1890, more than four (4) years before the commencement of this action."

As conclusions of law the referee found as follows:

"First. That interest on overdraft was excessive, but not illegal or usurious, and did not taint the subsequent debt, notes, and bonds, of which it formed a part of the consideration.

"Second. That the custom of bankers' to compute interest on a commercial basis of thirty days to the month, making three hundred and sixty days to the year, under the tables, is legal.

"Third. That plaintiff's cause of action accrued June 17th, and this suit is barred under § 5198 of the Revised Statutes of the United States, on which this action is based. "Fourth. That the matter in this suit was adjudicated between the same parties in the case of the Union Loan & T. Co. v. D. H. Talbot, and that relief could have been granted, and plaintiff is now estopped from maintaining this suit.

"Fifth. That interest charged plaintiff on overdraft was not included in and did not form a part of the decree in the case of the Union Loan & T. Co. v. D. H. Talbot, and was not paid by said sheriff's sale of plaintiff's property under execution issued on

that decree."

deed so as to constitute a former adjudication. That he set it up and that it was adjudicated we have no doubt. True, it was not set up with the same fulness and elaboration as in this case. Unquestionably it is matter which might have been pleaded in that case, and under a familiar rule the plaintiff must be held to have asserted all available defenses to that action.

"V. Said § 5198 provides that actions to recover back illegal interest paid must be commenced 'within two years from the time the usurious transaction occurred.' Now, whether or not we call the delivery of the bonds a payment, it is evident that the usurious transaction occurred on and be fore June 17, 1890, and it follows that this action is barred. These questions are so largely questions of fact, and rest upon familiar and undisputed principles of law, that we do not find it necessary to refer to any of the many authorities cited.

"The lower court was fully warranted in affirming the finding of fact as reported by the referee. While we do not concur in the conclusions of law that the interest on overdrafts was excessive, but not illegal or usurious, and that the custom of banks to compute interest on the commercial basis of thirty days to the month is legal, still it[179] does not follow that the judgment of the dis

He recommended that judgment be en-trict court is erroneous. tered dismissing plaintiff's petition, and that defendant have judgment for costs.

"It is correct notwithstanding the charge of illegal interest, because the plaintiff has never paid that interest, but has been allowed the full benefit of the facts in the foreclosure case, and because this action was not brought within two years of the time the usurious transaction occurred." [106 Iowa, 361, 76 N. W. 726.]

The plaintiff filed exceptions to the report, and the matter came on to be heard March 19, 1896, and the court adjudged that the conclusions of the referee were correct; that the matters in the suit had been adjudicated in the former action; that plaintiff's cause of action had accrued June 17, 1890, The assignments of error present the foland that his suit was barred by the statute lowing contentions: That the agreement of of the United States upon which the action June 17, 1890, in pursuance of which the ne was based, and plaintiff's petition was dis-gotiable bonds of plaintiff were delivered to missed.

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The court further said:,

"We have seen that unless the plaintiff has paid the illegal interest he is not entitled to recover it in this action. If it may be said that the delivery of the sixty-one bonds on June 17, 1890, was a payment, this action is barred, as it was not commenced 'within two years from the time the usurious transactions occurred,' having been commenced March 8, 1895.

"The interest on overdrafts was surely not paid by the sale of the land, for, as we have seen, it was not included in the decree. As we view the case, we think the illegal charges of interest have never been paid, and therefore the plaintiff is not entitled to recover in this action.


the defendant, did not constitute a payment of the interest on the overdrafts theretofore charged, but that the sales in the foreclosure suit May 19 and July 2, 1894, constituted such payment, and as the action brought within two years from the latter dates, it was not barred; that the foreclosure suit was not res judicata because the defense of illegal interest was based upon the law of the state of Iowa, and not upon the Revised Statutes of the United States; that illegal interest was embraced in the judg ment in the foreclosure suit; that the deduction which was made was only of the illegal interest on the overdrafts, and of no other interest; that the Revised Statutes direct "a forfeiture of the entire interest," not merely of the amount of interest paid in excess of that allowed by law; that § 5198 provides that in case the greater rate of interest has been paid, the person so paying the sum "may recover back amount of the interest thus paid."


Messrs. A. A. Hoehling, Jr., and James "IV. There is some dispute as to whether K. Redington argued the cause and filed a plaintiff set up these charges of illegal in-brief for plaintiff in error:

terest in the action to foreclose the trust If usury enters into the original transac

tion, or subsequent transactions of a similar nature, it affects all consecutive securities, however remote, growing out of such transaction; neither the renewals of old nor the substitution of new securities can efface the usury, and the infirmity pervades the entire transaction to its close.

bitt, 177 U. S. 523, 44 L. ed. 872, 20 Sup. Ct. Rep. 715.

In proceedings in this Court to review the action of state courts, this Court does not enter into consideration of questions of fact, but will accept the determination of the state courts in such matters as conclusive, and inquire simply whether there have been errors of law.

Campbell v. McHarg, 9 Iowa, 354; Smith v. Coopers, 9 Iowa, 376; Garth v. Cooper, 12 Iowa, 364; First Nat. Bank v. Stauffer, 1 Fed. 187; Farmers' & M. Bank v. Hoag-ed. 574, 21 Sup. Ct. Rep. 399. land, 7 Fed. 159; Danforth v. National State Bank, 17 L. R. A. 622, 1 C. C. A. 62, 3 U. S. App. 7, 48 Fed. 271; Brown v. Marion Nat. Bank, 169 U. S. 416, 42 L. ed. 801, 18 Sup. Ct. Rep. 390.

Gardner v. Bonestell, 180 U. S. 362, 45 L.

As the indebtedness of plaintiff was to a national bank, the definition of usury and the penalties affixed thereto are to be determined by sections 5197 and 5198 of the Revised Statutes of the United States, and not by the laws of the state of Iowa.

Farmers' & M. Nat. Bank v. Dearing, 91 U. S. 29, 23 L. ed. 196; Haseltine v. Central Nat. Bank, 183 U. S. 132, ante, 118, 22 Sup. Ct. Rep. 50.

Under this Federal legislation the penalty recoverable is twice the amount of the entire interest paid, not twice the excess of interest paid over the legal rate.

Crocker v. First Nat. Bank, 4 Dill. 358, Fed. Cas. No. 3,397; National Bank v. Davis, 8 Biss. 100, Fed. Cas. No. 10,038; National Exch. Bank v. Moore, 2 Bond, 175, Fed. Cas. No. 10,041; Brown v. Second Nat. Bank, 72 Pa. 211; Overholt v. First Nat. Bank, 82 Pa. 490; Lebanon Nat. Bank v. Karmany, 98 Pa. 65; Louisville Trust Co. v. Kentucky Nat. Bank, 87 Fed. 143; Louisville Trust Co. v. Kentucky Nat. Bank, 102 Fed. 442.

Payment of the illegal interest in this case was not made by the delivery of the bonds.

Brown v. Marion Nat. Bank, 169 U. S. 416, 42 L. ed. 801, 18 Sup. Ct. Rep. 390.

Such payment was made by the sale of the premises in controversy and the appropriation of the proceeds of such sale by the defendant in error to the part satisfaction of its claim.

Brown v. Marion Nat. Bank, 169 U. S. 416, 42 L. ed. 801, 18 Sup. Ct. Rep. 390; McBroom v. Scottish Mortg. & Land Invest. Co. 153 U. S. 318, 38 L. ed. 729, 14 Sup. Ct. Rep. 852.

That a Federal statute was construed unfavorably to one of the parties to a suit is no ground of jurisdiction of this Court, unless such construction is not only unfavorable, but is against the right, etc., especially set up and claimed under the statute.

Kizer v. Texarkana & Ft. S. R. Co. 179 U.
S. 199, 45 L. ed. 152, 21 Sup. Ct. Rep. 100.

Where the decision of the state court
rests on questions not Federal in their char-
acter, this Court will not take jurisdiction.
Pittsburgh & L. A. Iron Co. v. Cleveland
Iron Min. Co. 178 U. S. 270, 44 L. ed. 1065,
20 Sup. Ct. Rep. 931.

Where Federal questions were involved, but the decision of the state court could be properly rested on questions not Federal in their character, and the Federal question was not necessary to the determination of the case, this Court could not take jurisdiction.

Johnson v. Risk, 137 U. S. 300, 34 L. ed. 683, 11 Sup. Ct. Rep. 111; Cook County v. Calumet & C. Canal & Dock Co. 138 U. S. 651, 34 L. ed. 1115, 11 Sup. Ct. Rep. 435; O'Neil v. Vermont, 144 U. S. 336, 36 L. ed. 457, 12 Sup. Ct. Rep. 693.

Mr. Justice McKenna delivered the opinion of the court:

1. We are first confronted by a motion to dismiss the action on the ground that no Federal question was decided by the supreme court of Iowa. We think the motion should be overruled. *The plaintiff expli-[180] citly based his right of action upon 88 5197 and 5198 of the Revised Statutes of the United States. The judgment of the trial court and that of the supreme court of the state denied such right. Stat. § 709. This court therefore has jurisdiction.

2. Section 5197 authorizes a national bank to charge the rate of interest fixed by the laws of the state in which the bank is doing business. The consequences of a charge in excess of such rate are expressed in g 5198 to be as follows:

"The taking, receiving, reserving,


The remedy given by the statute for the wrong is a penal suit, and such aggrieved party can have redress in no other mode or form of procedure, either by way of counter-charging a rate of interest greater than is claim, set-off, or otherwise.

Farmers' & M. Nat. Bank v. Dearing, 91 U. S. 29, 23 L. ed. 196; Barnet v. Muncie Nat. Bank, 98 U. S. 555, 25 L. ed. 212.

Mr. Asa F. Call argued the cause and filed a brief for defendant in error:

To sustain a writ of error from this Court, something more must appear than that the parties claim a right under an act of Congress.

De Lamar's Nevada Gold Min. Co. v. Nes

allowed by the preceding section, when
ure of the entire interest which the note,
knowingly done, shall be deemed a forfeit-
bill, or other evidence of debt carries with
it, or which has been agreed to be paid
thereon. In case the greater rate of inter-
est 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 tak-
ing or receiving the same; provided such ac-

tion is commenced within two years from the payment of the illegal interest the statute time the usurious transaction occurred." inakes a condition of the recovery of its penTwo cases are provided for (1) where i-alty. If there can be a substitute for such legal interest has been taken, received, or payment it cannot be found in the insufficharged; (2) where illegal interest has been ciency of the pleading or the deficiency of paid. In the first case the entire interest the relief in another action. which the "evidence of debt carries with it" Judgment affirmed. shall be deemed forfeited. In the second case the person who has paid "the greater rate of interest may recover twice the amount of interest thus paid."

Mr. Justice Gray took no part in the decision.

*DANIEL H. TALBOT, Piff. in Err., [182]



(See S. C. Reporter's ed. 182-188.)

Error to state court-Federal questionusury by national banks—action to recover back usurious interest-when barred by limitation-concealment of wrong-suffi ciency of petition.



A decision by the highest court of a state adverse to the right claimed under U. S. Rev. Stat. §§ 5197, 5198, to recover back usurious interest from a national bank, presents a Federal question, which gives to the Supreme Court of the United States the right to review the judgment of such state court.

A petition to recover back usurious interest from a national bank, under U. S. Rev. Stat. § 5197, 5198, which shows on its face that the action was not "commenced within two years from the time the usurious transactions occurred," as required by the latter section, cannot withstand a demurrer because of an allegation that the charge and reservation of the usurious interest were without plaintiff's knowledge or consent, since, even if the period of limitation of the statute does not begin until discovery of the wrong, the court will not indulge the presumption that plaintiff's consciousness of the wrong was not aroused until sometime within two years before the commencement of the action.

In what way is the statute available to plaintiff? Or, rather, in what way was it available when the foreclosure suit was brought, and in what way is it yet available? Had illegal interest been paid by plaintiff at that time, or had illegal interest been only charged by defendant? The latter is the contention of the plaintiff, and he controverts the position taken by the supreme court of Iowa, that the agreement of June 17, 1890, constituted a payment, and that the action was barred because not commenced within two years from that date. We may yield, arguendo, to plaintiff's contention, and thereby eliminate the statute of limitations from consideration. But nev ertheless the judgment must be affirmed. 8] The plaintiff's situation, then, at the time of the foreclosure suit, was that he was sued for illegal interest charged but not paid, and he entered a defense to avoid its payment. He was successful. The court found that he had been charged illegal interest, and deducted its amount from the sum for which he was sued. In other words, judgment was rendered against him for the principal sum and legal interest. But he insists that such judgment was not the full relief to which he was entitled. To that judgment, he claims, he was entitled under the state law which he pleaded, but that under the statutes of the United States, which he could not plead, as he contends, he was entitled to a forfeiture of the entire interest, and as such forfeited interest was included in the judgment, it was paid by the sale under the judgment of the property mortgaged, and a cause of action immediately arose to recover twice the amount of that interest so paid. We can- Argued March 17, 18, 1902. Decided April not assent to the contention. It is the interest charged, not the interest to which a forfeiture might be enforced, that the statute regards as illegal. And a forfeiture may or may not occur. Interest greater than the legal rate may be charged, but it may be relinquished and recovery be had of the legal rate. This was decided in McBroom v. Scottish Mortg. & Land Invest. Co. 153 U. S. 318, 38 L. ed. 729, 14 Sup. Ct. Rep. 852, and repeated in Savings & L. Soc. v. Multnomah County, 169 U. S. 416, 42 L. ed. 803, 18 Sup. Ct. Rep. 392. Those cases also decided that illegal interest ("the greater rate" the statute calls it) must be paid, to be recovered back. Indeed, it is a contradiction to say that interest may be recovered back which has not been paid, and whether it is relinquished before suit or deducted by order of the court before judgment, it is in neither case paid by the judgment or by the satisfaction of the judgment. The fact of

[No. 190.]

14, 1902.

INState of Iowa to review a judgment which affirmed a judgment of the District Court of

N ERROR to the Supreme Court of the

courts; necessity of Federal question-see notes NOTE.-On Federal jurisdiction over state to Hamblin v. Western Land Co. 37 L. ed. U. S. 267, and Kipley v. Illinois ex rel. Akin, 42 L. ed. U. S. 998.

As to what is a Federal question; when considered-see note to Re Buchanan, 39 L. ed. U. S. 884.

On usury by national banks-see notes to

Farmers' & M. Nat. Bank v. Dearing, 23 L. ed. U. S. 196. and Citizens' Nat. Bank v. Gentry (Ky.) 56 L. R. A. 673.

That the statute of limitations runs from the discovery of concealed fraud-see notes to CarR. A. 799; Peck V. Bank of America (R. I.) 7 rier v. Chicago, R. I. & P. R. Co. (Iowa) 6 L. L. R. A. 826; Amaker v. New (S. C.) 8 L R A. 687, and Hammond v. Hopkins, 36 L. ed U. S. 135.

Woodbury County sustaining a demurrer to of $2,000 advanced to plaintiff, making a a petition in an action to recover back usu- total of $10,000, in a promissory note bearrious interest from a national bank. Af-ing interest at the rate of 10 per cent per firmed. annum, and as collateral security for said

See same case below, 111 Iowa, 583, 82 N. note plaintiff assigned to the bank all of his W. 963.

Statement by Mr. Justice McKenna: This is an action brought in the district court of Woodbury county, Iowa, under $8 5197 and 5198 of the Revised Statutes of the United States, relating to national banks, to recover the sum of $16,250, the amount of interest alleged to have been unlawfully charged and collected by the defendant bank. The original petition alleged as follows: "The plaintiff claims of the defendants, and each of them, the sum of $16,000, as money justly due plaintiff from defendants, on account of unlawful and usurious interest knowingly and unlawfully taken from the plaintiff within the seven years last past.

"The plaintiff further alleges that during said time he had various and numerous business transactions with the defendant bank; in all said transactions defendant charged and exacted a greater rate of interest for the use of moneys had and received by plaintiff from the defendants than the law recognizes or permits a national bank to charge for the use of money."

The petition also alleged that the books and accounts wherein said transactions were kept were in the possession of the defendant, and "that the plaintiff has no itemized statement of the account between him and [183]the defendant," and that therefore he was unable to incorporate in the petition a statement of the accounts or bill of particulars. The petition also alleged that there was due plaintiff the sum of $250, deposited by him with the defendant, which had never been drawn out or paid to him.

Upon demurrer to the petition the court ordered it to be more specific, "so far as to require the plaintiff to state his cause of action for usury in one count, and also to state his cause of action for a deposit in a separate count, and also to state the amount claimed as usury that was paid within two years next prior to the commencement of this cause of action." The petition was thereupon amended.

We are only concerned with the first and second counts, which alleged the usury. It was alleged in the first count that on or about the 27th of May, 1889, the plaintiff commenced doing business with the bank in the ordinary way between the bank and its patrons, and continued to so do business with it until it closed its doors on or about the 27th of August, 1896. That during that time the bank knowingly charged him with a greater rate of interest than allowed by the laws of Iowa, which amounted to more than $1, but the exact amount of which he was unable to state, because the books containing the transactions were in the possession of the bank.

That on the 24th of February, 1890, the bank added the amount of usurious interest charged by it to the legitimate indebtedness of plaintiff, and included both and the sum

equity in eighty-one contracts, covering 3,290.57 acres of land in Plymouth county,


That on the 4th of March, 1890, plaintiff executed to the bank a non-negotiable promissory note for $28,000, to cover all of his indebtedness to the bank, to wit, $14,500, in a draft, to pay on certain railroad lands, the $10,000 note herein mentioned before, and the unlawful and usurious interest knowingly reserved and charged prior thereto, and continued in said $10,000 note aforesaid. [184] and continued and renewed in the $28,000 note."

To secure said note plaintiff executed a mortgage of the land aforesaid.

"That the above note and mortgage, which were made upon the 4th day of March, 1890, did include the $10,000 illegal and unearned note, and interest to the amount of $17.10; and which said note and mortgage were made to date back and to bear date of March 1, 1890, thereby increasing the rate of interest on the $10,000 note to about 14 per cent per annum; and which said illegal, unlawful, and usurious interest was knowingly reserved and charged by the defendant, and included in and is a part of the $28,000 note aforesaid.

"That the unlawful and usurious interest knowingly reserved and charged by said defendant bank against the plaintiff herein, together with the interest which in law and in fact was and is forfeited, but was unlawfully and wrongfully put in a pretended judgment against plaintiff herein in a certain case entitled J. W. White v. D. H. Talbot et al., in the district court of Plymouth county, Iowa, and the forfeited interest which has since accrued, amounts in all to about $9,000; the exact amount plaintiff cannot state for the reason the accounts, books, papers, and records of said business between plaintiff and defendant bank is in the custody and possession of said defendant, and to which plaintiff has no access; and which amount of $9,000 is due and owing to the plaintiff from the defendant.”

The second count alleged the transactions between the plaintiff and the bank, substantially as in the first count, though in somewhat different order and form, and not so much in detail, and that the charges and reservations of usurious interest and its additions and continuations through the various forms of his indebtedness were without his knowledge or consent.

That the bank without the knowledge or consent of plaintiff delivered the $28,000 note and the mortgage which was executed to secure the same to one J. W. White, a stockholder in the bank, "who afterwards unlawfully, and before said note was due and [185] payable, commenced foreclosure proceedings in the district court of Plymouth county, Iowa."

That said White with certain officers of

lied on the statements of counsel and the allegation of the petition, and did not know that usurious interest was charged, and, "de ceived and misled by the fraud practised upon it," rendered judgment "for the sum of $13,125.40, more than would be actually due at maturity of said note and mortgage, to wit, March 1, 1895."

That the district court of Plymouth coun

the bank "did conspire with a view to the bringing about a foreclosure, and by this means adjudicate the liabilities which they would bear under the provisions of § 5329, Revised Statutes, because of the knowingly reserving and charging of unlawful and ille gal interest as heretofore set out in this amended petition. And that said interested parties as officers or agents of the said bank, unlawfully and with the intent to impose up-ty did not have jurisdiction of plaintiff or on the court, by fraudulent representations to the honorable judge of the district court in Plymouth county, Iowa, set out in their petition for said foreclosure the right and justice of foreclosure upon the sole ground of nonpayment of interest, which interest they, individually and collectively, had full knowledge of having been reserved and charged, and of which the defendant in said proceedings was without knowledge at that time, and the said interest was forfeited un-and stated as grounds of demurrer to the der the provisions of §§ 5197 and 5198 of the Revised Statutes.

"Par. 6. That the said J. W. White, in pursuance of the conspiracy formed with the said A. S. Garretson and W. L. Joy as aforesaid, and for the purpose of misleading and deceiving said district court and causing it to assume jurisdiction in said case, wrong fully and unlawfully suppressed the fact that said $28,000 note contained unlawful and usurious interest, and that all of the interest in said note and the indebtedness of the plaintiff to defendant and said Garretson had been forfeited, and suppressed the fact that said note had lost its interest-bearing power and was not due, and that no right of action then existed, and suppressed the fact that the court had no jurisdiction to try or hear said cause or render judgment therein.

"Par. 7. The plaintiff further states that on or about the 9th day of April, 1891, the said J. W. White, A. S. Garretson, W. L. Joy, and the firm of Joy, Hudson, Call, & Joy, and the defendant bank, did wrongfully and unlawfully combine, conspire, and confederate together to and did cause an action to be commenced and proceedings to be insti[186]tuted against the plaintiff *herein, and the iand described in said Exhibit 'B,' in the dis

the lands mortgaged because by reason of the circumstances set out, and that the note was not due, and the judgment, decree, and the execution were void.

That the said White and the defendant bank, on or about the 31st of May, 1894, took possession of the lands and property de scribed in the mortgage, and has forcibly held possession ever since.

The defendant demurred to the petition,

first count, among others, that it did not ap-
pear that any usurious interest had been
paid by plaintiff, and that it did not state a
cause of action within the provisions of §§
5197 and 5198 of the Revised Statutes of the
United States. As grounds of demurrer to
the second count it was stated: "1st. That
said action is barred by the limitations pre-
scribed in § 5198, Revised Statutes of the[187]
United States, under which said action pur-
ports to be brought."

The demurrer was sustained, and the

plaintiff not pleading further, the action was affirmed the judgment. Thereupon this writ dismissed. The supreme court of the state of error was allowed.

The supreme court of the state, passing on the case, said:

"The defendant demurred to the two action herein stated. Several grounds were counts of the petition alleging the cause of stated in the demurrer,-among others, that the statute of limitations had run against tained generally, and, the plaintiff electing plaintiff's claim. The demurrer was susclaim made in counts one and two of the pe to stand on his pleadings, the cause as to the

tition was dismissed.

"The $28,000 note was never paid by the trict court of Plymouth county, Iowa, in the plaintiff. A land mortgage was given to sename of said J. W. White, instead of the cure it, and that was foreclosed in Plymouth name of the defendant herein, The Sioux Na- the plaintiff thereon May 6, 1891. The land county, Iowa, and a decree rendered against tional Bank, the real party in interest. That covered by this mortgage was sold sometime said action was so commenced in the name thereafter, just when does not certainly apof said J. W. White for the purpose of avoid-pear, but it was more than two years prior ing and evading the force and effect of the to the commencement of this action. sections of the Revised Statutes of the Unit- "Section 5198 of the Revised Statutes of ed States hereinbefore set forth and referred to in this amendment."

the United States provides for the recovery back of twice the amount of unlawful interest paid if the action therefor be commenced within two years from the time the usurious transaction occurred.

That on the 6th of May, 1891, judgment was obtained in the foreclosure suit for the sum of $31,086.50, which included "the unlawful and usurious interest and the for"This action was begun October 7, 1896, feited interest." The land mortgaged was and at that time the plaintiff's cause of acsold "on special execution" to satisfy the|tion was barred, and the demurrer for that judgment, and, except three 40-acre pieces reason was properly sustained. There was was purchased by C. L. Joy, a director of the no error in striking a part of the prayer bank, for White. Sheriff's deeds were sub- from the third count of the petition. sequently executed to the purchasers and recorded in Plymouth county.

That the court in the foreclosure suit re

"The judgment is affirmed." [111 Iowa, 583, 82 N. W. 963.]

The assignments of error assert in various

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