The Bank of the United States, Plaintiffs In Error v. Herbert Waggener, George Wagley and Alexander Miller

• Decision Date: 01 January 1835
• Citation: 9 L.Ed. 163,34 U.S. 378,9 Pet. 378
• Parties: THE BANK OF THE UNITED STATES, PLAINTIFFS IN ERROR v. HERBERT G. WAGGENER, GEORGE WAGLEY AND ALEXANDER MILLER
• Court: U.S. Supreme Court

34 U.S. 378

9 Pet. 378

9 L.Ed. 163

THE BANK OF THE UNITED STATES, PLAINTIFFS IN ERROR v. HERBERT G. WAGGENER, GEORGE WAGLEY AND ALEXANDER MILLER.

January Term, 1835

IN error to the circuit court of the United States for the Kentucky district.

The plaintiffs in error instituted an action against the defendants, and one William Owens, on a promissory note for 5000 dollars, dated the 7th of February 1822, and payable at the office of the Bank of the United States at Lexington, Kentucky, on the 7th of February 1825, with interest at the rate of six per centum per annum. The defendants were joint and several promissors with William Owens. Upon a plea and demurrer in the suit, a division of opinion was certified by the judges of the circuit court to this court, upon which the opinion of the court was given, as reported in 2 Peters 527.

Afterwards, at May term 1833, the case having been remanded, judgment was entered against William Owens for want of a plea, and the other defendants pleaded the general issue; upon which, the cause was tried by a jury, and a verdict and judgment, under the direction of the court, were given for the defendants. A bill of exceptions to the refusal of the court to give the instructions asked by the plaintiffs, and to those given by the court at the request of the defendants, was tendered on behalf of the plaintiffs, and was sealed by the judges of the circuit court.

The note declared on was in the following terms:

'On or before the 7th day of February 1825, we, William Owens, Alexander Miller, Herbert G. Waggener, George Wagley, jointly and severally, promise to pay to the President, Directors and Company of the Bank of the United States, at their office of discount and deposit at Lexington, the sum of 5000 dollars in lawful money of the United States, with interest thereon, in like money, after the rate of six per cent per annum from this day until paid, for value received, at the said office of discount and deposit at Lexington, without defalcation. Witness our hands, this 7th day of February 1822.

'WILLIAM OWENS,

'ALEX. MILLER,

'HERBERT G. WAGGENER,

'GEORGE WAGLEY.

'Witness—JOHN BREEN.'

On which note is the following indorsement:

'Mem.—Interest is to be charged on this note from the 21st day of May 1822 only and not from the 7th of February 1822, within mentioned, the former being the day on which the amount was actually received by the makers of the note.

'H. CLAY.'

The evidence in the case established the following facts. Before the time when the note was given, the office of the Bank of the United States at Lexington was the holder of a large amount of notes of the Bank of Kentucky, which had been received in the usual course of business, at the full value of the notes as expressed upon them, in gold and silver. These notes were considered as valuable to the full extent of their amount, although the Bank of Kentucky had suspended paying their notes in specie. No doubt was entertained by the officers of the office of the Bank of the United States, of the full ability of the Bank of Kentucky so to redeem them. At the time the loan was made to Owens on the note sued upon, the notes of the Bank of Kentucky had depreciated to the amount of between thirty-three and forty per cent. It was also in evidence, that when the Bank of Kentucky suspended specie payments in 1819, the institution was considerably indebted to the plaintiffs at the office at Lexington, for her notes taken in the usual course of business, and for government deposits transferred to that office from the Bank of Kentucky and its branches; and that the accounts had been settled between the institutions, the balance ascertained and placed to the credit of the plaintiffs on the books of the Bank of Kentucky, as a deposit upon which the Bank of Kentucky agreed, in consideration of forbearance of the plaintiffs, to pay interest at the rate of six per cent per annum; and that said interest, as it accrued, was carried at stated intervals of time to the credit of the plaintiffs on the books of the bank; and that the amount paid Owens on the said check had the effect of stopping the interest on that sum from that time. The balance which remained due from the Bank of Kentucky to the Bank of the United States was finally settled and discharged in specie or its equivalent, about seven months after the date or time of the said loan to Owens. The Bank of Kentucky did not, for many years after the date of the loan to Owens, generally resume the payment of its notes in specie, or its equivalent.

In the state of things existing in 1822, William Owens applied to the office at Lexington for a loan of 5000 dollars in the notes of the Bank of Kentucky, assuring the bank that they would answer his purpose as well as gold or silver. The offer was rejected by the directors of the bank; and on its renewal, was again refused. A third time the loan was applied for, the interference of a gentleman connected with the business of the bank, not a director, to procure it, was solicited and obtained; and the application was referred to the board at Philadelphia, by which the loan was authorized, a mortgage on real estate being given as an additional security for the loan. The mortgage and note having been executed, the amount of the same was paid to William Owens by handing him 1100 dollars in notes of the Kentucky Bank, and a check of that bank for 3900 dollars, which was paid to him at that bank in its notes.

The defence to the action was, that the transaction was usurious, and therefore contrary to the act of congress incorporating the Bank of the United States, and void. On the trial, the following instructions to the jury were asked by the counsel for the plaintiffs.

'1. That if they believe from the evidence, that the consideration of the note sued on was 3900 dollars, paid in a check on the Bank of Kentucky, and 1100 dollars in Kentucky notes, and that the contract was fairly made, without any intention to evade the laws against usury; but that the parties making the contract intended to exchange credits for the accommodation of Owens; that the Bank of Kentucky was solvent, and so understood to be, and able to pay all its debts by coercion: that the contract is not void for usury, nor contrary to the fundamental law or charter of the bank, notwithstanding it was known to the parties, that said bank did not pay specie for its notes without coercion, and that the difference in exchange between bank notes of the Bank of Kentucky and gold and silver, was from thirty-three to forty per cent against the notes of the Bank of Kentucky.

'2. To instruct the jury, that if they believe from the evidence, that the contract was made on the part of the bank fairly, and with nointention to avoid the prohibition of their charter by taking a greater rate of interest than six per cent, or the statutes against usury, but at the instance, and for the accommodation and benefit of the defendant Owens; and that at the time of the negotiation and contract for the check on the bank, and the 1100 dollars in bank notes of the Bank of Kentucky, that bank was indebted to the Bank of the United States, at their office aforesaid, the sum of 10,000 dollars or more, bearing an interest of six per cent, which sum, it was understood and believed by the parties to the contract, at and before its execution, the Bank of Kentucky was well able to pay, with interest, and which sum it did pay, after deducting the 3900 dollars, paid to the defendant Owings, with interest in gold or silver, or its equivalent: that the contract was not usurious, unless they believe that the contract was a shift or device entered into to avoid the statute against usury, and the prohibition of the charter, notwithstanding the jury should find that the check and notes aforesaid were, in point of fact, of less value than gold and silver.

'3. If the jury find, from the evidence in the cause, that the defendants applied to the plaintiffs to obtain from them 5000 dollars of the notes of the President, Directors and Company of the Bank of Kentucky; and in consideration of their delivering, or causing to be delivered to the defendants 5000 dollars of such notes; and the said Bank of Kentucky was then solvent and able to pay the said notes, and has so continued up to this time; and that the holders thereof could, by reasonable diligence, have recovered the amount thereof, with six per centum per annum interest thereon, from the time of the delivery of them by plaintiffs to defendants, up to the time of such recovery; and that said arrangement and contract was not made under a device, or with the intent to evade the statutes against usury, or to evade the law inhibiting the plaintiffs from receiving or reserving upon loans interest at a greater rate than six per centum per annum: then the transactiom was not in law usurious or unlawful, and the jury should find for the plaintiffs.

'4. That unless the jury find from the evidence in the cause that the advance sale or loan of the notes on the Bank of Kentucky, made by plaintiffs to defendants, was so made as a shift or device to avoid the statute against usury, or in avoidance of the clause of the act of congress which inhibits the plaintiffs from taking or reserving more than at the rate of six per centum per annum for the loan, forbearance, or giving day of payment of money, the law is for the plaintiffs, and the jury should find accordingly.

'5. That unless they believe, from the evidence in this cause, that there was a lending of money, and a reservation of a greater rate of interest than at the rate of six per centum per annum stipulated to be paid by defendants to plaintiffs: the law is for the plaintiffs, and the jury should find for them; unless they further find that there was a shift or device resorted to by the parties with the intent and for the purpose of avoiding the law, by which something other than money was advanced, and by...