delivered the opinion of the Court:
Walker having been declared a bankrupt pending this litigation, it is insisted by defendant in error that Jenkins, his assignee in bankruptcy, can not prosecute the writ of error in this case, because, as it is said, he was not a party to the suit before decree, and does not have any interest in the subject matter. This question was decided in favor of the right of the assignee in such a case to be heard in this court (in the case of Jenkins v. Greenbaum et al. 95 Ill. 11), and needs no further consideration here.
The objections raised by plaintiff in error to the validity of the charter of the defendant bank, are disposed of by the decision of this court in the case of The People ex rel. v. Lœwenthal et al. 93 Ill. 191, wherein the charter was) held valid.
The question relating to the right of Walker, under such pleadings as are found in this case, to avail himself of the benefit of payments made, as of usurious interest, to the extent of disregarding the .usurious agreements, and applying as payments upon the principal all moneys paid as interest in excess of the amount allowed by law, has been determined in favor of that right in the case of Jenkins v. Greenbaum et al. supra) and the reasoning and authorities upon which that decision was placed need not be repeated here.
It is insisted, however, by defendants in error, that the question of the application of such payments can not be raised upon this record,—and this upon the position that (as is insisted) the record fails to show that any exceptions were taken to the master’s report. This position can not be sustained. The court, in the order referring the cause to the master, gave specific directions to the master as to the basis upon which the account should be stated, and it is to be taken, (in absence of exceptions to the master’s report), that the account was stated upon the basis laid down in the order of reference. That order is subject to review.
In the order of reference the master was directed, in ascertaining the amount due upon the several principal notes, tl not to consider the question of usurious payments of interest upon any of said notes.” This direction to the master was erroneous, and, for this reason alone, the decree of the circuit court ought to have been reversed by the Appellate Court.
There is' evidence tending to prove that payments of usurious interest were made by Walker, wdiich ought to be credited upon the notes in controversy. The circuit court, as we understand this record, without determining whether such payments were made or not, evidently held the inquiry immaterial or incompetent under the pleadings, and so directed the master not to consider the question. This was error.
Another question arises upon this record, and demands our consideration. The circuit court found “that at different times during the continuance of the dealings between Walker and the International Bank, accounts were presented to Walker by the bank, of amounts debited and credited to him upon the books of the bank; and that said accounts were retained by said Walker, without objection on his part, made either to the aggregate or the various items of said accounts; and that, up to the time of the commencement of this litigation, no objections had been made to the same; and that said accounts are not to be investigated by the master as to such general items; but said Walker may be allowed to prove, if he can, that there have been certain items included fraudulently in said accounts, or that there are specific credits to which he is entitled in said accounts.” ,
It is insisted by plaintiff in error that this order was erroneous. If this order is to be understood as precluding an investigation as to payments of usurious interest .except in regard to specific items, it can not be sustained. The proofs tend to show continuous relations between the bank and Walker, from 1868 up to the close of their transactions, the bank all the Avhile occupying the position of creditor; and Walker that of debtor,—and that Walker at no time paid off in full his debt to the bank, and the contracts as to the use to be made of the collaterals, Avith other evidence in the case, tends to show that part, at least, of their dealings formed one continuous and connected transaction, with multifarious branches. If this be so, then, in so far as this is so, all moneys paid by Walker to the bank as interest under usurious contracts, agreements or arrangements, (in excess of the rate of six per cent per annum) in such part of this business on Avhich any of these notes rest, and all moneys paid by Walker, and so applied by the bank, in any such part of their transactions, should, in stating this account, be credited to Walker, with the same effect as if no such usurious agreements had been made, and treating such moneys as not allowed by the parties or included in the several statements of account rendered to Walker. Such accounts ought to be taken as correct, on the basis on which the business is shown to have been transacted and the accounts kept, (except in so far as shown specifically to have been made in error). If it be shown that at a given stage of this business the bank was regularly charging Walker with a given rate of interest in excess of that permitted by law, it should be taken as tending to prove that the accounts were kept and stated upon that basis, and, that while they are to be taken to have been correctly kept on that basis, and correctly stated, still, such false results, if any, as necessarily arose from the unlawful basis, if shown, should be disregarded by the master, and the account should be stated upon the true basis, upon the facts to be derived from proofs and from the books and the statements of account made from time to time, (viewing them as accurately kept and accurately made on the basis upon which the business may be shown to have been done), and such statements of account rendered from time to time, if shown to be upon the supposed unlawful basis, should be corrected and modified in this regard, without requiring specific proof of the details of each transaction in which such correction or modification is to be made. It may not be necessary, to reach the proper result, that these accounts be opened generally as to all of their items, or that the entire details of the account be stated anew. It may be sufficient, and a more convenient mode of reaching true results, to adopt the statements as prima facie correct, modifying the same only so far as the proofs show that the same ought to be modified.
If it should turn out that, stating the account upon its true basis, Walker has, as he claims in fact, fully paid the whole of his indebtedness, with lawful interest to the bank, the principal notes should be cancelled and the collaterals surrendered. If any portion of his debt remains unpaid, a decree should go against the collaterals for that amount.
It may be well to say something about the charges in some of these accounts, consisting of notes marked paid and can-celled, with debit tickets thereto attached. In an account presented for the first time, such items seem to us not to be allowable in the absence of vouchers or explanatory proof. But, when found in accounts rendered from time to time, and left for so long a time unquestioned and unchallenged, they ought to stand, in the absence of proof that they are wrong.
Walker, however, testifies against the justice of these items, while LowenthaFs testimony is in their support. It would seem that if these notes were in fact paid by Walker, the amount would appear in the books of the bank,—and if, as contended by Walker, he paid any one of these notes, by checks on other banks, or in cash, or by checks on this bank, which were charged to him in his deposit account, and he was again debited with the amount of such note by a debit ticket, without withdrawing any money on account of such debit, it would seem the books of the bank would not balance. If it were clearly shown that any of the books of the bank would furnish explanation of the source of such debits, such entries ought to be produced.
It is contended that the several settlement-checks, as they are called, and the releases signed by Walker, should unconditionally close the door against the investigation of the matter of usurious payments. This will not do. Adopt that rule and every usurious transaction could readily be covered from the scrutiny of the courts, and the statute on this subject would be a dead letter. Courts of Chancery must look through all such devices, and must be guided by the real truth when ascertained.
The notes in question, and the matters on which they rest for consideration, are open to investigation. The matter of the amount of interest paid upon, or reserved from the principal notes in this case, or paid or reserved in any transacr tions growing out of these notes, or from which these notes sprang, either in whole or in part, and the matter of interest paid or reserved in any part of the transactions between Walker and the bank, constituting a continuous and connected course of business, of which these principal notes constitute a part, is a proper subject of inquiry. Where a note or debt of any kind (on which unlawful interest had been paid or reserved) was paid, in whole or in part, by the discount of a new note, and by the application thereto of the proceeds (or a part of proceeds of the new note) made through the form of a check drawn by the debtor upon the fund provided in whole or in part by the discount of the new note, this would, in substance, be a renewal of the old note or debt in another form, and, in such case, the matter of the amount of interest paid in any part of such transaction, is open to investigation.
Of course, where a debt or note was created or made by Walker to the bank, not connected with the principal notes in this case, by the general course of their dealings, or otherwise, and such independent debt was paid off by Walker -without passing any part thereof into the consideration of the principal notes, directly or through some intervening transaction, in such case no inquiry can properly be made into the amount of interest paid or reserved in such transaction, although it may have been part of their continuous dealings, for Walker can not be allowed, in such case, to recover back, by credit or otherwise, interest thus voluntarily paid, (although in excess of the rate allowed by law), which has in no way enlarged the amount of the notes in controversy.
But (as we said in Jenkins v. Greenbaum et al. supra) if “these notes are the result of renewals from time to time, of sums on which usury had been paid, or in which it was included, then such usury above six per cent would be a proper credit. If, at any time, settlements were had and new notes were given in which there was included no usury, or on which none had been paid, the master could not go behind the settlement,”' in absence of proof of fraud, or specific error, or mistake. But, as long as any portion of the debt on which usury has been paid or reserved remains, in its excess over six per cent it should be deducted as a credit.
The judgment of the Appellate Court in this case must be reversed, and the cause remanded, that an account may be stated in conformity with this opinion.
Judgment reversed.
Subsequently, on an application for a rehearing, the following additional opinion was filed:
Per Curiam :We have examined carefully the suggestions made in the petition by defendants in error for a rehearing, and find no sufficient cause for allowing the same. We have modified the language of the opinion in some respects, in an endeavor to prevent a misapprehension of our views. We can not sanction the position of counsel, that the circuit court found, as a fact, that no usurious payments were made upon the notes in controversy or upon any transaction so connected with the same as to constitute any part of the consideration of, or foundation of, the same.
The record is very voluminous, and we do not deem it our ■duty, in the present condition of the same, to wade through it, and determine in this court the ultimate facts, and are not to be understood as doing so. This is the province of the circuit court, and the regular and appropriate mode of doing so is to refer the controverted question of fact to a ■master for his investigation and report on each. This affords an opportunity for either party to except to his findings respectively, and on the rulings upon such exceptions specific questions can be presented.
What we decide is, that it was error in the circuit court to ignore all questions relating to the allegations of payments of usurious interest. Had the circuit court found that usurious payments had not been -made, we might examine the proofs as to such finding. In the absence of such finding, the master- should have been directed, to ascertain and report the facts in that regard.
The discussion of other questions, found in the opinion, are mere suggestions of the rules which may be applicable upon certain hypotheses presented or insisted upon by counsel in the briefs. • These suggestions may be rather premature, and" might, with eminent propriety, have been withheld until the facts were properly brought before us. In such case, we have but one hypothesis to apply the law to. We are asked-to make these suggestions more unequivocal, so as to include or exclude certain hypotheses suggested by the petitioner. We forbear to do so until the actual facts of the case are definitely shown, either in a report of the master or in specific findings by the court.
Rehearing denied.