4 S.D. 566 | S.D. | 1894
This was an action originally commenced by John Guild, under the provisions of Section 5198, Rev. St. U. S., generally known as the “National Banking Law,” to recover of the defendant, a national bank of the United States, organized under the national banking law, and doing business at the city of Deadwood, Lawrence county, in the now state of South Dakota, the amount of illegal interest alleged to have been charged and received by said defendant upon promissory notes, overdrafts, and monthly balances, in transactions between said plaintiff and said defendant, between April 30, 1886, and November 30, 1887. The complaint contains 29 causes of action, to each of which the defendant interposed a separate demurrer. The demurrers were all and severally overruled by the court, and leave given to answer over. The defendant' declining to answer, judgment was rendered in favor of the present plaintiff, who, upon the death of said John Guild, was substituted as plaintiff, for the sum of $4,338.29. From this judgment the defendant has appealed.
The only question presented for our decision upon this appeal is, do the facts stated in the several causes of action constitute a tause of action, upon which plaintiff was entitled to recover?
The complaint may properly be divided into two parts. The first 9 causes of action are alleged to have arisen for illegal
The learned counsel for the appellant contend that in the county of Lawrence, and in all the Black Hills counties, from February, 1881, to July, 1887, it was lawful for a national bank to charge and receive any rate of interest that might be agreed upon between itself and customers, and that after Julyl, 1887, it was lawful for such bank to charge and receive 12 per cent per annum. The learned counsel for the respondent contend that the law in force in Lawrence county from 1881 to 1887 provided no rate of interest, but permitted parties to charge and receive such rate as they might agree on, and that a national bank doing business in that county was not permitted to charge more than at the rate of 7 per cent per annum. And they further insist that, since July 1, 1887, no rate of interest has been provided by law, and hence not more than 7 per cent could be charged and received by a national bank.
The first question presented is, what is the true construction of the terms “allow” and “fixed,” as used in the section defining the rate of interest national banks may charge under the nationaL banking act. It will be noticed that by the first clause of Section 5197 it is provided, “Any association may take * * * interest at the rate allowed by the laws of the state, territory or district where the bank is located,” and that by the second clause it is provided that, “When no rate is fixed by the laws of the state or territory, or district, the bank may take, * * * a rate not exceeding seven per centum.” And it will be further noticed that under the law as it existed in the Black Hills counties from 1881 to July, 1887, parties, including all corporaties and state banks, were allowed “to take, receive, retain and contract for any rate agreed upon between the parties.” In construing the language used in the section under consideration, it will be well to notice the object and purpose of the national banking act. This is very clearly stated by Mr: Justice Strong in Tiffany v. Bank, 18 Wall. 409, which was an action, like the present one, to recover alleged illegal interest taken by a national bank. The learned judge says: “It cannot be doubted, in view of the purpose of congress in providing for the organization of national banking associations, that it was intended to give'them a firm footing in the different states where they might be located. It was expected they would come into competition with the state banks, and it was intended to give them at least equal advantages in such competition. In order to accomplish this, they were empowered to receive interest at the same rates, whatever those rates might
The authority mainly relied on by counsel for respondent, in support of their contention, is the case of Johnson v. Bank, 74 N. Y. 329, and the same case taken by writ of error to the supreme court of the United States, and reported under the title of Bank v. Johnson, 104 U. S. 271. We have given these two decisions very careful consideration, but we are unable to discover their applicability to the case at bah It seems to us that the question presented in that case for decision was an entirely different one from the one presented in the case at bar. The highest rate of interest established by law in New York was 7 per centum per annum, and no provision was made by law for taking any higher rate, by agreement of parties or otherwise. The interest was absolutely fixed and limited by law to a rate not exceeding 7 per cent. A national bank in that' state took and received interest at the rate of 12 per cent, but claimed it was taken not as interest, but as discount on the purchase of business paper. The court of appeals of New York, and the supreme court of the United States, held that, under the national banking act, discounting paper was one of its forms of loaning money, and, the rate of such loans being limited by the laws of the state of New York, the bank could not take interest in excess of that limit. Therefore, the taking by the bank of 12 per cent was unlawful. The supreme court of California, as will be noticed, does not regard the Johnson case, as decided by the court of appeals of New York, as in conflict with its decisions; and the supreme court of Texas, in the case cited, makes no mention of that case, or the decision in the same case on writ of error in the supreme court of the United States, although that decision was made a number of years prior to the Texas decision. Therefore, if these decisions in the Johnson
In the eighth and ninth causes of action the interest alleged to have been paid was paid on a promissory note, subsequent to July 1, 1887, at the rate of 12 per cent per annum, though it was agreed on and specified in the note executed prior to July 1, 1887, to be at the rate of 18 per cent per annum. It is alleged in these two causes of action that the promissory note on which interest at the rate of 12 per cent per annum was taken, received, reserved, and retained by the defendant was executed on the 21st day of July, 1886, and was given for the sum of $7,000, “with interest at the rate of one and one-half per cent per month from the date thereof until paid.” This note, and the express contract in writing for the payment of the interest at the rate specified, were legal and valid when made; and the repeal of the law under which they were made did not affect the validity of the note, or the contract for the interest at the rate specified, or render the note or the contract for the payment of interest at the rate specified invalid. A law changing the rate of interest which can lawfully be taken
This brings us to the consideration of the last 20 causes of action. It is alleged in these causes of action — which are all alike, except as to amount — that “the defendant knowingly, and usuriously charged, took, received and reserved from plaintiff, and plaintiff paid to defendant, for interest, * * * being at the rate of 24 per cent per annum. These allegations are to be taken in connection with the last clause of the first paragraph of the complaint, hereinbefore inserted, in which it is alleged that these charges for interest were made monthly, and paid upon balances and overdrafts for the preceding month. It is not specifically alleged in these causes of action that there was no contract in writing as to the rate to be charged, but as it was not lawful to take a higher rate of interest than 12 per cent, when no rate was agreed on in writing under the act of 1881 as amended, and it is alleged that the defendant usuriously charged, took and received interest at the rate of 24 per cent per annum, which is admitted by the demurrer, we think the complaint, as to these 20 causes of action, is sufficient. If the rate was agreed on, and was evidenced by an express written contract, that would be a matter of defense. It appears, therefore, that the rate of interest charged and received was in ex
The learned counsel for the respondent contend that the law of 1881, made for certain counties alone, was in contravention of the organic act, and was therefore void. The only sections of the organic act, called to our attention, with which the law in controversy is claimed to be in conflict, are Section 1851, Rev. St. U. S., Section 12 of the Organic Act, and the act of congress approved July 30, 1886. Section 1851 provides ‘ ‘that the legislative power of the territory shall extend to all rightful subjects of legislation not inconsistent with the constitution and laws of the United States,” and the act of congress provides that “the legislature of the territories of the United States shall not pass special or local laws in any of the following enumerated cases, that is to say: * * * regulating the rate of interest on money;” and the act concludes “that all acts and parts of acts hereafter passed by any territorial legislature in conflict with the provisions of this act shall be null and void.” The grant of power to territorial legislatures by the provisions of Section 1851 is broad and comprehensive, and was evidently intended to vest in territorial legislatures the powers ordinarily exercised by the legislatures of organized states, subject, however, to the disapproval of congress. The acts of a territorial legislature, therefore, not in conflict with the constitution or laws of the United States, or the organic act, are considered as valid and binding as the acts of legislatures of
Therefore, our conclusions are that the interest taken and retained by the defendnat upon the first nine causes of action was legally received and retained, and that no right exists on the part of the plaintiff to recover back any portion of the interest so paid and retained, and that, as to the causes of action set out in the last 20 causes of action, the interest received and retained was illegally taken and retained, and that the defendant is liable for the same. The judgment of the circuit court must therefore be modified by deducting therefrom all sums received for interest included in the first nine causes of action, and, when so modified, is affirmed. The cause is therefore remanded to the circuit court, with directions to modify the judgment as above indicated. As the judgment is modified each party will pay his own costs on this appeal.