Dickey v. Bank of Clarksdale

• Decision Date: 07 November 1938
• Docket Number: 33207
• Citation: 183 Miss. 748,184 So. 314
• Court: Mississippi Supreme Court
• Parties: DICKEY v. BANK OF CLARKSDALE

184 So. 314

183 Miss. 748

DICKEY v. BANK OF CLARKSDALE

No. 33207

Supreme Court of Mississippi

November 7, 1938

(In Banc.)

1 USURY.

Collection of interest of $121.67 on note for $1,500 for one year providing for payment of interest at eight per cent., which was computed by calculating the year as 360 days plus 5 days did not render transaction usurious, notwithstanding that interest for calendar year, strictly speaking, would have been $120, since "year" within usury statute is 360 days, especially in view of failure of Legislature to make change in usury statutes which would expressly abrogate such interpretation of phrase "per annum" therein which had prevailed for approximately 100 years.

2 USURY.

Where balance of 11,300 due on note was renewed by one note for $1,150, due in one year with interest at 8 per cent, and by six notes for $25 each, due, respectively, in a series of one to six months after date on which service charge of $1 each was collected at maturity, notes for $25 were usurious, since interest represented by service charge exceeded 8 per cent.

3 USURY.

A "service charge" is something which a bank requires a borrower to pay in order to have loan or accommodation and hence is "interest" under another name and is "usurious" when it exceeds 8 per cent, per annum.

4. CUSTOMS AND USAGES.

Universal custom of banks in making service charges in excess of legal interest rate because expense of making small loans could not be covered by legal rate of interest could not affect question whether notes on which service charge was made were usurious.

5. CONSTITUTIONAL LAW.

Whether small borrower should be required to pay more interest than borrowers who are able to receive larger accommodations is question for Legislature, the province of the court being only to declare what the law is.

6. CUSTOMS AND USAGES.

No custom or asserted business necessity can override statutes as interpreted by courts or in any manner displace them.

7 USURY.

Where the transaction is one entire contract and it is usurious as to part, it is illegal as to the whole, so far as the interest is concerned.

8. USURY.

In usury cases, courts will look through the form to the substance and the real facts in such respect will control.

9. USURY.

Where balance of $1,300 due on note was renewed by one note for $1,150 with interest at 8 per cent, and by six notes for $25 each, due, respectively, in a series of from one to six months and on which service charge of $1 each was collected at maturity, usury exacted on notes for $25 infected entire renewal transaction of $1,300 with usury and interest on the note for $1,150 as well as each of the notes for $25 was forfeit, notwithstanding that holder of one of smaller notes might have been able to maintain an action on it after due date.

10. USURY.

Where balance of $1,300 due on note was renewed by one note for $1,150 with interest at 8 per cent, and by six notes for $25 each, due, respectively, in a series of from one to six months and on which service charge of $1 each was collected at maturity, principal of debt evidenced by two notes for $25 on which service charge represented interest in excess of 20 per cent, was not forfeit, since interest, including service charge, was required to be referred to the whole actual debt.

11. USURY.

Payments of usurious interest are by operation of law payments on the principal of the balance of the debt due.

12. USURY.

Notes given for a greater sum than legally due are "usurious," if the interest on the real debt exceeds 8 per cent.

13. USURY.

When the taint of usury has attached, all subsequent payments of interest or for service charges are credited by law to the principal throughout all subsequent renewals so long; as the identity of the subject matter is preserved or is traceable as belonging to the original debt.

14. USURY.

Where balance of $1,300 due on note was renewed by one note for $1,150 for one year with interest at 8 per cent, and by six notes for $25 each, due, respectively, in a series of from one to six months, on which service charge of $1 each was collected at maturity and at maturity of the larger note the transaction was again renewed without deducting or crediting usurious interest, all payments of interest and service charges from date of original renewal down to and including last payment in entire succeeding series in transaction were to be credited on principal as it existed on the date of original renewal.

15. USURY.

Absence of willful or intentional design to violate law by bank in exacting usurious service charges in loan transaction did not preclude forfeiture of interest in transaction, since all persons in doing what they intended to do are held to the legal consequences of the act intended.

16. USURY.

Usury in service charges of $1 and of 50 cents on small notes given in loan transactions could not be disregarded by court under maxim de minimis non curat lex, since legal wrong can be no less a wrong merely because its effect is diffused among several instead of falling on one alone.

SMITH, C. J., and ETHRIDGE and MCGOWEN, JJ., dissenting in part.

HON. WM. A. ALCOBK, JE., Judge.

APPEAL from the circuit court of Coahoma county, HON. WM. A. ALCORN, JR., Judge.

Action on notes by the Bank of Clarksdale against W. E. Dickey. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Reversed and remanded.

G. Edw. Williams, of Clarksdale, for appellant.

For convenience in computing interest for a fraction of a year or for an odd number of days this court has permitted the use of an interest calculator based on thirty days to the month.

Planters Bank v. Snodgrass, 4 H. 573; Cox v. Timlake, 169 Miss. 568, 153 So. 794; 66 C. J. 219.

The notes call for eight per cent per annum. The statute provides that if a greater rate of interest than eight per cent per annum shall be stipulated for or received in any case, all interest shall be forfeited.

62 C. J., pages 963 and 965; Bank v. Hoyt, 32 N.Y. 119; Hiller v. Ellis, 72 Miss. 709; Leonard v. Cox, 7 N.W. 289; Vail v. Van Dorn, 63 N.W. 787.

Usury is a moral taint, and no subterfuge, however cunningly devised, will be permitted to conceal it.

Warner v. Forshay, 57 F.2d 656.

The only burden the defendant had was to prove the plaintiff intentionally did the thing which the statute prohibits. When this was done, the law presumes the intent.

Chandler v. Cooke, 163 Miss. 147, 137 So. 496; Hebron Bank v. Gambrel, 116 Miss. 343.

Ignorance of law excuses no one, not even an honest money lender.

66 C. J. 179.

It was never claimed by the appellee that the collection of excessive interest on this note was an oversight or a mistake. The interest was purposely calculated on the entire principal without taking into consideration any of the four credits and it was contended in the trial of the case, by one of the vice presidents, that the bank had a perfect right to charge interest in this manner.

That interest upward of fifty per cent was charged on certain of the small notes executed by appellant was freely admitted by appellee.

One of the vice presidents stated that it is customary among all the banks in Mississippi to handle small notes by making a "service charge" in addition to the legal interest charge. The other vice-president stated that all banks in Mississippi handle small notes in the same manner.

In the absence of law, custom or usage may serve to establish a rule which will be binding, but where there is a positive prohibitory enactment, any custom that is in conflict with its provisions can have no weight or force whatever.

Wallace v. Fouche, 27 Miss. 266; Beck v. Tucker, 113 So. 209.

It makes no difference whether the lender chooses to designate the amount charged as a "service charge" if the payment is to be made to the lender because of or for the use of the loan, the amount charged will be considered as interest.

Bank v. Owens, 7 L.Ed. 508.

The verdict of the jury was contrary to the law and facts.

The court should have granted the peremptory instruction requested by the defendant.

Bank v. Frazier, 63 Miss. 238; Jones v. Brewer, 146 Miss. 142, 110 So. 115; Chandler v. Cooke, 163 Miss. 147, 137 So. 496; Cobe v. Guyer, 237 Ill. 568; Archer v. McCray, 59 Ga. 546; Vickery v. Dickson, 35 Barb. 96; Canal Commercial Trust & Savings Bank v. Brewer, 108 So. 424; Wied v. Crum, 92 So. 252; Cotton States Bldg. Co. v. Jones, 62 S.W. 741; Taylor v. Morris, 22 N.J. Eq. 606.

If the lender does not purge the contract of usury, the law does it for him, by considering interest payments as payments on principal as of the date of such payments.

Bank v. Frazier, 63 Miss. 238; Jones v. Brewer, 146 Miss. 142; Callanan v. Shaw, 24 Iowa 441.

Since all interest is forfeited by the plain terms of the statute, the law applies the amount paid to the principal.

Words and Phrases, second series, "Forfeiture;" Bank v. Frazier, 63 Miss. 238; Bank v. Welch, 104 S.W. 610; Black's Law Dictionary, "Forfeit;" Cotton v. Thompson, 159 S.W. 455; Burrows v. Cook, 17 Iowa 436; Gladwin St. Bk. v. Dow, 180 N.W. 601, 13 A.L.R. 1233; Bateman v. Blake, 45 N.W. 831; Polkinghorne v. Hendricks, 61 Miss. 366; Bank v. Orchards, 68 N.W. 144.

The application of a payment not having been directed, the law will, as between a legal and illegal debt, apply it on the legal debt. So the principal of law which applies such unappropriated payments first to discharge the interest due and then reduce the principal, cannot operate in the case of usurious interest, for all interest is forfeited, eo instanti, by an agreement to pay interest at an illegal rate, and payments will not be applied by operation of law to the...