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Statement of the Caso.
entirely clear under the evidence that all interest charged on overdrafts in excess of six per cent was a greater rate of interest than was allowed by the laws of this State.”
The court further said:
“We have seen that unless the plaintiff has paid the illegal interest he is not entitled to recover it in this action. If it may be said that the delivery of the sixty-one bonds on June 17, 1890, was a payment, this action is barred, as it was not commenced within two years from the time the usurious transactions occurred,' having been commenced March 8, 1895.
“The interest on overdrafts was surely not paid by the sale of the land, for, as we have seen, it was not included in the decree. As we view the case, we think the illegal charges of interest have never been paid, and therefore the plaintiff is not entitled to recover in this action.
“IV. There is some dispute as whether plaintiff set up these charges of illegal interest in the action to foreclose the trust deed so as to constitute a former adjudication. That he set it up and that it was adjudicated we have no doubt. True, it was not set up with the same fullness and elaboration as in this case. Unquestionably it is matter which might have been plead in that case, and under a familiar rule the plaintiff must be held to have asserted all available defences to that action.
“V. Said section 5198 provides that actions to recover back illegal interest paid must be commenced within two years from the time the usurious transactions occurred. Now, whether or not we call the delivery of the bonds a payment, it is evident that the usurious transaction occurred on and before June 17, 1890, and it follows that this action is barred. These questions are so largely questions of fact and rest upon familiar and undisputed principles of law that we do not find it necessary to refer to any of the many authorities cited.
“The lower court was fully warranted in affirming the findings of fact as reported by the referee. While we do not concur in the conclusions of law that the interest on overdrafts was excessive, but not illegal or usurious, and that the custom of banks to compute interest on the commercial basis of thirty
Opinion of the Court.
days to the month is legal, still it does not follow that the judgment of the District Court is erroneous.
" It is correct, notwithstanding the charge of illegal interest, because the plaintiff has never paid that interest, but has been illowed the full benefit of the facts in the foreclosure case and because this action was not brought within two years of the time the usurious transaction occurred.”'
The assignments of error present the following contentions : That the agreement of June 17, 1890, in pursuance of which the negotiable bonds of plaintiff were delivered to the defendant, did not constitute a payment of the interest on the overdrafts theretofore charged, but that the sales in the foreclosure suit May 19 and July 2, 1894, constituted such payment, and as the action was brought within two years from the latter dates, it was not barred; that the foreclosure suit was not res judicata because the defence of illegal interest was based upon the law of the State of Iowa, and not upon the Revised Statutes of the United States; that illegal interest was embraced in the judgment in the foreclosure suit; that the deduction which was made was only of the illegal interest on the overdrafts, and of no other interest; that the Revised Statutes direct “a forfeiture of the entire interest," not merely of the amount of interest paid in excess of that allowed by law; that section 5198 provides that in case the greater rate of interest has been paid, the person so paying the sum “may recover back
the amount of interest so paid."
Mr. A. A. Hoehling, Jr., and Mr. James K. Redington for plaintiff in error.
Mr. Asa F. Call for defendants in error.
MR. JUSTICE MOKENNA, after making the above statement, delivered the opinion of the court.
1. We are first confronted by a motion to dismiss the action on the ground that no Federal question was decided by the Supreme Court of Iowa. We think the motion should be over
Opinion of the Court.
ruled. The plaintiff explicitly based his right of action upon sections 5197 and 5198 of the Revised Statutes of the United States. The judgment of the trial court and that of the Supreme Court of the State denied such right. Sec. 709, Re vised Statutes. This court, therefore, has jurisdiction.
2. Section 5197 authorizes a national bank to charge the rate of interest fixed by the laws of the State in which the bank is doing business. The consequences of a charge in excess of such rate are expressed in section 5198 to be as follows:
“The taking, receiving or charging a rate of interest greater than is allowed by the preceding section, when knowingly done, 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 of debt, twice the amount of the interest thus paid from the association taking or receiving the same; provided, such action is commenced within two years from the tiine the usurious transaction occurred.”
Two cases are provided for (1) where illegal interest has been taken, received or charged; (2) where illegal interest has been paid. In the first case the entire interest which the “evidence of debt carries with it ” shall be deemed forfeited. In the second case the person who has paid “the greater rate of interest may recover twice the amount of interest thus paid."
In what way is the statute available to plaintiff? Or, rather, in what way was it available when the foreclosure suit was brought and in what way is it yet available! Had illegal interest been paid by plaintiff at that time or had illegal interest been only charged by defendant? The latter is the contention of the plaintiff, and he controverts the position taken by the Supreme Court of Iowa, that the agreement of June 17, 1890, constituted a payment, and that the action was barred because not commenced within two years from that date. We may yield, arguendo, to plaintiff's contention, and thereby eliminate the statute of limitations from consideration. But nevertheless the judgment. must be affirmed.
Opinion of the Court.
The plaintiff's situation, then, at the time of the foreclosure suit was that he was sued for illegal interest charged but not paid, and he entered a defence to avoid its payment. He was successful. The court found that he had been charged illegal interest, and deducted its amount from the sum for which he was sued. In other words, judgment was rendered against him for the principal sum and legal interest. But he insists that such judgment was not the full relief to which he was entitled. To that judgment, he claims, he was entitled under the state law which he pleaded, but that under the statutes of the United States, which he could not plead, as he contends, he was entitled to a forfeiture of the entire interest, and as such forfeited interest was included in the judgment it was paid by the sale under the judgment of the property mortgaged, and a cause of action immediately arose to recover twice the amount of that interest so paid. We cannot assent to the contention. It is the interest charged, not the interest to which a forfeiture might be enforced, that the statute regards as illegal. And a forfeiture may or may not occur. Interest greater than the legal rate may be charged, but it may be relinquished and recovery be had of the legal rate. This was decided in Mc Brown v. Scottish Investment Company, 153 U. S. 318, and repeated in Savings Society v. Multnomah County, 169 U. S. 421. Those cases also decided that illegal interest (“the greater rate” the statute calls it) must be paid, to be recovered back. Indeed, it is a contradiction to say that interest may be recovered back which has not been paid, and whether it is relinquished before suit or deducted by order of the court before judgment, it is in neither case paid by the judgment nor by the satisfaction of the judgment. The fact of payment of the illegal interest, the statute makes a condition of the recovery of its penalty. If there can be a substitute for such payment it cannot be found in the insufficiency of the pleading or the deficiency of the relief, in another action.
MR Justice GRAY took no part in the decision.
Statement of the Case.
TALBOT v. SIOUX NATIONAL BANK.
ERROR TO THE SUPREME COURT OF THE STATE OF IOWA.
No. 190. Argued March 17, 1902.--Decided April 14, 1902.
A motion was made to dismiss on the ground that the record presented no
Federal question, which was overruled. This suit was not commenced within the time prescribed by the statute of
limitations. On the face of the petition in this case, the action was barred, and against
its allegations, and the circuinstances detailed in it, the court cannot indulge the supposition that the plaintiff's consciousness of the wrong was not aroused until some time within two years from the commencement of this action.
This is an action brought in the District Court of Woodbury County, Iowa, under sections 5197 and 5198 of the Revised Statutes of the United States, relating to national banks, to recover the sum of $16,250, the amount of interest alleged to have been unlawfully charged and collected by the defendant bank. It was argued with No. 164, ante, 171.
The original petition alleged as follows:
“The plaintiff claims of the defendants, and each of them, the sum of $16,000, as money justly due plaintiff from defendants, on account of unlawful and usurious interest, knowingly and unlawfully taken from the plaintiff within the seven years last passed.
“The plaintiff further alleges that during said time he had various and numerous business transactions with the defendant bank; in all said transactions defendant charged and exacted a greater rate of interest for the use of moneys had and received by plaintiff from the defendants than the law recognizes or permits a national bank to charge for the use of money."
The petition also alleged that the books and accounts wherein said transactions were kept were in the possession of the defendant, and that the plaintiff has no itemized statement of the account between him and the defendant," and that, therefore,