DISC 0 U N T. Interest reserved from the amount loaned at the time of making a loan. An allowance sometimes made for prompt payment. As a verb, it is used to denote the act of giving money for a bill of ex change or promissory note, deducting the in terest. Dunkle v. Renick, 6 Ohio St. 527 ; Niagara County Bank v. Baker, 15 Ohio St. 87; Philadelphia Loan Co. v. Towner, 13 Conn. 249 ; State v. Savings Institution, 48 Mo. 189; Fleckner v. Bank, 8 Wheat. (U. S.) 338, 5 L. Ed. 631; Saltmarsh v. Bank, 14 Ala. 677; Weckler v. Bank, 42 Md. 592, 20 Am. Rep. 95.
Discounting means to take interest in ad vance ; McLean v. Bank, 3 McLean 597, Fed. Cas. No. 8,888. It is a mode of loaning mon ey : New York Firemen Ins. Co. v. Ely, 2 Cow. (N. Y.) 678; Weckler v. Bank, 42 Md. 592, 20 Am. Rep. 95. As to whether dis counting includes buying and selling, the cases are not uniform. It is held to be an other name for buying at a discount ; Tracy v. Talmage, 18 Barb. (N.Y Y.) 456; Fleckner v. Bank, 8 Wheat. (U. S.) 338, 5 L. Ed. 631; Pape v. Bank, 20 Kan. 450, 27 Am. Rep. 183; contra, First Nat. Bank of Rochester v. Pierson, 24 Minn. 141, 31 Am. Rep. 341; Niagara County Bank v. Baker, 15 Ohio St. 87. See 16 L. R. A. 223, note.
In an ordinary commercial document, dis count means rebate of interest and not "true" or mathematical discount; [1896] 2 Ch. 320.
A discount by a bank means ex vi termini a deduction or drawback made upon its ad vances or loans of money upon negotiable paper or other evidences of debt, payable at a future day, which are transferred to the bank. It is the difference between the price and the amount of the debt, the evi dence of which is transferred ; National Bank v. Johnson, 104 U. S. 276, 26 L. Ed. 742; Fleckner v. Bank, 8 Wheat. (U. S.) 338, 350, 5 L. Ed. 631.
The taking of legal interest in advance is not usurious; but it is only allowed for the benefit of trade and where the bill or note discounted is meant for circulation and is for a short term; N'ew York Firemen Ins. Co. v. Ely, 2 Cow. (N. Y.) 678 ; President, etc., of Bank of Utica v. Wager, 2 Cow. (N. Y.) 712; Bank of Utica v. Phillips, 3 Wend. (N. Y.) 408.
There is a difference between buying a bill and discounting it. The former word is used when the seller does not indorse the bill and is not accountable for its payment; McElwee v. Collins, 20 N. C. 350 ; but the discount of negotiable paper at more than a lawful rate of interest includes purchase of such paper as well as loans ; Danforth v. Bank, 48 Fed. 271, 1 C. C. A. 62, 17 L. R. A. 622.
The bona fide sale of a note, made in good faith for full value in its inception, is valid and not usurious, but if in its origin it was ' only a nominal negotiation, it is invalidated by a subsequent usurious transaction ; Nich ols v. Fearson, 7 Pet. (U. S.) 103, 8 L. Ed. 623; Junction R. Co. v. Bank, 12 Wall. (U.
S.) 226, 20 L. Ed. 385.
The discount of a note at more than legal interest, for an indorser who was neither maker nor payee, is not usurious ; Gaul v. Willis, 26 Pa. 259 ; Moore v. Baird, 30 Pa 138; Cram v. Hendricks, 7 Wend. (N. Y.) 569 (but it must be a bona fide sale and not a device to cover usury and it may be in dorsed by the transferor ; French v. Grindle, 15 Me. 163; Roark v. Turner, 29 Ga. 455: National Bank of Michigan v. Green, 33 Ia. 140); but this rule only applies to business paper, since the sale of accommodation pa per at a discount of more than legal inter est is usurious ; Belden v. Lamb, 17 Conn. 441; in some cases it is held that if the ven dor indorses or guarantees or otherwise be comes liable for the payment of the bill or note, the transaction is usurious; National Bank v. Johnson, 104 U. S. 271, 26 L. Ed. 742; Cowles v. McVickar, 3 Wis. 725, where, however, it was also held that the indorse ment was valid to pass a good title to the holder as against the maker though usurious as against the indorser ; the note, being val id in its inception, was not vitiated by the subsequent transaction except as against the indorser. The last ruling, however, was said to be obiter dictum., but, the question arising for adjudication, the view was ap proved and the subsequent case so decided ; Armstrong v. Gibson, 31 Wis. 61, 11 Am. Rep. 599.
The discounting of negotiable paper under. the • national bank act is synonymous with loans; National Bank v. Johnson, 104 U. S. 271, 26 L. Ed. 742, citing Niagara County Bank v. Baker, 15 Ohio St. 68, to the ef fect that to discount paper is "only a mode of loaning money with the right to take the interest allowed by law in advance." See NATIONAL BANKS.
Where in an act of incorporation the ex-. ercise of banking powers was prohibited, it was held that thereby the discounting of notes was forbidden; United German Bank v. Katz, 57 Md. 128, 139; Sewell, Banking.
The true discount for a given sum, for a given time, is such a sum as will in that time amount to the interest of the sum to be discounted. Wharton.
In Practice. A set-off or defalcation in an action. Viner, Abr. Discount. But see Trabue's Ex'r v. Harris, 1 Mete. (Ky.) 597.
In common-law actions there was a plea of discount, but it is little used. In Dela ware, where the common-law pleading is closely adhered to and short pleas are fre quently used, it was said that there was.
never any definite idea connected with the plea of discount in the Delaware practice; that they could not "give it the force or meaning of a plea of set-off." Glazier v. McCollister, 5 Harring. (Del.) 4L Hence that plea is rather intended for use when matter which constitutes a deduction or de falcation of or from the plaintiff's claim is introduced to reduce it.