Lazear v. National Union Bank of Baltimore.

held by it, and the non-payment of which is the foundation of this suit. The United States Banking Law authorizes banks, organized under its provisions, to receive the same rate of interest that is allowed by the laws of the States in which such institutions are located, and no more, and provides that if more is demanded and received, the whole interest shall be forfeited, or that twice the amount of interest so paid may be recovered by the person paying it, or his legal representatives, provided suit for that purpose be brought within two years from the date of the usurious transaction. See chap. 3, §§ 5197 and 5198, U. S. Rev. Stat. There is no provision, however, declaring an usurious contract void. While as a general rule contracts which are in violation of the common or statute law are void, yet this rule does not apply to cases like the present.

In most of the States there are laws regulating the rate of interest; and yet we have been referred to no case and have found none in which a contract has been declared void, by reason of the fact that a greater interest than that allowed by law has been received under it, unless the law itself has provided that the taking of illegal interest shall render the contract void. This court, in the case of Lester v. Houard Bank, enforced the contract, notwithstanding the bank had made the loan to Purvis, its president, in violation of the terms of its charter, and in that case this court said: "Cases are to be found, arising under contracts made in violation of a statute, in the application to which of the general rule, courts have been governed by the plain and obvious purposes of the law; and in such it has been repeatedly held that an action would lie against a party receiving money under such a contract upon a promise implied by law to refund it."

In the case of Fleckner v. U. S. Bank, 8 Wheat. 355, Mr. Justice STORY, in delivering the opinion of the court, says: "The taking of interest by the bank beyond the sum authorized by the charter would doubtless be a violation of its charter, for which a remedy might be applied by the government; but as the act of Congress does not declare that it shall avoid the contract, it is not perceived how the original defendant could avail himself of this ground to defeat a recovery." See, also, Bundel v. Isaac, 13 Md. 224, to same effect.

Lazear v. National Union Bank of Baltimore.

We think it very clear that the demand and receipt by the bank of usurious interest upon the notes, offered in evidence, does not avoid the contract between the appellant and the appellee. There was therefore no error in the refusal to grant the third, fifth, fifth and a half, eighth, ninth and tenth prayers of the appellant, nor in refusing his motion to withdraw from the jury the notes which had been offered in evidence subject to exception.

But it was also contended that the usurious interest received by the bank upon the discount of paper upon which Lazear Brothers were drawers or indorsers, should be recouped or set off against the amount of the notes offered in evidence. It must be borne in mind that none of the paper of Lazear Brothers discounted by the bank was discounted for the benefit of the appellant, and that none of the usurious interest taken by the bank was paid by him. It was paid by Lazear Brothers and Shurtz & Co., and they, and not the appellant, have been the sufferers by the exaction of illegal interest. If the notes had been discounted at the rate of interest prescribed by law, the appellant would have been in no better situation than he is now, for if bound at all, he would have been liable for the amount of the notes, with legal interest thereon from the date of their maturity to the time of the trial of the case. But it has been frequently held that no one, except the party who has paid it, can recover the usurious interest paid. Smith v. Exchange Bank of Pittsburg, 26 Ohio St. 125; Thomp. N. B. Cas. 836; Scott v. Leary, 34 Md. 395, and Hough v. Horsey, 36 Md. 184. It will be found too that section 5198 of the Banking Act gives the remedy in such cases to the party who has paid the usurious interest, and to his legal representatives, provided they bring suit to recover it back within two years from the date of the usurious transaction. It was optional with the parties who paid it to the appellee to institute proceedings for that purpose or not, and they have not thought proper to do so within that time, and they are therefore now without remedy.

The Superior Court of Baltimore city was therefore right in excluding from the consideration of the jury the statement of the interest paid as set out in the third exception, and in rejecting the appellant's twelfth prayer.

Lazear v. National Union Bank of Baltimore.

The appellant's seventh prayer is based upon the theory that the note of Lazear Brothers for five thousand dollars, dated June 22, 1872, which was obtained by the appellee from Winchester & Son, note and bill brokers, was not discounted but purchased; that such purchase was not authorized by the Banking Act, and consequently that the appellee obtained no title to the note, and was not entitled to recover upon it. Sub-section 7 of the act enumerates the powers which are conferred upon institutions, organized under the law, and provides that such institutions "shall have all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt; by receiving deposits; by buying and selling exchange, coin and bullion; by loaning money on personal security; and by obtaining, issuing and circulating notes according to the provisions of this title."

A corporation has no other powers than such as are specifically granted, or such as are necessary for the purpose of carrying into effect the powers expressly granted. This rule of law is so well settled that we need refer to no other case than that of Weckler v. First National Bank, 42 Md. 591; s. c., 20 Am. Rep. 95; Thomp. N. B. Cas. 533. The only power to buy and sell with which National banks are clothed is the authority given by chapter 1, section 5137, sub-sections 1, 2, 3 and 4, to purchase real estate for the special purposes, and under the circumstances therein stated.

The act plainly shows that it was the intention of Congress to so limit and restrict National banks as to prevent them from exacting and receiving a greater rate of interest than is authorized by the laws of the States within which such institutions may be respectively located, and to prohibit them from becoming buyers and sellers of promissory notes. The evidence shows that Winchester & Son, note and bill brokers, were employed by Lazear Brothers to sell the note of June 22, 1872, to any purchasers willing to buy, and that it was sold to the appellees, over the counter of its banking-house, at nine per cent discount, for Lazear Brothers, the drawers, who received the proceeds of sale. None

Lazear v. National Union Bank of Baltimore.

of the bank officers were informed that the Winchesters were acting for Lazear Brothers, nor were the latter told to whom the note had been sold. The note was sold to the bank on the 8th day of July, 1872. The president of the bank testified that the note in question was purchased by order of the board of directors, and that he had an impression, he believed, that Lazear Brothers were to get the proceeds of it. He further proved, that after customers of the bank were served, it sometimes invested its surplus funds in notes. We are of opinion that this transaction was an out-and-out purchase by the bank, and that such purchase was without authority, and that the bank acquired no title to the note, and cannot recover thereon in this suit. While we do not mean to say that a National bank may not invest its surplus capital in notes, we are of opinion that it has no authority to use such surplus funds, as may remain on hand from day to day, for the purpose of buying notes. First National Bank of Rochester v. Pierson, 24 Minn. 140; s. c., 31 Am. Rep. 341; Thomp. N. B. Cas. 637; Farmers and Mechanics' Bank v. Baldwin, 23 Minn. 198; s. c., 23 Am. Rep. 683; Thomp. N. B. Cas. 639. If any other construction were given to such a transaction as this the intention of Congress to prohibit National banks from buying and selling notes would be entirely defeated, and those institutions would be at perfect liberty to decline making discounts for their customers, and afterward to buy up the very paper, which had been offered for discount and refused, at such price as the banks might choose to give. The note of the 22d June, 1872, for five thousand dollars, was acquired by the appellee by purchase without authority to make such purchase, and it is not, therefore, entitled to the note, and cannot recover upon it, and the appellant's seventh prayer ought to have been granted.

The guaranty of the appellant is shown to have been executed by him, and accepted by the appellee, and the subsequent discounting of paper, of which Lazear Brothers were drawers, or which they had indorsed, furnished prima facie evidence that such discounts were made upon the faith of the guaranty. such prima facie evidence may be rebutted by other proof offered VOL. II-34

But

National Pemberton Bank v. Porter.

by the guarantor, or by facts and circumstances put in evidence by the appellee.

Whether the money was parted with by the appellee on the faith of the guaranty or otherwise is a question exclusively for the determination of the jury, and there are some facts and circumstances appearing in the evidence as contained in the record, which should have been submitted to the consideration of the jury, whose duty it is to determine to what weight, if any, they are entitled. We are of opinion, therefore, that there was error in rejecting the appellant's fourteenth prayer. It follows from what we have said that there was also error in granting the appellee's modified prayer, because it permitted the jury to find for the appellee the amount of the five thousand dollar note after deducting the usurious interest received upon it, and also because it took from the jury the question whether the money obtained from the appellee had been loaned upon the faith of the guaranty.

The sixth and thirteenth prayers of the appellant were waived or abandoned at the argument of the case, and we need not refer to them further than to say that we think there was no error in rejecting them.

As there was error in rejecting the seventh and fourteenth prayers of the appellant, and in granting the modified prayer of the appellee, the judgment appealed from will be reversed and a new trial awarded.

Judgment reversed and new trial awarded.

NATIONAL PEMBERTON BANK V. PORTER.

(125 Mass. 333; 28 Am. Rep. 235.)

Action-promissory note

National bank as purchaser.

A National bank, having purchased a promissory note from an indorsee, brought an action thereon in its own name against an indorser; held, that the action was maintainable, whether the bank was by law authorized to acquire title to notes by purchase or not.