Schumacher v. Lawrence

• Decision Date: 15 January 1940
• Docket Number: No. 8045.,8045.
• Parties: SCHUMACHER v. LAWRENCE.
• Court: U.S. Court of Appeals — Sixth Circuit

108 F.2d 576 (1940)

SCHUMACHER v. LAWRENCE.

No. 8045.

Circuit Court of Appeals, Sixth Circuit.

January 15, 1940.

George Haggarty, of Detroit, Mich. (Tracy L. Towner, and John P. Kirk, both of Ypsilanti, Mich., and George Haggarty, of Detroit, Mich., on the brief), for appellant.

Harold M. Shapero, of Detroit, Mich. (J. Don Lawrence, of Ypsilanti, Mich., and Harold M. Shapero, of Detroit, Mich., on the brief), for appellee.

Before HICKS, SIMONS, and ALLEN, Circuit Judges.

ALLEN, Circuit Judge.

Appellant, as receiver of a national bank and holder of a mortgage on real estate, executed by appellee on May 2, 1931, brought suit for foreclosure. The defense was that the interest charged was usurious, that the entire interest was therefore forfeited, and that appellee, prior to the institution of the suit, had tendered the full amount due.

The mortgage and note were in the face amount of $3,500.00 with interest at seven per cent. At the time the loan was made the mortgagor was required by the bank to pay $17.50 mortgage tax, $6.50 for certificate of abstract, $1.50 for recording the mortgage, and $5.00 for attorney's fee, or a total of $30.50. Appellee paid the mortgagee $1,169.98, which was applied both to principal and interest. On January 22, 1936, appellee tendered $2,330.12, asserting that this was in excess of the amount due. Appellant claims that the correct balance is $2,975.00. The District Court found that $2,299.52 was due, and inasmuch as the tender exceeded this amount, decreed that no costs should be awarded to the bank.

The controlling question is whether a claim for interest paid under a usurious loan made by a national bank can be recovered or set off in a foreclosure suit.

Under § 85, Title 12, U.S.C., 12 U.S.C.A. § 85, national banks may charge interest at the rate allowed by the laws of the state. The maximum lawful rate of interest in Michigan is seven per cent. per annum (Comp.Laws of Michigan 1929, § 9239). The question whether the rate of interest is usurious is decided according to the law of the state in which the loan is made. Evans v. National Bank of Savannah, 251 U.S. 108, 40 S.Ct. 58, 64 L.Ed. 171. Appellant concedes that under the Michigan decisions, the loan was usurious. Any charge against the mortgagor in addition to the maximum allowable rate of interest constitutes usury, where the charge is to be borne by the mortgagee, such as a tax on the mortgagee's interest (Comp.Laws Mich.1929, § 3647), or recording fees. Union Guardian Trust Co. v. Crawford, 270 Mich. 207, 258 N.W. 248; McKenna v. Wilson, 280 Mich. 227, 273 N.W. 457. Therefore the entire interest agreed to be paid on the note was forfeited, and appellant asks only for $2,975.00, the balance of the unpaid principal, with interest from the date of the commencement of the suit. But appellee contends, and the District Court held, that the interest already paid could be set off against the principal due. The pertinent conclusion of law of the District Court is as follows:

"1. Defendant has raised the defense of usury to the interest claimed by the plaintiff. It is my opinion that this case is controlled by Union Guardian Trust Company v. Crawford, 270 Mich. 207, 258 N.W. 248. It therefore follows that the plaintiff is not entitled to the payment of any interest on this account, and all payments heretofore made should be credited upon the principal. It therefore leaves a principal balance due as of this date in the amount of...