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Brown v. The Second National Bank of Erie.

for V. M. Thompson, of which those in suit are the culmination, in violation of the express words and against the policy of its fundamental law, it cannot recover at all any part of its claim.

"2. That having charged and received unlawful interest on money, notes and bills preceding those in suit, it thereby forfeited and became liable to pay to V. M. Thompson double the amount of interest so paid, and that he has a right to defalk those amounts and have the same credited on the notes now in suit against his surety.

"That if he is not entitled to this credit he should, at least, have credit for the excess of interest or discount that he has paid from time to time as of the date of the notes on which this suit is brought.

"3. That he is entitled to an abatement of the interest on the notes in suit because they were discounted at a higher rate of interest than six per cent per annum.

"I believe these embrace substantially all the legal propositions presented by the defendant's counsel, pertinent to the issues raised by the facts in the case.

"From the first and second of these propositions we dissent.

"The act of Congress is the law of these National banks. It prescribes no such penalty as a forfeiture of the debt for a violation of its restriction as to the amount of interest to be charged. It does impose a penalty, and the only duty of the courts is to inflict it in the mode prescribed. For having taken usurious interest on previous loans the bank might have been sued within two years and double the amount so received recovered by the party injured. This was not done, and therefore all redress for that infraction of the law is gone. It is enough to say of that claim that it is outlawed without deciding whether unsued for, it could have been claimed as a set-off even within the two years after the penalty had been incurred.

"We therefore charge you that the plaintiff is not barred from its recovery upon the notes in suit, by reason of its having taken usurious interest upon them, or on any previous notes or drafts discounted by it from the claim.

"Nor is the plaintiff entitled to set off or claim credit for double the amount of interest paid by Thompson on notes or bills previously discounted by the defendant for him.

"To the third proposition we agree, and say to you that for any

Brown v. The Second National Bank of Erie.

excess of interest taken by the plaintiff in the discount of notes or drafts previous to those in suit for Thompson in the regular course of business, he is entitled to a credit, and the defendants may claim it as a set-off in this case. Such amounts being received in violation of law cannot be retained, and neither time nor contract will sanctify them or legalize the defendant's possession as against the rightful owner.

"We also approve the fourth proposition, that the defendants are entitled to an abatement of all interest or discount charged for the loan of money upon the notes in suit prior to their maturity. This is conceded. This amount, Mr. Curry states, was $355, which the defendants are entitled to have credited on the notes and deducted therefrom at their respective dates."

The verdict was for the plaintiff for $23,849.50.

The defendants removed the record to the Supreme Court, by writ of error, and there assigned for error the rulings of the court in the charge.

J. R. Thompson and C. B. Curtis (with whom was B. Grant), for plaintiff in error.

J. C. Marshall and J. H. Walker (with whom was F. F. Marshall), for defendant in error.

SHARSWOOD, J. A close examination of the words of the act of Congress of June 3d, 1864, under which the defendants in error were organized and incorporated as a National bank, will show, we think, that it was intended to draw a distinction between the case of the reservation of a discount at an unlawful rate of interest and the actual consummation of the usury by the receipt of it by the payment of the note or loan when due. It is declared by the 30th section that "the knowingly receiving, reserving or charging a rate of interest greater than aforesaid shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence carries with it, or which was agreed to be paid thereon." This has evident reference to the enforcement of the contract by judicial process, in which case it is provided that it shall be held and adjudged that the bank shall forfeit the entire interest that is, shall recover only the sum actually loaned or advanced without any interest at all. There is a marked difference in the language of the clause which follows and which makes provision for the case

Brown v. The Second National Bank of Erie.

66

where the usury had been consummated by the actual receipt by the bank of the usury. And in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back in any action of debt 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." Upon any other construction it would be difficult to make the different clauses of the section consistent. For if on payment simple interest is forfeited, why not also provide for its recovery back by action as well as for the penalty of double the amount? Nothing would have been easier than to have expressed the intention that the entire interest should be recovered back in all cases, but double the amount only by an action instituted within two years. The maxim well applies, Expressio unius est exclusio alterius. If there were no special limitations in the act, and it has no necessary connection with the other clauses, no consistent construction could be put upon the language of the section taken altogether, except by holding that no action can be maintained for the simple interest, neither before nor after it is paid; but as to that, the remedy is by defense to the action on the note or loan, in which case the entire interest" shall be held and adjudged" to be forfeited. There may be a good reason for this if it was the intention of Congress to give the bank a locus pænitentiæ so far as the penalty of double the amount was concerned, and allow them to save it by not actually taking it upon the maturity and payment of the debt. This accords with the general current of the decisions upon the construction of the usury laws whenever the contract is not itself declared to be void by the statutes. It is actual payment on the foot of the usurious contract, either in part or in whole, which consummates the usury, and from which the limitation of the action for the penalty commences to run, but lawful interest may be recovered in an action for the principal. Wycoff v. Longhead, 2 Dall. 92; Turner v. Calvert, 12 S. & R. 46; Musgrave v. Gibbs, 1 Dall. 216; Kirkpatrick v. Houston, 4 W. & S. 115; Lamb v. Lindsey, id. 44; Thomas v. Shoemaker, 6 W. & S. 179; Oyster v. Longnecker, 4 Harris, 269; Craig v. Pleiss, 2 Casey, 271. These views dispose of the only assignments of error which we consider it necessary to discuss.

Judgment affirmed.

Fowler v. Scully.

FOWLER V. SCULLY.

(72 Pennsylvania State, 456.)

National bank-Validity of mortgage to.

F. gave to a National bank a mortgage to secure notes thereafter to be dis counted for him. Held, that under the National Currency Act of June 3, 1864, the mortgage was void, and could not be enforced against the assignee of F. for benefit of creditors of F.*

SCIR

CIRE FACIAS issued by John D. Scully in trust for the First National Bank of Pittsburg against Silas S. Fowler and William Vankirk, to enforce the payment of a mortgage given by Fowler to Scully in trust for the bank. Vankirk was the assignee of Fowler, for benefit of his creditors. The object of the mortgage is thus recited in the instrument: "Whereas, the said bank hath agreed to discount for said Fowler an amount in the aggregate not exceeding $100,000, such negotiable business paper as he shall offer for that purpose, consisting chiefly of bills of exchange, or drafts drawn by him on his customers on account of work, etc., done, and orders filled by him for them from time to time in the course of his business; and, whereas, said Fowler wishes to avoid the necessity of procuring the additional indorsement to said paper by a third party."

*

*

*

The defense was by Vankirk to the effect that the mortgage was void under the act of Congress relative to banking companies, of June 3, 1864. The court ordered judgment for plaintiff. The defendant brought error to this court.

G. Shiras, Jr., and Hopkins & Lazar, for plaintiff in error.

M. W. Acheson, for defendant in error.

AGNEW, J. The First National Bank of Pittsburg asked the District Court to enforce by scire facias the payment of a mortgage for future advances. The defendant, the owner of the mortgaged land, asserts that the mortgage is forbidden by the act of Congress,

* See Wood v. People's National Bank post, and note.

Fowler v. Scully.

which confers upon the bank its charter and all its powers. The simple question is: Is the mortgage valid or void; and if void, will the law enforce it? In deciding this question, we must be guided by the Federal laws and Federal precedents, for the subject is one of Federal origin and Federal control. The plaintiff is a corporation created and governed by the act of Congress, approved the 3d of June, 1864, commonly called the National Bank Act. What is the Federal rule to be applied to such a corporation? In the Bank of U. S. v. Dandridge, 12 Wheat. 64, Justice STORY lays down this rule: "Whatever may be the implied powers of aggregate corporations by the common law, and the modes by which these powers are to be carried into operation, corporations created by statute must depend, both for their powers and the mode of exercising them, upon the construction of the statute itself." For this he cites the following language of Chief Justice MARSHALL, in Head v. Prov. Ins. Co., 4 Cranch, 127: "Without ascribing to this body, which in its corporate capacity is the mere creature of the act to which it owes its existence, all the qualities and disabilities annexed by the common law to ancient institutions of this sort, it may be correctly said to be precisely what the incorporating act has made it; to derive all its powers from that act and to be capable of exerting its faculties only in the manner the act authorizes." These propositions are repeated by himself in Dartmouth College v. Woodward, 4 Wheat. 636, and by TANEY, C. J., in Bank of Augusta v. Earle, 13 Pet. 587, and Penrise v. Chesapeake & Delaware Canal Co., 9 How. 184. In our own State, the same doctrine is recognized in the case of a National bank. Justice STRONG said: "The bank is a creature of the act, dependent on it for all its powers, and controlled by all the restrictions which the act imposes." Venango National Bank v. Taylor, 6 P. F. Smith, 14. This being the settled rule of interpretation, the question is: "Does the act of Congress authorize or permit a National bank to take a mortgage of lands, to secure the payment of future loans and discounts?"

The banking powers of these associations are to be found in the 8th section, and are "to carry on the business of banking by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt; by buying and selling exchange, coin and bullion; by loaning money on personal security; by obtaining, issuing and circulating notes according to the provisions of the

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