233 U.S. 536
HOLDEN LAND & LIVE STOCK COMPANY, William D. McLeod, Administrator with the Will Annexed of Howard M. Holden, Deceased, et al., Plffs. in Err.,
INTERSTATE TRADING COMPANY, National Bank of Commerce of Kansas City, Missouri, and George T. Cutts, Receiver of said Bank.
Argued February 26 and 27, 1914.
Decided May 4, 1914.
Messrs. Edward P. Garnett, Oliver H. Dean, and Charles Blood Smith for plaintiffs in error. [233 U.S. 536, 537] Messrs. Leonard S. Ferry, Thomas F. Doran, John S. Dean, and Elijah Robinson for defendants in error.
Mr. Justice Hughes delivered the opinion of the court:
This suit was brought by the Holden Land & Live Stock Company and Howard M. Holden in the district [233 U.S. 536, 538] court of Shawnee county, Kansas, to have certain conveyances which were absolute on their face, and the accompanying contracts, decreed to be mortgages, and for an accounting in order to ascertain the amount of the indebtedness thereby secured. It was also alleged that usury had been exacted by the creditor (the National Bank of Commerce of Kansas City, Missouri), and upon this ground it was prayed that in taking the account the debtor should be charged only with the principal, and that the entire interest should be adjudged to be forefeited under 5197 and 5198 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3493).
The principal facts and the nature of the litigation are succinctly stated by the supreme court of Kansas, as follows (87 Kan. 221-223, -- L.R. A.(N.S.) --, 123 Pac. 733):
The supreme court of the state decided in favor of the plaintiffs in error upon the second question. Approving the findings made in the trial court, it was concluded that [233 U.S. 536, 540] the relations between the parties were in effect those of mortgagor and mortgagee, and that the appropriate remedy was a foreclosure and sale. Accordingly, the judgment was modified so as to provide that the lien upon the Kansas land should be enforced in this manner.
The court affirmed the judgment in other respects; and because, in fixing the amount to be paid in order to redeem the lands in question, the court did not require the forfeiture of all interest, this writ of error is prosecuted.
The question at once arises whether, in view of the character of the suit and the basis of the ruling, the judgment is subject to review in this court. The action, it will be observed, was not one brought by the bank to enforce the payment of the indebtedness, thus involving the application of the statutory measure of the bank's legal right. Nor was the debtor availing himself of the exclusive remedy afforded by the statute in cases where usurious interest has actually been paid to a national bank (Barnet v. Muncie Nat. Bank, 98 U.S. 555 , 25 L. ed. 212; Stephens v. Monongahela, Nat. Bank, 111 U.S. 197 , 28 L. ed. 399, 4 Sup. Ct. Rep. 336). While the plaintiffs insisted that interest should be forfeited, still they were suitors in equity, seeking to be permitted to redeem the lands which had been conveyed; and the decision was placed distinctly upon the ground that the relief sought should be granted only upon the equitable condition that the plaintiff should be charged with the principal of the debt and legal interest. Upon this point the supreme court of Kansas said (87 Kan. 221, 233, 234):
The judgment thus rests upon an independent or non-Federal ground which was adequate to sustain it. The court applied a familiar equitable principle in defining the basis upon which extraordinary aid would be given. 'A court of equity is not positively bound to interfere in such cases by an active exertion of its powers; but it has a discretion on the subject, and may prescribe the terms of its interference.' Story, Eq. Jur . 301; Fanning v. Dunham, 5 Johns. Ch. 122, 142, 143, 9 Am. Dec. 283; Tiffany v. Boatman's Sav. Inst. 18 Wall. 375, 385, 21 L. ed. 868, 879. It is manifest that the plaintiffs were not proceeding by virtue of any Federal right in seeking to have the conveyances which had been executed in the form of absolute transfers of title declared to be mortgages; and it was competent for the court whose intervention was desired for this purpose, to demand that its conscience be satisfied by the doing of equity on the part of those who asked it. [233 U.S. 536, 542] The decision involves simply the exercise of the equitable jurisdiction in accordance with the jurisprudence of the state, and the ruling which prescribed the conditions of relief is not reviewable here.
The writ of error must be dismissed.
Mr. Justice Day, dissenting:
I am unable to agree that this court does not have jurisdiction of this writ of error. In my judgment, if the principle here invoked is applied to a case like the one under consideration, it will result that the state court may determine, without power of review in this court, the ultimate effect and scope of rights secured by a Federal statute.
It appears from the opinion of the supreme court of Kansas, quoted in the opinion in this case, that a national bank, organized under and subject to the limitations of the Federal statutes in that respect, received usury upon a debt which was secured by a coneyance of title which was upon its face a deed. The plaintiff in error stated in its petition the facts which showed the usurious arrangement with the bank and the charging upon the debt of interest in violation of the statute, and thus distinctly relied upon a Federal statute controlling the right of national banks to take usurious interest. It asked to have the conveyance decreed a mortgage in fact and security for the debt, and that only the amount legally collectible thereon should be held to be due. These allegations brought the case within the provisions of 5197 and 5198 of the Revised Statutes of the United States (U. S. Comp. Stat. 1901, p. 3493), fixing certain consequences for taking usurious interest by national banks. The state court found that the deed had at all times been intended by the parties to be and was security for the debt, but decreed that it should extend to the balance of the debt, with legal interest. [233 U.S. 536, 543] By means of this petition a right of Federal origin was specially set up, which, if denied, gave the right to come to this court under a Federal statute which has been in substantially the same form, so far as this writ of error is concerned, since the passage of the judiciary act in 1789 [1 Stat. at L. 73, chap. 20]. This is not controverted in the opinion in this case, but the position is taken that the decision rests upon an independent ground not involving a denial of Federal right, and therefore is not reviewable here.
I am not unmindful of the rule frequently recognized in the decisions of this court, that if the judgment of the state court rests upon an independent, separate ground of local or general law, broad enough or sufficient in itself to base the decision upon and to control the rights of the parties, this court has no jurisdiction to review the action of the state court. So far as I understand the decisions where such independent ground has been sustained, resulting in a lack of jurisdiction in this court to review a decision of a state court, the judgment has proceeded upon the principle that, irrespective of the Federal right asserted, an independent ground of judgment, not involving the Federal question, has controlled the decision. For example, in a number of cases in this court it has been held that, conceding the Federal right asserted to have been one which might have been maintained, nevertheless, if, upon the general doctrine of laches that right no longer exists, the refusal to enforce it because of laches rests the decision upon a principle of general law, applicable to all rights, Federal or otherwise, and is not of itself a denial of a Federal right. So this court has more than once held that a decision placing the rights of the parties upon the doctrine of res judicata, where the decision did not necessarily involve the denial of a right of a Federal character, places the decision upon a non-Federal ground and is not reviewable here. These are examples of independent grounds of general law, which the state court has the right [233 U.S. 536, 544] to apply to all asserted rights, and their maintenance does not amount to a denial of special claims of Federal right.
Applying these principles here, it seems to me that where a party specially asserts, as it did in this case, the application of the Federal statute, which, in unequivocal terms, provides ( 5198 [U. S. Comp. Stat. 1901, p. 3493]) that the 'taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding section, when knowingly done [which the record discloses was so taken in this case], shall be deemed 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,' and the supreme court of the state, holding that, notwithstanding the Federal statute, it has the discretion to condition its relief, allowing redemption only upon the payment of principal and legal interest, it has in effect denied the right asserted under the Federal statute, and the correctness of the decision is reviewable here. This statute has no conditions attached to it, and is upon its face applicable [233 U.S. 536, 545] wherever a situation arises which comes within its terms. In effect, the state court said this is true; usury has been charged upon this contract, and, because of the statute, the security is not enforceable beyond the face of the debt; but as the giver of the security has been obliged to apply to the equity powers of a state court for the carrying out of the contract, a condition may be attached to the relief to which the party is otherwise entitled, and the state court charged the plaintiff in error with the debt, with legal interest, notwithstanding the Federal statute which declares the interest forfeited upon such facts as are here presented. When the court so decided, in my judgment, it necessarily denied a Federal right, and, whether right or wrong, the denial of that right laid the basis for ultimate decision by this court as to the nature and extent of the rights secured by the Federal statute.
In my opinion this court should review the judgment and determine for itself whether the rule invoked in the state court has this effect upon a Federal statute, which unconditionally forfeits the entire interest where usurious interest has been knowingly reserved or taken.
I therefore dissent from the opinion of the court holding that there is no jurisdiction of the case.
Mr. Justice McKenna and Mr. Justice Van Devanter concur in this dissent.