Citizens' Bank v. Heyward

Heyward Bank 190 Syllabus C.S. 11731 CITIZENS’ BANK v. HEYWARD

(133 709) 1. bank tional Usury Bank Constitute personally, —Contract 2 Per per cent, Usury. Contract, whereby Cent, held, interest to — to President Pay to constitute and additional 2 Bank ^[8] usury. ’Per Cent. op Bank borrower per Personally cent, Interest agreed to president and Held to Addi- pay to Agent.- -Principal responsible for tortious acts 2. Principal and — J., authority. performed scope Gary, (Per within of his C. Bonham, Watts, J., DeVore, Rice, Townsend, Henry, and and Cir- .Judges.) cuit Facts, in mortgage, 3. to foreclose action are Appeal Error. — and equity usury, being whether there was reviewable to determine J., Watts, J., DeVore, Rice, Gary, Henry, and (Per case. C. Townsend, Bonham, Judges.) and Circuit Banking. respects imputation president’s —As knowl- 4. Banks and bank, usury edge of to benefltted fraudulent act of bank held cent, interest, president borrower taking per additional bank, making for Code was secured bank liable under Civ. Watts, 1922, J., J., 3638, 3640, usury. Gary, (Per C. §§ Proc. Rice, Townsend, Bonham, DeVore, Judges.) Henry, and and Circuit Usury. 1922, lender providing 5. no shall Civ. Proc. § —Code loan, induce charged usury money paid to another to be to take more than lawful neither took nor contracted where lender interest, usury 3639. repeal penalty for under Section held not to DeVore, Featherstone, J., Watts, J., Shipp, (Per.Gary, C. and Bonham, Rice, Townsend, Judges.) and Circuit Henry, Banking Knowledge Making and — President, 6. Banks at Per With Per Cent. Additional Him Cent. Loan Imputed be That Contract Was Must Usurious, Personally, Anything Officer Had to Do With No Other Where cent, per interest and 2 per loan'at to bank Contract. —Where cent, by president thereof was made additional contract, president’s anything to do with officer had no other imputed must to bank. constituted be knowledge that loan Shipp, Judges.) Circuit (Per Featherstone Agent.- Generally, to agent notice 7. Corporations Principal — — particularly corporations. principal, case of is notice Judges.) Shipp, Circuit Featherstone and (Per Citizens’ Term, 1925 Providing Charged Usury Shall —Statute No Lender That by Money Paid Borrower With Because Was to Others Usury Lender Dm Take Nor Order to Obtain Where Not Loan, (cid:127) Contract Take Than Lawful Held Not to to More Interest, 1922, (Code 3640). Civ. Proc. Operate Retrospectively § —Code 1922, 3640, providing charged Civ. Proc. no lender shall § money usary paid agreed paid for or to be in order to others loan, obtain where lender neither took nor contracted to take more interest, operate retrospectively. (Per than lawful held not to Shipp, Judges.) Featherstone Circuit having only prospective are to he construed

9. Statutes.- —Statutes operation, purpose retrospective give unless them effect ex- declared, pressly necessarily implied language from (Per used. Judges.) Featherstone and Shipp, Circuit Before Johnson, April, 1924. Reversed Berkeley, J., and remanded. Citizens’

Action MarifeH. by Heyward. against for and defendant Judgment plaintiff, appeals. Grimball, for Whaley,

Messrs. Barnwell & appellant, cent, cite: cent., bank by at two eight per phis per Loan loan, commission bank paid presidént arranging for of 521; C., 152; E., 394; C., usurious: 104 92 83 S. S. S. 528; C., 290; C., C., 151; 473; C., 43 40 33 50 S. S. S. S. C., 361; C., 408; 17 11 973. Same; Cyc., 39 S. rule S. where excessive commission changed charged by \agent Code, 1922, 3640; lender: .Civ. without sanction Sec. of C., 152. 104 liable acts within S. Principal of to instruc- though acting contrary scope agency, C., 317; C., C., 528; 549; C., 82 77 76 tions: 82 S. S. S. S. 394; E., 33 217. President S. bank is its alter 92 ego: C., 290; C., 848; 43 50 528. Cases distin- S. S. S. C., 281; 111., 145 481. 50 guished:

Messrs, Rivers & Young, respondent, cite: ñagood, his own engaged Knowledge fraud for benefit C., 50 288. Violation law principal: not imputable W., 116 N. business scope agency: not within apparent 169; R. A. 399. S.), (N. 19 E. Acceptance personal scope within apparent general agency commission 192 Bank Opinion Y„ Y., 452; E., 1007; 114 lend N. 21 money: N. 109 N. 473; E., 379; Y., 466; Y., 219; N. 66 N. N. Conn., 81'; Iowa, 33; 568; N. 18 N. Eq., Eq., J. J. 537; 111., 16 N. 481. Eq., J.

December of the Court was delivered Mr. opinion ChiEE Gary.

Justice When this case was heard first time Supreme Court, Fraser, was delivered Mr. opinion Justice who has since died. wrote, which he following opinion except

1, 2 a from the case of quotation Mayfield Mortgage C., 158;

Co., E., 370, 104 88 which is omitted: facts, brief, defendant, “The are: Miss Heyward, n sent brother, her who was her agent, plaintiff to borrow The money. loan with Mr. agent negotiated Brown, Bank, who was authorized president fully by his to make loans. The contract Mr. between Hey- Bank, Brown, ward and Mr. and a also president director of the was that Heyward Miss should pay cent, cent, Brown, to the Bank per per personally. cent, This loan went on for The years. was per paid cent, a clerk of Bank and the was per pres- paid ident. run two' were to with the life These of the loan. usury? Was trial Court held that it was not usury. ' think it usury. We was

“It does not need the citation of to show authority that a for is the tortious acts his principal responsible agent, within the of his performed authority. scope for the unlawful manner which the responsible does an authorized act. It makes no what name difference called, a when we are a thing may violation uncovering law, what It but is its nature. makes no that difference were instead one: In the two checks made Case Mayfield to indicate that it was so as was not large intended fee Bank Citizens’ fee n — a cloak that case there was a only usury. for

basis Here the did not do charge plaintiff for fee. the law the reverence basis to even claim there was a cent, service was But the charged. two per cent, contract that the tzvo was to continue during per the loan. The contract was that the life of cent, loan, a clerk in the Bank receive ten should for the per loan, the life of the and is usurious. seen during We have made,' even it is though voluntarily payment immaterial.” (Italics added.) this case is the statutes are affirmed, against usury

“If dead. Any concern can a loan money-lending employ will who unlimited and no one charge usury, for himself can show that the money-lender behind closed doors him- cent., but legal eight another only got eight per self cent, per too.” (Italics added.) “The judgment reversed.

“Mr. concurred. Watts Justice

“Mr. Marion concurred result. Justice “Mr. Associate W. C. Cothran dissented. Acting Justice “Mr. Chief did Cothran Gary Mr. Justice Justice not participate.” Brown,

C. R. I. a witness testified as plaintiff, follows:

“I was the of the Bank when these loans were president made. The by-laws contain as following provisions of the ‘He shall call the duties directors president: when it He shall at all times necessary. he deems together exercise of the affairs over directors general supervision of the He shall have corporation. general superintendence of all officers and direction employees corpora- their duties are tion. He shall see that properly performed to the office and shall all services of pertaining perform * * * It was the of the banking corporation.’ president made the loans custom the Bank that president of was usually the Bank. The presidеnt

Opinion prac- custom was carried out loans. That making the Bank. of existence tically through loan “I directors’ when meeting at the present au- is- that the directors My impression was discussed. $7,020. The the. loan to question thorized the increase of cent, with the not taken commission was up the two(cid:127) per They the Bank. It into funds of directors. never went individually.” me know that was being did not paid added.) (Italics

“Recross-Examination: after the increase of directors authorize Did the “Q. $770 made? A. recollec- My or before it was it had been made $7,020 it was dis- that the loan was raised to tion is when money additional advisability lending cussed as to the I looked That is have my impression. Mr. Heyward. that, if record to see there was any the minutes over record any in the minutes where there was I can’t find but that account was it, I sure that a discussion but am because we had done that o'n several oc- board had my an additional sum requested when Mr. Heyward casions in the minute book yet, casually- I find as fail money. it, it was at any where any.record brought up over looking this, been loan has except passed of these meetings, after it time the board time to from recorded.” added.) (Italics

“I as to make president could assume the authority the custom usually loan That was anyhow. have additional cared to case information the loan. added.) to whether not to make (Italics I

“It mind because wanted to be sure my was so vivid the col- as to the value of that there wasn’t any question Mr. a com- reference to Heyward paying lateral without statement was made me per- that time a mission. At he I feel that should have to a com- pay didn’t sonally and we considered it if the loan was good, good, mission it, like me and he have knew he stated that he would to and Heyward and T like me so would to have money.’ personally, you said, he I will to it to I ddn’t it to have pay pay you, Tf (Italics added.) another bank on Broad Street.’ “I never sent can’t state that Nat. positively cent, cent, two one check both the and the per 'eight per for Bank, mail, interest drawn to the order the Citizens’ it; and-I am that he did not do say almost willing would not with me at all impress being right thing for Nat. to cover these amounts. He do to sénd a check to two n couldhave done it, but I the Bank doubt very seriously if would have had to do with the check.” (Italics anything added.) ,was letter evidence: following put

“March Brown, Charleston, “Mr. I. C.-—Dear C. R. Sir: of Marie interest a bond paid mortgage on Having H. for I am in her as her Heyward, stead acting Bank, time to time in the Citizens’ it is under- from agent, cent, that I been the Citizens’ Bank 8 stood have per paying called interest as for bond mortgage per cent, 'as commission said loan. you personally and has been done my

“This is policy accordance bond, the life understood we now being during at the ewe the Bank six months’ interest advance rate of cent. 8 per

“Yours very truly,- Heyward,. H.

“Marie “Per N. Heyward, Agt.” defendant, a witness testified Nathaniel Heyward, n as follows: cent, the Bank and two “These payments eight per cent, Brown, the were to Mr. per made, loan was made continuously when the ipi2, first from me. I this letter was sent by always fig- when ip20, up cent, at each extra two per payment. ured amount whole the loan as principal on paid Heyward Citizens’ Opinion [135) on increased time to time. was paid interest from the whole amount and was increased as the principal.” (Italics added.) Honor, of fact his the Circuit following findings

Judge: Heyward,

“That and the de- brother Nat. fendant, Brown, Marie H. C. Heyward, to R. I.. offered Bank, Citizens’ a commission of per two cent, loan, of the amount of the and was offered Brown as his accepted by personal and was not money, paid cent, to the Bank. Interest at the rate of an- eight per per cent, Bank, num was and the two commis- paid per sion to Brown was handled paid separately, was paid unknown, him benefit, un- his own individual use and authorized, Bank, and not ratified as a com- personal cent, mission of on two the loan its life. There per during is no that the Bank testimony tO'show ever received tending commission, it any or that benefited in portion any is, way likewise, by Brown’s unlawful act. There a total of, failure of authorized, that the Bank knew' rat- proof or ified the unlawful act its president.

“It does not that the commission was made appear loans, condition or making and it appears renewing that the the commission. The mortgagor paid voliintarily receipt personally Brown commission was repre- condemned, hensible and cannot be vol- severely but the too offer usual untary pay commission shows incident to loans usurious was absent 'oppressiveness’ case at bar.” (Italics added.)

“While it have been might within scope pres- ident’s and collect a commission for agency charge use surely cannot be contended benefit of that, authorization, in the absence of the Bank’s knowledge, ratification, or that he within or even acting scope, in the of his or for his Master’s apparent scope agency, business in such a commission exacting per- own Citizens’ Pall 192S benefit;

sonal use not in the absence some certainly that he proof was thus for his ren- compensated services dered to the Bank as its employee agent.”

The exceptions are as follows:

“I. Honor, His erred, the Circuit it is Judge, respectfully submitted in Bank, that decreeing Citizens’ plaintiff, should defendant, have judgment Marie H. against in Heyward, $7,020, sum of with interest and attor- fees ney’s and for the sale of the The mortgaged property.

error being: That the

“(a) loan was usurious because the president Bank, who Bank, was also director in the and was by Bank, custom of the in for loans charge making Bank, Bank, who made this loan for the collected cent, in interest himself, in addition to the eight per cent, Bank, to the paid two on the loan per principal which the Circuit found as a fact have been Judge done 20, 1912, the life during of the loan'from March to No- 24, vember 1919, $3,502.33, which amounts to interest paid to the Bank cent., at $875.59, eight per paid director, president, Bank in agent making th.e loan.

“(b) Circuit should have found that Marie Judge H. Heyward was entitled to offset the loan an against amount to twice the amount equal of interest amount- paid, $4,377.92, to twice $8,755.84. ing

“II. The Circuit should have held the loan usurious Judge on the that the rule of law Carolina is that grounds South of excessive and receiving unreasonable commissions of the lender with the actual or knowledge," constructive, of the renders the transaction usu- principal, rious, if such commissions and the interest added exceed Brown, the lawful rates. as and di- And Bank, rector of the was the of the Bank in making loan, his to the commissions is respect Bank.” imputable the plaintiff ~~ C. 135. S. — 14 — C. S.

Opinion his Carolina from case only South conclusion, Knobe- was Honor, the Circuit based Judge, E., The facts C., Bank, lock v. S. S. in the case from those case are different entirely present particular the vital supra, Knobelock notice to' the the law as to in the Knobelock Case imputed involved, jury that the the reason was not the verdict notice and was no such that there had found Therefore, the Court upon any rulings final. obiter dicta. were question purely C., 472; 4 Garvin, 27 In the case of Garvin v. says: the Court however, bound Court, considered as “The is not it. is decided by but what only by opinion, argument of argu- made in course The remark referred to was then under consider- ment, unnecessary question which, some ation, one of those observations and was said, á on a legal question has well ‘fall from Judge one him, a not such arising a case before but suggested is, therefore, not It manner him. as to decision require other it may on Judges, although as binding precedent now question entitled to more or less etc. respect,’ the time is res integra." made for first be cited in the Knobelock Case would used language the fact that the but for exceptions, to sustain appellant’s in this then before the Court is not involved the question case, seen reference to following language: as will be for

“The was not whether acting Small question individual, Trustee, or for himself as an but himself as he whether, in transaction of the deposit, out drawing for the Bank. was in way Knowledge Small’s any acting im- reference to the was not fraudulent intent with deposit unless, in the transaction of to the particular putable acted out money, Small receiving deposited paying * * * the Bank. in the transaction under “The real was whether question Citizens’

consideration Small for the Bank. The acting agent Bank is to know presumed what its knew as its presidertt ** * but not agent, what Small knew as executor. its this,

“Besides he had at already, 'plaintiff’s request, charged home ‘knowledge to the brought agent of corpora act, tion possessing authority matter to acting'in relates, which the notice is the case strongest charging with notice of matter known to corporation its agents,’ in accordance with the decision in v.Webb Graniteville Man * * * Co., C., ufacturing Am. Rep., 479.] “Participation by the fruits principal agent’s fraud is not test whether the is im- agent’s knowledge to the putable but it affords on principal, evidence the ques- tion whether the in the agent fraudulent transaction was within the acting of his author- scope agency, previously * * * ratified, ized or subsequently is the test.

“In the relation to a third party, exists, rule that notice undisputed agent is notice if the comes to the of facts principal, ** * while he is for the acting principal. 172; “See, also, C., Rowan, Akers 33 S. A., R. where Court said: ‘The Circuit Judge rule, overlooked to the admitted qualifications general Sloan, that notice is notice to principal. pf he was at the time the solicitor and one though of its directors did fact that acquire knowledge suits were commenced while against Robbins acting * * * either of those capacities.’ Court, case, of the last-mentioned in Raply this

“Speaking C., 151; E., 686, 40 ‘The v. said: [Rapley] Klugh, S. S. Bank was exonerated from responsibility of its and because director), such (solicitor of its was not while in business for acquired engaged Bank, but the solicitor acquired was while as acting ** * Robbins himself.’ C., 294; Bank,

“In the case Bickley Heyward Opinion following Am. the Court sustained Rep., St. the’Circuit Tf the president charge by Judge: that does concern fraud to a subject commits a relative per- and other the Bank in duty dealing strangers to Bank, will be the corporation sons business with having mis- and for such acts such persons liable to third person ” deeds of its president agent.’ case, reviewable the facts are As this an equity was whether there of determining for purpose Bank, or not. on the usury part facts, have we After carefully considering scheme a well-planned that there was reached (cid:127)conclusion course, Of it would Bank itself charge usury. to from shown to be except natural that would expect was that the The scheme payment circumstantial evidence. commissions, as cent., was to continue called of the two per not ne- Brown did the loan was President únpaid. long so, if he had done individual, for the loan as an gotiate it, to receive during he not have continued would life Mr. to Heyward The letter written by the loan. ad- take that he did not intend to shows simply usurious, that contract fact vantage Mr. President Heyward to blind. The statement mere that, I will to “If I have you, pay don’t it pay Brown Street,” he was Broad shows to another bank .on the money. order to get compelled pay its of President Brown shows upon statement following stated: correctly the facts were not face that sent Nat. never “I can’t state positively cent, cent, and the two the eight per one check both per mail to the order Citizens’ interest drawn it; that that he did not do I almost say am willing at all with*being right thing not impress-me would do, to cover these two amounts. a check to send Nat: if the it, I very seriously but doubt have He could done Heyward Bank Citizens' Term, 1925 Pall check”— the Bank would have had to do with anything the usurious contract. exposed that would have for in stated Rey- notice is thus of principle imputed Witte, C., Am. 678: nolds v. Rep., the ordinary “There this from distinguish nothing one, convenience, act for another to case where employs business, in or to Reynolds as his exempt particular ordinarily and from the Caldwell & principles Sons all these attach to the relation and Of of principal agent. than that which there is not one more principles important of his author- makes the act of the within agent, scope alium, sed ity, per the act of the per ‘qui facit — facit mis- Reynolds, Caldwell & of they were agents Sons case, de- thereby, appropriated, purpose Is liable for Reynolds the collaterals of stroyed Witte. If the act there can that act? himself had done Reynolds * * * liable to be no doubt that he would have been Witte. ‘within is the understanding phrase “What proper ? Does ‘the include negli- the agency’ scope’ scope fraud? It cannot be restricted and exclude properly gence creation of the intended agency, to what parties ap- as no for that would also exclude negligence, more than for the of being negligent, any purpose pointed cannot fraudulently. question thé purpose acting to be conferred by intended authority (cid:127)be determined between the authority must distinguish We principal. act and the transact authority to commit a fraudulent the fraudulent act was com- in the course of which business reference the intention of the Tested prin- mitted. ‘the nor fraud is within neither negligence scope cipal, the connection the act with but tested by the agency’; taking business of agency, property fraud much is as ‘within scope agency’ very property in- to take it. The others . allowing proper as negligence in the course is, agency the act was done whether quiry was, If it then the authority agent. virtue and by Opinion C. S. whether negli- the act was principal responsible, merely or fraudulent.” gent

In Mercantile it is said: Smith’s Law “The has be not principal responsible, been thought to for but for the fraud his merely deliberate of negligence, committed in the execution of his though employment, as, instance, without the for authority, principal’s selling false for true The jewels ones. reason given by Lord Holt, C. one. a sensible appears ‘Seeing/ says he, ‘that J. deceit, some one must be it is loser more seasonable deceiver, he who and be employs in the should confides Such, than loser stranger. certainly, the opinion ” Roman lawyers.’ (Italics added.) of in well stated on 452: principle Story Agency, § n ‘It ais that, doctrine of general law although prin- is not liable he cipal ordinarily sometimes (for is) unless, suit for criminal the acts or misdeeds of his agent, indeed, them, he has authorized or ishe co-operated yet held frauds, liable third in a civil suit for the persons deceits, concealments, misrepresentations, and negligences, malfeasances, other and omissions of duty of his agent, in the course did his employment, although principal of in, or or authorize or justify indeed know participate misconduct, of such if or even he forbade the acts or dis- of all them. In such cases the rule approved re- applies and it is spondeat superior; upon public policy found convenience, in no other there could be way safety any persons third their either with the dealings, directly him, with principal indirectly instrumental- through ity In such case agénts. every holds out trusted, competent and and thereby, fit he in effect, warrants his fidelity conduct in all good within the agency.” (Italics added.) matters scope from language Mercantile Smith’s and Story Law McGowan, were on quoted Agency approval by Justice . Witte, Court in Reynolds who delivered the opinion C., 5; 36 Am. Rep. & Manu the case of Union v. Wando Mining C., 361, Co., 17 this Court says: factoring di- “Mr. the Union and a Mowry president & Company, rector of Mining Manufacturing Wando all had the effect the time occurrences which during of all secretary deprive company and was at powers present meetings agency, at which took and was the company they place, president of Bank at the were His times when those notes discounted. therefore, was, and the Bank is official, bound the his by knowledge." added.) legal (Italics effect of

Mr. Cothran thus concludes his opinion: Justice “It has been it is suggested against public policy for this Court to the exaction the by president countenance of a bank of a commission for his service personal nego- bank, the affirmance loan his and that tiating by Judge decree, be, as it will would work widely spread Johnson’s annihilate usury havoc with borrowers the practically laws the State.

“It seems be assumed the affirmance of the decree an amounts to such conduct. This approval assump- mark; the tion is wide of the Court considers a most fla- trust, breach the se- grant reprehensible deserving condemnation; verest what affirmance means judicial that the Bank is not liable penalties usury added.) statute.” (Italics

“That the Bank be liable to a borrower who might might it for suit of the exac- recovery bring against illegal tion, no we entertain doubt. exaction forced Such by situation, of a bank occupying fiduciary president the actual within would con- acting scope agency, tort, liable, stitute a for which his would be just be would liable to a as a railroad company passenger fare collected by the return of a conductor. illegal

Opinion “But the of the Bank for liability of the penalties statute usury and its return the exaction liability illegal áre matters. entirely'different

“The the Court of the Bank’s by liability declaration return the exaction illegal fallacy should demonstrate that the Court suggestion of such conduct approved bank, an officer of a and should allay apprehension that the officers of other banks will be emboldened decision to follow abhorred example president in this case. Court would

“The welcome the opportunity giving cent, mortgagor this case credit for the two commis- per sions collected if justified pleadings relief; such but the counterclaim is based solely upon penalties under the statute and we see no to do way so. think, however,

“We that the defendant should al- lowed to move the Circuit Court for án order permitting her to amend her answer by as a setting liability up counterclaim, this Court whether a question reserving claim in can tort be set as a counterclaim in an action up be, upon contract. If it cannot the defendánt’s remedy by is' to her. action separate' open . “As to the mátter of policy: source public primary of the declaration of of public State policy General- the Courts Assembly; only assume prerogative in the absence of declaration. General As- legislative has and declared that sembly spoken exaction of commission an intermediary shall not constitute usury, has no and this Court to decide otherwise. The power Court, however,' has the the General power, Assembly made no declaration the' to declare subject, having that the Bank shall requires be'liable for public policy the tort committed in a bank the collec- tion exaction from a illegal borrower.

“The iri the minds of difficulty those members' of the Citizens’ Term, 1925 decree, it is respectfully of the

Court favor a reversal who familiar of the principle lies in- the suggested, application within the acts of an that a is liable for principal between distinguish to failing of his scope agency, liability its for a of the principal penalty liability cannot en- The former tortious act. damages the conditions prescribing forced under statute except com- under the the latter liability; principles such mon law. . the judgment this Court is that

“The judgment defendant leave to other Circuit Court be affirmed with indicated.” her as above for an amendment of answer move ' Honor, decree of Mr. Cothran states Justice rea- for the following be affirmed should Johnson, Judge : sons borrower, a commission by the

“1. The payment it, the interest of the lender where together rate, construed usury cannot be exceeds the lawful charged, exaction. of the illegal the lender was cognizant unless exaction by of an illegal “2. The an agent thereof, as notice cannot himself be imputed law, the interest act is contrary against where the agent’s benefit. and fоr his personal of the principal law as it stood prior that under the “3. Assuming 1922, 3, § Volume of the Act of (Code passage been judicially have may the transaction question 3640), usurious, of trial the therefor at the time penalty declared 3640, and 3639 had been by Section repealed under Section not recoverable.” 1922, 3638, 3639, Code of are Laws Sections follows: cent, interest than (7) per 3638. seven greater No “Sec. taken, allowed or upon annum shall be agreed per charged, for the lend- in this hiring, contract arising State upon any way either commodity, by or or use of other money ing otherwise, interest, writ- or except upon discount straight

Opinion ten wherein, contracts a of in- by rate express agreement, cent, terest not be Pro- charged: exceeding eight per may vided, That where insurance a as condition company, any for a loan such by or company, money mortgage other shall that the borrower insure either security, require another, his life or that or such with com- property, pany to such or cause to assign assigned be company, it, to loan, of insurance for such any as policy security agree or thereon the continuance pay premiums during loans, of such whether such be or premiums annually paid installments, such shall not considered premiums be as section, interest on such loan within of this meaning nor shall loan be rendered usurious reason of any by any such requirements where rate of interest charged fixed, the loan does not the rate exceed above where the premiums for the insurance charged premiums do exceed to other under charged like circumstances and con- persons ditions who do not loans. obtain or receive,, Any

“Sec. who shall person corporation receive, or contract to interest as amount any greater than is. for in the interest, section forfeit all provided preceding shall and the action and such costs portion original: debt as shall due shall be recovered without interest or costs, and where amount so or any charged contracted for has been actually received such or person he- corporation, she, or shall they or also forfeit double total amount interest, received in respect be collected by separate- action or allowed as a counterclaim any action brought to recover sum. 3640. No-lender shall be

“Sec. under charged sections reason of money preceding paid .agreed be paid the borrower in others order to obtain loan took where lender neither nor contracted take more Provided, however, than lawful interest: That suit be- may six from within months the date of such brought transaction such other have may against persons excessive: charged Heyward Citizens' ' commissions, fees or excessive be had may recovery thereon for the excess over and above a fee reasonable or reasonable commissions.”

We to the consideration proceed of the first of these prop- ositions, which is as follows: the borrower payment by a commission to the lender, it, where together of of with the rate, interest exceeds the cannot charged, lawful be construed usury Unless lender was cognizant of exaction. illegal

We have shоwn already by that the lender testimony was a to the party contract, illegal usurious and that is, therefore, said proposition inapplicable.

The second of said is as follows: The knowl- propositions an edge exaction illegal cannot by himself, imputed as notice where the thereof, act agent’s law, contrary the interest against principal, personal benefit. cited, authorities which we have as well as those Cothran, cited Mr. by that this show proposi Justice

tion cannot be sustained. It is a mistake to suppose that the Bank was not benefited fraudulent act of Brown, President as it could effect, not be carried into ex cept by borrower securing out whom it made several thousand dollars. Brown, Brown v. See C., 173;

The third is as follows: proposition that under Assuming the law as it prior stood to the Act ipió (Code ip22, § Vol. 3640) 3, transaction in have been question may usurious, declared at the judicially time trial penalty under had been repealed Section by Section therefor 363P and was not recoverable. 3640 consists of two Section first of parts, the which is as follows:

“No lender shall be under the charged pre- sections reason of ceding money paid to be agreed others the borrower in order to obtain paid a loan where Bank '

Opinion more than neither took nor contracted to take lender lawful interest:”

—which with means that a lender shall be charged under the or by money sections reason paid preceding in order to obtain to be others borrower agreed by paid loan, either contracted to take where the lender took or more than lawful interest.

Mr. Cothran contends that part Sec- Justice 5 tion 3640 ‍​​‌​​​​​‌‌‌‌​​​‌​‌‌​​​​‌​‌​‌‌​‌​‌‌‌‌​‌‌‌​​‌​​​‌​‍which we have quoted, repealed penalty while, hand, we

under on the other Section contend that the extends to those cases where only repeal than the lender neither nor contracted to take more took which, It in order exemption lawful interest. an merely lender, to be must be set as a dny up defense benefit and testimony. established

The other 3640 is as follows: part Section “Provided, however, within That suit may brought such six months from the of such transaction against date fees or exces- other as have excessive persons may charged commissions, thereon for the sive and be had recovery may fee reasonable com- excess over and above a reasonable missions.” Court, under

As no is before the question part section, it case. has no application present

It is the of this Court that the judgment judgment reversed, remanded the Circuit Court be and that the case be further be nec- may to that Court for such as proceedings effect the herein announced. into views essary carry and Watts, DeVore, Mr. Associate Messrs. Justice and Circuit Judges, Townsend, Bonham, Henry, Rice, concur. and Circuit Featherstone, SeasE, Shipp,

Messrs. concur in result. Judges, and Marion, Cothran Messrs. Associate Justices Purdy Acting R. O. Associate

Messrs. Justice Bank Term, 1925 Mauedin, Circuit Wieson, Dennis, Mann, Messrs. dissent. Judges, The : following opin- (concurring)

Mr. Watts Justice concurred Mr. Fraser and ion the late was written by Justice it my I now the Chief myself. adopt Justice in the case: opinion The defend-

This mortgage. action foreclose ant set usury. up defendant, facts, brief, are: Miss Heyward, brother, Bank to

sent her her to the plaintiff who was agent, Mr. bоrrow loan money. agent negotiated Brown, who was fully authorized Mr. to make The contract between loans. Bank, and Brown, the of the Heyward and Mr. should Miss Heyward also director of the was that cent, cent, Brown, to the Bank two to per pay eight per on The eight loan went for years. per This personally. cent, cent, and the a clerk two per to paid run with the These were to to two president. paid life of loan. it trial Court held usury? Was think it was usury. it was not usury. We Co., 157, 159; C., Mayfield Mortgage E., 372, we find: is a contract unlawful- a Court “(a) When probing ness, it is does not work an the mere name which called name, substance, It is the and not gov- estoppel. not are in this that have stated erns. There some cases State It does not usury. practical the true test of change rule, it to true but tends confu- result to come back name. have the right People sion to call things wrong A contract the law does not forbid. to make contract any but, on one may contracting parties; work hardship contract, the Courts of must unless law forbids Law themselves, or the must take care Leg- enforce it. People them the contract unlawful. must islature protect making into a Court of Court Equity, “When a goes litigant Concurring Opinion ipay refuse its to aid an enforce unconscionable demand. ‘He seeks who must do Neither the Court of equity equity.’ nor the Court of or Equity has the to take right money Eaw any another, kind of from one and ex- to property give in obedience to There cept some law. is that forbids no law or penalizes an charging of unreasonable commission or an An unreasonable fee. unconscionable or fee commission there being paid, is remedy no at law or equity. have, however, Courts un- to uncover the hidden right lawfulness aof contract and A declare its character. true sum of retained money paid to evade attempt law against usury be declared to be in fact may usurious interest, interest; and, when it is usurious adjudged then the law usurious interest against and should be applies, enforced. The result not but it is well practical changed, and lawful give logical names to the matters we- is, deal. The for the question Court was the payment of this fee a so, cloak hide usurious If interest? * * * penalty usury attaches transaction. payment. “Voluntary

“The mere fact that a is made payment voluntarily sufficient, because one usurious interest any may pay and then suit for and voluntarily recover it. No bring effective circumstances accompanying voluntary pay- ment have been relied appellant.”

It does not need the citation of a authority show that is for the principal tortious acts of his responsible agent, performed within the authority. his scope for the unlawful manner in which the responsible agent does an authorized act. It makes no difference by what called, name a when may be we are a vio- thing uncovering law, lation of the It but what its nature. makes no dif- ference two checks were made instead of one. In the the fee was so indicate Mayfield that it was large Case fee, only usury. intended as a cloak In that case there was a basis for the fee. Here the charge plaintiff Bank did not do the law reverence to even claim that there was cent, a basis of service for which two per charged. cent, But the contract was that the two was to continue per the life during loаn. The contract was that the pres- cent, ident and a clerk in the Bank should receive ten per loan, for the loan, life of the during and is usurious. We have seen that even though payment voluntarily n made, it is immaterial.

If affirmed, this case is the statutes are against usury dead. Any concern can a loan money-lending employ who will for himself unlimited and no one charge usury, can show that behind closed doors the himself money-lender cent., not only his but another got legal per eight eight per cent. too. Gary

Mr. concurs. Chiee Justice I Feati-ierstonE, Circuit concur in re- Mr. Judge: sult of the opinions Chief and Mr. Justice Justice Watts, and think the of the Circuit Court judgment ought to be reversed for the reasons: following

The loan was made the Bank its through president, cent, Brown, Mr. Miss Fleyward agreeing pay eight per cent, to the Bank and two to the of the Bank. per The record shows that officer no of the Bank other 6 had do to with anything contract. so making

far concerned, as the transaction was the president was the Bank and his must to the imputed Bank. rule general doubt is that notice beyond is notice to rule is principal, prob- more

ably stringent case than corporations natural persons.

To this rule there are some well-defined but exceptions, which, we are case, concerned with the facts in the present do not within my opinion, place any exceptions rule. general 212

Concurring Opinion cases, The some Carolina Circuit relied South Judge which do not seem to me to control. C., E., 165; Rowan,

In Akers v. 33 S. S. A., R. it was to bank sought chárge Sloan, its at of Col. one of its directors and knowledge as he had obtained while torney, acting knowledge Robbins, not one which the Court said could attorney bank, be done. Col. for the was acting Sloan information Court said he could not have imparted without a his client. breach to duty E., 680, C., 150;

In Rapley Klugh, S. S. Court held that the acquired president in the of land to the conveyed purchase corporation, another, afterwards to the conveyed it president bank. must be grantees imputed C., 259; E., 962, Knobelock v. and committed a bank Small Jacob funds, trust, breach of certain which were on out drawing Trustee, hold in his name as and was to sought deposit Court, Mr. bank speaking through responsible. said: Jones, Justice the refusal to

“The error in alleges seventh exception This charge. request charge plaintiff’s eighth request it, if was that dealt with as we understand charge, Small Trustee, but secretly bank as this as ostensibly to- deposit individual, in- of his fraudulent own tent, reference this to the bank .with to- deposit imputable are unable to which he was We see president. .merit was not whether question distinction. Small trustee, indi- for himself as or for himself as an was acting vidual, whether, in the transaction of out the but drawing he for the bank. Knowl- way deposit, any acting reference fraudulent intent with Small’s edge bank, unless, in the was not partic- deposit imputable out and receiving ular transaction paying deposited for the bank.” acted monéy, Small Heyward Citizens' Term, 1925 Mr. Again, said: Justice Jones “ ‘That in order to a bank notice the with charge facts which its or other officer has knowledge transaction, in to a he have acted in the reference must bank,’ transaction on behalf of the which the Judge to added, ‘if he was either the or acting wholly partially When, bank.’ therefore, he under con- request the qualified sideration, he meant to correct it in same the particular. a expression, of an ‘knowledge agent corporation other while in a fraud for- own principal, his engaged

benefit,’ without been explanation, might have supposed by not to jury exclude any participation princi- in the fraud; pal of the profits hence the to avoid Judge, such words, added the impression, mak- thereby qualifying it clear ing to an jury while agent in engaged benefit, a fraud for his own in which the prin- is not in cipal any way cannot be participant, imputed in principal. the fruits Participation principal of the fraud agent’s is not the test whether the agent’s knowledge is imputable to it evi- but affords principal, dence on whether the in the fraudulent question agent transaction was within acting scope of agency pre- ratified, viously authorized or which subsequently test.”

A careful in the reading entire Knobelock opinion will Case reveal that it is not now case controlling under consideration.

In none of the cases decided our it Court has been held that the notice agent must not be imputed he where for the principal acting solely reference transaction was obtained.

In 2 Pomeroy’s Ed.), § author Equity (4th says:

“The Courts confined the of this carefully operation have the condition described where exception presumption C. 135. S. — 15 —

Concurring Opinion real disclose the did not arises that necessarily such he was committing to his because facts principal, its essential fraud that concealment was independent these cir- beyond been extended has never perpetration; follows, therefore, fraud of an that every It cumstances. and in the very course of his employment, and, transaction, not fall within exception; same does fraud the agent’s it does not when apply most emphatically, within material facts in concealment of consists his merely from his principal.” knowledge own says: author in the same Again, Section Pol Upon Wholly Rule—Based “True Rationale of notice rule constructive of and Expediency. icy —The of constructive like the doctrine through agent principal, and foundation its ultimate in must find notice general, It will and expediency. in of motives only policy support be derived it should whether not in the least to-inquire aid us identical with the princi that the is from the notion the notion that from alter ego pal principal’s —or —is retain a ben allowed to acquire cannot be the principal which his agent an act or proceeding efit means of through is, I have already true rationale as knew to be wrong. facts—not of material shown, knowledge that the agent’s what law assumes ultimate facts—or necessarily from considerations always, must knowledge, to be his as the and treated principal’s regarded be expediency could society affairs otherwise business knowledge; transacted. Whenever safely is, he has obtained actual whenever is actual—that has, therefore, facts, received certain information of his knowledge notice-—this imputation actual Whenever agent’s and reasonable. is evident principal only facts exists contempla facts of certain a constructive he has received is, when tion law—that no less thereof to notice—the imputation circumstances, If, a party, under any clear. reasonable Bank himself, while treated, must be dealing contempla law, tion of information, one who has certain acquired and must be charged constructive notice thereby, same result when, must circumstances, follow under like party dealing by means of an If that agent. assumed information called constructive notice shall affect a party himself, acting should him affect equally acting through attorney. As doctrine is thus based en tirely-on motives-of it should policy, never its application transcend the and limits of those scope motives. When ever its in a state operation of facts given would produce manifest should, injustice, Courts if not absolutely compelled authority, withhold express such operation.

A tendency to restrict the doctrine—to confine it within limits established—is already exhibited clearly many the recent of the ablest now on the decisions. Some Judges bench have English even dissent from expressed strong itself, the doctrine in some of its and phrases applications, where a especially with notice infor charged principal transaction, mation in a former acquired which such is assumed to have remembered. The in cases which this branch of the rule English commonly arises are more involve a different condition of frequent, circumstances, in and are much more harsh consequently effects, their than class of cases which come analogous the American Courts.” before 514; States, S., McCaskill 216 Co. v. United U. 30 Ct., 391; Ed., 596, 54 Court said: L. is, law, a

“Undoubtedly in corporation a person entity entirely distinct from its stockholders and officers. It may have interest distinct from theirs. interests, Their it may conceived, be ma)^ interest, adverse to its and hence has arisen against that their its presumption knowledge that, the counter knowledge, in presumption transactions it, with when adverse, their interest is their will knowledge not be to it. attributed But while this should presumption Bank Citizens’

Concurring Opinion be enforced it should not be car- protect corporation, ried a means so far as to to become corporation enable A or a means to evade its responsibilities. growing fraud is, therefore, in the Courts to look be- tendency exhibited it, form the and to yond corporate purpose officers are identified Illustrations who with purpose. 663, 664, are of this in on Cook given Corporations, §§ 727. The Court in was enforced Simmons principle S., Ct., 239; Doran, Creek Coal v.Co. U. Ed., 1063. In that case a claimed title to corporation L. land' one be- a deed of its of whom through corporators, came its Of the effect of this the Court said: president. ‘Associated a carry forward common together enterprise, or actual notice of all these corporators was the or notice of the company; and, them, if constructive notice com- bound bound the ” pany.’ Co.,

In the notes to A. Brookhouse v. R. Publishing (N. the annotator that Mr. S.), says prob- Pomeroy rule down a little too but on ably lays broadly, page he annotator) says: (the is, however, if

“There not the authority, good weight authority, favor of qualification foregoing excep therefrom, therefore, and, tion so as to exclude to bring within the rule general charges officer, cases where the knowledge possessed agent, third is the sole he acts for himself or though person, in the transaction ques representative corporation denies, and tion. None of the cases above cited expressly with, existence of them are inconsistent necessarily few the and some of them— of such exception; qualification Ga., 112 Hiers, T.& Co. v. e. g., English-American Loan D., 550; 823; E., v. 9 Feeney, 38 103. National Bank S. S. A., W., 874; 732, Bank v. 46 R. and Commercial 70 N. L. 623; A., C., 267; E., 17 326— 110 14 R. N. S. L. Burgwyn, reason of such quali- By admit expressly qualification. 217 v. Pall fication the of in was denied Brob application exception Ga., 527; E., Penniman, 350, ston v. 97 25 that holding S.

a bank was with its and of chargeable knowledge cashier, firm, that the of a proceeds note members, they were were to be used for their pur private firm, and not for the poses, they,having rep purposes in loan the note. resented bank and making taking So, Loan, Co., in 109 Morris v. & Georgia Savings Banking Ga., 12; 378; A., 506, 46 R. cashier where.the bank, an'individual, had interest in a of a as promissory and, consideration, note which he knew was without given to, cashier, reference con discounted the note without with, held that bank, other of the it was sultation officer any note, without bank was not a bona purchaser fide & T. Co. v. notice. The case of Bnglish-American Loan Heirs, cases upon from the last two supra, distinguished was sought that the whose person knowledge ground director, had no merely the bank was charged affairs. of the bank’s active in the management participation D., In Black Hills National Bank Kellogg, W., 1071, the cashier N. that it was held of a bank as to defenses note made to against promissory him in his individual him transferred capacity, bank, bank, it he trans chargeable appearing in of. acted the business behalf bank. case of Na tional Bank Feeney, supra, was subsequently distinguished that the cashier that case was not a ground which the loan was member the discount committee Myers, made. Co. v. Mo. App., Steam Stonecutter effect, said, the rule that the Court where an officer his individual ca of a deals with corporation is not uncommu pacity corporation chargeable nicated facts trans affecting validity action, does not where the .officer is for the apply acting h'imself, as well as the case corporation distinguished Lovitt, Mo., 520; National Bank v. Merchants' Heyward 218 v. Citizens’ C. Concurring Opinion S. 770, 825; W., 35 Am. supra, up.on ground Rep., St. acting that in that case one the corporation, officer individual, officer, with another representing déalt qualification exception corporation. foregoing 5 Cal. Unrep., is also v. McCarthy, Witter supported by P., 14 267; Grat. (Va.), 43 969. Barksdale v. Finney, 338, Bank, 1 Tex. Civ. App., & B. Savings Wilson Smith Iowa, 115; W., 1119; 90 20 and Anderson v. Kinley, 554; W., 58 N. 909.” 421; 415; Co., Ala., So., 8 Mercantile

Lea v. Am. is a strong R. A. S.), Rep., (N. St. must in the Court held that case corporation point, Riddle, one take information possessed are its of Judge Tyson’s opinion perti- agent. parts Some Thus, and, mind, on page nent here unanswerable. my Ala., 428; So., 417: Am. 98 of 119 Rep.; St. n is, fullest effect, that Riddle did have the “It conceded notice; it insisted that his wás not acquired but com- in the his for management course of agency therefore, and, cannot his knowledge plainant corporation, soundness Conceding affect the of 'that rights company. evidence, case, it rule in a is but a of the insistence proper case, the rule the facts of this and has its limitations. Under therefore, no and, can exert influence has no application, interested and Here con- its decision. was personally Riddle debt sought which the cerned agreement now ' Besides, he was sole manager collected originаted. at his will—its alter controller of the creditor company one, the seems, it sole stockholder but it ego and,— Indeed, it is difficult a nonresident. to1 other being consider itself, so com- t-hán the creditor corporation him as other and under to his subject weré affairs of pletely will he in this transaction particular his immediate control. But result himself and for company. acted both'for him acquisition personally that transaction the note for his evi- $30;000 company of bank stock Pall 1925 loan, $90,000 collateral. All of and some dencing this he his as of the consideration and comány acquired part loan, for his cor- the debt which making constituting So, now this to collect poration attempting proceeding. then, we must Riddle two as an look upon capacities—one Riddle, individual, his and the other as manager of company. individual, Riddle, as an are found and as manager, entering into a their with the benefit joint joint transaction Piedmont & Improvement Company, Land with full of the organization details legal knowledge short, of that he as an individual man- and as company. their interest. joint an act for ager co-operated doing As to act transaction became as one they particular must be one person, imputed knowledge Riddle the other. For Riddle as individual and as gen- eral óf not do a act corporation his could manager single It for their mutual benefit from different would standpoints. for him to had a dif- be a have psychological impossibility the affairs of the debtor cor- ferent consciousness respecting from what as of his general company, poration, manager we hold that as manager he had and so individually; general of the debtor he had the affairs familiarity same individually. he Ander- company undoubtedly possessed Iowa, W., 554; N. 909. Huron Print- 58 v. 90 Kinley, son D., 520; W., Kittleson, 57 4 N. 233.” & Co. B. ing Ala., Am. 147 119 Rep.; St. Again, page on So., 418, he said: man- had while acquired Riddle “Suppose in a the one transaction prior his ager company, involved, communicate it to corpo- and desired here was, it ? He ration, he have commmunicated to whom would said, all intents corporation purposes we have say but sheerest nonsense to nothing It could be itself. to him- he communicate should that as agent of his corporation. managing representative self' as in no could notice other acquire way the corporation Since Concurring Opinion than by and officer, its through head or managing it will scarcely doubted that notice to' such officer is of necessity notice to it.”

See, also, notes to v. Hamilton Lilly R. A. 561, (N. Also, S.), and 563. First National Bank v. Burns, St., 434; E, 93, notes; Ohio N. 49 L. R. A. (N. 764. S.), These cases hold the knowledge of agent must be when imputed, he sole representative. See, also, 2 C. J,

A very reason for the rule that illuminating notice to the is agent notice to the is found in Machine principal Co. v. Co., Furniture Ala., 190; So., 174 726; 1918B, 56 R. A. 924. Said the Court:

“Constructive notice the actual principal through of the knowledge evidence, is not a agent rule of but one of substantive law. Given notice to or of the knowledge agent, received while so and the is acting, conclu- principal it; bound sively not because by fact, he ever knows it in be- cause his actual" immaterial, is utterly but be- cause as to the which the thing is agent doing agent in law the and the principal, is in law the agent. Their legal Nor identity matter, can it in this complete. rule, of the aspect whether the not, has or has private or reasons interests which make it even certain unlikely that he will not inform his principal.” Brown, bar, the case at who made the trade with Miss Heyward, was the Bank. What he knew the Bank knew. If he had wanted impart information to the to whom would he have it ? imparted he Would1 have had to “I, say: individual, as an hereby notify myself, presi- dent, that I made a usurious have contract with Miss Hey- ward ?” Mills, Mass,

Atlantic Mills v. I'nd. Orchard 147 E., 496; 698, N. 9 Am. is a Rep, St. case in strong point. There Gray corporation sought Bank with notice. At 700 of Am. charged Rep.; St. page Mass., 273; E., 17 N. the Court said:

“It is true that no officerof besides knew Gray the plaintiff checks; of the fraudulent of these in the very but origin them, transaction of was represented receiving plaintiff alone, by him and is Gray, bound knowledge. * * * There was no transaction whatever between Gray and the the transfer of this plaintiff respect money, in which the either in whole or represented, plaintiff and, therefore, than by any Gray; other part, person

* * * must had be deemed to have plaintiff funds, because, true ownership, receiving acted It must be deemed to solely Gray’s through agency. knew, known he cannot retain the benefit have what and it of his act without of his knowl- consequences accepting edge.” Mass., 280; Am.

Again 707 of 9 (at page Rep; St. 17 N. 505): beneficial,

“It cannot so much of act as was Gray’s adopt the rest.” reject the Bank in case to recover is seeking So present Brown, a contract which it cannot made its agent, through without with his do taking along knowledge. States, Curtis, 262

The case of & H. Co. v. United C. S., 216; Ed., 956, Ct., U. 43 67 is a case strong L. Ed.; said, in Taft 960 67 point. page Chief L. Justice S., 224; Ct., 262 U. 573: bar,

“In the case at Holbrook was the sole acting in to land for it. It is true titles securing company he make the more titles he more would got profit that, out and we as between may assume agency, him in fraudulent for the titles company, securing instructions; he he was his but company, violating adventure, in a common and if the were company company adventure, of that insists on fruits it must be retaining .Bank Citizens’ Concurring Opinion with the charged whom knowledge agent through the fruits came.” St., 434; Burns,

First National Bank v. 88 Ohio E., 93; N. A.R. is one the best S.), (N. L. considered cases to be found on the all of subject. Nearly the cases on the are discussed. subject syllabus as -follows:

“A can act its officers and only corporation through and the agents, of such officers and knowledge agents the transaction of the business within corporation’s of their authority becomes at scope once without actual or commu- corporation any presumptive nication from agent principal.

“Where the officer is both for himself as an indi- acting vidual and as in the manager banking corporation pur- Bank, of a chase note from himself and his action in that behalf is and ratified man- adopted as a man is as man- ager’s knowledge equally of the Bank. He cannot únknow as what he ager manager knows as a man. To hold otherwise would be to. promote it.” fraud rather than (Headnotes by Court.) prevent Wannámaker’s remarks are Judge very Some striking, to me In 49 R. they seem unanswerable. A. (N. St., 422; ot the bottom of Ohio (88 S.), page from N. Mechem on 95), Agency: quoting then, notice or

“Whatever reaches the knowledge, under circumstances within these of his (matters scope law reaches authority), principal.” Wannamaker Judge proceeds: from “This case of those сited distinguishable many brief, in the error’s several reasons. The plaintiff Boesel as and active agency manager admitted; second, is what he did as such agent authorized the Bank. This is estab- fully conclusively fact that the Bank at no time the the by' repudiated lished but, the or on questioned agent’s authority, transaction the Bank Citizens’ notes, to hold said suit brought continued

contrary, the them, error for a reversal and is now prosecuting it is admitted not below. this case judgment Again, manager that Boesel as active only notes, Bank as such fully authorized to purchase officer, committee, or no board of but that other person, needed whatsoever any directors to take complete .action contract, such a case in whereas purchase. Again, are those cases cited tort.” many A., Wannamaker, R. Again, says (N. Judge St., : at Ohio 103 N. page 96) S.), (88 60 E., “In First 78': National (C. C.), Blake view, “A number of cases are of this cited large support and it is well that an or settled officer with agent, dealing account, or on his is not own corporation principal communicate which would be presumed conceal, his interest to or corporation with But there is room not such no chargeable knowledge. where is the application this-principle in the If sole of both transction. representative parties of the Bank in the Cornish was sole representative himself, there was no one from whom transaction- concealed, to whom it could information could have been If he sole been communicated. was the representative have have each each must had knowledge.” party, equal Wannamaker, otherwise,” “To said “would hold Judge fraud; door for all sorts of widest possible open fraud, less the likeli- aggravated more atrocious Be- liability upon Why? of fixing principal. hood the less to communicate the likely cause would no has in sound place fact to the principal. holding Such morals and not to be or good ought encouraged business our Courts.”' that Brown’s conduct was fraud- be also said may It cent. There- The Bank was satisfied get eight per ulent. for Brown to fore, no fraud on the two get it was Heyward Bank

Concurring Opinion [13S cent. was not He out cent. per of one defrauding He was not in a transaction which neces- engaging would result in sarily to the for Miss injury Heyward not ; bound to it was a her usury; personal with plead right not, she could could or as she chose. Cothran,

In the of Mr. is opinion position Justice 1916, 3640, 1922, taken Act that the now Code Section Law, repealed the the violation of penalty Usury therefore, concerned, that, so far as the case is present 1916, the contract was although made before the Court cannot penalty. In answer to this apply position, is sufficient 3640 is say not section Section which fixes the done That is penalty. by Section It cannot be Act of contended that the Sec- repealed Therefore, tion 3639. It does not to do so. undertake section fixes the and which cases covers all penalty is still in usury, existence.

It is true that where Act a is fixing penalty repealed, inflicted, there can be no even punishment though pro- Act visions of the before the This were violated repeal. a true where criminal statute has been is violated and a conviction had after the statute creating repeal offense аnd reason for that fixing penalty. There is obvious: no left to power impose the penalty. answer, me, A it seems to Mr. complete position Cothran, is the statement the section (3639) Justice was never penalty usury That prescribing repealed. all section condemns usurious transactions and provides therefor. penalty terms, its

Again, express provides Section that—

“No shall be lender under charged pre- section, reason of money paid' to be ceding agreed. loan, others order paid borrower in obtain where the neither took nor lender contracted to take more than lawful interest.” Bank

Citizens’. Term, 1925 FaU consti- defines should not This Act what clearly (1916) It did undertake tute in a state of facts. usury, given statute, but, the contrary, to on repeal expressly cir- these refers to and 3639. Under recognizes Section cumstances, Mr. all of the authorities quoted by Justice' Cothran have no manifestly application. lia-

Next, Bank from does 3640 relieve the Section received, interest on the contract for usurious bility of 1916? before the of the Act made passage all It is a rule of construction that statutes statutory are be only op- construed as having prospective to eration, and intention of the Leg- unless purpose effect islature to them a is expressly give retrospective declared, used. or is from the language necessarily implied understood that This rule is so and thoroughly universal will useless to it. The reader to cite support authority 1916, in the Act of any search vain to find expression must, there- which will make it We retrospectively. operate after fore, read it as to transactions only occurring referring its adoption approval.

(cid:127) reasons, re- For I think should be these judgment versed. Circuit concurs. Judge, Shipp,

Mr. : The action is for (dissenting) Cothran Mr. Justice executed the defendant five mortgages, the foreclosure of Bank, of certain secure the payment the plaintiff as follows: in amounts bonds dated and 4,000.00 20, March 1912...........................$ 18, 600.00 1913 ............................ April 950.00 1915 ........................ November 700.00 I, ............................ April 770.00- ............................... May, 7,020.00 Total ................................$ cent, cent, interest and ten per The bonds call for eight per The loans enumerated were consoli- fees. several attorneys’

Dissenting Opinion C. loan, carried as one to- dated on books 24, 1916, $7,020 on interest taling upon May 24, 1919; has- been the balance November paid up claimed to due $7,020, with interest at eight per being cent, from that date. was in the usual foreclosure form. complaint

defendant “the said set claim of up usury, plain- tiff, con- Citizens’ its officers and agents, through defendant, tracted to as interest from this upon receive several debts mort- evidenced several bonds and set out in than said amount gages complaint, greater cent, cent, annum”; annum, wit, ten eight per per per per that the interest loans November so received said up to .24, 1919, $4,382.61; amounted to that the double penalty, interest, $8,764.22; the amount of to amounts she entitled set that amount off against principal difference, loans, $7,020, due Bank her the by leaving $1,744.22, the basis a counterclaim her. interposed by

The made a Carolina & Trust Company South Toan a junior was awarded party holding mortgage, judgment cent, $3,750 with interest at annum from eight per per cent, 1, 1922, November and ten fees. No attorneys’ per has been and that objection interposed judgment out of the passes appeal. Bank and the de- transactions between plaintiff fendant, an Mr. Heyward, Miss began application by Nat. of Miss and for her Heyward, Heyward, brother acting Brown, $4,000. for a loan of He with C. R. I. negotiated Bank, the Bank to Miss by, of the and loan was consummated Nat. Heyward agreement as her life of the loan Heyward pay during cent, Bank, annum interest to the and two eight per per cent, commissions The in- president. per personally cent, at was at terest stated intervals to eight per paid cent, and the commissions two to Brown. per were commissions payments handled separately, Citizens' Bank and use to Brown for his

being regularly paid personal benefit, unknown, unauthorized, the Bank. and unratified by to take Master Harvey simply

The case was referred to the coming he did. Upon testimony, report Honor, Judge in of his the case heard by report, dis- He filed a decree of the Fourteenth Circuit. Johnson, fore- claim usury, ordering the defense and allowing sub- From has closure. his decree the plaintiff appealed, consid- hereinafter the several stantially questions raising Court, the of this ‍​​‌​​​​​‌‌‌‌​​​‌​‌‌​​​​‌​‌​‌‌​‌​‌‌‌‌​‌‌‌​​‌​​​‌​‍ered. the members division of Upon the Court before heard duly upon reargument appeal and twelve banc, members of the Court en of five consisting, seven, the of ten to a record vote Circuit Judges. By reversing Chief was approved, opinion Justice that the transaction decree of and holding Judge Johnson usury. was infected with stand, decision, is as if allowed to

The result of that has spent who received mortgagor, follows: The of her ob- entirely of the Bank’s is relieved $7,020 money, counterclaim, it, allowed, her to return and is ligation amount That is to received $1,744.22. say, $4,382.11; double that sum is “in of interest” is respect That is sub- $8,764.22, the allowed the mortgagor. penalty debt, $7,020, leaving a credit of the ject to $1,744.22. Bank in mortgagor debt to it : the Bank is that loses The effect finances of upon 7,020.00 of the The debt....................$ 24, 1919 to it November Interest from upon Jan- 3,427.32 1, 1926 ......................... uary 1,744.22 The counterclaim.......................... ...........................$12,191.54 Total loss action, the Bank has become institution of Since been, insolvent; taken over Exam- it has State The in of iner, liquidation. are now process its affairs therefore, will, fall $12,000 than upon more loss of above Dissenting Opinion C. stockholders, creditors, and other who had depositors, not the slighest of the participation wrong- ful it, conduct of or in the fruits of president, strained, and, are held I they the most responsible upon think, erroneous, law. technically constructive application (cid:127) That the conduct of the Bank was rep- president rehensible, law, the interest of the contrary against Bank, creditors, violative of his solemn trust de- and stockholders of the and in his in- positors, own terest, for benefit, one no will personal deny; attempt but reasonable that fall this loss should inno- upon creditors, stockholders, cent rather than depositors, transaction, the nefarious has conspirator who $7,000 received and more than of the Bank’s spent money? As Court of the quoted by Supreme United States Co., 141 384, S., Ct., 1, Fowler v. Trust U. 12 S. Ed., : (35 786) forfeitures, “The law does not favor and in such cases the Courts hold to a and strict with the rigid compliance law imposing penalty.”

The decree of should- be affirmed Judge Johnson reasons: following borrower,

(1) payment by an exorbitant lender, commission to it, of the where together with the rate, interest exceeds the lawful cannot charged, be construed usury unless the lender was cognizant exaction. illegal

(2) of a bank making exaction illegal from a borrower for his own personal benefit, will not to the bank. be imputed law,

(3) that under the as it Assuming stood prior 1922, 3, Act (Code § passage Vol. the transaction in 3640), have been question’may judicially usurious, therefor, at declared the time trial the penalty 3640, under had been Section repealed by Section and was not recoverable. .

1. The payment by borrower of an exorbitant com- mission to the lender, agent it, where with together the interest exceeds the charged, rate, lawful cannot be con- strued unless the lender was cognizant illegal exaction.

It seems to been have assumed that a of two charge cent, per commissions was an unreasonable and exorbitant one, an illegal exaction. There is no evidence the case upon subject,, was the which the ground upon E., in the judgment Case, C., 152; Mayfield S. S.

370, will, was however, reversed. I assume that it was unreasonable, exorbitant, and that if illegal, properly charge- able to the of which Brown corporation president, sufficient infect the transaction I do not usury.

think that there be a can of doubt under the shadow deci- others, sions of this Court all and that this exaction illegal cannot be the lender charged up against unless he was cog- nizant of the fact.

The case Brown, C., 173; of Brown v. instructive; and interesting admittedly case of first in the impression at State issue. upon point case question was whether the exaction an $1,500 commissions a loan upon constituted usury. record shows that that question was to be solved further whether the lender had notice question of the exac tion. The American Freehold Mortgage Land Company, an was the English corporation, mortgagee-lender; they had a business connection with Corbin of New Banking Company clients; York who for their City, loans placed latter op Duncan, erated in South Carolina IT. W. attor through Brown, ney at Barnwell. The A. mortgagor, applied John $7,500, to Duncan for a loan the usual signed appli loan, cation Duncan his appointing negotiate $1,500 him agreeing commissions his services. pay note, All of the papers, mortgage, application (show Duncan the commissions ing agreement pay stated), C. 135.

16 S. — — Heyward Citizens’

Dissenting Opinion the Com- to Corbin Banking were forwarded Duncan the the loan after some was delay perfected pany, in- Duncan, off $7,500, who- certain sent to- money, paid $1,500 retained premises, cumbrances the mortgaged upon balance, about commissions, and held for his agreed Brown, the mean- had died in $1,500, for the estate who In estate defense time. the settlement of Brown’s The Court the mortgage. was interposed against ' said: to is, commissions “The above to agreement pay [that loan, for the original part application was Duncan] and the drawn which was forwarded and accepted, papers Now, the sent back and signed. in accordance with were is, $1,500 this contract make pay did question the actual loan as to the who were mortgagees, usurious * * * makes think the authority lenders? We weight of fact, that whether contract question depend upon * * * amount, and unreasonable excessive pay they it. If furnished money upon known those who made and accepted, knew the facts when proposition held to the loan will be cases. citing usurious” — had held that Duncan The Circuit both and Cor- Judge were loan Company general bin agents Banking that had actual they knowledge “and mortgage company, exaction and therein.” of the usurious participated Court said: Supreme benefit, did or not did derive mortgagees

“Whether $1,500, rea- which was not a from indirectly, or directly rendered, can- services we charge any sonable proper such had that contract they doubt that had made, re- the terms they accepted when proposed, been money.” mitted the concur that Court did not Supreme

It will be observed had the Circuit that the Judge mortgagees in the finding exaction, but held that regard- in the unlawful participated it, fact, if which they had they of this less fact, found aas contract was usurious. This decision appears be based the fact not only that the lender exaction, had notice of the but a fact such exac- tion was unreasonable under circumstances. other words, if the commissions -Duncan had charged by been services, a reasonable for his compensation contract the. usurious, would not have been the although mortgagee may exaction; have had notice express for the Court specifically states:

“One who a loan of negotiates money may properly allowed reasonable for his and compensation expenses trouble, in addition to interest.”

This is in clearly out brought dissenting opinion of Mclver, Chief and the to principle appears be recog Justice nized cases, in the later v. particularly Mayfield Mortgage Co., C., 152; E., 104 S. where it is said: S.

“It was not denied that the borrower could be required to a pay reasonable fee without violation of the -statutes against usury.”

In an exceedingly strong dissenting opinion, worthy that Mclver, great Chief he Judge, takes posi- Justice tion that the transaction not constitute does unless usury, the lender not had only illegal' exaction but in the participated benefits therefrom. accruing

Personally, writer approves doc- opinion trine disclosed and thinks dissenting opinion, Brown, v. Brown the case of so far-as the leading opinion therewith; is inconsistent should be overruled. The prop- osition that an intermediary has the without right affecting contract with to original usury, reasonable charge loan, sum as his services compensation negotiating whether the lender was regardless the ex- cognizant not, action or of whether regardless lender partici- not, benefits from such exaction or pated accruing unsound, for if lender fundamentally -knew - exaction, to and was or participate therein, subsequently Citizens'1 C.

Dissenting S. Opinion charge whether the so, immaterial it would"be entirely did event, lender otherwise; in either was reasonable rate. Fowler than have more legal would received Ed., 1; 384; Ct., Co., S., 141 U. Trust S. think, therefore, test I that the prescribed Chief.Jus- best, namely, agree- tice Mclver is the simplest intermediary an does ment for commissions to be paid unless lender is par- not contract with usury, taint the benefit there- substantial in or is to receive some ticipate concerned, it is from. But as the case present so far now adopt should all whether the Court at material Cose; in the Brown or the minority opinion majority that the difference, will be assumed' reduce the points rule still majority obtains. C., Baxley, New Co. v. England

444, 885, with commis in connection the charge sustained, was not intermediary specifically sions paid to no evidence tending the that there was upon ground exaction the illegal show that the lender knew of alleged in that the of the opinion other than writer Justices, result,” in case, but there is nothing “concurred in the in the doctrine announced their recession from dicate the Brown Case. E., 990; C., 345; 26 Gillam,

In Co. v. 49 S. S. Mortgage com- E., 203, in connection with 29 the of charge S. sustained, specifically to an intermediary missions paid the of the lender on part of ground knowledge said: Court of the exaction. alleged illegal consummated, the Corbin Banking loan “When $200, besides amounting commissions deducted Company This was with hereinafter mentioned. done other sums the case Under on the knowledge part plaintiff. 452, Brown, C., E., 17 these facts 38 Brown S. S. constitute usury.”' Woodward, C., 521; 65

In Co. v. S. Mortgage of the principle the Court repeated exaction test unlawful was the of usury. They alleged say:

“The excessive and unreasonable commis- receiving the lender actual sions agent knowledge, constructive, or renders the transaction principal, usurious, such the interest added exceed if commissions and rates” cases). lawful (citing and universally

“The doctrine is well settled recognized, take a reasonable lawfully an commission may agent or bonus from the borrower for and services expenses loan; whenever the lender is not effecting privy or -in no between the borrower arrangement agent, bonus, in the commission transac- way participates * * * tion free the taint of usury. will be from regarded -If a loan from the money, agent making accepts interest, a bonus rate of such beyond borrower legal usurious, act of the will not render the contract if bonus was taken without him.” on not received by Tyler Usury, and was Palmer, S., 98; Ct., 301; U. The case Call v. Ed., 559, that case it appears precisely point. Davidson, Mrs. that Call pro applied Burnham, lender, $10,000. The agent, a loan of posed *of Mrs. money the loan from Davidson which negotiated investment, $10,000, note for he held for Call’s taking in connection with the $2,000 his services reserving difference, $8,000. In the suit Call loan paying that the reservation of Call was contended against $2,000 infected the note with The usury. Burnham by facts, statement of Court', says: in the preliminary Mrs. of this sum was to Davidson—she “No part paid $10,000 not that it had been deducted from did know * * * Call, never authorized lend lent her to and she by cent., than ten rate interest or per her at a of money greater of the sum lent. In commission or bonus out to retain any v, Dissenting Opinion S. G. no short, and had no benefit from usury she received it.” Court, it is said: In opinion clear, therefore, “It that Mrs. Davidson lender] [the interest, or reserving cannot usurious be charged taking of her Burnham. bound the acts agent, unless she was that, an It is settled when agent But she was so bound. in- lend for lawful who is authorized money rate, more than the lawful terest exacts for his own benefit the loan or authority principal, without rendered is not usurious.” thereby authorities, including Court quotes array Iowa, W., 397; 1 N. from Brigham Myers, following 613; 140: 33 Am. Rep., com- a bonus or money

“When an takes loaning interest, himself rate of without beyond mission legal consent of his does authority, or principal, knowledge, the loan not affect with principal.” the' concludes discussion with strikingly Court remark: on decisions seem be founded principles

“These plain For when two justice persons, right. borrower, their own conspire together purposes law, cаn for their violate how acts justly punishment the innocent third lender?” imposed on party, Pet., 378; Ed., 163, In Bank v. Waggener, L. Court said: is for the contract on its face

“Where interest legal only, there it must be that there was some proved, corrupt agree- ment, shift, or device to cover and that it was usury; * ** in the There must contemplation full parties. be an intent to take interest.” illegal Co., S., Ct., 841; Grant v. Insurance 121 U. 7 S. Ed., 905, the Court said: Grant,

“It contended is.also that the loans received by him from the plaintiff were usurious interest to the Heyward 235 v.

Citizens’ Term; 1925 . the entire $9,000, amount of and that interest thereby are of that the evi- fqrf.eited, we opinion .decreed .But shows that the commissions Grant dence paid n loans alleged have were (in consisted), not no contract made paid plaintiff plaintiff.

for usurious interest did it take any.” nor. Baaden,

To the same effect are: Forbes v. 31 N. Eq., J. 92; Osborn, A.,

381. 41 3 Nichols v. N. 155. Eq., Short J. Pullen, Ark., ; W., v. 63 385 38 1113. S. v. Sherwood Swift W., 804; Camak, Ga., 43 507.1 (Ark.), v. 97 S. McLean E., Ga., E., 25 235; 493. McCall v. 116 42 Herring, S. S. Schmeltz, Ill., 560; 468. E., Gantzer v. 206 69 N. 584. Minn., 343; W., 3. Brainard 66 69 N. v. Prouty, Babcock Minn., W., 199; v. 69 71 Murray, N. 913. Commonwealth Dakko, Minn., 386; W., Co. v. 89 94 N. 1088. Franzen v. Wis., 239; Hammond, W., 169; 136 116 N. 19 R. A. L. 399; Havard, S.), 128 Am. 1079.

(N. St. Clarke v. Rep., Ga., 242; E., A., 837; 111 36 R. .51 499. S. v. Hughes L. Griswold, Ga., 299; E., 82 9 1092. Gardner v. Ruffner, Ala., 666; So., 206 Davis, Harvard 91 580. v. Ga., 580; 145 E., 740. Ga., 113; 142 Wacasie v. Radford, 82 S. 442. S., Silverman v. Katz 120 N. Y. 790. (Sup.), Brown Jones, v. S., 89 Misc. N. Rep., Y. 571. v. Testera Richardson, Wash., 377; P., See, also, 998.

vast in note to array citations 19 R. (N. A. S.), sustaining proposition.

“Money to a paid mortgagee’s agent, pursuance of an between such agreement the mortgagor as com- for, of, and as consideration pensation the mort- procuring forbearance, no thereof gagee’s part received being cannot be on deducted mortgagee, foreclosure of the Baaden, usary.” Porbes mortgage, N. J., 381. Eq., “In absence of any proof showing the lender of received money any commissions which an agent 1Reported in full in the Reporter, Southwestern reported in full Ark., in 64

Dissenting Opinion loan, be will for a defense usury charged procuring 92; A., Osborn, 41 3 overruled.” N. 155. Eq, Nichols v. J. for “A trust a loan is not void deed to secure given retained of the len reason of commissions agent der, if the commission.” the lender had no knowledge W., 43 507.1 v. (Ark.), Sherwood S. Swift a husband makes a loan of his wife’s “Where money and, her made to her for the besides note agent, prin rate, takes with interest at the full also [sum], legal cipal himself, her con a commission for without or knowledge Ark, sent, Pullen, 63 the loan is not usurious.” v. Short 385; W., 38 1113. S.

“A is not the fact that the loan rendered usurious by consent, lender, or of the his ex knowledge without agent his service in acts from the borrower a for addition bonus interest, rate which the contract re highest legal Hammond, for serves the benefit the lender.” Franzen v. Wis, 239; W., 169; 136 399; 19 R. A. S.), 116 N. (N. Am. 128 1079. Rep, St. the maximum rate of interest was re

“Although legal loan, the lender’s the mere fact that served upon given an additional sum as a com borrower agent charged the loan did not render transaction mission making lender, he did not authorize such usurious as to the when same, of the and did not share had no knowledge charge, Camak, Ga., 804; 97 25 in the v. commission.” McLean E., 493. “If fees which in addition to of lender deducts make more than rate of interest and other charges eight cent, loan, time but lender not authorize during did per it, no transaction would not had knowledge charge, 580; Davis, Ga., v. as to lender.” Harvard usurious E., 740. 89 S. commission above the

“A reservation of broker’s legal not taint the transaction with interest does usury, rate of lender, of the unless it is if broker is even (cid:127)237 Bank v. Term, 1925 unless the lender of the lender made with or in addition to lawful derives some benefit therefrom 666; So., Ala., 580. Gardner Ruffner, terest.” v. Tail- had authority, to the decided

“According weight lender, his man been a and immediate agent direct from commissions own use and benefit receiving borrower, from without authority lender, usury.” infect the loan with Hughes would not 299; E., Ga., Griswold, 82 9 S. Ga., Havard, 837; Clarke A., sustained the usury R. the of plea

L. of fact lender had the knowledge that the ground specific added, to the that its commissions which agent had collected interest the rate. legal exceeded charged

“A of the a commission the borrower charge agent of the lender without the lender’s participa tion, and bor as a matter between the the agent private lender, not the loan as .to the rower did make usurious interest was in excess the commission addition to though 239; Hammond, Wis., 136 v. rate.” Franzen legal 399; W., 128 169; R. A. Am. S.), 116 N. 19 St. (N. 1079. Rep., exaction, a usurious solely

“When makes agent or sanc- authority benefit his own without knowledge, on part tion of his and without reason principal, such on the conduct part anticipate action, if he is not such he has illegal affected agent, ratified it.” Common- benefit therefrom or received-any Minn., 386; W., N. Dakko, 94 1088. wealth Co. v. 89 “The fact that who loaned money an agent prin a rate of retained commission at the maximum interest cipal a of the loan did not require out of the finding proceeds was retained without the knowl where commission he received no benefit' or consent of the principal edge Minn., ; W., 66 343 69 Prouty, Brainard v. N. 3. from it.” Minn., W., 199; 69 71 N. 913. Babcock v. Murray, v.

Dissenting Opinion “Where a broker loan of his negotiated money client’s at the full interest, rate of legal charged borrower commissions for which commissions obtaining money, lender, were not either received or in part whole the loan was not rendered usurious.” thereby Gantzer v. Ill., 560; E., Schmeltz, 206 69 N. 584.

“When more than no rate of interest reserved legal loan, on a that the lender’s charged borrower commission, usurious, will not render the transaction if the lender did not authorize such nor com- charge share Ga., 522; mission.” Herrin, E., McCall 442. the maximum rate interest was reserved “Though legal loan, on a the mere fact that the lender’s agent charged borrower a commission for the loan did not render making lender, transaction usurious as to the' when did not he authorize same, and had no charge Camak, did Ga., not share in it.” McLean loan of of bro- “Knowledge collection procuring fee .kerage to more than amounting interest per eight cent, Davis, will not lender.” Harvard v. imputed’ Ga., 580; 740. is well

“The established that a bank not con- is principle visited with of fraudulent its structively notice acts which officer it.” would disclose Real to Co. naturally Estate F., Co., 566; A., v. R. 113 C. C. Bank, Ala., 120; So., Tatum R. A.

1916-C, 767, is said: however, is,

“There a well-recognized to this exception rule of the as for general liability principal knowledge or notice the reaching while within line agent acting the of his That scope authority is that exception is not so with such chargeable notice when latter an engaged committing independent act, fraudulent act or to' be knowledge imputed' relates tO'this fraudulent transaction.”

Citizens’ Term, 1925

Also: or limitation as

“But this has a exception qualification trial; is, like on cases the one where the corporation matter, in the and the has no other agency representative on the of or notice party part asserting knowledge no or fault in trans- corporation guilty negligence action.” that, therefore, no.doubt,

There can bе of the proposition under the other by every law as declared this Court Court, intermediary, an exaction of commissions by to the interest for exceeds the legal added provided rate, contract cannot be held to have tainted the original that such exaction with unless it be made to appear actual or constructive of was with the knowledge lender.

In the case at bar the Circuit held that the Bank Judge had action its no actual notice of the reprehensible but it is contended the defendant “as president; Brown, and director president loan, of the Bank in making knowledge to the plaintiff commissions is

respect imputable Bank.” in the correctness of this contention will be discussed '

next subdivision this opinion. (cid:127)an II. The of a bank that made, from his exaction has been illegal personal implied benefit, it, act in cannot be for his imputed own making the bank. are, in five valid reasons

There my perfectly opinion, Brown, that he had required why commissions, exaction of cannot mortgagor illegal the essential element of supply imputed Brown, v. under the case of Brown supra: knowledge, com- The act exacting illegal (1) president his scope agency; was not within missions borrower; is a tort usury against The offense of (2) Dissenting Opinion unless tort of his is not liable for the principal scope the actual tort was committed within (not apparent) ot the agency; borrower; is a tort against offense of

(3) or notice has no the rule application of imputed torts; extended to will not be The rule of notice (4) 'imputed the unfaithful agent; is in collusion with one who be when notice will not applied The rule of (5) imputed of his agency, within agent, although engaged scope a fraud of it for the of perpetrating outside purpose steps for his benefit. his own upon com- the illegal exacting As to the first ground, of his the scope outside of missions Brown was acting agency: conferred authority It rate. loans at the was to legal

as its agent, negotiate tending there no evidence cannot be presumed, If he had taken show, do more. that he authorized to exaction, if the or face an illegal its a note showing upon it, the situa- the benefit of any had received part different, me too but it seems to plain been tion would have for own and collecting charging argument he outside scope exaction benefit an illegal stepped of his agency. interest at a rate of to loan money legal

“An authority it at to loan authority implication does include by not law will never to violate the authority rate. An an illegal exacted, in addition to the Danforth be When presumed. cent, note, in the some- interest, was embraced ten per himself, the le- he went outside of the benefit thing au- did not and Knapp of his agency; gitimate purposes he should it, by implication, either expressly thorize Iowa, Knapp, Gokey thereby.” affected 391, it said: R. A. S.), (N. In a note to is not rendered usurious by a loan held that “It has been 241 Heyward v. Citizens' Pall 1925 borrower, for his own bene- lender’s agent charging loan, fit, in or for excess a commission procuring bonus interest, the commission rate of where the highest legal consent, without the lender’s charged there no to him with such knowl- were circumstances charge that, such the Court in edge; charge, saying making for it wfill individual capacity, his own agent acting do his not that the lender authorized presumed be agent an cases. illegal citing many act”-—

See, also, R. A. 558: S.), note to 29 (N. L. on his own

"An fraud committed anby independent and bears of his account is beyond scope employment, his a for a tort committed servant willfully by analogy busi and not as a means own purposes, performing v. him master.” Gunster Scranton intrusted to his ness A., 650. Allen Pa., 327; 550; Am. Co., Rep., St. A., 716; 917; 5 R. Co., Mass., N. R. 15 Am. St. Rep., Co., 65 v. Capitol on-Houston Co.

In the case Thoms (now F., 341; A., Taft 12 C. it was said by Judge C. Chief : Justice) act- ostensibly though

“The truth is that where agent, committing really is in the business of principal, ing fraud, benefit, outside scope his he is for own acting therefore, would, unjust be most of his and it agency, it.” principal charge In the it is said: Knobelock Case his in a fraud of an while engaged

“Knowledge benefit, way in any par- own principal Participation cannot to the be ticipant, imputed principal. test is not fraud in the fruits agent’s imputable principal,

whether the agent’s knowledge whether the agent but it affords the question evidence on within scope--of the fraudulent transaction was acting ratified, or subsequently authorized agency, previously which is the test.” Banic

Dissenting Opinion S. 'C. As to the second the exaction of is a ground, borrower, tort against and before Bank can held it, it must responsible have been committed appear within the actual (not of apparent) scope agency. Co., C., 900, 19; E., Goble v. 115 Express the Court declared:

“Hence a cannot held in be liable principal damages the tort of his unless the -was the time agent at agent acting within the actual his scope agency.” to the third

As that of usury the exaction is a ground, tort the borrower and the rule of against imputed knowledge or notice has no to torts: application

The defense-of set in the defendant case up by bar, at if tort, tO’ assimilated an in action is certainly based a upon it statutory has no element penalty; certainly of an action a contract. As to actions in tort upon and actions based a same rule statutory should penalty, appfy. It is to find in the Burns, case Bank v. interesting 88 Ohio St., 434; 93; N. R. A. (N. S.), the fol- L. : lowing in a in

“Manifestly, case tort there sounding would be no in law act of the presumption wrongful agent act was the unless actual principal to do authority act or ratification subsequent after all the proven facts and circumstances the act were known. No man is, fact, to do in in presumed law, There and in wrong. morals a reason for the good distinction that there may not be between identity in legal principal agent tort that there is a case case contract.” to the As fourth that the rule ground, notice imputed will not be extended in favor of one iswho shown to have been in collusion with the to work a agent his wrong upon principal:

“The rule with his charging knowl- agent’s is established for protection those who deal with edge If, therefore, faith. the third agent good person Term, 1925 Pall acts in to defraud collusion with the agent principal, information the latter any will not with chargeable transaction, and ’whichthe receives to the pertaining third in- force where the with applies greater person him not enters structs into agent, agreement 2 C. J., communicate principal.” Ala., 120; So., R. A. In Tatum v. 1916-C, 767, im- if claims the held that the person, who aided and abetted the putation agent’s knowledge, he is his fraudulent agаinst purpose principal, not entitled to such rely upon imputation,

Mr. in his work on Banks and Tiffany, Banking (page states the 336), clearly comprehensively: principles “The the will not be to the knowledge agent imputed bank when the is an agent committing engaged independ- account, ent fraudulent act his own and the upon act, be relate to is facts which to sought imputed which, communicated, if would consumma- prevent fraud, tion of the or when the is on his agent openly acting or in a transaction with the own behalf behalf another on bank; transaction, an act but when in does any agent bank, as the sole and is not acting representative another, on himself his con- behalf of or although openly fraudulent, duct be it is held that the bank may generally act, in to retain not avail itself of the an advan- may order or to a claim founded thereon without being assert tage with his charged knowledge.”

As the fifth that the rule of notice imputed to ground, will not be where the within though applied agent, engaged for the of his aside agency, purpose per- scope steps his an fraud his petrating independent upon principal own benefit: notice, of imputed which doctrine theory upon based, is

from is agent, the knowledge agent, will com- the course of his while within acting employment, Bank Dissenting Opinion information affecting prin- municate to his all principal ‍​​‌​​​​​‌‌‌‌​​​‌​‌‌​​​​‌​‌​‌‌​‌​‌‌‌‌​‌‌‌​​‌​​​‌​‍in the common experience interest —a theory cipal’s acts foundation, agent mankind is without where law, and in contrary interest of his against principal, his own interest.

In a late deliverance of the Court very point upon 340; Co., C., the case of Bacot C. & T. S. v. S. L. E., 562, it said: is S. knowl-

“But the rule the agent’s imputing principal is not the knowledge agent where edge applicable while for himself or for a third -‘acquired person acting * * * is such not for the or where the knowledge principal, that, to human nature and agent according experience, conceal, ad- certain in an where the acting * * * or some third relation versary per- principal, dis- son in his would defeated own interest which closure’ cases. citing ”— notice to an.agent

“While under circumstances ordinary all is notice to his it is well established equally principal, is-en authorities that obtained who not be will a fraud gaged perpetrating 531; C., Mercer, 129 imputed S. principal.” parte Ex E., 33. S. of Akers v. To the same effect are cases precisely A., C., 451; R. Rowan, 33 E., 259; Bank, C., 27 Knobelock v. 50 962. Wardlaw S. S. E., 658; Mill, C., 368; 114 Am. v. Oil 74 54 Rep., St. S. S. E., 134; C., 1004. 40 18 680. v. S. Rapley Klugh, S. 226; Rich., Me., 39 v. Bank, Chase, 13 291. Bank v. 72. 139; D., 134 Co., 23 Am. 319. N. Bank v. Insurance Rep., W., Insur 873; A. 213. Foreman v. N. 38 R. (N. S.), L. 337; Co., Va., 694; R. A. S.), ance 104 52 3 (N. S. L. 300; 444; 1071; on Agency, 113 Am. Tiffany Rep., St. § Mechem Agency, on 721. 758; So., Ala., 158; 2 also, Hudson,

See, Frenkel v. 82 W., 9 60 Am. 736. Bunton v. Palm S. (Tex. Sup.), Rep., 245 Bank'z/. Pall 1925 182. Co., Central Coal & Coke Co. v. Good & George S. F., 793;

120 A., 57 C. C. v. 161. Waite Santa City of F., 529; Cruz Booker, Ill., (C. C.), 89 619. Booker v. 208 E., 709; 70 N. 100 Am. 250. v. 94 Rep., Sharp, St. Luton Mo., Mich., 202; Hicks, 53 W., N. 1054. 131 Traber v.

180; 32 W., 1145. v. Citizens’ S. Deposit Sebald W., 130; 105 14 (Ky.), R. A. 376. Veney S. (N. S.), L. Furth, 678; W., 171 Mo. 793. App.,

“If, in the course of the in he is same transaction which his employed, agent commits an fraud for independent benefit, own it his designedly against principal, essential to the existence or of such fraud very possibility that he should conceal from the real facts then principal, n of a from ordinary communicatio presumption to his fails. agent On the principal contrary, presump tion made, arises that no communication was and conse quently is not affected with constructive no tice.” Pom. § 675. Ed.), Eq. (3 Jur.

“While the of an to be agent ordinarily imputed wоuld now principal, well appear established that there is an to the construction exception of notice from the imputation agent the principal case of such conduct as raises a clear presump- tion that he would communicate fact in controversy, as where the communication of such a fact would necessarily the consummation prevent fraudulent scheme which the engaged perpetrating.” Innerarity Mass., 332; E., 282; 1 N. 52 Am. Rep., Va., Co., case of Baker v. Hill Berry E., 626; 1917-F, 303, R. A. it is said:

“There are cases which sanction the seemingly view that directors, rule exception does not general apply and other such presidents, officers of a managing corpora- tion, act; whom alone the can through but corporation Co., well-considered case Barnes v. Trenton Gaslight N. The rule Eq., says: based on the opinion J. C. 135. S. —

17 — Opinion

Dissenting communicated the facts to that has agent presumption where the his does not agent’s (though principal apply to that of his officer interest is corporation) opposed a for in such a transaction officer stands as principal, interest to to the His being stranger company. opposed the interest of the is not that company, presumption he will to the but that company, knowledge communicate it; he will conceal that an officer a where corporation interest, theirs, is to he must his own dealing opposed transaction, them in so as to be held not to represent he but may them with charge possess, them, which he has not communicated to and which they not a number of decisions do otherwise possess”- citing— American Courts. both English “Another case in that Brookhouse point instructive is 368; A., 219; 2 Co., H., v. Union 73 N. Publishing Cas., 623; R. A. 111 Am. 6 Ann. (N. S.), Rep., St. * * * * * * 675, to there is an extended note re cases; number decided conclusion viewing great notice that the to the broad being exception proposition viz., where the knowl is notice agent principal, is an officer of while not edge acquired by corporation, himself, for the but while acting corporation, acting finds in the deci imputable support corporation, sions of the Courts of United England, the States highest Courts, Union, and the Courts of twenty-seven States * * * It no can be the cases. is believed that case citing himself found when deciding acting transaction, in a in that transaction defrauded his same received no from the and the advantage principal, transaction, notice was notice to the principal.” Va., 28; Co., Martin Land said:

“A of an is not affected corporation it, when he himself contracts with or otherwise deals agent, in a in which his interests are with it transaction opposed Heyward Bank v. 247 Citizens' 1925 the interests of the for in such a he transaction company, could not represent company.”

“Notice not is to to the merely imputed corporation because one or more of its officers have facts, where the are to especially circumstances such as raise a clear that the officer did not communi presumption cate his where knowledge to as the fact corporation, one which he is interested in from the concealing corpora W., tion.” 730; Arnett v. 251 199 947. Stephens, Ky., S. S., 133;

In American 170 Surety v. U. Company Pauly, Ct., 552; Ed., 18 977, 42 S. it is said: L.

“The that the informed his presumption agent principal of that which his duty and the interests of his re- principal quired him to communicate does where the not arise agent acts or makes in execution declarations not of any duty he owes nor any within principal, authority possessed him, but subserve his own ends or to simply personal commit some fraud against such cases principal. is not bound or principal acts declarations of the unless be agent that he at the time actual notice proved had them, them, notice of failed received to- dis- haying avow what was assumed to be said and in his done behalf.”

“An rule that notice exception general agent is notice 'arises in case of such conduct as raises a clear he would presumption communicate the fact where the acts controversy, for himself in his own interest and to that of the adversely Co., 327; A., Pa., Gunster v. 181 37 principal.” Scranton 550; 650, L., 59 Am. 1 A. & Rep., St. quoting E. Enc. 1145.

“Notice corporation is not notice president to where in his corporation, own acting interests and those of the Note 70 against corporation.” Ill., 414; Am. v. 173 Rep., citing Hospital, St. Seaverns E., 1079; 50 N. 64 Am. 125. Franklin Co. v. St. Rep., O’Brien, Colo., 129; P., 22 1016; 43 55 Am. 118 Rep., St.

248 v. Dissenting Opinion A., W., 716; 120; 34 R. Sneed, Tenn., 97 36 Bank v. F., 114 274; Am. Levy Kauffman, 56 788. Rep., St. Pa., Co., 201 170; A., 126. 52 C. C. Sproul Standard 496; 55 A., Kan. 103; 1003. Hart v. Coryell, App., P., 517; P., Skinner, 10 Kan. App., 514. Bank v. W., 825; Am. Lovitt, Mo., St. Bank v. Rep., majority is the

The conduct of the considered by president fraudu- of and outrageous the Court en banc infamously so the extent of are to to the lent that they willing go punishing Bank, transaction, in to the favor an innocent entirely party of active in the fraud. participant the of Court minority

There is not in the minds of a the sentiment, are but dilution this slightest they of outraged innocent to fall the necks of the let the axe upon disposed unanimity absolute stockholders and There is depositors. of breach the conduct the as a condemnation of president trust, the and those his Bank scandalous fraud upon stockholders, fraud as and creditors —a interested depositors, benefit, from for his individual selfish concealed purposely his principal. the the

It was is an to fallacy say president obvious Bank, him, from his knowledge notice to and derived notice the Bank. fraud which he was was perpetrating, natural was a was president corporation; that they nature of It is person. things impossible Besides, the appellant’s excep- should have been the same. Bank; agent that the tion recognizes be the same person and the could how agent principal as fol- Two is in Exception explained. part has not been lows: Brown, director the president

“And loan, knowl- of the Bank making agent is to the commissions imputable with respect edge Bank.” plaintiff ' Besides, if of the knowledge it clear that seems (cid:127) that he himself had made an exaction of com- illegal by way borrower, missions collected from the into' his own put pocket, imputable because of relation- principal them, ship between it principal is but a vain lender, which is held out hope that he be re- may lieved from the if charge should that he appear was not fact, of the cognizant exaction. In alleged it is held that the burden of borrower, proof show on the exaction; of the lender knowledge part illegal a burden of if the exceeding light on the weight of the unfaithful part that he himself agent, had collected exaction, can be illegal imputed to the as no- tice of that fact. Camak, Ga., 804; E., 493, McLean it is that—

held “The оwn agent’s fact that he did commission, charge uncommunicated to his principal, is not to the latter.” imputable Davis, the is Ga.,

To same effect Harvard E., 740. Case, the Brown it was held that the lender distinctly must be shown to have had the of exac- knowledge illegal tion, not the to him of the the by of imputation knowledge but circumstances bf that perpetration, independent it and was held that the lender knowledge, did have knowl- from such circumstances and the edge that contract was fact, into usurious. that issue of the Why go burden of on the borrower, which was if establishing knowledge the of the the settled In the agent question by imputation? the Case, Court concluded that there was Baxley no such and the evidence of of knowledge, repelled charge How could this conclusion have been usury. reached if the theory should prevail? imputation the

At the conference held Court en banc after the case, in Honors, the it was their suggested by argument Eeatherstone, Townsend that the Circuit facts Judges (cid:127) Dissenting Opinion case did it within the bring exception gen- rule. The eral rule bound general a being principal by knowledge acquired by while agent acting transaction within the of his particular agency, scope conceded that where the acted for his own benefit in agent law, fraud of the rights contrary principal rule did not but it insisted that there general apply; was a qualification to the effect that exception, to' where was the sole of the agent representative corporation review, in the transaction under principal his knowledge was of to the necessity imputable principal. I submit that the respectfully suggestion,

. applied case, of the present betrays qualifica- misconception tions reason its invocation. To' that the say is bound of the principal agent upon the be the ground agent happens sole representative of the in the transaction is to corporation anni- practically hilate rule that the is not so bound where the interest, and in agent fraudulently his own I acting 1,000 am safe in that in 999 cases out saying is the sole representative they do not us- principal; ually act pairs. What means is that qualification where the in a certain transaction is the one only who could have acted for the principal, his will for there is no one to imputed principal, whom been knowledge could have extended. meaning doctrine becames clearer when the words are slightly tranposed. Instead “that where saying the officer is the sole representative corporation transaction,” the the should “that expression be where in transaction, the the officer is the sole of the representative that, That is to not corporation.” say, in but in all only other transactions he is the of the only representative cor- who could acted. have poration . S., S., .The case of McCaskill U. U. 30 S. Ed., Ct., 386; Honor, cited his by Eeath- Judge ’ erstone, In the case clearly distinguishable from at bar. fact, maintain, it sustains which-I as will'be the'position seen. case the an action to brought that Government cancel a land which had been issued to one Ward patent him and to McCaskill a cor- by Company, conveyed' J. J. his of which McCaskill and poration was president J. J. son, Robert, they a secretary; owning large majority

stock of the with the entire management corporation had control of its business affairs. patent to and the deed to the McCaskill Com- been issued Ward on were fraud pany ground attacked part in Both misrepresention patent. Ward obtaining by the Circuit as trial Court and Court found Appeals McCaskill, the matter fact that a J. J. knowledge

McCaskill had fraudulent Company, rep- made Ward obtaining resentations patent. it was a that bona purchaser contended

company fide McCaskill, though president that the knowledge it reason of the imputed be could not excep- company, held, Court rule stated. The quoted above tion Honor, Featherstone: Judge is, law, a person entity “Undoubtedly corporation and officers. may its stockholders It from distinct entirely interests, Their from theirs. if may interests distinct have n be interest, has conceived, to its and hence be adverse may that their is its presumption arisen against in transactions counter presumption knowledge, their interest is adverse will their it when with it. But while should presumption be attributed be carried should corporation enforced to protect to become a means of enable corporation far as to so A its responsibilities. growing to evade or means fraud therefore, to look be- is, exhibited the-Courts tendency of it and form to purpose corporate yond purpose.” are identified officers who Heyward Citizens'

Dissenting Opinion The Court adds:

“The case at bar is within the The bill principle. alleges McCaskill and Robert McCaskill were co- E. E. J. J. partners in the manufacture of lumber engaged at Free- Fla. port, business, They it incorporated is alleged, under Florida, the laws of ‘by name of corporate J. J. McCaskill with the Company, said McCaskill as pres- J. J. ident and the said Robert McCaskill as secretary, F. F. owning of the stock large of said majority corporation, with the entire management control of business and affairs of said corporation.’ There is no denial of this al- legation. interest and the corporators corpora- tion thus identical, adverse, shown to we think the ruling Creek Simmons Coal Co. v. Doran is applicable.” Ct., S., 417; referred ruling to was U. (142 Ed., : 1063) “Associated together forward a common enter- carry prise, the or actual notice all these corporators and the was the president or notice of the com- and if pany, constructive notice bound them it bound the company.”

There is but a circumstance in single parallel that case bar, and the case at and that is a transaction in which the had certain information. In president the former the president was as he practically corporation, and his brother owned a of the stock large majorit}'- and were in ex- clusive of the affairs of the management corporation; case at bar an officer in simply the stock of which was owned by stockholders generally, and the affairs of.which were under the control of a board of directors elected stockholders to whom the pres- ident this identical transaction reported and all other loans. In the former the interest of McCaskill was identical with corporation the full acquired benefit of from the fraudulent deed bar, case patentee. at corporation was not got nothing; intended that it the transaction were should the details of get anything; from the the president; concealed purposely by сorporation to that of his interest was and adverse directly purposely interest If the test is adverse identical corporation. I how it is officer do see corporation, to from the McCaskill Case. obtain comfort possible any The McCaskill obtained title the land covered Company to it, to fruits by the fraudulent held on enjoyed patent, it, in the and was the defendant case brought States, United sustain their title endeavoring to vigorously bar, —a in different situation from that at very case and how from the circumstances referred different to above in the extract from the Case. Simmons Co.,

In the case of Union Brookhouse v. 73 Publishing H., 368; A., 219; 623; N. 62 111 Am. 6 Ann. Rep., St. Cas., 675; 2 R. A. the note to which is S.), (N. L. Honor, Featherstone, declared, cited his Judge quot ing syllabus: use a

“That bank account one attempting corporation’s funds his ward is its treasurer and misappropriate officer not alter the that the does rule managing corporation he is not of its when chargeable in on an fraudulent act engaged committing independent account, own relate facts to to this imputed act.” fraudulent 368; Co., H.,

In Brookhouse v. 73 N. Union Publishing 219; 993; A., S.), R. A. Am. St. (N. Rep, L. 623; Cas., 675, 6 Ann. the Court said: im-

“The of a whether actual or corporation, officers; must be that of its this cir- but puted, necessarily cumstance does not transform the officers into' principals. * * * If, as the the assistant treasurer plaintiff argues, rep- Moore resented the defendant the receipt deposits, officer of the was not whom only corporation through act to the matter.” could corporation relating So., Ala, 421; Co., v. Mercantile case Lea

Dissenting Opinion [13S 415; 93, cited 8 R. A. 119 Am. S.), St. (N. Rep., Honor, Featherstone, from his as “a quoted Judge an dif entirely case mind strong point,” my presents . In that case ferent situation from that the case at bar cred- action was brought by corporation, judgment insolvent, another a sub- itor of corporation, compel scriber to the stock insolvent corporation capital stock with real estate at an who had for his overvalua- paid tion, to account for the difference. The defendant sub- full that the creditor had knowl- scriber alleged corporation that of the conditions under he subscribed and edge it that reason he had committed no fraud and was for upon A overvaluation. man by not responsible alleged the name of Riddle was the the creditor cor-° president and interested under- development was also poration full taken the insolvent and had notice of by corporation matters connected with knew that the organization. its He in at an land of the various subscribers had been over- put value, valuation, with the the basis of its then upon hope boom. the'Birmingham advanced sales upon during prices Riddle of these was whether question in relief of the facts should be to imputed corporation, The Court held that it should who had been sued. subscriber that the upon their holding specifically ground and placed Riddle as by president (creditor), represented corporation Riddle, who owned all had been organized and manager, ; block owned a nonresident the stock small except “and its and that he general manager that he was president all its outside relations with company constituted world”; “he the sole and controller of the manager that seems, his will-—its alter it ego and, at crеditor company — one, the other but nonresi- being was its sole stockholder Indeed, to consider his as other it is difficult than the dent. itself, so were the affairs completely corporation creditor and under his immediate to his will control.”' itof subject said, intents was, to all and as we háve purposes “He Térm, 1925 itself. be the sheerest non- It could but corporation nothing sense that as should communicate the knowl- say he to himself as the of his cor- edge managing representative notice in could no poration. Since corporation acquire officer, other than or it head way through managing it will be doubted that notice to such officer is of scarcely notice to it.” necessity

It seems hardly necessary point out the dif- glaring ferences between this case the case at bar. Riddle owned the entire stock in practically he corporation; was the in absolute control general manager, to, of the affairs no board of directors corporation; consulted; he was the interests corporation and its were his; same as in the loan transaction there was no one and no consult one to whom notice acquired himby extended; could be there was no in the loan suggestion he transaction was outside his scope agency, acting he a fraud his perpetrating corporation own benefit and the law. In the case at bar against Brown, shown to have owned president, more any stock director; than was him a necessary qualify that while other do, as all bank appears presidents he ne- loans, he all of them gotiated to the board of reported di- and they rectors were to their the Bank subject approval; commissions; benefit received no from the all were illegal Brown who studiously concealed the exaction from the board of in for their directors presenting approval this loan. very so relied closes opinion strongly this striking summary:

“The be, notice or never im- will to his ‘when it is such is the puted as it principal (1) agent’s disclose; when the duty not relations (2) agent’s or his conduct subject-matter renders it certain previous it; not that he will when the (3) disclose person claiming notice, or those he benefit whom represents, Citizens’

Dissenting Opinion C. ’’ colluded with cheat or defraud principal’ § Mechem on —citing Agency, conditions, Both the second and third absent in the Lea Case, are in the at case bar. present Honor, Featherstone,

His observes: Judge bar, Brown, “In case at who made the trade with Miss If Heyward, was the Bank. he knew the knew. What he had wanted to the information to the Bank to impart whom he it?” imparted would have

It is that Brown was the Bank. begging question say > him I In the cited What made do not know. case S., States, 216 U. by the learned McCaskill United Judge, 504; Ct., 386; Ed., 590, him, it and quoted said: is, law,

“Undoubtedly entity a corporation person from officers.” distinct its stockholders and entirely the officer the cases which hold Invariably identity so as to corporation charge corporation complete officer, with the to a or act of amounting fraud, are owns the cases where the officer practically corpo- control its affairs ration and is absolute and exclusive in the —a situation no means case at bar. presented have made a as to whom Brown could question report directors, To the to whom answered: board readily but custom tо all his his loans duty report only was their and from whom he had reason to and good approval, of the loan transaction which inured to did conceal part which, statement, to his own according his benefit and the directors. would have balked approval Honor, Another case cited “strong point,” Featherstone, is Atlantic Cotton Mills v. Indian Or Judge Mass., Mills, 49; 17 N. chard Am. Rep., St. is, far afield from the in It con my opinion, point In that case one was the treasurer each Gray of troversy. he had more than corporations; misappropriated of the funds; Atlantic Mills in order $200,000 periodically of the checks of the he to cover his would draw defalcation up Mills, the Atlantic and Mills, Indian favor of pass Orchord an action them to the the Atlantic Mills. credit of mill, an Atlantic Mills the other the against accounting them, all matters the Indian Orchard Mills between open a set-off extent of amount abstracted claimed the so Mills. and the credit the Atlantic Gary passed to set-off, the so denied the on to amount holding latter right credit. The case their was decided passed fraudulently Mills the of the Indian Orchard upon unquestionably favor cannot the that one retain benefit sound principle fraudulent transaction without accepting agent’s The Court of the agent’s knowledge. says: consequences of this “We have decision preferred point upon put if the treasurer of a is corporation broad ground defaulter, unknown and un- yet and his defalcation as third person, and from a and money steals suspected, he in order con- it with the funds of places corporation defalcation, the corporation ceal and make his uses good own, any as no other officer knowing its money facts, title not acquire good does corporation thereby owner, true the latter may but money against to recover maintain an action back corporation against * * * known the same. must be deemed to what It have knew, act he and it retain the benefit his without cannot ** * and of his knowledge consequences accepting circumstances, if the would plaintiff under the adopt it to make must adopt intention it a also payment, fraud.. beneficial, act as was Gary’s so much adopt It cannot rest.” reject to demonstrate are unnecessary

Comment comparison that be- citation. It is suggested inappositeness the contract made to recover cause the Bank seeking Brown, with it along so without taking cannot do exaction. The has received illegal exaction; it is to recover attempting of the illegal no part 258 Heyward Bank Citizens" v.

Dissenting Opinion S. C-. it; any it is to recover con- part only the attempting upon made, tract as which was authorized Brown’s employ- ment; all beyond that was outside of the of his scope agency. case of

The States, S., Curtis v. United U. Ct., 570; Ed., is also cited the Cir L. learned cuit It is Judge. from distinguishable the case at bar. clearly There the stockholders of intrusted another corporation stockholder who was vice president also and active manager the company, business to titles procuring lands be law, under the he patented Federal was to acre, a stated paid sum and where were per lands so Goverment, means of fraud the procured by upon which the stockholder thus acting agent corpora tiоn, had of the fraud of the it was entrymen, held that his as notice cor imputable poration. The decision was based fact squarely upon stockholders, stockholder, the other with the along agent were to retain the benefit seeking agent’s transaction. The held Court contention that had adverse interest sufficient to transaction within bring rule: exception general

“Curtis and Collins other knew exactly [the stockholders] how far Holbrook’s interest was to. agent’s] adverse [the theirs, but trusted him in the joint enterprise notwithstand- interests as adverse between them in ing. sharing fruits of common business cannot enable the company to retain its share with all repudiate he knew.”

The case would be if the Bank knew of Brown’s parallel exaction and illegal held on the notes notwithstanding mortgages representing various loans. Circuit learned also Judge cites case of Burns, St., 434; E., 93; Ohio 103 N. (N. R. A. That S.), portion syllabus (by the Court) him is sufficient to demonstrate the quoted by inappositeness of the citation sustain taken: position 192S himself as an indi- “Where the officer both acting in the vidual and as of a manager banking pur- corporation bank, chase of a note from his action himself bank, behalf is and adopted ratified manager’s as a man his as of knowledge knowledge manager equally the bank.”

It is the learned Circuit irony as the height suggest, does, that the for him- conduct Brown in Judge securing ,self an an injury exaction was neither fraudulent nor illegal to the mort- reason that Miss Bank, Heyward, not claim in the fact that she gagor, view of might usury, it, in a the inno- has claimed and its allowance results loss to creditors, stockholders, than cent of more and depositors, $12,000. E., 378; 12; Ga., 34

The case of 109 Morris v. A., 506, v. R. similar to case of Bank is quite Burns, the same supra, and the decision is based prin officer, bank, that the ratified the act of the ciple having claimed the of the transaction must be held chargea benefit dis ble with the of the officer that the paper counted was affected fraud. with Iowa, 554; W., 909, Anderson v. 58 N. Kinley, a company

was held that where secretary manager a of the stock and owned or controlled large part capital he much as wished his was managed imputable to the corporation. Co.,

In the case of Thomson-Houston Co. Capitol A., F., 643, 12 C. C. although agent, apparently actor, a as and notice sole had deserted his position agent, of his fraud was not imputed principal. Thompson,

The same be said of the case of Bank v. may A., F., 798; 56 C. which was also case C. where fraudulent cashier the bank was the sole actor transaction, but the “sole actor” doctrine was disapproved, and, fraudulent because of the adverse interest the agent, notice was bank. imputed

Dissenting Opinion C. in the of Kean are more stated case clearly principles F., 214, I have found any- v. Bank C. than (C. A.), where : law, the so-called

“Under this question view cases, others, ‘sole actor’ well as in all would be whether his in the authority within scope acting transaction, from such departed or whether he had particular either directly and was representative dealing capacity of his or was inactive on behalf principal principal in an If the was active on behalf adversary position. of, the result complained accomplishing if, in of his so within acting scope he doing, made the authority, liability, would be predicate not, he not he had whether was fraudulent or whether or If from his ends to subserve. he had aside personal stepped and was with his capacity adversely agent, dealing prin- he the it would make whether sole no difference cipal, not;” actor or Bank,

As is shown the case of Knobelock v. clearly C., 259; E., 962, Courts the many proceed upon of identity the theory principal agent, the legal the the whether act or determining question knowledge the the It to agent should be principal. appears imputed Featherstone, Honor, me that his has done likewise. Judge Court, however, Case, iñ the Knobelock does not concur in that It there said: is view.

“The rule to the the agent’s imputing principal knowledge that the by some Courts based reason agent substituted for the has with identity' principal, legal reason, and under the of this principal, prin- operation cipal is more held bound inflexibly by agent’s knowledge. own, Courts, our Other far the base majority, including it the rule on the that is the duty ground communicate to his all which he knowledge principal pos- business, and the sesses material the principal’s presump- that tion that he has done duty.” Bank Citizens'1 Pall

The president testified that the loans in instance were every submitted Bank, to the board of directors noth- cent, ing commissions; said to them about the two per further, and he if the says, commissions in- had been cluded in a check for both interest and commissions board would have had to do with the transaction. nothing course, president of knew that he had made exaction; and, an illegal that exaction assuming infected note if with the Bank knew of and con- it, sented to is whether question the Bank thereafter held face, note which was its with the legal upon charged of the he president that for his own had purposes an imposed exaction. illegal

Without the cases with exception holding are cases where third persons not parties fraudulent transaction have been inno- cently injured the fraud agent.

III. that under the as it Assuming law stood prior 1922, passage 3, Act of 1916 3640) Vol. (Code | the transaction in question been declared may judicially have usurious, therefor, at the time the trial the under penalty of. 3639, had been Section and was repealed Section not recoverable. ' stated, For the reasons there is slightest ground the Bank under the law as stood charging usury, to the prior Act of for there is not a passage of evidence either that the Bank particle show tending contracted to receive the commissions that it had or illegal exaction, it in the its or that by agent, in or benefited it. But even slightest degree participated if it had that the had beyond appeared controversy commission, exacted an unreasonable and that the Bank exaction, knew such of the could not held amenable be 3639, for the Act of the reason that penalties Section of the lender from 3640) relieves (Section specifically stated, the under the circumstances and charge usury C 135. 18 S. ——

Dissenting Opinion a the of a repeal statute providing penalty principle forfeiture, or as to trans- well subsequent applies prior actions.

The Act is as of 1916 follows: 3640) (Section under the “No lender pre- shall be charged to be sections money reason ceding paid agreed in to obtain where others a loan paid borrower ordеr to take more than the lender neither nor contracted took Provided, however, That be may lawful interest: suit from date of transac- within six months such brought have ex- tion such as may charged other against persons commissions, may and recovery cessive fees or excessive above reasonable had thereon the excess over and a fee or reasonable commissions.” C., 173; Brown,

The case Brown had, 452, with the knowl- had decided that where unrea- lender, from the borrower an exacted edge loan, the sonable sum for services in negotiating and contract tainted with thereby usury, original 3639, at- in now for what is Section penalties provided tached, the lender was made to a forfeiture whereby subject “double and also a forfeiture of of all interest costs This has of interest.” the total amount received respect Court, the time before the between been followed all cases Case, 1892, and Brown the date of the decision of the It a construction of Act of Section necessarily liabilities 3639, parties and declared rights ifas had section; it was as effectual statute under that so specifically provided. 3640,

The Act completely abrogated Section Case, an entirely and provided rule declared the Brown the ex- It declares that for the borrower. remedy different indicated sum for service of even unreasonable action but that usury, remedy not constitute borrower’s should excess intermediary a suit over should be against compensation. above reasonable case, 1924, At the time of trial of the Act April, force, of 1916 was in and the rule in the "Brown Case was determination, therefore, not. The is: question Has the borrower the forfeiture, recover right penalty by way committed, authorized at the time the interdicted act was but at the trial of suit abrogated therefor. (Note.—A part was incurred after the alleged penalty passage 1916, the Act allowed, should been clearly not have but not even that part which was incurred between 1912 Act, should been prior have allowed. The matter will if be treated as all had incurred been prior the Act.) subject leading authority case of upon S., Ct., 408; Daggs, 143; Ed.,

Ewell U. In that case the note and were m executed mortgage cent.; interest stipulated twenty at that per time there was a of Texas statute the rate of in limiting terest twelve for ex per providing penalty centx it, interest; of a forfeiture of all in ceeding 1870 the Con Texas, stitution of which then went into effect and continued trial, laws, in force till after the all repealed and inter usury dicted defense any 1872 the payee ground; maker, the note suit and recovered brought against note, for the full amount of the certain judgment a. less credits, cent.; the interest calculated at twenty per being land which had maker of the note been mortgaged by brother; in 1875 the really belonged mortgagee to his against action to foreclose the brought mortgage brother; maker of the claimed the note and the the brother statute, benefit of which was force at usury Texas executed-; the time note the lower were mortgage Court held that the of Texas all usury repealed Constitution laws, and set after that defense prevented up repeal.

It thus that the involved precise question appears Heyward Dissenting Opinion The Supreme was then decided upon case аt bar appeal. said: Court .that, the notwithstanding

“It is claimed by appellant laws, are usury rights parties this repeal the time in force at law according be determined that law the terms of took that by the transaction place; B. was void and between Ewell Daggs contract James no subse- and that reserved paid; as to the entire interest void; and contract make valid a originally law could quent is not bound debtor], that the brother appellant [the favor B. rendered Ewell by against judgment James suit make the de- in the and is entitled present of Daggs, fense.” : as follows

The Court concluded to enable Texas was effect of the statute of “The him of the interest recovery a against sued to' resist party was, nature; it in its contracted and he had to pay, which lender a loss for- upon a statute and penal inflicting if not extent. been the general, feiture to that has Such And it uniform, such statutes. construction placed upon such decided that repeal has been quite generally as. so as laws, clause, retrospectively, saving operated without a future, even actions upon to cut off defense for laws, made. And such operating contracts previously all effect, as objections have been upheld, against of vested deprived that they rights, on the ground parties very of contracts. point the obligation impaired them; are they following citing decided so cases”— considered herein. later continues:

The Court these rest solid Independent “And decisions ground. taken the forfeiture as a penalty, the nature of Act, more general deeper a away by repeal is, that ‍​​‌​​​​​‌‌‌‌​​​‌​‌‌​​​​‌​‌​‌‌​‌​‌‌‌‌​‌‌‌​​‌​​​‌​‍are to be they supported on which right principle him his contract is stat- to avoid given a defendant own, its because affects the ute, for purposes Citizens’

merits of his and that whatever the statute obligation; gives, circumstances, under such remains in as it long fieri, transaction, not realized into a having passed completed statute, may, be taken It is subsequent away. privi- in the and forms no element lege belongs remedy, that inhere in he has the contract. benefit which rights contract, which, received con- as the consideration of the law, made, he trary to actually just ground imposing him, he upon by liability subsequent legislation, intended to incur. an- That has been repeatedly principle nounced and acted this cases. upon citing Court”-— Leavitt, Y., 9,

In Curtis v. 15 N. cited Supreme Court the United in v. it is held: Daggs, States Ewell

“The Act in the nature being repeal penalties forfeitures,’ reservation, im- or no containing express suits; as well as ex- plied, on operates existing subsequent not such defense there- tinguishing only right pleading after, but of urging maintaining plea, although previ- in, if ously allowed and established.” already put Dec., Conn., Wadsworth, 149; In Welch v. 30 79 Am. 239, in it is held: also cited v. Daggs, Ewell

“The to usurious contracts hold they parties any right law, to a subject have to may penalties by the given modification or and a consequent repeal Legislature, direct or indirect validation of the contract.” Russell, 474,

In v. 7 Blackf. also cited Andrews (Ind.), v. it is held: Daggs, Ewell interest, that' “The Act which declares respecting '* * * void, not be embraces con- usurious contracts shall made before as well as those made after its tracts passage.” Ind., 68, In v. also cited v. Wood Kennedy, Ewell it is held: Daggs, - interest, on account is a usury,

“The forfeiture оf hence the of the statute the for- creating penalty; repeal the extent of the relieve from it to repeal.” feiture will v.

Dissenting Opinion Pace, In Danville v. 25 Grat. 18 Am. (Va.), Rep., 663, also cited in v. it is held: Daggs, Ewell * * * 1873, 22,

“The Act of March in reference-to the defense of the defense usury by corporations prohibiting is retroactive in made its contracts applying operation, aby before its even suit may corporation passage, though have been on such contract before its brought passage.” Ill.,

In Lawrence, 331, Parmlee v. cited in also Ewell v. it is held: Daggs,

“A to a three-fold forfeiture of all the interest re- right contract, served on a on account of usury, is not a vested which the cannot take right away.” Legislature Ark., 26; 777, Am. Rep., Scruggs, Woodruff also cited it is held: Daggs, Ewell 1868, “The Act laws of July repealing State, all contracts made operated upon previously its still as all passage, well future outstanding, contracts.” State, Fla., 89; So.,

In Pensacola R. R. v. 68, 110 Am. the Court says: St. Rep., “The law seems to be settled that in quite clearly actions character, statute, a a penal depending upon repeal the statute an will pending appeal deprive Appellate Court of- to render a any which this power judgment by enforced, penalty may be and that the effect aof repealing statute is to obliterate the statute repealed as completly if enacted, it had never been for the of those except purpose commenced, actions or suits which were prosecuted law, concluded whilst it was an and that existing an action cannot be considered as concluded while an therein appeal is before an Court pending Appellate having jurisdiction to review it.”

“The effect of the of a statute penal is to repeal prevent trial, or any prosecution, judgment any offense commit- ted it while it was force unless there against is a saving in the Act. If it clause repealing repealed an pending Pall Court, the final action of the Appellate appeal before the affirmance of a conviction.” will appeal prevent Matthewson, Pet., 412; Ed., In Satterlee also cited in the Court said: v. Daggs, Ewell declare, a statute contrary general princi-

“Should law, im- that contracts founded ples illegal consideration, moral in existence at the time of whether statute, or which thereafter entered passing might into, should nevertheless be valid and the par- binding upon ties, all would character of such an admit retrospective 'enactment, create the effect of it was to a contract between where none had existed.” parties previously L.,

In 25 943, R. C. it is said: there it can be no vested in a until “Since right penalty has been reduced to of a unqualified judgment, repeal statute a as the re- same imposing way penalty, operates is, statute, of a criminal all strictly abrogates peal of action which had been reduced to not rights judgment, and all actions and to recover a proceedings pending penalty final which had been are de- prosecuted judgment, feated unless there clause re- repeal, saving * * * that have been incurred. After spect penalties law, of a no forfeiture or can be visited repeal penalty on the the usurious contract.” party holding Limitations, on Constitutional it is Cooley said:

“On the same acts legislative invalid principle validating sustained, when these contracts have been Acts no farther go contract than to bind a which he has party by attempted into, to enter but which was invalid reason some of per- it, to make on his or of inability through sonal part neglect formality, some of legal consequence or some ingredient law; in the contract forbidden question they is one of and not a constitutional suggest policy power.” Law, on 129, In and Constitutional Statutes Sedgewick it is said:

“There can be no doubt of truth or of validity the as-

268 v.

Dissenting Opinion sertion, statute, that when there is a of no repeal penal a. enforced, can be nor penalty inflicted a punishment vio- force, lation of the law while unless under some special provisions.”

In character, civil actions a penal of a depending upon statute, State, where inures to the penalty repeal such statute an will pending appeal deprive Appellate Court of any to render power a which the judgment by State, may be enforced.” penalty Pensacola & A. R. Co. v. Fla., 86; So., 985; 45 33 110 Am. 67. Rep., St.

“The statute, clause, a repeal without penal any saving takes all away right to thereunder proceed recovery of a even in an penalty, action when the pending takes repeal effect.” Dressner, Div., v. 215; 23 County 48 N. Y. App. S., 953.

At common “if law a statute a giving special remedy * * * clause, unconditionally without a repealed, all saving actions must stop where finds them.” repeal Merlo v. Co., Ill., Coal 328; 258 101 N. 525.

“The repeal action, a statute a creating without right a suits, saving clause as to pending destroys right; action at pending whatever even after stage, judgment but before the thereof, or entry falls.” pending appeal, Ettor v. Tacoma, S., 148; Ct., 228 U. 428; Ed.,

In Muller, Fla., Coe So., 90, it is held: “Usury defense, being merely statutory founded upon any common-law either right, legal it is equitable, clearly within the power take Legislature to it away.” Cole, McCord, State it is held:

“No doctrine of law is better established than that where one commits an offense which is made statute, a felony by and then the statute be he cannot repealed, be punished as a felon in respect that statute. And doctrine applies as well to the imposing recovery as to the penalties, creating punishment felonies.” In the case of v. Taylor, McCord, 483, State it was Heyward v.

Citizens’ Term, 1925 that the contention the General conceded Attorney the correct that— defendant’s counsel was the Court has no longer a statute is

“When repealed, it, there is some saving of cases under unless jurisdiction the offense under the clause purpose punishing former law.” existing 584, Farrow,

In the plaintiff brought Allen v. Bailey, action, for the recov- what then denominated a tam qui an usu- amount loaned of one-half of treble the ery upon State, contract, under rious the other half going Act D'. 1777. The action was commenced of A. 1830, December, issue,

cause was docketed and at prior the Act of 1777 at which time the provisions penal ordered The trial (Richardson) were repealed. Judge main- nonsuit, not be that the action could ground The order Act 1777 had been tained after the repealed. sustained, saying: nonsuit was Court “The relied on counsel have ground, plaintiff’s committed, as soon as the offense was proceedings a right were recovery instituted for penalty, not take could vested which the Legislature the plaintiff, I admit the correctness the Act of 1830. cannot away by can that the of this farthest argument proposition. extended, be, inchoate, im- that an would legitimately vested, itself had not right interest commenced. perfect vest, I could until the money nor do conceive that it time, received. it was under control of to that Up conceive, and, law, I law, it is a power delegated himself; State, the use of the and for sue same could revoke it at authority, delegated power, execution.” time before its final any Court, Rich.,

In v. by Judge State O’Neall, says: incurred, on a

“The effect of a before repeal penalty Act, is to discharge penalty.” repealing C., 208, the Court Lay, quotes Lay ap-

Dissenting Opinion Cole, extract from the case of v. the State proval foregoing 2 Farrow, 2 1, Allen v. McCord, and cites with approval Bailey, supra. E., 1018, C., 17;

In the v. 42 19 Cope Hampton, S. S. the for a at the bridge; sued plaintiff County injury upon by time of the of the all that was injury, required plaintiff the statute that his load did was to and injury prove exceed the After the and before injury ordinary weight. trial, the 'to law was amended require plaintiff allege This he on the of the County. prove negligence part trial, failed to do upon taking position to him. A Act did not nonsuit was granted, amending apply Court, saying: which was sustained by usj allowed statute is “As seems to liability nature of a for penalty doing somewhat imposed to do that which the statute omitting prohibited, recoverable, statute the amount on the which the required, named, fixed conditions to be instead of the jury It that an for a must statute. is well settled action penalty statute is force the repeal be while the because brought ‘The statute of the statute takes action. away right be sought, under which the recovered must be penalty at the and if of force rendition that be judgment; it follows that if there no the true principle, necessarily * * * law, can render Court no judgment.’ Allen v. Farrow, Hill, Solomons, v. 3 Bailey, 96. The State Plaintiff in such a case has no common-law remedy. statute, derived is from and the solely right remedy must be furnished- that statute.” Mansel, C., 468; E., 481, v. S. the de- State fendant was convicted a violation of Section Daw, which was of force at the time the offense Dispensary been was commited but had at the repealed time the The Court was tried. sustained defendant plea of the Court ground: jurisdiction contains a a statute section “When prescribing punish- 271’ v. ment section, for a violation of the is re- and this section section, after a pealed has violated the but before party him, sentence is he cannot be imposed upon punished such violation.”

Taken into consideration with declaration Cole, 2 McCord, Court State 1: “And the doctrine as well to the applies imposing recovery penalties, creating felonies” —there punishment ap- no answer to the pears proposition.

See, also, Moore, C., 192; State 128 S. 672. State Lewis 351. (S. C.), It is conceded that Gilliland v. Phillips, case C., 152 (Moses, Willard to Hoge, JJ.), opposed conclusions reached. It is also Car- opposed South olina hereinbefore, cases cited both decided before and after that decision; it is to the opposed announced principle in text-books, the recognized the decisions of the Supreme Court States, of the United and of practically evеry State I Court. think that it left should be in its isolation.

It been has that it is suggested against public policy this Court to countenance the exaction by of a bank of a commission for his in service personal negoti- a loan ating bank, that affirmance of Judge decree, be, as will would work widely spread Johnson’s havoc with borowers and annihilate the practically usury laws of the State.

It seems to be assumed that the affirmance decree amounts to an of such conduct. approval assumption This mark; is wide of the the Court considers it a most flagrant trust, breach of reprehensible severest deserving condemnation; judicial what the affirmance is that means liable statute. usury penalties I have been unable to utterly of his grasp argument Honor, Eeatherstone, Judge reply foregoing prop- osition. He says:

“In it is answer sufficient that position, say Bank

Dissenting Opinion fixes the That which penalty. 3640 is not the section Section It be contended that cannot is done 3639. by Section It does not undertake 3639. Act of 1916 Section repealed fixes the Therefore, the section penalty to do so. in existence.” all is still usury, and which covers cases me, my nor is suggestion It never occurred there What that Section opinion, repealed Section the Act of (Section before the passage under usury, express provi- is still 3640) except of that Act: sions under the pre- with usury

“No lender shall be charged or agreed reason money section paid ceding (3639) loan, in order to obtain a the borrower to be others paid more take nor contracted to where the lender neither took than lawful interest.” than

I could plainer do not see how anything possibly effi- Act, the continued recognizing provisions transaction referred to. cácy except Section says: As the learned Judge not con- defines what should clearly Act

“This (1916) It not undertake state of facts. did in a stitute usury, given statute, but, contrary, the expressly on usury to repeal 3639”—a proposition refers to and Section recognizes I which thoroughly agree. of the authorities circumstances all “under these

Why have no manifestly Mr. Cothran applica- by quoted Justice a non manifestly sequitur. and is tion” is inconceivable to base theories upon There are two only possible has no 3640) that the Act of (Section a conclusion That the payment by case: (1) present to the application Brown, of a commission to president, the borrower another; to that cent., not a (2) of was payment two per cannot be a retro- 3640) given the Act of (Section effect. spective Brown; to he re- paid directly were

The' commissions in his never them pocket; them and ceived put Bank v. Pall them; received contracted to receive a of penny exaction; no individual had Brown of distinct or entity was one Bank was a person person; (McCaskill ; States, follows v. United it logically supra) other that the made to a than were person payments lender. in a crimi- learned that defendant concludes Judge

nal case a statute which was cannot under punished offense, force at but which the time the commission trial; assumes two' had been at the time but repealed in maintenance of his conclusion positions principle present First, is not to the case: applicable Section and, has never been prescribing repealed; penalty second, 1916 (Section that there is in the Act of nothing it a effect. 3640) which purports give retrospective to As first has been contended that it position, .hot 1916, in so 3639 was the Act of repealed except Section 1916, Act far as it the con- was applicable, prior Act, dition defined in the Act. Prior to passage Brown decisions this Court with beginning of an a lender who was exaction supra, cognizant illegal usury. commissions agent, chargeable Act annihilated the effect of decisions; repealed those Sec- concerned, tion far as this so condition pre- An scribed for the borrower: remedy new substantive for the such excessive action recovery charges, against All lender is neces- remedy and against agent. penalty the Act. sarily pretermitted by

As to the that the Act is not second retrospec- position, effect, I attention the authorities tive in its can call only above, that the unanimity right cited with absolute holding is not a vested right, statute penalties time, any at even away authority bemay by legislative taken incurred, recovery been before a after the have may penalty It is a matter of that actually has been adjudicated. regret they “manifestly learned Circuit Judge mind of the 274 v.

Dissenting Opinion have no Particular attention is application.” called to cases from Cole, McCord, our own 2 v. 1. reports: State 2 McCord, v. 2 Taylor, Farrow, 483. State Allen v. Bailey, 584. Bank, Rich., C., v. 12 State 609. 10 v. Lay Lay, S. 208. v. C., 17; E., 42 19 Cope Hampton County, S. S. 468; 1018. C., v. Mansel, E., 481. State S. S. State Moore, C., E., Lewis, 672. S. State I Rich., from repeat quotation 609: State v. “The incurred, effect of a on a before the repeal 'penalty Act, is to repealing discharge penalty.” action, This was not a criminal but one for a statutory penalty. in difficulty the minds those members of

Court decree, who favor a reversal is respectfully lies in the suggested, familiar application principle is liable for the an acts of within principal scope agency, between failing distinguish liability of for a and its liability penalty for the tortious act. be The former cannot en- damages forced under the statute the conditions except prescribing of such liability; latter under the com- principles mon law.

As to the matter of policy: The source public primary of the declaration is the public policy State General Assembly; the Courts assume this only prerogative in the absence of declaration. The As- legislative General has and declared sembly spoken that the exaction com- mission shall intermediary not constitute usury, and Court, this Court has no to decide otherwise. power however, has the the General made power, Assembly having no declaration to declare that subject, public policy the Bank shall liable for the requires tort committed by the of a bank collection an illegal exaction from a borrower. Heyward Bank

Citizens' Term, 1925 Pall think, therefore, I that the of this Court should judgment be an affirmance of decree. Judge Johnson’s Acting Mr. Marion, Mr. Associate Justice Justice R. O. and Purdy, Wieson, Dennis, Mann, Messrs.

Mauedin, Circuit concur. Judges, Acting C. A W. Mr. Cothran*. Associate Justice case, careful very consideration of this both to the as law facts, renders it me .for to concur in the impossible of the opinion Court. be dissent will grounds my set forth in as concise a as the statement this importance case will permit.

There seems no doubt facts: following 1912 an brother, was entered agreement into between the agent, defendant and president plaintiff Bank, whereby of the Bank president should make a loan of some of the funds of the Bank to the defendant and cent, should for the charge benefit the Bank in- eight per terest thereon. An extra or additional of two charge per cent, was to be paid for his services in president the loan for the defendant. At the end obtaining of each year the defendant due interest the Bank and the paid cent, additional two per by separate one payments, Brown, the Bank and the R. I. being other to C. who was of two cent president, personally. charge per not for the benefit the Bank and was unknown Bank, as it was known to the who was except for his It own benefit. was also known making charge the defendant that the to benefit cent., extra per two but that was the benefit of solely Brown. foreclosure Upon mortgage the defendant set the claim of that under usury, up charging cent, the law the extra two was unlawful and per payment the law imposed by penalty against taking argument *Opinion delivered after first and mentioned in concurrence Mauldin, Judge report of Circuit embodied for that reason. Cothran, Justice, Acting did W. Associate not sit with the C. Court era banc.

Dissenting Opinion C. usurious The trial should inure her benefit. Judge interest defendant, dismissed claim of the and the leading opin- ion reverses the of the lower Court. judgment

The from v. Mort leading Mayfield opinon fully quotes Co., C., 158, 159; 372. That was gage The a case jury and the was for the judg verdict plaintiff. fee ment was The and a new trial ordered. reversed of was, the of attorney agent who as stated the opinion, both as to amount so excessive parties, being charged to the usury.' ground was reversed judgment upon that there was to unreasonable the no evidence show how was, fee and based such uncertain hence verdict stand. Court testimony says: could not “The is: the of this for the Court Was question payment so, fee a cloak to If the hide usurious interest? of penalty attaches the transaction.” crux situation in the as the of the Taking question case, it in the provisions we will review the light present of the Code as well as of decided cases. or any of the Code provides person

Section receive contract receive corporation greater who shall or amount of interest than is allowed law shall by pay pen- must, therefore, for so be made alty appear It doing. contracted that the Bank either received or case present interest. no whatever to receive excessive There is proof than as interest a cent more was al- that the received Brown, lowed law. It is true and is admitted fully cent, Bank, per of the received two president per- its but it is true that other sonally, through also directors, knew of this transaction. It officers nothing however, had this trans- .held, that the Bank is of the Bank had control of the action because the president Bank, and was capa- loan was the department, agent the doctrine of agent. ble of binding through principal the acts true that the bound It is quite principal or within the when such acts are done scope ap- agent Citations are authority. hardly necessary scope parent rule, sustain this but what has rule to the application case? It present is nowhere claimed that the had president the direct from the Bank authority to violate interest State, laws and, as to the authority, apparent agent borrower knew that the acting Hence, himself there was not even the individually. ap- pearance Bank to the unlawful transaction. binding Because a man is the aof bank or other cor- representative poration no reason he should lose his entire why individ- uality make the corporation for his responsible personal acts, be right The conduct they wrong. agent while for his acting within the lines and bounds principal of his duties as such will bind the but that principal, should be bound acts of the done outside the of his and for his scope own employment per- sonal and I is a doctrine to which gain cannot advantage agree.

It is claimed of that because the had the charge loan the Bank he acted within the of his department of scope cent, authority two additional to the charging per legal rate for his use. a “cloak to hide usurious Was this personal interest” for the benefit the Bank? re- Was Bank or to receive this extra interest ceiving which contracting would cause it to incur the in the Code? penalties prescribed If so, we will forced to a con- testimony upon put be. defendant, it is struction denied both and plaintiff admitted that the Bank was not to benefit any way by extra of two cent. This extra could charge payment per therefore, not, that the Bank been a cloak to hide have admittedly did not receive.

The cases in the deal touching subject appear State fee, commission, or with the reasonableness of largely extra made to and.with payment relative thereto. Neither of these points case. The reasonableness of the two raised in present and the ceñt. was not want knowl- questioned charge per on the was not doubted. edge part C. 135. 19 S. — —

Dissenting Opinion C. S. Brown, subject first cases on this is Brown v. One of the C., 173; In that case a commission cent, $7,500. a loan on twenty charged per excessive and Court that this was unreasonable and held the law as under the claim of permitted prevail then : The opinion says existing.

“The had terms the Act show that the lawmakers a direct between the lender contract contemplation borrower, the lender offense denounced is against interest than of a rate of greater the*taking ‘allowing’ * * * also, one law allows. I who nego- suppose, money tiates loan of be allowed reasonable may properly trouble, for his in addition to compensation expenses interest.”

Further : opinion says Jhe “Now, $1,500 is, did this contract to the-question pay make the loan usurious who were the mortgagees, actual on the are subject lenders? decisions general accord; but, not at all in to review and without attempting cited, reconcile the numerous we think weight cases fact, makes authority depend question whether the contract to an excessive and unreasonable pay amount, ‘commissions,’ to the such as what here called known to middlemen matter whom those (no made), was If who it. the facts furnished knew they money upon loan when the was made and the will proposition accepted, be held to usurious.” dissented,

In a able Mclver Chief very оpinion Justice the lender did know the that even holding though borrower an sum to an ob- was additional paying loan, the tain the not constitute as lender did yet not interested and derived no benefit. either the case by opinion Testing present Case, in the Brown no Court or by dissenting opinion found. the lender of ex- usury can be Knowledge in the was the test while opinion, cessive amount it held that and amount knowledge dissent was both were 279 v. Term, 1925 In immaterial. case no present is made that charge amount paid excessive, and the only knowledge charged the Bank was in a matter president without the of his scope authority as but a per- sonal matter of his own. E.,

In Woodward, C., 521; Co. v. Mortgage S. S. 739, the authorities are carefully reviewed. same ques issue, tion of excessive charges was made ágain point and the says: opinion cent,

“We regard charge of the amount twenty per the loan as commissions unreasonable and excessive for any * * * service rendered benefit defendant. hold, therefore, We that the transaction is usurious.” The basis of this decision was likewise amount, the lender and the excessive both of which points have been referred to. previously Brown, further the relation of

Discussing president, to the made reference is to a few of au- many thorities.

In 31 Cyc., is said: commission, “The a secret payment bribe or gratuity the third agent (Brown) party (Heyward) an inducement for into contractual on entering relations behalf of his an principal Bank), or (the agreement commissions, such such pay collusion as entitles the avoid the contract.” principal to

In that the is bound holding by the acts of principal done within the agents of his scope authority, Court Co., C., 311; Williams Insurance S. 676, says:

“And it unquestionably would be in violation of the of this rule if a spirit should be allowed reap a benefit from the and unauthorized act wrongful agent.” Ga., E., 442, Wacasie Radford, says: Court

280 v. Dissenting Opinion in max- “That addition the lender’s agent charges loan, rate, imum commission for obtaining a legal lender, as to the will render transaction usurious he in where not know of or share such charges.” does S., 790, In v. Katz N. Y. Silverman (Sup.), Court says: a

“That the exacted bonus from the bor- lender’s agent usurious, rower does not render transaction where lender bonus and had received no part of such exaction.” Jones, Brown 89 Misc.

Directly point Rep., S., N. 571. The says: Y. Court “A to the lender’s borrower’s agent by payment of the lender from which without benefit, no does not make the contract the lender received usurious.” 998, Wash., 377; P., Richardson,

In Testera the Court says: chattel

“Payment to the of a mortgagee and releasing services in mortgage note preparing one, usurious a held not to render transaction prior cent, interest was twelve although per charged.” cited, effect could other cases same be Numerous but the of this would unduly prolonged. length opinion in this is based the Act The claim case 1898, the Code. as now Section appearing now known another Act was Section passed, rea- shall be with usury by that no lender charged provides to be order son of others money paid agreed paid neither nor the lender took agreed obtain loan where for the lawful interest.' attorney appel- take more than for two rea- has application lant insists that this section no the transac- of force 1912 when sons : That it was not Act made, that the word “others” in herein was tion disin- That Brown relates to disinterested parties. the interest of the Bank was con- so far as terested party, 281 Bank v. Pall 1925 first cerned, out and has been emphasized pointed effect, of if the Act did any,' What part of opinion. than to show 1916 have on this case other policy usury? relative to such against stringent provisions State on con- effect the Act had a Whether or not retrospective interesting a very tracts made before its passage presents time. ques- not be decided at this question which will Act of 1916 tion the effect of for determination is 1898, in the Act of a change so regard making great a statute. which was clearly penalty L., 943, the rule is thus expressed:

In 25 R. C. in a until there can be no vested right penalty “Since of a the unqualified repeal has been reduced judgment, as the way the same operates statute a penalty imposing statute, is, all that it abrogates of a criminal strictly repeal to judgment, not been reduced of which have action rights a to recover penalty and all actions and pending proceedings are de- to a final judgment which had not been prosecuted * * * feated repeal. law, forfeiture a no usury penalty

“After the repeal of contract.” the usurious holding can be visited on party Act of 1916 re- that the not contend' The writer does that Act 1898, he does contend but the Act pealed had the Act 1916 that was so changed executed after 1916 case been in the mortgages present defeated have been provisions would claim Act. that cases will only of the law two this view To sustain Court of United cited, from Supreme are they but Carolina, it would Court South Supreme States are all-sufficient. seem that they 408; Ct., S., 108 U.

In v. S. Daggs, Ewell Ed., 682, says: the Court “ * * * under such circum- the statute gives, Whatever realized by remains stances, as it fieri, as'long transaction, a sub- may, by into completed having passed Co. Co. Planters' Fertz. Planters' Fertz.

Syllabus ‘ statute, be taken It is a be- sequent away. privilege in the and forms ‍​​‌​​​​​‌‌‌‌​​​‌​‌‌​​​​‌​‌​‌‌​‌​‌‌‌‌​‌‌‌​​‌​​​‌​‍no element longs remedy, rights inhere in the contract.” Mansel, C., 468; State

Court that the has no says Court General juris- Sessions diction of an offense of has statute which been violating before trial. repealed This case was followed and approved 351. C.), State (S. Lewis would, therefore, It the Act appear having been before entered suit passed any any judgment case, in the is conclusive of the brought question. present It is held in the that the act of the Bank leading opinion and that an usurious affirmance the judgment would kill the laws In neither con- usury of these State. I clusions can I have endeavored to show that the agree. conduct Bank was legal and that was not bound by the unlawful acts of its which were his own benefit and personal carefully concealed from Bank. laws, -the death it need said regard usury be only that the laws are usury active those which disclaim States this; in cases similar cases where the makes from a trade with the borrower and personal profit where both and borrower withhold and conceal all informa- tion relative from the lender. thereto PLANTERS’ FERTILIZER & PHOSPHATE CO. PLANTERS’ FERTILIZER CO.

(133 E., 706) Corporations. Equity jurisdiction —Court of to enjoin has use of corporation name another same nearly or use of so name sim- misleading. ilar as to and Unfair, Competition. Corpo- 2. Trade-marks and Trade-names — ration named Fertilizer “Planters’ & Phosphate Company,” known to trade as “Planters’ Fertilizer Company,” using trade-name

Case Details

Case Name: Citizens' Bank v. Heyward

Court Name: Supreme Court of South Carolina

Date Published: Dec 8, 1925

Citation: 133 S.E. 709

Docket Number: 11731

Court Abbreviation: S.C.