction from the face value of the' paper than the law allowed, it was excessive discount, for which it incurred the penalties of the Statute; but the' transfer of the paper vested a good title in the Bank. ■ And as by the opinion of the majority of the Court it is declared that the Bank acquired no title to the note in question, and is therefore not entitled to recover on it, I must respectfully dissent from that portion of the opinion, though I concur in the conclusions as to the other portions of the case.
*131After the announcement of the foregoing decision, the appellee, hy its counsel, applied to the Court for a re-hearing of the question presented hy the seventh prayer of the appellant, as to the right of the appellee to recover on the note of Lazear Brothers for $5000, dated the 22nd of June, 1812. The Court, in response to this application, directed a re-argument on notes.
Rotes were filed on hehalf of the appellee hy John N. Steele and I. Nevett Steele, and on hehalf of the appellant by T. Alex. Seth, R. Stockett Mathews and S. Teackle Wallis.
Bartol, C. J. and Bowie, Brent, G-rason, Miller, Alvey and Irvins, J., participated in the decision on the re-argument.
Grason, J., delivered the opinion of the Court.
This case was argued and decided hy this Court at the April term, 1819, and is now before us again upon a re-argument granted upon the motion of the appellee. The re-argument- was asked only upon the appellant’s seventh prayer, which was based upon the theory that the note of Lazear Brothers for five thousand dollars, dated June 22nd, 1812, which was obtained hy the appellee from Winchester & Son, note and bill brokers, was not discounted hut pm,rchased; that such purchase was not authorized hy the Banking Act, and, consequently, that the appellee acquired no title to the note, and could not recover upon it. This question was most thoroughly and ably discussed hy the counsel of the respective parties, arid after a very careful consideration of the case, it was held that the appellee acquired the note in question hy purchase, and not by discount, that such purchase was not authorized hy the Banking Act, and that the appellee acquired no title to the note and could not recover upon it. This question has again been very fully argued upon notes, *132filed by the counsel of the respective parties, and has again been carefully considered, and a> majority of the Court concur in the opinion, heretofore filed in the case, and in the conclusions therein reached.
(Decided 1st July, 1880.)
The judgment appealed from, will, therefore, he reversed, and a new trial awarded.
Judgment reversed, and

neio trial awarded.

Note.—The Reporter is requested to state, that Chief Judge Bartol, who concurred in the opinion of the majority first rendered, entertaining doubts as to the correctness of the decision upon the question presented by the appellant’s seventh prayer, requested a re-argument of that question; and upon the final disposition of the case after the re-argument, concurred in the views expressed by Judge Alvisy in his dissenting opinion. Judge Irving concurred with Chief Judge Bartol and Judge Ai/vey in their dissent.