NE Code § 45-105 (2021)
2021 Nebraska Revised Statutes|Chapter 45 - Interest, Loans, and Debt|45-105 - Usury; penalty.

45-105.  Usury; penalty.If a greater rate of interest than is allowed in section 45-101.03 shall be contracted for or received or reserved, the contract shall not on that account be void, but if in any action on such contract, proof be made that illegal interest has been directly or indirectly contracted for, or taken, or reserved, the plaintiff shall recover only the principal, without interest, and the defendant shall recover costs; and if interest shall have been paid thereon, judgment shall be for the principal, deducting interest paid; Provided, the acts and dealings of an agent in loaning money shall bind the principal, and in all cases where there is illegal interest by the transaction of the agent, the principal will be held thereby as if he had done the same in person. Where the same person acts as agent for the borrower who obtains the money from the lender, he shall be deemed to be the agent of the lender also.Source   Laws 1879, § 5, p. 114;   R.S.1913, § 3350;   C.S.1922, § 2838;   C.S.1929, § 45-105;   R.S.1943, § 45-105;   Laws 1975, LB 349, § 5.  Annotations  1. Definition 2. Transactions usurious 3. Transactions not usurious 4. National banks 5. Foreign building and loan associations 6. Acts of agents 7. Conflict of laws 8. Usury as defense 9. Pleading and proof 10. Costs 11. Miscellaneous 1. Definition Elements of usury are (1) a loan, express or implied; (2) an understanding that the money will be returned; (3) for such loan, a greater rate of interest than allowed by law shall be paid or agreed to be paid; and (4) a corrupt intent to take more than the legal rate of interest for the money loaned. Farmland Enterprises, Inc. v. Schueman, 212 Neb. 342, 322 N.W.2d 665 (1982). Usurious intent need not be implied where variable interest rate at time of contracting was below legal limit but where it exceeded the limit because of increase in the prime rate to which contract referred. Farmland Enterprises, Inc. v. Schueman, 212 Neb. 342, 322 N.W.2d 665 (1982). A nonlicensee may make an installment loan where interest not in excess of nine percent per annum is charged. Pattavina v. Pignotti, 177 Neb. 217, 128 N.W.2d 817 (1964). What constitutes usury is defined. State ex rel. Beck v. Associates Discount Corp., 168 Neb. 298, 96 N.W.2d 55 (1959). Usury is intent, under contract, on part of borrower to give and of lender to receive interest in excess of legal limit. Menzie v. Smith, 63 Neb. 666, 88 N.W. 855 (1902). To constitute usury, there must be a contract by which lender receives or reserves a greater rate of interest than maximum allowed by law. Richards v. Kountze, 4 Neb. 200 (1876). 2. Transactions usurious Usurious loan disguised as conditional or time sale is subject to forfeiture of interest. Midstates Acceptance v. Voss, 189 Neb. 411, 202 N.W.2d 822 (1972). Usurious contract not void, but recovery limited to amount of principal without interest less interest paid. Baker v. A. C. Nelson Co., 185 Neb. 128, 174 N.W.2d 197 (1970). Where defense of usury is established, plaintiff is not entitled to recover interest on the principal. Central Constr. Co. v. Blanchard, 180 Neb. 62, 141 N.W.2d 416 (1966). Where sum named in promissory note exceeds sum actually loaned, such excess being a commission to payee, which added to interest aggregates more than legal rate of interest, the note is usurious. Detweiler v. Forman, 120 Neb. 780, 235 N.W. 330 (1931). Prior to 1927, mortgage requiring mortgagor to pay maximum legal interest plus taxes on mortgagee's interest in mortgaged premises was usurious. War Finance Corp. v. Thornton, 118 Neb. 797, 226 N.W. 454 (1929); Stuart v. Durland, 115 Neb. 211, 212 N.W. 31 (1927), 53 A.L.R. 739 (1927). Sale or purchase of property at price beyond its value as condition for making loan, with intent that lender receive more than lawful rate is usurious. Sanford v. Hawthorne, 103 Neb. 867, 174 N.W. 863 (1919). Taking interest for more than one year in advance is unauthorized by statute and is usurious. Allen v. Dunn, 71 Neb. 831, 99 N.W. 680 (1904). Exacting bonus in addition to highest legal rate renders transaction usurious. Hare v. Winterer, 64 Neb. 551, 90 N.W. 544 (1902). Where debtor executes note and mortgage at lawful rate, and at maturity enters into new usurious contract for extension under which lender retains note and mortgage as collateral, all interest is forfeited after date of usurious contract. Chicago Lumber Co. v. Bancroft, 64 Neb. 176, 89 N.W. 780 (1902). Stipulation for legal rate until maturity, and if not then paid, for higher legal rate from date, is penalty and not enforceable. Stipulation that past due installments of interest shall draw interest, if total interest does not exceed ten percent, is valid. Hallam v. Telleren, 55 Neb. 255, 75 N.W. 560 (1898). Usury law cannot be evaded by antedating note bearing highest legal rate from date. Vail v. Van Doren, 45 Neb. 450, 63 N.W. 787 (1895). Usurious note given for extension of legal note is usurious. McDonald v. Beer, 42 Neb. 437, 60 N.W. 868 (1894). Loan, made at twelve percent for one year, is not purged of usury by extension for another year at eight percent. Doyle v. Holland, 39 Neb. 87, 57 N.W. 989 (1894). Agreement to pay attorney's fee for extension of time is usurious, and amount must be applied on principal. Rosa v. Doggett, 8 Neb. 48 (1878). Where purported lease and farm equipment dealer's guaranty was found to be a usurious loan transaction but was not found to have been fraudulently obtained, seller of farm equipment was entitled to avoid guaranty only to extent of usurious interest and his right to reimbursement from farmer was vitiated only to extent of usurious interest. McKeeman v. Commercial Credit Equipment Corp., 320 F.Supp. 938 (D. Neb. 1970). 3. Transactions not usurious Prior to 1941, contract for payment of interest at rate of ten percent was not usurious. Lefferdink v. Schmutte, 149 Neb. 695, 32 N.W.2d 194 (1948). A clause in a mortgage upon real estate located in a foreign state, that the mortgagor will pay the tax on the note secured thereby, does not render such note usurious though the note bears interest at the maximum legal rate and is taxable to the mortgagor. Pierson v. Faulkner, 134 Neb. 865, 279 N.W. 813 (1938). To constitute usury, brokerage charge and interest for term of loan must exceed legal maximum. Western Securities Co. v. Naughton, 124 Neb. 702, 248 N.W. 56 (1933). A dealer in automobiles may in good faith sell a car on time in excess of the cash price without tainting the transaction with usury, though the difference in prices may exceed the maximum legal rate of interest. Grand Island Finance Co. v. Fowler, 124 Neb. 514, 247 N.W. 429 (1933). A mortgage is not void because usurious interest is exacted thereunder, and mortgagor's covenant to pay taxes is invalidated only to extent of usury involved. Matthews v. Guenther, 120 Neb. 742, 235 N.W. 98 (1931). Interest upon interest cannot be stipulated for, but agreement made after interest is due, that it shall bear maximum rate, is valid, and extending time is sufficient consideration for such agreement. Sanford v. Lundquist, 80 Neb. 414, 118 N.W. 129 (1908). Officer of bank cannot make contract with corporation of which he is officer to pay usurious rate on money owing by him to bank, thereby escaping payment of all interest. Gund v. Ballard, 73 Neb. 547, 103 N.W. 309 (1905). Mistake in computing interest will not render contract usurious. Dodds v. McCormick Harv. Machine Co., 62 Neb. 759, 87 N.W. 911 (1901). Contract for legal rate is not rendered usurious by oral agreement to pay more than legal rate, unless carried out. Koehler v. Dodge, 31 Neb. 328, 47 N.W. 913 (1891). Interest taken in advance is not usurious, unless total amount of interest exceeds ten percent. Foster v. Pitman, 2 Neb. Unof. 672, 89 N.W. 763 (1902). 4. National banks Exemption of national banks from state usury laws owes existence to acts of Congress, and will not cover note and mortgage collateral to note in national bank. Gadsden v. Thrush, 58 Neb. 340, 78 N.W. 632 (1899). Prohibition of federal law against taking usury applies to artificial as well as natural persons, is not penal statute and not strictly construed. Albion Nat. Bank v. Montgomery, 54 Neb. 681, 74 N.W. 1102 (1898). Defense of usury is available in action by national bank to recover unpaid interest where rate contracted for is in excess of that prescribed by Act of Congress. Tomblin v. Higgins, 53 Neb. 92, 73 N.W. 461 (1897). State law relating to usury does not apply to national banks so far as the penalty and remedy are concerned, which are governed by federal law. First Nat. Bank of Tobias v. Barnett, 51 Neb. 397, 70 N.W. 937 (1897). Usurious interest paid on loan cannot be set off in suit to recover principal more than two years after payment, as federal statute governs. Montgomery v. Albion Nat. Bank, 50 Neb. 652, 70 N.W. 239 (1897). Payment of loan made by national bank is not a condition precedent to maintain suit to recover double amount of usurious interest paid. Exeter Nat. Bank v. Orchard, 43 Neb. 579, 61 N.W. 833 (1895). Limitation of two years in which to recover penalty under federal statute dated from actual payment of such usurious interest. Lanham v. First Nat. Bank of Crete, 42 Neb. 757, 60 N.W. 1041 (1894); First Nat. Bank of Dorchester v. Smith, 36 Neb. 199, 54 N.W. 254 (1893). Courts of this state have jurisdiction in actions to recover from national banks the penalty provided by federal statute for taking usury. Schuyler Nat. Bank v. Bollong, 37 Neb. 620, 56 N.W. 209 (1893). National bank cannot collect usurious interest, but usurious interest charged but not paid, cannot be recovered. Hall v. Bank of Fairfield, 30 Neb. 99, 46 N.W. 150 (1890). 5. Foreign building and loan associations Requirement that borrower subscribe to capital stock as a condition to obtaining loan, the stock to be paid for in monthly installments, made the transaction usurious. Clarke v. Woodruff, 72 Neb. 286, 100 N.W. 314 (1904). Foreign building and loan associations doing business in Nebraska are subject to penalties of statute against usury. Anselme v. American S. & L. Assn., 66 Neb. 520, 92 N.W. 745 (1902); Interstate S. & L. Assn. v. Strine, 59 Neb. 27, 80 N.W. 45 (1899). Special terms and exemptions given to domestic building and loan associations by general law, are constitutional and not in conflict with general interest law. Livingston L. & B. Assn. v. Drummond, 49 Neb. 200, 68 N.W. 375 (1896). 6. Acts of agents Agent of lender exacting, directly or indirectly, interest in excess of legal rate, renders transaction usurious. Hare v. Hooper, 56 Neb. 480, 76 N.W. 1055 (1898); Courtnay v. Price, 12 Neb. 188, 10 N.W. 698 (1881). Broker, receiving bonus for procuring loan as agent of borrowers, does not render transaction usurious. Davis v. Sloman, 27 Neb. 877, 44 N.W. 41 (1889). 7. Conflict of laws Notes made and payable in foreign state calling for rate higher than legal in this state will be enforced in absence of plea of usury. McCready v. Phillips, 56 Neb. 446, 76 N.W. 885 (1898). Where contract is made in Nebraska, payable in New York, validity is to be determined by laws of Nebraska. Bascom v. Zediker, 48 Neb. 380, 67 N.W. 148 (1896). Presumption is that laws of other state are same as our own, unless pleaded and proved. People's B., L. & S. Assn. v. Backus, 2 Neb. Unof. 463, 89 N.W. 315 (1902). 8. Usury as defense Although variable interest rate caused interest in excess of the then legal limit to be paid for a period, usury is not available as a defense because the action on the loan was not brought until after Legislature exempted the transaction from the interest limitation. Farmland Enterprises, Inc. v. Schueman, 212 Neb. 342, 322 N.W.2d 665 (1982). Purchaser of equity of redemption may set up defense of usury against mortgage where he deducted from purchase money only legal interest. Nat. Mut. B. & L. Assn. v. Retzman, 69 Neb. 667, 96 N.W. 204 (1903). Mortgagor, who has conveyed lands by warranty deed, is entitled to intervene for purpose of pleading usury in foreclosure action. Pitman v. Ireland, 64 Neb. 675, 90 N.W. 540 (1902). Where usury is established, plaintiff is only entitled to actual amount loaned less all payments of interest and principal on debt. Male v. Wink, 61 Neb. 748, 86 N.W. 472 (1901). Defense is available in action on account, without alleging fraud or mistake. Jorgensen v. Kingsley, 60 Neb. 44, 82 N.W. 104 (1900). Defense of usury is personal to borrower and his sureties and privies, and not available to purchaser of equity of redemption of mortgaged premises. Bldg. & Loan Assn. of Dakota v. Walker, 59 Neb. 456, 81 N.W. 308 (1899); People's B., L. & S. Assn. v. Pickard, 2 Neb. Unof. 144, 96 N.W. 337 (1901). Where usurious note has been repeatedly renewed, notes being taken in name of bank or cashier and transferred after due, holder of final note takes subject to defense of usury. Farmers Bank of Kearney v. Oliver, 55 Neb. 774, 76 N.W. 449 (1898). Where debtor delivered accommodation note in payment of usurious note, accommodation note was not renewal of usurious loan, and maker could not raise defense of usury. Palmer v. Carpenter, 53 Neb. 394, 73 N.W. 690 (1898). Every renewal of a note given for a usurious loan of money is subject to the defense of usury between the original parties and purchasers with notice. McDonald v. Aufdengarten, 41 Neb. 40, 59 N.W. 762 (1894). Innocent purchaser of note for value before maturity and without notice takes note free from defense of usury. Van Etten v. Howell, 40 Neb. 850, 59 N.W. 389 (1894). If usurious interest is received and deposited in bank by officers of bank as agent of depositor, bank cannot raise defense of usury against depositor. Porter v. Sherman County Banking Co., 40 Neb. 274, 58 N.W. 721 (1894). Where usury is shown in original transaction, every subsequent security given on same is usurious and holder must show that he is bona fide holder, before maturity, without notice. Knox v. Williams, 24 Neb. 630, 39 N.W. 786 (1888). Defense is available to maker against assignee of mortgage alone, note not being endorsed though transferred for value before maturity and without notice. Doll v. Hollenbeck, 19 Neb. 639, 28 N.W. 286 (1886). Usury is personal defense, except where contract for usury is separable from agreement to pay interest, when it may be pleaded by anyone. Bean v. People's B., L. & S. Assn., 2 Neb. Unof. 810, 90 N.W. 222 (1902). Usury cannot be asserted by purchaser of mortgaged premises who has assumed mortgage. People's B., L. & S. Assn. of Geneva v. Palmer, 2 Neb. Unof. 460, 89 N.W. 316 (1902). 9. Pleading and proof The claim of usury in this state is a defense to a cause of action. Usury must be pleaded to be available as a defense. General Fiberglass Supply, Inc. v. Roemer, 256 Neb. 810, 594 N.W.2d 283 (1999). Burden is on one pleading usury, but, when proved, holder of note must prove that he is bona fide purchaser before maturity, for value, without notice. Male v. Wink, 61 Neb. 748, 86 N.W. 472 (1901); Blackwell v. Wright, 27 Neb. 269, 43 N.W. 116 (1889); Olmsted v. New Eng. Mtg. Sec. Co., 11 Neb. 487, 9 N.W. 650 (1881); Bovier v. McCarthy, 4 Neb. Unof. 490, 94 N.W. 965 (1903). Usury may be proved by defendant under general denial in replevin. Davis v. Culver, 58 Neb. 265, 78 N.W. 504 (1899). In action to foreclose a mortgage, answer was sufficient to plead defense of usury where it alleged execution of note and mortgage in excess of the money loaned so that interest in excess of the maximum lawful rate on the amount loaned was reserved and to be paid to the lender. FarmLand Sec. Co. v. Nelson, 52 Neb. 624, 72 N.W. 1048 (1897). Plea must show contract by which there was reserved or received a rate in excess of highest legal rate. McKinley-Lanning L. & T. Co. v. Aldrich, 50 Neb. 785, 70 N.W. 399 (1897). It is essential to a plea of usury that it state with whom the agreement alleged to be usurious was made, when made, where made, and the facts which it is alleged make the transaction usurious. Rainbolt v. Strang, 39 Neb. 339, 58 N.W. 96 (1894); Hare v. Winterer, 1 Neb. Unof. 854, 96 N.W. 179 (1901). Plea should state with whom contract was made, its nature, and amount of usurious interest agreed upon or received. New Eng. Co. Mtg. Sec. v. Sandford, 16 Neb. 689, 21 N.W. 394 (1884). Plea of usury is defense in action on usurious contract, but cannot be retained as set-off or counterclaim after action is dismissed. New Eng. Mtg. Sec. Co. v. Aughe, 12 Neb. 504, 11 N.W. 753 (1882). 10. Costs Where defense is established, plaintiff is not entitled to costs nor interest on judgment awarded him. Interstate S. & L. Assn. v. Strine, 58 Neb. 133, 78 N.W. 377 (1899). Where defense of usury is sustained, defendant is entitled to costs, and also costs on attachment sued out to recover usurious debt. Montgomery v. Albion Nat. Bank, 50 Neb. 652, 70 N.W. 239 (1897). 11. Miscellaneous Remedy for recovery of usury under this section contrasted with remedy under Installment Loan Act. Dailey v. A. C. Nelsen Co., 178 Neb. 881, 136 N.W.2d 186 (1965). Amendment to this section in 1963 Special Session by Legislative Bill 11 was unconstitutional as special legislation. State Securities Co. v. Ley, 177 Neb. 251, 128 N.W.2d 766 (1964). Amendment to this section in 1963 Special Session by Legislative Bill 16 was unconstitutional as special legislation. Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964). The scope of the effect of usury on installment loans has been broadened in comparison to what it is on ordinary loans. Commonwealth Trailer Sales, Inc. v. Bradt, 166 Neb. 1, 87 N.W.2d 705 (1958). Statute does not make contract void where a usurious rate of interest is charged. McNish v. General Credit Corp., 164 Neb. 526, 83 N.W.2d 1 (1957). Installment Loan Act was independent act and not unconstitutional for failure to amend this section. State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215 (1956). Payee loses only interest for violation of general usury law. Fidelity Finance Co. v. Westfall, 127 Neb. 56, 254 N.W. 710 (1934). Where a note has been paid, an action cannot be maintained to recover usurious interest. Waller v. First Trust Co., 126 Neb. 403, 255 N.W. 29 (1934). Borrower under usurious contract is entitled to possession of mortgaged property divested of lien upon payment or tender of principal. Frenzer v. Richards, 60 Neb. 131, 82 N.W. 317 (1900). Usury once paid cannot be recovered in independent action. Blain v. Willson, 32 Neb. 302, 49 N.W. 224 (1891); New Eng. Mtg. Sec. Co. v. Aughe, 12 Neb. 504, 11 N.W. 753 (1882). Where there are unmatured renewal notes, a greater part of which represent usurious interest on former notes, and where there is reason to fear that the notes will be transferred to a bona fide holder for value, the debtor may obtain relief by injunction. Wilhelmson v. Bentley, 25 Neb. 473, 41 N.W. 387 (1889). Borrower seeking relief from usurious contract in equity must tender amount of principal and lawful interest and court will render decree for principal with seven percent interest. Eiseman v. Gallagher, 24 Neb. 79, 37 N.W. 941 (1888).