85 Pa. 528 | Pa. | 1876
delivered the opinion of the court, May 6th 1878.
This controversy has arisen in the distribution of the proceeds of a sheriff’s sale of the real estate of Zephaniah Waid. At the date of the sale,«.the Second National Bank of Titusville held a judgment amounting to $2156.12, and William M. Henderson was plaintiff in a judgment for the use of the same bank, amounting to $1879.73. Waid became the endorser of a note of Shugert & Starr to the bank for $2500, on the 18th of December 1872. In a suit subsequently brought on it, judgment was obtained on the 20th o.f May 1873. Before the note was given, interest at the rate of ten per cent, had been paid by Shugert & Starr on the debt it represented, to the amount of $125.68. When it was given, on the 18th of December 1872, a discount at the rate of twelve per cent., amounting to $77.50, was retained. It was the second renewal of a note originally given on the 30th of May, and first renewed on the 6th of September 1872. It was only at the date of the second renewal that Waid became endorser. Upon the proof that, usurious interest had been reserved, the auditor decided that “the interest-bearing power of the obligation had been destroyed,” and “ as there was no point of time in the history of such paper at which it could be freed from the taint of illegality, so it followed that there could be no point of time from which it would bear interest.” Under the view of the law thus taken in the report, the costs, the attorney’s commissions of five per cent., stipulated for in the note, charges for protests, and all interest accrued on the original note and its renewals, and on the judgment, were excluded from the allowance made to the bank. There were also deducted the interest, attorney’s fees, and costs accrued in a judgment on a note for $1700, made up in part of an independent note for $1500, previously discounted, and in part of interest and costs of the judgment obtained on the note of Shugert & Starr. On the same ground of usury, the sum of $111.99 was deducted from the Henderson judgment. These rulings of the auditor were affirmed by the court, upon exceptions. It has been settled by a line of authority that, in the distribution of a fund, an auditor cannot inquire into the validity of a judgment regular upon its -face : Dyott’s Estate, 2 W. & S. 557; Leeds v. Bender, 6 Id. 315; Ellmaker v. The Insurance Co., Id. 442; Thompson’s Appeal, 7 P. F. Smith 175. But he may receive testimony to show that since its rendition the judgment has been paid or otherwise satisfied : Borland’s Appeal,
If, then, creditors may not impeach a judgment before an auditor for a fraud upon the debtor, it follows that, in order to sustain the auditor and the court below, we must go to the extent of holding that the usury complained of was a fraud upon the creditors — a collusive fraud to hinder and delay them. That there was fraud and collusion in fact is not pretended, which drives us to the yet narrower question whether an usurious contract is a fraud per se upon creditors. It w'as said in Good v. Grant, 26 P. F. Smith 52, that 44 to pay interest in excess of the legal rate is not necessarily, fraudulent as to creditors;” and in Miners’ Trust Company Bank v. Roseberry, 31 P. F. Smith 309, it was said by Merour, J.:
4 4 Whenever the usurious contract is intended to defraud creditors, or when the circumstances of the debtor are known to be such that it can reasonably be presumed that this will be the natural effect, the right of creditors to postpone the excess of interest must be conceded.” But in each of these cases the question whether any one but the borrower could go behind the judgment was left undecided, as it had been left undecided in Verner v. Carson, 16 P. F. Smith 440. In Greene v. Tyler, 3 Wright 361, it was held competent for a second mortgagee to question, in a distribution, a prior mortgage, on the ground of usury; and in Bachdell’s Appeal, 6
The appellant in this case is a National Bank. Section 5197 of the Revised Statutes allows such banks to charge and receive such rate of interest as is authorized by the laws of the state where the bank is located, and sect. 5198 provides that: “ Knowingly taking, receiving or charging a rate of interest greater than aforesaid, shall be held and adjudged a forfeiture of the entire interest which the note, bill or other evidence of debt carries with it, or which has been agreed to be paid thereon.” Thus it will be seen that under the Act of Congress no interest can be recovered upon a usurious contract, while by the law of this state the legal interest can be recovered, but no more. While the former uses the word “ forfeiture,” and is penal to the extent of the interest, it does not make the entire contract void or even voidable. If under our Act of 1858 it is not a fraud per se upon creditors for a debtor to pay more than the legal rate of interest, it would be straining the law to say that it is so under the Act of Congress. The whole question of interest is regulated by our own statute. The Act of Congress applies only to the national banks, and as to them the rate of interest conforms to the state law.
Where creditors allege that usury is a fraud upon them they must do more than show the payment in the usual course of business of interest in excess of the legal rate. That is a matter of which the debtor alone can complain. In the case in hand there was nothing to show collusion to defraud creditors. It follows that they had no standing before the auditor to set aside the appellant’s judgment.
Even in view of the record as it was made up by the auditor, the case did not justify the charging the costs of the distribution upon
The decree of the Common Pleas is reversed, and it is now adjudged and decreed that the fund in court be-applied first to the costs of the distribution; secondly, to the city’s claim for taxes, sewer and paving assessments: and, thirdly, to the judgments in their order for the amounts shown by the record to have been due upon them respectively at the date of the sheriff’s sale; the costs of this appeal to be paid by the appellees.