Appeal from Common Pleas Circuit Court of Berkeley County; J. Henry Johnson, Judge.
GARY, C. J. When this case was heard the first time by the Supreme Court, the opinion was delivered by Mr. Justice ERASER, who has since died.
The following is the opinion which he wrote, except a quotation from the case of Mayfield v. Mortgage Co., 104 S. C 158, 88 S. E. 370, which is omitted:
"The facts, in brief, are: Miss Heyward, the defendant, sent her brother, who was her agent, to the plaintiff bank to borrow money. The agent negotiated the loan with Mr. Brown, the president of the bank, who was fully authorized by his bank to make loans. The contract between Mr. Heyward and Mr. Brown, the president of the bank, and also a director of the bank, was that Miss Heyward should pay 8 per cent, to the bank and 2 per cent, to Brown, personally. This loan went on for years. The 8 per cent, was paid to a clerk of the bank and the 2 per cent, was paid to the president. These two were to run with the life of the loan. Was it usury? The trial court held that it was not usury. We think it was usury.
"It does not need the citation of authority to show that a principal is responsible for the tortious acts of his agent, performed within the scope of his authority. The principal is responsible for the unlawful manner in which the agent does an authorized act. It makes no difference by what name a thing may be called, when ice are uncovering a violation of the law, but what is its nature. It makes no difference that two checks were made instead of one. In the May field Case the fee was so large as to indicate that it was not intended as a fee—only a cloak for usury In that case there was a basis for the charge of a fee. Here the plaintiff did not do the law the reverence to even claim that there was a basis of service for which 2 per cent, was charged. But the contract was that the 2 per cent, was to continue during the life of the loan. The contract was that the president and a clerk in the bank should receive 10 per cent, for the loan, during the life of the loan, and is usurious. Wre have seen that even though the payment was voluntarily made, it is immaterial. (Italics added.)
"If this case is affirmed, the statutes against usury are dead. Any money-lending concern can employ a loan agent who will charge for himself unlimited usury, and no one can show that behind closed doors the money-lender himself not only got his legal 8 per cent., but another 8 per cent. too. (Italics added.)
"The judgment is reversed.
"Watts, J., concurred.
"Marion, J., concurred in result.
"W. C. Cothran, A. A. J., dissented.
"Gary, C. J., and Cothran, J., did not participate."
C. R. I. Brown, a witness for the plaintiff,
testified as follows:
"I was the president of the bank when these loans were made. The by-laws contain the following provisions as to the duties of the president: 'He shall call the directors together when he deems it necessary. He shall at all times exercise general supervision over the directors of the affairs of the corporation. He shall have general superintendence and direction of all officers and employees of the corporation. He shall see that their duties are properly performed and shall perform all services pertaining to the office of president of the banking corporation.' * * * It was the custom of the bank that the president made the loans for the bank. The president was usually the agent of the bank in making loans. That custom was carried out practically through the existence of the bank.
"I was present at the directors' meeting when this loan was discussed. My impression is that the directors authorized the increase of the loan to $7,020. The question of the 2 per cent, commission was not taken up with the directors. It never went into the funds of the hank. They did not know that it was being paid to me individually. (Italics added.)
"Recross-examination:
"Q. Did1 the directors authorize the increase of $770 after it had been made or before it was made? A. My recollection is that when the loan was raised to $7,020 it was discussed as to the advisability of lending additional money to Mr. Heyward. That is my impression. I have looked over the minutes to see if there was any record of that, but I can't find in the minutes where there was any record of it, but I am sure that a discussion of that account was had with my board because we had done that on several occasions when Mr. Heyward requested an additional sum of money. I fail to find in the minute book as yet, casually looking over it, any record where it was brought up at any of these meetings, except this, that the loan has been passed from time to time by the board after it was recorded. (Italics added.)
"I could assume the authority as president to make the loan anyhow. That was usually the custom of the bank, in case the president cared to have additional information as to whether or not to make the loan. (Italics added.)
"It was so vivid in my mind because I wanted to be sure that there wasn't any question as to the value of the collateral without reference to Mr. Heyward paying a commission. At that time a statement was made by me personally that I didn't feel that he should have to pay a commission if the loan was good, and we considered it good, and he stated that he would like me to have it, and he knew me personally, and so 'I would like you to have this money, ' he said, 'If I don't pay it to you, I will have to pay it to another bank on Broad street.' (Italics added.)
"I can't state positively that Nat. Heyward never sent one check for both the 8 per cent, and the 2 per cent, interest by mail, drawn to the order of the Citizens' Bank, and I am almost willing to say that he did not do it; that would not impress me at all with being the right thing for Nat. to do to send a check to cover these two amounts. He could have done it, but I doubt very seriously if the bank would have had anything to do with the check." (Italics added.)
The following letter was put in evidence:
"March 15, 1920.
"Mr. C. R. I. Brown, Charleston, S. C—Dear Sir: Having paid the interest on a bond and mortgage of Marie H. Heyward, for which I am acting in her stead as her agent, from time to time in the Citizens' Bank, it is understood that I have been paying the Citizens' Bank 8 per cent, interest as called for by the bond and mortgage and 2 per cent, to you personally as commission for said loan.. "This is in accordance with my policy and has been done during the life of the boud, it being understood that we now owe the bank six months' interest in advance at the rate of 8 per cent.
"Yours very truly, Marie H. Heyward,
"Per N. Heyward, Agt."
Nathaniel Heyward, a witness for the defendant, testified as follows:
"Those payments of 8 per cent, to the bank and 2 per cent, to Mr. Brown, the president of the bank, were made continuously from 1912, when the first loan was made, up to 1920, when this letter was sent by me. I always figured the amount at each payment. The extra 2 per cent, was paid on the whole principal of the loan as the principal was increased from time to time. The interest was paid on the whole amount and was increased as the principal." (Italics added.)
The following are findings of fact by his honor, the circuit judge:
"That Nat. Heyward, the brother and agent of the defendant, Marie II. Heyward, offered to C. R. I. Brown, the president of the Citizens' Bank a commission of 2 per cent, of the amount of the loan, which was offered and accepted by Brown as his personal money, and was not paid to the bank. Interest at the rate of 8 per cent, per annum was paid to the bank, and the 2 per cent, commission paid to Brown was handled separately, and was paid to him for his own individual use and benefit, unknown, unauthorized, and not ratified by the bank, as a personal commission of 2 per cent, on the loan during its life. There is no testimony tending to show that the bank ever received any portion of the commission, or that it benefited in any way by Brown's unlawful act. There is, likewise, a total failure of proof that the bank knew of, authorized, or ratified the unlawful act of its president.
"It does not appear that the commission was made a condition to making or renewing the loans, and it appears that the mortgagor voluntarily paid the commission. The receipt by Brown personally of the commission was reprehensible and cannot be too severely condemned, but the voluntary offer to pay the commission shows that the usual 'oppressiveness' incident to usurious loans was absent in the case at bar. (Italics added.)
"While it might have been within the scope of the president's agency to charge and collect a commission for the use and benefit of the bank, surely it cannot be contended that, in the absence of the bank's knowledge, authorization, or ratification, that he was acting within the scope, or even with the apparent scope of his agency, or for his master's business in exacting such a commission for his own personal
use and benefit; certainly not in the absence of some proof that he was thus compensated for his services rendered to the bank as its employee or agent."
The exceptions are as follows:
"I. His honor, the circuit judge, erred, it is respectfully submitted, in decreeing that the plaintiff, Citizens' Bank, should have judgment against the defendant, Marie H. Heyward, in the sum of $7,020, with interest and attorney's fees and for the sale of the mortgaged property. The error being:
"(a) That the loan was usurious because the president of the bank, who was also a director in the bank, and was by the custom of the bank, in...
