Mitchell v. Joplin Nat. Bank. "It is well settled that a debtor may, at or before the time of payment, direct its application, and that the creditor must apply it as directed, but if the debtor fail to make such direction when he might, the creditor may apply it as he pleases. It must, however, be applied to a debt that is due in preference to one that is not due. There is an exception, however, to these general rules, and that is, where the debt or part of it is usurious, the creditor cannot in the absence of special directions so to do from the debtor, apply the payment to usurious interest or to any debt which the debtor is not bound to pay." 7 C. J. 826, states the matter thus: "Where a national bank contracts for interest at a usurious rate, it immediately forfeits all interest, and unappropriated payments by the debtor must be first applied to the principal, so that as long as any part of the principal remains unpaid there is no payment of usurious interest subjecting the bank to a forfeiture of twice the amount received. Such forfeiture may be incurred, however, where, although the principal remains unpaid, in whole or in part, payments made by the debtor are specifically applied by him, or by the bank with his consent to the usurious interest." It is well to state here that defendant bank did not contract for usurious interest. The offense was in reserving or receiving usurious interest. The note on its, face bore interest from maturity at eight per centum, and the defendant therefore had a lawful right to charge that rate from maturity, so there was nothing in the note itself to indicate that the transaction was tainted with usury. 3 R. C. L., p. 671, sec. 302, says: "Where a general payment is made the law will not apply it as a payment of the unlawful interest reserved, so as to subject the bank to the penalty. There being no appropriation of any part of the payment by the debtor to the payment of interest, as such, the law will not presume an application of it to an illegal and void obligation; nor will it permit the creditor to make such an appli Mitchell v. Joplin Nat. Bank. cation. So, the principal of law which applies such unappropriated payment first to discharge the interest due, and then to reduce the principal, cannot operate; for all interest was forfeited, eo instanti, by the agreement to pay interest at the illegal rate, and payments will not be applied by operation of law to the discharge of unlawful obligations in preference to debts justly due. And the maker of a note carrying interest at a usurious rate will not be held to have intended a general payment to be applied on interest merely because the payment was so applied on the books of the bank without his knowledge." The two texts quoted cite many authorities supporting the proposition that notwithstanding the forfeiture of interest provided for by statute the debtor or maker of he usurious note may direct or acquiesce in the application of a payment to the payment of interest on a contract tainted with usury, so as to cause limitations to begin to run from the date of such payment. There are two entirely different divisions of section 5198, supra; the first provides for a forfeiture when usury has been knowingly contracted for and such usury entered into the note; the second provides for the recovery back of twice the amount of all interest actually paid when said interest is in part usurious. The courts uniformly hold that under the first provision the maker of the note or debtor can interpose the plea of usurious interest in a suit on the note, and defeat the payment of any interest where said interest is in part usurious; while on the other hand if he has in fact made any payment on interest which includes a payment in part of usurious interest, he cannot plead such payment either as a credit on the principal or as an offset or counterclaim to the principal, but his only remedy for such usury thus paid is found in the second provision of section 5198, and consists solely in his right to recover in a separate suit double the amount of interest actually paid. [McCarthy v. National Bank, 27 S. Dak. 269; 121 N. W. 853; 25 L. R. A. Mitchell v. Joplin Nat. Bank. (N. S.) 335; 21 Annotated Cases 437; National Bank v. Gadsden, 191 U. S. 451; 24 S. Ct. 129; 48 L. Ed. 258; Hazeltine v. National Bank, 183 U. S. 132; (see Hazeltine v. National Bank, 155 Mo. 66.); Driesbach v. National Bank, 104 U. S. 52; 26 L. Ed. 658.] The authorities it seems are divided as to when the limitations begin to run, and this division is upon the question whether, when the maker of a note has paid money thereon, which the payee with the maker's knowledge and consent has applied in payment of usurious interest, in whole or in part, a cause of action at one arises for the penalty provided by section 5198 regardless of whether the principal has been paid or not; or whether, on the other hand, no such action arises on behalf of the maker of such note until he has made payments thereon in excess of the original debt and legal interest. It is pointed out in McCarthy v. National Bank, supra, that many of the cases supporting the rule that no action accrues until there has been an actual payment of a sum greater than the original debt with legal interest have erred through not making a distinction between cases where payments have been made, which payments have been applied upon usurious interest with the knowledge and consent of the debtor, and cases where such application had been made or attempted to have been made by the creditor without the consent of the debtor. We think this is a sound observation. A debtor may pay, if he chooses, usurious interest, and may direct that a payment which he makes be applied to the payment of usurious interest, but notwithstanding that he pays voluntarily, he may yet recover back twice the amount of all interest paid provided he commences his action within the period of limitation. It remains, therefore, to determine whether or not the payment of June 25, 1909, and which payment was applied on interest by the bank, was so applied by the direction of the plaintiff or with his knowledge and consent, or whether or not the facts justify the conclusion that the defendant acquiesced in the ap Mitchell v. Joplin Nat. Bank. plication of such payment and thus and thereby adopted and ratified said application. Mrs. Church was connected with the transactions giving rise to this cause from its inception. The record shows that she and the plaintiff were engaged as partners in the mining business and also that she was the cashier of a national bank. They kept a partnership account and also a partnership bank account. When the plaintiff sent the $4000 note and warranty deed from California, he sent it to Mrs. Church, and it was she that delivered the note to the bank and the deed to Waite. Mrs. Church paid the $306.67 by giving a partnership check drawn on the deposit account of plaintiff and herself. She charged plaintiff with the amount in the accounts kept by the partnership. At the time of this payment, the defendant bank delivered to Mrs. Church a receipt as follows: "Received of S. D. Mitchell, $306.67 dollars, interest on note to this date. (Signed) Joplin National Bank, Joplin, Mo. A. H. Waite, President," and dated June 25, 1909. The plaintiff it appears ignored all notices and requests to see about his overdue note. He came back from California the latter part of May, 1908, only a few days after forwarding the note and deed. He claims, however, that he had no knowledge at the time about Mrs. Church's payment of the $306.67, yet he says that in the latter part of 1909, he found the receipt above mentioned among the papers of the ChurchMitchell Mining Company. He knew, therefore, for three years before the commencement of this suit that the $306.67 had been applied on payment. of interest, a part of which was usurious; and he also knew that Mrs. Church had charged him with said amount, and that he had settled and paid the same in the course of the partnership between himself and Mrs. Church, which partnership still existed at the time of the trial of this case below. Plaintiff went through the suit by the bank to foreclose the mortgage which was filed a year after he had actual knowledge of the application of the $306.67 payment; yet he interposed no defense of Mitchell v. Joplin Nat. Bank. usury, and so far as the record here shows, made no protest or complaint about the application of the $306.67 payment, and in that suit the $306.67 payment was adjudged in effect a payment on the interest. There is only one reasonable conclusion to draw and that is that Mrs. Church when she made the payment of $306.67 was acting for and on behalf of plaintiff under the general authority with reference to this particular note as she had been connected with the transaction from its inception, and this conclusion is amply supported by the acquiesence by the plaintiff for the period of three years after he had actual knowledge of the application of this payment. We think that plaintiff's conduct towards the application of the $306.67 payment after he had actual knowledge thereof as a matter of law amounts to a ratification and adoption of the application of this payment and he should not, after such lapse of time, be heard to say that Mrs. Church had no right to make the payment on the interest. Also we are of the opinion that plaintiff having appeared to the suit to foreclose in which the payment in question was in effect adjudged a payment on interest, he is now precluded from reopening that question. We find no foundation to support plaintiff's contentions with reference to the application of this payment. Plaintiff would accept the payment made by Mrs. Church and does so accept it but seeks to characterize it as a payment on the principal. This he might have done in the foreclosure suit, but he chose otherwise. Mrs. Church made the payment on the interest, and the bank gave to her a receipt so showing. Plaintiff cannot adopt in part and reject in part the act of his agent. He cannot adopt or ratify that which is favorable without also adopting that which may be burdensome. [Porter v. Woods, 138 Mo. 539, 39 S. W. 794.] Having reached the conclusion that the payment of $306.67 was appropriated or applied to the payment of interest, a part of which was usurious by the direction in effect of the plaintiff through his agent Mrs. Church, we hold that limitations began to run from |