Rockland-Atlas Nat. Bank of Boston v. Murphy

• Decision Date: 06 February 1953
• Docket Number: ROCKLAND-ATLAS
• Citation: 329 Mass. 755,110 N.E.2d 638
• Parties: NAT. BANK OF BOSTON v. MURPHY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 638

110 N.E.2d 638

329 Mass. 755

ROCKLAND-ATLAS NAT. BANK OF BOSTON v. MURPHY.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 10, 1952.

Decided Feb. 6, 1953.

Phillip A. Gorman, Boston, for plaintiff.

No argument nor brief for defendant.

Before QUA, C. J., and RONAN, WILKINS, SPALDING and COUNIHAN, JJ.

RONAN, Justice.

This is an action of contract against George E. Murphy and Elizabeth A. Donahue, ¹ the makers of a promissory note for $300 dated December 22, 1950, payable in twelve equal monthly instalments of $25, the first of which was payable on February 5, 1951. The note also contained a provision that in case of default there should be added to the unpaid balance due the costs and expenses of collection, including an attorney's fee of 15% of the unpaid balance but in no event less than $5. The judge found for the plaintiff in an amount less than that contended by the plaintiff to be due. He made a report to the Appellate Division which ordered the report dismissed. An appeal by the plaintiff brings the case here.

The defendants made no payments other than one of $25 on March 20, 1951, s12.50 on May 10, 1951, and a similar amount on May 23, 1951. A tender of $25 on April 20, 1951, on condition that an action to collect the note should be withheld was rejected. The judge found that the loan was subject to G.L. (Ter.Ed.) c. 140, § 90, as appearing in St.1946, c. 223, § 1, governing the rate of interest permissible for loans of less than $1,000, and that the interest charged was not excessive. He found that $257.89 was due at the date of the writ and found for the plaintiff for this amount with interest at 18% to the date of the finding.

A national bank in making loans is allowed by the Federal law to take, receive, and charge the same rate of interest, if one is established by the statutes of a State where the bank is located, as may be charged by the State banks. Title 12 U.S.C.A. § 85. The purpose of this act of Congress is to put national banks on an equality with State banks in competing in the business of lending money. The lawful rate permitted to State banks is the measure which national banks must adopt in conducting the business of making loans. The charging of a higher rate than that established by the State law is a violation not of the State law but of a Federal law which prescribes the penalties exclusively of any State statute in order to protect the national bank from discrimination. Title 12 U.S.C.A. § 86, Central National Bank v. Pratt, 115 Mass. 539; First National Bank v. Childs, 133 Mass. 248; Tiffany v. National Bank, 18 Wall. 409, 21 L.Ed. 862; Farmers' & Mechanics' National Bank v. Dearing, 91 U.S. 29, 23 L.Ed. 196; McCollum v. Hamilton National Bank, 303 U.S. 245, 58 S.Ct. 568, 82 L.Ed. 819; Schumacher v. Lawrence, 6 Cir., 108 F.2d 576; Panos v. Smith, 6 Cir., 116 F.2d 445; Anderson v. Hershey, 6 Cir., 127 F.2d 884.

The questions are what the amount of interest is for which the defendant Murphy was liable and also whether he was obliged to pay an attorney's fee.

It is provided by G.L. (Ter.Ed.) c. 107, § 3, that the rate of interest in the absence of an agreement is 6% a year, and that except as provided by G.L. (Ter.Ed.) c. 140 in § 78 (pawnbrokers' loans), in § 90 (loans of less than $1,000), in § 92 (small loans secured by mortgage on household furniture), and in §§ 96, 100 (loans under the small loans act), it shall be lawful to pay, reserve, or contract for any rate of interest or discount but that no rate of interest just mentioned shall be recovered in a suit unless the agreement to pay is in writing. Nelson v. Beal, 278 Mass. 130, 179 N.E. 598; Foley v. Flaherty, 278 Mass. 134, 137, 179 N.E. 599; New England Factors, Inc. v. Genstil, 322 Mass. 36, 42, 76 N.E.2d 151.

A national bank is expressly authorized to make loans, Title 12 U.S.C.A. § 24 subd. Seventh, and to conduct its business in accordance with the rules and regulations of the Comptroller of Currency. Title 12 U.S.C.A. § 211. In making a loan of $300 or less it could adopt the rate of interest permissible by G.L. (Ter.Ed.) c. 140, §§ 96-113, the small loans act, so called, but, if it did so, it was bound to keep within the rates prescribed by § 100, as appearing in St.1946, c. 174, § 1, of the act and as affected within lawful limits by the rules made in accordance with said section by the commissioner of banks of the Commonwealth. Of course, these rules and regulations, some of which set out in the record, are of no materiality, save only as they were involved in fixing the rate of interest. This is true even if the present small loans act does not, as did St.1908, c. 605, expressly exempt banks and banking institutions from its application. Indeed, the validity of the earlier act was challenged upon the ground that this exemption violated the equal protection clause of the Fourteenth Amendment to the Constitution of the United States but the statute was upheld on the ground that the evil sought to be reached by that statute did not arise from the making of small loans by national banks or by banking institutions under the supervision of the commissioner of banks. Mutual Loan Co. v. Martell, 200 Mass. 482, 86 N.E. 916, 43 L.R.A.,N.S., 746, affirmed 222 U.S. 225, 32 S.Ct. 74, 56 L.Ed. 175; Dewey v. Richardson, 206 Mass. 430, 92 N.E. 708. The only bearing the small loans act has on the present case is upon the question whether it can be found that the plaintiff in making the loan has complied with the rates of interest prescribed by the act. We need only to point out that the terms of the note do not comply in all respects with the rates of interest designated by the act. It is plain from the rulings of the judge on the requests that he found that the loan was not made in accordance with § 100, as amended, of the small loans act but was made at the rates permitted by G.L. (Ter.Ed.) c. 140, § 90, as amended, and further that the rate charged was not excessive. The question then is what was the amount of interest the defendant was obligated to pay on the loan as prescribed by this last section.

The rate of interest that may be charged for a loan of less than $1,000 'made at a rate of more than six per cent per annum' ² is not stated categorically in § 90, but it is prescribed effectively although indirectly by providing in general that the borrower may dischage his obligation by paying or tendering the amount due with interest if the rate is not more than 18% per annum, but if the interest is in excess of 18% a year, with interest at this last mentioned rate and in either case together with a sum not exceeding $5 for the actual expenses of making and securing the loan, and further providing that, if an action is brought to collect the loan, the verdict or finding shall in no event exceed the amount that would be required to discharge the indebtedness at the time of the verdict or finding. The waiver by the debtor of any of the benefits given by this section or a release of any of the rights granted to him by this section shall be deemed to be against public policy and void. A loan subject to this section calling for interest in excess of 18% is not unlawful or void but the borrower cannot be required to pay a higher rate of interest even if he has agreed in writing to do so. Reed v. Boston Loan Co., 160 Mass. 237, 35 N.E. 677; Colby v. Bissell, 198 Mass. 315, 84 N.E. 313; Spofford v. State Loan Co., 208 Mass. 84, 94 N.E. 287; Shawmut Commercial Paper Co. v. Brigham, 211 Mass. 72, 97 N.E. 636; Levin v. Wall, 290 Mass. 423, 195 N.E. 790; List Finance Corp. v. Sherry, 298 Mass. 533, 11 N.E.2d 442.

While in a sense it might be said that no particular rate was fixed by the law of this Commonwealth on loans for less than $1,000 and calling for more than 6% interest, yet the plaintiff cannot proceed on the theory that, no rate being fixed, it could charge 'a rate not exceeding 7 per centum, or 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal reserved bank in the Federal reserve district where the bank is located, whichever may be the...