The. action was upon a promissory note dated the 7th of December, 1909, whereby the defendant promised to pay to the order of the plaintiff on demand the sum of $67,009.23, with interest. The complaint alleges that the defendant was entitled to a credit of $8,891, the amount received by the plaintiff for the sale of certain collateral securities sold by the plain*784tiff, and that there is .now due and owing from the defendant to the plaintiff the sum of $58,119.73, with interest. The only allegation of the complaint denied in the answer is that contained in the 7th clause of the complaint relating to the credit due to the plaintiff. The answer then sets up, first, an affirmative defense to the whole cause of action; second, a partial defense; and, third, a counterclaim; and demands judgment that the note declared on and the notes of which it was a renewal he declared fraudulent and void; that what was called an escrow card he declared to have been procured by fraud, and that the sales of certain of the collateral securities were unauthorized and void; and that the plaintiff deliver to the defendant the remainder of said collateral or pay to the defendant the value thereof; and for other and"further relief.
The first defense alleged the procuring by the defendant from the plaintiff of certain loans of money; that these loans were usurious and void in consequence of the plaintiff’s exacting from the defendant certain commissions for making the loans; that the plaintiff held on or about October 7, 1909, certain notes of the defendant which were unpaid, and claimed to have sold certain securities held to secure the payment of these notes and by the purchase thereof had acquired legal title to the same, but that at said date the plaintiff had not acquired legal title to the said securities, but held that as trustee for the defendant and as pledgee of the defendant; that on October 8, 1909, the plaintiff was pressing the defendant for payment of the said notes and threatened to sue him for the amount of the principal and interest, and the defendant was desirous of obtaining time for the payment of the samé, and insisted that he was entitled in accordance with plaintiff’s» agreement to an extension of said loans; that the plaintiff refused to perform its said agreement and took undue advantage of the necessities of the defendant and compelled him to submit to certain terms exacted by the plaintiff; that the plaintiff then and there informed defendant that it owned 200 shares of the stock of a corporation known as the American Piano Company; that said stock, as plaintiff well knew, was of no market value; that defendant then and there informed plaintiff that he did net want said stock and would not take it; that, *785notwithstanding, the plaintiff as a condition of renewing the notes above mentioned and consolidating the same into a single note, and extending the time of payment, substituted therefor, and in order to conceal the real consideration of the transaction and to evade the interest and usury laws of the State of New York, required of the defendant as a condition of plaintiff’s forbearing its demand for payment of the said four notes for a period of sixty days, that the defendant would purchase and accept' and agree to pay the sum of $12,000 for the said shares of stock of the American Piano Company and agree to pay in addition $2,500; that the purpose of such insistence and nominal sale to the defendant was to enable the plaintiff to charge as consideration of the said forbearance and of the loan hereinafter mentioned the sum of $12,000, and the defendant agreed to pay and did pay said sum. and also the sum of $2,500 in addition thereto for the forbearance and loan hereinafter mentioned; that such payments were in addition to the payment of legal interest upon the amount of said loan; that for the purpose of renewing the four promissory notes and purchasing said collateral security which plaintiff claimed to have disposed of, defendant delivered to plaintiff a certain promissory note dated October 8, 1909, whereby the plaintiff agreed to pay to the defendant $66,345.78 sixty days after October 8, 1909, with interest, which last-mentioned promissory note and the whole thereof was illegal, usurious and void to the extent of $20,421.13 thereof, and that there was included in the amount thereby promised to be paid $12,000 for the purchase of this piano stock and $2,500 as commissions for the extension of the loan; that when this $66,345.78 matured the defendant, on the demand of the plaintiff on December 7, 1909, executed the note mentioned in the complaint, and that the sole consideration of the said note was the usurious notes hereinbefore mentioned; that the said last-named note for $67,009.53 was and is usurious and void to the extent of at least $20,696.35; that there was included within the amount therein provided to be paid legal interest upon the loans amounting to $1,283, and $663.45 legal interest which had been forfeited by reason of the usurious demands specified. .
*786The second partial defense-was that the defendant had on deposit with the plaintiff the sum of $5,500 or thereabouts belonging to the defendant, which should be applied in part payment of the amount actually due on the notes mentioned in the complaint. The defendant also set up in the answer a counterclaim which involved substantially the same allegations set up as a defense to the note, and then demanded the affirmative relief hereinbefore specified.
Upon the trial the court submitted certain specified questions to the jury, whereby the jury found that the defendant had on deposit with the plaintiff -on April 18, 1910, the date of the commencement of the action, the sum of $4,559.10, whereupon the plaintiff asked for the direction of a verdict of $44,817.39. Upon consideration the court directed a verdict for the plaintiff for $40,714.13 and dismissed the equitable counterclaim, and from the judgment entered upon that verdict the defendant appeals.
There are but two questions which it is necessary to discuss in considering this appeal. The first is the right of the defendant to offset the amount of these commissions which the plaintiff exacted from the defendant as a condition for continuing the loans; and, second, whether the plaintiff can recover the so-called purchase price for the 200 shares of piano stock which the defendant was compelled to purchase of the plaintiff as a condition of renewing the various loans represented by the four notes which became due on October 8, 1909.
It was proved by the defendant that the plaintiff had exacted from the defendant various commissions for making and extending various loans which the defendant procured from the plaintiff; that those commissions were in excess of legal interest and were included in the note in suit. The defendant, however, in his answer expressly alleges that these various sums of money known as commissions were paid by the defendant to the plaintiff- as consideration for the making or extending of the loans represented by the defendant’s notes then held by the plaintiff; and it would appear that these exactions were illegal and in violation of the laws of this State. Such sums of money having been paid by the defendant to the plaintiff, the question is, whether they can be recovered or offset in this *787action as against the amount included in the note which the defendant had promised to pay to'the plaintiff. The plaintiff is a trust company organized under the laws of the State of New York.
By section 74 of the Banking Law (Consol. Laws, chap. 2; Laws of 1909, chap. 10), which provided for the interest chargeable by a bank and a private and individual banker doing business in this State, it was provided that the true intent and meaning of this section “is to place and continue banks and private and individual bankers on an equality in the particulars herein referred to with the national banks organized under the act of Congress entitled 1 An act to provide a national currency secured by pledges of United States bonds, and to provide for the circulation and redemption thereof,’ approved June third, eighteen hundred and sixty-four.”
In Brown v. Marion Nat. Bank (169 U. S. 416), in discussing the effect of the National Banking Law, it is said: “ The last section clearly makes a difference between interest which a note, bill or other evidence of debt held by a national bank ‘ carries with it or which has been agreed to be paid thereon,’ and interest which has been ‘paid.’ Interest included in a renewal note, or evidenced by a separate note, does not thereby cease to be interest within the meaning of section 5198 and become principal. If a bank which violates that section sues upon the note, bill or other evidence of debt held by it, the debtor may insist that the entire interest, legal and usurious, ■ included in his written obligation and agreed to be paid, but which has not been actually paid, shall be either credited on the note, or eliminated from it, and judgment given only for the original principal debt, with interest at the legal rate from the commencement of the suit.” But in Haseltine v. Central Bank of Springfield, No. 2 (183 U. S. 132), following the prior adjudications, it was" held that where usurious interest has been paid to a national bank, the remedy afforded by section 5198 of the United States Revised Statutes is exclusive and is confined to an independent action to recover such usurious payments. That case was followed in Schuyler Nat. Bank v. Gadsden (191 U. S. 451). And in Schlesinger v. Gilhooly (189 N. Y. 1) it was held that, in order to give effect to the *788evident intent of the Legislature of this State, the statute enacted in 1870 (Laws of 1870, chap. 163) to put the State banks upon an equality with national banks should have the same interpretation and effect as was given to the act of Congress; that section 1 of the act of 1870 (re-enacted as section 74 of the Banking Law) was operative and superseded the usury law. (See, also, Schlesinger v. Kelly, 114 App. Div. 546; Caponigri v. Altieri, 165 N. Y. 255.)
In view of the allegations of the answer that these sums in addition to the interest allowed by law were actually paid by the defendant to the plaintiff and that there was in each case in form at least the delivery of a check by the defendant to the plaintiff covering the extra commissions or interest, we think that the defendant could not offset or counterclaim the amount ' of this illegal interest or commission in an action on the note, but his exclusive remedy was an action to recover the penalty provided for by law for the taking of the illegal interest or commission, and that the court below, therefore, properly refused to allow as an offset or defense to the note the amount of such illegal commission or interest.
The transaction involving the alleged purchase of the piano company stock, however, stands upon a different footing. ' The plaintiff was the owner of this stock, which was itself of little if any value. As a condition of renewing the loans, the plaintiff insisted upon the defendant purchasing this stock, and the purchase price was included in the note, in renewal of which the note in suit was given. There was no other consideration for the insertion of the sum of $12,000 in the obligation made by the defendant to the plaintiff. This stock was never delivered to the defendant, but was retained by the plaintiff as additional security for the loan. There was here no payment of any interest by the defendant to the plaintiff. The plaintiff merely added to the defendant’s obligation what was called the purchase price of the stock, the stock itself being retained in the possession of the plaintiff, and so far as appears it still is in its possession or in that of the State Superintendent of Banking as liquidator. From the facts as proved in this case we do not consider that the defendant.ever became liable to the plaintiff to pay that $12,000. The purchase of valueless property or *789property at an exorbitant price-is one of the familiar devices to cover the exaction of usurious interest; and it is apparent that the plaintiff in forcing the sale of this valueless stock upon the defendant for the consideration of $12,000 was in effect securing to itself an obligation of the defendant to pay the sum of $12,000 without any real consideration. The plaintiff retained and still has the stock. The defendant never ratified or in any way confirmed the sale of the stock to him and has received no possible benefit from it. Its purchase was exacted as a method by which the plaintiff was to receive the defendant’s obligation to pay $12,000 in addition to the legal interest, and I think, therefore, under the decision in Brown v. Marion Nat. Bank (169 U. S. 416), that the defendant was entitled to insist that this sum, which had not been actually paid, should be credited on the note or eliminated from it, and judgment given only for the principal debt, with interest at the legal rate from the commencement of the suit.
At the end of the defendant’s case the court granted a motion to dismiss the first defense, to which the defendant excepted; and this defense included the demand that the defendant was entitled to credit on this note for the sum of. $12,000, which he had agreed to pay for the purchase of the piano company stock. Upon a new trial the plaintiff would have the right to meet the defendant’s testimony as to the sale of this stock.
My conclusion is that the judgment and order must be reversed and a new trial ordered, with costs to the appellant to abide the event, unless the plaintiff will stipulate to reduce the amount of the judgment by $12,000, with interest from October 8, 1909, in which event the judgment as so modified and the order appealed from will be affirmed, without, costs of this appeal.
Clarke, Scott and Miller, JJ., concurred; Dowling, J., dissented.