National Bank of Auburn v. Lewis.

v. Second National Bank of Erie, 72 Penn. St. 209, 213; s. c., Thomp. N. B. Cas. 849; Overholt v. National Bank of Mt. Pleasant, 82 Penn. St. 490; s. c., Thomp. N. B. Cas. 833; Lucas v. Gov. Natianal Bank of Pottsville, 78 Penn. St. 228; s. c., 21 Am. Rep. 17; Thomp. N. B. Cas. 872; see, also, National Bank of Madison v. Davis, Thomp. N. B. Cas. 350.

It is said that under section 5198, interest can only be forfeited when the note carries interest with it, and the excessive rate of interest has been agreed to be paid. Such a construction would restrict a recovery to cases where the note bears interest upon its face only, and I think, is not sanctioned by a fair interpretation of the law. If the interest has been paid in advance, as is authorized by law, then within the meaning of the statute, that interest is carried with the note, and has been agreed to be paid upon the same. It is enough that it has been taken, received or charged to create a forfeiture, as is held in the opinion, which analyzes the different sections of the act, in F. and M. Nat. Bank v. Dearing, 1 Otto, 29, s. c., Thomp. N. B. Cas. 117, and as is also fully sustained in the cases to which we have referred. The effect of the construction contended for would be to render the law inoperative and of but little avail, as interest, in transactions of this kind, is usually paid in advance, as authorized, and cannot be upheld upon any sound rule applicable to the interpretation of statutes of this description.

The right of an accommodation indorser, without consideration, to the same benefit as the makers would have under the National Banking Act, by way of set-off or rebatement of the interest usuriously taken on notes discounted, is, I think, well settled. The first indorser is not a party in the action. It does not appear that the makers have been served with process; and the recovery here is sought against the second indorser alone. He is called upon to pay the entire demand; and upon principle, there appears to be no reason why he is not entitled to the same defenses as the maker may have. Section 5198 declares that there shall be a forfeiture, without confining it to the maker; and it is a reasonable presumption that it should be for the benefit of any one who might be compelled to pay the obligation. We think it certainly applies

National Bank of Auburn v. Lewis.

to a party who has been sued upon the note and against whom alone a remedy is sought, by an action to recover the amount of the same. That the indorser is entitled to the benefit of this provision is also decided in several cases. In re Wild, 11 Blatchf. 243; Thomp. N. B. Cas. 246, Wild was the indorser, without consideration, and a mere surety of the notes in question, which were given in renewal of prior notes held by a National bank, and it was laid down by WOODRUFF, Circuit judge, that the loan being made, reserving a compensation exceeding seven per cent interest per annum, "the transaction in question was within the prohibition of the National Banking Law, and that the bank, eo instanti it made the loan, upon the terms exacted, incurred the forfeiture of the entire interest which the notes received, carried with them, or which was agreed to be paid thereon." See, also, Nat. Ex. Bank of Columbus v. Munroe, 2 Bond. 170; Brown v. Second National Bank of Erie, 72 Penn. 209; s. c., Thomp. N. B. Cas. 849; Cake v. First National Bank of Lebanon, 86 Penn. St. 303; s. C., Thomp. N. B. Cas. 890.

The moment usurious interest is taken or charged, the forfeiture is established; and as the cases hold, any party to the transaction may avail himself of it, if payment is sought to be enforced against him. Under the usury laws of this State the term "borrower" includes any person who is a party to the original contract, or in any way liable to pay the loan. Wheelock v. Lee, 64 N. Y. 247; Bissell v. Kellogg, 65 id. 432; Livingston v. Harris, 11 Wend. 329; Post v. Bank of Utica, 7 Hill, 391. Applying the same principle, the person by whom the usury is paid, or his legal representative, may well be regarded as including the indorser. The right to set off the usury taken, or to rebate the note to that extent, in this case, does not rest upon the same principle as the statutes in regard to that subject, in this State, but upon the construction of the act of Congress, which, as we have seen, is held in the reported cases cited, to authorize such a defense by the indorser, when sued upon the note. It is enough that when called upon to pay, such right exists, without considering the question, which is not now before us, whether the indorser can maintain

Robinson v. National Bank of New Berne.

an action to recover back the interest paid by the maker, before he has paid the demand.

In the case at bar, the entire line or series of notes discounted, which are stated at length in the sixth defense, constitutes one connected and continuous transaction; and under such circumstances, the taint of usury affects the whole, and when the bank sues to recover upon the last of a series of renewal notes, the forfeiture of the entire interest follows as a necessary result, and credit must be given for all the interest which has been paid from the beginning on the loan. Overholt v. National Bank of Mt. Pleasant, supra; Tuthill v. Daves, 20 Johns. 286; Cake v. First National Bank of Lebanon, supra; Brown v. Second National Bank of Erie, supra.

The defendant was clearly entitled, upon the trial, to introduce evidence showing the taking of usury upon the various notes described in the answers; and the court erred in rejecting the various offers made, relating to the same.

For the errors referred to the judgment must be reversed and a new trial granted, with costs to abide the event.

A State court has jurisdiction of an action on contract brought by a resident of the State against a National bank located in another State, and except as against a National bank which has committed or is contemplating an act of insolvency.

An attachment can issue against a National bank from a State court. (Ses note, p. 316.)

(New York Court of Appeals.)

DANFORTH, J. This case comes here upon appeal by defendant from an order made by a General Term of the Supreme Court of the fourth department upon the following facts: The plaintiff resides in this State and is a creditor of the defendant. The defendant is a banking association organized under the laws of the United States (title LXII, U. S. R. S.) and is located at New Berne, North Carolina. Upon affidavits showing these and other facts sufficient to bring the case within the provisions of the Code of Civil Procedure, in force in this State, an attachment was granted by one of the justices of the Supreme Court and levied upon property of the defendant in the city of New York. The defendant moved at a Special Term to vacate the attachment, but the motion was denied and the order there made was affirmed at General Term. It is from the order of affirmance that this appeal is taken. The defendant seeks to sustain the appeal upon two grounds: First. That the Supreme Court had no jurisdiction over the action. Second. If otherwise, it had no power to grant the attachment. But notwithstanding the ingenious argument of the learned counsel for the appellant, I think neither position can be sustained. First, as to jurisdiction; it is not necessary to consider whether Congress might have conferred upon the Federal courts exclusive judgment over actions against National banks and prohibited the State courts from entertaining them; but this could be done, if at all, only by express language or provisions consistent only with that construction. Houston v. Moore, 5 Wheat. 1, and other cases cited infra. In its absence a State court would have the same power and jurisdiction in suits, to which a National bank was a party, as if it was an individual. Bower v. First Nat. Bank of Medina, 34 How. Pr. 409; Cooke v. State Nat. Bank of Boston, 52 N. Y. 96; s. c., 11 Am. Rep. 667; Thomp. N. B. Cas. 698. I do not find such language or provisions in the act under which the defendant is organized. Nor is its existence

Robinson v. National Bank of New Berne.

claimed by the learned counsel for the appellant who has submitted this case in an exhaustive oral and printed argument. In the latter he says: "And Congress has not only nowhere deprived the State courts of jurisdiction of actions against National banks but has expressly conferred it, at the same time conferring a similar jurisdiction upon the Federal courts, but in both cases requiring actions and proceedings against them to be brought in the State where they are located and protecting them from attachment and similar process before judgment," and asserts "that the plaintiff has all the remedy to which he has any just claim in an action against the defendant in the State or Federal courts of North Carolina."

The contention then is, that outside of the State where the bank is located, neither Federal nor State courts have jurisdiction, and that redress for any cause of action must be there sought, and as it has been held that the statute referred to extends to actions by as well as against these corporations (Kennedy v. Gibson, 8 Wall. 498; Thomp. N. B. Cas. 17) it would follow that the bank must confine its operations to the limit of its own State or be deprived of legal or judicial aid to enforce its rights. This construction seems to be unwarranted by the very conditions of its being. The defendant was endowed with certain powers and privileges, in the exercise of which it might be brought into relation with citizens of different States, and we might therefore expect that its liabili ties arising therefrom could be enforced in the same manner and to the same extent as if it was a natural person and not a creation of the law. It was to loan money and discount commercial paper, and although located in North Carolina its transactions might extend into other States, for its interest would follow the person of its debtors, and it would be concerned in the disposition of his property wherever situated. ("It is, therefore, provided that it may purchase and hold such real estate as may be mortgaged to it in good faith by way of security for debts previously contracted, or such as shall be conveyed to it in satisfaction of similar debts contracted in the course of its dealings, or such as it shall purchase at sales under judgment, decrees or mortgages held by it, or shall purchase to secure debts due it" § 5137, sub. 23, U.