Marion National Bank v. Thompson, &C.

• Decision Date: 13 May 1897
• Citation: 101 Ky. 277
• Parties: Marion National Bank v. Thompson, &c.
• Court: Kentucky Court of Appeals

101 Ky. 277

Marion National Bank v. Thompson, &c.

Court of Appeals of Kentucky.

May 13, 1897.

APPEAL FROM MARION CIRCUIT COURT.

W. J. LISLE FOR APPELLANT.

JOHN McCHORD FOR APPELLEE.

JUDGE PAYNTER DELIVERED THE OPINION OF THE COURT.

On September 29, 1885, G. T. Thompson with C. R. Thompson surety presented a promissory note to the Marion National Bank for discount, payable four months after date for $4,304 40. The bank reserved the interest at 7 per cent. It paid Thompson $4,199 83, reserving $104 57, which was the interest for the time stated. The note was renewed every four months, the three days of grace added until the 27th of November, 1893, when the note in question for $4,000 was executed. The interest was paid at the time of the various renewals, except June 7th, 1887, June 22d, 1889, July 6th, 1891, March 8th, 1893, July 24th, 1893, and at these renewals the interest for the ensuing four months was added to the amount of the note, which had been previously given, and the new note given for the amount of the previous note, and the interest thus added. From the answers which the cashier of the bank made to the interrogatories propounded, and from his deposition, it appears that the interest thus added in the note was paid at dates subsequent to the time the interest was added in the note. At one time $620 was paid, at another a note for $316 25 was given for the interest which had been embraced in the note. In all these renewals, interest was calculated at 7 per cent. The court below adjudged that all payments of interest at the several renewals from June 7th, 1887, be applied as payments on the original sum borrowed. The court fixes the principal of the debt at $4,199 83, and the credits as we have indicated, $2,132 93, being the aggregate payments of interest since June 7th, 1887. The court also adjudged the note for $316 35 should be cancelled, because it was executed for installments of interest which embraced usury. In other words, the court has applied as credits on the note, the amount actually paid at renewals, and also interest which had been embraced in the note and subsequently paid. The legal rate of interest in this State is 6 per cent per annum. The Revised Statutes of the United States contains provisions as follows:

Section 5197. "Any association may 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 under this title. When no rate is fixed by the laws of the State or Territory or district, the bank may take, receive, reserve, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill or other evidence of debt is to run" * * * * * * * * * *

Section 5198. "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 a 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 * * * * * * * *

A national bank is authorized to take, receive, reserve or charge on loans, interest at the rate of 6 per cent. If a greater sum than that is taken received, reserved or charged on any loan or discount made it has violated the law. By section 5198, when this is knowingly done, there is a forfeiture of the entire interest which the note, bill or other evidence of debt, carries with it, and which has been agreed to be paid thereon. As a penalty, if the bank has been paid the interest, 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 interest thus paid, providing such action has commenced within two years from the time the usurious transaction occurred. If a note is given for a sum, and also an amount which is interest at the usurious rate, the note carries the interest with it, whether that be shown by the writing or not. If the note purports to draw interest at a usurious rate when there is an agreement to pay interest on the note, when the note is renewed for a given time at a usurious rate of interest and that interest be embraced in the renewal note for the time it is to run, then the note carries with it the interest; so whatever usurious interest is embraced in the note, or whatever interest at a usurious rate, it purports to draw, in an action on a note for such interest it thus carries with it must be adjudged to be forfeited. When the interest has been actually paid, then the person by whom it has been paid, or his legal representative may recover back in a separate action in the nature of an action of debt, twice the amount of the interest thus...