
    NATIONAL STATE BANK OF NEWARK v. BOYLAN.
    
      N. Y. Superior Court; Special Term,
    March, 1877.
    Demurrer.—Counter-claim. —Pleading. —National Bank. — Usury.
    Under the United States statutes prohibiting national banks from taking greater interest than allowed by the State where they are located, if the borrower voluntarily pay usurious interest, he cannot recover it back, unless within two years after the usurious transaction, he brings the action provided by the statute for that purpose.
    
    Advantage of a limitation of such a kind may be taken by demurrer instead of by answer.
    Whether, where some parts of a counter-claim refer to interest paid within the two years’ limitation and other parts not, a demurrer will lie to the whole, guere.
    
    One of two joint defendants cannot set up any matter for a counterclaim, unless there can be under the pleadings a several judgment against him.
    Demurrer to answer.
    The National State Bank of Newark brought this action against James B. Boylan and John Boylan to recover the amount of two judgments obtained by the plaintiff against the defendants in the supreme court of New Jersey ; one being for $3059.01, obtained August 25,1876, and the other for $1851.94, obtained September 18, 1876.
    The defendant John Boylan, answering separately, denied any knowledge or information sufficient to form a belief as to each and every allegation of the complaint not expressly admitted or denied.
    Then on information and belief he alleged the incorporation of the plaintiff originally under the laws of New Jersey and subsequently under the laws of the United States as a national bank. “That at the time of the commencement of this action there was not nor is there now any claim, demand, or cause of action existing in favor of said plaintiff and against this defendant upon which defendant was primarily or originally liable. And that, if any claim, demand, or cause of action existed at the time of the commencement of this action, or now exists against defendant and in favor of plaintiff, that the same is and was the original and proper debt or obligation of the defendant James B. Boylan, and this defendant is only liable thereon as surety and conditionally. ” That plaintiff had sufficient collateral security in its hands to pay the debt, but had refused to so apply it.
    By way of counter-claim the defendant alleged on information and Relief that at the time of making several loans and discounts set forth in detail the legal rate of interest in New Jersey was seven per cent. That at the same time the United States statute allowed national banks to receive the same interest allowed by the laws of the State where the bank is located, and no more, and that when a greater amount was knowingly taken, the entire interest should be forfeited ; that in case the greater rate had been paid, the person by whom it had been paid or his legal representatives could recover hack from the association taking or receiving it, within two years from the time the usurious transaction occurred, twice the amount of interest so paid. That plaintiff’s bank is located at Newark, in the State of New Jersey, and that, prior to the making of each of the discounts referred to, plaintiff and defendant, in violation of each of the said statutes, knowingly made a usurious agreement for said loans, and that usurious interest was received by plaintiff in pursuance of such agreement.
    After setting forth more than sixty separate usurious loans or discounts between February 11, 1871, and June 7, 1875, the answer continued, in substance, that each of the notes so discounted was either the note of the defendant, John Boylan, or a note made for the purpose of raising money, and had no valid or legal inception prior to the discount thereof. Also, that prior to the discounting of these notes the plaintiff made various loans to the defendant, for which he paid usurious interest, amounting in all to $5,000 over and above. lawful interest. That prior to the action the plaintiff did, as aforesaid, have and receive to the use of the defendant the sum of $7,368.14, for money paid by him to said plaintiff in excess of legal interest upon loans. Wherefore he asked for a dismission of the complaint as to him, and judgment for $7,952.53.
    The plaintiff demurred to this answer.
    
      Martin & Smith, for plaintiff.
    
      Oliver J. Wells, for defendant.
    
      
      Compare Hintermister v. First Nat. Bank, 64 N. Y. 212 ; rev’g 3 Hun, 345.
    
   Sedgwick, J.

The decision of this demurrer involves a construction of section 30, of 13 U. S. Stat at L., June 3, 1864, as to the time within which an action for an excess of interest received by the plaintiff on a usurious loan by it to the defendant may be brought.

The act declares that every association may receive on a loan or discount, “interest at the rate allowed by the laws of the State or Territory, where the bank is located, and no more.” . . “And the knowingly taking,” &c., “a rate of interest greater than aforesaid shall be held and adjudged a forfeiture of the entire interest, which the . . . evidence of debt carries with it, or which has been agreed to be paid thereon. And, in case a greater rate of interest has been paid, the person or persons paying the same . . may recover back, in an action of debt, twice the amount of interest thus paid, from the association taking . . the same: Provided, That such action is commenced within two years from the time the usurious transaction occurred.”

Whether or not the statute gives a general cause of action, based upon the illegality of a national bank taking more interest than is allowed by the law of the State where the bank is situated, as declared by the first part of the section, in addition to the particular causes of action given thereafter, such general cause of action to be governed by the statute of limitations of the State or of the United States, in case there should be one, is to be determined solely by the intent of the section. It was competent, of course, for Congress to declare that a borrower should have no such general cause of action.

I am of opinion that the section provides in its special clauses, for all the causes of action that result from an infraction of the section. The special clauses are so framed and attached to the rest of the section, that thereby is implied the negative of there being a general cause of action so to call it.

The statute did not take away the right to recover the principal of a loan on which usurious interest had been taken or agreed for. It proceeds to say, that the taking or charging a usurious rate, is to be held a forfeiture of the entire interest, and if a usurious rate has been paid, twice its amount may be recovered back, provided the action has been begun within two years. An entire scheme of protection, involving a policy peculiar to it, is thus given to a borrower. In case the interest has been paid, twice the amount of the usurious rate may be recovered, and in all other cases, the bank forfeits all right to the interest.

At common law, if the borrower were oppressed, as he was supposed to b¿, by the usurer, and paid the usurious rate, he could recover it, because, although in pari delicto, he was a victim. The United States statute gives an action in such a case of a peculiar kind, which makes the borrower whole and enforces the policy of the statute.

At common law, if he had not paid the usurious interest, and then, on demand, voluntarily paid it with the principal due, in the absence of some statutory action he could not recover the excess of interest back. Under the United States statute the interest being forfeited, if the borrower voluntarily pays it, without something more, but for the action to be brought within two years, the borrower cannot recover it back.

So that we see the statute by a way of its own provides for all the cases in which a borrower may be protected, just as did the common law, and in such a form, that to me it seems clear, that the particular provisions are meant to include all the consequences to be attached to a violation of the provision that says a bank shall take the interest of the particular State and no more (Farmer’s, &c. Nat. Bank v. Dearing, 1 Otto, 29 ; Palen v. Johnson, 50 N. Y. 49 ; Smith v. Marvin, 27 Id. 137; Wheaton v. Hibbard, 20 Johns. 290). The reasoning of Palen v. Johnson is to be applied in this case, and the United States statute takes hold of the right of action, under the general prohibition, and regulates its exercise, just as in that case the statute took hold of the right under the section declaratory of the common law and regulated its exercise.

Palen v. Johnson is a precedent to allow advantage being taken by demurrer of a limitation of this kind, instead of by pleading the statute of limitations.

On general principles it seems to me clear, that, if, especially when all circumstances of oppression are wanting, the borrower chooses to pay voluntarily, his action is confined to the statute.

There are some parts of the counter-claim which refer to interest received within two years. There is a doubt raised, whether part of the counter-claim, being on this point good, a demurrer will lie to the whole counter-claim. It is unnecessary to decide this at this time, because I find a fatal objection to the whole counter-claim.

It is based upon an objection peculiar to the defendant John Boylan, individually. This is not proper matter for a counter-claim, unless [there could be, under the pleadings, a several judgment against him. There could not be, because the complaint is upon a judgment against him and another jointly. Without at all deciding that if this judgment were against an indorser and a maker of a note, it is joint, there is no allegation of the answer that such is the character of the judgment, or that the defendant is liable thereon as a surety. The answer says that if the plaintiff have any claim against him, it is only on his liability as surety, but this supposition of possibility does not refer to the judgment pleaded, for the defendant denies that there was such a judgment, by denying any knowledge of its execution or any information sufficient to form a belief as to its existence (Perry v. Chester, 12 Abb. Pr. N. S. 131; Bathgate v. Haskin, 59 N. Y. 533).

The demurrer should be ¡Sustained with costs with leave to amend within twenty days upon payment of costs. No amendment should be permitted, however, which includes in a counter-claim sums paid for alleged usurious interest, both before and after the commencement of the two years specified by the statute, but they may be separately stated, so that the question of law may be clearly settled.

There was no appeal, and defendant amended his answer.  