189 N.Y. 1 | NY | 1907
Lead Opinion
The learned Appellate Division rendered judgment in this case on the authority of its previous decision in *5 Schlesinger v. Kelly (
The subject is of great importance to the business community, since it affects all banks doing business in this state, and, if the appellant is right, leaves them open to daily loss, even if they act with the utmost care and in the best of faith. The solvency of every bank, as well as the solvency of many depositors, might depend more upon accident than upon business foresight and ability, while the most scrupulous effort to obey the law would afford no protection. It was stated on the argument, as an illustration, for the fact does not appear in the record, that the makers "of more than half of the commercial paper held by the Federal Bank at the time of its failure allege an usurious origin thereof."
Without passing upon the effect of the Negotiable Instruments Law, I shall first discuss the question considered in the prevailing opinion below, to which we are much indebted. That question depends primarily upon the effect of certain sections of the Federal Banking Act, when read in connection with section 55 of our State Banking Law. We divide in judgment on that question as well as upon another, not considered below nor argued before us, which relates to the power of Congress to pass an act having the effect which I think should be given to the Federal statute.
The law of this state relating to interest and usury not only *6 forbids the taking of interest upon a loan of money in excess of the rate prescribed, but also renders void all bonds, notes and other contracts given to secure a loan made in violation of that provision. (2 R.S. 772, §§ 2, 5; L. 1837, ch. 430, § 1.)
The act of Congress entitled "An act to provide a national currency secured by a pledge of United States bonds and to provide for the circulation and redemption thereof," approved June third, 1864, provided that any association organized thereunder might "take, receive, reserve and charge on any loan or discount made, or upon any note, bill of exchange or other evidences of debt, interest at the rate allowed by the laws of the state or territory where the bank is located, and no more, except that where by the laws of any state a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized in any such state under this act. * * * And the knowingly taking, receiving, reserving or charging a rate of interest greater than aforesaid, shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon. And in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back, in any action of debt, twice the amount of the interest thus paid from the association taking or receiving the same, providing that such action is commenced within two years from the time the usurious transaction occurred." (13 U.S. Stat. at Large, p. 108, § 30.) This statute was re-enacted in 1874 without substantial change, and the section quoted now appears in two sections of the United States Revised Statutes. (U.S.R.S. §§ 5197 and 5198.) Section 5197, entitled "Limitation upon rate of interest which may be taken," embraces the first sentence quoted from the original act, and section 5198, entitled "Consequences of taking usurious interest," the remainder.
The Banking Law of the state of New York provides that "Every bank and private and individual banker doing business *7 in this state may take, receive, reserve and charge on every loan and discount made, or upon any note, bill of exchange or other evidence of debt, interest at the rate of six per centum per annum; and such interest may be taken in advance, reckoning the days for which the note, bill or evidence of debt has to run. The knowingly taking, receiving, reserving or charging a greater rate of interest shall be held and adjudged a forfeiture of the entire interest which the note, bill or evidence of debt carries with it, or which has been agreed to be paid thereon. If a greater rate of interest has been paid, the person paying the same or his legal representatives may recover back twice the amount of the interest thus paid from the bank and private or individual banker taking or receiving the same, if such action is brought within two years from the time the excess of interest is taken. * * * The true intent and meaning of this section is to place and continue banks, and private and individual bankers on an equality in the particulars herein referred to with the national banks organized under the act of Congress, entitled `An act to provide a national currency secured by pledges of United States bonds and to provide for the circulation and redemption, thereof,' approved June the third, eighteen hundred and sixty-four." (L. 1870, ch. 163; L. 1892, ch. 689, § 55, as amended by L. 1900, ch. 310, § 1.) This part of the statute needs no construction, and no argument is required to unfold its controlling purpose, which, as the simple reading shows, was to place state banks on an absolute equality with national banks, so far as the subject of usury is concerned, in order to prevent state banks from being driven out of business, for capital goes where there is the least risk. It does not occur to me how that object could be made plainer, and the criticism of more than thirty years or more since the pioneer act of 1870 was passed seems to have raised no serious doubt in that respect.
The notes in question were void as between the original parties thereto, and they would have continued void in the hands of any individual to whom they might have been transferred. *8
(Claflin v. Boorum,
What have the courts said with reference to the subject?
The first case bearing upon the question that was considered by this court after the National Banking Act of 1864 was passed was decided in 1872, but as the plaintiff in that case was a national bank there was no occasion to consider the effect of the act of 1870. (First National Bank of Whitehall v. Lamb,
The next case, decided in 1874, presented the same question with reference to a state bank. The act of 1870 was considered and it was held to have "the effect of giving the state banks the same rights and privileges and making them *9
subject to the same forfeitures in respect to taking usury as the national banks have under the act of Congress;" that as this court had held that national banks, notwithstanding the national act, were subject to the usury laws of the state, the provision of the state act relating to equality of rights required that state banks should be governed by the same rule and held subject to the same forfeiture. (Farmers' Bank of Fayetteville v.Hale,
The law, as thus laid down, was regarded as settled in this state until 1875, when the provisions of the National Banking Act relating to the subject were presented for consideration by the Supreme Court of the United States. A case arose in this state which involved the question whether national banks are subject to the usury laws of the states in which they are located. When decided by this court it was held that they were, in accordance with our previous decisions, but on error to the Supreme Court of the United States our judgment was reversed, all the justices concurring. (Farmers Mechanics' Nat. Bank of Buffalo v.Dearing,
Mr. Justice SWAYNE, speaking for the court, after referring to the provisions of the act of 1864, said: "These clauses, examined by their own light, seem to us too clear to admit of doubt as to anything to which they relate. They form a system ofregulations. All the parts are in harmony with each other, andcover the entire subject. * * * In any view that can be taken of the thirtieth section, the power to supplement it by state legislation is conferred neither expressly nor by implication. There is nothing which gives support to such a suggestion. There was reason why the rate of interest should be governed by the law of the state where the bank is situated; but there is none why usury should be visited with a forfeiture of the entire debt in one state, and with no penal consequence whatever in another. This, we think, would be unreason, and contrary to the manifest intent of Congress. Where a statute prescribes a rate of interest, and simply forbids the taking of more, and more is contracted for, the contract is good for what might be lawfully taken, and void only *10
as to the excess. * * * The thirtieth section is remedial as well as penal, and is to be liberally construed to effect the object which Congress had in view in enacting it. (Gray v. Bennett,
3 Met. 522.) * * * This section has been elaborately considered by the highest court of Massachusetts, of Pennsylvania, of Ohio and of Indiana. (Davis, Receiver, v. Randall,
The importance of this decision justifies the elaborate quotations I have made and shall make hereafter, for they are necessary in order to appreciate the theory as well as the result. It bears directly and with controlling force not only upon the question I am now discussing, but also upon the question soon to be considered. There was no limitation to the decision as made and none has since been applied. It is still regarded as in full force by the court that made it, which, after citing it as recently as 1901, said: "In that case it was held that a law of New York forfeiting the entire debt for usury was superseded by the National Banking Law, and such law was only to be regarded in determining the penalty for usury." (Haseltine v. Central Bankof Springfield,
The court held in the Dearing case, as I read the opinion, that the National Banking Act forms "a system of regulations" and covers "the entire subject" of usury, as applied to national banks; that such banks, as instruments of the general government, cannot be controlled nor their operations in any wise affected by state laws, "except in so far as Congress may see proper to permit;" that even taxation, unless authorized *11 by Congress, is powerless against them; that the policy of the nation with reference to its banks, including the subject of usury so far as it affects them, when once declared by its legislature, is exclusive, and cannot be thwarted by state legislation; that "whenever the will of the nation intervenes exclusively" with reference to a subject under its control "the authority of the state retires;" that there is no reason "why usury should be visited with the forfeiture of the entire debt in one state and with no penal consequences whatever in another," and that such a result would be "contrary to the manifest intent of Congress;" that as the act of 1864 "creates a new offense and denounces the penalty," such penalty is exclusive; and, finally, in substance, that state laws against usury, so far as they affect national banks, are suspended and in abeyance until Congress permits their enforcement.
The exclusive intent and effect of the National Banking Act was also recognized in Schuyler Nat. Bank v. Gadsden
(
While the exact question before us was not presented in theDearing case, the principle that national banks are not subject to state legislation without the permission of Congress, and that the National Banking Act covers the entire subject of usury and forfeitures therefor, so far as such banks are concerned, when considered in connection with the parity clause of our State Banking Act, necessarily controls the decision of this case. If that decision was right the judgment under review cannot be wrong.
Congress said in effect: "In creating national banks as national agencies, we subject them to the forfeiture of interest only on account of usury and we make this the sole rule on that subject, to the exclusion of all state laws with their diverse regulations, as applied to said banks." Our state legislature then said in substance: "In order to place state banks on a parity with national banks we enact the same law upon the subject of usury as applied to the former that Congress has *12
enacted on that subject as applied to the latter." This court recognized the logical result when it expressly overruled its previous decisions in the Lamb and Hale cases and said: "But by the authoritative decision of the court at Washington, the act of Congress receiving a different interpretation from that which we thought it would bear, it follows that in order to give effect to the evident intention of the legislature of this state, the statute enacted in 1870 to put the state banks upon an equality with the national banks should have the same interpretation and effect as is given to the act of Congress. Any other interpretation would do violence to the clearly expressed will of the legislature, do injustice to the state institutions and give undue effect to the legislation of Congress so far as it is hostile to the state banks." (Hintermeister v. First NationalBank of Chittenango,
The original National Banking Act of 1863 provided a forfeiture of the debt as the penalty for usury, and clearly that penalty was exclusive and suspended those provided by less stringent state statutes. (12 U.S. Stat. at Large, 665, § 46.) After that act had been in force for one year the act of 1864 was passed and thus the history of Federal legislation shows that it was the national policy "to keep the matter of the penalties to be imposed upon the banks for usurious transactions within the control of Congress." (Cent. Nat. Bank v. Pratt,
The meaning of the court is emphasized by what it said in the next case reported in the same volume: "The defense that the drafts in suit are void under the laws of New York against usury, cannot be sustained. The act of Congress to provide a national currency supersedes the state laws upon this subject so far as applicable to national banks." (Davis v. Randall,
The argument that if the legislature had intended by the act of 1892 to repeal the usury law it would have included it in the "schedule of laws repealed" is without force. The legislature did not intend to repeal that law absolutely, for without doubt it left it in force as to individuals. It wished, as it expressly declared, to place state banks on an equality with national banks as to the penalty for usury, and, hence, made the forfeiture of the interest the sole penalty and thus by necessary implication, in view of the Federal statute as construed by the highest Federal court, repealed the usury law as to state banks, leaving it unchanged in all other respects, with certain exceptions not now material. This court held in the Hale case that the first section of the act of 1870, "standing alone, would supersede the usury laws and operate as a repeal by implication, so far as applicable to banking associations," but for the parity clause therein. As, however, it had decided in the Lamb case that Congress had subjected national banks to state laws on the subject of usury, it further held *14 that the parity clause prevented the repeal of the usury statute by placing both classes of banks on an equality. After theDearing case was decided this court reversed its holding as to the effect of the parity clause, but it has never receded from its construction of the rest of the statute.
"The particulars" referred to in the parity clause of section 55 of the Banking Law are those previously mentioned therein and include interest, usury and the forfeiture therefor; "the purchase, discount or sale" of commercial paper and the like. With reference to those particulars the legislature in 1892, evidently with the Dearing case and our own decisions in mind, re-enacted the act of 1870 and again expressed its intention "to place and continue" state banks on an equality with national banks. It refrained from imposing a forfeiture of the debt when usurious paper was purchased in good faith by such banks. In other words it adopted the Federal statute, as construed by the Federal court, as to those particulars and modified the usury act accordingly. The repeal was by state statute, following a Federal statute, which had superseded pro tanto the state law against usury, but no state law upon any other subject was affected, because no other subject was specifically mentioned. It is only when a Federal statute speaks that the state statute must stand aside. (Caponigri v. Altieri,
We need not search for an express exemption, but only for an express forfeiture, and as no penalty is imposed by either statute for the purchase by a bank, in good faith and without notice, of a note void for usury as between the original parties, and the only penalty prescribed is when the bank acts "knowingly," it follows, if I have reasoned correctly, that the notes in question were valid in the hands of the Federal Bank and that they are valid in the hands of the plaintiff, its receiver, provided Congress had power to pass an act making its rule on the subject of usury the only rule applicable to national banks. It is gratifying to reach this conclusion, for otherwise, as was well said below, the result would be this: "That whereas when the bank was the wrongdoer and took *15 the usurious interest, although the usury statute declared the note void the banking statutes made it valid as to its face value and the wrongdoer escaped all forfeiture except in so far as the interest was concerned; while if the bank were an absolutely innocent party and had taken the note in good faith for a valuable consideration and without notice, receiving thereon only the legal interest on the face thereof, yet, nevertheless, it would be punished for the illegal act of others by the loss of the full amount advanced by it. Such a result would be so inequitable and illogical as to demonstrate that the reasoning must be fallacious."
I shall endeavor to be brief in my discussion of the question as to the power of Congress to supersede state laws against usury, so far as they affect national banks. The question is already settled if I have properly construed the National Banking Act and have correctly read the Dearing case from which I quote again as follows: "The constitutionality of the act of 1864 is not questioned. It rests on the same principle as the act creating the second bank of the United States. The reasoning of Secretary Hamilton and of this court in M'Culloch v. Maryland (4 Wheat. 316) and in Osborn v. The Bank of the United States (9 id. 738) therefore applies. The national banks organized under the act are instruments to be used to aid the government in the administration of an important branch of the public service. They are means appropriate to that end. Of the degree of the necessity which existed for creating them Congress is the sole judge. Being such means, brought into existence for this purpose, and intended to be so employed, the states can exercise no control over them, nor in any wise affect their operation, except in so far as Congress may see proper to permit. Anything beyond this is `an abuse, because it is the usurpation of power which a single state cannot give.' Against the national will `the states have no power, by taxation or otherwise, to retard, impede, burthen or in any manner control the operation of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government.' *16 (Bank of the United States v. McCulloch, supra; Weston v.Charleston, 2 Pet. 466; Brown v. Maryland, 12 Wheat. 419;Dobbins v. Erie Co., id. 419.) The power to create carries with it the power to preserve. The latter is a corollary from the former. The principle announced in the authorities cited is indispensable to the efficiency, the independence and indeed to the beneficial existence of the general government; otherwise it would be liable in the discharge of its most important trusts to be annoyed and thwarted by the will and caprice of every state in the Union. Infinite confusion would follow. The government would be reduced to a pitiable condition of weakness. The form might remain, but the vital essence would have departed. * * * Whenever the will of the nation intervenes exclusively in this class of cases, the authority of the state retires and lies in abeyance until a proper occasion for its exercise shall recur. (Gilman v. Philadelphia, 3 Wall. 713; Ex parte Mc Niel, 13 id. 240.) The power of the states to tax the existing national banks lies within the category last mentioned. It must always be borne in mind that the Constitution of the United States, `and the laws which shall be made in pursuance thereof,' are `a supreme law of the land' (Const. art. 6) and that this law is as much a part of the law of each state and as binding upon its authorities and people as its own local constitution and laws."
This is but the logical result of Chief Justice MARSHALL'S great opinion in M'Culloch v. Maryland (4 Wheat. 415), which, with the approval of all the justices, held that Congress had power to incorporate a national bank, although the subject is not included among the powers expressly enumerated in the Constitution. As was said in a later case, the opinion rests upon the proposition that a national bank is an instrument which is "necessary and proper for carrying into effect the powers vested in the government of the United States." (Osborn v. Bank ofthe United States, 9 Wheat. 738, 860.)
If Congress has power to pass an act it has power to include such provisions as, in its judgment, will make the act effective, unless they are forbidden by the Constitution, expressly *17
or impliedly. (Easton v. Iowa,
While usury is within the scope of the police power, which is ordinarily under the control of the states, when that power *18
is so exercised by a state as to obstruct "a convenient, useful and essential instrumentality in the prosecution of the fiscal operations of government," such as national banks are held to be, it must give way to the supreme power of the nation. Thus, it was held in Easton v. Iowa (supra) that even the criminal laws of a state when in conflict with the National Banking Act, must yield to the superior power of Congress. In that case the president of a national bank was indicted, convicted and sentenced to imprisonment under the provisions of a state statute for the offense of having received, as such officer, a deposit of one hundred dollars in money for said bank at a time when it was not only insolvent, but such insolvency was known to the defendant. The judgment was reversed, and Mr. Justice SHIRAS, speaking for all the members of the court, after referring to the National Banking Act, said: "That legislation has in view the erection of a system extending throughout the country, and independent, so far as powers conferred are concerned, of state legislation, which, if permitted to be applicable, might impose limitations and restrictions as various and as numerous as the states." After quoting from the Dearing case the learned justice continued: "Such being the nature of these national institutions, it must be obvious that their operations cannot be limited or controlled by state legislation, and the Supreme Court of Iowa was in error when it held that national banks are organized and their business prosecuted for private gain, and that there is no reason why the officers of such banks should be exempted from the penalties prescribed for fraudulent banking. Nor is it altogether true, as asserted by that court, that there is no act of Congress prohibiting the receipts of deposits by national banks or their officers when a bank is insolvent. It is true that there is no express prohibition contained in the Federal statutes, but there are apt provisions, sanctioned by severe penalties, which are intended to protect the depositors and other creditors of national banks from fraudulent banking." He then declared that a national bank is authorized, among other things, "to make contracts, * * * to exercise, *19
by its board of directors or duly authorized officers, all such incidental powers as shall be necessary to carry on the business of banking, by discounting and negotiating promissory notes, drafts and bills of exchange; by receiving deposits; by buying and selling exchange; by loaning money on personal security. * * * It thus appears that Congress has provided a symmetrical and complete scheme for banks to be organized under the provisions of the statute." After reviewing many cases he finally said: "Our conclusions, upon principle and authority, are that Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks and has the sole power to regulate and control the exercise of their operations; that it is not competent for state legislatures to interfere, whether with hostile or friendly intentions with national banks or their officers in the exercise of the powers bestowed upon them by the general government." This case was expressly approved in McClellan v. Chipman
(
In Davis v. Elmira Savings Bank (
If these cases and the cases cited therein, to which I shall not further refer, rest on sound principles, as we are bound to assume, can it be held that Congress has no power to provide a penalty for usury as affecting national banks in any and every aspect to the exclusion of all state laws upon the subject? With power to place in abeyance the criminal and insolvent laws of a state as applied to those banks and their officers, has it no power to supersede a state law which attacks the solvency of every national bank within its limits? May an agency of the United States government be destroyed or its usefulness and efficiency seriously impaired by state legislation which directly tends to bring about that result? The question of policy or expediency is not before us, but simply whether the nation has the power to protect itself and its instrumentalities from grave injury if not total destruction. To hold that it does not would reach far and lead to startling results. The right to create and protect national banks, although not named in the Constitution, is well established by the decisions of the highest Federal court and any attempt to *21 limit the powers and functions of such banks is an attempt to limit a law which is "necessary and proper" for carrying into execution powers vested by the Constitution in the government of the United States. In view of the dual character of our government, the one state and the other national, when the latter has jurisdiction over a subject its action, of necessity, is paramount, and to the extent of any conflict between state and national legislation must render nugatory all state acts repugnant thereto.
The argument that a state cannot grant an exceptional privilege to a state bank because it would be class legislation, is foreclosed by the settled law that state banks knowingly taking usury forfeit the interest only, the same as national banks, whereas all other corporations, as well as all persons and firms, forfeit both principal and interest. The right to give this exclusive privilege to state banks is thoroughly supported by authority. A classification is justified which frees state banks from injurious competition with national banks by placing the former in the same position as the latter with reference to the subject of usury.
Without prolonging the discussion I think that the National Banking Act was intended to supersede all state laws on the subject of usury as applied to national banks and that Congress had power to pass the act as thus construed. The judgment appealed from should, therefore, be affirmed, with costs.
Dissenting Opinion
I dissent from the decision about to be made. That statutes regulating the rate of interest to be charged for loans of money and punishing usury are a constitutional exercise of the police power of the state is settled by authority. (Cooley's Principles of Constitutional Law [3d ed.], p. 260.) Such laws may be, as claimed by the political economists, mere relics of barbarism. Nevertheless, as they have been enacted for ages in every country, nobody but a theorist would deny their validity however much jurists might deplore their drastic character. In this *22
state from the year 1787, when the first statute was passed on the subject, until the present time, with the exception of the period between the years 1830 and 1837, usury has rendered all securities infected therewith absolutely void, not only between the parties but as to purchasers in good faith, and not only as to non-negotiable securities but also as to commercial paper. This has been most forcibly stated by my brother VANN in the case of Claflin v. Boorum (
As to the statement made by counsel for the respondent of an alleged fact not appearing in the record, that the makers "of more than one-half the commercial paper held by the Federal Bank at the time of its failure alleged a usurious origin thereof," it may be said that further research also outside of the record discloses that the president of this bank is now a convict in states prison for the offense of grand larceny. What has driven the bank into a receivership does not appear, *24 but it is as easily attributable to the fact that it had a dishonest president as to the severity of our usury law. Having thus disposed of these extraneous considerations we are now brought to a consideration of the law of the case.
I insist on three propositions: 1st, that the Federal statute deals only with the action of the national banks in taking excessive interest, and has no application to the effect of usury between prior parties to the instrument; 2d, that Congress has no constitutional power to legislate on the validity or invalidity of contracts made between third parties having no relation to the national banks, and 3d, that even if Congress has the power claimed and has exercised it in favor of the national banks, the legislature has no power to extend a similar exemption and exception in favor of state banks. As to the first proposition, the Federal statute enacts that national banks shall be allowed to take the rate of interest permitted by the state or territory where they are located, and in the absence of any local law a rate not exceeding seven per cent per annum. It then provides that the taking of a greater rate of interest than that allowed shall be adjudged a forfeiture of the entire interest on the note, and in case the excess of interest has been paid, that the party paying it may recover from the bank double the amount paid. The statute deals exclusively with the action of the bank in taking interest from the person to whom it loans the money or for whom it discounts the paper. It does not regulate nor assume to regulate in any degree the dealings of the prior parties to the instrument as between themselves or the effect of those dealings on parties who do not contract with the bank. It is confined to the dealings of a bank with its customers. So true is this that even at this day it is an open question in the Supreme Court of the United States whether a national bank can purchase commercial paper as distinguished from discounting it, and if it can, whether the interest provisions of the act of Congress are applicable to such a transaction or not. (National Bank v.Johnson,
The principle involved in the present case has, in my judgment, been expressly decided by the Supreme Court of the United States in McClellan v. Chipman (
The whole fabric of the respondent's argument on this question is based on a practice against which I have often had occasion to protest, that is, the excerpting of expressions from judicial opinions and construing them without regard to their context or the subject then before the court. (Fealey v. Bull,
I have said that it is about to be decided that even though a bank, national or state, takes a note with knowledge of the usury between the original parties, it may enforce it, and I contend that this is the necessary import of the decision. The theory of the decision is that the Federal statute abolished or superseded all usury laws of the state as to paper a national bank might discount. The only provision of the Federal statute is that which enacts that if a bank takes usury it shall forfeit twice the interest. The "knowingly" found in the statute applies solely to knowingly taking excessive interest, not to any knowledge of the prior character of the note. If this is the only provision of law extant on the subject, so long as the bank itself does not take usury in discounting the note, what possible statute, state or national, can render a note void or uncollectible, even if the bank had full knowledge of the inception of the note? And in fact, even if it took usury in discounting it, on what principle of law could it be subjected to any other penalty than that provided in the statute for the forfeiture of double the interest? There is no provision in the Federal statute as to the effect of usury on prior parties to the note. Usury only affects the note by virtue of the state statute declaring the usurious note void. If that statute is abrogated from the instant the note is purchased by the bank, what has the knowledge of the bank that it was usurious between the original parties to do with the question before *28 us? There is no middle ground upon which to stand. Either the usurious note is void even though the bank is ignorant of the usury, or it is good though the bank does know of it.
I deny that Congress has the power to enact a statute susceptible of the interpretation that is about to be given. Doubtless it may prescribe an exclusive rule for the government of the transactions of national banks and for the dealings of parties with them. Thus it has been held that the penalties imposed by the Federal statute upon national banks for taking usury are exclusive, and also it has been held that state statutes making criminal certain conduct of national bank officers is an invasion of the powers of Congress. (Farmers M.Nat. Bank v. Dearing,
But if Congress possess the power claimed and has exercised it in favor of national banks, it does not follow that the state has the same right to grant the exceptional privilege to state banks. This position does not rest on any claim that the state might not abolish or modify the usury laws, but on the ground that it is class legislation of the most extreme character, I think, that has ever come before the courts. The only authority that exists for the Federal government to character national banks is that they are fiscal agencies of the government. The whole question of Federal authority was reviewed by the Supreme Court of the United States in Osborn v. Bank of the United States (9 Wheat. 738). In the opinion there delivered Chief Justice MARSHALL, in answering the contention that the state had power to tax the bank, said: "The *31
foundation of the argument in favor of the right of a State to tax the bank is laid in the supposed character of that institution. The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great and principal object. If these premises were true, the conclusion drawn from them would be inevitable. This mere private corporation, engaged in its own business, with its own views, would certainly be subject to the taxing power of the state, as any individual would be; and the casual circumstance of its being employed by the government in the transaction of its fiscal affairs would no more exempt its private business from the operation of that power than it would exempt the private business of any individual employed in the same manner. But the premises are not true. The bank is not considered as a private corporation, whose principal object is individual trade and individual profit, but as a public corporation created for public and national purposes. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies having no political connection with the government, is admitted; but the bank is not such an individual or company. It was not created for its own sake or for private purposes." This being the theory of the creation of national banks, that they are actually governmental agencies, it may be that Congress can confer upon them rights and privileges greater than that of any other individual or corporation in the country, but the statutes of this state will be searched in vain for any connection between the government of the state and state banks. The state banks are no more governmental agencies of the state than are insurance companies, manufacturing companies, or other business corporations. The statute authorizing the incorporation of banks and the regulation of their conduct contemplates a corporation organized, to use the language of Chief Justice MARSHALL, with "private trade and private profit for its great and principal object." The bank which *32
this plaintiff represents was no more an agent of the state or engaged in the discharge of a governmental function than a Herkimer county dairy company. The state cannot, therefore, grant to such corporations rights and privileges beyond every other citizen of the state. It may be said that this objection would apply with equal force to the statutory provision which enacts that state banks taking usury only forfeit the interest, the same as national banks, while individuals and other corporations forfeit the whole principal, the validity of which enactment has been recognized by the courts. I think a distinction may be drawn between the two cases, but that it is not necessary to consider. The unconstitutionality of class legislation is a doctrine only recently developed in the courts, but, nevertheless, it has of late years become firmly established. It has principally arisen in the the Federal courts and in other states in relation to anti-trust and labor laws. In Connolly v. Union Sewer PipeCo. (
I shall not discuss at any length the effect of the Negotiable Instruments Law (L. 1897, ch. 612, § 96). It think that under well-settled principles of statutory construction we cannot construe its general language as repealing the provisions of the usury, gaming and lottery laws, which render obligations given on such considerations absolutely void. The Negotiable Instruments Law applies only to commercial paper, and the effect of the usury and gaming statutes, like that relating to patent rights, is to withdraw notes given on such considerations from the domain of negotiable instruments. (Eastman v. Shaw,
The judgments of the Appellate Division and Trial Term should be reversed and a new trial ordered, with costs to abide the event.
GRAY and CHASE, JJ., concur with VANN, J., and WILLARD BARTLETT, J., concurs in result on the ground that under the Negotiable Instruments Law a bona fide purchaser takes a note free from the defense of usury; WERNER and HISCOCK, JJ., concur with CULLEN, Ch. J.
Judgment affirmed.