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Parallels between Talmudic and New York Usury Laws

Published online by Cambridge University Press:  03 June 2009

Bernard J. Meislin
Bernard J. Meislin
Affiliation:
Member of the New York Bar
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Extract

The two jurisdictions with the greatest volume and complexity of laws dealing with usury are the United States and Israel. England, the wellspring of our common law, and one of present-day Israel's legal fonts, did away with all regulation of interest over a century ago. All of continental Europe contains only two or three jurisdictions which apply legal limits to interest on loans. The communist countries present a special situation since private loans at interest have no official place in the economic system. Islamic countries, like Pakistan, constitutionally frown on interest but it is present in practice, thereby embarrassing the secular authorities. However, the extent of legal experience with loans at interest in all other jurisdictions combined does not rival that wealth of elaborate study which is to be found in judicial decisions and legislative documents in American and Jewish law. It is, therefore, of interest to examine from a comparative standpoint the approach to usury taken by United States' courts and by Jewish legal authorities to see in which respects they differ and are similar.

Type
Usury
Information
Comparative Studies in Society and History , Volume 9 , Issue 1 , October 1966 , pp. 84 - 100
Copyright
Copyright © Society for the Comparative Study of Society and History 1966

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References

1 See Rosenbaum v. Zeger, Israel Supreme Court, Civ. App. No. 248Œ53, English translation, p. 19. The opinion of Justice Silberg states: “Let us not forget that the states of the U.S.A. make up an overwhelming majority of the states in the world which have a legal rate of interest… The richest experience in matters relating to interest can be found in the sources of Jewish law.” Four American states, incidentally, have no usury laws whatever. They are Colorado, Massachusetts, New Hampshire and Maine. See The New York Times, January 17, 1960, pp. R. 1. 8Google Scholar.

2 Homer, Sidney, A History of Interest Rates (New Brunswick, New Jersey, Rutgers University Press, 1963), p. 187Google Scholar. In 1854 the usury laws were finally repealed for all forms of credit.

3 Rosenbaum v. Zeger, op. cit., p. 19.

4 Sidney Homer, loc. cit., p. 540, “Interest rates under communism are not comparable in any important sense with interest rates in free market countries… Unofficial rates of interest in modern Russia are not reported, but must exist when a ‘friend’ quietly assists a ‘friend’ in need”; The New York Times, October 18, 1965, p. 16Google Scholar reports the Soviet Union's Finance Minister on the historical role of interest: “He noted that in the past Communist economists favored a reduction of interest rate to a nominal figure, or even complete elimination of interest, on the ground that all the financial resources of industrial enterprises, whether their own or in the form of loans, were state property anyway.”

5 See The Wall Street Journal, August 12, 1964, p. 1Google Scholar; Joseph H. Spengler, “Economic Thought of Islam”, Comparative Studies in Society and History, Vol. VI, No. 3, pp. 268, 274–275.

6 Rosenbaum v. Zeger, op. cit., is a case in point.

7 The Talmud, Vol. II, Mezia, Baba, Chapter V (London, Soncino Press, 1935), p. 361Google Scholar et seq.

8 The Standard Jewish Encyclopedia (Garden City, N.Y., Doubleday & Company, 1959), p. 1790Google Scholar; the Talmud contains the records of academic discussion and of judicial administration of Jewish law by generations of scholars and jurists. In external form the Talmud consists of the Mishnah together with a “gemara”, which is both a commentary on and a supplement to the Mishnah. Mishnah means literally “teaching” or “repetition”. It required some four centuries of study and discussion to compile the Mishnah, beginning possibly during the earlier half of the second century B.C. and ending with the close of the second century A.D. The scholars of the Mishnah are the Tannaim (teachers), and those of the Gemara are known as Amoraim (interpreters). Horowitz, George, The Spirit of Jewish Law (New York, Central Book Company, 1953), pp. 31–37Google Scholar; See also Strack, Hermann L., Introduction to the Talmud and Midrash (Philadelphia, Jewish Publication Society of America, 1931), pp. 3–7Google Scholar.

9 Baba Mezia, op. cit., p. 363.

10 General Obligations Law § 5–501.

11 Baba Mezia, op. cit., p. 363 fn. 4.

12 Ibid., pp. 363–363; See also Neufeld, Edward, “The Prohibitions Against Loans at Interest in Ancient Hebrew Laws”, Hebrew Union College Annual, Vol. XXVI (1955), pp. 355–412Google Scholar; Meislin, & Cohen, , “Backgrounds of the Biblical Law Against Usury”, Comparative Studies in Society and History, Vol. VI, No. 3 (1964), pp. 250–267CrossRefGoogle Scholar.

13 Title Guaranty Co. v. Klein, 178 F. 689, 102 CCA. 189 (1909).

14 Spencer v. Tilden, 5 Cow. (N.Y.) 144 (1825).

15 Dry Dock Bank v. American Life Ins. Co. 3 N.Y. 344 (1850); Bull v. Rice, 5 N.Y. 315 (1851). The basic New York statute, it should be noted, refers to loans of “money, goods or things in action”. General Obligations Law § 5–501.

16 Baba Mezia, op. cit., p. 398 fn. 8.

17 General Obligations Law § 5–501 (1).

18 Baba Mezia, op. cit., p. 378.

19 The Talmud, Vol. II (London, Soncino Press, 1935)Google Scholar, introduction, p. xii.

20 Baba Mezia, op. cit., p. 368 fn. 4; Ibid., p. 371 fn. 3; Ibid., p. 372 fn. 7.

21 Ibid., p. 393 fn. 9.

22 Ibid., p. 373 fn. 3.

23 Ibid., p. 386 fn. 3.

24 Ibid., p. 418.

25 Ibid., p. 435.

26 Ibid., p. 434 fn. 4.

27 Ibid., p. 436 fn. 3.

28 Ibid., p. 380.

29 105 App. Div. 542, 94 N.Y.S. 404. Two distinguished American lawyers represented the litigants. Alton B. Parker, representing the borrowing hotel owner, ran for the Presidency of the United States between the time of the trial and the decision on appeal. Samuel Untermeyer, who argued that there was no usury, became widely known for his exposure of “high finance” and the “money trust”, leading to Congressional reform of stock exchanges and regulation of trusts and combinations.

30 Baba Mezia, op. cit., p. 381.

31 Tillinghast v. Pratt, 18 Weekly Dig. 570. 32 Hun. 69 (1884).

32 Grannis v. Stevens, 216 N.Y. 583, 111 N.E. 263 (1916).

33 Baba Mezia, op. cit., p. 393.

34 Vilas v. McBride, 62 Hun. 32, 17 N.Y.S. 171, aff'd 136 N.Y. 634.

35 Baba Mezia, op. cit., p.385.

36 Rabbi D. H. Freedman, in footnote (3) to Baba Mezia, op. cit., p. 386.

37 Giel v. Thompson, 13 N.Y. St. R. 725. See also Chandler v. Powers, 9 N.Y. St. R. 169 (1887); Browne v. Dewe, 1 Sandf. Ch. 56, 2 N.Y. Leg. Obs. 339 (1833).

38 Phillips v. Mason, 66 Hun. 580, 21 N.Y.S. 842 (1893).

39 Baba Mezia, op. cit., fol. 65 (a), pp. 382–383.

40 Twelve manehs equals 1200 zuz.

41 Baba Mezia, op. cit., p. 383.

42 Morris Plan Bank of Schenectady v. Faulds, 47 N.Y.S. 2d 920, reversed on other grounds, 269 App. Div. 238, 55 N.Y.S. 2d 372 (1944); People v. Guttin, 266 App. Div. 1023, 44 N.Y.S. 2d 821 (1943); Failing v. National Bond & Investment Corporation, 12 N.Y.S. 2d 260, affd 258 App. Div. 778, 14 N.Y.S. 2d 1011 (1939); Florida Land Holding Corp. v. Burke, 135 Misc. 341, 238 N.Y.S. 1, affd 229 App. Div. 853, 243 N.Y.S. 799 (1929); Aglio v. Carousel. Inc., 34 Misc. 2d 79, 228 N.Y.S. 2d 350 (1962); Thomas v. Knickerbocker Operating Co., 108 N.Y.S. 2d 234 (1951); Frank v. Davis, 23 Abb. N.C. 419, 6 N.Y.S. 144, 25 N.Y. St. R. 207, affd 127 N.Y. 673, 28 N.E. 255 (1889); Flagg v. Fisk, 93 App. Div. 169, 87 N.Y.S. 530, affd 179 N.Y. 590, 72 N.E. 1141 (1904); Steinert v. Hamel, 11 Weekly Dig. 431 (1880).

43 Butts v. Samuel, 5 App. Div. 2d 1008, 174 N.Y.S. 2d 325 (1958); Bennis v. Thomas, 14 App. Div. 2d 895, 221 N.Y.S. 2d 350 (1961).

44 Zussman v. Woodbridge, 49 Misc. 496, 97 N.Y.S. 973 (1906).

45 Western Reserve Bank v. Potter, 1 Clarke 432 (1841).

46 Archer Motor Co. v. Relin, 255 App. Div. 333, 8 N.Y.S. 2d 469 (1938).

47 Quackenbos v. Sayer, 62 N.Y. 344 (1875). See also Black v. Ryder 5 Daly 304 (1874).

48 Todd v. Brown, 177 App. Div. 397, 164 N.Y.S. 278.

49 Muller v. Philadelphia, 208 N.Y. 182, 101 N.E. 762 (1913); See, also, Hartley v. Eagle Ins. Co., 167 App. Div. 230. 152 N.Y.S. 686, reversed on other grounds, 222 N.Y. 178, 118 N.E. 622 (1915); Hall v. Eagle Ins. Co., 151 App. Div. 815, 136 N.Y.S. 774, affd 211 N.Y. 507, 105 N.E. 1085 (1915); Otten v. Freund, 150 App. Div. 434, 135 N.Y.S. 59 (1912); Wetzler v. Wood, 143 App. Div. 311, 128 N.Y.S. 501 (1912); Mercantile Trust Co. v. Gimbernat, 134 App. Div. 410, 119 N.Y.S. 103 (1909); Hagaman v. Reinach, 48 Misc. 206, 96 N.Y.S. 719 (1905).

50 Baba Mezia, op. cit., p. 397.

51 Ibid., p. 397.

52 Vee Bee Service Co. v. Household Finance Corporation, 51 N.Y.S. 2d 590, affd 269 App. Div. 772, 55 N.Y.S. 2d 570 (1944); cf. National City Bank of New York v. Levine, 155 Misc. 132, 277 N.Y.S. 664 (1933).

53 Bonetti v. United Beauty Supply, 31 N.Y.S. 2d 463 (1941); Universal Credit Co. v. Lowell, 166 Misc 15, 2 N.Y.S. 2d 743 (1938); Ganz v. Lancaster, 169 N.Y. 357, 62 N.E. 413, 58 L.R.A. 151 (1902); P. J. Tierney Sons, Inc. v. Bajowski, 258 N.Y. 563, 180 N.E. 333 (1932); Crippen v. Heermance, 9 Paige 211 (1841).

54 Deitch v. Kessler, 13 Misc. 2d 421, 177 N.Y.S. 2d 792, modified on other grounds, 8 App. Div. 2d 599, 184 N.Y.S. 2d 389, affd 291 N.Y. 2d 827, 196 N.Y.S. 2d 704 (1958).

55 Baba Mezia, op. cit., p. 423.

56 Ibid., p. 423 fn. 11.

57 Ibid., p. 405.

58 Ibid., p. 405 fn. 3.

59 Ibid., p. 405.

60 R. Shesheth, Ibid., p. 405.

61 Braynard v. Hoppock, 32 N.Y. 571, 88 Am. Dec. 349.

62 62 Rowe v. Gunson, 25 How. Prac. (N.Y.) 360.

63 2 Paige 267.

64 See also Pomeroy v. Ainsworth, 22 Barb. 118 (1856); O'arrell v. Martin, 161 Misc. 353, 292 N.Y.S. 581 (1936); Browne v. Vredenburgh, 43 N.Y. 195 (1871).

65 Diehl v. Becker, 227 N.Y. 318, 125 N.E. 533 (1919).

66 43 N.Y. 195 (1870).

67 See also Cleveland v. Loder, 7 Paige 557 (1839).

68 Baba Mezia, op. cit., p. 404.

69 Ibid., p. 423.

70 O'Farrell v. Martin, 161 Misc. 353, 292 N.Y.S. 581 (1936); Pomeroy v. Ainsworth, 22 Barb. 118 (1856).

71 Webster v. Roe, 212 App. Div. 756, 210 N.Y.S. 366.

72 Baba Mezia, op. cit., p. 396.

73 General Obligations Law § 5–521.

74 Inroads were made upon the quoted policy at the 1965 session of the New York legislature which enacted Penal Law Sections 2401 and 2403; these designate the taking of interest at a rate exceeding 25 percent per annum as criminal usury and make such crime a felony punishable by imprisonment up to five years and a fine not exceeding $5,000. By amendment to the General Obligations Law, Sections 5–519 and 5–521, the provision that a corporation may not plead usury is amended so that it does not apply to the defense of criminal usury.

75 General Obligations Law § 5–523. The 1965 New York legislature also enacted a prohibition on charges under this statute in excess of 25 percent per annum.

76 General Obligations Law § 5–525. The 1965 New York legislature amended this section to prohibit interest charges in excess of 25 percent per annum.

77 General Obligations Law § 5–521 (2).

78 Durst v. Abrash, 253 N.Y.S. 2d 351, 359 (1964).

79 Corpus Juris Secundum, Vol. 91, § 4 (6) (a); See also fn. 96, infra.

80 Baba Mezia, op. cit., p. 433.

81 Ibid., p. 433 fn. 5.

82 Ibid., p. 406.

83 Ibid., p. 406 fn. 4.

84 Ibid., p. 378.

85 Ibid., p. 378 fn. 8.

86 Ibid., pp. 378–379.

87 Salina Bank v. Alvord, 31 N.Y. 473 (1865); See also, Bevier v. Covell 87 N.Y. 50 (1881); Fiedler v. Damn, 50 N.Y. 437 (1872); Marvine v. Hymers 12 N.Y. 223 (1885); Woodruff v. Hurson, 32 Barb. 557 (1860); Keyes v. Moultrie, 3 Bosw. 1 (1858); Conger v. Tradesman's Bank, Hill & D. Supp. (1842); New York Firemens Ins. Co. v. Sturges 2 Cow. 664 (1824).

88 General Obligations Law § 5–351. The term “real estate security” is used in a very broad sense. Srebnick v. Transportation Pavilion, 43 Misc. 2d 860 (1964).

89 Baba Mezia, op. cit., p. 403.

90 The heathen and “foreigner” are equated. See Gutttnan, Michael, “The Term “Foreigner’ (Nokri) Historically Considered”, Hebrew Union College Annual, Vol. III )Google Scholar.

91 Baba Mezia, op. cit., p. 407.

92 Corpus Juris Secundum, Vol. 91, Sec. 4 (6) (c), p. 564; Wayne County Savings Bank v. Low, 81 N.Y. 566, 37 Am. R. 533, 8 Abb. N. Cas. 390 (1880).

93 Corpus Juris Secundum, Vol. 91, Sec. 4 (6) (c), p. 564.

94 Baba Mezia, op. cit., p. 409.

95 Ibid., p. 409 fn. 8.

96 Ibid., p. 409.

97 Ibid., pp. 409–410.

98 Corpus Juris Secundum, Vol. 91, Sec. 4 (6) (c), p. 564.

99 Baba Mezia, op. cit., p. 367.

100 See National Equipment Rental Limited v, Stanley, D.C. N.Y., 117 F. Supp. 583, aff d 283 F. 2d 600 (1959).

101 Baba Mezia, op. cit., p. 416.

102 Corpus Juris Secundum, Vol. 91, Sec. 157, fnn. 69 and 70, p. 763.

103 Baba Mezia, op. cit., pp. 363 fn. 4, 364 and 435 “The borrower, by offering interest and appealing to the creditor's avarice, places a stumbling block before him” Morton v. Thurber, 85 N.Y. 550 (1881); Guggenheim v. Geiszler, 81 N.Y. 293 (1880); Brown v. Robinson, 224 N.Y. 301, 318 (1918).

104 Baba Mezia, op. cit., p. 364 fn. 9.

105 Howard v. Kirkpatrick, 30 N.Y.S. 2d 166, affd 263 App. Div. 776, 31 N.Y.S. 2d 182 (1941).

106 Baba Mezia, op. cit., p. 365 fn. 5; Corpus Juris Secundum, Vol. 91, Sec. 73. p. 650.

107 General Obligation Law § 5–513.

108 Baba Mezia, op. cit., p. 370.

109 Ibid., p. 370 fn. 6.

110 Ibid., p. 370.

111 Ibid., p. 370 fn. 7.

112 Ibid., p. 370 fn. 10.