State ex rel. Attorney-General v. Boatmen's Sav. Inst.

• Decision Date: 31 March 1871
• Citation: 48 Mo. 189
• Parties: STATE OF MISSOURI ex rel. Attorney-General, Relator, v. THE BOATMEN'S SAVINGS INSTITUTION, Respondent.
• Court: Missouri Supreme Court

48 Mo. 189

STATE OF MISSOURI ex rel. Attorney-General, Relator,

v.THE BOATMEN'S SAVINGS INSTITUTION, Respondent.

Supreme Court of Missouri.

March Term, 1871.

Quo Warranto.

H. B. Johnson, Attorney-General, with whom were Clover and Knox, for relator, cited Lehigh Bridge Co. v. Lehigh Coal Co., 4 Rawle, Penn., 9; 6 Conn. 209; 14 Ohio, 10; State Bank v. State, 1 Black, 279; Canal Co. v. R.R. Co., 4 Gill & Johns. 1; Trustees of McIntire Poor School v. Zanesville Canal & Man. Co., 9 Ohio, 203; Penobscot Boom Corp. v. Lamson, 16 Me. 224; Hodson v. Copeland, id. 314; Atchafalaya Bank v. Dawn, 13 La. 497; Charles River Bridge v. Warren Bridge, 7 Pick., Mass., 371; All Saints Church v. Lovett, 1 Hall, N. Y., 198; John v. Farmers' & Mechanics' Bank of Indiana, 2 Blackf., Ind., 367; Hamtramck v. Bank of Edwardsville, 2 Mo. 169; Day v. Stetson, 8 Greenl. 372; State v. N. O. Gaslight & Banking Co., 2 Rob., La., 529; 5 Wheat. 658-9; 9 Cranch, 51-2; Rex v. Passmore, 3 T. R. 246; Eastern Archipelago v. Regan, 22 Eng. L. & Eq. 238, 337-8; 18 Eng. L. & Eq. 167; Rex v. Corporation of Carmarthen, 2 Burr. 869; King v. Ogden et al., 10 Bd. 230; Tancred on Quo Warranto, 14; 28 Penn. 387; 3 Harg. C. & Tr. 545; 2 T. R. 515; 10 Ohio, 548.

Gantt, and Lackland, Martin & Lackland, for respondent.

The statute (Adj. Sess. Acts 1855, p. 149, § 3) draws a plain distinction between loans and discounts. The counsel contend that the discount was of accommodation paper and a mere colorable transaction, being in fact a loan and nothing more. But the pleadings do not show this. (McLean, Assignee, v. Lafayette Bank, 3 McLean, 587 et seq.; Rock River Bank v. Sherwood, 10 Wis. 233 et seq.)

CURRIER, Judge, delivered the opinion of the court.

This is a proceeding in the nature of a writ quo warranto, prosecuted by the attorney-general in behalf of the State, with a view to forfeiture of the defendant's charter. Supposed violations of the charter, in loaning money and discounting paper at usurious rates, constitute the groundwork of the prosecution.

As showing such violation, it is alleged that said banking institution, in willful disregard of the restrictions of its charter, has, for a long time past, been in the constant practice of loaning its money by discounting promissory notes at exorbitant and usurious rates of interest, far exceeding the rate of eight per cent. per annum prescribed in the charter, and at the rate of eighteen per cent. per annum; and that defendant has also, in repeated instances during the years 1868, 1869 and 1870, been in the “constant practice” of loaning its money at a rate of interest exceeding eight per cent. per annum; and further, that said defendant, during said years, has been in the constant practice of buying bills of exchange at a far greater rate than the current rates of exchange, with intent thereby to evade and violate the provisions of said charter.

Three classes of facts are here set out as constituting violations of the charter: first, the loaning of money in the way of discounts at usurious rates; second, the loaning of money at usurious rates without specifying the manner of the loan; third, the buying of bills of exchange at rates exceeding the current rates of exchange, with intent to evade and violate the charter restrictions as to the rate of interest on loans.

The relator's replication, in which these facts are alleged, is demurred to, and the question is thus raised whether the facts set out in the pleading, assuming them to be true, show violations of the defendant's charter of a character to warrant its forfeiture. If the facts show a violation of the charter at all, it has not been contended that they are not of a character to warrant this proceeding. The defendant's proposition is that no violations of the charter are shown; in other words, that the facts alleged do not, under the charter, constitute usury.

By the charter the bank was authorized to “lend money at any rate of interest not exceeding eight per cent. per annum,” and also “to discount, buy and sell promissory notes, bonds, bills of exchange, and other securities.” (Adj. Sess. Acts 1855, p. 149, § 3.)

One point made by the defendant's counsel is that the eight per cent. restriction has no relation to the discounting of commercial paper, and that the charter therefor imposed no restrictions respecting rates of discount. A distinction is thus sought to be drawn between loans and discounts as regards the charter restrictions upon the reservation of interest.

The distinction is unsubstantial. The term “discount,” as a substantive, means the interest reserved from the amount lent at the time of making the loan; as a verb, it is used to denote the act of giving money for a note or bill of exchange, deducting the interest. In a discount the interest is reserved, or collected in advance; while in ordinary loans the interest is paid, or agreed to be paid, after it is earned. In either case the transaction constitutes a loan, and a reservation of interest beyond the specified eight per cent. is usury, and the payment of interest in advance does not change the usurious character of the transaction. It cannot be imagined that the Legislature in granting the charter intended to restrict...