Sometimes the statutes against usury apply only to discounts of the bank 1 and sometimes the statute applies to loans of money.2 In either case, however the transaction is disguised, if it amounts to a loan or a discount and an intentional reservation of a greater rate of interest than is allowed by law, the transaction is usurious. Thus the discounting of a note at the bank, and the reception of depreciated post-notes therefor, is usury where the bank obtains more than the lawful rate of interest.3 So is the taking of a note payable in gold for depreciated bank-notes.4 But in either case the intention to charge the greater rate must be an ingredient of the transaction.5 Where a bank lends its own bills upon a note, together with bills of other banks slightly depreciated, and deducts the legal rate, upon the agreement that, if any of the bills are returned during the continuance of the loan, such bills were to be paid in specie, the contract was held not to be usurious.8 Since a bank is bound to redeem its own bills, the lending of them at their face value, though depreciated, is not usurious, although the legal rate of interest is charged.7 But the opposite rule would apply to bills of other banks.8 The retention of a commission by the agent of the borrower under some circumstances may be usurious.9 Under statutes which forbid usurious discounts, a note in payment of a pre-existing debt is not a discount;10 nor, it seems, is a transaction where a note is taken for both the principal and interest.11 But contracts whereby banks tried to keep their notes in circulation have been held to be discounts,12 as also have purchases of bank-bills payable at a distant place,13 and promissory notes,14 where purchased at a discount. The charging of interest at the highest legal rate by bank discount has been held to be usurious, upon notes running for a longer period than a year, as, for instance, by deducting from a note the interest for one year multiplied by the number of years the note has to run;15 but the charging of in-

4 Ewing v. Toledo Sav. Bank, 43 Ohio St. 31; Farmers' Bank v. Burchard, 33 Vt. 346. See as to the principle involved, Sec. 29, ante. The foregoing cases are exceptional. In Illinois there is a peculiar statute (2 Starr & Curtis, ch. 74, sec. 8), which provides that upon any written contract, wherever payable, if made in the state, or between citizens or corporations of the state, or a citizen or a corporation of the state and a citizen or corporation of any other state, territory or country, any rate above seven per cent, shall be usurious. This is an attempt to project the laws of the state over other states as to foreign contracts. Other states would refuse to follow it. It could not affect national banks. It has been ignored in Morris v. Wibaux, 159

I11. 627, 47 111. App. 630; Giddings v. McCumber, 51 111. App. 373, sem-tie; Roundtree v. Baker, 52 111. 241. It seems never to have been applied, though on the statute book since 1857. The statute is noticed without comment in Fowler v. Equitable Trust Co., 141 U. S. 384.

1See Planters' Bank v. Goetter, 108 Ala. 408.

2 Farmers' Bank v. Burchard, 33 Vt. 346. The national bank act applies to discounts, loans and purchases. See sections 5197 and 5198 of the Revised Statutes of the United States.

3 Gaither v. Farmers' Bank, 1 Pet. 44

4 Bank v. Owens, 2 Pet 527.

5Bank of U. S. v. Waggener, 9 Pet. 378, which explains the preceding cases.

6 Northampton Bank v. Allen, 10 Mass. 284 To the same effect is Bank of Orleans v. Curtis, 11 Met. 359. Compare Bank of Chenango v. Curtis, 19 Johns. 326; Farmers' Bank v. Burchard, 33 Vt 346.

7 Maury v. Ingraham, 28 Miss. 171; State Bank v. Ford, 5 Ired. 692. These were notes payable on demand, not post notes.

8 See last two cases cited. But if the tacit understanding was to return for the loan like depreciated notes, a different rule would apply. Curtis v. Leavitt, 17 Barb. 309.

9 Olmstead v. New England Mort. Co., 11 Neb. 487. Compare Union Nat. Bank v. Louisville, etc. R. Co., 145 I11. 208. See Clark on Contracts, 403.

10 Lime Rock Bank v. Hewett, 52 Me. 531. It is not a usury casa terest by bank discount is not usually considered to be usurious.16 The discounting of a note to pay a note which is not yet due, but has been previously discounted, is not usurious.17 A charge made for exchange in addition to the legal rate is not usurious18 unless it be a mere device to avoid the statute.19 The charging of a higher rate of interest after maturity is not usurious,20 nor is the insertion of certain penalties for non-payment of the note,21 such as attorney's fees for collection by suit.22 National banks are permitted to charge the rate fixed by the laws of the state for natural persons23 unless a higher rate is allowed to banks of issue, in which case they may charge the latter rate.2* Where no rate is fixed by the laws of the state, national banks may charge seven per centum.25 Where the laws of the state permit any rate to be fixed by agreement, it is doubtful whether a national bank may charge more than seven per centum, unless state banks of issue in the particu-

11Planters' Bank v. Goetter, 108 Ala. 408. But if the note is actually for usurious interest and considered payment thereof, it is difficult to see how this case can be correctly decided. See note 19 to Sec. 198, post.

12 Compare last two cases cited in note 6 to this section.

13 People v. Metropolitan Bank, 7 How. Pr. 144.

14 Atlantic State Bank v. Savery, 82 N. Y. 291.

15 Branch Bank v. Strothers, 15 Ala. 51. See next note as to the proper rule.

16 Clark on Contracts, 402. Bank discount, that is to say, payment of interest in advance, is not usury. Fowler v. Trust Co., 141 U. S. 384. But it undoubtedly is, as a matter of fact, paying interest upon interest. See Bank of Alexandria v. Mandeville, 1 Cranch, C. C. 552; Maine Bank v. Butts, 9 Mass. 49.

17 Maine Bank v. Butts, 9 Mass. 49. See Carolina Bank v. Parrot, 30 S. C. 61. But charging interest on overdrafts, while crediting drafts as cash, is not usurious. Timberlake v. First Nat. Bank, 43 Fed. R 231.

18 Planters' Bank v. Bivingsville Cotton Co., 11 Rich. Law, 677; Merchants' Bank v. Sassie, 33 Mo. 350; Farmers' Bank v. Garten, 34 Mo. 119; Marvine v. Hymers, 12 N. Y. 223; Southern Bank v. Brashears, 1 Disn. 207. National banks are permitted by statute to make such a charge.

19 Central Bank v. St. John, 17 Wis. 157. But compare Farmers' Bank v. Parker, 37 N. Y. 148, and International Bank v. Bradley, 19 N. Y. 245, where the transaction was no more than, an .evasion, but was held not usurious.

20 Chambliss v. Robertson, 23 Miss. 302.

21 Clark on Contracts, 401. But see a curious decision holding a stipulation for attorneys' fees void. Merchants' Nat. Bank v. Sevier, 14 Fed. R 662.

22 They are universally allowed. Whether they destroy the negotiability of a note is a much-discussed question, both under statutes and at common law.

23 See Rev. Stat, sees. 5197, 519a lar state are permitted to charge such a rate.26 This statute applies to discounts or purchases of commercial paper at the bank as well as to loans;27 but whether or not a note is void for usury in the hands of a bona fide holder where the note itself stipulates for legal interest must depend upon the statute.28 Under state statutes a discount of commercial paper is sometimes usurious and sometimes it is not.29 But a bank does not make itself liable for collecting usurious interest where it acted simply as agent, although it transferred the note.30 A bank may charge a certain rate for lending its credit by indorsement, where it does not discount the note, without making itself liable for a usurious transaction. Renewal notes are held to be within the statutes of usury.31 If the last note contained usurious interest, and each renewal also contained it, each note will be held to be usurious, and only the original principal can be recovered.32

24 See last section.

25 See last note.

26 If state banks of issue are permitted to charge any agreed rate, a national bank may charge it. First Nat. Bank v. Duncan, Fed. Cas. No. 4804; Tiffany v. State Bank, 18 WalL 409. But where the law permits to private persons any rate, and there are no banks of issue, as there are not in some states, it would seem to follow that, no rate being fixed, the statute as to seven per cent, governs. So National Bank v. Johnson, 104 U. S. 271, expressly states, and says of Tiffany v. State Bank, supra: " It is not intimated or implied " that that case establishes any other rule. And so is Crocker v. First Nat Bank, 4 DilL 358. But contra are Hines v. Marmolejo, 60 CaL 229, & state where banks of issue are prohibited by the constitution; Wolverton v. Exch. Nat. Bank, 11 Wash. 94; Guild v. First Nat. Bank, 4 S. D. 566; National Bank v. Bruher,

64 Tex. 571; Rockwell v. Farmers' Bank, 4 Cola App. 562; California Bank v. Ginty, 108 Cal. 148. The difficulty is that the statute is wrongly worded, and these courts are doing some amending to make the law read correctly.

27 National Bank v. Johnson, 104 U. S. 271; Johnson v. National Bank, 74 N. Y. 329; Danforth v. Nat. State Bank, 48 Fed. R 271, semble.

28 Second Nat. Bank v. Morgan, 165 Pa. 199.

29 Dunkle v. Renick, 6 Ohio St. 527. Compare Nash v. White's Bank, 68 N. Y. 396; Atlantic State Bank v. Savery, 82 N. Y. 291.

30 First Nat. Bank v. Miltonberger, 33 Neb. 847.

31 Winterset Nat Bank v. Eyre, 52 Iowa, 114; Farmers' Bank v. Hoagland, 7 Fed. R 159; Snyder v. Mt. Sterling Bank, 94 Ky. 231.

32 Peoples v. First Nat Bank, 15 Ky. Law R 748. See also Moniteau