Garland v. Union Trust Co.

On January __, 1913, in the district court of Oklahoma county, Union Trust Company, a corporation, and the same Company as trustee, defendant in error, sued D.N. Garland and Inez, his wife, J.C. Barr and Ollie, his wife, plaintiffs in error, upon their 50 certain real estate gold notes of $1,000 each, made, executed, and delivered by them on May 25, 1912, to the Union Trust Company as trustee, all of which later came into its hands as registered holder. Two of said notes were payable December 1, 1912, 3 June 1, 1913; 2 December 1, 1913; 3 June 1, 1914; 2 December 1, 1914; 3 June 1, 1915; and 35 June 1, 1918. Each was made payable to bearer or to the registered holder thereof, and provided for 6 per cent. interest per annum from June 1, 1912. Each further provided that the principal sum, "if not paid at maturity, shall bear interest at the rate of 10% per annum with annual rests after maturity until paid." At the same time plaintiff sued to foreclose a mortgage or deed of trust, in favor of the Union Trust Company as trustee, given by defendants upon a certain 10-story building in Oklahoma City to secure the payment of said notes. Among other things the petition alleged that, by reason of defendants' failure to pay the two $1,000 notes falling due December 1, 1912, plaintiff had elected to declare the whole debt due and payable, pursuant to the terms of the mortgage, which provides that in case default should be made in the payment of any coupon or notes thereby secured when the same became due, the trustee may, upon certain conditions (complied with), declare the principal of all notes thereby secured immediately due and payable; that, although its lien was prior to that of all others upon the property, one Silas Rowland claimed some interest therein inferior to that of plaintiff's lien, and prayed judgment for the full amount of the mortgage debt, to wit. $50,000, with interest at 10 per cent. per annum and an additional 10 per cent. as an attorney's fee, and for a foreclosure of the mortgage, and that Rowland's interest in the property, if any he have, be declared inferior and subject to the lien of the mortgage.

For answer defendants, after denying every allegation in plaintiff's petition, except such as were specifically admitted, as a second defense, admitted the execution and delivery of the notes and mortgage sued, and alleged that the consideration for same was the loan of $50,000; that plaintiff, through its officers and agents, knowingly and wrongfully and with intent to violate the laws of the state, with reference to the charging of usurious interest, charged, reserved, and received from defendants, and that defendants paid plaintiff $2,500 cash at the time of the loan as interest for the use of said money from the date of the execution of said instruments until December 21, 1912, and executed to plaintiff a note for $2,750, bearing 8 per cent. interest, and payable one year thereafter, and made interest payments amounting to $1,572.22, or in all $6,822.22, being interest exacted during that time at the rate of 27 per cent. per annum; and that by reason of such usurious charge defendants were entitled to set off against plaintiff's demand twice said sum so reserved, to wit, $13,644.44. For further answer defendants submitted a calculation to show that on the face of the evidence of debt and the commission note of $2,750, the usury reserved and charged was $12,830, and prayed that double said amount, or $25,660, be set off against plaintiff's demand. For further answer they allege for the reason that, by the terms of the bonds and the coupons thereto attached, there is reserved and charged 6 per cent. interest per annum upon the bonds before maturity and 10 per cent. thereafter until paid, the same are usurious because, they say, this increase of 4 per cent., was for the "detention" of money in contravention of the statute, and entitled defendants to set off against the debt twice the amount thereof. By amendment a count was added to the petition, praying judgment on the note for $2,750 and for a foreclosure of the mortgage by which the same was secured; said note having matured since the beginning of the suit. For reply, after a specific denial of all new matter set up in the answer, the Union Trust Company, after reciting the fact of the loan and the dates upon which it was payable, said:

"That at the time of the execution of the notes or bonds and deed of trust securing the payment of said indebtedness the said defendants above named paid to plaintiff the sum of $2,500, and executed and delivered to the Union Trust Company their note for $2,750, with interest at 8 per cent. per annum, payable on May 25, 1913, secured by a second mortgage upon said property, and that plaintiff is still the owner and holder of said note, and same has never been transferred or negotiated and is unpaid.

"Plaintiff further states that the sum of $2,500, which was paid to plaintiff at the time of the making of said loan, the sum of $2,750 which the defendants promised to pay plaintiffs on May 25, 1913, together with the several interest payments alleged to have been made by the said defendants to plaintiff, was a part of the interest which accrued upon said loan for the entire time said loan run, and was not payment of interest for the dates set forth in the answer and cross-petition of said defendants, and was a part performance of the entire contract.

"Plaintiffs further state that under the terms of said contract there would have accrued upon the $2,000 payable December 1, 1912, at 6 per cent. the sum of $62; that there would have accrued on the $3,000 which became due on June 1, 1913, the sum of $165; that there would have accrued on the $2,000 which became due and payable on December 1, 1913, the sum of $182; that there would have accrued on the $3,000 which matured on June 1, 1914, at 6 per cent. the sum of $302; and there would have accrued on the $3,000 due and payable on June 1, 1915, at 6 per cent. the sum of $543; and that there would have accrued on the sum of $35,000, which became due and payable on June 1, 1918, at 6 per cent., the sum of $12,635; that there would have accrued on the note for $2.750 which matured May 25, 1913, at 8 per cent., the sum of $220, which with the $2,500 paid at the time of the execution of the papers and the $2,750 evidenced by said note due May 1, 1913, would have amounted in the aggregate to $18,740, being all of the interest which the plaintiffs exacted and which the defendants contracted to pay on said loan.

"Plaintiffs further state that under the law they were entitled to collect interest at 10 per cent. per annum; that the interest which would have accrued on $2,000 maturing December 1, 1912, at 10 per cent., would have amounted to $103.33; that plaintiffs are entitled to collect on the $3,000 which matured on June 1, 1913, at 10 per cent., the sum of $305; that plaintiffs are entitled to collect on the $2,000 due December 1, 1913, at 10 per cent., the sum of $303.30; that plaintiffs are entitled to collect on the $3,000 due December 1, 1914, at 10 per cent., the sum of $605; that plaintiffs are entitled to collect on the $2,000 due December 1, 1914, at 10 per cent., the sum of $503.33; that plaintiffs are entitled to collect on the $3,000 due June 1, 1915, at 10 per cent., the sum of $905; that plaintiffs are entitled to collect on the $35,000 due June 1, 1918, at 10 per cent., the sum of $_____, amounting in the aggregate to $23,783.32, being the maximum amount of interest which plaintiffs were entitled to collect under the law.

"Plaintiffs further state that under the terms of said contract as hereinbefore stated, defendants were only required to pay the sum of $19,740, and the plaintiffs were entitled to collect under the law the sum of $23,783.32, there being a difference of $4,043.32, which plaintiffs were entitled under the law to collect, and which amount is less than the defendants agreed to pay or the plaintiffs exacted from the said defendants, and by reason thereof said loan was not usurious"

— and asked that the same be foreclosed. Then came one W.J. Walker and intervened, and for answer and cross-petition, after denying generally the allegations set forth in the petition, set up a mortgage of $15,750 on the premises made, executed, and delivered to Silas Rowland by Garland and wife and Barr and wife on May 25, 1912, and by said Rowland, for value and before maturity, assigned to him, and prayed that the same be decreed a first lien on the property and foreclosed. And after Garland and wife and Barr and wife had answered and pleaded that the same was usurious and Walker had joined issue by general denial, and Barr had pleaded that he, pending the suit, had been adjudged a bankrupt, and Rowland had disclaimed, there was trial to the court upon the issue of usury joined between the Union Trust Company and Garland and wife and Barr and wife in the enforcement of plaintiff's $50,000 mortgage, whereupon the court on October 20, 1913, found, from the evidence and the agreed statement of facts, the facts substantially to be: That on May 25, 1912, defendants, to secure a loan of $50,000, executed the notes and mortgage sought to be foreclosed; that the notes were for $1,000 each, payable as pleaded, with interest at 6 per cent. per annum, payable semiannually; that when the mortgage was executed, defendants paid plaintiff, as a commission for making the loan, $2,500, and also executed to plaintiff the promissory note of $2,750 declared on; that each of the $1,000 notes contained:

"Said principal sum if not paid at maturity shall bear interest at the rate of 10 per cent. per annum with annual rests after maturity until paid,"

— and the mortgage reserved to the mortgagee the right to accelerate the payment of the debt, as pleaded, if any installment of the principal or interest was not paid when due; and also contained the words "appraisement waived," and provided for an attorney's fee, etc. The court further found plaintiff to be the owner; that the mortgage was duly recorded; that default had been made in the payment of the two notes of $1,000 each, due December 1, 1912; that plaintiff had duly declared the default and its election to declare the entire debt thereby secured due and payable; that plaintiff was entitled to a foreclosure thereof, and, that there was due and owing thereon $52,666.67, with interest thereon at 6 per cent. per annum from that date, October 20, 1913, together with $5,266.66 as an attorney's fee, for all of which he gave judgment and decreed the same to be the first lien upon the property. The court further found that when defendants executed to plaintiff their promissory note for $2,750 they also executed to plaintiff a mortgage on the same property to secure its payment as pleaded; that said mortgage contained the words "appraisement waived," and also provided for 10 per cent. additional as an attorney's fee in the event of foreclosure; that the same was duly recorded; that plaintiff was entitled to foreclose it, and that there was due and owing thereon $2,953.08, with interest at 6 per cent. per annum from October 20, 1913, together with $295.30 as an attorney's fee, for all of which he gave judgment and decreed the same to be a second lien upon the property; that the title of the defendants and Walker in and to the mortgaged property was inferior and subject to the plaintiff's judgment, and so ordered, adjudged, and decreed; and that the property be sold to satisfy the debt. Thereafter, on the issues tried to the court upon the issue of usury joined between the defendants and Walker in his suit to foreclose his mortgage, the court found that there was usury in that transaction to the extent of $4,650 only, and that Walker was entitled to recover $11,100 only thereon, together with $1,500 as an attorney's fee and to have his mortgage foreclosed, and so adjudged and decreed, to reverse which defendants only bring the case here, and contend the court erred in holding that there was no usury in plaintiff's mortgage, and not in holding there was usury in the Walker mortgage, but in holding that $4,650 only was the extent of the usury therein.

39 Cyc. 918, 919, says that, in order to constitute usury, there must be an unlawful intent; the subject-matter must be money or money's equivalent; a loan or forbearance; the sum loaned be absolutely or conditionally repayable; and that there must be an exaction for the use of the loan of something in excess of that allowed by law. Rev. Laws 1910, sec. 1002, reads:

"Interest is a compensation allowed for the use or forbearance, or detention of money, or its equivalent."

Section 1004 prescribes that:

"The legal rate of interest shall not exceed six per cent. in the absence of any contract as to the rate of interest, and by contract parties may agree upon any rate not to exceed ten per cent. per annum. Said rates of six and ten per cent. shall be, respectively, the legal rate and the maximum contract rates of interest."

And section 1005:

"The taking, receiving, reserving or charging a rate of interest greater than is allowed by the preceding section shall be deemed * * * usury."

There was no usury in this transaction. In Metz v. Winne,15 Okla. 1, 79 P. 223, the court said in the syllabus:

"The law of this territory prohibits the taking or contracting for any higher rate of interest than 12 per cent. per annum, and makes it unlawful to deduct more than one year's interest from the loan in advance, but it is not unlawful to compute the interest for the entire time the loan is to run, and contract to pay such sum in installments of such sums and at such times as the parties may by contract agree."

This is what was, in effect, done here, and the question is: Computing the interest for the entire time the loan had to run, does the interest reserved exceed the legal rate? If so, the loan is usurious; otherwise not. In other words, the test is as laid down in J. I. Case, etc., Co. v. Tomlin et al., 174 Mo. App. 512, 161 S.W. 286. There, referring to Taylor v. Buzard, 114 Mo. App. 622, 90 S.W. 126, the court said:

"In that case the test of usury in a contract is said to be 'whether it would, if performed, result in securing a greater rate of profit on the subject-matter than is allowed by law.' "

Accepting, then, the concession that the $2,500, or, rather, to be exact, the $2,325 (the difference is immaterial) deducted from the principal sum at the time the loan was made and the $2,750 note executed at the same time, together with interest thereon as reserved therein ($110 of which, being semiannual interest thereon, was paid when due), were for interest paid and charged and not a commission, as found by the court, applying the test stated, the contract, if performed, would have exacted of defendants interest as follows:

From
Princi-    What        Date      Time       Amt. of
pal.    Date        Due                  Interest
   $ 2,000    6-1-12     12-1-12    6 mo.   6%  $    60
3,000    6-1-12      6-1-13    1 yr.   6%      180
2,000    6-1-12     12-1-13   18 mo.   6%      180
3,000    6-1-12      6-1-14    2 yr.   6%      360
2 000    6-1-12     12-1-14   30 mo.   6%      300
3,000    6-1-12      6-1-15    3 yr.   6%      450
35,000    6-1-12      6-1-18    6 yr.   6%   12,600

Total interest provided for in the bonds ________ $14,220 Interest collected in advance _____________________ 2,325 Note for additional interest ______________________ 2,750 Interest on $2,750 note for 1 year at 8 per cent. _______________________________________________ 220 ----- Total interest collectible under the con- tract _______________________________________ $19,515

Or a little over 8 per cent. interest on the loan, which, of course, was not usurious. In Georgia Southern R. Co. v. Trust Co., 94 Ga. 306, 21 S.E. 701, 32 L. R. A. 208, 47 Am. St. Rep. 153, it is said:

"A calculation will show that if the bonds ran to full maturity, as contemplated, the lender of the money would not receive, in the aggregate, as much as 8 per cent. per annum for the use of the money, although at the beginning he put out on each bond only $850, and at the end received $1,000. The $150 added to the 6 per cent. interest annually received would not amount to as much as 8 per cent. per annum on $850 for the full term. That the bonds by their terms bore interest from a date previous to their delivery makes no difference, because, notwithstanding this fact, the gross amount of interest for the full term would not have been equal to 8 per cent. per annum. So the original contract, if the bonds ran 40 years, was not usurious; and it does not appear that they contained any stipulation which would prevent a fair and legal adjustment of the interest between the parties in case the bonds became due earlier because of a default in paying interest. Nor does it appear that in providing for the maturity of the bonds in case of such default, there was any device or contrivance to cover up usury."

This was the method adopted to determine whether there was usury in the loan sought to be collected in Metz v. Winne, supra. In that case Metz, on August 27, 1901, borrowed of Winne $600 for 10 years and executed, payable to him, a promissory note for that amount, together with 10 interest coupon notes for $42 each. At the same time he also executed, payable to Winne, a promissory note for $150, due September 1, 1902, together with another note of $30, due at the same time. The $600 note and coupon notes were secured by a first, and the $150 and $30 notes were secured by a second, mortgage on the same property. Winne assigned the $600 note and interest coupons; and, when Metz failed to pay the first coupon when due, Winne took it up and sued on it, as well as on the $150 note, and to foreclose his second mortgage, which contained a provision that, in the event the mortgagor failed to pay any interest note secured by the first mortgage, the holder of the second might pay it, and the sum so paid should become a lien secured by the second, and the holder thereof entitled to an immediate foreclosure. Defendant pleaded usury; and in holding such there was not, Burford, C. J., said:

"The facts specially pleaded in the answer are that the defendants borrowed from Winne $600, payable in 10 years, with interest at 7 per cent., and that they executed 1 note for $600 and 10 notes for $42 each, representing the interest for the 10 respective years; that they also executed the note for $150, which was for additional interest, and aver that such sum was usurious and excessive. A mere matter of mathematical calculation is sufficient to refute the conclusion of the pleader. Parties may contract for a rate of interest not to exceed 12 per cent. The interest on $600 for 10 years at 12 per cent. is $720. The interest contracted for as shown by these notes is as follows: Ten notes, $42 each, $420; 1 note, $30 and 1 note $150, total $600, which is $120 less than the maximum interest the mortgagee was entitled under the law to deduct. It is argued that the law does not permit more than 1 year's interest to be deducted in advance. Section 848, Wilson's Stat. 1903, provides: 'The interest which would become due at the end of a term for which a loan is made, not exceeding one year's interest in all, may be deducted from the loan in advance if the parties thus agree.' But it is not alleged or contended that any portion of the interest claimed was deducted from the loan in advance. On the contrary, it appears from the pleading that the mortgagors borrowed and received $600, and executed interest notes, payable in installments after the first year. If they comply with the contract, they will have the use of the principal sum for the period of 10 years, and the presumption is that they will do so. We know of no law that will prevent a borrower from paying all the interest on a loan at the end of 1 year or in such installments as he may desire and the parties may agree upon, so long as the person making the loan does not exact over 12 per cent. per annum, nor deduct more than I year's interest from the amount of the loan in advance. The courts do not undertake to make contracts for individuals, nor to relieve them from burdensome obligations voluntarily assumed and entered into."

To be sure, in that case no interest was taken out of the principal sum, while here $2,325, or less than 5 per cent., was so taken, and a note executed for $2,750 payable in 1 year. But this distinction makes no difference, for, referring to the Winne Case, Kane, J., in Covington v. Fisher, 22 Okla. 207,97 P. 615, said:

"It is true that in that case the interest was not taken out of the principal sum, but the case holds that the mortgagee had a right to contract for the payment of a part of the interest covering the entire period of the 10-year loan at the end of the first year, and for such a sum to be paid at that time as would be largely in excess of the maximum legal rate, if computed only for the period of a year; but the court holds it proper to make the computation for the entire time, and the principle to be drawn from the opinion is that the contracting for the payment of interest in advance does not make the transaction usurious."

We are therefore of opinion that there is no merit in defendants' contention, in effect, that the $2,325 deducted as interest in advance, together with the exaction of a note for $2,750, with interest thereon at 8 per cent. for a year, and the further exaction of $1,572.22 as interest on the loan up to December 21, 1912, or in all, $6,822.22, was the exaction of usury at the rate of some 27 per cent. for a loan of $50,000 from the date of the mortgage up to that time. This for the reason that, although such rate seems excessive, computed, as it is, for a part only of the time the loan had to run, the same is not excessive when those payments are spread out over the entire time the contract, if performed, had to run, as we have seen.

But before passing this $50 000 mortgage, it might be well to add that, because plaintiff, under the contract, by the exercise of its option accelerating the maturity of the loan, was entitled to demand and receive more than the amount of the loan, with legal interest to the time the loan was called, it does not follow that the plea of usury should prevail. On this point 29 Am. Eng. Encyc. of Law, 508, says:

"A provision by way of penalty accelerating the maturity of a loan on default in payments by the borrower will not necessarily render the loan usurious, though through the exercise of such option the lender may be entitled at law to demand the return of more than the amount lent with legal interest. Thus, where in consideration of a loan an obligation is taken for an amount as principal greater than the amount of the loan, but the interest stipulated therefor is less than the highest legal rate, so that if the contract is carried out according to its terms no more than the principal with legal interest will be paid, a provision that upon default in the payment of the interest the entire principal shall become due at the option of the lender will not render the transaction necessarily usurious, though upon such default and the exercise by the lender of his option more than the amount lent with legal interest to the time when the loan is called will be payable. And the same rule has been applied where installment notes were given for the principal and interest for the full term of the loan."

In Goodale v. Wallace et al., 19 S.D. 405, 103 N.W. 651, 117 Am. St. Rep. 962, 9 Ann. Cas. 545, the court said:

"It is further contended by the appellants that as there was a stipulation in the mortgage that if the mortgagors should fail to pay any portion of the above-mentioned sum, either principal or interest, promptly at the times they should become due, the whole sum — both principal and interest — should at once become due and collectible, therefore the contract was clearly usurious, as the whole amount of the principal of the notes would become due and payable upon default in the payment of the first note; but this contention is untenable, for the reason that such stipulation is in the nature of a penalty from which the mortgagors could relieve themselves by a prompt payment of the notes when due. Webb on Usury, sec. 120; 2 Am. Eng. Ency. Law, p. 468. The author in speaking of this class of cases, says: 'So if the provision for the payment of excessive interest is dependent on contingency which the borrower may avoid by paying the debt, with legal interest, the loan will not be deemed usurious.' State v. Elliott, 61 Kan. 518, 59 P. 1047; Tholen v. Duffy, 7 Kan. 405. A similar clause is frequently inserted in mortgages, but the stipulation has never been held as constituting a contract for the payment of usurious interest, so far as our researches extend."

There is no authority holding the contrary, so far as we know. By this we do not mean to intimate that plaintiff, had it sued therefor, which it did not, was entitled to recover in this action on the interest coupons not due at the time the trustee accelerated the maturity of the principal debt and foreclosed therefor. On the contrary, on this point, we mean to say that recovery upon those coupons could not be had for the reason that the moment the principal debt and interest, accrued up to the time to which the maturity of the debt, was accelerated, are paid, the remaining undue interest coupons are discharged. This is in keeping with authority (Dugan et al. v. Lewis et al., 79 Tex. 246, 14 S.W. 1024, 12 L. R. A. 93, 23 Am. St. Rep. 332; R. R. Co. v. Mer. Trust Co., 94 Ga. 306,21 S.E. 701; Goodale v. Wallace, supra; Moore et al. v. Cameron et al., 93 N.C. 51), and is plaintiff's theory of the case. It is also carried into the judgment of the court, who permitted a recovery for the principal debt only, together with interest thereon at 6 per cent. from December 1, 1912, or the time when the first two notes fell due, up to the date of the judgment. There was no error in this, so far as the question of usury is concerned, and the judgment must stand, provided, of course, the court did not err in the amount of interest due on the loan.

But, say defendants, this contract is usurious because it provides for interest on the principal sum at 6 per cent. per annum before maturity, or from June 1, 1912, until paid, and, if not paid at maturity, 10 per cent. thereafter, with annual rests until paid. And it is contended by counsel for defendants, not that this increased rate of interest is a penalty and unenforceable, but that it renders the contract usurious because, they say, this increase of 4 per cent. was for the "detention" of money in contravention of the statute, supra. Not so. Being an increase in the maximum legal rate only, the contract was a valid contract for the payment of interest. 39 Cyc. 953, denominates such excess of interest as a penalty, but adds:

"Whether such penalty for the nonperformance of the contract is enforceable or not, all authorities are agreed that the contract is not usurious, but remains a valid and enforceable obligation against the debtor."

And so we have held in a case where, as here, the increase was the extent of the maximum legal rate only. National Life Ins. Co. v. Hale, 54 Okla. 600, 154 P. 536, L. R. A. 1916E, 721. In that case this court, speaking through Collier, C., held that where a promissory note drawing 5 1/2 per cent. interest, payable semiannually, contained a clause providing that the rate should be increased to the maximum legal rate of interest, in the event of default in payment of either principal or interest at maturity, such increased rate was a valid contract for the payment of interest.

We said just now that the court did right in holding there was no usury in the $50.000 loan, and that the judgment of the court in favor of plaintiff for $52,666.67 (principal and interest from December 1, 1912, the date the mortgagors defaulted in the payment of the two $2,000 notes, up to the date of the judgment) must stand unless the court erred in calculating the interest due on the debt up to that time. And this he did for the reason that, as plaintiff, by the express terms of the evidence of debt, was only entitled to recover thereon 6 per cent. interest from June 1, 1912, until maturity (the 10 per cent. thereafter is not contended for), plaintiff was entitled to recover 6 per cent. only on the debt from that date until the date of the judgment, which, principal and interest, would be $54,166.66. And for this amount the court should have rendered judgment, less $2,500, conceded to be interest paid at the time the loan was made, with 6 per cent. interest thereon from May 26, 1912, to the date of the judgment, amounting, principal and interest, to $2,711.16, less also $110, paid as semiannual interest on the $2,750 mortgage, with interest thereon from November 23, 1912, at 6 per cent. per annum up to the date of the judgment, amounting, principal and interest, to $115.64, and less, also, $1,572.22, paid as interest on the debt, together with interest thereon at 6 per cent. per annum from December 21, 1912, to the date of the judgment, amounting, principal and interest, to $1,642.64, or in all, as interest already paid upon the loan, $4,469.44. And, as said sum exceeds the interest on the loan at 6 per cent. from June 1, 1912, to the date of the judgment by $302.78, the court should have applied that amount in reduction of the principal debt and rendered judgment in favor of plaintiff for $49,679.22, 10 per cent. of which should have been adjudged as an attorney's fee. And this is the judgment the trial court should have rendered.

In Miller v. Fergerson (Ky.) 47 S.W. 1081, the facts were that plaintiff sold defendant a certain lot for $1,120, and afterwards loaned him $650 from that time with which to erect a house upon the lot. As the debt aggregated $1,770, they counted 6 per cent. thereon for 5 years from April 24, 1894, making the principal and interest $2,301, and defendant gave plaintiff 60 notes therefor of $38.35 each, with interest from maturity, payable, respectively, July 1, 1894, and the first of each month thereafter. In the evidence of debt it was agreed that in case defendant defaulted in the payment of as many as 4 of the notes, plaintiff would have the right to treat them as all due and payable. The first one fell due and was paid; 13 fell due and were not paid. Whereupon plaintiff elected to treat them all due and sued to recover, not only on the 13 notes, but asked judgment on the remaining 46, with interest from the time the action was commenced until paid. The court rendered judgment for the full amount claimed. In reversing the case, the Supreme Court held that 6 per cent. upon the indebtedness up to the date of the judgment was all plaintiff was entitled to recover. In passing the court said:

"In the second place, although, as consideration for the land, the agreement between the parties to add interest to the principal sum of $1,120 was legal and permissible, still, as appellee, taking advantage of the misfortune of appellant, has come into a court of equity for enforcement of that agreement, at a time and in a manner not reasonably anticipated when it was made, he must consent to such judgment as, under the circumstances, a chancellor ought to render. In our opinion, accepting the answer as true, appellant is entitled to recover of appellee, in addition to $650, the aggregate of $1,120, and interest thereon at rate of 6 per cent. from date of the land sale until date of the judgment appealed from. Wherefore the judgment is reversed, and the case remanded for proceedings consistent with this opinion."

And so we hold that plaintiff was entitled to recover 6 per cent. on this debt from its inception to the date of judgment. And, as the trial court should have done, so we will do, that is, upon the undisputed facts, render such judgment as the trial court should have rendered, which is that plaintiff have judgment for $49.679.22, together with $4,967.92 as an attorney's fee, the judgment to draw interest as decreed by the court.

We said just now that plaintiff was not entitled to recover for the remaining interest coupons not due at the time the trustee declared the principal debt due and foreclosed therefor. This, we said, was for the reason that the moment the principal and accrued interest, up to the time of the acceleration of the maturity of the debt, are paid, the remaining undue interest coupons are discharged. For the same reason, contrary to the holding of the court, plaintiff is not entitled to recover on its second mortgage of $2,750; for, like the undue coupons, having been executed to secure the payment of interest charged and unearned at the time of the acceleration of the maturity of the debt, it also was discharged. It is for this reason that plaintiff cannot recover on said mortgage, and not for the reason that said mortgage was a part of a scheme to exact usury, as contended by defendant. We are therefore of opinion that the court erred in rendering judgment on said mortgage, as stated, and in ordering it foreclosed.

We are therefore of opinion that, there being error as indicated in the judgment of the trial court in determining the amount due on the $50,000 mortgage of the Union Trust Company, the judgment foreclosing the same should be reversed and modified, and that the judgment foreclosing the $2,750 mortgage should be reversed, with directions to dismiss the suit as to it.

As to the judgment foreclosing the Walker mortgage, it is assigned that the court erred, not in holding that the same was usurious, but in holding that defendants were entitled to a set-off of $4,650 only on the mortgage debt. There is no dispute as to the facts. The evidence discloses that the mortgage on its face secured a loan of $15,750 for 3 years, with coupons thereto attached for $787.50 each, payable semiannually, with interest at 10 per cent. per annum; that $750 was deducted from the principal at the time of the loan, and retained as interest paid upon the loan; that the first coupon was paid when due; that Walker, the assignee of the mortgage, upon failure to pay the second, exercised his option to accelerate the payment of the loan and foreclosed, whereupon he was met with a plea of usury, which the court found to be sustained by the evidence, and pursuant thereto set off the debt with $4,650, and rendered judgment in favor of Walker, foreclosing his mortgage for the balance of the debt, as stated. The governing statute, section 1005, supra, in full reads:

"The taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding section shall be deemed a forfeiture of twice the amount of interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case a greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover from the person, firm or corporation taking or receiving same, in an action in the nature of an action of debt, twice the amount of the interest so paid; * * * Provided, further, that before any suit can be brought to recover such usurious interest, the party bringing such suit must make written demand for return of such usury."

As stated in Miller v. Oklahoma St. Bank, 53 Okla. 616,157 P. 767, the provisions of this section of our statute are substantially the same as section 5198 of the Revised Statutes of the United States, construing which, in Haseltine v. Central Nat. Bank, 183 U.S. 132, 22 Sup. Ct. 50, 46 L.Ed. 118, the court said:

"Two separate and distinct classes of cases are contemplated by this section: First, those wherein usurious interest has been taken, received, reserved, or charged, in which case there shall be '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'; second, in case usurious interest has been paid, the person paying it may recover back twice the amount of the interest 'thus paid from the association taking or receiving the same.' While the first class refers to interest taken and received, as well as that reserved or charged, the latter part of the clause apparently limits the forfeiture to such interest as the evidence of debt carries with it, or which has been agreed to be paid, in contradistinction to interest actually paid, which is covered by the second clause of the section."

From which we learn that, if no interest on this loan had been paid, defendants would have fallen into the first class mentioned, and been entitled to set off against plaintiff's demand a sum equal to the entire interest which the mortgage carried; that is, interest on $15,750 for 3 years at 10 per cent. per annum, or $4,725. And, on the other hand, if all the interest called for by this evidence of debt had been paid, defendants would have fallen into the second class, and, had the mortgagee foreclosed for the principal sum, defendants would have nothing to set off, but would have been compelled to resort to an action in the nature of an action of debt to recover twice the amount of interest paid. All of which seems clear enough. But what shall we say when the facts are, as here, that the interest on the loan has partly been paid and part remains unpaid or charged? We say part has been paid, for the court, in effect, found that $750 was deducted from the principal at the time the loan was made, and that the same was interest and rendered the transaction usurious; and it is conceded that the first interest coupon of $787.50 was paid, or in all $1,537.50 was interest paid on the loan. As this left 2 years and six months interest charged and unpaid, does the statute mean defendants are entitled to set off twice the interest charged by the evidence of debt, that is, $4,725, and, in another action, in the nature of an action of debt, recover against the mortgagee twice the $1,537.50 interest paid? If it does, there would be a double recovery of the interest paid to the extent of the amount of the first coupon, for it is clear that that much of the interest paid would be merged in the set-off. Then, what does it mean? It means, in this case, that so far as the interest paid is concerned, twice that must be recovered in a separate action in the nature of an action of debt, leaving only, as a subject of set-off, twice the remaining interest of 2 years and 6 months charged, or twice $3,937.50, that is, $7,875, which, deducted from the principal debt of $15,750, leaves $7,875, for which the mortgage should be foreclosed, plus 10 per cent. of that amount for an attorney's fee, since defendants assign as error that plaintiffs should not have been allowed any attorney's fee at all. In the headnotes to the Haseltine Case, supra, it is said.

"Usurious interest paid in cash upon renewals of a note given to a national bank, and of all other notes of which it was a consolidation, cannot be set off in an action upon the note, as the remedy provided by U.S. Rev. Stat. Sec. 5198 [U.S. Comp. St. 1916, sec. 9759], where such usurious interest has been actually paid, viz., a recovery in an action in the nature of an action of debt, or twice the amount of the interest thus paid, is exclusive."

Which means that, as the remedy by separate action for the recovery of twice the usurious interest paid is exclusive, no part of it can properly be merged in a set-off of twice the interest which the evidence of debt carries, and that where, as here, both set-off and separate action should be employed to meet the situation, each should be employed to operate within its proper sphere. So far as the present application of this statute is in conflict with Miller v. Oklahoma State Bank, supra, the same is overruled.

There is no merit in the remaining assignments of error.

The cause is therefore reversed and remanded, with directions to modify the judgment and foreclose, pursuant to the views herein expressed. Let the costs of this appeal be equally divided between the Union Trust Company and the defendants Garland and Barr and the intervener Walker. All the Justices concur, except THACKER, J., who concurs in conclusion.