Morris v. First State Bank of Dallas , 192 S.W. 1074 ( 1917 )

In support of his first assignment Morris insists that the allegations in Sewell's answer set out in the statement above and forming the basis of his cross-action were insufficient, because indefinite and uncertain, in that it did not appear therefrom whether the 1 per cent. of the face of the checks deducted by Morris when he cashed them was a charge by him of "interest" or "exchange." The basis of the contention is the fact that the pleader designated the 1 per cent. deducted as "interest" or "exchange." The argument seems to be that, if the 1 per cent. was retained as "exchange," sewell was not entitled to the relief he sought. The contention is overruled. "Interest" is defined by the statute as "the compensation allowed by law or fixed by the parties to a contract for the use or forbearance or detention of money." Article 4973, Vernon's Statutes. It was alleged in the pleading in question that the moneys paid to Sewell on the checks were loans, and that the sums paid and agreed to be paid by him for the use of same were in excess of what the law allowed. The facts relied upon to show the transactions to be usurious having been alleged, we think it was of no importance, it appearing from those facts that the transactions were usurious, that the pleader designated the sums deducted for use of money as "exchange."

The court did not err when he sustained the exception to the part of Morris' answer setting up as a reason why the Dallas Bank was not entitled to recovery against him, its failure to have the checks sued upon protested for nonpayment at the time they were presented to the Bettie Bank. It appeared that this suit was commenced before the first term of the Upshur county district court after the right of action in favor of the Dallas Bank accrued. Articles 579, 581, Vernon's Statutes. Nor did the court err when he sustained the exception to the part of said answer setting up as a defense against the recovery sought against Morris by the Dallas Bank the failure of the latter to promptly return the checks to the former when the Bettie Bank refused to pay them. Having credited the account Morris had with it with the amount of the checks and paid drafts of his, reducing his balance with it to $601.83, the Dallas Bank had a right as against Morris to hold the checks until it was paid the amount thereof less said $601.83.

It is next insisted that the judgment, in so far as it is in favor of Sewell against Morris for $2,457.10 on account of usury in the transactions between them, is "contrary to the law and the evidence," in that, quoting from the brief:

"(A) There is no evidence whatever that this defendant ever loaned the said Sewell any sums of money whatever, or charged him any interest whatever. (B) The evidence shows that in all transactions between this defendant (Morris) and P. J. Sewell the defendant purchased and paid for sight drafts drawn by the said P. J. Sewell on the First State Bank of Bettie, and that the only charges he made were for exchange or discount."

We agree that what the testimony showed was as stated, in effect, in the quotation just made from the brief, to wit, that Morris acquired the checks by discounting them; but we do not agree that the trial court therefore was not authorized to find that the transactions were usurious. "To discount" commercial paper is "to take interest in advance, and in banking is a mode of loaning money." Weckler v. Bank, 42 Md. 581, 20 Am.Rep. 95; Black v. Bank, 96 Md. 399, 54 A. 88. The rule applicable to the conceded and undisputed facts is stated in 39 Cyc. p. 935, as follows:

"When the chose discounted is obtained directly from the maker or before it has acquired validity by a transfer for value, it can be nothing more than the maker's promise to pay, and the purchase of such a promise at a discount exceeding the lawful rate of interest is merely making a loan at a usurious rate."

By Mr. Daniel (1 Negotiable Instruments, § 753) as follows:

"If a note is offered for discount by the maker, it is plainly usurious, as between him and the party to whom it is delivered, if the discount from its face value were greater than that allowed upon a loan."

And by Prof. Paige (1 Contracts, § 477) as follows:

"If the vendor sell an obligation on which he is primarily liable, at such discount (that is, at a discount to exceed the maximum rate of interest), the transaction is merely one of giving an obligation for a larger sum than the debt, and is usurious if the discount exceeds the maximum rate of interest."

There is no error in the judgment, and it is affirmed.