Court Opinion

ID: 5236664
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:10:51.31115+00
Date Added: 2024-06-11T08:27:44.434731
License: Public Domain

McLaughlin, J.:
This action was brought in the Municipal Court of the City of New York to recover sixty dollars and interest, a balance alleged to be due on a promissory note for eighty dollars. The note'was dated March 30, 1912, payable thirty days after date, to the order of the plaintiff, a private banker. The defendant pleaded, and upon the trial sought to prove that the note was usurious and void under section 314 of the Banking Law as it then existed. (See Consol. Laws, chap. 2 [Laws of 1909, chap. 10], § 314.) Such evidence was excluded on the ground that that section did not apply to one doing business as a private banker. Judgment was rendered for the plaintiff for the amount of the note with interest, together with the costs of the action, from which defendant appealed to the Appellate Term. That court affirmed the judgment, and from its determination defendant, by permission, appeals to this court.
• By an act of Congress passed in 1864 (13 U. S. Stat. at Large, 99, chap. 106) National banks were authorized to charge interest upon loans at the rate allowed by the laws of the State or Territory in which the bank was located, and no more. The same act fixed the penalty for exacting interest in excess of such rate as the forfeiture of the entire interest upon the loan, and provided, further, that if excess interest had been paid to the bank twice the amount of the interest thus paid might be recovered, provided an action for that purpose were commenced within two years from the date of the usurious *378transaction. (13 U. S. Stat. at Large, 108, § 30; U. S. E. S. §§ 5197, 5198.)
In 1870 the Legislature of the State of New York, with the expressed intention of placing State banks of this State on an equality with National banks in this particular, fixed the legal rate of interest at seven per cent per annum, and provided the same penalty as the act of Congress, above referred to, for charging interest in excess of that rate. (Laws of 1870, chap. 163.)
The Court of Appeals held that the act of Congress, to which reference has been made, did not relieve a National bank from the provisions of the statutes of the State of New York relating to usury (First National Bank of Whitehall v. Lamb, 50 N. Y. 95), nor did chapter 163 of the Laws of 1870 of the State of New York relieve State banks. (Farmers’ Bank v. Hale, 59 N. Y. 53.) The Supreme Court of the United States subsequently held in Farmers, etc., Nat. Bank v. Dearing (91 U. S. 29) that the view expressed by the Court of Appeals in First National Bank of Whitehall v. Lamb (supra) was erroneous. Following this decision, the Court of Appeals held that as the provision of the act of the Legislature amending the Banking Law of the State (Laws of 1870, chap. 163, amdg. Laws of 1838, chap. 260, as amd.) was intended to put State banks upon an equality with National banks in respect to interest on loans and the penalty for taking usurious interest, it should receive the same interpretation as the act of Congress relating to National banks, and as an interpretation had been given to the act of Congress by the Supreme Court, the same interpretation would be applied to the State law. (Hinter-mister v. First National Bank, 64 N. Y. 212.)
As was said in Schlesinger v. Kelly (114 App. Div. 546): “The effect of these decisions and these statutes is that if an usurious note is directly given to a State bank and said bank takes, receives or reserves interest beyond the amount allowed by law, that, nevertheless, the note is not void, and the sole forfeiture is that provided in regard to the interest and the right of action to recover within two years double the amount of interest paid. The amount of the note is a valid and enforcible debt.”
In 1880 chapter 163 of the Laws of 1870 was amended so as
*379to include private or individual bankers (Laws of 1880, chap. 567), and thereafter it was held that the usury laws did not apply to them any more than they did to National and State banks; in other words, they were placed in the same position that the banks were with reference to the rate of interest taken. (Perkins v. Smith, 116 N. Y. 441; Caponigri v. Altieri, 165 id. 255; Schlesinger v. Gilhooly, 189 id. 1; Schlesinger v. Lehmaier, 191 id. 69.) The provisions of the act of 1870, as amended, were subtantially embodied in section 74 of the Banking Law (Consol. Laws, chap. 2; Laws of 1909, chap. 10) which was in force at the time the note in suit was executed. (See Laws of 1882, chap. 409, §§ 68, 69; Laws of 1896, chap. 548; Banking Law [G-en. Laws, chap. 37; Laws of 1892, chap. 689], § 55, as amd. by Laws of 1900, chap. 310; Id. §§ 215, 216.) It was proved upon the trial, and is not questioned by the appellant, that at the time of the transaction plaintiff was a private banker. But it is urged that the privileges conferred upon private bankers by section 74 are limited by section 314 of the same law and that a private banker cannot take interest in excess of the legal rate on loans of less than §200. This section 314 is substantially a re-enactment of section 5 of chapter 326 of the Laws of 1895, as amended by chapter 78 of the Laws of 1902. The section appears in article 10 of the Banking Law, which is entitled “Personal Loan Associations.” The first section of the article (§ 310) provides that in any county of the State in which there is an incorporated city (except the counties of Monroe and Westchester) * five or more persons may organize and become a corporation for the purpose of aiding such persons as shall be deemed in need of pecuniary assistance, by loans of money at interest, not exceeding $200 to any one person, upon a pledge or mortgage of personal property; that before transacting any business they shall file a bond in a specified amount with the Superintendent of Banks; that the bonds shall be renewed and refiled annually (§ 311); that no such corporation shall, in any year, declare or pay a dividend on its capital stock amounting to more than ten per cent (§ 313); then comes section 314, which provides, among other things, that “ In any such county no person or corporation, other than corporations organized *380pursuant to this article, shall, directly or indirectly, charge or receive any interest, discount or consideration greater than the legal rate of interest upon the loan, use or forbearance of money, goods or things in action less than two hundred dollars in amount or value, or upon the loan, use or sale of personal credit in any wise where there is taken for such loan, use or sale of personal credit any security upon any household furniture, apparatus or appliances, sewing machine, plate or silver-ware in actual use, tools or implements of trade, wearing apparel or jewelry. * * * Any person, and the several officers of any corporation, who shall violate the foregoing prohibition, shall be guilty of a misdemeanor, and upon proof of such fact the debt shall be discharged and the security shall be void. But this section shall not apply to licensed pawnbrokers, making loans upon the actual and permanent deposit of personal property as security; nor shall this section affect in anyway the validity or legality of any loan of money or credit exceeding two hundred dollars in amount.” (See Laws of 1910, chap. 127, amdg. §§ 310-313.)
It seems to me clear, not only from the language used, but from its position in the Banking Law, that the Legislature did not intend section 314 should be applied to private bankers. It is quite inconceivable that both sections would be enacted by the same act if one were intended to repeal or nullify the other. This view is also strengthened by the fact that when the new Banking Law(Consol. Laws, chap. 2; Laws of 1914, chap. 369) was passed, the sections referred to (74 and 314) were substantially re-enacted, the former becoming section 114 and the latter section 368 of the new law, the prohibition being directed against any person or corporation other than those duly authorized by the Superintendent of Banks, etc. I cannot believe the Legislature intended that by section 368 State banks and private bankers should be limited as to the rate of interest, when their rights are defined in another section of the same statute, viz., section 114. (See, also, Laws of 1914, chap. 518, § 32.) It is true, as contended, there is no direct authority bearing upon the question under consideration, but the recent case of People v. Young (207 N. Y . 522) is significant as to the view entertained by the Court of Appeals regarding the effect of these *381two sections. There, the appeal was from a judgment convicting the defendants of having taken interest in excess of the legal rate in violation of section 314 of the Banking Law. Judge Bartlett, who delivered the opinion, in which all the other judges of the court concurred, said: “ The appellants contend that they are protected from prosecution for usury under section 314 of the Banking Law by reason of the fact that they are ‘ private hankers ’ and, therefore, within the immunity afforded to every ‘ bank and private and individual banker ’ by section 74 of the Banking Law itself, which section was originally revised from chapter 409 of the Laws of 1882 and the true intent and meaning of which was declared to be ‘ to place and continue banks and private and individual bankers on an equality ’ with national banks under the Federal laws. The effect of this legislation, as is well known, was and is to place • State banks and private and individual bankers within the State on the same footing as national hanks in respect to usurious loans or discounts; so that only double the amount of the interest is recoverable in such cases, but the entire loan is not rendered void by reason of the usury. * ® * It seems to me that it is almost preposterous to claim that the State Loan and Bealty Association or these defendants as its agents can be regarded as bankers in any sense.”
The purpose of the statute relating to State banks and private and individual hankers was, as already indicated, to place them upon the same footing as National hanks in respect to usurious loans or discounts, and if the construction urged by the appellant were to be adopted this purpose would he destroyed, because a National bank could take a usurious rate of interest on loans less than $200 and the only penalty would be that double the amount of interest might be recovered, hut the entire loan would not thereby he rendered void; whereas if a State bank or private or individual banker did so, he would he guilty of a misdemeanor and the debt itself satisfied and discharged.
The determination appealed from is, therefore, affirmed, with costs.
Ingraham, P. J., Laughlin and Dowling, JJ., concurred; Hotchkiss, J., dissented.

 See Laws of 1910, chap. 127.— [Rep.