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arise as to when rests may be taken; and as to what rate of interest shall be allowed in cases not specifically provided for by a distinct agreement. Usage, if it contravenes no law, will govern in such controversies. So when a banker and his customer are shown to have conducted their banking account for a series of years upon a certain specified system, which is not in itself intrinsically illegal, it will be assumed that that system had been originally agreed upon between them, and the principles involved in it will be held binding for the solution of any subsequent disagreement. But acquiescence in the general system does not go further than to fix the principle upon which the accounts shall be computed; it does not admit the accuracy of particular items, any of which may be disputed.?
It is necessary, however, that the principle which it is sought thus to establish should be one that is in itself strictly legal. Thus it cannot be questioned that a bank, or banker, equally with any other individual, is subject to the operation of the usury laws, and cannot exact more than the legal rate of interest, either directly or indirectly. The custom, pursued in discounting, of deducting the interest at the beginning of the term of the loan, thereby in fact gaining a very little more than the strict legal rate, is allowed and has been sanctioned by the courts; this matter is treated under the topic “ Discount,"
One of the most common methods of circumventing the usury laws is by taking “rests” at very short intervals, and so compounding the interest many times, perhaps, in the course of a single year. That “rests” may be taken at intervals of proper length is undoubted; the only question is, what interval is proper? In Clancarty v. Latouche, supra, a compounding at tri-monthly rests was declared to be usurious and intolerable. In Rufford v. Bishop,t it was said that the decision in Clancarty v. Latouche seemed to throw some doubts on rests
I Mosse v. Salt, 32 Beav. 269.
4 5 Russ. 346.
at a less interval than one year, but that it must be admitted that shorter rests were legal. No definite rule of law therefore exists on the point. In the United States, accountings in every branch of business are customarily had more promptly and frequently than is usual in England, and it is quite probable that tri-monthly rests might be sanctioned, if agreed to by both parties.
The nature of the customer's indebtedness to his banker for advances is not affected by the fact that the final footing is cast so as to include interest, which, by rests at proper intervals, has been from time to time converted into principal, and has since itself also borne interest. Hence a mortgage, given generally to secure the customer's balance, will secure a balance of which such interest, and interest upon interest, are component parts. But where a mortgage is given by the customer to secure a specific balance owing by him on a certain day, and subsequent transactions are had between the parties, in which, as well as in those which had preceded the mortgage, compound interest was uniformly charged, it was nevertheless held that the precise sum secured by the mortgage was thereby at once excepted from the general custom governing the other dealings of the parties, and that interest could not thereafter be compounded thereon, but must be calculated at simple rates, as in all cases of ordinary mortgage debts.2
When a judgment is recovered by the bank against the customer for overdrafts or advances, interest will be allowed at the same rate which the bank itself was paying upon deposits on the same account. But where the banker and the customer arrange that all indebtedness of either to the other shall bear interest at a certain rate per cent, yet upon the death of the customer, or upon his closing his dealings with the banker, being at the time indebted to him, or upon his insolvency; or upon the death of the banker, or his ceasing to carry on business, or becoming bankrupt, the special arrangement at once ceases to operate, and from the date of such occurrence the balance of indebtedness then due from either to the other carries only such simple interest as is carried by any other ordinary contract debt.1
1 Rufford v. Bishop, supra.
2 Mosse v. Salt, 32 Beav. 269. 3 Gwyn v. Godby, supra ; Ikin v. Bradley, supra.
In casting interest it is clear that the banker must debit the drawer of a check, not from the date of the drawing but from the date of the actual payment of the check. If the banker accepts the check some time before actually paying it, it has not been decided whether he may debit the drawer from the date of the acceptance or from that of the paying. But it has been said that the accepting of a check payable at a day future is equivalent to a loan, by the drawer to the banker, of the amount named for the interval. Following this principle, it would practically amount to a debiting at the time of payment. For if the debit were made at the time of acceptance, yet the acceptance, creating at once a loan from the depositor to the banker for the interval, would cause interest to run on the same sum, for the same period at the same rate per cent, from the banker to the customer, and the one amount would exactly offset the other. But since the acceptance only binds the banker, at his own peril, to keep funds enough of the depositor to meet it when payment is demanded, and as until such demand he has the full use of such funds, it would seem interest should in reason be calculated to the date when demand may be made.
From the rule laid down at the opening of this chapter, that the banker is in no sense a trustee, or quasi trustee, for the benefit of his customer, it follows that under an agreement to allow interest, he is under no obligation annually to balance the account and credit the interest, so as to prevent tlie running of the Statute of Limitations.3
1 Crosskill v. Bower, 32 Beav. 86. 2 Goodbody v. Foster, cited to this point in Byles or Bills, Sharswood's ed.,
3 Pott v. Clegg, 16 Mee. & W. 321 ; Foley v. Hill, 2 H. L. Ca. 40.
POWERS, DUTIES, AND LIABILITIES OF OFFICERS AND AGENTS.
Conduct of the Corporate Business through Agents or Officers.
The old rule of law was, that a corporation could do no act save by a deed executed under its corporate seal. But this ancient principle has of late years been done away with by the compulsion of the practical necessities of business; and in our land and our time corporations without number transact their affairs with a very infrequent use of this once indispensable formality. In the case of The Bank of Columbia v. Patterson's Administrator, the Supreme Court of the United States first boldly and absolutely declared that the old rule could no longer be regarded as law, and the same has been since consistently and frequently ruled, in cases not only of banks but of various other species of corporations. That class of corporations which are the creatures of a statute, whether general or special, are said never to have been within the force of the common-law rule. If the statute provides that the management shall be in the hands of a board, or if it orders or authorizes the election of certain officers for the fulfilment of certain familiar functions, all acts done by such board or by such officers within the scope of their authority are to be regarded as done directly under and in pursuance of a power vested in them by the legislative enactment, and therefore as relieved from those formalities which otherwise the common law might demand. Then, too, the ancient rule simply required that when the corporation itself performed an act, that act should be done by deed and with the seal. This rule, strictly construed, still leaves the corporation free to create agents to whom it may delegate power to act for it, and the acts of such agents, though binding the corporation, are yet not precisely the acts of the corporation, and so need not be performed by deed nor evidenced by seal. Such are the two favorite methods which jurists have adopted for annulling without breaking an ancient and time-honored principle. Either artifice accomplishes sufficiently satisfactorily the desired end. Though to make the former apply it is essential that there should be a statutory enactment, which is not wholly silent concerning the government or appointment of officers of the corporation; and the latter is available only when the deed and corporate seal appear somewhere in the chain of proceedings. For the corporation must act somewhere and at some time in creating the original agency and making the primal delegation, and this act must be accompanied by the common-law formalities, since it cannot receive the protection of the agency-theory. But the simple truth is, that the elastic expansion of modern business has irrevocably snapped the clumsy and useless ligament, which older generations found less intolerable. Judges, in evading the rigidity of an antiquated dogma of the law, have simply yielded to that pressure of invincible necessity which the developments in the conduct and systems of the business world are every day bringing to bear upon old-world legal technicalities. It would only drag the law into contempt to declare that it requires every check or draft, every loan or discount, every indorsement or transfer, made by a bank, to be evidenced by a corporate deed and seal.
1 7 Cranch, 299.
2 Fleckner v. Bank of United States, 8 Wheat. 338; Mechanics' Bank of Alexandria v. Bank of Columbia, 5 id. 326; Stamford Bank v. Benedict, 15 Conn. 437; Ridgway v. Farmers' Bank, 12 Serg. & R. 256; Fishmongers' Company v. Robertson, 12 L. J. N. S. 185; 5 Man. & Gr. 286; 6 Scott, N. R. 56.
The business of an incorporated bank can of course be con
1 The “associations" of New York, organized under the statutes of that state, differ only in some slight and insignificant particulars from ordinary corporations. For all the purposes of the matters now under discussion they may be regarded as corporations. The National Banking Act, sec. 8, especially declares that all