8 Miss. 508 | Miss. | 1843
stated the case and delivered th'e opinion of the court.
Two points have been presented to us in argument growing out of the charge: ,
1. Whether the contract sued on is affected with usury.
2. If so, whether it is wholly void, or only to the extent of the interest.
In regard to the first question, the existence of usury in the transaction, it is not explained in the charge with sufficient precision what is meant by usury. It is certainly true in regard to this point, that the form of the contract, or the division of the contract into distinct parts, can make no difference. The law will hot permit any device to defeat its provisions, where the consummation of usury is really intended, and the departure from the ordinary form of contract is meant merely as a veil to disguise the real features of the transaction. But it is well settled that in' a case like this, where, besides the contract of loan there is also a contract by way of pledge, or mortgage, or collateral security as accessary to the payment of the debt which is the principal, that some fair and just compensation for labor, trouble and expense about the accessary thing, may be legally stipulated for. Comyn on Usury, 46; Trotter v. Curtis, 19 John. 160; 2 Cowen, 769. This stipulation, however, must not be resorted to as a cover for usury. The matter then becomes a question of fact, whether the taking of the cotton under an agreement to account for its nett proceeds in New York, without the addition of domestic exchange, was a means adopted to conceal the usurious intention, or was a fair contract, the bank taking the risk of profit in that way as a compensation for its trouble. Again, in contracts of loan, if there is a hazard that the creditor may receive less than his principal, it is no usury, 8 Leigh, 248. 1 J. J. Marshall, 596. But the hazard must not be merely colorable. Pike v. Ledwell, 5 Esp. Rep. 164. In this case if at the time of payment the rate of exchange had been in favor of Manchester against New York, the bank would have been loser to that extent. In the fluctuations of the balance of trade mutations in the rate of exchange between two points are by no means unfrequent. If it was not fixed and certain that the bank would make in this matter of exchange,
The contract in this instance in regard to the cotton is not illegal, according to any principles which can be brought to bear upon it. ' One of the'attributes of a'corporation at common law is, “that it may take and grant property, contract obligations, sue and be sued by its corporate name, in the same manner as an individual.” 2 Kent, 278; Angell & Ames, 59. Unless specially restrained by their charters, or by statute, they have these powers, neither limited as to objects nor circumscribed as to quantity. Ibid, 104. These remarks apply solely to the acquisition and disposition of property; corporate powers in other respects are more strictly construed. The charter of this bank, .in that particular, is very ample; “it is made capable of buying,, receiving, and holding property and estate of whatsoever nature, and the same to alien and dispose of at pleasure.” Terms more comprehensive could scarcely be employed. It is, moreover,, a power .necessarily incident to every bank of discount, that it should be permitted to secure its loans in any manner not prohibited by'its charter, or some public statute. Without such power the privilege of banking would be a poor boon. 2 Ala. 472. It will scarcely be doubted that the bank might take a deed of trust or mortgage on slaves or other personalty to secure a debt due to it; The almost daily occurrence of such acts is a strong evidence'of their legality, and such contracts have -been often enforced in the courts of the country.
There is but one restriction [in the charter of this bank; that which is contained in the ninth section, by which it is enacted, “that the company shall have power to secure their loans for periods of more than a year by pledges of real estate, but in no case shall purchase the real estate so pledged.”- With this single exception, there is no prohibition upon it to secure its loans in any way it may deem advisable. “Every corporation, unless expressly forbidden, has, by implication of law, the power to do such acts as are essential to its existence, or necessary to enable it to perform its functions.” Banks & Hines v. The Bank of the State of
Having shown that there is nothing in the agreement as to the cotton which affects the validity of this contract, and that the charge of the court in regard to what constitutes usury was too broad and general, I come next to inquire, whether if the existence of usury be established, the contract thereby becomes wholly void.
The loan in this case was for twelve months, and. the only clause in the charter which can affect it is in these words: “the -rate of discount which said company is authorized to take on paper having twelve months or longer to run, is hereby declared to be eight per cent, per annum.” There is no prohibition to take more, nor penalty for excess in this particular. Our statute, upon the subject of interest, in substance, enacts, “that no person or persons whomsoever, shall take directly or indirectly for any contract, more than eight dollars for the forbearance or giving day of payment of one hundred dollars for one year, and if more be taken or received in or by any such contract, no .interest or premium whatever shall be allowed or recovered, but the principal sum only.” From the terms of this act it is manifest that if a natural person had been the plaintiff in this case, the charge would be erroneous. Is a different principle applicable to a bank, or in other words, are banks included in the word persons under the general provisions of the statute? In the various definitions by legal writers of-the term corporation, it is often called a person. Thus in Angel & Ames, page 7, it is said, that when any number
An act of incorporation never attempts to embody all the rules and principles which are to govern the institution it creates. Of necessity it has reference to the existing laws of the state in which it is passed. Those laws apply as forcibly to an artificial person at the time of its creation as to a natural person at birth. The one is governed by them except so far as exempted by its charter, just as the other is clothed with them at the first moment of existence. A charter containing provisions contrary to the constitution would be void, precisely as any other legislative act. This shows that the general laws in force at the time of its creation bear upon it, except so far as its charter may take it out of their influence. Angell &. Ames, 142; McCarty v. Orphan Asylum Society, 9 Cowen, 463. The only objection urged in argument to this is, that it would tend to divest vested rights. The principle as here laid down has no such tendency, because it is restricted to the laws in force at the time the charter is enacted. But corporations are likewise subject to subsequent legislative action. A state law may
Indeed the argument for the defendant in error is founded upon the assumption, that this corporation is subject to the general law of the land, for it demands the application of a common law principle to this contract, in order to make it void. The common law can only be in force, in this state, to the extent that it remains unchanged by statute. The common law rule against usury, at the time of the enactment of this bank charter, was so far modified that the contract was only avoided as to the interest. The common law rule making the contract wholly void, was to this extent repealed by necessary implication; how then can its principle be invoked to operate on this contract.
By the words of the charter as above set forth, the bank, in regard to loans for twelve months, is not restrained by express words from taking more than eight per cent, there is neither any prohibition by way of penalty, it follows that there is no restriction at all unless it be an implied one, or unless we apply the general statute of interest to this bank. This would be right, and if the bank has contracted for more interest than is allowed by its charter it can only recover the principal sum lent.
The case most strongly urged against this conclusion is that of the Bank of the United States v. Owen, 2 Peters, 527. It has been pressed upon us with so much earnestness in support of the position, that the contract if infected with usury is utterly void, that we feel it a duty to examine it, and to show why we cannot concur in it. The first step in this process is to ascertain precisely what was in question, and what was decided in that case upon this point. In reference to this matter the court itself says, “the question here has relation exclusively to the legal effect of a violation of the provision in the charter on the subject of interest, and does not bring in question the operation of the statute of usury of Kentucky upon the validity of this contract. To understand the gist of the question, it is necessary to observe, that although the act of incorporation forbids the taking of more than six per cent, it does not declare void any contract
“ The question then is, whether such contracts are void in law, upon general principles. The answer would seem to be plain and obvious, that no court of justice can in its nature be made the handmaid of iniquity. Courts are instituted to carry into effect the laws of a country; how can they then become auxiliary to the consummation of violations of law?” The length of this extract will be excused, because it is necessary to the distinct understanding of the decision.
Here it is expressly stated that the decision is to turn alone upon the construction of the charter of that bank, without reference to the bearing of any general statute upon the subject of interest. Why it was so considered does not appear; perhaps it was because the court then thought there was no general statute which could bear upon it, or which would vary the result. The same court had previously decided in more than one instance, that the Bank of the United States was governed by the law of Congress alone, and was subject to no other legislation. McCullough v. State of Maryland, 4 Wh.; 9 Wh. 859. Now there was no act of Congress other than the charter, on the subject of interest, which could bear on the point, and the court in the outset disclaims any reference to the act of Kentucky, and confines its attention exclusively to the charter. We shall see in the further progress of this opinion, that its course has not been uniform on this point. The words of the charter are, “nor shall said bank take more than at the rate of six per centum per annum for or upon its loans or discounts.” By the demurrer it was admitted that the bank had “unlawfully, usuriously, and corruptly” stipulated for more than the legal rate of interest. And the court decided that the contract was void upon general principles; “and that there could be no legal remedy for that which is itself illegal.” With this general conclusion we have no concern; I shall proceed to point out the difference between that case and the one before this court. First, then, the charter of the Commercial Bank of Manchester does not in terms declare that it shall not take more than eight per cent, discount; the inference that the taking of more is prohibited, is
But there is still stronger evidence on this point. The case of the Bank v. Owens in 2 Peters, came up on a certificate of division of opinion of the judges of the circuit court; when the cause was remanded, the demurrer was withdrawn and replications filed, a jury, verdict, judgment for defendants and another appeal. The case of the Bank of the United States v. Wagoner and others, 9 Peters, 378, is the same case and between the same parties, the order of names only being reversed, with that of the Bank v. Owens, in 2 Peters. In delivering its opinion in the case in 9 Peters, it will be seen that the court departs from the course pursued in 2 Peters, and takes the usury act of Kentucky into its consideration. It says, “ it is in reference to the usury act of Kentucky, and this article of the bank charter, that the various instructions asked or given are to be examined.” The rule of construction adopted in reference to the usury laws, is there stated. They treat the question throughout as one which is influenced by the statute of usury, apply the same rules of construction, and under this view of the subject, they again reverse the case, and send it back with instructions strongly calculated to insure recovery upon the part of the bank. Hence it seems that the court receded from the position taken in the case of Owens, that it was to be considered without reference to the general law of usury, and took a broader and juster view.
But to test still farther the claims which that case has on our regard, as authority, let us look to what the same court said on a previous occasion, as to the invalidity of a contract on the ground of usury. In the case of De Wolf v. Johnson, 10 Wh., they say, “ under a law which forbids the taking of usurious interest, but does not avoid the securities, a court of equity will not refuse its aid to recover the principal.” Why should a court of law under
Again, in the case of Lloyd v. Scott, 4 Peters, 205, the same court says “ that usury is now only considered an illegal or immoral act, because it is prohibited by law.” From this it follows inevitably that the measure of its illegality, is the extent of the prohibition by law, and as in this state there is no forfeiture by statute except of the interest, the party has a clear right to recover the principal.
Once more: in the case of Fleckner v. the Bank of the United States, 8 Wh., the court says: “ The statutes of the states as well as of England, contain an express provision, that usurious contracts shall be utterly void, and without such an enactment, the contract would be valid, at least in respect to 'persons who were strangers to the usury. The taking of interest by the bank beyond the sum authorized by the charter would be a violation, for which a remedy might be applied by the government, but as .the act of congress does not declare it shall avoid the contract, it is not perceived how the defendant could avail himself of this ground to defeat a recovery. 8 Whe. 355. The demurrer in the case of Owens was probably filed because of this decision in the case of Fleckner, that such defence was not admissible, under the same charter; and after the cause went back, was again tried, and again came to the supreme court, though at that time upon replication, they say they deliberately adhere to the decision in the case of Fleckner.
In our view of the case in 2 Peters, it does not sustain the position of counsel, that the contract in the case before us is void; it could only be authority for that position in a state of case, in which the contract was left unaffected by any statute such as ours. Every decision cited by the coiirt occurred between individuals, thus showing that it was not intended to draw any distinction as to the validity of the contract, between a natural and an artificial person. But 'if it does go the length contended for, we do not believe that it is in accordance with either the previous or subse
The case of the Bank of Chillicothe v. Swayne et al., 8 Ohio, 257, was likewise urged as an authority for the same position, but does not sustain it. On the contrary the court reviews the whole train of previous decisions in that state, and in Pennsylvania, on the subject of usury, and in conclusion says, “ upon the whole we entertain the opinion that the contract is not void, as being against the general law of the state upon the subject of interest.” The judgment in that case was for the defendants upon another point to be hereafter considered more at large, and that point cannot be more concisely stated, than in the language of the court itself. “ This contract is void, not because the rate of interest is greater than the rate allowed by the general law of the land, but because it is such a contract as the plaintiffs had no power or capacity to make.”
The same question arose in the Philadelphia Loan Company v. Towner, 13 Conn. 249. It was there held that the bank was on the same footing with individuals, as to usurious contracts.
Lyon v. State Bank of Alabama, 1 Stewart, 468, is an express authority, that where a bank exceeds the rate of interest allowed by its charter, but does not transcend the general usury law, the contract is not usurious, or otherwise void for illegality. In this conclusion we concur.
It is insisted, lastly, that if more interest is reserved than is allowed by the charter, the contract is void, because of want of capacity in the corporation to make it.
The rules for the construction of corporate powers have' been frequently laid down; perhaps there is none more just, comprehensive and applicable than that to be found in Ang. & Am. 140, adopted in 8 Gill & John. 319. “In deciding whether a corporation can make a particular contract, we are to consider, in the first place, whether its charter, or some statute binding upon it, forbids or permits it to make such contract; and if the charter and valid statutory law are silent upon the subject, in the second place, whether a power to make such a contract may not be implied on the part of the corporation, as directly or incidentally
The powers to loan money, to issue bills and notes, to accept securities, and to receive payment, are necessary to the existence of every banking institution. Without them it could not conduct its business, and their enumeration is but an unfolding of the idea of what is implied by the term bank. When it does any of these things, it is strictly within the bounds of its powers; and the act, so far from being foreign to the purpose of its institution, is entirely subservient to it. Every one admits that a bank may discount a note, unless it be specially restrained; but the argument here is, that it has no power to discount a note at a greater rate of interest than its charter allows; if it does, the note is void, because of the want of such power.
There is this distinction between the contract of an individual and of a corporation: “The former can do all acts and make all contracts which are not, in the eye of the law, inconsistent with the general good of society; the latter can make only such as are connected with the purpose for which it was created, and which are necessary, either directly or incidentally, to answer the end and object for which it was instituted.” Ang. & Ames, 139.
With this difference, the acts of each should be viewed in the same light. In other words, if a corporation makes a contract in regard to a matter fairly within the scope of its charter, the construction should be the same as in the case of an individual. Upon another branch of the case, we have shown that a bank, except so far as exempted or restrained by the terms of its charter, is subject to the general laws of the land, precisely as a natural person. It remains to inquire what is the consequence, where a natural person exceeds the limits of a particular authority entrusted to him. Take, first, the case of a partnership, which more nearly resembles a corporation than any other. Each partner is the accredited agent of all, and as long as he acts in matters within the scope and objects of the partnership, all are bound; but if one make a contract entirely foreign to the purpose and object of the partnership, the rest are not bound. But suppose he make a contract embracing some matters within the scope and objects of the partnership, and others beyond such scope, is the whole contract
The case in Ohio establishes a principle different from what is settled in any other that we have seen; and, as it has been strongly urged upon our notice, upon this point of want of power, it requires some examination at our hands.
The case is founded, as we conceive, upon a misapplication of principles. For example, here follows a portion of its reasoning, and that, too, which is the turning point of the decision. The court says: “for a corporation created for the purposes of contracting a railroad, or of acting as a library association, to carry on banking operations, and to claim to do it under its charter, would be absurd, unless the power so to do was expressly, or by implication, authorized in its charter. If an agent is restricted by the power received from his principal, if the legislature of the state cannot transcend the powers delegated_ in the constitution, much less can a corporation go beyond the charter by which it exists.” Now these principles are all undeniable. If a corporation makes a contract entirely foreign to the purposes of its institution, as in case a railroad company or library association attempts to carry on banking, the act is void, simply because of a want of power in reference to the subject matter, unless there is some general law to cure it. But if the agent exceed his authority the act is not void, if the good can be separated from the bad, as we have already shown. If a legislature pass an act which transcends the-constitution, it is void only for the excess, as has been often decided. The first principle adverted to, as to a contract foreign to the purposes of the institution, had nothing to do with the case before the court, because it was an act of banking done by a bank. The last was misapplied, because the act was only an exceeding of the power, which was not void, except for the excess. The court had-already stated in the same case that by the law of Ohio the taking of usury by the bank did not prevent it from recovering principal and legal interest. That was, in our view, in ac
The court in Ohio, in conclusion, rests its decision, as to the point of want of power, upon the case of Owens in 2 Peters, That case does not sustain the position. The court, in the case of Owens, says in the passage already quoted, “the question then is, whether such contracts are void in law upon general principles?” ' The question of power or want of power in the bank, is not once alluded to; it is decided entirely upon general principles, and every case cited was between individuals, founded upon some contract against law, common or statute, or against public policy. These do not go to show that the contract of the bank in that instance was void for want of power, but to place it upon the same footing with individuals.
It may be well here to remark, that the Kentucky statute on the. subject of usury, in force at the time of the making of the note sued on, like the English statute of Ann, avoided all contracts infected Avith usury. That the question as to power was not considered by the court, may be inferred from the circumstance, that in the case of Fleckner, in 8 Wheaton, the same court had decided that a violation of charter of the bank, in this very thing of taking more interest than was allowed, could only be reached by a proceeding on the part of the government; the defendant had nothing to do with it. In the case of Owens this point is not alluded to, but in 9 Peters they say they deliberately adhere to it. They adhere to the principle, not that the defendant might not set up usury as a defence where there was a usury statute against the contract, but that he should not set up in a collateral proceeding a violation of the charter; in other words, a want of poArer to make the contract.
That this is the doctrine established by these cases is still more manifest, because in the case of Wagoner, in 9 Peters, they make the case turn exclusively upon the question of usury, precisely as if the note had been given to an individual. The case of Swayne is against the case of Owens, so far as it takes the statute of usury of Ohio into consideration; it is against it too, — at all events it is
The doctrine laid down in Fleckner’s case, 8 Wheaton, has been followed by several of the most respectable courts in the Union. Chester Glass Company v. Dewy, 16 Mass. 102; Silver Lake Bank v. North, 4 John. Ch. 370; Ang. & Ames, 146; The Banks v. Poitoux 3 Rand. 143. A portion of the opinion of the court in this last cáse so well illustrates the point that I cannot forbear transcribing it. “It would be extremely inconvenient if every contractor with one of these banks could, for the purpose of avoiding his contract, institute the inquiry whether the bank had violated its charter. This case does not fall within the principle of Wilson v. Spencer, 1 Rand. 76. In that case an association of individuals dealt in a manner utterly prohibited by law, and a contract founded on those unlawful dealings was declared to be void. In this case the statutes do not prohibit the purchase of real property by the banks, but only limit the extent of such purchases; and the question whether they have or have not exceeded the limits prescribed to them, is not fit to be tried in this suit, and at the instance of this party.”
I think, then, it may be safely concluded that this question of power does not interfere with our conclusion, and that when a bank discounts a note in its usual course of business, if it should
Usury has now ceased to be considered a crime. 1 Howard, 596, 600. It is unlawful to the extent that it is made so by statute, and no farther. If in this state a contract violates the statute, it may be enforced for the principal sum, incurring the loss of interest. The good may be severed from the bad, the legal from the illegal, and by the best decisions, recovery may be had in all such cases for the part which is good, the whole not being void. United States v. Bradley, 10 Peters, 360; Pigot’s case, 11 Co. 27; Newman v. Newman, 4 M. & Selw. 66.
There is another feature of this case which should not be overlooked. The contract on the part of the bank is executed, and the opposite party is secured in the enjoyment of the fruits beyond disturbance. How then can he object the want of power? In England the rule that a corporate act to be binding must be under seal, is still rigidly adhered to, except, perhaps, in commercial transactions, and it cannot make a valid lease of lands unless under its corporate seal. If it make an executory lease not under its corporate seal, it could not be sued upon it, and therefore shall not sue unless it offers to perform, because of a want of entire mutuality. But if it has made such lease, and the other party has enjoyed the premises, the corporation may sue and recover. Mayor and Corporation of Stafford v. Till, 4 Bing. 75; Chit. Con. 221.
Another circumstance may be worthy of remark, though it has had very slight influence on our determination. It is that the charter of this bank, in regard to .contracts having twelve months to run, contains no express prohibition against exceeding eight per cent, interest, and imposes no penalty. In this respect it differs from the case of Owens and of Swayne.
I have endeavored to show that the principle of want of power cannot be made to operate in this case. But even if mistaken in this, it cannot benefit the defendants in error. It is clear that the bank had the power under its charter to discount the note sued on, and to reserve eight per cent, discount, which is all that was done. If it had not the power to make the additional stipulation about the cotton and the domestic exchange, that is the part which fails for want of power. “Where a distinct limitation or appoint
Some apology may be necessary for the unusual length of this opinion. It may be found in the fact, that we were admonished that many other cases in this and the inferior courts awaited our decision. It was, therefore, not deemed sufficient to state the mere result of our inquiries, without also making known the process of reasoning by which we reached the conclusion.
On the whole, we are of opinion that a corporation is subject to the constitution and general laws of the land in force at the time of its creation and applicable to its condition, precisely as a natural person, except so far as its charter has conferred exemptions or imposed restrictions. The charge of the court below departs from this principle, in declaring that the contract if usurious is wholly void. The judgment is therefore reversed, and the cause remanded for a new trial, to be governed by the principles herein laid down.
Judgment reversed.
I was very much inclined to think, on the argument of this case, that the record did not present a contract which the law could pronounce usurious. Subsequent investigation and reflection have convinced me that I was not mistaken. I therefore entirely concur in the opinion on the first ground taken, that the contract was not usurious. In truth, there seems to be a doubt whether there was any contract for the reservation of domestic
Believing, then, that this contract is not usurious, I have not investigated the question as to what would be the effect on the whole contract, if it were so, and therefore give no opinion on that point.
