Brown v. Marion National Bank, 169 U.S. 416 (1898)

Brown v. Marion National Bank

No. 201

Submitted January 21, 1898
Decided February 21, 1898
169 U.S. 416

ERROR TO THE COURT OF APPEALS

OF THE STATE OF KENTUCKY

Syllabus

Section 5198 of the Revised Statutes of the United States, prescribing what rate of interest may be taken, received, reserved, or charged by a national banking association, makes a difference between interest which a note, bill or other evidence of debt "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.

If a national bank sues upon a 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.

The forfeiture declared by the statute is not waived by giving a renewal note in which is included the usurious interest. No matter how many renewals may be 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.

If, for instance, one executes his note to a national bank for a named sum as evidence of a loan to him of that amount to be paid in one year at ten percent interest, such a rate of interest being illegal, and if renewal notes are executed each year for five years, without any money being in fact paid by the borrower -- each renewal note including past interest, legal and usurious -- the sum included in the last note, in excess of the. sum originally loaned, would be interest which that note carried or which was agreed to be paid, and not, as to any part of it, interest paid.

If the note, when sued on, includes usurious interest, or interest upon usurious interest, agreed to be paid, the holder may elect to remit such interest, and it cannot then be said that usurious interest was paid to him.

If the obligee actually pays usurious interest as such, the usurious transaction must be held to have then, and not before, occurred, and he must sue within two years thereafter.

The case is stated in the opinion.