Merchants' Nat. Bank v. Sharkey

Opinion by Mr. .Chief Justice McBride.

Section 5198, U. S. Revised Stat. (Vol. 5, p. 130, Fed. Stat. Anno.; U. S. Comp. St. 1901, p. 3493), provides that:

“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.”

Section 5198 (Vol. 5, p. 133, Fed. Stat. Anno.) provides that:

“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 for debt, twice the amount of the interest thus paid from the association receiving the same; provided, such action is commenced within two years from the time the usurious transaction occurred.”

1. By the great preponderance of authority it is held that the remedy herein provided for usurious transactions by national banks is exclusive. Farmers’ & Mechanics’ National Bank v. Dearing, 91 U. S. 29 ( 23 L. Ed. 196 ; Haseltine v. Central Bank of Springfield, 183 U. S. 132 (22 Sup. Ct. 49: 46 L. Ed. 118 ). The usurious interest paid cannot be offset or counterclaimed against the principal debt in an action brought by the bank upon the note. Barnet v. National Bank, 98 U. S. 555 ( 25 L. Ed. 212 ). This is the rule even where the State statutes provide that such counterclaim may be pleaded. Barnet *35 v. National Bank, 98 U. S. 555 ( 25 L. Ed. 212 ). In the case last cited the court say:

“The remedy given by statute for the wrong is a penal suit. To that the party aggrieved or his legal representatives must resort. He can have redress in no other mode or form of procedure. The statute which gives the right prescribes the redress, and both provisions are alike obligatory upon the parties.”

2. As to the interest accruing after the commencement of the suit, we are of the opinion that the court should have admitted testimony tending to show the usurious nature of the transaction. The conventional interest, if unpaid, is forfeited; but, as to interest accruing after the commencement of the suit, the rule seems to be that the plaintiff is entitled to recover at the legal rate only. Brown v. Marion National Bank, 169 U. S. 418 (18 Sup. Ct. 390: 42 L. Ed. 801 ). The legal rate in this State is 6 per cent. The rate specified in the note is 8 per cent. Defendants were entitled for the purpose of reducing the rate of interest from the conventional rate to the legal rate to introduce the evidence rejected.

The judgment will therefore be reversed, and a new trial ordered, unless the plaintiff shall within 20 days remit the sum of $71.46; and in either case the defendants, having recovered a better judgment here than in the court below, should recover their costs in this court.

Reversed.