
    The Metropolitan Trust Company or the City or New York, Plaintiff, v. Alice Hawley Truax, as Administratrix C. T. A., of the Goods, Chattels and Credits of Chauncey S. Truax, Deceased, Defendant.
    (Supreme Court, New York Trial Term,
    May, 1910.)
    New trial—Grounds — Verdict or findings contrary to law or evidence — Excessive damages — Illegal interest.
    Usury — Penalties how recovered.
    The penalty for the exaction of illegal interest paid pursuant to a stipulation made at the time of making a loan must be enforced in an action brought for that purpose and cannot be pleaded either as a defense or as a counterclaim.
    Where the plaintiff, in an action to recover a loan, recovers in addition the amount of illegal interest stipulated for at the time of making the loan, a motion to set aside the verdict and for a new trial will be granted, unless plaintiff elects to reduce the verdict by the amount of such interest.
    
      Motion to set aside a verdict and for a new trial.
    Davies, Stone & Auerbach (Herbert Barry, of counsel), for defendant and motion.
    Parsons, Closson & McIlvaine (Austen G. Fox, of counsel), for plaintiff, opposed.
   Giegerich, J.

The illegal interest stipulated for at the time of the original loan appears to have been paid by the borrower and not merely to have been reserved by the lender. It seems, therefore, that the penalty for that exaction must be enforced in an action brought for that purpose and cannot be set up as matter of defense or counterclaim in this action. Barnett v. Muncie Nat. Bank, 98 U. S. 555, 558; Hessberg v. Matter, 64 Misc. Rep. 97. The illegal interest agreed upon at the time of the renewal of the loan appears to have been paid to the extent of $5,000 only. The sum so paid cannot be set off in this action, but may be recovered in a penal action. The reservation of an illegal rate, however, prevents the recovery of any interest not already paid. Banking Law, § 74; Barnett v. Muncie Hat. Bank, supra. Consequently the verdict should be reduced by the amount of the interest for the period between May 14, 1907, and the commencement of the action. The plaintiff detached coupons of the face value of $45,000, which must be taken to be their actual value in the absence of evidence to the contrary. The interest paid by Mr. Ertz as interest, and excluding the sums which the parties described as commissions, amounted to $24,000. The difference is $21,000, and I think the verdict should be further reduced to the extent of one-fortieth of that sum, or $525. If the plaintiff elects to take a reduction of the verdict to the extent indicated, it will be so ordered and the motion for a new trial will be denied. Otherwise the motion will be granted.

Ordered accordingly.  