Brown v. Marion Nat Bank of Lebanon, Ky

• Decision Date: 21 February 1898
• Docket Number: No. 201,201
• Citation: 18 S.Ct. 390,169 U.S. 416,42 L.Ed. 801
• Parties: BROWN v. MARION NAT. BANK OF LEBANON, KY
• Court: U.S. Supreme Court

169 U.S. 416

18 S.Ct. 390

42 L.Ed. 801

BROWN

v MARION NAT. BANK OF LEBANON, KY.

No. 201.

February 21, 1898.

E. J. McDermott, for plaintiff in error.

W. J. Lisle, for defendant in error.

Mr. Justice HARLAN delivered the opinion of the court.

This case was twice before the court of appeals of Kentucky. The first judgment of the court of original jurisdiction was reversed in that court, and the cause was remanded for further proceedings. 92 Ky. 607, 18 S. W. 635.

he present appeal brings up for review the final judgment rendered by the court of appeals of Kentucky on a second appeal to that court. 35 S. W. 926.

The case requires the construction of certain provisions of the Revised Statutes of the United States relating to national banking associations.

Section 5197 authorizes a national banking association to take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of the state, territory, or district where the bank is located, and no more, except that where, by the laws of any state, a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized or existing in any such state. When no rate is fixed by the laws of the state, territory, or district, the bank may take, receive, reserve, or charge a rate not exceeding 7 per cent., and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run.

Section 5198 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 such action is commenced within two years from the time the usurious transaction occurred. That suits, actions and proceedings against any association under this title may be had in any circuit, district or territorial court of United States held within the district in which such association may be established, or in any state, county or municipal court in the county or city in which said association is located having jurisdiction in similar cases.'

The last section clearly makes a difference between interest which a note, bill, or other evidence of debt held by a national bank 'carries with it, or which has been agreed to be paid thereon,' and interest which has been 'paid.' Interest included in a renewal note, or evidenced by a separate note, does not thereby cease to be interest, within the meaning of section 5198, and become principal.

If a bank which violates by that section sues upon the note, bill, or other evidence of debt held by it, the debtor may insist that the entire interest, legal and usurious, included in his written obligation, and agreed to be paid, but which has not been actually paid, shall be either credited on the note, or eliminated from it, and judgment given only for the original principal debt, with interest at the legal rate from the commencement of the suit. We say 'entire interest,' because such are the words of the statute, based on the act of June 3, 1864 (13 Stat. pp. 99, 108, c. 106, § 30), whereas the prior statute of February 25, 1863 (12 Stat. pp. 665, 678, c. 58, § 46), declared that the knowingly taking, reserving, or charging a greater rate of interest than was allowed should be held and adjudged a forfeiture of 'the debt or demand' on which usurious interest was taken, reserved, or charged.

The forfeiture declared by the statute is not waived or avoided by giving a separate note for the interest, or by giving a renewal note in which is included the usurious interest. No matter how many renewals may have been made, if the bank has charged a greater rate of interest than the law allows, it must, if the forfeiture clause of the statute be relied on, and the matter is thus brought to the attention of the court, lose the entire interest which the note carries or which has been agreed to be paid. By no other construction of the § atute can effect be given to the clause forfeiting the entire interest which the note, bill, or other evidence of debt carries, or which was agreed to be paid, but which has not been actually paid.

It is said that, within the...