Patrick Carthy v. First National Bank of Rapid City, South Dakota

• Decision Date: 19 February 1912
• Docket Number: No. 122,122
• Citation: 32 S.Ct. 240,223 U.S. 493,56 L.Ed. 523
• Parties: PATRICK B. McCARTHY, Plff. in Err., v. FIRST NATIONAL BANK OF RAPID CITY, SOUTH DAKOTA
• Court: U.S. Supreme Court

223 U.S. 493

32 S.Ct. 240

56 L.Ed. 523

PATRICK B. McCARTHY, Plff. in Err.,

v FIRST NATIONAL BANK OF RAPID CITY, SOUTH DAKOTA.

No. 122.

Argued December 19, 1911.

Decided February 19, 1912.

Statement by Mr. Justice Lamar:

Patrick B. McCarthy, under the provisions of Rev. Stat. § 5198, U. S. Comp. Stat. 1901, p. 3493, brought suit against the First National Bank of Rapid City, South Dakota, for twice the amount of interest paid the bank.

The complaint alleged that, the maximum legal rate being 12 per cent, McCarthy, on August 27, 1887, borrowed from the defendant $4,000, giving therefor promissory notes payable at different dates, each bearing 18 per cent interest. These notes were not paid at maturity, and from time to time were renewed at the same rate. Many payments of usurious interest were made. The debt was finally consolidated into a note, bearing 12 per cent interest, dated May 22, 1889, for $5,000, which included the original principal and unpaid interest. It was renewed and secured by mortgage July 22, 1891. McCarthy alleges that between August 27, 1887, and January 1, 1897, he paid on the original and renewal notes various sums, aggregating $3,802.74, as interest, and that the defendant 'knowingly . . . applied the same to the payment of usurious interest, and indorsed the same on the said several promissory notes as interest received thereon.'

On January 26, 1897, the bank instituted proceedings to foreclose the mortgage given by plaintiff, his wife and others, to secure the debt. McCarthy filed a plea of usury, which was sustained, and, after purging the debt of usury and forfeiting all interest, a decree was finally entered, January 12, 1905, foreclosing the mortgage for $5,951.56, made up of the original debt of $4,000, taxes paid on the mortgaged property, and costs. On January 21 this sum was paid to the bank, and on January 25, 1905, plaintiff brought this suit for $7,605.48, or twice the amount of interest paid. The defendant set up, by its plea, that the action was barred, because not brought within two years from the date of payment of the usurious interest. The plaintiff replied that the statute only began to run from the date the debt was paid. For the purpose of showing that the payments on account of interest ($3,802.74) did not equal the amount of the original debt ($4,000), and that the judgment had been paid (January 21, 1905) less than two years before suit, he offered the record in the foreclosure proceedings. It was excluded by the trial court, but incorporated in the record by bill of exceptions.

Messrs. Hannis Taylor, Charles W. Brown, John F. Schrader, and Clarence L. Lewis for plaintiff in error.

[Argument of Counsel from page 495 intentionally omitted] Messrs. Charles J. Buell and A. K. Gardner for defendant in error.

[Argument of Counsel from page 496 intentionally omitted] Mr. Justice Lamar, after making the foregoing statement, delivered the opinion of the court:

Section 5198 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3493), under which this suit was brought, provides that 'taking, receiving, reserving, or charging' more than a lawful rate of interest, when knowingly done by a national bank, shall be deemed a forfeiture of the entire interest. In case a greater than the lawful rate 'has been paid, the person by whom it has been paid . . . may recover back . . . twice the amount of the interest thus paid, . . . provided such action is commenced within two years from the time the usurious transaction occurred.'

The debt was created in 1887, was paid in full in January, 1905, and on January 25, of the same year, the maker of the note brought suit to recover twice the amount of the interest paid thereon prior to 1897.

In considering the bank's plea that the action was barred because not brought within two years, and the plaintiff's claim that the statute only ran from the date the debt was paid, the supreme court of South Dakota pointed out the irreconcilable conflict in the cases dealing with this question, and, after making careful analysis of all the authorities, reached the conclusion, in which we concur, that the statute begins to run from the date of the payment of the usurious interest. 23 S. D. 269, 23 L.R.A.(N.S.) 335, 121 N. W. 853, 21 A. & E. Ann. Cas. 437. Considering...