Citizens National Bank of Kansas City, Missouri v. Donnell

Citation49 L.Ed. 238,25 S.Ct. 49,195 U.S. 369
Decision Date28 November 1904
Docket NumberNo. 36,36
PartiesCITIZENS' NATIONAL BANK OF KANSAS CITY, MISSOURI, Plff. in Err., v. M. S. C. DONNELL
CourtU.S. Supreme Court

Messrs. Oliver H. Dean, William D. McLeod, and Hale Holden for plaintiff in error.

[Argument of Counsel from pages 369-372 intentionally omitted] Mr. Edward P. Garnett for defendant in error.

Mr. Justice Holmes delivered the opinion of the court:

This is a writ of error to the supreme court of Missouri on the ground that the plaintiff in error is denied the rights with regard to charging interest conferred upon it by the national banking act. Rev. Stat. §§ 5197, 5198, U. S. Comp. Stat. 1901, p. 3493. The suit was brought by the plaintiff in error upon a promissory note for $20,000, with interest at 8 per cent, made on April 29, 1892. The facts, shortly stated, are as follows: On October 29, 1892, the plaintiff bought the defendant's note for $15,000, with interest at 7 per cent. On July 12, 1895, the defendant being behindhand with his payments of interest and also having overdrawn a bank account which he kept in the plaintiff's bank, he gave the plaintiff a new note for $17,500, and interest at 7 per cent, in satisfaction of both liabilities. The amount of this note included three semiannual interest charges of $525 each, with a few days' further interest, on the former note, with interest on this interest from the time it was due, and charges of 1 per cent or more a month on the amount overdrawn each month. It left the defendant with a credit on his bank account of $230.50. On April 29, 1896, the note in suit and another note for $2,000 were given in satisfaction of the last note for $17,500, and of another note for $2,500, of October 1, 1895, with interest accrued on both, and of an overdraft of $919.90, and a the beginning of the above transactions, and as before, charges of about 1 per cent a month on the amounts actually overdrawn.

The supreme court of Missouri held that the plaintiff must forfeit all interest from the beginning of th above transactions, and could recover only the original $15,000 the actual overdraft on July 12, 1895, $474.24, the bank credit of $230, given the same day, the note of October 1, 1895, for $2,500, the overdraft on April 29, 1896, of $878.81, and the bank credit of $2.42—in all, $19,081.97, less $5,500 collected on account since the action was begun. 172 Mo. 384, 72 S. W. 925.

By the U. S. Rev. Stat. § 5197, U. S. Comp. Stat. 1901, p. 3493, a bank may charge 'interest at the rate allowed by the laws of the state, . . . where the bank is located, and no more.' By § 5198 (U. S. Comp. Stat. 1901, p. 3493), taking, receiving, or charging 'a rate of interest greater than is allowed by the preceding section, when knowingly done, shall be deemed 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.' The Revised Statutes of Missouri fix 6 per cent as the rate of interest in the absence of agreement (§ 3705), but allow parties to agree in writing for not over 8 per cent (§ 3706). They also allow parties to contract in writing for the payment of interest upon interest, 'but the interest shall not be compounded oftener than once in a year' (§ 3711). It will be seen that the charge on the overdrafts went beyond § 3706, and the compounding of the semiannual interest on the notes encountered § 3711.

The plaintiff in error denies that the prohibition of compounding oftener than once a year affects the 'rate of interest' within the meaning of those words in U. S. Rev. Stat. § 5198, U. S. Comp. Stat. 1901, p. 3493, and contends that so long as the total sums received would not amount to more than 8 per cent on the debt, it has a right to charge them under U. S. Rev....

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    • United States
    • U.S. District Court — Southern District of West Virginia
    • 28 Diciembre 2016
    ...at 745–47, 116 S.Ct. 1730 ).)Huntington also attempts to use the Supreme Court's decision in Citizens' National Bank of Kansas City v. Donnell , 195 U.S. 369, 25 S.Ct. 49, 49 L.Ed. 238 (1904), to argue that it may choose to follow Ohio law to determine "how frequently Huntington may assess ......
  • Smiley v. Citibank
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    ...of interest which necessarily excludes late fees from the scope of that term"]; cf. Citizens' National Bank v. Donnell (1904) 195 U.S. 369, 373-374, 25 S.Ct. 49, 50, 49 L.Ed. 238 (per Holmes, J.) [implying that "interest" under section 30 of the National Bank Act may include overdraft To th......
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