O'Hare v. Second National Bank of Titusville. ingly and willfully to defeat the restriction in the 29th section referred to, it is not proper to say or to speculate upon. Therein, however, lies the difference between the case of the Morris Run Coal Company v. Barkley Coal Company, 18 P. F. Smith, 174, cited and relied on in this case. There the contract was void because in restraint of trade, both parties were in pari delicto, and the draft sued on was the provided instrument for carrying the illegal agreement into execution. Hence, it was said there," the illegal consideration entered directly into the instrument, and is followed up, because the law will not permit itself to be violated by mere indirection." Here the fact of the excess of the indebtedness, and the bank's knowledge of the fact, were only collateral to the contract of discount, and not presumed to be within the knowledge of the borrower, and the note was not intended by both parties to be the instrument of committing a fraud upon the law. Both the consideration and the note were lawful in themselves. The affidavit does not charge combination or conspiracy to defeat the law. Other considerations connect themselves with the question. It was evidently not the intention of Congress to aim at the securities taken by the bank and declare them illegal, as it was in the 28th section, forbidding mortgages other than those taken to secure previously contracted debts. The securities not being referred to in the 29th section, or declared illegal, we are at liberty to inquire into the true purpose of Congress, in considering whether we should declare the securities themselves illegal by implication. If such were not the real intent of Congress, we ought not to raise an implication to defeat recovery. Evidently the limitation of the indebtedness to the one-tenth in the 29th section was intended as a general rule for conducting the business of the bank; a rule laid down from experience to regulate its loans for its own best interest and those of stockholders and creditors, not a rule to regulate its customers. It was, as remarked in Fowler v. Scully, a regulation to prevent these associations from splitting on the rock which has ruined so many banks, to wit, that of lending too much of their capital to one person or firm. The intention being to protect the association and its stockholders and creditors from unwise banking, we cannot suppose it was meant to injure them by forbidding recovery of the injudicious loans. We should not interpret the section so as to carry its prohibition beyond its true purpose, and thus cause it to destroy the very interest it intended to protect by the Lucas v. Government National Bank of Pottsville. regulation. To do so would be, as said by the court below, to demand a penalty in favor of an individual for an offense against the country, and invite to dishonesty under a pretense of a regard for the law. As to the usurious interest we shall say nothing, the defendant in error having, in his paper-book, agreed to correct the judgments by proper deduction. We leave the enforcement of this agreement to the court below, if the correction should not be voluntarily made. Judgment affirmed. LUCAS V. GOVERNMENT NATIONAL BANK OF POTTSVILLE. National bank· (78 Pennsylvania State, 228.) Usury-Set-off — Limitation of actions for excessive interest. Where a National bank exacts illegal interest on the discount of a note the interest-bearing power of the obligation is destroyed and there will be no time from which it can bear interest. In an action by a National bank on negotiable paper discounted by it, the defendant may set off the amount of interest in excess of the lawful rate paid on other transactions. The interest paid by the defendant beyond that authorized by the act of Congress belongs to him, and the bank can hold it only for his use. * In such action, a State statute limiting the time within which action to recover excessive interest may be brought does not apply. A CTION on promissory notes. The opinion states the case. D. A. Jones and J. W. & J. Ryon, for plaintiffs in error. G. R. Kaercher, for defendant in error. GORDON, J. This was an action brought by the Government National Bank of Pottsville against John Lucas & Co., on two certain notes and one check, all of which were drawn by George J. Richardson to the defendants, and by them indorsed to the plain * See Overholt v. Nat. Bank, post, wherein this case is explained. Lucas v. Government National Bank of Pottsville. tiff. John Lucas, on the part of the defendants, filed an affidavit of defense, setting forth, "That the said John Lucas & Co. were the payees on the notes and check upon which suit is founded, and that George J. Richardson was the maker. That said notes and check were sold to the said plaintiff at a discount of from 18 to 24 per cent per annum, and that the defendants received from the plaintiff the amount of said notes and check, less said rate of discount. In addition to the above, said plaintiff has received from George J. Richardson (corrected by a supplemental affidavit to read'defendants,' instead of George J. Richardson'), on his (their) notes, not less than $3,000 in excess of the legal rate of interest, the same having been purchased by the plaintiff at about the rate of 21 to 24 per cent per annum discount from the said defendants; and said defendants claim from the plaintiffs double the amount of interest under the act of Congress." On the 7th day of July, 1873, on motion of the plaintiffs' counsel, the court entered judgment against the defendants for the whole amount of the plaintiffs' claim with interest from and after the maturity of the paper, striking out and disallowing, however, 18 per cent, the amount of discount. The judgment is erroneous in that it includes interest on the paper in suit from the time it fell due. The act of Congress speaks in this wise: "And knowingly taking, receiving 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 of debt carries with it, or which has been agreed to be paid thereon." Rev. Stat., § 5198. Observe, it is the entire interest which the bill or note carries with it that is forfeited, and not merely that which the party borrowing may agree to pay. The illegal act destroys the interestbearing power of the obligation, and as there can be no point in the history of such paper at which it is freed from the taint of illegality, so it follows there can be no point of time from which it can bear interest. The plaintiff was entitled to recover the face of the note and check, and no more. Brown v. Second Nat. Bank of Erie, 22 P. F. Smith, 209 (ante, p. 849). Technically, the latter part of the affidavit of defense is bad, for it claims, as a set-off, that which the act of Congress imposes as a penalty on the usurious transaction, to wit, double the amount of interest paid. In this, defendants had no such interest as would enable them to use it by way of defalcation, for it could be ac Lucas v. Government National Bank of Pottsville. quired only through an action of debt under the statute; and until the forfeiture was pronounced in their favor, by judgment of the court, they had nothing therein which would be the subject of set-off. But, as we hold that the defendants are entitled to defalk the amount of the usurious discounts, which they paid the plaintiffs on previous transactions, we are disposed to treat the affidavit as faulty only in form, rather than substance. The money paid to the plaintiff, over and above that which the act of Congress authorized it to receive, belonged to the defendants, and the bank could hold it only for their use. This very point was raised and decided in Thomas v. Shoemaker, 6 W. & S. 179. That case ruled that usurious interest paid might be recovered back in an action for money had and received, and that it was not questionable, but that such interest secured on previous transactions might be defalked against the plaintiff's claim in the suit then pending. This decision was made under the act of 1823, then in force, by which, where more than legal interest was received, the money or other things lent was wholly forfeited. The reason lying at the foundation of this and all similar decisions is very obvious. 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 was in the taker. In such case he is to be held as one wrongfully in possession of his neighbor's property. This reason applies a fortiori to the case in hand, for these National banks are the mere creatures of the act of Congress. From it they derive all the powers they possess; when, therefore, they act contrary to its express provisions and mandates, they usurp powers that do not belong to them, and such act is clearly ultra vires and void. In the case now in hand, if the affidavit of John Lucas be true, this bank has taken from the defendants some $3,000, which the act of Congress has not only, in express terms, declared it should not take, but impose a penalty upon it for taking. By no right, then, does the plaintiff hold this money; it has no property therein, and its possession thereof is but that of a trustee or bailee of the defendants. Another error into which the court fell was in supposing that the case came within the provision of our act of March 28th, 1858, First National Bank of Carlisle v. Graham. which provides, that where the debt and excessive interest have been paid, no action to recover back such excess can be maintained but within six months after such payment. But this case does not come under that act, but, as we have seen, under the act of Congress, which operates upon a subject of its own creation, and over which it has supreme control; hence our act cannot be made to supplement the National statute with a limitation not found in it. As the only limitation found in the act of Congress applies alone to the action for the penalty, it follows that the claim of the defendants can only be barred by a failure to sue for the same within the period of six years after it accrued. The judgment is reversed and a procedendo awarded. FIRST NATIONAL BANK OF CARLISLE V. GRAHAM. (79 Pennsylvania State, 106.) National bank - Deposits for safe-keeping — Liability of bailee. In an action against a National bank to recover bonds deposited with it for safe-keeping, without compensation, and which the bank alleged were stolen from its vaults, held, (1) that the bank was liable only for gross negligence; (2) that its failure to give prompt notice of the robbery was a question for the jury as bearing on the question of negligence; and (3) that while the mere voluntary act of the cashier in receiving the funds would not subject the bank to liability, yet if the deposit was known to the directors and they acquiesced in its retention, a contract relation was created by which the defendants would be held bound.* A CTION of assumpsit to recover the value of four United States bonds of $1,000, cash, deposited with the defendant by the plaintiff for safe-keeping, and for which there was given to the plaintiff the following receipt: "CARLISLE, Pa., October 22d, 1868. "Miss F. L. Graham has left in this bank, for safe-keeping, four thousand dollars in U. S. 5–20 bonds of 1867, to be returned on the return of this receipt. "CHARLES H. HEPBURN, Cashier." When the plaintiff demanded the bonds, they were not delivered to her, the officers of the bank informing her that they had been * See Wiley v. First National Bank, post, and note. |