John R. Alley & Co. v. Federal Nat. Bank

• Decision Date: 13 January 1942
• Docket Number: No. 2318.,2318.
• Citation: 124 F.2d 995
• Parties: JOHN R. ALLEY & CO., Inc., et al. v. FEDERAL NAT. BANK OF SHAWNEE, SHAWNEE COUNTY, OKL.
• Court: U.S. Court of Appeals — Tenth Circuit

124 F.2d 995 (1942)

JOHN R. ALLEY & CO., Inc., et al. v. FEDERAL NAT. BANK OF SHAWNEE, SHAWNEE COUNTY, OKL.

No. 2318.

Circuit Court of Appeals, Tenth Circuit.

January 13, 1942.

William J. Crowe, of Oklahoma City, Okl. (James S. Twyford and Solon W. Smith, both of Oklahoma City, Okl., on the brief), for appellants.

Mark Goode, of Shawnee, Okl. (John L. Goode, of Shawnee, Okl., on the brief), for appellee.

Before BRATTON, HUXMAN, and MURRAH, Circuit Judges.

HUXMAN, Circuit Judge.

John R. Alley & Company, Inc.,¹ entered into certain contracts with the Oklahoma State Highway Commission for the construction of highways. It completed the work but failed to pay a number of labor and material bills, and it became necessary for the bonding company² to assume and pay these bills. The company instituted suit to determine its right and the right of other claimants to certain funds still in the hands of the highway commission. During the progress of the work the contractor had borrowed various sums from the Federal National Bank of Shawnee, Oklahoma,³ for which it gave its notes. The bank filed its answer in the proceeding, alleging that the contractor was indebted to it in the sum of $5,177.16, the balance due on the notes secured by assignment of contractor's estimates. It prayed for judgment against the contractor in this amount and for a further judgment decreeing its indebtedness to be secured by an assignment of the amount due the contractor from the highway commission. Other defendants filed answers setting up their claims.

Thereafter, the contractor filed an amended answer and counterclaim alleging that the bank had charged usurious interest on the various loans, in violation of law, in the total sum of $5,777.65. It prayed that the bank take nothing under its claim and that it have judgment against the bank for $11,555.30, twice the amount of the usurious interest charged. The bank filed a motion to dismiss the amended answer and counterclaim on the ground that the pretended claim of usury could not be set up in this action and could be maintained only in an independent action at law against the usurer. This contention was sustained and judgment was entered dismissing the answer and counterclaim of the contractor.

12 U.S.C.A. § 86 provides: "The taking, receiving, reserving, 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, That such action is commenced within two years from the time the usurious transaction occurred."

It has been held without exception that the right granted by the statute can be asserted only in a separate and independent action in the nature of an action in debt. Barnet v. Muncie Nat. Bank, 98 U.S. 555, 25 L.Ed. 212; Haseltine v. Central Nat. Bank, 183 U.S. 132, 22 S.Ct. 50, 46 L.Ed. 118; Driesbach v. Second Nat. Bank, 104 U.S. 52, 26 L.Ed. 658; Stephens v. Monongahela Nat. Bank, 111 U.S. 197, 4 S.Ct. 336, 337, 28 L.Ed. 399; McCollum v. Hamilton Nat. Bank, 303 U.S. 245, 58 S.Ct. 568, 82 L.Ed. 819. The rationale of these cases is that where, as here, the statute creates a right or offense and provides a specific remedy or punishment, those provisions are exclusive and the liability can be enforced only in an action brought specifically and exclusively for that purpose.

All of these decisions antedate the adoption of the New Rules of Civil Procedure, 28 U.S.C.A. following section 723c, and our question is to determine whether the adoption of the new rules has modified the rule announced in these decisions. There is no longer an action in the nature of debt. All forms of actions are abolished, and the rules provide for but a single form of action, known as "civil action." Rule 13 provides for compulsory counterclaims arising out of the "transaction" or "occurrence." The spirit of the new rules is to have a speedy adjudication of all controversies between the parties in a single action and without a multiplicity of suits. The counterclaim arose out of the transaction and is maintainable in this action, unless prohibited by some rule of law.

The Congressional authority given the Supreme Court to adopt rules was limited to matters of procedure in the Federal District Court. It was expressly provided that substantive rights should neither be abridged, enlarged nor modified. They were left untouched by the rules. 48 Stat. 1064, 28 U.S.C.A. § 723b. Appellee contends, and the court held, that permitting the assertion of the counterclaim in this action would be giving to appellant a substantive right that it did not have prior to the adoption of the rules, and was therefore beyond the limitation of Congressional authority conferring upon the Supreme Court the power to adopt uniform rules of civil procedure.

It is necessary to distinguish between a substantive right and the vehicle or medium through which it is enforced. The substantive right created by the statute is the right to recover twice the amount of usury as a penalty. This right could in no wise be affected by the new rules. The method or procedure provided in the statute for the enforcement of the right was an independent action in the nature of an action of debt, and under the decisions it was held that this right could not be asserted in the form of a counterclaim in a pending action. But the new rules provide for the settlement of all controversies arising between parties in a single action. They specifically provide for compulsory counterclaims arising out of a "transaction" or "occurrence." The right to the penalty admittedly arose out of the transaction which the bank seeks to enforce and is therefore maintainable as such under the new rules.

If there is a conflict between the procedure provided for in the statute for the enforcement of the right created thereby and that provided for in the New Rules of Civil Procedure, the former must yield to the latter, because the Congressional authority under which the new rules were...