Suit by a national bank upon a bill of exchange. Defense, usury.
The bank, in discounting the bill, reserved a greater amount than
was allowed for inter est by the law of the state where it was
situated. There was no proof of the current rate of exchange.
Held that the bank was entitled to recover.
This suit was brought by the Union National Bank of Pittsburg,
Pa., against George M. Wheeler, as endorser of two bills of
exchange, one dated Jan. 20, 1871, for $10,000, and one dated March
8, 1871, for $5,000, drawn by Slack, superintendent of the Brady's
Bend Iron Company, on and accepted by the treasurer of said
company, pursuant to authority vested in him for that purpose, and
payable sixty days after their respective dates at the American
Exchange National Bank of New York. The plaintiff discounted both
bills for the benefit of the company: the first on the
twenty-fourth day of January, 1871, and the second on the day of
its date -- the company receiving the amount mentioned in the
bills, less the sum of $246.
The rate of interest in Pennsylvania was six percent per
annum.
Said bills were duly protested for nonpayment, and notice given
to the defendant. There was no proof of the rate of exchange when
they were discounted.
There was a judgment in favor of the bank, which was affirmed by
the Court of Appeals of the State of New York, and the record
remitted to the inferior court. Wheeler then brought the case here
by a writ of error.
Page 96 U. S. 269
MR. JUSTICE HARLAN delivered the opinion of the Court.
The controlling question presented in this case for our
determination involves the construction of the National Currency
Act of June 3, 1864, 13 Stat. 108, which declares that "the
knowingly taking, receiving, reserving, or charging a rate of
interest greater" than that "allowed by the laws of the state or
territory where the bank is located," shall be
"held and adjudged a forfeiture of the entire interest which the
bill, note, or other evidence of debt carries with it, or which has
been agreed to be paid thereon."
The same section also declares:
"But the purchase, discount, or sale of a
bona fide
bill of exchange, payable at another place than the place of such
purchase, discount, or sale, at not more than the current rate of
exchange for sight drafts in addition to the interest, shall not be
considered as taking or receiving a greater rate of interest."
Wheeler, the plaintiff in error, was sued as endorser upon two
bills of exchange, drawn at Brady's Bend, Pa., payable sixty days
after date at the American Exchange Bank, in New York, and
discounted by the Union National Bank of Pittsburg for the benefit
of the Brady's Bend Iron Company, a corporation created under the
laws of Pennsylvania. Wheeler claims that the bank, under the
provisions of the statute, forfeited the entire interest which the
bills carried, or which was agreed to be paid. This claim was
denied first in the Superior Court for the City and County of New
York, where this action was commenced, and subsequently in the
Court of Appeals of that state.
No question having been raised as to the
bona fide
character of the bills, the bank had, by the express words of the
statute, the right to charge and receive the current rate of
exchange for sight drafts, in addition to interest at the rate of
six percent per annum, which is the rate fixed by general statute
in the State of Pennsylvania. But upon examining the special
finding of facts which the state court based its judgment, we
discover no evidence of the current rate of exchange at the
date
Page 96 U. S. 270
of discount. That exchange was in fact charged cannot be
gainsaid by Wheeler, since he avers in his answer that the bills
were discounted under an usurious agreement that the bank should
receive, in addition to certain interest in excess of the statutory
rate, commissions or exchange of one-quarter of one percent. No
such agreement was, however, proven. Indeed, the record furnishes
no evidence of any distinct agreement either as to the amount of
interest or exchange to be reserved by the bank upon discounting
the bills. Nothing seems to have been said at the time of discount
as to the amount to be reserved by way of interest or upon the
subject of exchange, and the court refused, upon the request of
Wheeler, to find it as a fact in the case, that "no exchange was
charged." While it may be inferred that exchange was charged by the
bank, we are uninformed by the record whether it exceeded the
current rate for sight drafts.
The statute should be liberally construed to effect the ends for
which it was passed, but a forfeiture under its provisions should
not be declared unless the facts upon which it must rest are
clearly established. It should appear affirmatively that the bank
knowingly received or reserved an amount in excess of the statutory
rate of interest and the current exchange for sight drafts. There
is no proof of the rate of exchange, and since the courts uniformly
incline against the declaration of a forfeiture, the party seeking
such declaration should be held to make convincing proof of every
fact essential to forfeiture.
It is unnecessary to consider any other question in the
case.
Judgment affirmed.
