
    Butterworth, receiver of the Island City Bank, vs. W. & J. O'Brien.
    A corporation cannot recover back usurious premiums paid by it on the loan or forbearance of money.
    THIS is an appeal from an order of Mr. Justice Sutherland, made at special term, sustaining a demurrer to the complaint, upon the ground that it does not state facts sufficient to constitute a cause of action. The complaint sets forth in due form the appointment of the plaintiff as receiver of the Island City Bank, a hanking incorporation, and then alleges that prior to his appointment as such receiver and within one year past, the said bank has paid and said defendants have received on the loan or forbearance of various sums of money, by said defendants to said bank, the sum of $10,000 in excess of interest" over and above the legal rate of seven per cent per annum, which he cannot state with precision or particularity, but charges that the defendants can do so. The plaintiff therefore j>rays for an accounting, to determine the amount thereof, and judgment for that sum. The complaint also contains a prayer for general relief.
    
      C. A. Peabody, for the appellant.
    I. The highest rate of interest allowed by law in this state is seven per cent. (1 R. S. 772, §§ 1, 2.) All contracts for a higher rate than that are void. Any excess paid above this rate may be recovered back. (1 R. S. 772, § 3.) The excess beyond legal interest could be recovered back at common law, without the aid of the statute. ( Wheaton v. Hibbard, 20 John. 290.) This is confessedly the case now as to natural persons.
    II. The statute of 1850, which enacts that “ no corporation shall hereafter interpose the defense of usury,” does not alter the rate of compensation for the use of money, or legalize a contract made by a corporation for a higher rate than that theretofore allowed by law.
    III. The “ defense” of usury, in that statute means a defense used to defeat a claim for the reason that usury had been reserved, or agreed to be paid, concerning it. A defense to a claim or debt by reason of a taint of usury. This is what was understood and meant by “ the defense of usury.” It has no other meaning, either in common parlance or in the books.
    IV. A corporation, therefore, is only prohibited by this statute, to interpose the fact of usury to defeat a claim, because of the taint of usury. It merely takes from corporations the right to insist on the forfeiture of the debt or claim. The statute was penal in its character. It was so as to corporations as well as natural persons. It is so no longer, as to corporations.
    V. The statute does not legalize a contract made by a corporation to pay what would be usury, if agreed to be paid by a natural person. The language used would have been far different if that had been intended. It does not repeal the laws against usury, as to corporations. It may, perhaps, be said to repeal the penalties against it, as to them. It assumes the continued existence of usury as to corporations, when it restrains them from interposing it as a defense. The penal feature, or one enforcing a forfeiture, alone is repealed.
    YI. There was in existence a system of legislation the purpose of which was to restrict the rate of interest on money. Ho reference is made to any feature of this system, and no suggestion of an intent to alter this rate. It stands as it was. Seven per cent is still the highest rate allowed by law. An evil was perceived, however, which the legislature proceeded to remedy. It was the use made of the “ defense of usury” by corporations. Hot that the rate of interest as to them was too low, or should in any manner be altered. Ho suggestion was made of this kind. But the use made of the “ defense of usury,” was the evil to be avoided and to which the legislature addressed itself when this statute was enacted. (Curtis v. Leavitt, 15 N. Y. Rep. 1.) These views are the same as those expressed in Curtis v. Leavitt, (1 N. Y. Rep. 1; see opinion of Range, p. 229.) He puts his decision of the question of the constitutionality of the law of 1850 as to contracts previously entered into on the ground that the law as it stood before was penal, and to warrant his decision on that ground he must have limited the operation of the act of 1850" to that feature of the law or that use of the defense, that the act of 1850 only affected it in its penal feature. So in speaking of the effect of the statute of 1850. He treats only of the defense of usury, and of that as operating to cause a forfeiture; and treats the repeal (as he terms it) of the former laws as extending only to the penal effect of the statutes. (See p. 229.) The question there necessary to be decided was whether the prohibition against that defense, as to corporations, related to contracts made before the law of 1850 was passed; and if so, whether it was valid as to such contracts. Shankland, J., p. 173, speaking of this law of 1850, svays, it does not impair the obligation of a contract, but merely deprives “ the borrower of a defense in the nature of a penalty or forfeitureand therefore, he says, that it may apply to prior contracts without the constitutional objection as to vested rights. (See also opinion of Brown, Jp. 151, 2.) He calls the law, which the statute of 1850 prohibits corporations to avail themselves of, “ severely penal in its provisions.” He speaks of the “ penal and savage nature of the act,” and proceeds to say that the retrospective character of the act does not make it void, because the rights which it took from the corporations were of the nature of a penalty; not vested and of perfect obligation. That case proceeds on the idea that the statute of 1850 affects only the penal feature of the law; and all the opinions proceed on that idea. In any other view it must, under the course of reasoning adopted there, have been adjudged as to that case unconstitutional as operating to divest a vested right. The result of that case is that the constitutionality of the law was sustained as to the contract in question made prior to the passage of the law, because it only took away the right to claim a penalty.
    VII. The complaint, as a pleading, is good. If it be indefinite, a demurrer is not the remedy. The remedy is by motion, that it be made definite under § 160 of the code. Every fact necessary to a recovery is stated here. (Prindle v. Caruthers, 15 N. Y. Rep. 425. Allen v. Patterson, 3 Selden, 476. Eno v. Woodworth, 4 Comst. 249. Richards v. Edick, 17 Barb. 260.) A demurrer will not lie for uncertainty.
    VIII. A defect in the prayer, or a supposed prayer for relief, is no ground for demurrer. The plaintiff is to be adjudged any relief to which he shows himself entitled. (Code, § 275. 
      Marquat v. Marquat, 2 Kenan, 341. Bishop v. Houghton, 1 E. D. Smith, 566. Andrews v. Shaffer, 12 How. Pr. 443.)
    
      Waldo Hutchins, for the defendant.
    I. A conclusive an-, swer to this action is, that it is brought in fact by a corporation ; which is prohibited, by statute, from interposing the defense of usury in any action. (Laws of 1850, ch. 172.)
    II. Had an action been brought by the defendants against the bank, upon an evidence of indebtedness, including interest at a greater rate than seven per cent, the bank could not have set up the defense of usury. The plaintiffs in that action would have recovered the full amount. But if this action can be maintained, in the case supposed the bank could at once have turned round and sued the O’Briens in the same court in which the original action was brought, and have recovered back a sum of money which had previously, by the judgment of the same court, been awarded to the O’Briens ; thus indirectly doing what could not be’ done directly. This would controvert well established' principles of law, and lead to a multiplicity of suits; which the law will not tolerate.
    III. The law of 1850 leaves parties, when dealing with corporations, to make their own bargains as to the rate of interest ; and when a contract is made, the corporation is prohibited from interposing the defense of usury, in any action. Such has been the effect given to the statute. Many of the rail road corporations in this state have issued bonds bearing a greater rate of interest than seven per cent; or if not bearing a greater rate of interest than seven per cent, such bonds have been sold at rates greatly below par, thus indirectly allowing more than seven per cent interest. To allow this action to be maintained would be to allow, in. all such cases, an action to be maintained by every company, to recover back the excess beyond seven per cent, whenever it was paid. Although this question has not been definitively passed upon by the courts, still it has been, in effect, decided in the case of Curtis v. Leavitt, (15 N. Y. Rep. 1.) Judge Comstock, at page 85, says: “ My impression is, that the act must he construed as a repeal of the statute of usury, as to all contracts of corporations, stipulating to pay interest; thus leaving the contracts in full force according to their terms, and that such an act is liable to no constitutional objection.” If this be so, then it is an end of this' case. But, besides, there was no law in force at the time the contract was made between the bank and the O’Briens, which made it an illegal contract. Then how, or upon what ground, after the money has been paid, can an action be maintained to recover it back ?
    IY. Again; the complaint is defective in this, that it does not set out, distinctly, the terms of the usurious contract. In Vroom v. Ditmas, (4 Paige, 526,) the chancellor states the rule to be as follows: “ The defense must be distinctly set up in the plea or answer, and the terms of the usurious contract, and the quantum of the usurious interest or premium must be specified and distinctly and correctly set out, and the defendant must prove the usury as laid.” The same rule also applies to a substantive cause of action. (See 8 Paige, 457; 3 Hill, 564.) The allegation in the complaint is that the defendants received “ at least the sum of $10,000,” &c. and then the plaintiff distinctly avers “ that he cannot state the precise amount of such excess,” &c.; and he goes on to state that the defendants can inform him, and prays for an accounting. To allow this action to be maintained would violate all rules of pleading applicable to actions brought upon usurious contracts.
   By the Court, Hogeboom, J.

This case presents the question whether a corporation may recover back usurious premiums paid by it on .the loan or forbearance of money. It involves the construction of the act of 1850, which is as follows: “Ho corporation shall hereafter interpose the defense of usury in any action.” (Laws of 1850, ch. 172, § 1.) Our statute forbids any person or corporation, directly or indirectly, to take any greater sum than at the rate of seven per cent per annum for the loan or forbearance of money, (1 R. S. 771, 2, §§ 1, 2,) and as a consequence of, or penalty for, the violation of this statute, authorizes any person paying such larger sum to recover back such excess, if the action be brought within one year after the payment. (§ 3.) The benefit of this latter section (prior to the act of 1850) probably attached to corporations, although it is observable that the second section, which forbids the taking of usury, uses both the words “person” and “corporation,” and extends the prohibition to both; whereas the third section, which authorizes a suit to recover back the usury, uses only the word “person,” and not “corporation.” Subsequent sections of the statute declare void all bonds, notes, contracts and evidences of debt reserving any usurious premium (§ 5;) authorize the prosecution thereof to be restrained by injunction, (§ 14;) and make the taking of usury a misdemeanor. (§ 15.) In this shape, the statute against usury, as amended in 1837, remained until the act of 1850 was enacted, which simply provided that “no corporation should thereafter interpose the defense of usury in any action.” This statute, like every other of general application, should receive a construction in accordance with the intent of its framers and in furtherance of the object sought to be accomplished. It was probably intended, in part at least, for the benefit of corporations, to enable them to obtain, in critical emergencies, pecuniary facilities for the promotion of the objects of their incorporation. They are forbidden to interpose the defense of usury; and therefore when prosecuted upon a usurious contract, they were bound to pay or suffer judgment against them. And I think the fair construction of the statute is that they were bound to pay, not only the sum actually borrowed, with legal interest, but also the usurious premium. The law creates no distinction between the sum actually borrowed with interest, and the excess over seven per cent. It declares that they shall not interpose the defence—the defense for any purpose. What they have agreed to pay, they must pay. The contract is made legal as to them, by removing every legal obstacle to a recovery against them. Hence evidences of debt securing or reserving as against them wHat would otherwise be an usurious premium are not void or illegal, but are lawful, and the whole amount may be recovered in an action. If so, then I think it cannot subsequently be recovered back. It would contravene well settled principles, and all legal simplicity, first to allow a recovery of the usury, and then to allow it to be immediately recovered back. I do not understand that the law allows such a thing to be done now in the case of natural persons, as to whom the laws against usury are in nowise repealed dr modified. They may recover back money actually paid by way of usury, first, because the agreement to pay and the act of payment are illegal transactions, and secondly, because the law presumes that the urgency of their pecuniary necessities may have left them no practical option, except to obtain the money at the time of the original loan, on such terms as they could. But if actually prosecuted on the usurious contract, I know of no law or legal rule by which they may suffer a recovery and then turn immediately round and by a prosecution on their part get back money, as to which they had a legal and valid defense against its recovery, when originally prosecuted. If these views are correct, they dispose of this case. If a suit for the usurious premiums could not be successfully defended, neither can they be voluntarily paid, or compulsorily collected, and then be restored to the party originally paying them, through the agency of a suit instituted for that express and only purpose. Such is this suit, and it must fail, for the reasons stated.

Again; the only just or legal foundation (prior to the statute of 1850,) for the suit to recover back usurious premiums paid, was the illegality of the original transaction—the fact that the receipt of the money by the usurer was forbidden. But the statute of 1850, by prohibiting the defense, has removed the taint of usury. It is no longer, as to corporations, illegal. It has become a lawful and proper transaction. Hence the reason of the rule which allowed the action to recover back the money fails. The illegality being removed, the foundation for the action no longer exists.

It is argued, that this is giving the statute of 1850 a more extended meaning than was designed by its framers—that it was only intended to take away the defense of usury—to prevent the avoidance of a contract otherwise valid, for that cause; and not to pronounce usury lawful, or to repeal the law which forbids it. It is argued that full effect may be given to the statute of 1850, by preventing a party from defeating a contract on account of usury, or from setting it aside and canceling it in a court of equity; and that this is the more benign and equitable construction, and most consistent with the spirit of the law, inasmuch as it compels a party to do just what' is equitable, to wit, to pay the money actually borrowed and legal interest, and relieves him from what is inequitable, oppressive, and against the policy of the law.

But I do not find sufficient foundation in the phraseology of the law, upon which to build such a construction. The language is general and unqualified. It takes away the defense —the objection of usury. It strikes it out of existence, and the ordinary consequences must follow. It not only disallows the defense, but it forbids it to be used in any way defensively; that is, to accomplish the same object by affirmative action, as, for example in a proceeding to vacate or set aside a contract, as would be accomplished by strictly defensive action, as for example, in setting up the usury in an answer to an action upon the contract. If it goes this length, and it was rather conceded on the argument that it did, then I think it goes still further, and forbids not only a defense to an action for the usury or usurious premium, but forbids an action to recover back the usurious premium. The money borrowed, the legal interest, and the usurious premium are all mingled together in one transaction, form part of one single and indi- . visible contract, and when the statute says the defense of usury shall not be interposed to it, I think it means to each and every part of it—no one part more than another. At least I feel bound to put that construction upon it, until the legislature speak in more specific and discriminating terms.

[New York General Term,

September 20, 1858.

Davies, Sutherland and Hogeboom, Justices.]

I think this view of the statute of 1850 is taken, in substance, by all the judges in the court of appeals who delivered opinions in the case of Curtis v. Leavitt, (15 N. Y. Rep. 9. See opinion of Comstock, p. 85; of Brown, pp. 152-154; of Shankland, p. 173; of Paige, pp. 228-230; of Selden, pp. 254, 255.)

The result is, that the complaint is radically defective, and cannot be sustained. It becomes unnecessary, therefore, to consider the other question discussed on the argument, whether the usurious transactions were set forth with sufficient particularity and precision to uphold the complaint as a pleading.

The order of the special term should be affirmed, with costs.  