Overholt v. National Bank of Mt. Pleasant. twice the amount of interest thus paid from the association taking or receiving the same: provided, that such action is commenced within two years from the time the usurious transaction occurred.” It is very clear we think that Congress intended that the National banks should be effectually prevented, as far as legislation could prevent it, from either charging or receiving more than the legal rate of interest in the States in which they might be located and carry on their business. Experience had abundantly shown that to do this it would not be sufficient to provide that the excess over the lawful rate only should be illegal. These institutions of large capital would naturally exercise great power over those who should stand in need of their assistance; for it is as true now as it was in the days of Solomon, "The rich ruleth over the poor and the borrower is servant to the lender." It was considered, no doubt, that it would be too severe a measure to provide that the debt itself should be forfeited or the security given for it declared void. That too had been tried in England and some of the United States, but was found not to arrest the practice, but only to increase the unjust gain of the usurer, who required to be indemnified by the needy borrower for the risk he run by a much increased rate. It was deemed a sufficiently effectual prevention to enact that wherever the bank violated the law by "knowingly receiving, reserving or charging" more than the lawful interest, they should recover none, and that where the unlawful interest had been voluntarily paid, the debtor should be entitled to recover as a penalty double the whole interest paid, provided suit were brought within two years. Wherever the bank must resort to a suit, there the forfeiture of the entire interest, when an illegal rate has been stipulated or taken, follows as a necessary result. It was abundantly shown in Campbell v. Sloan, 12 P. F. Smith, 485, by numerous English and American authorities cited in the opinion of the court, that where there has been a series of renewal notes given for the continuation of the same original loan or advance, the taint of usury in the first transaction follows down the descent through the entire line. A renewal note is not payment of the original debt, and a new debt or novation in view of the usury laws, however it may be, if the parties so intend, as to other questions. If it were held otherwise nothing would be so easy as to evade the statute. What the creditor is entitled to recover is the original loan with lawful interest, and the borrower is entitled to credit for all that he has paid beyond Overholt v. National Bank of Mt. Pleasant. what by law he was bound to pay. It is clear then as to the National banks that whenever they charge or stipulate for an illegal rate all payment of interest and not merely the excess is illegal. "The Illegal Act," as is well remarked by Mr. Justice GORDON in Lucas v. Government National Bank, 28 P. F. Smith, 231 (ante, p. 872)," destroys the interest-bearing power of the obligation." "The receiving of such excessive interest is treated by the supreme power in the State as a public evil and as such prohibited; consequently when taken against the statutory prohibition, it is acquired without right and no title thereto vests in the taker. In such case he is to be held as one wrongfully in possession of his neighbor's property." It follows that when the bank resorts to legal proceedings to recover its debt on the last of the series of renewal notes, the borrower is entitled to credit for all the interest he had paid from the beginning on the loan and not merely to the excess above the lawful rate. This question was not before the court, and was not decided in Brown v. Second National Bank of Erie, 22 P. F. Smith, 209 (ante, p. 849). The only matters which could avail the plaintiff in error there, were the answers to the two first points which he made below. These were, that the bank could not recover any part of its claim, and that if it could the debtor was entitled to defalk double the amount of interest paid. These the court below refused, and their judgment was affirmed. His third point was, that he was entitled to credit for the excess of the interest he had paid from time to time on the renewal notes; and his fourth was, that he was entitled to an abatement of all the interest on the note in suit; and these the court below affirmed. What is stated in the syllabus as decided by the court below-if indeed it was meant to say that the debtor could only set off the excess of interest on previous noteswas not involved in the affirmance of the judgment. In Lucas v. Government National Bank, 28 P. F. Smith, 228 (ante, p. 872), the credit claimed was not for interest paid on former notes of which the note in suit was the last renewal, but upon entirely independent loans which had been paid in full; and the defendant claimed to defalk double the amount which he had paid. This the court held he could not do, but that he was entitled to defalk the usurious interest he had paid on previous transactions. The affidavit of defense stated that the defendant had paid not less than $3,000 in excess of the legal rate of interest; and this, it was held, he had Woods v. People's National Bank of Pittsburgh. a right to defalk. Further than this it was not necessary to go in order to reverse the judgment and award a procedendo. We are of opinion that the defendant below was not entitled to defalk the interest on the four-thousand-dollar note, which was not in suit. The words of the act of Congress, "shall be held a forfeiture of the entire interest which the note, bill or other evidence carries with it," as was said in Brown v. The Second National Bank of Erie, have evident reference to the enforcement of the contract by judicial process. No action is given to recover back the interest charged, and if not, there can be no defalcation against an independent claim. Non constat that the principal of the four-thousand-dollar note will ever be sued for; but when it is, all the interest paid on the notes of which it is the last renewal will be a credit upon it. Judgments reversed and writs of procedendo awarded. WOODS V. PEOPLE'S NATIONAL BANK OF PITTSBURGH. (83 Pennsylvania State, 57.) Mortgage on real estate to National bank. A mortgage to a National bank is valid as to pre-existing debts, but void as to future loans.* A SSUMPSIT against Robert Woods as indorser of three promissory notes. In 1869 and 1870 Robert Woods, the defendant below, indorsed three accommodation notes of R. L. McAboy, to the amount of $7,000, which notes were discounted by the People's National *That a mortgage of real estate to a National bank to secure a contemporaneous or a future loan is void, was held in the following cases: Kansas Valley National Bank v. Rowell, ante, p. 264; Merchants' National Bank v. Mears, ante, p. 353; First National Bank v. Haire, ante, p. 480; Ornn v. Merchants' National Bank, ante, p. 490; Matthews v. Skinker, ante, p. 647; Crocker v. Whitney, ante, p. 745; Fowler v. Scully, ante, p. 854. For special circumstances under which a mortgage to a National bank has been held valid, see First National Bank v. Haire, ante, p. 480; Ornn v. Mer Woods v. People's National Bank of Pittsburgh. Bank of Pittsburgh, the plaintiff below. In March, 1870, the bank loaned McAboy $5,055 upon his own note unindorsed. On September 1st, 1870, the wife of McAboy executed a mortgage to the bank for $20,000 to secure the above notes and to secure an additional loan to McAboy of $8,000, which latter was made to him September 8th, 1870, McAboy giving the bank two notes for $4,000 each. The notes indorsed by Woods were subsequently renewed. Afterward, upon default in payment of the various notes, the bank brought suit upon its mortgage and recovered $13,564.82 upon it, and then brought this action against Woods upon the notes indorsed by him. Upon these facts the court below (STOWE, A. J.) instructed the jury to find for the plaintiff, which they did in the sum of $9,228.94. After judgment the defendant below took this writ of error, assigning for error the charge of the court and the refusal of evidence of an admission made by the president of the bank tending to show the purpose for which the mortgage in question was given to it. Hampton & Dalzell, for plaintiff in error. M. W. Acheson and W. L. Chalfant, for defendant in error. PAXON, J. It was held in Fowler v. Scully, 22 P. F. Smith, 456, that the loaning of money by a National bank upon mortgage or other real estate security is ultra vires, and forbidden by the act of Congress. This of course does not apply to the case where a bank has in good faith taken a mortgage by way of security for a previously existing debt. Such case comes within one of the express exceptions of the act of Congress. It follows, therefore, that in so far as the mortgage of Mrs. McAboy to the People's National Bank of Pittsburgh was given to secure money thereafter to be loaned to her husband, it was ultra vires. It is manifest from chants' National Bank, ante, p. 490; Upton v. National Bank, ante, p. 618; Richards v. Kountz, ante, p. 652. A National bank may sell real estate owned by it and take back a mortgage for the purchase-money. New Orleans National Bank v. Raymond, ante, p. 516. So a National bank may purchase such real estate as may be necessary to secure a debt due it, though the value of the property be in excess of the debt provided the intent be bona fide. Upton v. National Bank, ante, p. 618. See Allen v. Freedman's Savings and Trust Co., 14 Fla. 418, wherein it was held that one who has borrowed money from a bank upon securities on which it was prohibited from lending, cannot avail himself of the prohibition as a defense to an action for the money. Cake v. The First National Bank of Lebanon. the evidence that the loan of $8,000 to Mr. McAboy on or about the 8th of September, 1870, was upon the faith of the mortgage. As to this loan the mortgage was not a valid security. But it was good as to the indebtedness of Mr. McAboy to the bank existing prior to its execution, amounting to about $12,055. For $7,000 of this sum the bank held the indorsements of the plaintiff in error. His contention is that the bank was bound to apply the money received from a sheriff's sale of the mortgaged premises to the notes held by it at the time the mortgage was given. In this we think he is right. As the indorser of Mr. McAboy's notes, held by the bank, he had a right to call upon the latter to apply the money to the payment of the notes for which alone the mortgage was legally held as security. The mortgage was as much for his benefit as for the bank. The latter has no right to apply the proceeds thereof to the two unsecured notes of $4,000 each. Under the authority of Fowler v. Scully, supra, Mr. McAboy could have objected to such appropriation. Whatever he might have done in this respect, the plaintiff in error as his indorser may do also. From what has been said it will be seen that both the assignments of error are sustained. The judgment is reversed, and a venire facias de novo awarded. CAKE V. THE FIRST NATIONAL BANK OF LEBANON.* Whether other notes have been accepted by a bank in renewal of notes sued on is a question for the jury. Where there has been a series of renewal notes given for the continuation of the same original loan, a taint of usury in the first transaction follows down through the whole, and in an action by a National bank on the last of the series, the borrower is entitled to credit for all the interest he has paid from the beginning.t A CTION against the defendant as an accommodation indorser of a draft and a note, discounted by the plaintiff, a National bank, for the maker, Stine. *Not yet reported in the Pennsylvania Reports. + See Overholt v. Bank, ante, p. 883. |