Anna Maria Thornton, Executrix of William Thornton, Plaintiff In Error v. the Bank of Washington

• Decision Date: 01 January 1830
• Citation: 3 Pet. 36,7 L.Ed. 594,28 U.S. 36
• Parties: ANNA MARIA THORNTON, EXECUTRIX OF WILLIAM THORNTON, PLAINTIFF IN ERROR v. THE BANK OF WASHINGTON
• Court: U.S. Supreme Court

28 U.S. 36

3 Pet. 36

7 L.Ed. 594

ANNA MARIA THORNTON, EXECUTRIX OF WILLIAM THORNTON, PLAINTIFF IN ERROR v. THE BANK OF WASHINGTON.

January Term, 1830

ERROR to the circuit court of the county at Washington in the district of Columbia.

This case was brought before the court to reverse the judgment of the circuit court on a demurrer to the evidence offered by the defendants in error, the plaintiffs below, to sustain a claim on Mr Thornton as indorser on a promissory note discounted at the bank of Washington, for the benefit of one Bailey, the maker of the note.

The facts of the case are stated in the opinion of the court, delivered by Mr. Justice STORY.

Mr C. C. Lee and Mr Jones, for the plaintiffs in error, contended that the evidence offered by the plaintiffs below proved that usury had been taken on the note, and by the statute of usury in Aryland the note was declared void. If usury had been taken, the judgment of the circuit court must therefore be reversed.

The loan was made on a note payable in sixty days, which with the days of grace made it a loan for sixty-three days, and the bank had received the interest in advance by way of discount for sixty-four days.

The legislation of all mankind has been against usury; and the legislation of Maryland has been desirous and vigilant to suppress it. The principle in all courts acting under these laws has been, that if usury was found to have been taken, the wit of man would not evade the statute.

The transactions between the bank and the drawer of the note are admitted. It was a loan of money, and six renewals of the note took place in the year, and therefore the interest for six days was illegally taken. The series of loans are to be considered as one transaction. The notes were given for the accommodation of the drawer; and their renewals were expected, and were considered by the borrower and the bank as a part of the contract. The succeeding note was only substituted for that which had preceded it, in order to enable the bank to charge and receive the interest, by way of discount, every sixty-three days. Every security was therefore tainted with the usury of the whole dealing. This position is fully maintained by the case of Cuthbert vs. Hayley, 8 T. R. 390. The law of Maryland relative to usury and that of England is the same, as was seen by this court in the case of Gaither vs. The bank of Georgetown, 1 Peters, 37. Cited also, Marshall, 349. 5 Taunt. 780. 7 Com. Dig. Usury, 627. 3 T. R. 530.

The taking of interest by way of discount was a device which was originally, and long continued to be, considered a violation of the statute. Barns vs. Worledge, Cro. James, 25. Comyn on Usury, 82. Noy, 171. 1 Bulstrode, 20. These cases are confirmed in Marsh vs. Martindale, 3 Bos & Pul. 154, and fully establish the principle that receiving interest beforehand is usury. Comyn on Usury, 90.

It is admitted that the practice of bankers to take 'discount' is now allowed; but this is upon principles which do not authorise the practice which prevails with the defendants in error. As late as 14 George II. 7 Mod. 353, it was held by Mr Chief Justice Wills, that 'otherwise the force of the statute would be taken away.' The practice is since however considered legal for bankers to take interest in advance as discount. The allowance of this practice, upon the principles by which it is protected, is not evidence that the general principles of the law are altered. The expenses of postage, remittance, and commission, are considered as paid by this advance. Auriol vs. Thomas, 2 T. R. 52. 1 Bos. & Pul. 144. Comyn on Usury, 128.

That the principles of the law as originally established are not altered, cited Peake's Nisi Prius Cases, 200. Comyn, 125. 4 Taunt. 810. Brooke, qui tam vs. Middleton, 1 Camp. 445. Comyn, 132.

Banks are allowed to deduct interest, and, ex vi termini, discount. Fleckner vs. The bank of the United States, 8 Wheat. 354. But this does not allow the deduction of a greater amount than the interest for the actual advance. The bill of exceptions presents the custom of the bank as a justification of the proceeding. Custom is no protection. Floyer vs. Edwards, 1 Cowp. 112. Dunham vs. Gould, 16 Johns. 367.

It was argued that the practice of the bank to give notice of the dishonour of the bill on the fourth day after the sixty days, does not relieve the case from difficulty; as this could only be done by proof that there was a forbearance until the fourth day, the very reverse of which is established by the evidence; nor will the practice of the bank to protest on the fourth day, and not before, assist the claim. The universal commercial rule is, that on the third day of grace the note is due; and on non-payment before or upon that day, the money may be demanded and suit brought.

The question in this case has been decided in New York. Bank of Utica vs. Wagner, 2 Cowen's Rep. 712. If more than legal interest is reserve or taken, it is usury, whether by agreement or not. 3 Bigelow's Dig. 796. 4 Mass. 156. 15 Mass. 96.

Mr Lear and Mr Webster, for the defendant in error, contended, that the Maryland law of usury, passed in 1704, similar to the statute of Ann, had no application to the case. It was passed before the establishment of banks. The language is prohibitory as to any 'person,' and this may include 'corporations sole,' but not corporations aggregate. It is a criminal law, and a strict construction may be insisted upon. The insertion of a prohibition against taking more than six per centum in the charters of banks, is a proof that the general terms of the usury laws are not considered as extending to such corporations. It would not be necessary if this were the sound construction of the usury law.

In this case the whole question is, whether there was an agreement for forbearance for the loan of money on which more than legal interest has been taken. It is agreed that, in England, discount or interest in advance is not usurious. The facts of the case do not show that the borrower had the money for less than sixty-four days. On the sixty-fourth day, according to the custom of the bank, the note would be protested. It is admitted that a custom of trade will not take a case out of this statute, but it will go a great way to explain a transaction. 2 T. R. 52. Cowp. Rep. 114. 2 W. Black....