Evans v. National Bank of Savannah

Background

A private party sued a national bank (the National Bank of Savannah) claiming the bank charged illegal interest when it discounted short-term notes and reserved interest in advance at eight percent under Georgia law. The dispute turned on whether those discounts amounted to usury under federal law, given recent Georgia court decisions. The case reached the Supreme Court after the lower court treated the pleadings as presenting only that federal question.

Reasoning

The core question was whether a national bank subjects itself to usury penalties by taking ordinary bank discounts and reserving interest in advance at the highest rate allowed by the state. The Court looked to the National Bank Act and earlier decisions and concluded Congress intended national banks to discount notes in the ordinary course of business and to reserve interest at the state’s maximum rate. Because the federal statute permits banks to take interest up to the rate allowed by the state, the Court held that charging eight percent in Georgia did not, by itself, make the discounts usurious.

Real world impact

The decision lets national banks continue the common commercial practice of discounting short-term paper and keeping interest reserved in advance when they stay within the state’s maximum rate. Borrowers in Georgia and similar states face limited ability to claim usury when banks follow the ordinary discounting practice. The ruling affirms that the bank’s right to retain such interest is grounded in federal law rather than state rules alone.

Dissents or concurrances

Justice Pitney (joined by Justices Brandeis and Clarke) dissented, arguing that a recent Georgia decision changed what Georgia law permits and that some later transactions may have exceeded the state’s actual limit, so those should be reversed.