95 Ala. 521 | Ala. | 1891
Tbe terms “discount” and “loan” are employed in tbe books indiscriminately and synonymously in all cases where compensation for the use of money advanced is retained out of tbe gross sum at tbe time of tbe advancement. Thus it is said: “Discounting, or loaning money, with a deduction of tbe interest in advance, is a part of tbe general business of banking,” &c. — 2 Amer. & Eng. Encyc. of Law, p. 92. And a discount is thus defined: “By tbe language of tbe commercial world, and tbe settled practice of banks, a discount by a bank means, eoc vi termini, a deduction or drawback made upon its advances or loans of money, upon negotiable paper, or other evidences of debt, payable at a future day, which are transferred to tbe bank. Tbe term ‘discount,’ as a substantive, means tbe interest reserved from tbe amount lent at tbe time of making tbe loan; as a verb, it is used to denote tbe act of giving money for a note or bill of exchange, deducting the interest.” 5 Amer. & Eng. Encyc. of Law, 678-9. A distinction between discounts and loans is sometimes enforced by tbe terms of statutes obtaining in tbe premises; but, in tbe absence of any element of this kind — whenever tbe words stand alone upon tbe signification accorded them in tbe general law — every loan upon evidences of debt, where tbe compensation for tbe use of money till tbe maturity of tbe debt is deducted from tbe principal and retained by tbe lender at tbe time of making the loan, is a discount.- — Fleckner v. U. S. Bank, 8 Wheat. 351; Nat. Bank v. Johnson, 14 Otto, (U. S.) 276; Saltmarsh v. P. & M. Bank, 14 Ala. 677; Loan Co. v. Towner, 13 Conn. 259; Pope v. Capitol Bank, 20 Kans. 440; Bank v. Baker, 15 Ohio St. 85; Talmadge v. Pell, 7 N. Y. 328; Bank v. Bruce, 17 N. Y. 515; Freeman v. Britton, 2 Harr. (N. J.) 206.
On these principles, we entertain no doubt that tbe transaction in and by which plaintiff acquired tbe draft of Swem 6 Thomas, which bad been accepted by defendant for tbe accommodation of the drawers, by advancing to Swem & Thomas tbe face value thereof, less a certain per cent, thereon which was retained by plaintiff for tbe use of tbe gross sum so advanced for tbe time of tbe paper, was a discounting of tbe draft within tbe usual sense of that term, and hence within tbe meaning of tbe word as employed in section 4140
The section referred to is as follows : “Any banker who discounts any note, bill of exchange, or draft, at a higher rate of interest than eight per cent, per annum, not including the difference of exchange, is guilty of a misdemeanor.” It is admitted that the plaintiff discounted the draft in question at a higher rate of interest than eight per. cent.. per annum;. or rather, it is admitted that the plaintiff, which is a banking corporation, acquired the draft by paying or advancing thereon the sum nominated therein, less about one per cent, which was deducted and retained by it as compensation for the use of the money till maturity of the paper, which was due and payable at thirty days. This, as we have seen, was a discounting of the draft within the statute quoted; and the rate of discount being equal to twelve per cent, per annum, the discount was violative of the statute, and involved a crime on the part of plaintiff, assuming the. constitutionality of the enactment.
This was section 4435 of the Code of 1876. It was then directed against individual bankers only. As it then stood, it was adjudged to be unconstitutional by this court in Carter Bros. & Co. v. Coleman, 84 Ala. 256. The ground of that decision is not expressly stated, but it was based on authorities (Smith v. L. & N. R. R. Co., 75 Ala. 449, and S. & N. R. R. Co. v. Morris, 63 Ala. 193), a reference to which leaves little doubt that the statute was held invalid because it did not apply also to corporations engaged in the business of banking; and this is made manifest by the further statement of the court: “The statute has since been changed (Code, 1886, § 4140), with what effect we need not inquire.” The change here referred tcf consists in the omission from its last codification of the word “individual,” the effect being to make it applicable to corporate as well as individual bankers, and to obviate the infirmity pointed out in Carter Bros. & Co. v. Coleman. We do not conceive that there could have been any other objection to the constitutionality of the original enactment; and, that objection having been eliminated by amendment, we áre clear in the conviction that it is now a valid and efficacious exercise of legislative power. It is quite erroneous to say that it is class legislation, in a vitiating sense. It does apply to a class, of course, as do very many other statutes in our jurisprudence whose validity has never been, and can not be successfully questioned; as, for instances, statutes regulating railroads, physicians, lawyers, common carriers, warehousemen, &c.; but,
The business of banking is well understood and defined. A chief part of it, in most instances, consists in the lending of money, and this is almost always done by discounting-evidences of debt. The opportunities and temptations of persons engaged in it to evade or violate laws against usury are so much greater and more frequent than those of persons not so engaged, as to raise up a necessity for the application of more' stringent measures of repression than are necessary in respect of other businesses and persons engaged therein. And it is this consideration which differentiates the business of banking from all others in respect of usury, and furnishes a predicate for such legislation as is embodied in section 4140 for the regulation of banking and bankers, which does not exist as to any other occupation; just as the inherent clangers involved in the operation of a railroad differentiates that from other occupations, and necessitates legislation which would be entirely unnecessary and innocuous in respect of the business of farming, for instance. Anri upon this ground statutes of this character, when made to apply to all persons, whether individuals or corporations, regulating occupations, have been uniformly upheld. Judge Cooley, in this connection, says: “The legislature may also deem it desirable to prescribe particular rules for the several occupations, and to establish distinctions in the rights, obligations, duties and capacities of citizens. The business of common carriers, for instance, or of bankers, may require special statutory regulations for the general benefit; and it may be matter of public policy to give laborers in one business a specific lien for their wages, when it would be impracticable and impolitic to do the same for persons engaged in some other employments. If the law be otherwise unobjectionable, all that can be required in these cases is, that they be. general in their application to the class or locality to which they apply ; and they are then public in character, and of their propriety and policy the legislature must judge.” — Cooley’s Const. Lim., pp. 480-81.
In a recent case, a statute of Kentucky which gave a right of action against railroads to the representatives of persons, not in the service of the road, killed through the negligence
It is equally free from doubt, in our opinion, tbat tbe effect of tbis statute on tbe transaction in and by which tbe plaintiff acquired tbe draft and acceptance sued on would vitiate it in toto, and avoid and defeat all right on tbe part of tbe plaintiff under tbat contract. Tbe title upon which plaintiff relies is one which be acquired in confessed and palpable violation of a law which denounced bis act in tbat regard as a crime. Tbe doctrine is nowhere more firmly established than in Alabama, tbat no rights can spring from or be rested upon an act in tbe performance of which a
The rulings of the trial court on the pleadings, and its finding and judgment on the facts, are opposed to these views. The judgment is reversed, and the case having been tried without jury below, judgment will • be here rendered for the defendant.
Beversed and rendered.