Mr. Justice PITNEY, with whom concurred Mr. Justice BRANDEIS and Mr. Justice CLARKE, dissenting.
I agree that in this case but one federal question is properly presented for our consideration, and that is whether the National Bank of Savannah took usury, in violation of sections 5197 and 5198, Rev. Stat. U.S. when, in discounting short-term notes in the ordinary course of business at its banking house in the state of Georgia, it knowingly reserved in advance a discount at the rate of 8 per centum per annum, computed upon the face of such notes, when by the laws of Georgia this was not allowed to be done by state banks of issue.
I agree that this question is to be determined by the provisions of section 5197; but, so far as it depends upon ascertaining the local rate of interest, we must determine it according to the law of the state of Georgia, because the cited sections make that law the criterion. It is settled that although the consequences of acceptance of usurious interest by a national bank and the penalties to be enforced are to be determined by the provisions of the National Banking Act, the ascertainment of the rate of interest allowable is to be according to the state law. Farmers', etc., National Bank v. Dearing, 91 U.S. 29, 32, 23 L. Ed. 196; Union National Bank v. Louisville, &c. Railway, 163 U.S. 325, 331, 16 Sup. Ct. 1039, 41 L. Ed. 177; Haseltine v. Central Bank of Springfield, 183 U.S. 132, 134, 22 Sup. Ct. 50, 46 L. Ed. 118.
The language of section 5197 is explicit. It allows a national bank to—
'take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of the state. * * * where the bank is located, and no more, except that where by the laws of any state a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized or existing in any such state under this title. When no rate is fixed by the laws of the state, * * * the bank may take, receive, reserve, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run. * * *' I regard it as clear that by 'the laws of the state' is meant not merely acts of legislation, much less a particular act or section, or a particular phrase in a single section. In order to determine the point in controversy we must take all applicable provisions of the statutes as interpreted and construed by the decisions of the court of last resort, and from their combined effect determine what is 'interest at the rate allowed by the laws of the state.'
The pertinent statute law of the state of Georgia is found in sections 3426, 3427, and 3436 of the Code. The first of these defines 'what is lawful interest,' and prescribes 7 per centum per annum as the legal rate where no rate is named in the contract, and permits a higher rate to be specified in writing, 'but in no event to exceed 8 per cent. per annum.' Section 3427 defines usury as:
'Reserving and taking, or contracting to reserve and take, either directly or by indirection, a greater sum for the use of money than the lawful interest.'
'It shall not be lawful for any person, company, or corporation to reserve, charge, or take for any loan or advance of money, or forbearance to enforce the collection of any sum of money, and rate of interest greater than eight per centum per annum, either directly or indirectly by way of commission for advances, discount, exchange, or by any contract or contrivance or device whatever.'
I agree that, under the decisions of this court and the general current of authority, the discounting of short-term notes with a reservation of interest in advance at the highest rate allowed by statute is permissible, in the absence of special restriction. Fleckner v. U.S. Bank, 8 Wheat. 338, 349, 354, 5 L. Ed. 631.
And I understand it to have been permitted in Georgia prior to the recent decision by the Supreme Court of that state in Loganville Banking Co. v. Forrester, 143 Ga. 302, 84 S. E. 961, L. R. A. 1915D, 1195. See Mackenzie v. Flannery, 90 Ga. 590, 599, 16 S. E. 710; Union Savings Bank v. Dottenheim, 107 Ga. 606, 614, 34 S. E. 217; McCall v. Herring, 116 Ga. 235, 243, 42 S. E. 468.
The Forrester Case was decided April 13, 1915. The claim involved in the present suit includes a series of transactions, the first of which was on November 2, 1914, the last on October 18, 1915. A majority of these were prior to the decision in the Forrester Case, and as to them I agree that there was no violation of the federal statute.