MacRackan v. Bank of Columbus

• Decision Date: 26 November 1913
• Citation: MacRackan v. Bank of Columbus, 164 N.C. 24, 80 S.E. 184 (N.C. 1913)
• Parties: MACRACKAN v. BANK OF COLUMBUS.
• Court: North Carolina Supreme Court

80 S.E. 184

164 N.C. 24

MACRACKAN v. BANK OF COLUMBUS.

Supreme Court of North Carolina

November 26, 1913

Appeal from Superior Court, Columbus County; Ferguson, Judge.

Action by Donald MacRackan against the Bank of Columbus. Judgment for plaintiff, and defendant appeals. Affirmed.

Brown and Allen, JJ., dissenting.

Under the statute defining "usury," the scienter is sufficiently proved by the note where it shows on its face that more than the legal rate of interest was charged.

This action was brought to recover the penalty under Revisal, § 1951, for knowingly charging and receiving from plaintiff a greater rate of interest than allowed by law, namely, 8 per cent. interest on a note for $3,000. The jury returned the following verdict:

"(1) Did the defendant knowingly take and receive from the plaintiff on the $3,000 note a greater rate of interest than 6 per cent. per annum from the 9th day of February 1912? Answer: Yes.

(2) If so, what amount of interest was paid on said note from the 9th day of February to the 30th day of May, 1912? Answer $75.35.

(3) What sum, if any, is the plaintiff entitled to recover? Answer: $150.70."

There was evidence that plaintiff was a member of the board of directors, one of the managing and loan committee of defendant bank; but he testified that as such he never passed on the loans of the bank, nor did he fix the rate of interest or help to do it. He also testified that he resigned about the time the loan in controversy was made, and that when he paid the unlawful interest he was not a member of the board of directors or the committee. The following are the two instructions which defendant requested should be given to the jury:

"(1) If the jury find from the evidence and by the greater weight thereof that at the time the note sued on in this action, to wit, on the 9th day of November, 1911, and the time same was paid, to wit, on the 30th day of May, 1912 the plaintiff was a stockholder and director in the Bank of Columbus, defendant in this action, and was at said time a member of the loan or finance committee, and as such passed on said note, and was at said time a member of the examining committee, the plaintiff would not be entitled to recover, even though they shall find that the plaintiff was charged and paid a greater rate of interest than 6 per cent.

(2) To entitle the plaintiff to recover in this action, the jury must find by the greater weight of the evidence, not only that the defendant charged and received more than 6 per cent. interest from the plaintiff, but at the time same was charged and received the defendant knew it was usury and there was in the mind of the lender a wrongful intent and purpose to take more than the lawful rate for the use of his money."

The first instruction was refused, and defendant excepted; the second was refused except as given in the charge, and defendant again excepted. Judgment for plaintiff, and defendant appealed.

Irvin B. Tucker, W. H. Powell, and D. J. Lewis, all of Whiteville, for appellant.

Jackson Greer, of Whiteville, for appellee.

WALKER, J. (after stating the facts as above).

The defendant loaned to the plaintiff the sum of $3,000 and charged, reserved, and received from him, as interest thereon, a sum in excess of the legal rate. The character of the transaction is not involved in any doubt.

Interest is the premium allowed by law for the use of money, while usury is the taking of more for its use than the law allows. It is an illegal profit. 4Blk. Com. 156; Yarborough v. Hughes, 139 N.C. 200, 51 S.E. 904. If the lender knowingly takes, receives, reserves, or charges a greater rate than 6 per cent. per annum, he forfeits the interest; and, if the unlawful interest has been paid to him, he is liable to a penalty of twice the amount of interest so received. Revisal, § 1951. The second prayer for instruction is directed to the intent with which the interest was paid. Where there is negotiation for a loan of money, and the borrower agrees to return the amount advanced at all events, it is a contract of lending; and however the transaction may be shaped or disguised, if a profit or return beyond the legal rate of interest is intended to be made out of the necessities or improvidence of the borrower, or otherwise, the contract is usurious.

The corrupt intent mentioned in the books consists in the charging or receiving the excessive interest with the knowledge that it is prohibited by law and the purpose to violate it. Our statutes make it usury if the interest is knowingly charged or received at the unlawful rate. When the illegal purpose stands clearly revealed on the face of the instrument, as in this case, no further inquiry into the intent is required. Miller v. Insurance Co., 118 N.C. 612, 24 S.E. 484, 54 Am. St. Rep. 741. The contract itself establishes the corrupt intent, as it is susceptible of no other meaning. These principles were settled in the recent case of Riley v. Sears, 154 N.C. 509, 70 S.E. 997. This transaction cannot be explained upon any other theory than that the defendant knew the interest it exacted to be unlawful, and this makes it usury. Doster v. English, 152 N.C. 339, 67 S.E. 754. The court charged the jury that knowledge of the illegal character of the interest received by the defendant was essential to its liability when it gave this instruction: "If you find by the greater weight of the evidence that between February 9, 1912, and May 30, 1912, the plaintiff paid to the defendant bank a greater rate of interest than 6 per cent., and at the time the bank knowingly charged and received a greater rate than 6 per cent., then it is your duty to answer the first issue, 'Yes.' If you do not so find by the greater weight of the evidence, you would answer it, 'No.' "

The second question is: Did the fact that plaintiff was a member of the board of directors, and the managing and loan committee, purge the transaction of its usurious taint? The language of our statute (Revisal, § 1951) is positive and peremptory, and it was said (by Justice Hoke) in Riley v. Sears, supra, that the courts have enforced it strictly and with insistence and alertness. It may be added by us now that it is the declared policy of the state, which for many years has stood with the approval of the popular will, that usury shall not be exacted of the borrower; and "whenever, directly or indirectly, unlawful interest has been taken or charged, the provisions of the statute must be applied." Riley v. Sears, supra, and numerous cases therein cited. The only test is the taking of the excessive interest knowingly, and it can make no difference who is the borrower. There is no exception in the statute of any person or class of persons. A bank is not privileged by the law to exact a larger rate of interest from its stockholders or officers than from those who are not. This court has uniformly held that a stockholder who has paid usurious interest to the corporation, of which he is a member, can recover the penalty "notwithstanding that he is in pari delicto in the transaction. The statute (Code, § 3836; Revisal, § 1951) expressly provides that a party who has so paid usurious interest (and is in pari delicto) may recover double the amount he has paid." Hollowell v. B. & L. Asso., 120 N.C. 286, 26 S.E. 781. The same was held in Rowland v. B. & L. Asso., 115 N.C. 825, 18 S.E. 965, where Justice Burwell says: "Thus it appears that what it takes from one of its stockholders, under the pretense that it is lending at 6 per cent., it gives to another with a lavish hand. It is both a taker and a giver of usury."

The doctrine is familiar that, where each is equally in fault (in pari delicto), the law favors him who is defending, or as otherwise expressed, when the fault is mutual and of equal degree, the law will leave the case as it finds it. But the principle does not apply here. It is not, in law, a case of equal fault. Lord Ellenborough once said that, where there is oppression on the one side and submission on the other, it never can be predicated as par delictum, for one holds the rod and the other bows to it. Broom's Legal Maxims (6th Am. Ed.) 695; Smith v. Cuff, 6 M. & S. 160. And in Atkinson v. Denby, 7 H. & N. (Exch.) 933, approving Smith v. Cuff, 6 M. & Sel. 160, and Smith v. Bromley, 2 Doug. 695, note, Chief Justice Cockburn said that, where one of the parties is in a position to dictate and the other has no other alternative but to submit, it is virtually a state of coercion; and, while the parties may be in delicto, it is not par delictum. They are not equally in fault, one being in a position of dependence on the other and having to submit to his terms or suffer if he does not, and that it would be mischievous if it were held that he could not recover the money paid under such circumstances.

Lord Mansfield, in the Court of King's Bench, while deciding the case of Lowry v. Bourdieu (2 Douglas, 469), reported in 99 Eng. Reports (Full Reprint, at pages 209, 301), said: "He desired it might not be understood that the court held that, in all cases where money has been paid on an illegal consideration, it cannot be recovered back. That in cases of oppression, when paid, for instance, to a creditor to induce him to sign a bankrupt's certificate, or upon a usurious contract, it may be recoverd, for in such cases the parties are not in pari delicto."

The commentator on Jones v. Barclay, infra (99 Eng. Reports, Full Reprint, at page 443, note F7), says: "The inference to be drawn from the various decisions that have taken place on this subject, stated here and in the notes to Lowry v Bourdieu, supra, 468, appear to be that, the general principle remaining, that in pari delicto potior est conditio possidentis, the two...