Duncan v. Maryland Savings Institution

delivered the opinion of the court.

Of the numerous questions which have been raised in this case, that which, in its proper order, first presents itself for determination, is, whether the Maryland Savings Institution has *308the power of lending any portion of its deposites, or of discounting therewith, promissory notes or other securities for debt.

As a corporation possessing no powers but those expressly or impliedly conferred on it by the enactment which brought it into being, to the terms of such enactment must we look for the outline of its powers.

The first section of the act authorises the institution to make all contracts whatsoever.

The third empowers the directors to provide for the investment of the funds of the corporation.

The fourth section under which deposites are received pro- * vides that, all monies so received shall be invested in public ■ stocks or other secureties at the discretion of the directors.

In incorporating this company it was not the design of the legislature to create a mere stock jobbing institution, the funds of which were to be kept employed in buying and selling stocks which, from the nature of business in'receiving and paying off deposites, must have been the case, if all funds were exclusively appropriated to the purchase of stocks. Its charter therefore gave to the directors a discretionary power, to make investments in stocks or other securities.

What is the nature of the security here alluded to ? “any thing given or deposited to secure the payment of a debt.” The words, “other securities,” therefore,'embrace bills, bonds, notes, mortgages, &e., and the authority to make investments therein, clothes the institution with the power of making loans by way of discount. The concluding proviso to this section of the act of assembly, “that no part of the funds of said corporation, shall be loaned to any officer or director of said corporation,” demonstrates the existence of the power we have ascribed to it. The People vs. The Utica Insurance Company, 15 Johns. 392.

But it is insisted that, the Maryland Savings Institution is deprived of the authority imputed to it, by the 6th section of its charter, which restrains it from doing “any act or acts in*309consistent with the privileges secured to the existing banking institutions in the city of Baltimore.”

By the acts of 1813, chapter 122 and 1831, chapter 131, in the 11th section of which it is enacted that, “in case of the acceptance of, and compliance with, the provisions of this act, by the several banks hereby required to make the aforementioned road, the faith of the state is further pledged to the aforesaid banks in the city of Baltimore, not to grant a charter of incorporation to any other banking institution to be established in the city or precincts of Baltimore, before the 1st January 1845,”

Banking powers have been defined as consisting of the right of issuing negotiable notes, discounting notes, and receiving deposites. See 5 Conn. 383, The People vs. President, &c. of Manhattan Co. 15 John. 390, The People vs. Utica Insurance Company.

If then the creation of a corporation with any one of these hanking powers is a violation of the faith of the State, plighted to the banks of Baltimore, the incorporation of the Maryland Savings Institution, is a violation of that pledge, whether the right of discounting he granted or not. The primary object of the legislature and of the company incorporated, the authority to receive deposites, has been explicitly given; and this is one of the three enumerated attributes of a banking institution. If the construction now contended for of the acts of 1813 and 1831. were sustained, it would follow that, all the Savings Institutions and Insurance Companies, created by legislative sanction in the city of Baltimore, since the year 1813 were violations of the faith of the state pledged to the banks of Baltimore. To disrobe itself of the power of creating such institutions, so highly beneficial to the public interest, was never designed by the legislature. The interference of the operations of such institutions with the concerns of the banks, was too unimportant, to induce the exaction of such a pledge from the State. The true interpretation of the engagement, entered into by the legislature with the banks was, that no charter of incorporation should be granted to any banking in*310stitution to be established within the city or precincts of Baltimore, clothed with the valuable and important power of issuing, negotiable notes. The object of the banks being to secure to themselves the exclusive emission of bank paper within the prohibited district.

It is said that, a loan on such security as that given by the appellant, was not authorised by the charter of the Maryland Savings Institution, which requires two securities to be taken for all money lent. But no such requisition is to be found in the charter, and if there were, it has been complied with in making the loan in question, two securities having been given, one the personal responsibility of the appellant, the other the sixteen shares of hypothecated stock.

An objection was made to the form of the note discounted, that it was not a negotiable note. In this there is no weight, it is a note within the Statute of Anne; on it three days of grace are allowed according to mercantile usage, and it is as beneficial a security to the institution as if it had been made payable to its order.

The first bill of exceptions concedes that, the interest taken by the Maryland Savings Institution was the legal interest, which would have been payable on the note at the expiration of six months and three days; but insists that, it was the duty of the institution to have advanced to the appellant the entire sum of money specified in the note, and at the maturity thereof he was to repay the amount of the note with the interest thereon.

The fallacy of such a position is demonstrated by the note itself. It was payable six months after date and did not bear interest. If then the institution had advanced, upon the note, the amount expressed upon its face, according to its tenor, at the expiration of the six months, the institution would have been reimbursed the sum by it originally advanced, without any interest whatever. Such a mode of making a loan, on such a security, has no countenance from the charter of the Savings Institution, or the law of the land. Under this exception it is also insisted that, taking the interest in advance, *311upon the discount of the note, is usurious, and avoids the note given as a security for the loan. In Floyer vs. Edwards, Cowp. 115, Lord Mansfield said, “upon a nice calculation it will be found that the practice of the bank in discounting bills exceeds the rate of 5 per cent, (the legal rate of interest in England,) for they take interest upon the whole sum for the whole time; the bills run, but pay only part of the money, viz., by deducting the interest; yet this is not usury.” And in Thornton vs. Bank of Washington, 3 Peters, 40, the Supreme Court say, to sustain the defence it has been said that the receipt of the interest in advance for sixty four days, upon the discount of the note, is usury. But we are all of opinion, that the taking of interest in advance upon the discount of notes in the usual course of business by a bank, is not usury. The doctrine has been long settled, and is not now open for controversy. And the same principle was decided in The Bank of Utica vs. Wager, 2 Cowen, 712. Agricultural Bank vs. Bissel, 12 Pickering, 588, and Fleckner vs. U. S. Bank, 8 Wheat. 338, — in which latter case Storv, J., in delivering the opinion of the court, says, that an authority to make discounts, means an authority to receive the interest in advance. By the act of assembly of 1832, ch. 152, all other corporate bodies, and all citizens and residents of this State, are, in respect to the mode of discounting and the rate of charging interest on loans, placed upon the' same footing with the banks.

In the second bill of exceptions the defendant insists that, by Rowlett’s Tables, the discount deducted from the note should have been four dollars and fifty-eight cents, whereas the deduction actually made was four dollars and sixty cents; and he thereupon-prayed the court to instruct the jury, that if they believe the plaintiffs did intentionally exact and take from the defendant the sum of four dollars and sixty cents, as and for interest upon the sum so loaned by them, that the plaintiffs are not entitled to recover; because such exaction and taking of said sum for interest was corrupt and usurious, and avoids the contract of loan; which instruction the court refused, but di*312rected the jury that, the said exaction and taking of interest was not in itself usurious.

We do not stop to inquire whether, according to Rowlett’s Tables, now made a part of the law of the land, two cents more have, in point of fact, been deducted for interest than is authorised by law. But we assume, upon the hypothesis of the prayer, that two cents more were intentionally exacted as interest, than by the letter of the law the plaintiffs were warranted in receiving; and we are still of opinion that the court were right in refusing the defendant’s prayer, and giving to the jury the instruction as stated. In Stockett vs. Ellicott, 3 Gill & John. 123, a case where usury was set up as a defence to a note, given for the balance due on an account, containing items of principal and interest, and where in fact more than six per cent, interest had been charged, this court said, it is the intention that gives character to the transaction; the agreement, the intention of the parties, constituting a principal ingredient of usury. In Duvall vs. The Farmer’s Bank of Maryland, 7 Gill and John. 60, this court have said, that “the finding of an intention to take more than legal interest was indispensable. The calculations or deductions of interest according to Rowlett’s Tables were in all cases legalized by the act of 1826, ch. 90, and the admission is, that the bank has always been in the practice of charging interest or discount agreeably to the calculations in Rowlett’s Tables. Now if it be true that the exception does show, greater interest or discount was in fact taken than was indicated by these tables, it would not necessarily follow that it was usury. For that must depend on intention, and if designing to follow calculations which were lawful, and the admission of the uniform practice would seem to lead to such a deduction, they had, by mistake or error, and not by intention, deviated from the rules prescribed by Rowlett, a case would be presented from which usury could not be deduced.” A party who demands and takes as a discount, a larger amount than is authorised by Rowlett’s Tables, intentionally exacts what he receives. But whether this intentional exaction be the result of mistake or accident, or of a corrupt usu*313rious design, is a matter of fact to be submitted to the jury. In the prayer under consideration, the defendant’s counsel called on the court to decide this fact, instead of leaving it to the jury-. The prayer on that account was properly rejected, and the instruction given was fully sustained by the authorities referred to.

We think the court below were right in refusing the defendant’s prayer, in his third bill of exceptions, for the same reasons that sustained the refusal in the second exception. Nor do we think that, the judgment of the county court ought to be reversed, on account of the court’s instruction to the jury that, the exaction of the interest complained of, was not usurious, conceding, without a reference to Rowlett'1s Tables, to test the truth of the fact, that there was an overcharge of two cents in the calculation of interest,, in the absence of all proof indicating a corrupt and usurious design in making such overcharge, we regard it as too trifling and inconclusive a circumstance, to warrant the jury in finding a corrupt and usurious intention in the plaintiff. The pitiful amount of the sum exacted standing alone, rather disproves than proves usury. The finding of such a fact was therefore properly withheld from the jury.

Approving of the conduct of the county court as set forth in all the defendant’s hills of exceptions we affirm their judgment.

JUDGMENT AFFIRMED.