McLaughlin, J.:
This action was brought in the Municipal Court of the City of New York to recover sixty dollars and interest, a balance alleged to be due on a promissory note for eighty dollars. The note'was dated March 30, 1912, payable thirty days after date, to the order of the plaintiff, a private banker. The defendant pleaded, and upon the trial sought to prove that the note was usurious and void under section 314 of the Banking Law as it then existed. (See Consol. Laws, chap. 2 [Laws of 1909, chap. 10], § 314.) Such evidence was excluded on the ground that that section did not apply to one doing business as a private banker. Judgment was rendered for the plaintiff for the amount of the note with interest, together with the costs of the action, from which defendant appealed to the Appellate Term. That court affirmed the judgment, and from its determination defendant, by permission, appeals to this court.
• By an act of Congress passed in 1864 (13 U. S. Stat. at Large, 99, chap. 106) National banks were authorized to charge interest upon loans at the rate allowed by the laws of the State or Territory in which the bank was located, and no more. The same act fixed the penalty for exacting interest in excess of such rate as the forfeiture of the entire interest upon the loan, and provided, further, that if excess interest had been paid to the bank twice the amount of the interest thus paid might be recovered, provided an action for that purpose were commenced within two years from the date of the usurious [378] transaction. (13 U. S. Stat. at Large, 108, § 30; U. S. E. S. §§ 5197, 5198.)
In 1870 the Legislature of the State of New York, with the expressed intention of placing State banks of this State on an equality with National banks in this particular, fixed the legal rate of interest at seven per cent per annum, and provided the same penalty as the act of Congress, above referred to, for charging interest in excess of that rate. (Laws of 1870, chap. 163.)
The Court of Appeals held that the act of Congress, to which reference has been made, did not relieve a National bank from the provisions of the statutes of the State of New York relating to usury (First National Bank of Whitehall v. Lamb, 50 N. Y. 95), nor did chapter 163 of the Laws of 1870 of the State of New York relieve State banks. (Farmers’ Bank v. Hale, 59 N. Y. 53.) The Supreme Court of the United States subsequently held in Farmers, etc., Nat. Bank v. Dearing (91 U. S. 29) that the view expressed by the Court of Appeals in First National Bank of Whitehall v. Lamb (supra) was erroneous. Following this decision, the Court of Appeals held that as the provision of the act of the Legislature amending the Banking Law of the State (Laws of 1870, chap. 163, amdg. Laws of 1838, chap. 260, as amd.) was intended to put State banks upon an equality with National banks in respect to interest on loans and the penalty for taking usurious interest, it should receive the same interpretation as the act of Congress relating to National banks, and as an interpretation had been given to the act of Congress by the Supreme Court, the same interpretation would be applied to the State law. (Hinter-mister v. First National Bank, 64 N. Y. 212.)
As was said in Schlesinger v. Kelly (114 App. Div. 546): “The effect of these decisions and these statutes is that if an usurious note is directly given to a State bank and said bank takes, receives or reserves interest beyond the amount allowed by law, that, nevertheless, the note is not void, and the sole forfeiture is that provided in regard to the interest and the right of action to recover within two years double the amount of interest paid. The amount of the note is a valid and enforcible debt.”
In 1880 chapter 163 of the Laws of 1870 was amended so as
Free access — add to your briefcase to read the full text and ask questions with AI
McLaughlin, J.:
This action was brought in the Municipal Court of the City of New York to recover sixty dollars and interest, a balance alleged to be due on a promissory note for eighty dollars. The note'was dated March 30, 1912, payable thirty days after date, to the order of the plaintiff, a private banker. The defendant pleaded, and upon the trial sought to prove that the note was usurious and void under section 314 of the Banking Law as it then existed. (See Consol. Laws, chap. 2 [Laws of 1909, chap. 10], § 314.) Such evidence was excluded on the ground that that section did not apply to one doing business as a private banker. Judgment was rendered for the plaintiff for the amount of the note with interest, together with the costs of the action, from which defendant appealed to the Appellate Term. That court affirmed the judgment, and from its determination defendant, by permission, appeals to this court.
• By an act of Congress passed in 1864 (13 U. S. Stat. at Large, 99, chap. 106) National banks were authorized to charge interest upon loans at the rate allowed by the laws of the State or Territory in which the bank was located, and no more. The same act fixed the penalty for exacting interest in excess of such rate as the forfeiture of the entire interest upon the loan, and provided, further, that if excess interest had been paid to the bank twice the amount of the interest thus paid might be recovered, provided an action for that purpose were commenced within two years from the date of the usurious [378] transaction. (13 U. S. Stat. at Large, 108, § 30; U. S. E. S. §§ 5197, 5198.)
In 1870 the Legislature of the State of New York, with the expressed intention of placing State banks of this State on an equality with National banks in this particular, fixed the legal rate of interest at seven per cent per annum, and provided the same penalty as the act of Congress, above referred to, for charging interest in excess of that rate. (Laws of 1870, chap. 163.)
The Court of Appeals held that the act of Congress, to which reference has been made, did not relieve a National bank from the provisions of the statutes of the State of New York relating to usury (First National Bank of Whitehall v. Lamb, 50 N. Y. 95), nor did chapter 163 of the Laws of 1870 of the State of New York relieve State banks. (Farmers’ Bank v. Hale, 59 N. Y. 53.) The Supreme Court of the United States subsequently held in Farmers, etc., Nat. Bank v. Dearing (91 U. S. 29) that the view expressed by the Court of Appeals in First National Bank of Whitehall v. Lamb (supra) was erroneous. Following this decision, the Court of Appeals held that as the provision of the act of the Legislature amending the Banking Law of the State (Laws of 1870, chap. 163, amdg. Laws of 1838, chap. 260, as amd.) was intended to put State banks upon an equality with National banks in respect to interest on loans and the penalty for taking usurious interest, it should receive the same interpretation as the act of Congress relating to National banks, and as an interpretation had been given to the act of Congress by the Supreme Court, the same interpretation would be applied to the State law. (Hinter-mister v. First National Bank, 64 N. Y. 212.)
As was said in Schlesinger v. Kelly (114 App. Div. 546): “The effect of these decisions and these statutes is that if an usurious note is directly given to a State bank and said bank takes, receives or reserves interest beyond the amount allowed by law, that, nevertheless, the note is not void, and the sole forfeiture is that provided in regard to the interest and the right of action to recover within two years double the amount of interest paid. The amount of the note is a valid and enforcible debt.”
In 1880 chapter 163 of the Laws of 1870 was amended so as
[379] to include private or individual bankers (Laws of 1880, chap. 567), and thereafter it was held that the usury laws did not apply to them any more than they did to National and State banks; in other words, they were placed in the same position that the banks were with reference to the rate of interest taken. (Perkins v. Smith, 116 N. Y. 441; Caponigri v. Altieri, 165 id. 255; Schlesinger v. Gilhooly, 189 id. 1; Schlesinger v. Lehmaier, 191 id. 69.) The provisions of the act of 1870, as amended, were subtantially embodied in section 74 of the Banking Law (Consol. Laws, chap. 2; Laws of 1909, chap. 10) which was in force at the time the note in suit was executed. (See Laws of 1882, chap. 409, §§ 68, 69; Laws of 1896, chap. 548; Banking Law [G-en. Laws, chap. 37; Laws of 1892, chap. 689], § 55, as amd. by Laws of 1900, chap. 310; Id. §§ 215, 216.) It was proved upon the trial, and is not questioned by the appellant, that at the time of the transaction plaintiff was a private banker. But it is urged that the privileges conferred upon private bankers by section 74 are limited by section 314 of the same law and that a private banker cannot take interest in excess of the legal rate on loans of less than §200. This section 314 is substantially a re-enactment of section 5 of chapter 326 of the Laws of 1895, as amended by chapter 78 of the Laws of 1902. The section appears in article 10 of the Banking Law, which is entitled “Personal Loan Associations.” The first section of the article (§ 310) provides that in any county of the State in which there is an incorporated city (except the counties of Monroe and Westchester)