taken than the law allows, by reason of an erroneous opinion of the lender that he had a right to this interest, this is a mistake of law, and, agreeably to the general rule, will not excuse the lender, and the whole effect of usury will attach to the contract. (x)

The question has been very much discussed, whether banks, or other money-lenders, or bill or note discounters, have a legal right to adopt, as a principle of calculation, the rule that gives rather more that legal interest upon notes discounted, or to which the interest is added, in case of fractional portions of years and months. Rowlett's Tables, which are calculated mainly on the supposition that a year consists of 360 days, gives this advantage to the lender. The use of these tables, or of a similar principle of calculation, is very general, not to say universal. And although this practice is, strictly speaking, usurious, and there is much conflict in the authorities, we have no doubt that the prevailing rule of law sanctions this practice,

(x) Marsh v. Martindale, 3 B. & P. 154; Maine Bank v. Butts, 9 Mass. 49. This was an action brought by the bank, to recover possession of certain premises mortgaged to them by the defendant, to secure several notes given by him to the bank. The defendant alleged, that on the date of mortgage deed, the plaintiff loaned him $10,000, and that it was agreed between them that more than 6 per cent. interest should be paid upon the loan, and that the notes secured by the mortgage were given to secure such principal and illegal interest, and therefore he pleaded the statute of usury. It appeared, upon the trial, that there had been a forbearance of 10,000 dollars by the bank, and that the interest secured in the mortgage was more than 6 per cent. upon the 10,000 dollars; but it was proved that the excess had arisen, not from a direct reception by the bank of more than 6 per cent. upon any notes, but by reason of the defendant's having, in order to meet notes for 63 days, at the times they became due, procured new loans, a week previous to the expiration of the time of credit given for the former loans, giving new notes therefor; and it was contended, that although the money thus received amounted to more than 6 per cent. upon

the original debt, for the reason that the bank retained the amount of the new notes until the old notes became due, for the purpose of meeting them, yet, that as no more than the usual profits upon loans made on banking principles were received, such agreements were not usurious. But the court decided, that no banking company, any more than an individual, had authority to make a discount or loan, at a greater profit than 6 per cent. interest, nor was exempt from the restrictions of the statute against usury. And Sewall, J., said: “It is

The mistake

probable that in this case there was no intentional deviation on the part of the bank; but a mistake of their rights. This, however, is a consideration which must not influence our decision. was not involuntary, as a miscalculation might be considered, where an intention of conforming to the legal rule of interest was proved; but a voluntary departure from the rate. An excess of interest was intentionally taken, upon a mistaken supposition that banks were privileged, in this respect, to a certain extent. This was, therefore, in the sense of the law, a cor rupt agreement; for ignorance of the law will not excuse." See also, Childers v. Deane, 4 Rand. 406.

where it is adopted, merely as a convenience, and in conformity to usage (y)

SECTION VIII.

OF DISCOUNT OF NOTES AND BILLS.

The practice of discounting bills or notes, by deducting from their face the interest for the whole time they had to run, began with our banks, and was soon so firmly established, that it was sanctioned by the courts, almost of necessity. But this practice is, in itself, certainly usurious, for the borrower has the use of the amount of the note, minus the interest, and pays interest for the whole amount. Having been sanctioned in respect to corporations whose business it was to lend money, a distinction could not be made against individuals who lent money; and it may now be considered as settled, rather for the sake of convenience than upon principle, that it is not usurious to take the interest in advance, by way of discount, although it is obvious, that by carrying this principle far enough, any amount of excessive interest may be taken. Thus, if the legal interest were six per cent., and a note for a thousand dollars had ten years to run, the borrower would receive four hundred dollars, and at the end of ten years, pay six hundred for the use of it, or sixty dollars a year for the use of four hundred which is obviously much more than even compound interest There seems, however, to be a strong disposition to limit this practice to short paper, or at least not to apply it to long loans or discounts, although nothing like a fixed rule or standard can be found, either in the authorities or in the usage, and it must often be difficult to apply such a distinction. (z) It seems

And we think the present case comes within this rule. The intent was to compute and receive the interest for 60 days and grace. The grace is a regular portion of the time the note has to run, and the bank had a right to compute and receive interest for it. The period of sixty days is one sixth of a year, as nearly as can be computed without a fraction; and three days is the nearest approximation to the 10th part of a month, or the 120th part of a year, without fractions of a day.

Upon this view of the case, we are of opinion, that it is not shown that usurious interest was taken, contrary to the provisions of the statute, and that the defence is not sustained."

(z) See Barnes v. Warlich, Cro. Jac. 25, Yelv. 31, and Grysill v. Whichcott, Cro. Car. 283; Caliot v. Walker, 2 Anst. 496; Eaton v. Bell, 5 B. & Ald. 40; Mowry v. Bishop, 5 Paige, 98; Marvine v. Hymers, 2 Kern. 223.

originally to have been doubted, whether the receipt of interest quarterly or semiannually was not usurious, on the ground that the .ender received thereby more than the legal rate by the year. And for a considerable time those contracts were considered usurious, upon which the legal interest was deducted from the sum loaned, or paid in advance. (a) But the practice is now universal, both in England and in this country. The authorities, however, which sustain this departure from the accurate enforcement of the usury laws, seem mainly to rest upon the principle, that the additional sum received by the lender may be considered in the nature of a compensation for his services and trouble. And all the decisions show, that such anticipated reception of interest must be confined to cases where a bill or note is given by the borrower, and does not extend to any ordinary private agreement of loan. (b)

(a) In Anonymous, Noy, 171, usury was pleaded to an action upon a bond. Popham, J., said: "If a man lend £100 for a year, and to have £10 for the use of it, if the obligor pays the £10 twenty days before it is due, that does not make the obligation void, because it was not corrupt. But if, upon making the obligation, it had been agreed that the £10 should have been paid within the time, that should have been usury, because he had not the £100 for the whole year, when the £10 was to be paid within the year." And verdict was given accordingly.

(b) In N. Y. Firemen Ins. Co. v. Ely, 2 Cowen, 703, the principle extracted from the cases, by Sutherland, J., in which the whole court seem to have concurred, was this: "The taking of interest in advance, is allowed for the benefit of trade, although, by allowing it, more than the legal rate of interest is, in fact, taken; that being for the benefit of trade, the instrument discounted, or upon which the interest is taken in advance, must be such as will, and usually does, circulate or pass in the course of trade. It must, therefore, be a negotiable instrument, and payable at no very distant day; for without these qualities it will not circulate in the course of trade. Under these limitations, the taking of interest in advance, either by a bank, or incorporated company without banking powers, or an individual, is not usurious." In Marsh v. Martindale, 3 B. & P. 154, the defendants were acceptors

of a bill of exchange for £5,000, drawn by Robert Wood, payable in three years, to the plaintiff. It appeared that Robert Wood, having granted an annuity to the plaintiff, which he desired to redeem, and which, together with charges upon it, was worth £4,134, brought to the plaintiff the bill in question which the plaintiff agreed to discount, and the £5,000 was made up of the price of the annuity, £4,134, £116 paid to the defendant in cash, and £750, three years' discount on the note. The present action was on a bond given as a substitute for the note, and the defence of usury was set up, which it was attempted to answer by considering the transaction as a discount in advance of the interest due on the £5,000 note, which would not be usurious. The court determined, that as the bill was for so long a time, coupled with its being a redemption of the annuity, it was evident that the transaction was not a discount in the way of trade, but a loan of money, a method of obtaining more than legal interest, which was corrupt in law, whatever the intention of the parties might have been. Lord Alvanley, C. J., said: "It is also contended, that at all events the negotiation of the bill of exchange was a transaction in the usual mode, in which all persons possessed of bills of exchange have been permitted to discount them; in which cases the interest is always deducted from the money advanced. It certainly has been determined, that such a transaction on a bill of

SECTION IX.

OF A CHARGE FOR COMPENSATION FOR SERVICE.

It is quite certain, that the lender, whether banker or bro ker, may charge, in addition to the discount, a reasonable