Court Opinion

ID: 7134757
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:22:44.585138+00
Date Added: 2024-06-11T16:14:35.295572
License: Public Domain

*222Dissenting opinion of
Judge Hobson
in which Judges Guffy and Burnam concur:
The majority opinion is rested upon the case of McBroom v. Investment Co., 153 U. S., 318 (14 Sup. Ct., 852; 38 L. Ed., 729), which was based upon a statute of New Mexico materially different from the national banking act quoted. The majority opinion does not refer to the fact that in several cases the United States Supreme Court had previously announced the opposite rule under the national banking act, and that at the conclusion of the McBroom opinion these previous decisions are expressly referred to, and held' not applicable to that case. Thus, in Barnet v. Bank, 98 U. S., 555 (25 L. Ed., 212), the defendant was sued upon a bill of exchange for $4,000, dated November 18, 1873. In defense of the suit it was averred, first, that he became indebted to the bank on April 8, 1866, and from that time until the bill sued on'was made, the indebtedness was never less than $4,000; that the bank had taken $5,000 in excess óf the legal rate of interest; that for evasion the bills were arranged in series, and from time to time were renewed, the proceeds of the new bills being applied in payment of the prior ones; that all of the bills had been paid but the one in suit, and that nothing was due to the bank. A demurrer was sustained to this answer, and judgment entered for the full amount of the bilk
The court, after quoting the statute, said: “Two categories are thus defined, and the consequences denounced: (1) Where illegal interest has been knowingly stipulated for, but not paid, there 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 in the nature of *223such action, against the offending bank, brought by the, persons paying the same, or their legal representatives. The statutes of Ohio and Indiana upon the subject of usury may be laid out of view. They can not affect the case. Where the statute creates a new right or offense, and provides a specific remedy or punishment, they alone apply. Such provisions are exclusive. Bank v. Dearing, 91 U. S., 29 (23 L. Ed., 196). In the first defense the pay- • ment of usurious interest is distinctly averred, and it is sought to apply it by way of offset or payment to the •bill of exchange in suit. In our analysis of the statute, we have seen that this could not be done. Nothing more need be said upon the subject.”
In Driesbach v. Bank, 104 U. S., 52 (26 L. Ed., 658), the notes sued on were the last of a series of renewals which had been regularly discounted by the bank, interest being paid on all of them at the rate of eight or ten per cent. The defendant sought credit on the note for usury. The defense was held bad on the authority of the above case. In Stephens v. Bank, 111 U. S., 197 (4 Sup. Ct., 336, 337; 28 L. Ed., 399), the facts and the plea, were substantially the same, and the answer was again held bad. The court, referring to the previous decision, said: “The ground of that decision was that as, without the statute, there could be no recovery from the bank .for usurious interest actually paid, and as the statute which created the right to such a recovery also prescribed the remedy, that remedy was exclusive of all others for the enforcement of that, right. . . . The forfeiture and the remedy are creatures of the same statute, and must stand or fall together.” These cases are not only distinguished in the McBroom case, but are again referred to in Brown v. Bank, 169 U. S., 416 (18 Sup. Ct., 390; 42 L. Ed., 801). *224What are the facts of this case, to which these principles-are to be applied? On January 29, 1895, Forman borrowed of the bank $3,117.84, and executed his note to it,, due in six months, for $3,250; the interest on the loan for six months, at 8 per cent., being included in the face of the note. When this note fell due it was not paid, and on September 4, 1895, the note, with its accrued interest, amounting to $3,273.85, as figured up by the bank, was. charged to Forman’s account. He did not wish, or was not able, to pay the entire debt at that time, by $2,431.66, so a note was drawn, due in four months, the interest for the time being included in the face of the note, making-the amount of the note $2,500. In this transaction For-man plainly paid all of his debt of $3,273.85, then claimed by the bank, except $2,431.66, for which the new note was given. It is well known that banks collect interest in advance. This is the uniform way of doing the business.. and, without clear proof to the contrary, it must be presumed that the parties in this transaction conformed to the universal mode of doing business. If Forman had walked into the bank on September 4th and said, “I can not pay you all of my note, but will pay the interest and all of the principal, except $2,431.66, and for that will execute a new note,” the effect of the transaction would have been just the same; for what is tacitly understood need never be expressed in words, and, where men by their conduct unmistakably say a thing, it is unnecessary that they should also go through the idle form of saying it in words. The interest that was included in the original note was charged, but not paid, w’hen that note was given. It was paid, however, when that note was discharged and taken up, and a new note for a smaller amount executed. Fox-, as expressly held by the supreme court in the three *225cases above referred to, the new note was not infected by the usury in the previous transaction. The new note was usurious only to the extent of the current interest at 8 per cent, up to maturity which was included in it, and a right of action then existed to recover for the usury that day paid on the old note. The $2,500 note ran until January 29, 1896, $500 having been credited on it on January 7th. On January 29th the remainder of the debt was paid by charging it to the account of Forman as before, and the execution of a new note, the principal of which was $1,918.67, and interest up to maturity, $81.33, making $2,000. This note was not paid at maturity, and ran until September 24, 1896, when, with its accrued interest since maturity, it amounted to $2,026.22. Forman then made to the bank a note for $2,000, the principal of which was $1,958.67, and interest up to maturity, $41.33. How the court can say that no interest was paid in this transaction is hard to comprehend. A note was due, which, with its accrued interest, amounted to over $2,000, and a new note was given for $2,000, which bore no interest until its maturity. What had become of the balance of the debt? The bank had not lost it. The amount had been charged to Forman’s account. It represented the interest on this money, and, if this was not a payment of interest, how can one ever be shown, unless the debtor puts the money in an envelope and indorses it, “This money is paid on .interest as such?” The principal of the debt on January 29, 1896, was $1,918.67. After the payment of September 26, 1896, was made, the balance of the debt was $1,958.67; and if this money was not paid on interest, or was not interest collected by the bank, what did it represent? An act of Congress should not be so dealt with *226as to make it a vain thing, and deny it fair or reasonable effect. The purpose of the statute was not to protect national banks in the-exaction of usury, but to deter them from charging more than legal interest. There is no remedy except by action under the statute, and this action, ■by its express terms, must be brought “within two years from the time the usurious transaction occurred.” Each usurious transaction is distinct, and must stand or fall alone. The purpose in limiting the action to two years from the time of each separate transaction complained of is to secure a speedy settlement of such matters while the, facts are fresh or capable of proof, and to enable the banks to know their liabilities, so that they may intelligently declare dividend's1 and carry on their other business. Whether usurious interest has been paid in- any transaction is simply a question of fact, to be determined, like other similar questions of fact, according to the real intention of the parties as shown by the evidence. The court is not to follow an abstract principle, and shut its eyes to the facts, when, under the evidence, there can be no difference of opinion as to what the parties actually intended, among men of common intelligence acquainted with the business. Where there was- a debt of $1,918, and, after some months, without a new consideration, the debt was $1,958, can any one doubt that the $10 thus added to the debt was unpaid interest? And, it further appearing that $68 was also paid in cash, is it not just as apparent that this $68 was paid as interest? In other words, can there be any doubt, as a matter of business, that part of the interest charged wasi added to the debt, and that the remainder was collected in money? If Forman had at each renewal paid just the interest for the time, and no more, would it be held that the action could not be main*227tained? And what difference does it make that at two renewals he paid more, and at one less, than the interest ■charged? The intention of the parties is’ equally as plain in one case as in the other. A bank has no legitimate income, except the interest it earns. On this it lives. Out of it the expenses of the business and the dividends to its stockholders are paid. Such charges are not paid out of its capital. This is kept at interest for future earnings. In Smith v. Young, 74 Ky., 393, this court held that money paid as usurious interest on the renewal of a note would not be applied afterwards in reduction of the debt, but the only remedy was an action to'recover it within the time allowed by the statute. But in subsequent cases this was overruled, and it is now settled under the State statute that all payments as long as the debt remains will be applied on it. Hill v. Cornwall, 95 Ky., 512 (16 R., 97), (26 S. W., 540). But this rule can not be applied under the Federal statute. It allows no locus penitentiae. Under it, as soon as usury is in truth paid, a cause of action arises for the recovery of twice the amount so paid, and no subsequent change of mind by the bank can defeat the liability which has become absolute. In Bank v. Thompson, 101 Ky., 277 (19 R., 436) (40 S. W., 903), this court followed the decisions of the United States supreme court above referred to, and gave judgment for the full amount of a renewal note, notwithstanding usurious interest had been collected on the original note by the bank. The court below followed that decision, and I am of "opinion that his judgment is correct, and should be affirmed. I therefore dissent from the majority opinion.
Judges Guffy and Burnam concur in this dissent.