First National Bank v. Denson , 115 Ala. 650 ( 1896 )

McCLELLAN, J.

Section 5197 of the Revised Statutes of the United States authorizes national banks to charge and receive on loans, discounts, &c., &c., “interest at the rate allowed by the laws of the State, Territory or District where the bank is located, and no more.” The succeeding section — 5198—provides: “The taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding section, when knowingly clone, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back, in an action in the nature of an action in debt, twice the amount of interest thus paid from the association taking or receiving the same ; provided such action is commenced within two years from the time the usurious transaction occurred.”

The settled construction of the last clause of this statute in respect of its limitation of the time within which suit to recover back usury paid must be instituted, is that the “usurious transaction” occurs only when a greater amount than the principal with legal interest has been paid, or judgment has been taken for such greater amount; and hence that the time of the limitation does not begin to run until the creditor has received in the way of payment of principal and usurious interest a sum in excess of the principal and legal interest, or has taken judgment for such excessive sum. The theory upon which this construction proceeds is that the'creditor primarily has an election to repent him of his usurious exaction, which may be made or evidenced by crediting all payments received, whether intended at the time they are made to be of usury or not, on the principal and legal interest; that so long as he has this locus penitentiae it is to be assumed that he will avail himself of the right it gives him to purge the transaction of illegality, and that of consequence it cannot be affirmed until the contrary election has been made by receiving more than the debt and legal interest, or taking judgment therefor, that he has received usurious interest, and -until then the “usurious transaction” has not been consummated, and has not “occurred” within the meaning and intent of the statute. Thus in Duncan v. First National Bank, Thompson’s National Bank Cases, 360, 362 — an action for usury paid — decided by a federal district court, it is said : ‘ ‘From the origin of the loan, from the retaining of the first discount through all the renewals up to the time of the final payment of the principal, or up to the time of entering judgment, there is a locus penitentiae for the party taking the excessive interest. Any time till then he may consider the excessive interest paid on account of the loan, and so apply it and lessen the principal. Up to that time he may make this election. When payment is actually made or judgment is entered for the face amount of the notes or full amount of the loan, or payment is taken in full without any reduction by taking out the excessive interest, the cause of action is complete. The original loans in these cases were more than two years before these actions were brought, but the payment of one of the Millinger notes was made, and the judgment on the other Millinger note and the judgments on the Duncan notes were entered, near the time of bringing these suits, less than two years before. The payment [of the one Millinger note] and the judgment [on the other Millinger and the Duncan notes] concluded the transaction, and determined their character to be usurious. Till that time it was undetermined, and the statute did not begin to run.” This language is quoted with approval by the Supreme Court of the United States in McBroom v. Scottish Investment Co., 153 U. S. 318, 328, where a like ruling was made in respect of a statute of New Mexico which was in substance the same as the federal statute quoted above in the respect under consideration. In that case the court uses this language : ‘ ‘The contract of loan not being void, except as to the excess of interest stipulated to be paid, the question arises whether the lender is liable to an action for the penalty prescribed by the statute, so long as the principal debt with legal interest, after deducting all payments, is unpaid. We are of opinion that this question must be answered in the negative. * * * The borrower has no cause of action until usurious interest has been actually collected or received from him. Such is the mandate of the statute. And interest can not be said to have been collected and received, in excess of what may be lawfully collected and received, until the lender has in fact — after giving credits for all payments — collected and received more than the sum loaned, with legal interest. Such, in our judgment, is the construction of the statute of New Mexico. In this view, the limitation of three years, within which the borrower may sue for double the amount of the usurious interest collected and received from him, does not commence to run, and, therefore, the cause of action does not accrue, until the lender has actually collected or received more than the original debt with legal interest. These conclusions are supported by adjudged cases.” (Citing and quoting from Duncan v. Bank, supra; Stevens v. Lincoln, 7 Met. 525; Harvey v. Life Insurance Co., 60 Vt. 209, and Wright v. Laing, 3 B. & C. 165.)

The debtor obviously-has nothing to do with the exercise of the creditor's option. He has no locus penitentise, no place nor time nor opportunity to repent of anything or to ratify anything. His payment of usurious interest as such is as clear a manifestation of a confirmation and consummation of the usurious transaction as is possible for him to make, and yet that has no such effect upon it. The institution of an action by him to recover back usurious interest so paid is an equally unequivocal assertion of a consummated usurious transaction, and yet it has no such effect; and his action, as in HcBroom's Case, supra, will go out of court because prematurely instituted, because no cause of action had arisen, unless he shows that such with other payments exceed the principal of the loan and legal interest. Nothing, in short, that he can do or forego can hasten of impede the rounding out of the transaction into a consummated payment of usurious interest so long as he has not paid more than the debt and legal interest, or in the least clog or facilitate the unfettered election of the creditor to purge the payments of usury by crediting them upon the loan and interest. His plea of usury when sued for a balance of the principal and interest thereon is no more than an assertion than the contract is tainted with usury. It is much less an affirmation by him that usurious payments have been made than the payments themselves were, or than a suit to recover them back is. Indeed such plea does not at all assert that usurious payments have been made ; that is not the gist of it at all; but its gravamen is that usury was contracted to he paid, and relief upon it, so far from involving an adjudication that usurious interest has been paid, is, to the contrary, an adjudication that no interest has been paid on the particular debt in suit. The interposition of such a plea in a suit on a past due renewal note for a part of the original loan has no effect upon the rights of the creditor-plaintiff to apply usurious interest previously paid on the loan as evidenced by the original, or intervening renewal, notes to the principal and legal interest, and thus purge such payments of usury and forestall the possibility of the transaction, so far as the payments made were concerned, becoming an “usurious transaction” within the meaning of the statute. •

The statute has two distinct members ; it provides for two distinct classes of cases. We have been considering only its last clause. The exigencies of the case before us render it necessary to advert somewhat to the first clause and to consider the bearing it, or a defense of usui’y under it, has upon a case, growing out of the same loan, under the last clause. The effect and field of operation of each clause has been declared by the. Supreme Court of the United States. That court, speaking by Justice SwayNe, after quoting the section, said : “Two categories are thus defined, and the consequences denounced : 1. Where illegal interest has been knowingly stipulated but not paid ; then only the sum lent without 'interest can be recovered. 2. Where such illegal interest has been paid; then twice the amount so paid can be recovered in a penal action of debt, or suit iii the nature of such action, against the offending bank, brought by the persons paying the same or their legal representatives.”—Barnet v. National Bank, 98 U.S. 555. In the first category, relief may be had from the payment of all interest, stipulated for but not paid, under a plea of usury, which proceeds solely upon the ground that usury has been stipulated for, that the contract is tainted with usury. In the second category relief can only be had in the penal action which the statute itself gives. Usurious interest paid cannot be set off against the principal in an action by the creditor to recover the balance of the loan.—Barnet v. National Bank, supra. Or, as stated in another case: “Usurious interest paid a national bank on renewing a series of notes cannot, in an action by the bank on the last of them, be applied in satisfaction of the principal of the debt.”—Driesbach v. National Bank, 104 U. S. 52; Stevens v. Monongahela Bank, 111 U. S. 197; Carter v. Carusi, 112 U. S. 478. In the first category recovery is had “for the corruption of the contract; ” in the second 4 ‘for the corruption of the payment.” The corruption of the contract depends in no degree upon the corruption of any payment, nor indeed upon the fact that any payment has been made-. A corrupt payment knowingly taken may, probably' would, prove a corrupt contract; but in no case arising under the first clause of the statute is the court concerned with usurious payments made except evidentially : The fact of such payments having been made upon a given contract goes to show that the contract stipulated for such payments, and, hence, stipulated for usury ; but nothing in such case is adjudged in respect of such payments, the plaintiff’s recovery is not tolled by reference to them, the defendant’s right to a forfeiture of unpaid interest is not based upon them. After such plea interposed, as we have seen, and even after the case has been-developed before the jury, and the plea supported alone by evidence of such payments, the creditor-plaintiff may purge the payments of usury in the way we have stated, but that would not purge the contract of usury; it would still be a contract stipulating for the payment of usurious interest, and the defendant would still be entitled to a forfeiture of all unpaid interest. Since, therefore, the defense of usury to an action under the first category does not depend upon usurious payments made, and a judgment sustaining it is not based on the fact of such payments, but upon the stipulation of the contract of which such payments maybe evidence ; and since neither the sustaining of such plea nor any other possible judgment in such case can give the debtor any relief as to usurious payments already made, no ground can be conceived for holding such defendant estopped by such plea pleaded and sustained, as to that part of the stipulated interest remaining unpaid, to afterwards prosecute his action of debt under the statute for twice the amount of usurious interest which he had already paid. The plea goes to one thing, the action to another; and to sustain both is not to inflict a double penalty, but only to impose the penalty given by the statute for stipulating for usury which has not been paid, and also the independent penalty given by the statute for knowingly receiving usury whether stipulated for or not; and the debtor gets nothing under his plea which is recoverable in the action, and nothing in the action which he could take by his plea. To hold in a case like the one before us that such plea sustained defeats, by estoppel or otherwise, the action for usurious payments made, would be to say that if one defends property still left to him against the illegal demands of another he thereby loses the right to reclaim other of his effects which that other had wrongfully deprived him of.

Upon the foregoing considerations, our conclusions are, that plaintiff’s action is not barred by the limitation embraced in section 5198, Bevised Statutes, and that his right to maintain it is not affected by the fact that he pleaded usury against the note for a balance of the original loan in the suit upon it by the bank, and upon such plea had judgment forfeiting the interest on that note. The rulings of the city court are in harmony with these conclusions, and its judgment upon the demurrers to defendant’s pleas must be affirmed.

Affirmed.