Mitchell v. Joplin Nat. Bank.

National Bank, 184 Mo. App. 483, 170 S. W. 674.); but the Supreme Court retransferred the cause to this court. [Mitchell v. National Bank, 201 S. W. (Mo.) 903.]

April 24, 1908, defendant agreed to loan plaintiff $4000 for ninety days, the loan to be secured by a mortgage lien on eighty-five acres of land in Jasper county. At the time plaintiff's wife was in California, and the mortgage could not be completed without her signature. April 24, 1908, plaintiff and Mrs. V. F. Church gave to defendant their personal note for $3000 due on demand with interest at eight per centum from date, and defendant paid plaintiff the $3000. On May 14th thereafter plaintiff through Mrs. Church presented to defendant a $4000 note, signed by plaintiff and his wife, dated April 24, 1908, due in ninety days, bearing interest at eight per centum from due. To secure this last-mentioned note plaintiff and his wife executed a warranty deed to be held as a mortgage on the eighty-five acres of land. This deed was made to A. H. Waite, president of defendant bank. When the $4000 note and mortgage were presented to defendant it canceled and delivered the $3000 demand note, and paid to Mrs. Church for plaintiff $920, deducting $80 as discount on the $4000 for ninety days at eight per centum. August 25, 1908, plaintiff paid $1000. June 25, 1909, Mrs. Church paid $306.67, and this was applied on interest. Nothing more was paid on the note, and plaintiff at the November, 1910, term of the circuit court brought suit to foreclose the mortgage lien, and to enforce tax liens and costs, which defendant was compelled to pay because plaintiff had defaulted in the payment of taxes on the land, and suit had been brought for these taxes. Plaintiff and his wife who were defendants in the foreclosure suit appeared and answered by a general denial. December 31, 1910, judgment went in favor of the bank and against Mitchell and his wife for the amount of the balance due on the $4000 note, together with the amount paid out on account of taxes, and this judgment was declared

Mitchell v. Joplin Nat. Bank.

a special lien on the eighty-five acres of land. With an execution based upon this judgment the sheriff levied upon and sold the eighty-five acres acres of land on March 18, 1911, for $4000. As we understand the record the $4000 for which the land sold was the exact amount of the judgment and costs.

December 23, 1912, plaintiff commenced the cause now here to recover twice the amount of interest paid, which interest paid is alleged to be $809.49, and is alleged to have been paid on March 18, 1911, when the land was sold under execution. The taint of usury is alleged to exist because of the fact that defendant bank discounted the $4000 note at eight per centum, and further from the fact that when the $4000 note was presented on May 14, 1908, the defendant bank reckoned the discount from April 24, 1908, on the whole sum when in fact the bank had been out only $3000 from April 24th to May 14th. Also when Mrs. Church paid the $306.67, $106.67 thereof was applied as interest on the $4000 note from April 24th to August 25, 1908, the date when plaintiff made the $1000 payment; the remaining $200 was applied as payment of the interest on the $3000 balance from August 25, 1908 to June 25, 1909, and the note on the last-mentioned date was endorsed on back: "June 25, 1909, Int. Paid to date."

Plaintiff claims that by virtue of section 7179 and 7180, Revised Statutes 1909, defendant bank could not have lawfully discounted the $4000 note at a greater rate than six per centum. Plaintiff says in substance with reference to the first alleged act of usury that the defendant bank, when the $4000 note was presented on May 14, 1908, should have charged him $13.33% accrued interest on the $3000 demand note for twenty days, and then might have lawfully discounted the $4000 at six per centum from May 14th for the remaining seventy days, which discount would have been $46.66%; this last amount plus the $13.33% would be $60, which plaintiff contends was the only legitimate amount chargeable; whereas $80 was charged or reserved.

Mitchell v. Joplin Nat. Bank.

The effect of the original discount of $80, and then the application of $106.67 of the payment of the $306.67, as we understand the record, was equivalent to defendant charging sixteen per centum on the $4000 note for the ninety days from its date to maturity. The interest actually due on June 25, 1909, the question of forfeiture eliminated, was eight per centum on $4000 from July 24th, the maturity of said note, to August 25, 1908, when the $1000 payment was made; and eight per centum on $3000 from August 25, 1908 to June 25, 1909, when the $306.67 was paid and applied as interest. Interest actually due therefore was $226.67; but $306.67 was actually paid and applied as interest, thus showing clearly that $80 too much was paid, and this amount plus the $4.44 excessive discount in the first instance on the $1000, no part of which the bank had paid out until May 14th, makes $84.44 paid in excess of eight per centum.

The answer was a general denial, and a plea of the two year limitation in section 5198 United States Statute, and a plea that if usurious interest was received that it was done by mistake and was not knowingly done. The reply was a general denial. Sections 51975198, United States Statute are 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 has to run. And the

Mitchell v. Joplin Nat. Bank.

purchase, discount, or sale of a bona-fide bill of exchange, payable at another place than the place of such purchase, discount, or sale, at not more than the current rate of exchange for sight-drafts in addition to the interest, shall not be considered as taking or receiving a greater rate of interest.”

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 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 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. That suits, actions, and proceedings against any association. under this title may be had in any circuit, district, or territorial court of the United States held within the district in which such association may be established, or in any State, county, or municipal court in the county or city in which said association is located having jurisdiction in similar cases.

Our State statutes pertinent to the issues are sections 7179 and 7180, Revised Statutes 1909, and are as follows: Section 7179: "Creditors shall be allowed to receive interest at the rate of six per cent. per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written contracts, and on accounts after they become due and demand of payment is made; for money recovered for the use of another, and retained without the owner's knowledge of the receipt, and for all other money due or to become due for the forbearance of payment whereof an express promise to pay interest has been made."

Section 7180: "The parties may agree, in writing,

Mitchell v. Joplin Nat. Bank.

for the payment of interest, not exceeding eight per cent. per annum, on money due or to become due upon any contract."

Defendant concedes that it had no right in the first instance to discount the $4000 note for the full ninety days; and that when the $306.67 was paid it should not have figured the interest on the $4000 note from its date to the date of the payment of the $1000 on August 25, 1908; but says that this was done by mistake. In other words defendant concedes that it collected $84.44 in excess of eight per centum. Whether it was usury to discount plaintiff's note at eight per centum in advance when it bore interest from maturity only, we do not deem necessary to decide, because we think plaintiff's case depends upon the question of limitation, as it is conceded there was usurious interest paid either on June 25, 1909, when the $306.67 was paid and credited as interest, or on March 18, 1911, when the $4000 note was paid in full by execution sale.

If the $306.67 paid on June 25, 1909, was a payment on interest, then plaintiff's cause must fail, because of the bar of the statute; if, however, that payment of June 25, 1909, should as a matter of law, because of usury, be applied as a payment on the principal, then there was no usurious interest in fact paid until March 18, 1911. The statute (Sec. 5198, United States Statute) provides that the taking, receiving, reserving, or charging a greater rate of interest than is allowed by section 5197, when knowingly done, shall be deemed a forfeiture of the entire interest, and plaintiff contends that the payment of the $306.67 on June 25, 1909, should as a matter of law be credited as a payment on the principal. But the interest, although usurious, is not so forfeited that the maker may not direct a payment to be applied on the interest, or that the bank may not, with the knowledge and consent of the maker, apply a payment on the interest. Our Supreme Court in National Bank v. Donnell, 172 Mo. 1. c. 411, 72 S. W. 925, in considering a usury case under the United States Statute said: