I Cornell University Law Library The Moak Collection PURCHASED FOR The School of Law of Cornell University And Presented February 14, 1893 IN HEnORY OP JUDGE DOUGLASS BOARDMAN FIRST DEAN OF THE SCHOOL By his Wife and Daughter A. M. BOARDMAN and ELLEN D. WILLIAMS Cornell University Library KF 1036.T98 A treatise on tlie law of usury, pawns or 3 1924 018 849 798 p^ Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018849798 A TREATISE ON THE ; ' , , LAW OF USUET, PAWNS OR PLEDGES, ANT) MARITIME LOANS. By ransom H.XYLEE, Author of "Amebicaw Ecolestabtioal Law," " Commkn-taeies oh" the Law of Lnfakot' AND COVESTTrBEt'' "A TbBATISB ON THE REMEDY BT EJECTMENT, AND THE Law of Adtebsb Enjoyment," etc., bto. ALBANY : W^IHiIilAM: GrOXTIilD & S03S", 1873, Entered accoi'diDg to Act of CongreBS, m lae year eigUeen hundred and seventy-three, by wiLLIAJtt GOULD & SON, in the office of the Librarian of CongreBS, at Washington. THE ABGUS COMPANT, PRINTERS AHI> STERE0TYPEB3. AXBANT, N. T. PREFACE. The following treatise has been prepared under an impression that a work of the kind was required for the public convenience. The subjects which are treated 've regarded with interest in all parts of the American Union. So long as usury laws exist, it is of the utmost importance that they bdj understood. There is not at present an American work upon "^sury, in which the general subject is discussed. Mr. Blydenbui^h, some thirty years ago, brought out a small work on the law of usury, but he expressly declared that his work was designed only as a supplement to the English works of Powell, Comyn, and Ord ; and, since that, two or three other brief essays have appeared, giving the history of usury, or discussing the policy of usury laws, without any attempt to illustrate or explain what the law is. Within^ the last few years, the statutes of the several States upon the subject of usury have undergone considerable change, and in a few of the States laws against usury have been abolished altogether ; and, in the mean- time, many decisions have been pronounced by the courts bearing upon the subject. These circumstances, it is believed, have made it the more necessary that a new work should be prepared, show- ing, what the law really is, and where it may be found. Some have supposed that in those States where the effect of usury is not to nullify the contract infected by it, but merely to make it void as to the extra interest, and the like, the subject is of but little or no importance. This is doubtless a mistake. Wherever usury laws exist, in any form, the subject is of importance, To illustrate ; 4 PREFACE. ' In the State of Pennsylvania, the effect of usury in an instrumeut is merely to defeat the collection of the usurious interest. In a case, referred to and examined in this work, the plaintiff sought to foreclose a mortgage made to secure $43,200, with legal interest, and the defense of usury was interposed. The jury found that the amount unpaid on the mortgage was $42,682.87, but that, in fact, the mortgage was given to secure the payment of a loan at a rate of interest exceeding that established by law, and that, by deducting such excess, the amount actually unpaid was only $25,799.24. The question was fairly presented and litigated, whether the transaction was usurious or not, and it was found that it was usurious, and the result was that a deduction was made from the face of the mortgage of $16,883.63; demonstrating the necessity of a knowledge of the principles by which the question of usury is to be determined, even in those States where the effect of the law is simply to deprive the party of the right to collect the excessive interest. The probability is, that but few of the States will very soon try the experiment of doing without laws against usury in some form, and so long as such laws exist, a cor- rect understanding of them is of great importance to the com- mercial world. In respect to the contract of pawn or pledge, it may be safely affirmed that few subjects connected with the commerce of the country are of more general importance than the law regulating the subject of pledges or pawns. Every business man has more ox less to do with the subject, and yet there is scarcely any com- mercial subject less generally understood, or less adequately ascer- tained. Here, again, we are without the aid of a single American work. A few brief paragraphs are devoted to the subject in the excellent treatises of Judge Story and Mr. Edwards on Bailments, but no work has heretofore appeared in which the subject has been specially treated. This want has been seriously felt, and hence the importance of the discussion in this work, PREFACE. So, also, the subject of maritime loans is of marked interest ; especially to the members of the legal profession practicing in the great commercial centers of our country. It is true that the sub- ject has been discussed in works heretofore published ; but a con- siderable time has elapsed since those works first made their appearance, during which many important decisions have been made upon the subject, making it necessary that the whole matter should be newly presented. I have endeavored in this work to examine, carefully and fully, the several subjects which I have treated, and bring out with clear- ness and accuracy the law and principles by which they are respectively governed. Part I occupies 446 pages, in which the subject of usury is exhaustively treated, the constituents of usury clearly defined, the statutes in force in the several States relating to interest succinctly stated, and the principal authorities upon the subject, both in England and this country, thoroughly con- sidered, and the doctrine of the cases accurately stated ; thereby furnishing a precedent for almost every conceivable usurious case which may arise. Part II consists of 233 pages, in which the contract of pawn or pledge is fully considered, the proper parties to a pawh or pledge, their rights, obligations and liabilities, and the final disposition of the subject of the pawn or pledge, are designed to be plainly and accurately stated and defined. Part III consists of little less than 100 pages, and is devoted to a con- cise discussion of the subject of maritime loans, and the law relat- ing to bottomry and respondentia; and the doctrine of the authorities upon the subject is briefly laid down. The object of this work is to bring within a limited compass the law relating to the important subjects considered ; and to this end I have endeavored carefully to examine all the statutes in force, and the decisions of the courts bearing upon those subjects down to the present time, and faithfully give their spirit and import, so that they may be readily comprehended. The subjects 6 PREFACE. of the work may be regarded as somewhat cognate, and as neither is sufficiently prolific of itself to furnish material for a book of convenient size, I have thought it best to group the whole together in one volume, and thus produce a book of proper dimensions for use. Recognizing the fact that a good index adds greatly to the value of a book, I have given to the work a full and complete, though not prolix, alphabetical index, which I trust may be found convenient and useful. It has sometimes been remarked, that bur modem law books are not trustworthy as authority, and that it is never safe to rely upon-them without consulting the cases. This, surely, need not be the case, and I flatter myself that I have been enabled to produce a book which may be trusted; and for the reason, that I have been careful to fortify my statements by a reference to the authority upon which they have been made, and in no case to make a statement not sanctioned by competent authority. I have taken liberties with the standard elementary works upon the subjects discussed, but where I have availed myself of the labor of others, I have endeavored, so far as was practicable, to acknowledge the source to which I was indebted. I trust that the work may prove of service to my professional brethren, and an essential acquisition to the library of every practitioner. Deoembek, 1872. TABLE OF CONTENTS. PART I. OF THE LAW OF USURY CHAPTER I. PAOE. Definitions of Usury and Interest — The words differ in their meaning — Opinions respecting the Morality of Taking Interest — Anciently, the Practice Condemned — At Present, it is Approved 35 CHAPTEE IL History of Usury in Europe and Great Britain — Denunciations by the Early Writers of Usurers and their Practice 40 CHAPTEE III. History of Usury in the Colonies and in the American States 49 CHAPTEE IV. The Policy and Propriety of Usury Laws — Arguments and Opinions upon the subject 66 O TABLE OF- VONTMNTS. CHAPTEE V. PAGE, The Statutes in force in respect to Interest and Usury in the States of New York, Vermont, New Hampshire, Maine, Massachusetts, Rhode Island, Connecticut, New Jersey, Delaware, Pennsylvania, Ohio and Michigan — Table of the Rates of Interest in those States respectively 64 CHAPTEK VI. The Statutes in force in respect to Interest and Usury in the remaining States of Maryland, Virginia, "West Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Tennessee, Louisiana, Arjsansas, Texas, California, Oregon, Nevada, Nebraska, Kansas, Mis- souri, Iowa, Minnesota, Wisconsin, Illinois, Indiana and Kentucky — Federal Statute on the subject for National Banks — Table of the Rates of Interest in those States considered in this Chapter 71 CHAPTEE VII. Of the particular Statutes to be applied in cases of alleged Usury — Conlflict of Laws on the subject — Rules by which the question is determined .... 78 CHAPTEE VIII. The Constituents of Usury — There must be a Loan, express or implied — There must be an Agreement that the money lent shall or may be returned CHAPTEE IX. Constituents of Usury — Illegal Interest must be reserved or taken — There must be a Corrupt Agreement to take more than the legal rate. 101 CHAPTEE X. Transactions not tainted by Usury — Certain rules applicable to Usury — Contracts not usurious because there is no Loan — Elements of a Loan — Sales of credit — Guaranties 110 TABLE OF CONTENTS. ■ 9 CHAPTEK XL PAGE. Transactions not usurious for the want of the element of a Loan — Con- tracts in the form of compensation for service — Charges for reasonable commissions on making Loan — Loans upon condition that debt of third person be assumed, or that a subsisting debt of the borrower be paid. . . . 130 CHAPTER XII. Transactions not usurious — Compensation taken on account of exchange — Making deposits in consideration of a Loan — Taking Interest in advance ; 143 * CHAPTEE XIII. Transactions not usurious — Bonus to agents for negotiating Loan 156 CHAPTER XIY. Transactions not usurious — Cases in which the money loaned is not agi'eed to be returned at all events — Bottomry contracts — Contracts in the form of a post obit — Transactions between partners 179 CHAPTER XY. Transactions not usurious — Contracts in the form of an annuity — Same in form of a rent-charge — General considerations 188 CHAPTER XVI. Transactions not usurious — Interest in the nature of a penalty, or where the same may be avoided by prompt payment of the principal — Trans- actions where stocks are loaned or transferred — Sales of depreciated securities , 304 2 XO TABLE Of CONTENTS. CHAPTER XVII. FAOE. Transactions not usurious — Cases where Usury lias been incurred by mis- take — "Where the excessive Interest is reserved or paid as a gift — Of compound Interest, semi-annual Interest and the like , 239 CHAPTEE XVIII. Transactions not usurious — Loan of chattels 245 CHAPTER XIX. Transactions not usurious — Miscellaneous cases held to be free from the taint of Usury ^ 255 CHAPTER XX. Transactions held to be usurious — Cases of alleged mistake — Cases of purchase of negotiable paper — Mistake in construction of statute 274 CHAPTER XXI. Transactions held to be usurious -^Where there was an alleged hazard attending the principal — Cases of sea risk — Cases between copartners — Contracts in the form of a post obit — Contracts in the form of an annuity — Other alleged risks. , 284 CHAPTER XXII. Transactions held to be usurious-^ Cases of alleged penalty — Taking Interest in advance — Antedated instruments — Cases in which goods are advanced instead of money , 297 TASLE Of CONTMNTS. 11 CHAPTEE XXIII. FAQE. Transactions held to be usurious — Cases wliere stock is transferred— Warrants of a municipal corporation — Depreciated bank notes — Certi- ficates of trust and deposit— Exchange of drafts and obligations 309 CHAPTER XXIV. Transactions held to be usurious — Cases where something besides Interest is paid for the Loan — Extra sum paid for brokerage — Extra sum paid as commission — Extra sum paid as excliange 334 CHAPTER XXV. Transactions held to be usurious — Cases where exorbitant Interest is taken under the form of discounts — Cases of contingency or prompt payment, 388 CHAPTER XXVI. Transactions held to be usurious — Cases of a miscellaneous nature 351 CHAPTER XXVII. General Summary of the cases examined — The Doctrine of the Courts in respect to'alleged usurious transactions 363 CHAPTEE XXVIII. How Usury Laws are construed by judicial tribunals — difference between remedial and penal Statutes — Usifry Laws sometimes penal and some- times remedial, and are to be construed accordingly — The construction "must be sensible — Usury Laws never, retroactive 372 12 TABLE OF CONTENTS. CHAPTER XXIX. PASE. Effect of Usury upon the contract or security tainted by it — When the usurious security is void as between the parties — When as to subsequent holders or assignees 381 CHAPTER XXX. Effect of Usury upon prior and subsequent securities, collateral to the con- tract infected with the original taint — Reforming the original contract — Judgment upon the usurious transaction, and the like 393 CHAPTER XXXI. Usury as a defense to an action — Who may interpose the defense to Usury — None but the borrower or those in privity with him can set up the defense — Parties may also be estopped of their light to interpose the defense 403 CHAPTER XXXII. The Penalties of Usury, and actions at law against the Usurer — The action at law to recover back usurious Interest — When property deposited or transferred upon usurious contracts may be recovered 421 CHAPTER XXXIII. Relief in Equity in cases of Usury — When the proceedings may be main- tained — Q-eneral rules upon the subject 435 CHAPTER XXXIV. The practice in cases o£ Usury — Pleadings in such cases, both in Law and Equity — Amendments of tl ^ pleadings in these casss 450 TABLE OF CONTENTS. 13 CHAPTER XXXV. PASE. Compouncling a penal action for Usury— Trial of an action involving Usury — Competency cf the witnesses and the evidence in the action — The verdict and judgment— Opening default and granting new trials — The consequences of the trial in penal actions for Usury, 465 CHAPTEE XXXYI. Usury as a crime — The offense at Common Law — The oflFense by Statute — "When the offense is complete — The indictment and evidence, 474 FART II. OF THE LAW OF PAWNS OR PLEDGES. CHAPTER XXXVII. Definition of a -Pledge or Pawn — History of the contract of pledging or pawning personal property as a security for debt 481 CHAPTER XXXVIII. The contract ot pawning or pledging— What is a Pawn or Pledge — What may and what may not be pawned or pledged — General rules upon the subject 493 CHAPTER XXXIX. The claim to be secured by a Pawn or Pledge — The delivery of the thing pledged — Po_3session of the Pledge must be continued in the Pledgee. . . , 504 1^4 TABIjB OF CONTEN'TS. OHAPTER XL. PAGE. The person of the Pawnor or Pledgor — The power of minors, married women, factors and other agents to make a Pledge or Pawn 420 CHAPTER XLI. The title of the Pawnor or Pledgor, and his property in the thing pledged or pawned — His obligations and duties in respect to the thing pawned or 433 CHAPTER XLII. The rights of the Pawnor or Pledgor in respect to the property pledged — The Pledgor's right to transfer his interest in the thing pledged — His right to redeem the article pledged — The extinguishment of the contract of pledge 444 CHAPTER XLin. The Pledgee's property in the Pledge or Pawn — Rights of the Pledgee in respect to the Pledge before it is required to be redeemed 557 CHAPTER XLIY. Eights of vthe Pledgee to enforce his claim by disposing of the property pledged after the claim has matured — Negotiable securities to be col- lected and the money applied to pay the debt 576 CHAPTER XLV. Rights of the Pledgee after the claim has matured — In case goods or per- sonal property are pledged, the Pledge must be sold— "When and how the Pledge is to be sold — Rights of Pledgee in case of Pledge to secure Illegal claim — Extent of the Pledgee's claim in th^ Pledge— Pledgee's rights when several things are pledged — Waiver of errors in the sale of the Pledge 581 TABLE OF CONTENTS. 15 CHAPTER XLVI. , PAO£, Rights of the Pledgee after sale of the Pledge — Distribution of the pro- ceeds of the sale — Liabilities of Pledgee in respect to negotiable paper — His liability to account for the property in pledge 601 CHAPTER XLVII. Duties and obligations of the Pledgee in respect to the property pledged — • Care and diligence required — Presumptions in case of theft — Meaning of ordinary care, as understood in such cases , 615 CHAPTER XL VIII. Duties and obligations of the Pledgee upon the termination of the Pledge — Liability upon refiisal or neglect to restore the Pledge — Principles governing the question of the pawnee's liability for the loss of the Pawn, 027 CHAPTER XLIX. Remedies of the Pledgor in respect to the Pledge — When he may bring his action of Trover or Replevin — His action in Equity to redeem — His action when the pledge is without legal consideration 642 CHAPTER L. The operation of Bankrupt Laws in cases of Pledge — The doctrine of the English authorities upon the subject — The doctrine of the American cases on the point 65t5 CHAPTER LI. Effect of the death of the parties to a Pledge— Means of deteimining the party entitled to the property pledged in doubtful cases — Some miscel- laneous points in respect to Pledges referred to 668 1Q TASLE OF CONTENTS. CHAPTEE LII. PAGE. Statutory provisions in respect to the subject of Pawns or Pledges. — Tlie English Pawnbrokers' act — Laws of New York relating to pledges and the business of Pawnbroking 684 CHAPTER LIII. Statutory provisions in respect to the subject of Pawns or Pledges— Laws of the New England States upon the subject — Decisions of the Courts , under the Statutes 694 CHAPTEE LIY. Statutory provisions in respect to the subject of Pawns or Pledges — Laws of the Territory of Arizona relating to Pledges and Pawnbroking — Laws of the several States upon the subject, excepting those of New York and the New England States, which are considered in the two preceding chapters ' 699 PART III. THE LA\A^ OF MARITIME LOANS. CHAPTEE LV. Antiquity of Maritime Loans — Texts of the Homan Law relating to the subject — Definition, legality and nature of a Mai'ilime Loan — The con- stituents of a Bottomry contract — Difference between Bottomry, Loan, Partnership and Insurance — Form of a contract of Maritime Loan 715 TABLE OF CONTENTS. 17 CHAPTER LVI. FAGS. Maritime Interest— General rules in respect to it — Eate of Maritime Interest— Common legal interest— The French decisions upon the sub- ject 721 CHAPTER LVII. Who may be parties to a Maritime Loan — When the owner is bound by the acts of the master of a vessel— Of Bottomry by the master— The same by the owner of a vessel — Difference between Bottomry and Bespondeutia 728 CHAPTER LVIII. What may be pledged in a Maritime Loan — What may be lent at Maritime risk — Loan, how to be employed — Consequence if there happens to be no risk — The case of a fraudulent borrower — Proof of the shipment — Loan, how employed 742 ■ CHAPTER LIX. Risks and losses borne by the lenders in cases of Maritime Loan — Losses and average occasioned liy the perils of the sea — Lenders bear only the risks of the sea — Loan for the voyage or a limited time — Places of peril and change of the ship 749 CHAPTER LX. The nature of Bottomry bills — Where and in what manner Maritime moneys are to be paid — Limitations of actions for the recovery of the same — Rule in respect to security in such cases — Extinction of the con- tract of Bottomry — Cases illustrating the subject : 755 CHAPTER LXI. Lien of the lender upon the effects at risk — Priority of liens on the ship — Priority of liens upon the cargo — Principles applicable to Maritime liens, 766 3 18 TABLJS OF CONTENTS. CHAPTEE LXII. PAGE. The Bottomiy bond — Form, interpretation and effect of it — Requisites of the contract of Bottomry — Other security may be taken with the Bot- tomry contract — The lender's remedy in case of Maritime Loans — The form of the decree in Admiralty 776 CHAPTEE LXin. Some points respecting Maritime Loans settled by authority, promiscu- ously stated 785 CHAPTEE LXIV. Translation of the second title of the twenty-second book of the Digests, and of the twenty-third title of the fourth book of the Code, each entitled De Nautico Poenore— Translation of the fifth title of the third book of the French Ordinance concerning the Marine ; . 798 INDEX TO CASES CITED. A. PAOB. Abeyv. Eapelye 344,350, 387 Abraham v. Brown 467 Adams v. Clazton 665 Agnew V. McElhan 478 Agricnltoral Bank v. Bissell 166 Ainsworth V. Bowen 618 Aldrich v. Reynolds 234 Allen T.Dykera 558,587. 689 Allen V. Fergnson 457 Allen V. Mapes 473 Allen V. Newbniy 785 Ames V. Wentworth 667 Amphlets, Ex parte 656 Anasfasia, Freight Money ot 739, 774 Anderson v. Maltby 186 Andrews v. Herriot 81 Andrews v. Jones 130 Andrews v. Pond 79, 88, 147 Androscoggin E. E. Co. v. Auburn Bank.. 576 AnnC. Piatt, The 739,776, 786 Anonymous 231 Appleton V. Crowninshield 764, 765 Artenm v. Williams 661 Archer V. Putnam 313 Archibald v. Thomas 233, 236 Arendale v. Morgan 620, 556 Ariadne, The 788 Armon v. Delamirlc 643 Atkinson v. Manks 671 Atlantic Ins. Co. v. Conrad ' . . . . 775, 781 Atlantic, Th« 739 Atlas.The 796 Anburtv.Maze 374 Augusta, Bank of, T. Earle 80 Augusta, The 788, 794 Aurora v. Cobb 676 Aurora, The 731 Austin v. Chittenden 410 Austin V. Fuller 469 Austin V. Harrington 170, 332 B. Badger, Ex parte. Badlam t. Uaker. . 663 697 PASE, Bailey V. Colby 697 Bailey V. Tucker 565 Bakewellv. Ellsworth 538 Baldwin, Bx parte 663 Baldwin v. Lamb 126 Ballard v. Addy 230 Balmev. Wombough 85 Baltimore Ins. Co. v. Dalrymple 597 Bancroft v. Coueen 530 Bandel y. Isaac 460 Bank of Old Bominion v. Debuque, etc., R.S.CO 614 BanksT. McLellan 414 Banks V. Van Antwerp 264 Barbara, The 785 Barbe, qui tam, v. Parker 453 Barclay, Ex parte 664 Barclay V. Walmsby 256 Barkus v. Calhoun 406 Barnard, Bx parte 664 Bamet v. Stone 363 Barr v. Kane 684 Barrettv. Cole 519 Barretto v. Snowden 160 Barrow V. Coles 567 Barrow v. Paxton 533 Barrow v. Rhinelander 412, 613 Bartholbmew V. Taw 441 Bartlett v. Johnson 6!2 Bai'tlett V. Viner 374 Bassange v. Ross 354 Battle V. Shute 430 Battyv.Lloyd 179 Baxter v. Buck 159, 170, 332 Baxter v. Fanlam , 686 Beach t. Fulton Bank , 464 Beadle V. Munson , 141 Beardslee v. Eichardson 638 Beckwithv. Windsor Mannf. Co.,..,. 125, 141 Bedell t. Hoffman 671 Bedford, The Duke of , 785 Bedo T. Sanderson 324 Beemanr. Lawton 519 Beetev. Bidgood 114 Belfast, The 785 Belgin v. The Sloop Rainbow ^ 741 Bell T. Cfilhown g26 20 INDEX TO OASES CITED. PASE. BeUT.Day 169, 170 BcUv.Hnnt 671 BenT.Kice 847, 268 BeUv. Scott 273 Bellingerv. Edwards 339 Belmont Branch Bank t. Hoge 418 Bennett, Ez parte 660 Berdan V. Sedgwick 408, 418 Berlin 7. Eddy 612 Best T. Hayes 673 Bevan, Ex parte, .- 241 Billingsbyv. Dean 141, 21B Billingtonv, Wagoner 409 Bills V. Smith 662 Birdwoodv. Raphael 664 BissellT. Kellogg 446 Blackv. Hightown 473 Blaine v. The Ship Charles Carter .... 770, 771 Blandy v. Allan 630 Blascom v. Broadway Bank 509 Blexamv. Sannders 561 Block V. State 469 Blodgett V. Wadhams 359 Bloomfield v. The Southern Ins. Co 781 Bpdby V. Keynolds 643 Bodenhamner v. Newson 519 Bolander v. Getz 667 Boldero v. Jackson 312 Bonner v. Gregg 467 Bonsey v. Aunce 518 Booth V. Cook 108, 231 Booth V. Swezey 261, 470 Borrodaile, qui tarn, y. Middleton 453 Boston, The 731 Botsford V. Sanford 898 Bottv. McCoy 525 Boughton T. Bruce '. 434 ^owie v. Napier 524 Bowman v. Malcolm 662 Bpyerv. Edwards 83 Bradbury V. Waginhorst 380 Braddock v. Smith 673 Bradgerv. Shaw...; 661 . Bfakely V. Tuttle ggo Brannockv. Brannock 400 Brassv. Worth 593 BraynardT. Hoppock 288 •^rewster v. Hartley 508 Bridge T. Hubbard 347,897, 405 Bfirikenhoffv. Poote 347 Brogden V. Walker 681 Brolesky V. Miller 305 Bromley v. Child 663 Brooksv. Ayery 112i 407 Brown v. Barkham 206 Brown v. Bunals 649 Brown v. Ward 586 Brown V. Warren 609 Brown T. Waters 890 Brownell V. Hawkins 557 Brammel v. Enders 186 Brysonv. Eayner 597 BuckT. Fulton Bank 472 Buckingham T. McLean 145 Buckley v.GnUdbank 106, 230 Bucklin V.Millard 108, 831 Bullard T. Eaynor 412, 414, 439 BullockT. Boyd 418 Burbridge V. Cotton 188 Burden Y. Parry 139 BurdnsantT. Commercial Bank of Natchez, 314 Burke v. Avery 412 Burke v. Parker 308 Burke v. The M. P. Eich 734, 735, 768, 775 Burnett, Ex parte 6S7 Bursley V. Bignold 374 Burt V.Baker 467 Burton V. Baker 120 Busley V.Finn 237 Bush V. Buckingham 106, 230 Bushv. Fearon 780 Bush V.Lyon 546 Butler V. Miller 551 Butterworthv. O'Briau 425 Bntterworth y. Pearce 386 Button, tu re., Clanghton 659 Button V. Dawnham 185, 718 Button V. Downholm 286 ButtsT.Bacon ^ 348 Cabot Bank V. Badman 666 Cabot, The 771 Cabotv. Walker 248 Cadyv.Potter 673 Caiuv. Gimon 410 CaUahanv. Shaw 348, 421 Campbell v. Jones 602 Campbellv. McHarg 848 Campbell V. Parker 676 Campbell v. Sloan 402 Cannon v. Bryer 374 Garden v. Jvnes 621 Garden V. Kelly 413 Carlisle V. Gray 425 Carlisle, qui tarn, vr Treara 452 Garrington v. Pratt 776 Cartwright v. Wilmerding 516 Caruthers V. Humphrey 461 Castle, Case of 475 Catharine, The 790, 795 Oatlln V. Qunter 462, 470 Caurey V. Yates 658 INDEX TO CASUS CITED. 21 PAGE. CavaneBsv, Nay... 426 CayngaCo. Bankv. Hnnt 152, 164 Central Bank T. St. John 155 Chadbonrav. Watts 397 Chamberlain V. Dempsey 414, 439 Chamberlain v. McClong 361 Chamberlin V. Townsend. . .'. 419 Chambersbnrg Ins. Co. T. Smith 680 Chapman v. Brooks 675 Chapman v. Clongh 607 Chapman v. Gale 697 Chapman t. Robertson 386 Chapman v. Turner 648 Chatham Bank V. Betts 132 Chenango Bank t. Cnrtiss 217 Chester V. Kingston Bank 620 ■Chesterfield T. Janssen 182, 193, 219 Childers v. Dean 109, 236 Chinn V. Mitchell 400, 429, 441 Christie, Ex parte 666, 667 ChurchiU T. Hunt 417 Circassian, The 736 CityBankv. Perkins 679 City Savings Bank y. Bidwell 85, 86, 87 Clapp V- Hanson 388 Clark V. Dearborn 405 Clark -V. Eamshaw 627 Clark V. Hastings 461 Clarkv. Shee 49 Clark T. Sheehan 143 Clark V. Sisson 421 Cleveland v; Loder , 327 Cleveland v. State Bank 661 Cobbv. Titus 129 Cockey v. Forrest 338, 344, 387 Codd V. Eathbone 264 Coggs V. Bernard, 494, 663, 617, 622, 626, 627 637, 639, 683 Coit V. Humbert 647 Coker V.Guy 107 Cole V. Savage 406 Collier v. Nevlll 284, 386 Collins v. Makepeace 461 Columbia, etc.. Ass. v. Bellinger 313 Commercial Bank of New Orleans v. Martin, 610 Commonwealth v. Frost 468, 471 Comstock v. Smith 599 Condit V. Baldwin 104, 162, 164, 170 Connecticut v. Jackson 243 Conoverv. Van Mater 171 Conrad v. Atlantic Ins. Co 605, 749 Conyngham, Appeal of 696 Cook V. Bank of Lexington 314 Cookv. Barnes 378, 400 Cook v. Dyer 409 Cook, In Matter of 666 Cooper V. Benton 626 Cooper V. Ray 619 Cooper v. Tappan ,. 289, 447 PASE. Cooper v.WUlmatt 636, 643 Cope V. Aldln 90 Corcoran V. Powers 318 Coming V. Sibley 457 Coming, Ex parte 666 Cortelyou v. Lansing 533, 647, 646, 670 Corvlev. Harris 687, 686 Coster y. Dilworth 159. Cothrel v. Harrington 191 Cottony. Dunham 98 Couslandy. Davis ". — 655 Crane y. Hendricks 94,120, 122 Crane v. Prince 271 Cranesleyy. Thornton 672 Crawford y. Johnson 1 114 Crawford v. The Wmiam Fenn 733 Crescent City Bank y. Carpenter 675 Crlppin y. Heermance 399 Crockery. Colwell 274 Crocker v. Crocker 590 Crowell v. Delaplaine 399 Gumming y. Brown 567 Cummings y. Williams ,... 250, 252 Cnmmingsy. Wire 326 Cunningham v. Hall. ; 428 Curtis V. Leavitt £.,417, 698 Curtis y. Martin 459 Cnshman v. Hayes 597 Cutcher v. Coleman 410 Cuthbert y. Haley 234,339, 394 Cutlery. How 97, 211 Cutler y. Johnson 97 CuUer y. Wright 88, 114, 459 Cuyler y. Sanf ord : 153 D. Dabneyy. Green 681 Dagal v. Simmons 463 DagneU V. Wigley 157, 160 Danbyv.Lamb 645 Daniels, Ex parte 374 Davenport, Ex parte 657 Davis V. Pink 596 Davis y. Garr. '. 268 Davis V. Leslie 782 Dayv. Swift 619 Dazier v. Bray 473 Dean v. James 660 Deanv. Keate 636 Deever y. The Steamer Hope 784 De Forest V. Story 134, 141 Delano v. Rood 304 Delaware Ins. Co, v. Archer 779 Demandray v. Metcalf 648, 648, 669 Demart v. Masser 613 Denn v. Dodds 399 22 INDEX TO CASES CITED. PAGE. Denyeon T.Botha 527 Depay V.Clark 580, 646 Depuyv. Humphrey 384 I>eBbrough v. Harris 673 De Tasted, Ex parte 659 De Wolf v. Johnson 89 Dm V. Bllicott 379 Diller v. Bunbaker 596 Dixv. Tally 580 DixT. Van Wjck 406, 415 Dixie, Wallaston, Case of 456 Doakv.Bankof the State 648 Doak V. Snapp 228 Dobson, Ex parte 659 Donald V. Suckling.' 572 Donohoe v. Gamble 680 Dooman V. Jenkins 635, 636 Dowdall V. Lenox ; 98 Dowev. Schutt 344, 419 iDowell v. Vannoy 354, 471 Dowler v. Cnshman '667 Downes, Ex parte 657 Dowthorpc, The 793 Draco, The 788, 739, 752, 782, 787 Drake v. Latham 380 Draper v. Emerson 410 Drew T. Power 296 Dry Dock Bank v. Am. Life Ins. and T. Co., 121 307, 367 Duell v. Cndlipp 560 Dunham v. Dey 272 Dunham T. Gould 43, 64, 323 Dnnningv. Merrill 346, 396 Dunscomb t> Bunker 349, 388, 404 Durant v. Einstein 652 Durham v. Tucker • 461 Dnrkeev. City Bank 336, 458 Dyett, In Matter of 613 Dykers v. Allen 689 Dymonds v. Cockrill 191 E. Eagle Bank of Kochester t. Rigney 163 Eagleson v. Shotwell 301 Eastman v. Avery ..^^ 519 East Elver Bank v. Hoyt 335 Eaton V. Alger 138 Edhel V. Stamford 400 Edward Oliver, The 793 Edwards v. Skering 348 Ehringham V. Ford 354 Eichelberger v. Murdock 599 Eldridge V. Reed igg Elephanta, The 7g6 Elliot V. Armstrong g46 ■•■• PASE, Elliot T.Lynch 504 Elliot V.Wood 394 Ellis, Ex parte 663 Ellis V. Wans 394 Elmer V. Oakley 169 Ely V. McClurg 360 Emancipation, The 727, 788, 795 Eneas v. The Charlotte Minerva 738, 752 Esmay y. Fanning 633 Esterly, Appeal of 380 Evans V. Freeman 526 Evans V. Martlett 566 Evans V, Negley 289, 361 Ewlng V. Howard 463 Exeter Bank V. Gordon 697 Fairhaven, IThe 792 Faithful, The 797 Farmer's Loan and T. Co, v. Carroll 317 Farmers' and Mechanics' Bank v. Joslyn.. 398 Farr v. Ward 672 Faulknerv. Hill 605 Fawcettv. Feame 662 Fay V, Grimstead 463 Fayv.Lovejoy „. ■ 237, 430 Fellows V. Commissioners, etc, of Oneida, 165 Ferguson v. Hamilton." 419 Ferguson T. Spring 198 Ferguson V. Sntphen 305 Ferrallv. Shaen 339 Ferrierv. Scott's Adm'rs 355 Ferris v. Cravpford 4Q8 Fielder v. Vamer 407 Finch, Case of 189 Finn v. Brittleston 636 Finuecane v. Small 624, 625, 639 Finney v. Ackerman 380 FJrst, etc., Bankv.Nelson 508 First National Bank V. Owen 254 First National Bank of Whitehall v. Lamb 91^ 92 Fisher V. Anderson S14 Fishery. Bradford 681 Fisher V, Fisher 58I Fitch V. Rochef ort 688, 690 Fitzsimmons v. Baum 871, 362 Flarty v. Odbum 493 Flecknor v. United States Bank 156 Flemming v. MuUegan 93 Fletcher v. Dickinson ggg Fletcher v. Heath 525, 530 Fletcher V. Tayleur 645 Fletcher v. Troy Savings Bank 671 Flight V. Chaplin 134 Flint V. Schomberg 138 INDEX TO CASES CITED. 23 PASE. Flowneyv. Milling... 597 Flowers V. Sproule 648 ffloyer V. Edwards 807, 365 Foltzv.May 340 Poote V. Brown 612 Foote T. Storrs 636 Forbes T. Brig Hannah 717 Foster t. Essex Bank 6S5 Foster, j:x parte 667 Fonntainv. Grymes 193 Foxv.Holt 731 Franklin T. Neate 636, 642 Franklin Ins, Co. v. Lord 747 Fredwlck V. Lookup 457 French V. ShotweU 405 Fuller, Case of 190 Falton Bank v. Beach 464 Fnrberv. Stnrmy 673 Fnmissv. TheMagonn 786 G. Gabhart T. Sorrels 461 Gage V. Bnckley 553 Gaitten v. Fanners' and Mechanics' Bank of Georgetown 833 Galloway T. Logan , 325 Galln.Bx parte.. 657, 658 Gambrilv. Doe 141, 214 Gardner v. Lachlan 660 Garnet v.Ferot 206 Garth v. Cooper 348 Gayv. Moss 674 Geffaken v. Slingerland 603 Genet v. Howard 593 Georgia, Bank of, v. Lewin '. 88 Gerard, etc., Ins. Co. v. Marr 575 Gibb V. Tremont 88 Gibbs V. The Texas 734, 790 Gibson v. Humphrey 644 Gibson v. Philadelphia Ins. Co 778 Gibson v. Stevens 236 Gifford V. Whitcomb 468 Gilbert V. Sewels 840 Gillard v. Brittan 645 Gilpin V. Enderley , 187 Giveans v. McMurtry 448 Gladstone v. Birley ; 511 Glasfnrd v. Laing 331 Glennie v. Irwin 648 Glynn v. Locke 673 Gobebchiok, The 782 Goldsmith v. Brown 129 Goldstein v. Hart 642 Goodale v. Richardson 610 Goodrich v. Bnzzell 381 Goodricks v. Taylor , . aoi PAQB. Goss v. Emerson 697 Gould V. Homer 463 Gower v. Carter ^14 GrandGulf Bank V. Archer 314 Grant V. Holdeu 609 Grantham v. Hawley 506 Grapeshot, The 735 Gratitudine, The 741 Gray v. Brown ■ 409 Greeley V. -Smith 777, 782 Greeley v. Waterhouse 775 Green V. Graham 697 Green V.Kemp...' 405 Green V. Morse 413 Greenfield v. Dean of Windsor 498 Greenwood, Ex parte 657, 658 Griflfin v. New Jersey, etc., Co 305 Grifin V. Eogers 679 Grigg V. Stoker 174 Griswold v. Jackson 551, 633 Grose, Ex parte 656 Gmbb V. Brooke 330 Gunnison v. Gregg 408, 460 Hadden v. Innes 436 Halev.Hays , e08 Hale v. Hazilton 471 Hall V. Daggett 187 Hall V. Earnest 283 Hall V. Haggart 352 Hall V. Wilson 35,3 Hamburg, The 797 Hamerv. Harrell 98 Hamilton V. La Grange 242 Hamilton V. State Bank '. 595 Hamlin v. Fitch 263 HS,mmett v. Yea 105, 333, 334 Hammond V. Bangs 396 Hammond v. Hopping 396, 469 Hardy v. Peyton 631 Harger v. McCuUough 132, 327 Hargreavee V. Hutchinson 431 Harkins V. Peterson 686 HaiTington v. Long 501 Harrington v. Snyder 626 Harris v. Packwood 625 Harris v. Runuals 687 Harrison V. Hannah 346 Harrison, Ex parte 663 Harrusharger v. Kinney 471 Hart V. Draper 465 Hartley v. Harrison 414 Hartop V. Hoare 643 H^tshoru V. Davenport 44d 24 INDEX TO CASUS CITED. PAGE. Harvey V. Pocock 645 Haebronck v. Vandervoort 559, 648 HaskinB V. Kelly 551, 631 HaskinBT. Patterson 534 HaBsel, Case of 374 Hawks V. Drake 593 Hawks v. Henchdifl 609 Hawksv. Weaver 166, 269 Haynes v. Foster 526 Haynesv.Fry 139 Haysv.Eiddle 520 Hayward v. Le Baron 228, 238 Healdv. Carey -635 Healing V. Cottrell 635 Eeath V.Cook 236 Henry v. Bank of Salina 476 Benry V.Eddy 670 Herdltv. Nast 448 Herrickv. Jones 94 Herwig v. Oakley 787 Hickman, Succession of 325 Higtamanv. Molloy 655 Hilarity, The 739, 783 Hillegsburg Succession of 618 Hills V. Smitli 697 Hilton V. Waring 679, 611 Hinton V. Holliday 607 Hirst V. Peirse 648 Hirstv. TenEyck 648 Hogan V. Hansley 298 Hoger V. Edwards 364 Hogg V. Euffner 114 Holbrook y. Baker 505 Holf ord V. Blatchf ord 459 Holland v. Chambers 473 Hollenbeckv. Sliults 469. Holmesv.Hall 680 Holmes v. Wetmore k54 Holmes v. Williams 418 Holroyd v. Gwynne 661 Homes v. Crane 554 Hope V. Smith 391 Hopkins v. Baker 172 Hopley, Ex parte .' 659 Horton V. Earl of Devon 672 Horton y. Holliday 647 Horton v. Moot 289 Hosford V.Nichols 459 Houghton V. Payn 391 Howe V. Parker 538 Hbwesv.Ball 669 Howlqnsv. Bennet 18S, 200 Huling V. Drexel 271 Humphrey v. Pearce ; 391 Hunsacker v. Sturges 632 Hunt V. Acre 448 Hunt V. Ten Eyck 622 Hunt, Ez parte, re Amer 666 ThSS. Hunter, Ex parte 656 Hunter, The 786, 788 Hurdv.Hunt 260 Hurry V. The John and Alice TSl Hutchinson V. Homer 140 Hyatt T. Argenti 695 Indomitable, The 796 Ingallsv.Lee 120 International Bank v. Bradley 153 Irnhamv. Child 296 Isaaok V. Clarke 622, 636 Jacks V. Nichols 278-280, 336, 337 Jackson v. Butler 649 Jackson V. Dominick 395 Jackson y. Passitt 419 Jackson v. Henry 394 Jackson Y. Jones 396 Jackson V. Smith 470 Jackson V. Shawl 638, 703 Jackson V. Tnttle 406 Jacmel Packet, The 731, 735 Jacobs V. Latour 556 James v. Jayner 427 James v. Warren 505 Jane, The 788 Janson v. Lewis 213 Jarvis V. Kogers 524,565,574, 646 Jenkins V. Jones 551 Jenkins v. Nat. Village Bank of Bowdoin- ham 621 Jennison v. Parker 611 Jerusalem, The 770,782, 783 Jewel V. Wright 87 Johnson V. King 94 Johnson v. Morley 359 Johnson v. Shippen 786 - Johnsonv. Stear 573, 644 Jones V. Baldwin 620 Jones V. Berryhill 240 Jones V. Gibbons 660 Jones V. Hawkins 680 Jones V. Hubbard 218 Jones V. Richardson 511 Jonesv. Smith 648 Joyv.Kent 174 Judyv. Girard 220 INDEX TO CASES CITED. 25 K. Paqb. BCalorama, The ■. 733 Kathleen, The V3& Kay V. Whitaker 415 Keane v. Brandon .' 427 Keepland, Ex parte. In re Clapham 661 Kellogg V. Adams 402 Kellogg T. Hlckok 243 Kelly V. Cashing 793 Kemp V. Westhrook, 540, B47, 553, 559, 648, 650 Kendall v. Rohcrtaon 343 Kennon V. Dicken 243 Kensington, Ex parte 658, 664 Kent V.Walton 233, 387 Kenyon V. Smith 471 Ketchum v. Barber 116, 117, 272 Kentgen V. Parks 470 Kilbournv. Bradley 396 Kimball V. Hildreth * 675 Kinder V.Shaw B24 King V. Beard 687 Kingv. Clifton 465 Kingv. Drury 192 King V. Green 653 Kingv. HutchiuB 647 Kiser V. Euddick 610, 680 Kitchel V. Schenck 118 Kitchra, Estate of 598 Knapp V. Grayson 625 Knights V. Putnam 840 Knights V. The AttUa 790 Kortright v. Cady 551 Knhnerv. Butler 448 Xurz y. Holbrook 463 Kyneston v. Crouch 662 L. « LacMngton, Ex parte 663 Laddv. Wiggin 409 Lamigov. Gould 184 Lampleigh v. Braithwaite 544 Lane v. Bailey 684 Lane v. Losee 334 Lansatt v. Lippencott 524 Large v. Passmore 330 Lavinia, The, v. Barclay 729, 734 Law V.Merrill 357 Lawley v. Hooper 296 Lawrence v. Cowles 215 Lawrence v. Mathews 677 Learoyd V. Bobinson 526 Leavittv. De Lang 118 Le Blanc V. Harrison 824 Lee V. Baldwin 619 Lee V.Cass 455 Lee V. Peckham 402 PAGE. Lee V. Lelleck 88 Lee, Ex parte 663 Lefarge V. Horton 410 Legg V. Evans 568 Lelandv. Medora 727, 777 Levy V. Gadsby 106,331, 555 Lewis V. Graham 614 Lewis V. Hancock 793 Lewis, Exparte 770 Lickbarrowv. Mason 524, 666 Lightf oot. In re 663 Lilburne, The 661 Lindsay v. Barrow 673 Lindsay v. Sharp 98 Livingston v. Indianapolis Ins. Co 478 Lloydv. Keech 340 Lloydv. Scott 94^203,210, 434 Lockley V. Pye 645 Lockwood V. Ewen 647 Lockwood V. Mitchell 428 Longv. Storie 210 Long V. Wharton 174 Long, Case of 466 Loomis V. Eaton 406 Louisiana State Bank v. Gaiennie 680 Loveday, Case of 478 Lovett V. Diinond 406, 410 Lowv. Prichard 326 Lowv. Waller 300 Lncketts v. Townsend 594 .Lnln,The 738, 794 Lushingtou v. Waller 183 Lylev.Barker 561 Lynde V. Staats 299 M. Macomber v. Dunham 352, 469 Macomber v. Parker 510, 512, 654 Maddock V. Hammett 334 Maddockv. Eumhall 220 Madonna, The 771 Madora, The Ship 771, 788 Maine Bank v. Butts 109, 156, 275 Malrs V. Taylor i... 541 Maitland v. The Atlantic 776, 777 Mangue v. Haringhi 703 Manners v. Postan 454 Manney v. Stockton 429 Manning v. Tyler 462 MansBeld V. Ogle 290 Marine Bank of Chicago v. Wright 679 Markham v. Jaudon 494, 513, 591, 593, 613 Marsh v. Howe 143, 625 Marsh v. Lasher 464 Marsh v. Martindale 894 26 INDEX TO CASES CITED. PAGE. Marshall T, Birkensliaw 454 Martin v. Creflltors 676 Martinv. Foster 123, 856 Martin V. Eeid 683 Martinv. Somerville Water Power Co.... 531 Martini V. Coles B46 Martinsville, First Nat Banli of, v. Canat- sey 141 Marvine V. Hymers 153,153, 235 Marvine V. McCullum 341 Mary.Tlie 727,734,739,782 Mary Ann, Tlie 792 Maryland, etc., Ins. Co. v. Dalrymple 697 Masonv. Abdy 286 Mason v. Lord 415 Masters v. Drayton 467 Matherv. Staples 598 Matlock v. Mallory 3S4 Matthews v. Coe 412 Matthews V. Griffiths 333 Manghan T. Walker 465, 470 Maznzan v. Mead 122 McAllister V. Jerman 408 McAllister, Appeal of 272 McClure V. Williams , 396 McCombie V. Davies 639 McCraney v. Alden 86, 90, 348, 398 McGennes v. Hart . , 98, 325 McGraw v. Adams 672 McHenry v. Hazard 671 McKay v. Draper 671 McEenna, Ex parte 527 McLamore v. Hawkins 559 McNeil V. Fourth Nat. Bank, N. T 590 McNeil V. Tenth Nat. Bank 600 Mead v. Brown 661 Meagoe v. Simmons 329 Mechanics' Bank v. Edwards . . 407, 409 Meechv. Stover 424 Melville v. Am. Benefit Ass 362 Menstonev. Gibbins 783 Merrills v. Law 356, 469 Merritt v. Burton 148 Merville v. Le Blanc 427 Meyer v. City of Muscatine 244 Meyerstaiu v. Barber 675 Middlesex Bank v. Minot 614, 670 Miller v. Kerr 411 Miller v. The Rebecca 736, 737 Miller v. Tiffany 83 Milliken v. Dehon '. gge Mitchell V. Griffeth 805 Mitchell V. Oakley 343 Mitchell V. Preston , 305 Mitchell y. Winslow 666 Molton V. Camroux 631 Monk V. Hovey 404 Monroe v. Douglass 86 PASE. Monroe Bank y. Strong 396 Moody V. Hawkins 461, 471 Moore V. Battle ; 310 Moore v. Howland 95, 117 Moore, Ex'r. of, V. Vance 346 Moran v. Mayor, etc., of Mobile 625 Mordecai v. Stewart 430 More V, Howland 95 Morehead V. Newell 555 Morgan V. Fillmore 672 Morgan v. Mechanics' Banking Ass 262 Morgan V. Eavey 669 Morgan V. Tif ton 400 Morissetv. King 186 Morrel V. Fuller 458 Morrisy. Floyd 407 Morris, Executors of 297 Morris Canal, etc., Company v. Fisher 603 Morris Canal, etc., Company V. Lewis . ... 674 Morrison v. McKijmon 254 Morse T. Hovey 441, 444 Morse v. Bowland 402 Morse v. Wilson 285 Morse v. Woods 607, 697 Morton v. Bramner 686 Moses v. Cochrane 562, 564 Moss V. Bowland's Ex'rs 402 Mowry V. Bishop 243, 244 Mowry v. Wood 601, 677 Muir V. Newark Savings Inst 171 Mnmford v. Am. Life Ins. and Trust Co., 121 366 Munn v. Commission Co 341 Murphy V. State 478 Murray v. Barney 417 Murray v. Harding 108, 195, 3.31 MuBselman v. McElhenny 391 Myttoon v. Cock 634 N. Naish, Matter of, 197 Nasie, Case of 454 National Bank of Metropolis v. Orcutt 460 National Ins. Co. v. Sackett 340 Nanman v. Caldwell 641, 643 Navulshaw v. Brownrigg 626 Naylor v. Baltzell 787 Nelson v. Edwards 579 Nelson v. Wellington 577 Nelson, The 786,788,790, 794 Nevison V. Whitby 106, 230 New Bedford Savings Inst. v. Fair Haven Bank 668 Newbold v. Wright 524 Newell V. Doty 341 Newell V. Pratt 524 INDEX TO CASES CITED. 27 PAGB. New Jersey, etc., Co. v. Turner 469 Newlands t. Chalmers' Trustees 383 Newman v. Kershaw 4G5 Newman v. Kerson 90 New Orleans Gas, etc., Co. v. Dudley 459 NewsoQ V. Thornton 534 Newton v. Moody 673 New York Dry Dock Bank v. Am. L. Ins. and T. Co 306 New York Firemen's Ins. Co. v. Ely 236 NewYorkFiremen'sIns. Co.v. SturgiB,^107, 156 S3S, 237 New York Life Ins. and T. Co. v. Beete. . . 318 New York Mutual Life Ins. Co. v. Bowen, 414 Nicholas v. Bellows 427 Nicholas V. Skeel 429 Nicholas v. Fearson 126 Nichols V. Maynard 206 Nichols V. Stewart 461 Nicholson v. Oooch 663 Nicklssonv. Trotter 688 Nivan v. Roup 516 Noblev. Walker 447 Noland V. Clark 610 North V. Sergeant 165 Nottebohn v. Mass 599 Nunn, Ex parte 657. Nuova Loanese, The 791 o. Odiome V. Maxey 524 Ogle V. Atkinson 565 Ohio and Miss. B. B. Co. y. Kasson 414 Oliverv. Oliver 45, 382 Oliver Lee's Bank v. Walbridge, 161, 152, 153 334 Olivia, The 797 Oologardt V. The Anna 788 Oralia,The 741, 745 Orange Bank v. Colby 274 Oriental, The 737 Ottov. Durege 237, 238 Owen V. Barrow 468 P. Packard v. The Louisa 775 Packet, The 7.34,785, 786 Page, Case of 432 Paley. Leash 627 Palen V, Johnson 424 Pallard V. Baylor 212 Pallardv. Scholey 307 Palmer v. Baker 139, 329 Palmer V. Lord 423 PASS. Panama, The 738,739, 796 Parker viBrancker 596 Parker V. Cousins ...^ 400 Parker V. Gillies 691 Parker V. Linnett 672 Parmelee v. Lawrence 380, 449 Parr V. Eleasen 339 ParshaU V. Bggart 494, 516 Parsons v. Overmire /.. . . 511 Patapsco, The 733, 794 Patchin v. Pierce 651 Paterson v. Task 523 Pathonier v. Dawson ! 683 Patomi v. Campbell 672 Patton V. The Eandolph.. 731, 738 Paullv.Best 663 Payne v. Watt^raon 355 Paynev. Woodhull 500 Pearson V. Bailey 400 Peers v. Sampson 630 Peet V.Baxter 691 Pennell v. Attenborongh 685, 689 Pennsylvania Ins. Co. v. Duval 778 People V. Adriene 380 Perkins v. Conant. ..■ 429 Perrinev. Hotchkiss 273 Perrine V. Stryker 443 Perry v. Beardslee 631 Perry V. Roberts 603 Peters v. Mortimer 444 Pettingillv. Brown 468 Pettitt V. First, etc.. Bank 509, 558, 674 Petty V. Overall 625 Philanthropic, etc., Ass. v. McKnight 425 Phillips V. Belden 412 Phillips V. Jones , 644 Pickaway Co. Bank y. Prather 393 Pickens v. Yarborough 620 Pickeringv. Burk 523, 562 Pigot V. Cubley 695 Pike V. Ludwell 219,310 Plants, etc., Co. v. Falvey 679 Piatt V. Hibbard 636 Pomeroy v. Ainsworth 88 Pope V. Nickerson 782 Porter v. Mount 374, 423, 424, 471 Portland Bank V. Stone 152 Post V. Bank of TJtica 409, 438 Post V. Dart 405, 415 Powell V. Henry 620 Powell V. Jones 266 Powell V. Waters 347, 386 Powers V. Waters 341 Pratt V. Adams 85, 395 Pratt V. Willey 308 Prescott, Ex parte. . ." 657 Price V. Lyons Bank' 338, 396 Price V. PhiUips 668 28 INDEX TO CASES CITED. FASE. Price, Ex parte 660 Pridely v. Hose 498 Prother v. Fnrman 440 Pusey V. Pasey 649 Qnackenbnsli T. Leonard 186 Queen V. Dy 475 Quickv. Grant 187 Quiner t. Callender 384 R EahlT.Parr 751 Bamsdell v. Morgan 331, 433 Bandall v. Peters 603 Rankin v. McCnllougli 592 Kansom v. Hays 410, 430 Eapalye v. Anderson 94, 119 Ratcliff V. Davis 533,636,642, 669 Hatcliff V. Vance 546 Rawliueon v. Pearson 655 Eeade v. The Commercial Ins. Go 733 Beading V. Weston 406 Rebecca, Tile 771 Reed v. Jewell 681 Reed V. Smitli 331, 347 Beeves V. Cappen 608, 518 Reeves v. Smith 610 Regan V. Serle 672 Regina V. Goodbum 686 Begina v. Mandee .' 662 Regina V. Radnitz 662 Renolds V. Clayton 286 Rex T. Gilham 467 Rex V. Robinson 476 Rex V. Upton 457 Rexford v. Widgen 439 Rice v. Benedict 611 Rice V. Mather 129 Rice V. Welling 400 Richv. Tapping 308 Richards V. Brown 293 Richardson v. Brown 98, 325 Richardson v. Crandall 654 Ringgoldv. Binggold 622 Robbing v. Dillaye 235 Roberts V. Sykes ... 650 Roberts v. Thompson 631 Roberts v. Tremange 100, 291 Roberts v. Wyatt 517 Robertson V. Kensington 625 Robertson, In re 662 Robinson V. Bland 80 Robinson v. Cropsey 366, 595 Robinson v. Hnrley Robinsonv. Loomis 271 Robinson v. Macdonald 506 Rock, etc., Bank v. WooUscropt 336 Rockwell V. Charles 224 Rogers v. Buckingham 172 Rogers T. Sample 214 Rosa V. Bntterfieia 413, 417 Rose T. Dickson 302, 312 Ross V. Ackerman 470 Ross V.Hill 642 Ross V. Norvell 681 Eowe V. BeUaseys 203 Eowe V. Gunson 297 Rowev. Phillips 459 Royal V. Rowles 660 Royal Arch, The 774 Royal Stuart, The 791 Rozet V. McOlellan 621 Ruchu V. Conyngham 734 Rnddel V. Ambler 447 Ruddock V. Boyd 347 Enffln V. Armstrong 303, 339 Runyon V. Mercereaux 554 Rutherford V. Smith 463 Rutland Bankv.Woodmff 597 ByeUv.Rolle 507,517, 554 S. SaflbrdT.VaU 408 Salacia,The 774 Salarte v. Melville 169 Salina Bank V. Alvord 281 Salina Bank V. Henry 437 Sanderson V. Warner 382 Sandsv.Chubb 407 Sandusky Bank v. Scoville 360 Sanduvien V. Brunner 340 Saunders v. Davis 545 Saunders v. Lambert 427 Sawyer v. Ghan 174 Schalk V. Harmon 613 Schemerhom V. Am. LiTe Ins. and T. Co.. 321 Schemerhom v. Talman 323, 489 Schmidt V. Blood 625 Schoolev. Sail 606 Schoopv. Clarke 268 Schroeppel V. Coming.... 348, 414, 431, 432, 433 Scofleldv. Day 384 Scott V. Lewis 3" 3 Scott V. Lloj'd 203, 296, 361 Seawell v. Shonberger 426 Sellick V. Munson 607 Seneca Co. Bank v. Schermerhorn 327 Seymour V. Marvin 128 Seymour v. Strong '. 302, 312, 349, 860 INDEX TO CASES CITED. 29 PAQB. Shackell v. West 684, 635 ShankT. Payee 466 Shanksv. Kennedy 803 Sharpley V. Hunt VH ShawT. Coster 671, 678 Shaw V. Spencer B31 Sbepherd, Ex parte 656 Sheppard v. Union Bank of London 527 Shei'man v. Partridge 672 Ship Packet, The 741 Shuck V. Wright 814 Shnfelt T. Shnfelt 405 Simpson y. Fullenwider 389 Sizerv.Miller 121 Slevin v. Morrow 609 SloBsen V. Duff 268 Smalley V. Doughty 401,464 Smead V. Green *', 427 Smedberg v. Whittlesey 388, 389 Smedbury v. Simpson 389 Smilax, The .' 788 Smith T. Beech 109, 238 Smith V. Cooper 348 Smith V. HolUster 401 Smith V. Marvin 95, 128 Smith V. Nichols 890 Smith V.Payne 345 Smith V. Prager 467 Smith V. Eobinson 430 Smith V. Sasser 519 Smith V. Silvers 141 Smith T. Stoddard 428 Smith T. The MuncU Nat. Bank 141 Smith, Ex parte. In re Harvey 658 Smith and Strickland, Ex parte 664 Smousev. Bail 621 Snow V. Fourth, etc., Bank 634, 568 South Sea Co. v. Duncomb 606 Spain V.Hamilton 100, 448 Spalding V. Reeding 666 Spear, Ex parte 667 Spencerv. Tilden 848,250, 254 Spurrier V. MayosB 208,209, 364 Stainbank V. Shepard 789, 795 Stanley v. Jones 502 Stanley V. Whitney 398 St. Jago de Cuba, The 794 St. Johnv. O'Connel 505 St. Losky V. Davidson 620 State v. Auditor 880 State V. Fletcher 374 SteamsT. Marsh 584, 615 Steelev. Whipple 131, 328, 347 Stein V. Indianapolis, etc., Ass 410 Stephens v. Muir 408 Stephens V. Watson 475 Sterling v. Janson S93 Stevens T.BeU ... 647 Stevens y. Hurlbert Bank. . : 596, 630 PAQB. Stevens y. Lincoln 426, 428 Stevens v. Wilson 529 Stevenson y. Newerham 663 Stewart y. Drake 594 Stieiv.Hart 537 Stocknerv. Bthnall 836 Stoker v. Cogswell 649 Stonev. Ludderdale ^. 498 Stone y. McConnell 401 Stoney v. Am. Life Ins. Co 406 Storery. Coe 263, 471 Story y. Eimbrongh 380 Strettonv. Taylor 465,474 Stribbling v.Bauk 156, 818 Stuart v. Mecb. and Farmers' Bank 287 Sturgess v. Claude 673 Sturtevant v. Jaques 530 Styartv. Bowland 603 Summerset v. Cookson 649 Sumner v. Hamlet 517 Smnnerv. People 217, 8W Snydam y. Booth 878 Snydam y. Westfall 118,872, 878 Swainston y. Clay 662 Swartwont y. Payne 362 Sweet v. Spencer 327 Swettv. Brown 638, 555 Swinney v. State 489 Surtz V. Platz 416 Sylvester v. Swan 343 Taggart y. Packard 550 Tahnadge y. Pell 883 Tanfield y. Finch 190 Tartar, The 786,788 Tate y. Wellings 818, 310 Taylor v. Cheever 680 Taylor y. Chester 598 Taylor v. Cobb 456 Taylory. Daniels 398 Taylor y. Freemai; 585 Thallhimer v. Brinkerhoff. 602 Thayer y. Dwight 598 Thomas V. Gettings 735 Thotoas-y. Murray 181, 286 Thomas v. Watson 472 Thompsony. Andrews 508 Thompson y. Bury 441 Thompson y. Nesbit 304 Thompsony. Patrick 662 Thompsony. Pnmell 474 Thompson y. VanVechten 414 Thomson y. Powles 84 Thomson y. The Koyal Ins. Co 766 Thomdikev. Stone 178, 738 Thome y. Tilbnry 668 30 INDEX TO GASES CITED. PAez. Thornton v. Bank of Washington 166 rrhorp V. EnkB 98 Thurston v. Cornell 95, 136 Tlbbeta v. Flanders 696 TomkinsT. Bemet 49 Tompkins V. Hill 439 Tompkins v. Saltmarsh 629 Toole V. Stephen 332 Topclif V. Waller 457 Topping V. Keysell 663 TorryT. Grant 308, 388, 396 Towsler V. Durkee 336 Treadwell V. Davis 552,559, 600 Tregoing v. Attenborongh 431, 668 Trotterv. Crockett 607 Trotter V. Curtis 1S8 Troughton, Ex parte 658 Trontman V. Bamett 390 Tmllv. Trull 530 Truscottv. Davis 419 Truxworth V. Moore 445 Tucker v. Morris 673 Taf ts V. Shepaf d 342 Tnllet V. Linfleld 456 Tunno v. The Mary 784 Tunstall v. Boothby 498 Turnbull v. Ship Enterprise 718 Tnrney v. State Bank 228 Tnmongh v. Cooper 447 Turquandv. Mosedon 690 Turton v. Benson 206 Tnthill v. Davis 847,394 Tuttle V. Clark 211 Twogood, Ex parte 655, 659 Tyler V. Gates 243 u. Udall T.Walton 662 Union Bank T. Bell 448 Union Bank of Rochester v. Gregory 154 United States v. Athens Armory 380 United States T. Victor 672 United States Bank V. Lloyd 104 United States Bank v. Owens 323, 877 United States Bank v. Waggoner 222 Urqnhart v. Mdver 524, 539 Ushonse, Ex parte 660 UtIcaBank v. Wager 156 Utica Ins. Co. v. Bloodgood 156 Utlca Ins. Co. T. Cadwell 155 V. Valentine T.Conner 143 Valettev. Mason 680 Valley Bank v. Strlbbling 312 FASX. Van Amringe t. Peabody 534 Vanderzee T. Willis 648,655, 669 Vanderwater T. Yankee Blade 775 Van Duzer v. Howe 118, 132 Van Herbuck, Case of 466 Vaupell T. Woodward 899 Vaux T. Austin 472 Vest T.Craig 582 VibUia, The 741 Vickery T. Dickson 233, 347, 398 Vilas T.Jones 476 Virgin, The Ship, t. Vyfhius 771, 786 VroomT. Ditmas 459 w. Wade T. Wilson 451 Wadsworth T. Champion 211 WadsworthT. Thompson 682 Waite T. Windham, etc., Co 325 Wake.Exparte 655 Wakeman v. Grady 612 Walcott t: Kirth 519 WaldreuT. Chamberlain 731 WalesV. Webb 396 Walker T. Staples 675, 681 Wallace t. Bank of Washington 347 Ward T. Macaulay '. . . 561 Ware t. Bennett 425 Warev.Otis 695 Ware v. Thompson 448 Warren T. Crabtree 397 Washburn T. Pond 696 Washington Bank T. Arthur 313 Waterman T. Brown 660 Watriss T. Pierce 427 Wave, The 790 Way T. Foster 653 Webb T. Cowdell 669 Webster v. Seekamp 793 WeinserT. Shelton 349 WellST. Chapman 406, 413 Wells T.Foster 300 Wells T. Girling 209 Wendlebone t. Parks 392 Wensley, Ex parte 661 West T. Skip 661 Western Reserve Bank t. Potter 221 Westzinthns, In re 566 Wheaton T. Hibbard 422,423, 424 Wheaton T.May 183 Wheeler v. Newbould 879 Wbelpdale, Case of 396 Whipple T. Powers 254 Whitaker t. Sumner 555 White T.Bartlett 662 White T. Phelps 680 Whitebread, Bx par^ 656 INDEX TO CASES CITED. 81 PAOS. Wbitehall, First Nut. Bank of, y. Lamb, 91, 92 Whitlock V. Hoard 699 Whitney V. Peaz 575 Whitten v. Hayden 343 Whitwell V. Brigliam 597, 599 Whitworth T. Adams 127 Whitworth v. Yancey a 344 Wiley V. Crawford 677 Wiley T.Yale 426 WilkesT. Coffin 471 Wilkie T. Brig St Fetre 758 Willdnson T. Wilson 791 William and Emeline, The 739, 777, 788 Williams v. Archer 644 Williams v. Pitzhugh 446 ^Williams V. Fowler 359 Williams v. Herron 327 Williams T, House 132 Williams v. Stoner 344 Williams v. Tilt 407 WilUamsT. Wilson 392, 429 Williams, Ex parte 660 Williamson v. McClnro. 621 Willonghby v. Comstock 222, 601 Wills T. Murray 670 Wilmot ». Manson 471 PASS. Wilsonv.Dean 214 Wilson v. Duncan 671 Wilson T. Harvey 274 Wilson T. Little 601, 608, 668, 660, 585 Wing T. Dunn 388 Winser V. Shelton 3B8 Wood T. Rowcliffe .., '. 649 Woodruff T. Hurson 240 Woodworth v. Morris 678 Wordworth v. Huntown 449 Wrightv. Bnndy 408 WrightT. Wheeler 324 Wylde T. Radford 628 Wynne v. Crosthwaite 175 Young T. Fletcher 661 Young T. Miller 356 Ysabel Boza, La ' 794 Yuba, The 735 z. Zephyr, The 781 The Law of Usury, Pawns or Pledges, and Maritime Loans. I*ART I. OF THE LAW OF USURY. CHAPTEE I. DEFINITIONS OF USUET AND INTEREST THE WOEDS DIFFBE IN THEIE MEANING OPINIONS EESPECTING THE MOEALITT OF TAKING INTB- EE8T — ANCIENTLY, THE PEAOTICE CONDEMNED AT PEESENT, IT IS APPEOTED. UsuEY has been variously defined. The definition given to it by lexicographers is, "money paid for the use of money," or " interest ;". and such was the original signification of the word. The etymology of the words usury and interest is the same ; but, in modern law, the two words are quite difierent in their meaning. Interest is the premium allowed bylaw for the use of money; while Usury is the taking of more for the use of money than the law allows, or the extortion of a sum beyond what is legal. Lord Bacon, in his able work on " Civil History," pronounces usury to be " the bastard use of money." Judge Blackstone says it is " an unlawful contract, upon the loan of money, to receive the same= again with exorbitant increase." (4 Black. Com., 156.) . Matthew Bacon says, " Usury, in a strict sense, is a contract, upon the loan of money, to give the lender a certain profit for the use of it, upon all events, whether the borrower made any advantage of it, or the lender suffered any prejudice for the want of it, or whether it be paid on the day appointed or not" (6 Bac. Abr., Ut. '■'■Of Usury") ; and Judge Bouvier says, "Usury is the illegal profit which is required by the lender of a sum of money, from the borrower, for its use." (1 Bouv. Inst., 299.) The definitions by Blackstone and Bouvier give a fair idea of the meaning of the word according to its present use, though no more satisfactory, perhaps, than the one first above given. The true spirit of usury lies in taking an unjust advantage of the necessities of the borrower. The receiving of simple interest is regarded both legal and moral at the present day ; -while the taking of usury is considered by all Christian nations an offense against the laws of morality and right. It is true that, in former times, many good and learned men pei:plexed themselves and other people by raising doubts as to the propriety of requiring any eompeqsation for the use of money loaned. 3(5 LAW OF VSURT. These men made no distinction between this practice and usury; holding any increase of money to be indefensibly usurious. This view of the subject was taken at an early day by ecclesiastical writers, who stigmatized the taking of interest as contrary to the divine law, and by the canons of the church it was forbidden and punished as sinful and against Scripture. Especially, in the dark ages, when learning was confined to the monastery, and commerce was almost unknown, the severest denunciations were thundered by the church against the taking of simple interest, as a " horrible ' and damnable sin ;" and it was ranked with heresy, schism, incest and adultery, and punished by expulsion from the fold of the flock. This position was based upon the construction which they gave to the law of Moses among the Jews : " If thy brother be waxen poor, and fallen in decay with thee, then thou shalt relieve him ; yea, though heie a, stranger, or a sojourner, that he may live with thee. Take thou no usury of him, or- increase, but fear thy God, that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase " {Lev. XXV, 35-37). "Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything ' that is lent upon usury. Unto a stranger thou mayest lend upon usury, but unto thy brother thou shalt not lend upon usury " {Deut. xxiii, 19, 20 ).■ But it has been observed, that the Mosaical precept was clearly a political, and not a moral mandate, since it only prohibited the Jews from taking usury from their brethren, the Jews, while, in express words, it permitted them to take it of a stranger ; proving that the taking of moderate usury, or a reward for the use of money (for so the word signifies), is not, ipso facto, an oflcnse, since it was allowed where any but an Israelite was concerned. Besides, many pious and learned men and commenta- tors have expressed the opinion that usury, in the strict sense of the word, was only unlawful, even among the Jews, when contami- nated by oppression, cruelty or extortion. The Israelites were but little engaged in commerce, and their law was not only calculated, but intended, to keep them from mingling by any means with other nations. Their land also was divided by lot, and they were not allowed to alienate their inheritances. They were not, there- fore, much in the way of lending or taking money upon interest, to employ in trade or expend in estates, in which cases, and in those of the like nature, it does not appear inconsistent with either OPINIONS C0NCJSBNIN9 INTMBEST. 37 equity or law for the lender to receive a proportion of the profits from the borrower. And as the Jews were expressly permitted to take interest of the gentiles, it is evident that increase on lent money is not in itself unjust, or contrary to the divine law, when not attended by oppressive circumstances. Besides, the taking of interest would seem to be sanctioned, or, rather, not forbidden, in the ISTew Testament ; for it will be remembered that our Lord, in the parable of the nobleman, declares to the servant that had received one talent and had hid it in the earth, so that it gained nothing, " Thou oughtest, therefore, to have put my money to the exchangers, and then at my coming I should have received mine own with usury " {Mat. xxv, 27 ). It is reverently suggested that this injunction would not have been given, even parabolically, if it were immoral, or contrary to the law of Moses. In the middle ages, during the dark period of monkish supersti- tion and civil tyranny, when commerce was at its lowest ebb on the continent of Europe, and in England itself, and what little there was of it was monopolized by the Jews and the Lombards, so enormous was the interest demanded for the use of money, that the business of the broker or money-lender was considered detestable, and this feeling gave rise to the maxim, ^'■JJsuria dieiPur quasi ignus v/rens :" , " It is called usury, as though it were a consuming fire." The brokers, or usurers, during this period, were so cruel and oppressive that all interest on money was laid under a total interdict, and the traffic of the Lombards and Jews was everywhere considered odious and cruel. But when 'men's minds began to be more enlarged, when true religion and real liberty revived, commerce grew again into credit, and again introduced with itself its inseparable companion, the doctrine of loans upon interest. Anciently, it was held in England to be absolutely unlawful for a Christian to take any kind of usury or interest for the use of money, and whoever was found guilty of so doing was liable to be punished by the censures of the church in his lifetime, and if after death it was found that the deceased had been a usurer while living, all his chattels were forfeited to the king and his lands escheated to the lord of the fee (5 Bac. Air., tit. " Of Usury at Com. Law ") ; and even so late as the latter part of the sixteenth cen- tury, the great English jurist. Lord Coke, declared all usury unlaw- ful (2 Inst., 89 ; 3 *5., 151 ). But fifty years later. Sir Matthew 38 I^-AW OJP USURY. Hale, another eminent English jurist, says that at common law tlie Jewish usury, which was forty per cent, was prohibited, and no other {Hard., 420); and very soon after the time of Sir Matthew Hale, it was generally agreed that the taking of a reasonable inte- rest for the use of money was in itself lawful, and that a covenant or promise to pay it, in consideration of the forbearance of a debt, might be inferred, on the principle that one having an estate in money should be allowed to make a profit by it, as well as another having an estate in land, and that there was no reason why the lender of money should not make an advantage of it as well as the borrower. Indeed, in the thirteenth year of the reign of Queen Elizabeth, a statute was passed, which tolerated the receiv- ing of interest, but restrained it to ten pounds per cent ; and near the close of the last century. Dr. Paley, in his excellent and standard treatise upon the Principles of Moral and Political Philo- sophy, emphatically declares that no reason exists in the law of nature why a man should not be^paid for the lending of his money as well as any other property into which the money might be con- verted (1 Paley' s Phil., Boston soh. ed., 108 )f The ancient Athenians held usury in great abhorrence, but they tolerated the taking of interest, which they fixed at rates deemed sufficient to afford a fair profit for the use of the money loaned, having respect to the object to which the money was to be applied.f Among the Eomans, during the Empire, the most simple interest was condemned by the clergy of the east and west. Cyprian, Lactan- tius, Ohrysostom, Gregory of Nyssa, Ambrose, Jerome, Augus- tine, and a host of councils and casuists, were unanimous in their declarations against the practice ; but the condemnation of the statesmen, like Cato, Seneca and Plutarch, was more of the abuse of usury than of the practice itself. X Usury was the inveterate *Hume, in his thirty-third oliapter of the History of England, says : " In 1546 a law was made for fixing the interestiof money at ten per cent, the first legal interest known in England. For- merly all loans of that nature were regarded as usurious. The preamble of this very law treats the interest of money as illegal and criminal." + Among the laws of Solon, the great lawgiver of Athens, recorded by Plutarch, no restrictions upon the trade in money seem to have been enacted ; and Boeckh, the German philologist, in his graphic treatise upon ancient Athens, says : " It is a glorious monument of the enlightened and commercial character of Greece, that she had no laws on the subject of usury ; that her trade in money, like the trade in everything else, was left wholly without legal restriction." X Calvin, Melancthon, Beza and other eminent reforiners, all give their views upon the prac- tice of usury, that is, an oppressive or extortionate interest, which they severely condemn ; but nevertheless they express the opinion that the taking of a fair compensation for the use of money is both reasonable and lawful. (Ylde Calvin's Epist. "J)e Uswre "). OPINIONS CONCERNING INTMBEST, 39 grievance of the Eepublic, and was therefore discouraged by the Twelve Tables, and finally abolished by the clamors of the people. But it was soon revived by their wants and their idleness, tolerated by the discretion of the praetors, and ultimately, in the Empire, it was determined by the Code of Justinian, in which the necessary rules and restrictions in regard to it were inserted {Vide 4 Gib. Rome, ly Mihnam,, 368 ). In the American States, it has never been against the policy of the country, or, at least, it has not been for many generations, for the lender to take simple interest for the use of the money loaned, and the rate has been universally regulated by law. It must be' admitted, however, that at the present day there is a class of pseudo reformers, diminutive in numbers as yet, who advocate the doctrine that interest on money lent is extortion, and consequently illegitimate and immoral. Following the example of the com- munists of Europe, these men declare that capital is of itself unproductive, and that labor alone has rights. The same princi- ple leads to the conclusion, to which they hold, that a person who lends to another a chattel for his use, has no right to call upon the borrower for pay for the loan ; all that he can justly require is that the article be returned in good condition. They insist that whether capital be represented by property or money, it is equally unjust to take interest for the use of it. These doctrines, to be sure, are put forth in the main by a few demagogues and agita- tors who subsist by fermenting the passions and prejudices of the lower orders of the people ; and yet they not unfrequently create distrust and inconvenience, especially in the manufacturing and mining districts of the country. But there is no probability that these ideas will ever become a part of the settled policy of any of the States, for the reason that the mercantile and agricultural classes must always be hostile to such a state of things. The necessity of individuals will always make borrowing unavoidable, and without some profit allowed by law, few persons will be found who will lend. The public conscience "will, most likely, continue to regard the taking a recompense for the use of money loaned as neither oppressive nor immoral, and laws will continue to exist regulating the rate to be paid, in the absence of any express bargain between the parties. Though money was origi- nally used only for the purposes of exchange, yet the laws of every civilized country have for ages permitted it to be turned to the 40 LAW Oil' asuBy. purposes of profit. And that the allowance of a moderate interest tends greatly to the benefit of the public, especially in a trading country, is abundantly obvious from that generally acknowledged .principle, that commerce cannot subsist without mutual and extensive credit. Unless money can be borrowed, trade cannot be carried on, and, as before hinted, if no premium be allowed for the hire of money, few persons can be found who will lend it, and the life of commerce will be entirely at an end. But while the policy of a reasonable and fair interest for the use of money is almost universally approved, the practice of usury, or the taking of more than the law allows for such use, is qiiite as uniforinly condemned. The laws which regulate the rate of interest, and prescribe the consequences of usury, are quitevarious, and a correct understanding of all their provisions is important to the legal profession, and to the interests of commerce in general. CHAPTER II. HISTOBT OF trSHET IN ErEOPE AND GREAT BRITAIN DENUNCIATIONS BY THE EARLY WEITEKS OF USUREES AND THBIE_PEACTIOB. The occupation of the usurer has been bitterly denounced in all ages of the civilized world, and in most Christian countries 'there have been laws to suppress it. In respect to the usurer, St. Basil, one of the most learned theologians and illustrious orators of the early Christian church, uses this very extravagant language : " The griping usurer sees, unmoved, his necessitous borrower at his feet, condescending to every humiliation, professing everything that is vilifying ; he feels no compassion for his fellow-creatures ; though reduced to this abject state of supplication, he yields not to his humble prayer ; he is inexorable to his entreaties ; he melts not at his tears ; "he swears and protests that he has no money, and that he is under necessity of borrowing himself; he acquires credit to his lies by superadding an oath, and aggravates his inhuman and iniquitous trafiic with the grossest perjury. But when the wretched supplicant enters upon the terms of the loan, his countenance is changed ; he smiles with complacency ; he reminds him of his intimacy with his father, and treats him with MISTORT OF USUBT. 41 the most flattering cordiality, ' Let me see,' says he, ' if I have not some little cash in store, for I ought to have some belonging to a friend who lent it to me on very hard terms, to whom I pay most exorbitant interest for it ; but I shall not demand anything like that from you.' By fair words and promises, he seduces and completely entangles him in his snares ; he then gets his hand to paper and completes his wretchedness. How so ? By dismissing him bereft of liberty." And he closes by giving the advice : " Sell thy cattle, thy plate, thy household stuff, thine apparel ; sell anything rather than thy liberty ; never fall under the slavery of that monster, usury." This language, to excite disgust of the usurer^ was used in the fourth century ; but equally strong lan- guage has been frequently used since. In the seventeenth cen- tury, John Blaxton, an English writer of some eminence, gave a description of the usurer, saying, " The usurer is known, by his very looks often, by his speeches commonly, by his actions ever ; he hath a lean cheek, a meager body, as if he were fed by the devil's allowance ; his eyes are almost sunk to the backside of his head with admiration of money, his ears are set to tell the clock, his whole carcass is a mere anatomy " ( Vide Blaxtoii's ^'•English Usurer "). And the learned Dr. Fenton says, " The testimony of all authority, civil and humane, ecclesiastical and profane, natural and moral ; of all ages, old, new, middling ; of all churches, primitive, superstitious, reformed ; of all common creeds, Jewish, Christian, heathenish ; of all lands, foreign and domestic, are against usury ; * * * usury was never even defended for fifteen hundred years after Christ." Volumes have been pub- lished at different times, purporting to give an authentic history of the laws to prevent usury from the earliest period, but a very brief outline of the subject must suflice for the purposes of this work. In the year 1819, over fifty years ago, there was an importatit case in the Court of Errors of the State of New Tork, involving the question of usury, and the counsel for one of the parties made a violent assault upon the usury laws then in force in the State ; so much so, that the eminent Kent, then chancellor, and a mem- ber of the court, felt justified in spending a little time in their defense, and in the course of his remarks he gave some very interesting items of history in respect to usury laws in general. He said : " If we look back upon history, we shall find that there 6 42 LAW OF USURY. is scarcely any people, ancient or modem, that have not had usury laws. I believe there is not a nation in Europe at this day with- out them. In ancient Eome, according to Tacitus {Ann., lil). 6, ch. 16), usury was discouraged in the early period of the Repub- lic by the Twelve Tables, which reduced interest to one per cent. It was afterward lowered to one-half per cent, and finally abol- ished by the clamors of the people. It was revived in the ages of commerce and luxury, but placed under necessary restrictions. Four or six per cent was the ordinary interest ; eight per cent was allowed for the convenience of commerce, and twelve per cent might be taken for maritime hazards by the laws of Justinian, but the practice of more exorbitailt interest was severely restrained. " The Romans, through the greater part of their history, had the deepest abhorrence of usury. They did not derive their objection to usury from the prohibitions in the Mosaic law, nor did they hold it sinful, as the learned Fathers of the early and middle ages of the church have done, for they knew nothing of that law. The Roman lawgivers and jurists acted from views of public policy. They found, by their own experience, that unlimited , usury led to unlimited oppression, and the extortion of the creditor and the resistance of the debtor were constantly agitating and disturbing the public peace. " But it is not only the civilized and commercial nations of mod- ern Europe, and the sage lawgivers of ancient Rome, that have regulated the interest of money. It will be deemed a little sin- gular that the same voice against usury should have been raised in the laws of China, in the Hindoo Institutes of Menu, in the Koran of Mahomet, and, perhaps we may say, in the laws of all nations that we know of, whether Greek or barbarian. " There is one exception, however, that I ought to notice, and which is supposed to be found in the laws of Solon, given to the Athenian republic. This celebrated lawgiver is said to have allowed parties to regulate the rate of interest by their own contracts. When Solon was called to make laws for Athens, the State was in complete anarchy ; and when he was asked if he had provided the best laws for the Athenians, he replied that he had provided the best that their prejudices would admit of. One of his first steps was to cancel all existing debts ; though, according to Plutarch [Life of Solon), it is not certain that he proceeded to this violent measure, for many said that he did not cancel debts, but only BISTORT OF USURY. 43 moderated the interest. And the result of his laws allowing interest to regulate itself, I shall give in the words of De Pauws {Recherches Philosophique sur les Graces, 5 JLeot., § 2). He says that usage fixed the rate of interest at twelve per cent, in certain eases, and at eighteen per cent in others, and that the Athenians regarded all those who did not conform to this usage as usurers, that is, as the most vile and the most ignominious of mankind. The public voice which cried against them, and the profound con- tempt to which they were condemned, formed a punishment so great that the lawgiver did not deem it necessary to add any other punishment. The usage, in this case, formed the law. Now, according to this view of the fact, interest was limited at Athens as effectually and forcibly by discretionary law as it would have been by any penal statute ; and the Athenian commonwealth is not to be cited as a real exception to the general practice of mankind. " The principal error which has prevailed on this subject is the condemnation of any kind of interest, however small. A host of great names, from Aristotle among the Greeks to the modern civilians, such as Domat and Pothier, might be cited, who rank all interest of money under the name of usury, and condemn it. But the sense of mutual benefit has, on this point, resisted, with great firmness, the decrees of the church and the speculations of philoso- phers, and a regulated and reasonable interest has had the sanction not only of our own municipal laws, but of the most cultivated' and enlightened human reason. Grotius (K5. 2, o. 12, §§ 20, 22), after discussing the question whether usury be permitted by the natural and divine law, concludes that a reasonable interest may be permitted ; and he cites Holland as an instance in which eight per cent is the ordinary, and twelve per cent the mercantile inte- rest. But he insists that interest cannot be rightfully permitted beyond a reasonable limit : Non mordaces sed mordice, according to Heineccius, in his commentary on this passage, and who admits that it belongs to the discretion of the lawgiver to regulate the quantum of interest. He says, further, that in Germany, by imperial ordinances, in 1600 and 1654, interest at the rate of five per cent was allowed, though the canons of the church everywhere condemned it, and higher interest is now admitted " {Dunham v. Gould, 16 Johns. E., 367, 376-378.). In England, usury was an object of hatred and legal animadver- sion at least as early as the time of Alfred, king of the West 44 i-^"^ 0^ TTSCRY. Saxons, in tlie ninth century ; and Glanville, Fleta and Bracton bear the most decided testimony to the abhorrence in which it was held, and to the severity with which it was punished. No terms of opprobrium were spared by the early writers on the guilty wretches who dared not only to disobey what they under- stood to be the express commands of holy writ, but even to subvert the laws of nature, and to cause fruitfulness in that which had been intended to be barren and unproductive. But the detestation in which this "horrible vice" was contemplated, begun in the time of Hqnry VIII, in the first half of the sixteenth century, seems to have been somewhat diminished, and in the thirty- seventh year of that king's reign an act was passed by which the taking of interest for the use of money was expressly sanctioned and allpwed. This was the first act in England recognizing the legality of interest on loans, but it was not without some restraint. By the act, ten per cent was prescribed as the sum to be received "for the forbearance or giving day of payment of one whole year, and so after that rate ;" and it was enacted that any person receiv- ing more than the prescribed ten per cent should forfeit, for every offense, the total value of the money or thing forborn, and suffer imprisonment, and that one moiety of the forfeiture should go to ■ the king and the other to the prosecutor.* But it appears that this indulgent statute of Henry YIII did not have the desired effect of suppressing corrupt and exorbitant rates, and it was declared that " divers persons, blinded with inor- dinate love of themselves, had mistaken the same as a mainte- nance and allowance of usury," and the act was repealed in the following reign by an act which, after premising that " usury is by the word of God utterly prohibited as a vice most odious and detestable, which thing by no godly teachings and productions can sink into the hearts of divers greedy, uncharitable and covet- ous persons, nor by any terrible threatening of God's wrath and vengeance that justly hangeth over this realm for the great and open usury therein daily used and practiced, they will forsake such * Mr. Jefferson, in a letter to Mr. Hammond, which -will be found in the first volume of th^^ American State Papers, first edition, at page 307, Bays that "in England all iiiterest was against law until the statute of 37 Henry VIH, ch. 9 ;" and he furnishes the strongest reasons for confi- dence in hie correctness, hy the statement of a fact, that interest at that date was considered unlawful in all Eoman Catholic countries until the time referred to. When the statute of 37 Henry VIII was passed, that was the established religion in England. This was early regarded by the courts as a starting point of some importance, as it was thought to have a considerable beariL'g in construing the stAtutes on the subject. BISTORT OF USURY. 45 filthy gain and lucre unless some temporal punishment be pro- vided," proceeds to make all interest for money illegal, and enacts that no person shall lend any sum of money " for any manner of usury, increase, lucre, gain or interest, to be had, received or hoped for, over and above the sum so lent, upon pain of forfeiture of the value of the sum lent, and also of the usury " (5 cmd 6 Edward F/, cA. 20). It was found that the statute of Edward YI did not accomplish the desired effect, and in the reign of Elizabeth another act was passed, which, although it acknowledged that " all usury, being forbidden by the law of God, is sin and detestable," declared that the former act had not done so rrvuch good as was hoped it would, but rather the vice of usury had nrnch more exceedingly abounded ; and therefore it repealed the statute of Edward and revived the act of Henry VIII, and established the legal interest once more at ten per cent. But, as the disposable capital of the nation increased, ten per- cent interest was considered "too high, and in the following reign of James I, in 1624, the rate was reduced to eight per cent, and for the satisfaction of the bishops, whose scruples interfered, the statute was made to end with a proviso, that no words in the law contained should be construed or expounded to allow the practice of usury, in point of religion or conscience. In reference to this act, Sergeant Kolle said : " Usury hath been holden infamous by all statutes, as horrible and damnable ; and when the last statute of eight per cent was made, the bishops would not consent to it, because there was no clause in it, as Judge Dodridge said, to dis- grace usury as in former statutes, and for this, as the judges were sitting upon it, a clause was added for this purpose for their satis- faction, as may be seen at the end of the statute " ( Vide OTmer V. Oliver, ^Roll. ^.,469). In the twelfth year of the reign of Charles II, another act was passed, which recited that " the abatement of interest from ten to eight per cent had, from notable experience, been found bene- ficial to trade and agriculture, with many more advantages to the nation, and reducing it to a nearer proportion with foreign States with which we traffic," and then reduced the legal rate of interest to six per cent. This act remained unchanged for fifty years, and until 1713, when, in the twelfth year, of the reign of Queen Anne, an act was passed entitled " An act to reduce the rate of interest, 46 i^TT OF VSURY. without any prejudice to parliamentary securities," which fixed the rate of interest at five per cent. This act was generally known as the " Statute of Usury," and enacted, in substance, that no person should take, directly or indirectly, for loan of any money, wares, merchandise or other commodities whatsoever, above the value of £5 for the forbearance of £100 for a year, and so after that rate for a greater or lesser sum, or for a longer pr shorter time ; and that all laws, contracts and assurances whatso- ever, made for the payment of any principal, or money to be lent or covenanted to be performed upon or for any usury whereupon or whereby there should be reserved or taken above the rate of £5 in £100 should be utterly void ; and that any person who should take, accept and receive, by way or reason of any cor- rupt bargain, loan, exchange, chevisance, shift or interest of any wares, merchandise or other thing or things whatsoever, or by any deceitful way or means, or by any covin, engine or deceitful con- veyance, for the forbearing or giving day of payment for one whole year, of and for their money or other thing, above the sum of £5 for the forbearing of £100 for a year, and so after that rate for a greater or lesser sum, or for a longer or shorter time, should forfeit and lose for every such offense the total value of the moneys, wares, merchandises and other things so lent, bargained, exchanged or shifted. The statute then provided that scriveners, brokers, solicitors and drivers of bargains for contracts should take only five shillings brokerage for procuring the loan or forbear- ing of £100 for a year, and so ratably ; and for a violation of the provision, the person ofiending was adjudged to forfeit for every offense £20 with costs of suit, and suffer imprisonment for half a year ; the one moiety of the forfeiture to be to the queen's most excellent majesty, her heirs and successors, and the other moiety to whoever would sue for the same in the county where the offense was committed, and not elsewhere. It may be jvell to note tlie terms of this statute, from the fact that the most of the acts against usury since the passage of the same, both in England and in this country, have been framed from 'he statute of Queen Anne, and hence the decisions of the courts, under this act, are applicable in most cases of usury at the present day. In fact, the statute of Anne, like those of Elizabeth, James and Charles, is founded upon the statute of Henry VIII, and, indeed, varies very little in any other substantial respect than the rate of interest BISTORY OF USVRT. 47 prescribed ; so that the cases which were decided imder the statute of Henry may be taken as authorities applicable to all the subse- quent statutes, and consequently as declaratory of the law of usury at the present time, under the statute of Queen Anne. When contracts were made in a foreign country, the English courts directed the payment of interest according tp the rate allowed in such country; and Irish, American, Turkish and Indian interest was sometimes allowed to the amount of even twelve per cent, because, as was alleged, the refusal to enforce such contracts would put a stop to all foreign trade. But by an act passed in the thirteenth year of the reign of George III, no subject of his majesty in the East Indies was allowed to take Wiore than twelve per cent for the loan of any money or merchandise for a year ; and every contract for more, it was declared, should be void. And it was further enacted, that any person receiving more should for- feit treble the value of the money so lent, with costs, one moiety to the East India Company, and the other to him that would sue in the courts of India. And if no such prosecution was had within three years, the party aggrieved might recover what he 'had paid above twdve per cent ; and the compounding any such risk was made punishable with fine and imprisonment. By an act passed in the fourteenth year of the same reign, it was enacted that all mortgages and other securities on lands, tene- ments, hereditaments, slaves, cattle or other things in Ireland, and • also in his majesty's colonies or plantations in the West Indies, or any estate or interest therein, which should be made in Great Britain to any of his majesty's subjects, should be as valid as if they had been made in the country where the property lay, provi- ded the interest to be received did not exceed six per cent ; and also provided the lender had not loaned more than he knew the pro- perty secured to be worth. And any person borrowing more than the property secured was worth was made to forfeit treble the value of the sum borrowed, half to go to the informer, and half to the treasurer of Greenwich Hospital. By an act passed in the third year of the reign of George I, the governor and company of the Bank of England were enabled to borrow money at whatever rate of interest, or upon such terms as they might think fit; and the same liberty was given to the South Sea Company, by another act passed the same year. Thus the law stood, with no substantial variation, until the reign of William 48 I'^^ OP USURT. IV, when an act was passed exempting from the usury laws all billfe and .promissory notes made payable at or within three months after the date thereof, or not having more than three months to run ; and, by an act passed several years' later, the exemption was extended to bills and notes payable at or within twelve months, or not having more than twelve months to run. By an act passed in the second and third years of the reign of Queen Yictoria, it was enacted that no bill of exchange or promissory note, made payable at or within twelve months after the date thereof, or not having more than twelve months to run, nor any contract for the loan or forbearance of money above the sum of £10 sterling, should, by reason of any interest taken thereon, or secured thereby, or any agreement to pay, or receive, or allow interest in discount- ing, negotiating or transferring any such bill of exchange or pro- missory note, be void ; nor should the liability of any surety to any such bill of exchange or promissory note, nor the liability of any person borrowing any sum of money as aforesaid, be affected by reason of any statute or law in force for the prevention of usury ; and it was declared that no person should be liable under any usury law for any penalty or forfeiture for the forbearance of any money, or taking more than legal interest, in Great Britain or Ireland respectively ; provided that nothing contained in said act should extend to the loan or forbearance of any money upon secu- rity of any lands, tenements or hereditaments, or any estate or interest therein. And it was further declared, that nothing in the act contained should be construed to enable any person to claim, in any court of law or equity, more than £5 per cent interest on any amount, or on any contract or engagement, notwithstanding they might be relieved from the penalties against usury, unless it should appear to the court that any different rate of interest had been agreed to between the parties ; and the act left all la^vs rela- ting to pawnbrokers unrepealed and unaffected by the act. By the provisions of the act of Queen Anne', all bills of exchange or promissory notes on a usurious consideration were held to be absolutely void, even in the hands of honafide purchasers ; but the British Parliament, acknowledging the hardship of this rule, in the fifty-eighth year of the reign of George III, in 1818, passed an act declaring that "no biU of exchange or promissory note shall, though it may have been given for a usurious consideration, or upo^ a usurious contract, be void in the hands of an indiorgee for vcHwahle HISTORY OF USUBT. 49 consideration, unless such indorsee had, at the time of discounting or paying such consideration for the same, actual notice that such bill or note had been originally tainted with usury." It will be observed that the laws of Great Britain relating to usury gradually became less and less stringent ; and, some dozen years ago, public opinion had reached a crisis which called for free trade in interest, and, accordingly, Parliament passed an act repeal- ing aU laws then in force upon usury, and such is the state of the law in that kingdom at the present day (17 and 18 Vict., ch. 90). It seems that, in every period of the history of the laws of usury in Great Britain, the usurer has alone been regarded as the guilty party ; although, in one case, Chief Justice Treby, before whom it was tried, held that the borrower of money at usurious interest •was in pari delicto with the lender, and that there was no reason why he should be permitted to recover back the money paid, because he had parted with it freely, and volenti non fit injuria {TomkiMS V. Bernet, 1 Salk. E., 22 ). But the doctrine was soon exploded ; and, according to Lord Mansfield, Lord Hardwicke and Lord Talbot both declared their disapprobation of it. And, with regard to parties becoming fwrtic&ps crimmde, the distinction was laid down between the prohibitions of statutes made to protect weak or necessitous men from being overreached or oppressed; and the prohibitions of statutes enacted upon general reasons of policy and public expediency. In the latter case, all parties are equally criminal ; in the former, the oppressor is alone within the pale of the law {Ola/rke v. Shee, Oowp. B., 200 ). This doctrine has been universally recognized as correct, both in England and in this country ; and in no case is the borrower held to be a criminal for paying, or refusing to pay, usurious interest. CHAPTER III. HISTOET OF USDET IN THE COLONIES AND IN THE AMERICAN STATES. Theee is not as much of interest in the history of usury in the American States as in that of Great Britain. Indeed, the history of the subject in this country from the first settlement of the colo- nies until the Eevolution is little else but a repetition of the sub- 7 50 ^-^W OF VSUBT. ject during the same period in the mother country. The colonies, in peace, were governed by the laws of the home government, and among the rest they adopted the rules of that kingdom in respect to usury, and abided by the same until their respective law-making bodies enacted a code for themselves, and even then the changes were- usually slight and of but trifling importance. Perhaps the first act passed by any of the colonies relating to interest and usury was that of the colony of Massachusetts, passed in 1641, by which it was ordered and decreed that no man should be adjudged for the mere forbearance of any debt above £8 in £100 for one year, and not above that rate -proportionably for all sums whatsoever, bills of exchange excepted; but it was expressly declared that this should not be a color or countenance to allow ahy usury amongst them contrary to the law of God. This continued to be the law of the colony for one hundred and fifty years, when in 1Y93 an act was passed reducing the rate of inte- rest to six per cent, and making all contracts in which more than six per cent interest was reserved utterly void, and inflicting a penalty for receiving illegal interest to the fall, value of the money, goods or other things received, one moiety to the govern- ment and the other to the person prosecuting for the same. This act, with slight variations, continued to be the law in Massachu- setts until 1825, when the law was modified so that the contract reserving illegal interest was not thereby rendered void, but in such cases the defendant could recover his full costs, and the plain- tifi" forfeited threefold the amount of the whole interest reserved ; and if the illegal interest had been paid, the party paying the same was permitted to recover back threefold the amount of the whole interest paid,. provided an action was prosecuted therefor within two years from the time such interest was paid. This last act remained in force, substantially, untU 1867, when all usury laws were repealed. In the State of Yermont, the first statute upon the subject of usury seems to have been passed in October, 1Y97, which fixed the rate of interest at six per cent, and when more was reserved the excess and twenty-five per cent addition was forfeited, one moiety to the State and the other to the prosecutor. In 1822 another statute was passed, j^hich retained the rate of interest at six per cent, and provided that, in case more was paid, the excess might bp recovered back by the person paying the same, with the HISTOBT Of USURT. 51 interest thereon from the tinae of payment, and such has been the law in substance ever since. The first act regulating interest for the use of money in l^ew Hampshire was passed February 12, 1791, which fixed the rate at six per cent, and if more was taken, three times the excess was forfeited, one moiety to the prosecutor and the other moiety to the use of the county in which the oiFense was committed, with costs of prosecution, and this law has never been materially changed. The first act against usury in the State of Maine was passed in 1821, which fixed the rate of interest at six per cent, and a party who took a greater rate forfeited the whole sum, principal and interest. This act was amended in 1834, 'by which, in case of ille- gal interest, the excess only was forfeited, and the provisions of the act as amended were in force until the law now in force in the State was passed, which leaves the parties free to agree upon any rate of interest they please. In the State of Rhode Island, an act was passed in 1767, which was amended in 1795, and again in 1817, by which the rate of interest was fixed at six per cent. In 1822 a new act was passed retaining the legal rate of interest at six per cent, and in case more was agreed to be paid, the contract could only be enforced for the principal and legal interest ; and by the law now in force any agreement which the parties may make, in respect to the rate of interest, may be enforced. The first statute against usury in Connecticut was published as early as 1718, which fixed the legal rate of interest at six per cent, and declared all contracts by which more was reserved wholly void. This act was amended from time to time, but not substan- tially varied until the passage of the law now in force in that State upon the subject of usury and interest, and which is noticed in a subsequent chapter. The first act against usury in Df ew York was passed by the colo- nial Legislature in 1717, which fixed the rate of interest at six per cent, and in its other provisions was similar to the English statute of Queen Anne. The next year the act was amended, raising the rate of interest to eight per cent. In 1737 the rate was reduced to seven per cent, and the act, as thus amended, continued without substantial variation until the Revised Statutes of 1830 went into effect, which, as amended in 1837, contain th§ law upon the sub- ject now in force in this State. 52 i-^W" OF USURY. The first act against usury in New Jersey was passed in ITSS^ which fixed the rate of interest at seven per cent, and declared ali contracts reserving a greater rate utterly void, and, if anything was received on a usurious contract, it was to be forfeited. In 1823 the legal rate of interest was reduced to six per cent, and the act, as thus amended, continued in force until the adoption of the present statute upon the subject in the State. In the State of Delaware, the rate of interest was fixed, by an act of the Legislature, passed in 1759, at six per cent, and any per- son taking more forfeited the whole debt, one moiety to the State, and the other to the person prosecuting ; and this law has never been materially changed. In Pennsylvania, the first colonial act fixed the rate of interest at eight per cent, but in 1700 the same was reduced to six per cent, and, if more was received, the money or thing lent was for- feited. The act of 1700 was repealed in 1705, and eight per cent as the legal rate of interest restored ; but in 1723 the act of 1700 was re-enacted, and thus the law stood substantially until the law at present in force in the State went into effect. The first act in respect to interest and usury, in Ohio, was passed by the territorial Legislature in 1795, which was repealed by an act of the same Legislature in 1799, and the rate of interest fixed at six per cent, and, if more was reserved, the excess was forfeited. The first act of the State Legislature upon the subject was passed in 1804, which did not materially alter the act of the territorial Legislature then in force, and the law has remained substantially the same ever since. In Michigan, the territorial Legislature passed an act in 1833, fixing the legal rate of interest at seven per cent, and the same was amended by the State Legislature in 1846, and the act, as thus amended, is thepresent law of the State. The first acaugainst usury in Maryland was passed in 1692, by which the rate of interest for the loan of money was fixed at. six per cent, and for the loan of tobacco and other property at eight per cent ; and any contract which reserved more than legal interest was declared to be utterly void, and, if the illegal interest was actually paid, treble the value of the money or goods taken was forfeited. In 1704 a substantially similar act was passed, which has continued, with no material variation, until the present day. In Yirginia, in 1730, the Legislature passed an act fixing the rate HISTORY OF UBVKT. 53 of interest at six per cent. In 1734 the former act was amended, reducing the rate to five per cent, and giving the prosecutor his costs. The provisions of this act, as thus amended, were in force until 1796, when another act was passed, taking efi'ect in May, 1797, which raised the rate to six per cent, which has continued to be the rate ever since. The penalty for taking usury, under the original and subsequent acts, was a forfeiture of twice the amount of the debt, recoverable in an action qid ta/m. The original act relating to usury and interest in North Caro- lina was passed in 1741, and fixed the rate of interest at six per cent, and all contracts reserving a greater rate were declared to be void. This act, although several times amended, has been sub- stantially the law of that State up to the present time. In South Carolina, a law was passed against usury in 1719, and another in 1721, which prohibited parties taking more than ten per cent for the use of money, under the penalty of forfeiting treble the amount of the principal or thing loaned. In 1748 the rate of interest was reduced to eight per cent ; and again, by a law passed in 1777, the rate was reduced to seven per cent. The clause in the previous acts imposing the penalty for taking more than the legal interest was repealed in 1830, but no contract, by this act, could be enforced for anything but the principal and legal interest ; and thus the law continued until the passage of the act at present in force in that State. The first act against usury in Georgia was passed in 1759, which fixed the rate of interest at eight per cent, but in other respects it was similar in all its provisions to the British statute of Queen Anne. This act was repealed, or essentially modified, in 1822, so that contracts in which more than eight per cent interest was reserved were not to be void, but the principal due thereon might' be recovered at law, but no more. The act of 1822 continued in force until 1845, when the law at present in force in the States was passed. In the State of Florida, an act concerning usury and interest was passed in 1822 ; two acts were passed in 1829 to regulate the rate of interest; another was passed upon the subject in 1832, which was virtually repealed in 1833, and the rate of interest fixed at eight per cent, where no rate of interest was expressed in the contract, but the parties were allowed to agree upon a higher rate not exceeding ten per cent, and, if more was reserved, the whole 54 LAW OF U8UBT. interest was forfeited. This last act was repealed in 1844, and the rate of interest fixed at six per cent, in the absence of any stipu- lation upon the subject, but the parties were at liberty to raise the rate to eight per cent, with the previous penalty for taking more than the legal rate ; and thus the law stood until the passage of the act now in force in the State. The first act in respect to interest in Alabama was passed in 1805, and fixed the rate at six per cent. In 1818, another act was passed allowing parties to agree, in writing, upon any rate of interest ; and in 1819, still another act was passed, which has been once or twice amended, and is still the law of the State. In the State of Mississippi, the rate of interest was fixed, in 1822, at eight per cent, and whenever it was ascertained that more had been reserved, the principal sum only could be recovered ; but in cases of loan of money, the parties might agree upon a rate as high as ten per cent, and the contract be enforced. This continued in force until 1842, when the law at present in force was passed. In Tennessee, an act was passed in 1819, making usury an offense, but retaining the rate of interest theretofore recognized ; and, in 1835, the law now in force in the State was passed, the provisions of which will be given in a subsequent chapter. By the Civil Code of Louisiana, adopted at an early day in the State, it was declared that interest is either legal or conventional ; and the rate of legal interest was fixed at five per cent, and con- ventional interest, to be stipulated by the parties, not to exceed ^ ten per cent. This continued to be the law until the act now in force was passed, in 1860, and which is incorporated into the Eevised Statutes of 18Y0. The first act regulating interest in the State of Arkansas was approved in February, 1838, by which the rate was fixed at six per cent ; but the parties were permitted to agree, in writing, for the payment of interest not exceeding ten -per cent, and all bonds and other securities in which illegal interest was secured were declared to be void, except that negotiable paper in the hands of an indorsee or holder who had received the same in good faith and for a valuable consideration, without actual notice of the wrong, could not be impeached for usury, and when illegal inte- rest was paid, the excess could be recovered back. Such was the law until the adoption of the present State Constitution, which HISTORY OF aSUBY. 55 prohibits the passage of any law limiting the parties to any rate of interest for which they may be pleased to agree- In the State of Texas, previous to the adoption of the present Constitution of the State, the legal rate of interest was fixed at eight per cent, but the parties were at liberty to agree upon any rate not exceeding twelve per cent. The present Constitution upon the subject is the same as that of Arkansas. In California, the act in respect to interest was passed in 1850, and the same is now in force, the provisions of which wiU be given in a subsequent chapter. And in respect to Oregon, Nevada, Nebraska, Kansas, Iowa, Minnesota and Wisconsin, they having been so recently organized as States, there is nothing to be said relating to their laws regulating interest, except to give the acts now in force in those States, which wiU all be found in a subsequent chapter. The history of usury in Missouri is told in a few words. The first act of the State was passed in 1834, and fixed the rate of interest at six per cent ; but the parties to a contract might stipu- late for a higher rate, not exceeding ten per cent, and if more was reserved, the whole interest was forfeited, and only the principal, without any' interest, could be collected. This act, although amended several times, continued to be the law until the act now in force was enacted and approved. The first act against usury in Kentucky was passed in 1798, under which a contract reserving more than legal interest was void. In 1819, this act was repealed, and the rate of interest fixed at six per cent, and if a higher rate was agreed upon, the excess could not be collected, but the instrument was valid for the princi- pal and legal interest ; and this act is substantially in force at the present day. In the State of Illinois, an act was passed in 1833, by which the rate of interest was fixed at six per cent, but providing that when the parties expressly agreed upon an amount of interest not exceeding twelve per cent it shoidd be legal. A higher rate than twelve- per cent was forbidden under a forfeiture of threefold the amoimt of the whole interest reserved, one-third to the borrower, and the other two- thirds to the treasurer of the county in which the suit was instituted to recover the amount of principal and interest. This act was several times amended, and in some respects 56 i^w OF nsuRT. changed, until the law was passed which is in force in the State at the present time. In Indiana, by an act passed in 1831, any rate of interest could be taken, provided the parties agreed therefor in writing, and the. agreement was signed by the party to be charged. In 1838, another act was passed which fixed the rate at six per cent, unless the parties stipulated for a higher rate of interest in writing and signed by the party to be charged, but in no case could more than ten per cent be taken ; and any person taking illegal interest was subject to be indicted, and upon conviction be made to pay a fine to the State, for the use of the county treasurer of the county in which the offense was committed, of double the amount of the excess of interest received above the amount allowed by law. This continued to be the law until the act was passed which, at present, is in force in the State. Such is briefly the history of usury in the 'several States; and it will be observed thatin most cases statutes have existed to prohibit the taking of illegal interest, although in several of the States the laws against usury have been considerably relaxed in comparison with those which were originally enacted. CHAPTER ly. THE POLICY AND PEOPEIETT OF USTIET LAWS — AEGTJMENTS AND OPUTIOH'S UPON THE SUBJECT. It is always more important- to know what the law really is, than to be able to give a satisfactory reason for it. At the same time, a correct idea of the policy of an enactment will the better enable one to determine the light in which the same may be viewed by the courts, for it cannot be disguised that a decided public opinion has its influence upon adjudication. In respect to the policy of statutes against usury, there is now, and always has been, a great variety of opinion. The first law to prevent usury, that is, the taking of more than legal interest for the forbearance of money, in England, was, as we have seen, the statute of Henry VIII, passed in the sixteenth century. Previous to that, laws had existed making it penal to take any interest for .the loan of money. This act was subsequently made more stringent, but restored in POLICr OF mUBT LAWS. 57 the thirteenth year of the reign of Queen Elizabeth, in the year of our Lord 1570, and from the passage of the act of 13 Elizabeth, laws existed in some form for the suppression of usury, until the act of 17 and 18 Victoria, chapter 90, by which all laws then in force upon usury were repealed. Daring all this long period, the propriety of usury laws was frequently discussed, both in England, on the continent of Europe and in the American States. Lord Bacon, in one of his essays, civil and moral, exam- ined the arguments^!? and con., in which he says : " Many have made witty invectives against usury. They say that it is pity the devil should have God's part, which is the tithe ; that the usurer is the greatest Sabbath breaker, because his plow goeth every Sunday ; that the usurer is the drone that Virgil speaketh of : 'Ignavum fticos pecus a praesepitua arcent;' that the usurer breaketh the first law that was made for mankind after the fall, which was, m swdore imltus tui comedespanem Umm ; that usurers should have orange-tawny bonnets, because they do Judaize ; that it is against nature for money to beget money, and the like. ** Few have spoken of usury usefully." He then opens up the " incommodities " and " commodities " of usury, and eondudes that by " the balance of commodities and discommodities -of usury, two things are to be reconciled ; the one, that the tooth of usury be grinded, that it bite not too much ; the other, that there be left open a means to invite moneyed men to lend to the merchants, for the continuing and quickening of trade." And finally he says " that it is better to mitigate usury by declaration than to suffer it to rage by connivance" {Bog. Essays, Ow. cmd Mor., No. 41). Somewhat later, John Locke, the great English philosopher, declares, " money is an universal commodity, and is as necessary to trade as food is to life, and everybody must have it at what rate they can get it, and invariably pay dear when it is scarce ; you may as naturally hope to set a fixed price upon th.e use of houses or ships as of money. Those who will consider things beyond their names will find that money, as well as other commo- dities, is liable to the same change and inequality, and the rate of money is no more capable of being regulated than the price of land." Later still, Jeremy Bentham, the English judicial philosopher, in treating of the usury laws of England, said : " As well might a cla.use be added fixing and reducing the price of horses. It may be said against fixing the price of horseflesh tha+ 8 58 LAW OF vauBT. different horses may be of different values. I answer, not more different than the values which the use of the same sum of money may be of to different persons on different occasions " {Bmth. Def. of JJswry, 82). Lord Chief Justice Best, in 1825, in delivering the unanimous opinion of the twelve judges in the House of Lords upon a question submitted to them under the English usury laws, said : " The supposed policy of the usury laws in modern times is to protect necessity against avarice, to fix such a rate of interest as will enable industry to employ with advantage a borrowed capital, and thereby to promote labor and increase national wealth, and to enable the State to borrow on better terms than could be made if speculators could meet the ministers in the money market on equal terms. 'Laws framed on these principles are limited to the countries in which they are made. The foreign borrower wants not the protection of our laws, nor can it be extended to him. We may declare a contract void, but notwithstanding such declaration it may be enforced in the courts of the country in which it is made, if it be not repugnant to the laws of that country. "We leave the industry of other countries to the care of their respective gov- ernments. I will not say that it is impossible that our capitalists may be tempted by the high rate of interest in other countries to send money out of their own. I believe that our own government and commerce were inconvenienced by the large loans made by the servants of the India Company to the IN^abob of Arcot. But the risk of loans to persons living out of the reach of British laws is so great that in general much capital will not be drawn by those out of the country " {House of Lords, 3 Bing. H., 193 ; S. C, 11 Mig. G. L. R., 93, 95). Lord Henry Brougham, late high chancel- lor of England, when in the House of Commons in 1816, gave the opinion : " The repeal or modification of the usury laws is a meas- ure, in the present age, which nearly all mankind agree is perfectly safe, and calculated to afford the greatest measure of relief, and is, besides, innocuous alike to the borrower, to the lender and to the State." Again : " The greatest characters of the age have despised these laws. Sir Francis Baring, more than thirty years ago, strongly denounced them as injurious to those for whose benefit they were intended." And Mr. James Birch Kelly, in his " Summary of the History and Law of Usury, its Policy, and Suggestions for its Amendment," published in London in 1835, says : " All experience teaches us how unprofitable it is for the law to fix a maximum OPINIONS BBSPECTING USURY LAWS. 59 rate of interest applicable to every period. When there is little demand for money, it can be borrowed for less than the legal rate of interest on good security. "When the contrary is the case, the law is evaded and more than legal interest given ; for whatever may be the municipal regulation, there is no axiom better established than that ' money, like water, will always find its own level ;' that it is governed by the same rules, as to production and distribution, which affect all other merchantable commodities, and that the rate of interest for its use is no more capable of being- regulated by law, than are the rates of insurance or the price of labor, and that 'free trade in money is the only way of rendering it abundant' " {Kelly on Usury, 187). These and numberless other opinions and arguments put forth in favor of " free trade in money," together with the general spirit of legal reform in England, have produced the repeal of all laws relating to usury in that kingdom, and the whole matter of interest on money loaned is now regulated there by the voluntary contract of the parties. Grotius, the learned Dutch jurist and writer of the seventeenth century, speaking of interest for the use of money, observes : " If the compensation allowed by law does not exceed the proportion of the hazard even, or the want felt by the loan, its allowance is neither repugnant to the revealed nor the natural law ; but if it exceeds those bounds, it is then oppressive usury ; and though the municipal laws may give it uniformity, they can never make it just " {Be Jwre BelM et Paois, 2 l, ch. 11, § 22). From the earliest history of this country, the policy of laws against usury has been a matter of discussion, although but little has been put forth upon the subject, except a repetition of the arguments and positions used and taken by the different writers upon the other side of the Atlantic. It may be safely affirmed, however, that in most of the American States which were organ- ized within the 'first fifty years of the Republic, the experiment was, at some time, tried, of doing without usury laws of any kind, but the experiment was regarded as a failure, and statutes were ultimately passed fixing the rate of interest, and prohibiting the taking of any more than the legal rate. Perhaps the opinions of the opponents of usury laws in the States are as fairly represented as anywhere in a petition addressed to the Legislature of Massa- chusetts in 1834, from certain citizens of Boston, in which it was asked that the then existing laws in that State against usury be 60 ^^^ OF USURY. repealed. In the judgment of the petitioners, as declared in their petition, all usury laws, so far as they limit the rate of interest, are founded on erroneous principles, and are at variance with the commercial spirit of the age ; that every article of human traffic, whether money or any other thing, is alike subject to fluctuation,©! value, and that consequently the lasLrket price of them all is con- stantly liable to change; that the price of money, or, more pro- perly speaking, the price of its use, not less than the price of lumber, corn, tobacco, cotton or any other great commercial staple, is and must be regulated by the extent of the demand in the market, and that every attempt to fix their value, and render the price of . any of those articles invariable, is not only vain, but wholly unjust, and that it is, in the case of all these commodities, an equal infringement of private rights ; that where the use of money in the regular course of business produces a large amount of profit, the value of that use is proportionately increased ; that the law is wrong in imposing any restraint upon the absolute freedotn of commercial transactions, which, in order to be successful, must be left unfettered, and that in the case of money, which represents every other commodity, the evil is far greater than it could be in the case of any other article of traffic; that whUe the restrictions were intended to favor the interests of borrowers, they were even more injurious to borrowers than to lenders. This the petitioners attempt to demonstrate ; and, for the reasons stated, it was asked that the law of the State be so modified as to leave the rate of interest, like the rate of premiums pn insurances, perfectly open to contract, providing that in all cases where interest occurs, and the particular rate has not been expressly ageeed upon between the parties, six per cent remain the legal rate. The petition was referred to a committee, who made their report to the Legislature, in which they indorsed fully the views and arguments of the petitioners ; but believing that any sudden and extensive changes in the laws were inexpedient, they recommended a repeal of the usury laws only so far as they applied to promissory notes and bills of exchange, payable not less than three months from date • the evils.being felt more seriously in reference to this class of contracts than any other. These views have been reiterated and elaborated upon in most of the essays, addresses and reports which have followed the Boston memorial, and, in accordance with them, the legislation OPINIONS RESPECTIN& USURY LAWS. 61 adverse to usury laws in this country has been obtained. It seems to be the decided opinion of the enemies of usury laws everywhere, that the merchant or manufacturer, with his eyes open, provided he be neither a minor, of weak mind, under duress or circumvented by fraud, is as competent as the Legislature to judge whether or not it will be to his advantage to borrow at the rate of ten or twelve or a greater per cent ; fbr if he is deemed incompe- tent, in perfect freedom, to borrow on fair terms, and liable to be imposed upon, owing to the pressure and urgency of his necessi- ties, how, it is asked, can he be deemed more competent (the same ' causes operating) to sell either his goods, his life estate, his lease hold, his reversion, to bargain for the giving a, post obit bond, or granting an annuity? Yet, it is said, the law, in its kindness, pre- cludes him from borrowing on what it deems disadvantageous terms, but cannot prevent his selling his property on any terms, however usurious, though any one knows that the loss he would sustain in borrowing at an increased rate of interest may bear but a small proportion to what he might suffer by a forced sale. These arguments appear plausible, but some of them are more plausible than real. It seems to be assumed that the loan of money is the same in principle as the loan of anything else, and that the one should be as untrammeled as the other ; while the fact is, that money is an article distinguishable from merchantable com- modities generally, and is not subject to the same rules which govern them, and every day's observation shows that men are always less liable to be impelled by their necessities to agree to pay an exorbitant price for an article of property than for the use of money. Dr. Johnson maintained that usury laws were as necessary for the protection of lenders as for borrowers ; that the former were benefited by the removal of the temptation afforded by the prospect of extravagant interest to lend, on insufficient security, and there is much in the idea. But it is said, and, in fact, truly, that usury laws are vestiges of the times when the principles of commercial polity were wholly unknown ; when the Legislature extended its interference with the rights of individuals to almost every act of private life ; when the prices of bread, cloth, leather, wine and other necessa- ries of life were fixed by statutes. It does not follow, however, that because these laws first originated in the days of political darkness, when numberless legal abuses also had their origin, they Q2 L-^W OF VSURT. should th&refore be expunged from the statute books. On the contrary, it is contended by many great and good men, that, leooMse the usury laws have been hallowed by the wisdom and experience of our ancestors, they ought not to be abolished. The venerable and learned commentator upon American law, the late Chancellor Kent, in a very lucid opinion which he gave in a usury case then before the Court of Errors of the State of New York, an able extract from which is given in a previous chapter {mde cmte, ch. 2.), after examining the subject at con- siderable length, and referring to the history of the laws against usury from the earliest periods, asks : " Can we suppose that a principle of moral restraint, of such uniform and universal adop- tion, has no good sense in it ? Is it altogether the result of monk- ish prejudice ? Ought we not rather to conclude that the provision is adapted to the necessities and the wants of our species, and grows out of the natural infirmity of men, and the temptation to abuse inherent in pecuniary loans ?" He then proceeds : " The question of interest arises constantly, and intrudes itself into almost every transaction. It stimulates the cupidity for gain, and sensibly affects the heart, and gradually presses upon the relation of debtor and creditor. Civil government is continually placing guards over the weaknesses, and checks upon the passions of men ; and many cases might be mentioned, in which there is, equally with usury laws, an interference of the lawgiver with the natural liberty of mankind to deal as they please with each other. But no person doubts of the necessity and salutary efficacy of such checks. On the same principle, that unlimited usury may be per- mitted, the law ought to allow the creditor to insert in his bond a provision for compound interest whenever the stipulated interest becomes due and is not paid. Nay, parties ought to be allowed to agree that if the condition of a bond be not performed at the day, the penalty shall not only be nominally forfeited, but literally exacted. I should apprehend that if these things were to be per- mitted, there would not be strength enough in the government to support the administration of justice. It is an idle dream to suppose that we are wiser and better than the rest of mankind. Such doctrines may be taught by those who find it convenient to flatter popular prejudice ; but the records of our courts are daily teaching us a lesson of more humility. And, I apprehend, it would be perilous in the extreme to throw aside all the existing OPINIONS BESPECTINO USURY LAWS. 63 ctecks npon usurious extortion, and abolish or traduce a law which is founded on the accumulated experience of every age. " The Eoman commonwealth, if we may place reliance upon its entire history, tried every experiment on this interesting subject. The Romans had no law regulating the interest of money, and left parties to their own contracts, until the law of the Twelve Tables, according to Tacitus, or the law of the tribunes, in the year of Rome 398, according to Montesquieu. The consequence was, unending quarrels between the patricians and plebeians, and popu- lar secessions to the mens sacer, in which one party pleaded the obligation, and the other the severity, of their contracts. Interest was then reduced to the smallest allowance, and finally abolished, which led to a still more frightful usury, until, at last, the empe- rors were obliged to allow, but regulate and limit, the charge of usury. So true it is, according to the President Montesquieu {Esprit des Low, Im. 22, eh. 21, 22), who has discussed this subject at large, that extreme laws produce extreme evil ; les loix exl/remes da/nsle iienfont vcdtre le mal extreme. The Romans, at one time, had no laws against usury, and, at another time, they allowed no interest; and these are the extreme laws which this celebrated civilian condemns. "Lord Eedesdale said, in 1803 {1 Sch. d; Zef., 196, 312), many years after Jeremy Bentham, to whom the learned counsel referred for an able defense of usury, had first published his letters, that the statute of usury was founded on great principles of public policy. It was intended, he said, to protect distressed men, by facilitating the means of procuring money on reasonable terms, and by refa- sing to men who sit idle as high a rate of interest, without hazard, as those can procure who employ money in hazardous undertakings of trade and manufactures. I trust that theoretic reformers have not yet attained, on this subject, any decided victory over public opinion. Mr. Bentham contends that we ought not so much as to wish ' to see the spirit of project in any degree repressed.' It may be so ; but I hope I may be permitted to wish that the first experi- ments of his projects may not be made within these walls. The statute of usury is constantly interposing its warning voice between the creditor and the debtor, even in their most secret and danger- ous negotiations, and teaches a lesson of moderation to the one, and offers its protecting arm to the other. I am not willing to withdraw such a sentinel. I have been called to witness, in the g4 I'-AW or VSUBT. course of my official life, too many victims to the weakness and to the inflamed passions of men " {Dmihcmh v. Oould, 16 Johns. E.. 367, 378-380). The venerable chancellor is regarded asvery competent autho- rity upon the question here discussed. His sagacity and great learning particularly fitted him not only to give a true exposition of any given enactment, but to judge of the necessity and pro- priety of the enactment itself. From this opinion, it is quite clear that, in the judgment of this eminent jurist, the same necessity existed in his day for usury laws as that which called for them in earlier times, and that he did not sympathize with the sentiment that such checks are prejudicial to the exercise of enterprise, or stumbling-blocks in the way of commercial advancement. And it may be added, that, in most cases, the objections to these laws emanate from money-lenders themselves, and they are usually most prominent in making efforts to obtain their repeal; and, further, that it is the daily observation of every discerning business man, that no person can continue for any considerable length of time in any legitimate calling who is in the constant habit of borrowing, money at exorbitant interest ; his failure is a foregone conclusion, and it is only a question of time. The probabilities, therefore, are, that these legal restraints will still be continued in many, or most, of the American States, and that tlie time is, at least, far distant, when the system will be permanently abandoned. CHAPTER V. THE STATUTES IN FOEOB IN RESPECT TO INTEREST AND USUET IN THE STATES OF NEW TOEK, VERMONT, NEW HAMPSHIEE, MAINE, MA8SA- OHTJSETTS, RHODE ISLAND, CONNECnOUT, NEW JEESET, DELAWAEE, PBNNSZLVANIA, OHIO AND MICHIGAN TABLE OF THE RATES OF INTEREST IN THOSE STATES EE8PECTIVELT. Usury, as at present understood, is unknown to the common law, and depends wholly upon statutory enactment.* It becomes It was the opinion of Plowden, who wrote in the sixteenth century, that usury exists at com- mon law, notwithstanding the statute upon the subject. He says : " Where a statute or act of Parliament is made concerning any point of common law, the common law concernii.rr ihie point Is changed, altered or affected by the statute so far, only, as the statute expressly goes. STATUTES RESPM0TIN9 INTEREST. 65 necessary, therefore, before entering upon the general discussion, to examine the statutes of the several States upon the subject. Formerly the taking of usury was regarded as a heinous offense, and almost all of the States had statutes calculated to suppress it ; many of them penal in their nature and others remedial. But for many years the theory has been gaining ground that money, like merchandise, should be regulated by the market, and even now many of the States have no usury laws at all, and in those States in which such laws exist they are quite various, and scarcely any two of them are precisely alike. Those States which are now under- stood to have statutes to suppress usury are Alabama, Delaware, Illinois, Iowa, Kansas, Louisiana, Missouri, New Jersey. New York, North Carolina, Yirginia and Wisconsin ; while in Pennsyl- vania, Michigan, Mississippi and a few others of the States, the rate of interest is prescribed, with a provision that, if more is agreed to be taken, the excess shaU be forfeited. In most of the remain- ing States the parties are left to regulate the subject at discretion, by agreement, with a statute fixing the rate when no agreement is made, that is to say, after the principal becomes due. Perhaps the most stringent enactments to prohibit usury are those in force in the State of New York. In this State, the provisions of the statute are as follows : The rate of interest upon the loan or for- bearance of any money, goods or things in action is fixed at seven dollars upon $100, for one year, and after that rate for a greater or less sum, or for a longer or shorter time. No person or corpora- tion is permitted, directly or indirectly, to take or receive in money, goods or things in action, or in any other way, any greater sum or greater value, for the loan or forbearance of any money, •goods or things in action, than is before prescribed. And every person who shall pay or deliver any greater sum or rate than is pre- scribed, or his personal representatives, may recover such excess in an action against the person taking or receiving the same, or his personal representatives, provided the action be brought within one- year after such payment or delivery. If such action be not So, wheu an act of Parliament inflicts a new punishment for an old offense at common law, it still remains an offense, and punishable at common law, as it was before the act passed.^' He admits, however, that the authority of Lord Oote is the other way, but insists that his opinions do not claim universal submission, and adds : " It is with the greatest difidence that I venture to suggest that, in this instance, I feel under the necessity of withdrawing my assent to the opinion of that great man " (Plow. Usury, 61 ), But it has long since been abundantly settled by the highest judicial authority that iisury is illegal onl^ as it is made so b^ statute. 66 LAW OF USURY. brought within the said year, and-prosecuted with effect, then the said excess may be sued for, and recovered with costs, at any time within three years after the said one year, by any overseer of thS poor of the town where such payment may have been made, or by any county superintendent of the poor of the county in which the payment may have been made. All bonds, bills, noteSj assurances, conveyances, all other con- tracts or securities whatsoever (except bottomry and respondentia bonds and contracts), and all deposits of goods or other things, whereupon or whereby there shall be received or taken or secured, or agreed to be received or taken, any greater sum or value, for the loan or forbearance of any money, goods or things in action, than is prescribed as aforesaid, are declared void. And every per- son offending against the foregoing provisions of the statute may be compelled to answer on oath any bill that may be exhibited against him in a court of equity for the discovery of any sum of money, goods or things in action so taken, accepted or received, in violation of the provisions of the statute, or either of them. Every person who shall discover and repay or return the money, goods or other things so taken, accepted or received, or the value thereof, will be acquitted and discharged from any other or further forfeiture, penalty or punishment which he may have incurred by taking or receiving the money, goods or other things so discovered and repaid, or returned. And it is farther provided that whenever any borrower of any money, goods or things in -action shall bring his suit in equity for discovery a"s aforesaid, it shall not be necessary for him to pay or offer to. pay any interest whatever on the sum or thing loaned, nor can any court of equity require or compel the payment or deposit of the principal sum, or any part thereof, as a ■ condition of granting relief to the borrower, in any case of a usurious loan forbidden by the statute (1 B. S., T71, §§ 1-8 ; 1 Siat. atZm-ge, 725-727; 4 ih., 450). For the purpose of calculating interest, the statute provides that a month shall be considered the twelfth part of a year, and as con- sisting of thirty days ; and interest for any number of days less than a month shall be estimated by the proportion which such number of days shall bear to thirty ; and whenever, in any statute, act, deed, contract or instrument, any certain rate of interest is mentioned, and no period of time is stated for which such rate is to be calculated, interest must be calculated at the rate mentioned. STATUTES RESPECTING INTEREST. 67 by the year, in the same manner as if the words " per, annum," or "by the year," had been added to such rate (1 R. 8., TT3, §§ 9, 10 ; 1 Stat, at Large, 727). The statute, however, provides that no corporation shall interpose the defense of usury in any action {Imws of 1850, cA. 172; 3 Stat, at Large, 681). The sec- tion of the statute which renders void bonds, bills, notes, etc., for usury, as it was originally passed and incorporated into the Eevised Statutes of 1830, contained this reservation : " But 1;Jiis section shall not exteiid to any bills of exchange or promissory notes paya- ble to order or bearer, in the hands of "an indorsee or holder, who shall have received the same in good faith and for valuable con- sideration, and who had not, at the time of discounting said bill or note, or paying such consideration for the same, actual notice that such bill or note had been originally given for a usurious conside- ration, or upon a usurious contract." But it was very soon dis- covered that this reservation entirely defeated the object of the statute, and that, in point of fact, the practice of usury was more common and more oppressive than before the passage of the act; and, therefore, in 1837, the Legislature repealed the objectionable reservation. The act of 1837 further provides that whenever it shall satisfactorily appear, by the admissions of the defendant or by proof, that any bond, bill, note, assurance, pledge, conveyance, contract, security or any evidence of debt has been, taken or received in violation of the provisions of said title or of this act, a court of equity may declare the same to be void, and enjoin any prosecution thereon, and order the same to be surrendered and canceled. The act also declares that any person who shall, directly or indirectly, receive any greater interest, discount or consideration than is prescribed by the statute, shall be deemed guilty of a mis- demeanor, and on conviction thereof shall be punished by fine, not exceediug $1,000, or imprisonment, not exceeding six months, or both ; and makes it the duty of all courts of justice to charge the grand jury especially to inquire into any violation of the provisions of the act. And the statute contains the further provision, that every plaintiif examined as a witness pursuant to the act, or any defendant under the same, who shall swear falsely, shall, upon conviction thereof, suffer the pains and penalties of willful and corrupt perjuiy ; but the testimony given by any plaintiff, or the answer of any defendant, made pursuant to the statute, cannot be used against such person before any grand jury, or on the tjial of 68 I'A.W OF U8UBT. any indictment against such person {Lome of 1837, oh. 430; i Stat, at La/rge, 459, 460). These are the provisions of the statutes of New York for the prevention of usury, at present in force. It will be observed that the provision which declares the contract or instrument void for usury is different in its phraseology from that which declares the tahmg of usury a misdemeanor. In the former case, the agree- ment to take usury renders the transaction void, while in the latter it requires both the agremnent to take, and the ac^aZ takmg usury, to constitute the offense. By the statutes of the State of Vermont, no person can legally take, directly .or indirectly, more than six per cent interest for the forbearance of money ; and, whenever a greater rate of interest shall have been paid, the person paying the same may recover back the amount so paid above legal interest, with interest thereon from the time of payment. In ease the excess of interest only has been paid, or the same may have been included in the security for the loan, and an action be brought for the recovery of the loan, and the usury be pleaded as a defense, such excess may be allowed and deducted in the assessment of damages. And in the State of ]S"ew Hampshire, the statute provides that the legal rate of interest shall be six per cent, and that whoever shall receive more than the legal rate shall forfeit three times the excess to the person who shall prosecute for the same ; but no transaction is rendered void or voidable by reason of usury. The consequences resulting from usurious transactions in this State, are not as serious as in some of the States, and yet they are sufficiently so to make it important to understand the distinction between what is and what is not usury. In the States of Maine and Massachusetts the legal rate of mterest is six per cent, unless the parties stipulate in writing for a different rate, in which case the same may be recovered ; in other words, there is no law against usury in these two States, and the parties are left free to agree in writing for any rate of interest, and theagreement wiU be binding. And the statutes of Rhode Island upon the subject are substantially the same. In the State of Connecticut, the statute forbids the taking of more than six per cent interest for the use of money, or goods,- or any property whatever, and any person who shall take illegal interest forfeits such excess, one-half to him who shall sue there- STATOTES BESPBCTINa INTEREST. 69 for and prosecute Ms suit to effect, and the other half to the treasury of the State. And all contracts reserving more than legal interest are declared void as to the whole interest, and in any action brought upon the contract the amount of the original loan without interest can only be recovered. If the illegal interest has been paid upon the usurious contract, the same wiU be deducted from the amoimt loaned ; and in every action upon an alleged usurious contract the defendant may set up the usury, when the plaintiff may be made to testify, and the court will adjudicate the matter. But contracts to pay taxes and insurance upon the sum loaned, or upon the estate mortgaged to secure the same, are in no case to be deemed usurious. And interest east according to Eowlet's tables is declared not to be usurious {Gen,. Stat. 1866, tit. 66).* In New Jersey, parties are forbidden to take more than seven per cent interest on money or property loaned ; and all notes, bills, bonds, mortgages, contracts, covenants, conveyances and assur- ances, on which a higher rate shall be received or taken, are declared utterly void. Any borrower of money, etc., may exhibit his bill in chancery against the lender, and compel him or her to discover whether there was any usury in the transaction, and if the court find that there was, the lender will be obliged to accept the amount of the original loan without interest, and pay the costs of suit ; provided th4t the bill be exhibited before any suit shaU have been instituted to recover the penalty provided in case of illegal brokerage. But no bond, mortgage or other security for the payment of money, issued by a railroad or canal corporation under the laws of the State, will be deemed invalid because the same may be sold or assigned by such corporation below the par value thereof, provided the same be valid on its face {Nixon's Big. of ISeS,^. 43T, 439). In the State of Delaware, the legal rate of interest is fixed at six per cent, and any person taking, directly or indirectly, more than the legal rate for the loan or use of money, is subject to for- * Since this chapter was in manascript, and dnring the session of 1873, the Legislature of Connecticut passed an act absolutely repealing all usury laws in the State, and authorising any contract in writing for the payment of interest. And where there is no stipulation in the writing in respect to the rate of interest, the present statute leaves the rate at six per cent. The late law, however, is retained in the text, as it may he convenient for reference in con nection with some of the authorities cited from the courts of that State. 70 J^^W OF USURY. feit and pay, to any person who will sue for the same, a sum ec[ua] to the money lent, one-half for the use of the person so suing, and the other half for the use of the State (Revised Code of 1852, ch. 63, § 1). In Pennsylvania, the rate of interest as fixed by statute is six per cent, with some exceptional cases specially provided for. ■Usurious interest can in no case be collected, and when the same may have been voluntarily paid, it can be recovered back ; but the action therefor must be commenced within six months from the time of payment, or it will be barred. Negotiable paper, which has been received lonajide in the ordinary course of business, can- not be impeached for usury ; that is to say, the payment of nego- tiable paper in the hands of a lonafide holder cannot be avoided as to either principal or interest, even though it may have been usurious in its inception {Pii/rderi's Dig., 1862, jp. 561). In the State of Ohio, the legal rate of interest is six per cent, although the parties may agree upon a higher rate, not exceeding eight per cent, and the same caij be enforced. If the contract is usurious, that- is, if it reserves interest at a higher rate than is allowed by the statute, the same can only be , enforced for the principal and interest at six per cent. And in the State of Michi- gan, the legal rate of interest, in the absence of express agreement upon the subject, is seven per cent ; but the parties may agree in writing for the payment of a higher rate, not exceeding ten per cent. Contracts for the payment of usurious interest can only be enforced for the principal and legal interest, the excess only being forfeited. ISTegotiable paper in the hands of a honafide holder, to whom it has been sold, is collectible for the whole amount received, principal and interest. To repeat the rates of interest in the several States considered : the rate in New York is seven per cent, in Vermont six per cent, in New Hampshire six per cent, in Maine, Massachusetts, Connect- icut and Ehode Island six per cent ; but parties may contract in writing for any rate ; in New Jersey seven per cent, in Delaware and Pennsylvania six per cent, in. Ohio six per cent, or a higher rate by agreement of the parties, not to exceed eight per cent, and in Michigan seven per cent, with the right to the parties to agree upon a higher rate, not exceeding ten per cent. STATUTES BESPEOTING INTEREST, 71 CHAPTER VI. THE STATUTES m FOECE m BEBPECT TO INTEEEST AND USUET m THE EEMAXNING STATES OF MAETLAND, TIEGINIA, WEST VIEGINIA, NOETH OAEOLINA, SOUTH OAEOLINA, GEOEGIA, FLOEIDA, ALABAMA, MISSIS- SIPPI, TENNESSEE, tOUISIANA, AEKANSA8, TEXAS, CALIFOENIA, OEB- GON, NEVADA, NEBEASKA, KANSAS, MISSOUEI, IOWA, MINNESOTA, WISCONSIN, ILLINOIS, INDIANA AND KENTITCKT — PEDEEAL STATUTE ©N THE SUBJECT FOE NATIONAL BANKS — TABLE OF THE EATES OF INTEEEST IN THOSE STATES CONSIDEEED IN THIS CHAPTKE. In the State of Maryland, the rate of interest established by law is six per centum per annum, and any person exacting, directly or indirectlyj for a loan of money, goods or chattels, to be paid in money, above that rate, is deemed guilty of usury ; but no plea of usmy is available against any legal. or equitable assignee or holder of any bond, bill obligatory, bill of exchange, promissory note or other negotiable instrument, when such assignee or indorsee or holder shall have received the same for a iona fide and legal con- sideration, without notice of aoy usury in the creation or subse- quent assignment thereof. Any person guilty of usury forfeits the excess above the real sum or value of the goods and chattels actually lent or advanced, and the legal interest on such sum or value, which forfeiture inures to the benefit of the- defendant who shall plead and prove such usury ; and every plea of usury must state the sum of money or the value of the property actually lent or advanced, and the legal interest on the same, and the plaintiff may recover such sum or value, with legal interest from the time it was lent or a'dvanced (1 Md. Code, Art. 95, §§ 1-5). In Virginia, the rate of interest is six per centum per annum, and no person upon any contract is permitted to take for the loan or forbearance of money or other thing above the value of that rate, and all contracts or assurances made directly or indirectly for the loan or forbearance of money or other thing at a greater rate are declared to be void. Usury may be pleaded in general terms, and the plaintiff may reply generally, under which the par- ties may give any evidence which would be proper if the pleadings were special. Any borrower may bring an action in equity against the lender, to discover if there be wrong 72 LAW OF USURY. in the transaction, in which the defendant will he compelled to discover, on oath, the fects of the case, and if it appears that more than legal interest was reserved, the lender can . only recover the principal money, or other thing, without interest, and will he compelled to pay the costs of the suit. Any excess of interest which may be paid in any case may be recovered back, provided an action be brought therefor within one year after the same was paid. Any. judgment creditor who apprehends that he is in danger of loss by reason of usurious dealings on the part of his debtor, may exhibit his bill in equity against the party dealing with such debtor, and compel hiTin to discover, on oath, all the facts, and if it appear that more than legal interest has been received, the excess, or so much thereof as may be necessary, must b? applied to the satisfaction of the plaintiff's demand, provided that the bill must be filed within five years after the receipt of the illegal interest. If any person shall take, for the loan or for- bearance of money or other thing, interest above the legal rate, he will forfeit double the value of such money or thing, one moiety of which will go to the informer {Code of 1860, ch. 141). It will be observed that, in ease of usury, the excess only is forfeited when the proceedings are in equity, but if at law, the whole prin- cipal and interest are forfeited. The statute 'of Yirginia also provides that usury shall not be pleaded, in any case, by an incor- porated company {Code of 1860, ch. 5Y, § 38). *In the State of West Virginia, the legal rate of interest is declared by statute to be six per cent, and all contracts to pay more than this rate are void as to the excess, and no further. In an action upon an alleged usurious contract, the defendant may plead, in general terms, that the same is usurious, and under this plea he may prove the usury, and the borrower may exhibit his bill against the lender, setting up usury in a given transaction, and thereby compel the lender to discover the facts ; and if it appear that more than legal interest was reserved, judgment will be entered in favor of such lender for the amount of the principal and legal interest, but without costs {Code of 1868, oh. 96). In the State of North Carolina, the legal rate of interest for money or property loaned is fixed at six per cent, and persons taking more than the legal rate will forfeit double the value for- borne. The statute also provides that all bonds, contracts and assurances whatever, for the payment of any principal or money STATUTES BESPBOTIN& INTEREST. 73 lent or covenanted, to be performed, upon or for any usury, where- upon or whereby illegal interest shall be reserved, shall be void ; and any person who, upon any contract, shall take or receive illegal interest, will forfeit and lose, for every such offense, the double value of the moneys or property lent, bargained or exchanged ; the one moiety to the State, and the other to him who will sue for the same {Mm. Code of 1855, ch. 114). In Alabama, the rate of interest upon the loan or forbearance of money, things in action or goods, is eight per cent ; and all con- tracts for the payment of interest at a higher rate can be enforced only for the principal, and if any interest has been paid, it must be deducted from the principal, and a judgment rendered for the balance only. All change bills and notes for a sum not exceed- ing one dollar, issued or circulated in the State, without authority of law, bear interest at the rate of one hundred per ceut {Rev. Code of 1867, part 2, Utle 3, ch. 2, p. 406). In Alabama, where usury is relied on as a defense, the repre- sentative of the borrower is a competent witness to prove usury by his belief, provided he has given ten days' notice to the plain- tiff, or his attorney, of his intention to do so ; that is to say, unless the plaintiff, being the lender, denies, on oath in open court, the truth of the facts proposed to be sworn to by the defendant {Ren}. Code, § 2715 ). And in any action, if it be made to appear that usurious interest has been intentionally taken or reserved, _ the defendant recovers full costs {Re^. Code, § 2781). In the State of Louisiana, all debts bear interest at the rate of five per cent, unless otherwise stipulated. Conventional interest can in no case exceed eight, per cent, under pain of forfeiture of the entire interest contracted ; and if any person shall pay on any contract a higher rate of interest than is allowed by law, either as discount or otherwise, the same may be sued for and recovered within twelve months from the time of such payment. Bankers , and banking corporations are entitled to charge and receive discount at a rate not greater than the maximum allowed by law on conventional obligations ; and their other contracts are regulated by the same laws in regard to interest as are applicable to the contracts of individuals. The owner of any promissory note, bond or written obligation may collect the same, notwith- standing it may include a greater rate of interest or discount than 10 74 J^-^W OF USUUT. eight per cent, although after maturity the same can onlj bear interest at eight per cent {Rm. Stat. 1870, §§ 1883-1889). In Missouri, where no rate of interest is agreed upon, the rate is fixed at six per cent, but parties may agree in writing for the payment of interest, not exceeding ten per cent, on money due or to become due on contract. Persons are prohibited from taking any more or greater interest than these rates ; and when usury is pleaded, and the proof sustains the defense, judgment wUl be .given for the principal and ten per cent interest, but an order will be made that the whole amount of interest be set apart for the use of the common schools of the county in which the suit may be brought. Interest may be paid on interest, but it may not be compounded, oftener than once a year {Gen.. Stat, of 1866, ch. 89). In the State of Kansas, the rate of interest is fixed at seven per cent, unless a different rate is agreed upon between the par- ties ; but parties to any bond, bill, promissory note or other instru- ment in writing for the payment or forbearance of money, may stipulate therein for a rate of interest not exceeding twelve per cent. Payment of usurious interest, whether made in advance or not, will be deemed payment of principal ; and persons contract- ing for illegal interest will forfeit the entire interest, and will not be permitted to recover any more than the original principal {Gen. Stat, of 1868, ch. 51, as amended hy Laws of 1871, oh. 95). In ISTebraska, the legal rate of interest upon the loan, or for- bearance of money, goods or things in action, is fixed at ten per cent, unless a greater rate, not exceeding twelve per cent, be con- tracted for by the parties. If a greater rate of interest than is provided by law be contracted for or received, or reserved, and an action is brought on the contract, proof may be made of the illegal interest, and when the fact is proved, only the principal can be recovered, without interest, and the defendant will recover costs ; and if the interest has been paid, the same will be deducted from the principal and the judgment entered for the balance. , Any person charged with taking illegal interest may be required to answer on oath concerning it, and relief to a complainant, in case of a usurious loan, may be given without payment or tender by him of the principal sum {R0O. Stat, of 1866, oh. 28, as amended hy LaAjosofl%Q1,p. 8). In Iowa, the rate of interest is six per cent, unless the parties' STATUTMS BB8PECTING INTEREST. 75 agree in writing, which they may legally do, for a different rate, not exceeding ten per cent. The taking 'of any greater interest than is allowed by law is expressly prohibited, upon a penalty of the forfeiture of ten per cent upon the contract to the school fund of the county where the suit is brought. And the iona fide assignee of a usurious contract may recover of the usurer the full amount of the consideration paid by him for such contract, less the amount of the principal money loaned or due {Rev. Laws of 1860, ch. T2). In the State of Illinois, the rate of interest is fixed at six per cent, unless the parties otherwise agree, which they may do, for the payment of interest not exceeding ten per cent. If illegal interest be contracted for, the whole interest will be forfeited, and only the principal sum due can be recovered: Contracts made payable in any other State or Territory, or in the city of London, England, may be for the payment of interest according to the laws of the place where they are made payable, and the same may be fixed at the legal rate in Illinois {Gen. Stat, of 1869, ch. 54). -In Wisconsin, the legal rate of interest upon the loan or for- bearance of money, goods or things in action is seven per cent, except that the parties may contract for a greater rate, not exceed- ing twelve per cent ; and any person paying a greater interest than the law allows may recover, of the person who took or received the sanie, treble the amount of the excess of interest paid. Only the principal, without any interest, can be recovered in an action upon any bond, biU, note, assurance, conveyance or other don- tract or instrument, whereby there shall be reserved a rate of interest exceeding twelve per cent. Any person violating the law in respect to taking interest may be compelled to answer on oath respecting the same ; but no person can avail himself of the bene- fit of the law against usury, unless he first tender the principal sum loaned to the party entitled to the same {Rev. Stat. 1858, ch. 61). , In the State of Oregon, the rate of interest is fixed at ten per cent, and persons are prohibited from taking more, except that the parties to any contract may agree for the payment of interest at the rate of one per cent per month, when the same may be reserved. If it be ascertained, in any action upon any contract, that illegal interest has been contracted for, the entire debt contracted is for- feited to the school fund of the county where the suit is brought, 76 J^-^W OF VSURT. and a judgment will be rendered against the defendant for the original sum loaned, or" debt contracted, in favor of the State, for the use of the common school fund of such county, and against the plaiutiff for costs. But a lona fide assignee of the usurious contract may recover of the usurer the full amount paid by him for such contract, provided such assignee had no notice of the usury {Gen. Lcms, 1845-1867, ch. 24). In the remaining States, where usury laws exist, the consequences of usury are not serious. In South Carolina, the legal rate of interest is seven per cent, but the parties may contract for any rate without limit. In Georgia, the legal rate of interest is fixed at seven per cent, and no more can be collected, if agreed to be paid. In Florida, the rate of interest, in the absence of any contract on the subject, is eight per cent, but the parties may agree upon any rate of interest, and the contract can be enforced. In Mississippi, the rate of interest on debts, is six per cent, and on lent money eight per cent ; but it is competent for the parties to stipulate in writing for a higher rate, not exceeding ten per cent, and, if usu- rious interest be reserved, the excess over the legal rate is forfeited. In Tennessee, the legal rate of interest is six per cent, unless the parties stipulate for a higher rate, which it is competent for them to do, but not to exceed ten per cent ; if more be reserved, the excess is forfeited. In Arkansas, in the absence of any agreement on the subject, the rate of interest is six per cent, and it is forbid- den by the State Constitution that any law shall be passed to limit the rate of interest at which the parties shall agree ; that is to say, the parties may agree upon any rate to be paid. In Texas, the State Constitution on the subject of interest is similar to that of Arkansas ; but the legal rate of interest, in the absence of agree- ment, is fixed at eight per cent. In California, the legal rate of interest is fixed at ten per cent, but it is competent for the parties to agree in writing for the payment of any rate. In l^fevada, the law upon the subject of interest is the same as in California. In Indiana, the legal rate of interest is fixed at six per cent, unless the parties stipulate in writing for a different rate, which they are at.hberty to do, but not exceeding ten per cent ; if above the rate of ten per cent be agreed upon, the excess cannot be collected. In Kentucky, the legal rate of interest is six per cent, and a con- tract to pay more is simply void as to the excess. In Minnesota, in the absence of agreement, the statute rate of interest is seven STATUTES BESFBCTIN& INTEREST. _ 77 per cent ; but it is competent for the parties to agree in writing for a higher rate, not exceeding twelve per cent ; nothing above that rate can be enforced. This statement would not be co;np]ete without a reference to the federal statute in respect to the rate of interest to be taken by the national banks organized under that act. The statute pro- vides that every such banking association may take, receive, reserve and charge on any loan or discount such interest as is allowed by the laws of the State or Territory where the bank is located, and no more ; except that where by the laws of any gtate a diiFerent rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for associations organized in any such State under the said federal act. And when no rate is fixed by the laws of the State or Territory, the bank may take, receive, reserve or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill or other evidence of debt has to run. And the knowingly taking, receiving, reserving or charging a rate of interest greater than aforesaid is to 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. And in case a greater rate of interest has been paid, the person or persons, paying the same, or their legal representatives, may recover back, in an action of debt, twice the amount of the interest thus paid from the association taking or receiving the same, provided that the action therefor is commenced within two years from the time the usuri- ous transaction occurred. But the purchase, discount or sale of a hona fide bill of exchange, payable at another place than the place of such purchase, discount or sale, at not more than the current rate of exchange for sight drafts, iu addition to the interest, is not to be considered as taking or receiving a greater rate of interest ( Vide 2 Bright. Dig. U. S. Laws, p. 64, § 30). And now, to repeat for convenience the rates of interest in the several States considered in this chapter : The rate in Maryland, Virginia, "West Virginia, North Carolina, Mississippi, Tennessee, Arkansas, Missouri, Iowa, Illinois, Indiana and Kentucky is six per cent; in South Carolina, Greorgia, Kansas and Minnesota, seven per cent ; in Louisiana, five per cent ; in Florida, Alabama and Texas, eight per cent ; and in California, Oregon, Nevada and Nebraska, ten per cent. In one respect, all the statutes upon 78 , Ii'AW OF USURY. usury are in substantially the same language. They are negative, prohibiting any interest being taken above a certain rate ; they are none of them affirmative ; they do not declare in what cases inte- rest shall be taken ; much less do they in any case require it to be paid. So that it may be affirmed that neither by common law nor by statute is a party in any case required to pay interest. And it follows inevitably and irresistibly, upon the universal principle of all law, that a man cannot be made legally liable to pay interest, as such, without his own agreement to that effect. All that the statutes do is to prescribe the rate of interest and provide the con- sequences for undertaking to obtain more than the legal rate. The provisions of the statutes relating to usury in t^ie different States having thus, been detailed, and varient as they are in many essential particulars, it becomes an important inquiry as to the true interpretation to be given to those several acts, and the cases which may be considered within the pale of such acts, as well as those transactions which the courts have decided not to be tainted with the vice of usury. CHAPTEE VII. OF THE PAUTICTrLAB STATUTES TO BE APtLIED EST CASES OF ALLEGED U8TJET CONFLICT OF LAWS ON THE SUBJECT EULES BY WHICH THE QUESTION IS DETEEMINED. Befoee entering upon the general discussion of the interpreta- tion to be given to the statutes of the different States against usury, and the principles which apply to cases of usury under those statutes, it becomes necessary to examine an important question Which we meet at the very threshold of the discussion, viz. : which of the State laws are to govern in these cases of usury ; that is, when the alleged usurious transaction was entered into in one State and the same is to be performed in another, under the statute of which State is the case to be determined ? In order to obtain a correct understanding of the question, it is necessary to refer briefly to the law of nations, and more particularly to that branch of international jurisprudence relating to the conflict of laws in matters of contract. CONFLICT OF LAWS BESPECTINa USURY. 79 Now, the law of nations is the science which teaches the rights subsisting between nations or States and • the obhgations corre- spondent to those rights ; and it has been said that, in cases of doubt arising upon what is the law of nations, it is now an admitr ted rule amojigst all European nations that our common religion, Chrisbicmity, pointijg out the principles of natural justioe, should be equally appealed to and observed by us as an unfailing rule of construction. A nation or a State is a body politic, or a society of men bound together for the purpose of promoting their mutual safety and advantage by their combined strength. Every nation that governs itself, under what form soever, without dependence on any foreign power, is a sovereign State, and its rights are vir- tually the same as those of any other State. To give a nation a right to make an immediate figure in this grand society, it is suflSeient that it be really sovereign and independent ; that is, that it govern itself by its own authority and laws. Every sovereign State owes certain obligations to itself, and at the same time it is under certain well-defined obligations to sustain nations and States ; and among others, it is the duty of every State to recognize the laws of a sister State, and, under certain general principles, to give them force and effect. It may be laid down as a general rule, that the validity of a contract is to be decided by the law of the State where it was made, unless by its terms it is to be performed in another State, in which case the law of the State in which it is to be performed is to govern ; that is to say, when the contract is, either expressly or tacitly, to be performed in any other State than the one where it was entered into, the general rule is in conformity to the pre- sumed intention of the parties, that the contract, as to its validity, nature, obligation and interpretation, is to be governed by the law of the place of performance {Story^s Qonflict of Laws, § 280). This rule has been fully recognized by the Supreme Court of the United States, and, indeed, in some cases where the question of usury was involved. Said Chief Justice Taney : " The general principle in relation to contracts made in one place, to be executed in another, is well settled. They are to be governed by the law of the place of performance" {Andrews v. Pond, IB Peters' S., 65, 78). And in another very important case he said: "It is needless to enumerate here the instances in which, by the general practice of civihzed countries, the laws of the one, will, by the 80 i^"^ 0^ trsusr. comity of nations, be recognized and executed in another, where the rights of individuals are concerned. The cases of contracts made in a foreign country are famUiar examples ; and courts of justice have always expounded and executed them according to the law of the place in which they were made ; provided that that law was not repugnant to the law or policy of their own country. The comity thus extended to other nations is no impeach- ment of sovereignty. It is the voluntary act of the nation by which it is offered ; and is inadmissible when contrary to its policy or prejudicial to its interests. But it contributes so largely to promote justice between individuals, and to produce a friendly intercourse between the sovereignties to which they belong, that courts of justice have continually acted upon it, as a part of the voluntary law of nations" {Bemk of Augusta v. Earle, 13 Pdi&ri B., 519, 589). This language applies more particularly to foreign naidons, but the chief justice furthermore declares that these same rules of comity apply to the States of the Union as well, saying : " The intimate union of these States, as members of the same great political family, the deep and vital interest which binds them so closely together, should lead us, in the absence of proof to the contrary, to presume a greater degree of comity and friendship and kindness towards one another than we should be authorized to presume between foreign nations." The rule laid down in this case applies only where the performance of the contract is to be the place where it was made. In such cases the contract will be enforced in conformity to the law of the State in which it was made, whether the action is brought to enforce it in that State or in another ; and some jurists have maintained that the same rule would apply, although the contract is to be per- formed in another State. But Lord Mansfield stated the doctrine to the contrary many years ago : " The law of the place can never be the rule, where the transaction is entered into with an express view to the law of another country as the rule by which it is to be governed" {BoUnson v. Blwnd, 2 Burr. B., 1077, 1078). This is the general rule, and it has been uniformly adopted in this country and in England. The doctrine of the lex loci con- tractus is succinctly and accurately given by the late Judge Oowen in a note to one of the cases reported by him. He says : " The general proposition upon this head will be found in almost all the cases from which I shall extract the point decided; but it is more . CONFLICT OF LAWS BESPJEOTINB USURY. 81 generally laid down and supported as follows : That the law of a place wheie a contract is made, or to be performed, is to govern as to the natv/re, vaUdity, construcUon and effect of such contract ; that being valid in such place, it is to be considered equally valid, and to be enforced, everywhere, with the exception of cases in which the contract iS immoral or unjust, or in which the enforcing it in a State would be injurious to the rights, the interest or con- venience of such State or its citizens ; and, on the contrary, if a contract be void, or- be discharged by the law of the place where it is made en to be performed, it is to be considered as void or dis- charged everywhere, and to be enforced nowhere. * * * But as the laws of contracts, etc., in foreign States or countries are not admitted ex propria vigore,' hnt only eos comitate, the judicial power will exercise a discretion with respect to the laws they may be called upon to sanction ; for if they be manifestly unjust, or calculated to injure their own citizens, they ought to be rejected. * * * Accordingly an exception is, where it would be dan- gerous, or inconvenient, or of immoral tendency to enforce the foreign contract here " {Andr&ws v. Serriot, 4 Cow. R., 508, 511, 512, note). In some cases, importance seems to be attached to the circum- stance that one or both of the parties were inhabitants of the State or country where the contract was made. But there is, probably, no force to the distinction attempted to be made. The rule upon the subject is, that the law of the place where the con- tract is made is to control it, unless it appear upon the face of the contract that it was to be performed at some other place, or was made with reference to the laws of some other place ; and the reason of the rule is, not the allegiance due from the contracting parties- to the government where the contract is made or is to be executed, but the supposed reference which every contract has to the laws of the State or country where it is made or to be exe- cuted, whether the parties are citizens of that State or country or not. But the lex loci applies only to the validity or interpreta- tion of contracts, and not to the time, mode or extent of the . remedy. And yet the rule is well settled that, when a contract is made with reference to another country in which it is to be exe- cuted, it must be governed by the laws of the place where it is to have its effect. But the lex loci is to govern, unless the parties bad in view a different place, iy the terms of the contract. To U 82 i^W' OF USURT. repeat, then : the general rule established, ex comitate et jwe gentmm, is, that the place where the contract is made, and not where the action is brought, is to be considered in expounding and enforcing the contract, unless the parties have a view to its being executed elsewhere, in which case it is to be considered according to the laws of the place where the contract is to be executed ( FtcZe Lee v. SeUeck, 33 iV. Y. R., 615). This is the doctrine of the authorities, as well as the elementary. writers ; and it would seem as a general proposition that, from the rule, there would be no difficulty in ordinary cases of alleged usury to deter- mine the statutes under which they are to be decided. But the authorities are numerous in respect to the precise question of intent ; and the doctrine is, that it is to be governed by the leso loei, in conformity to the general rule. Said Chief Justice Taney : " The general principle in relation to contracts ma,de in one place, to be executed in another, is well settled. They are to be gov- erned by the law of the place of performance, and if the interest allowed by the laws of the place of performance is higher than that permitted at the place of the contract, the parties may stipu- late for the higher interest without incurring the penalties of usury." And from the whole case the learned reporter extracts the further doctrine : " When a contract has been made without reference to the laws of the State where it was made, or to the laws of the place of performance, and a rate of interest was reserved forbidden by the laws of the place where the contract was made, which was concealed under the name of exchange, in order to evade the law of usury, the question is not which law is to govern in executing the contract ; unquestionably it must be the law of the State where the agreement was entered into, and the instrument taken to insure its performance. A contract of this kind cannot stand on the same principles with a iona fide agreement, made in one State, to be executed in another. In the last mentioned cases, the agreements were permitted by the lex loci contractus, and will even be enforced there if the party is found within its jurisdiction. But the same rule cannot be applied to contracts forbidden by its laws, and designed to evade them. In such cases the legal consequences of such an agreement must be decided by .the law of the place where the contract was made. If void there, it is void everywhere" {Andrews v. Pond, 13 Peters' E„ 65, 77, 78). In aij earlier case, the Supreme Court CONFLICT OF LAWS SESPECTING VSTJTBT. 83 of the United States held that when a bill was drawn in Georgia on merchants in South Carolina, thelSnterest chargeable on the bill, in an action against the drawer for an alleged liability as acceptor, should be at the rate of interest allowed by the laws of South Carolina, and not the interest of Georgia ; Mr. Justice Thompson saying : " The contract of the defendants, if any were made, upon which they are responsible, was made in Sonth Carolina. The bills were to be paid there ; and, although they were drawn in Georgia, they were drawn, so far as respects the defendants, with a view to the State of South Carolina for the execution of the con- tract " {Boyer v. Edwards, 4 Peters' B., Ill, 123). These rules are subject to the qualification that the parties act in good faith, and that the form of the transaction is not adopted to disguise its real character. If a note, for instance, is made payable at a place foreign to the residence of either of the parties and to the subject-matter of the contract, for the purpose of obtaining a higher rate of interest than the laws of the place of contract allow, with intent to evade said law, the contract will be usurious if the rate of interest specified exceed the rate allowed by the lex loci contractus ; and perhaps it might be added that when a contract is made payable at a place other than the resi- dence of either of the parties, and foreign to the subject-matter of the contract, and a higher rate of interest is stipulated for than the laws of the place of contract permit, the parties will be presumed to have intended a fraudulent evasion of those laws. Such, probably, would be considered the rule ( Yide Miller v. Tiffany, 1 Wall. R., 298). ' Judge Story says : " The general rule is, that interest is to be paid on contracts according to the law of the place where they are to be performed in all eases where interest is expressly or impliedly to be paid. * * * Thns, a note made in Canada, where interest is six per cent, payable with interest in England, where it is five per cent, bears English interest only. Loans made in a place bear the interest of that place, unless they are payable elsewhere, And if payable in a foreign coxmtry, they may bear any rate of interest not exceeding that which is lawful by !the laws of that country. And, on this account, a contract for a loan made, and payable in a foreign country, may stipulate for interest higher than that allowed at home. If the contract for interest be illegal there, it will be everywhere; bat if it be 84 L^W OF nSVRT. legal where it is made, it will be of universal obligation, even in places where a lower interest Us, prescribed by law. The question, therefore, whether a contract is usurious or not, depends not upon the rate of the interest allowed, but upon the validity of that interest in the country where the contract is made and is to be executed " {Story^s Con. Zoms, §§ 291, 292). The learned com- mentator has fortified these several propositions by a reference to numerous judicial authorities, among which is one wherein the court said : " With respect to the question of usury, in order to hold the contract to be usurious, it must appear that the contract was made here, and that the consideration for it was to be paid here. It should appear, at least, that the payment was not to be made abroad ; for if it was to be made abroad it would not be usurious " {Thomson v. Powles, 2 Simons' E., 194). According to this doctrine, as enunciated by Judge Story, where a contract is entered into in one State for the payment of money in another, with interest specified according to the rate allowed in the State where the contract is made, but higher than that in the State where the debt is to be paid, the transaction would be usurious. And the learned commentator says : " John Yost, in his Commentaries on the Pandects, holds this very doctrine, which appears to me to be entirely in harmony with the received princi- ples of international law. He considers that interest must be according to the law of the place where the contract is to be per- formed, whether that place be where the contract is made, or it be another place. If the interest is in either case stipulated for beyond that rate, he deems it usurious. * * ' * Bur- gundus adopts the same doctrine. * * * In cases of express contract for interest, foreign jurists generally hold the same doctrine " {Story's Con. Laws, §§ 293 d, 293 e, 294). But this doctrine has not always been adopted to the furthest extent, and especially by the courts of the State of ISTew York. It has been held by the late Court of Chancery and by the Supreme Court of New York, in so many words, that, upon a contract for a loan of money made in one country and payable in another, the parties may stipulate for the payment of interest according to the laws of the place where the contract is made. Accordingly, promis- sory notes made and dated in Minnesota, for money there loaned and advanced, payable at a bank in the State of New York with interest at twenty-six and one-half per cent per annum, and CONFLICT OF LAWS BESPECTING USUBT. 85 Becured by mortgage on land in Minnesota, were held Ly the Supreme Court of New York to be valid, and the court therefore reftised to direct them to be surrendered and canceled {BaVme V. Womboiigh, 38 Ba/rb. R., 352). The notes would have been usurious had they been judged by the laws of the State of New York; but not so by the laws of Minnesota, because by the laws of the latter State any rate of interest is allowed which may be agreed on by the parties ; and it should be added that the court found in the case that the lender of the money, who resided in the State of New York at the time of the loan, had no intention to violate the laws of New York in making the loan. This was regarded as an important circumstance in the case, for, had it been otherwise, the laws of New York might have been applied to the transaction, and the notes held usurious and void ( Vide Pratt V. Adams, 1 JPmge's JR., 615). But in a much earlier casa before the court, it was held, when a note was made and indorsed in the city of New York for the benefit of the maker, and delivered to a resident of Connecticut to. take to the latter State to get discounted, on behalf of said maker, and which was accordingly taken to Connecticut and discounted at a usurious rate of interest by the laws of New York, that the transaction was not usurious. The note was treated as a foreign contract ; that is, a contract entered into in the State of Connecticut ; and it was, therefore, held that the burden of proof was upon the party pleading usury to show that the transaction was contrary to the laws of Connecticut ; that' not being shown, the transaction was upheld {City 8amm,gis Bank v. Bidmdl, 29 B&rb. S., 325). This was equivalent to holding what the reporter extracted as the doctrine of the case, viz., that where a loan was made in the State of Connecticut at a greater rate of interest than was allowed by the laws of New York, but no greater than the legal rate in Con- necticut, the fact that the note given by the borrower for the amount of the loan was made payable in New York, did not ren- der the transaction usurious and the note invalid. But it will be observed, also, that another important principle is laid down in this case, which is, apparently, against the general rule in such cases, viz., that, in the absence of all proof, the court will presume the rate of interest reserved to be in accordance with the laws of the State where the contract was made ; whereas,, the general xale is, that, in the absence of proof to the contrary, the court 86 i-4fr OF VSUBT. will presume that the laws of a foreign State are precisely like the laws of the State in which the court is held. That is to say, the laws of a country to whose courts a party appeals for redress furnish, in all cases, prima facie, the rule of decision • and if either party wishes the benefit of a different rule or law, as, for instance, lex domdciUi, lex looi cont/racinis, or lex loci rei sites, he must aver and prove it ( Vide Monroe v. Douglass, 5 JV. T. R., 447; McGraney v. Alien, 46 Sa/rl. R., 272). It is the rule, for the very good reason that the courts of a country are presumed to be acquainted only with their own laws ; those of other coun- tries are to be averred and proved, like other facts of which courts do not take judicial notice. But in the case of the Ci^j Sowings Rank V. Ridwell (29 Rarb. R., 325) it was observed that there is a general principle of law that courts will not presume the com- mission of crime or the existence of a state of facts which would operate as a forfeiture of property or rights ; and it was declared that this presumption is not confined to proceedings instituted with a view of punishing the supposed offense, but holds in all civil .suits where it comes collaterally in question. And because the eourtj by presuming the usury laws of Connecticut to be the same as those of New York, the lender of the money would necessarily be presumed to be guilty of a misdemeanor, the case was held to be an exception to the ordinary rule. So, it may be quite safely affirmed that where no place of per- formance is expressly stated or implied from the terms of the contract, the law of the place where it was made will govern in respect to its construction and validity. If a contract is, by its terms, to be performed partly in one country and partly in another, each portion is to be interpreted according to the laws of the country where it is to be performed. "Where a contract for the payment of money is made in one State and payment in another, and no interest is expressed in the contract, the interest is to be governed by the law of the place where it is payable ; and, in such case, if the rate of interest is expressed, and the same is not greater than is allowed by the laws of each State, the trans- action will be upheld ; that is to say, if the rate of interest be higher at the place of the contract than at the place of perform- ance, the parties may lawfully contract in that case also for the higher rate. And a party alleging that an agreement is invalid under the usury laws of another State, must show what are the CONFLICT OF LAWS SFSPFCTINa U8UBT. 87 laws of that State in relation to usury, or the presumption will be indulged that the agreement is valid under those laws. It should be stated here that, notwithstanding the decision of the City Savings Bank v. Bidwell (29 Barb. B., 325), the Court of Appeals of the State of New York have held that when a promissory note, made and dated in that State and payable at a' bank there, is negotiable in another State, the laws of New Tork are to con- trol as to the defense of usury ; and if the note is discounted at a rate of interest exceeding seven per cent, no action can be sus- tained upon it in New York {Jewell v. Wright, 30 N. T. B., 259). So far as seems to have been considered, the facts of the case in Barbour and the 30th New York are quite similar, although the decisions are directly at variance. In the case of Bidwell, the note was drawn, signed, indorsed, delivered and made payable in New York, with the understanding, however, that it was to be discounted in the State of Connecticut. In the case of "Wright, the note was drawn, signed, indorsed, delivered and made payable in the State of New York, without any proof as to where it was to be discounted. The notes in both cases were made • to raise money on, and the indorsers of both notes resided in the State of New York, although the note in the case of Bidwell was deliv- ered to a resident of Connecticut, to take to the latter State and get discounted. In the prevailing opinion in the case in the 30th New York it is observed : " The main question in the case is, whether the laws of New York or Connecticut are to control as to the defense of usury. The note was negotiated in Hartford, but was payable at Loekport, in New York. Nor can it be claimed that a contract is to be governed by the laws of the place where' it is made, if it is not to be performed acbording to the terms of the contract elsewhere. * * * But if such note or contract is, by its terms, to be performed in another State, then the laws of that State must govern. * * * The fact that the note was dated in New York is alone presumptive evidence that the maker not only resided at the place of its date, but contem- plated payment there. For the purpose of charging the indorsers, the makers (indorsers ?) must have been sought at their residences or places of business in this State. The same is stated in Curtis V. Leavitt (15 W. Y. B., 9, 227), where it is said : ' It is a gene- ral rule that the place, where contracts purely personal are made must govern as to their construction and validity, unless 88 J^-^W OF USURY. they are to be perfonned in another State or country, in which case their construction and validity depend upon the law of the place of performance.' * * * And in Cutler v. Wright (22 W. Y. R., 472) it was held that a note made in New York, but dated in Florida and payable there, was governed by the laws of that place ; and it is said the authorities did not leave this ques- tion in doubt. The same was also held in Porei&foy v. Ainsworth (22 Bml). R., 127). These cases from our own courts render it unnecessary to examine any other class of decisions upon this point." It would seem that this case in the 30th New York sub- stantially overrules the case in the 29th Barbour ; at all events, it would hardly be safe to rely upon the law as expounded in the latter ease. Where a contract was made in the State of Georgia, between parties subject to the laws of that State, in pursuance of which one of them drew a bill of exchange in favor of the other, upon a person residing in the State of New York, the Supreme Court of the latter State held that the parties must be considered as contracting according to the laws of the former State, and the transaction was to be determined under those laws. Ingraham, P. J., who delivered the opinion of the court, said: "The con- tract was made in Georgia, the money paid there, and the drawer as well as the bank were, at the time of the contract, both subject to the laws of Georgia. The mere fact that the funds upon which the draft was drawn were in the hands of a third person, in New York, was no part of the contract so as to affect its validity. The drawer owed the plaintiff some money, and gave the draft in Savannah. The whole transaction took place there, and was performed there, so far as the drawer had anything to do with it. In Cribb V. Tremont (20 Law cmd Eq. JR., 555) it was held that on such a bill of exchange, if not paid, the law of the place where made, and hot of the place where payable, was to govern as to the rule of damages, and the drawer was liable for interest accord- ing to the laws of the country where the bill was drawn. * * * The contract between the parties was made under the laws of another State, and we must consider the parties as contracting according to the laws of that place " {Bank of the State of Georgia v. ZeiOin, 45 Ba/ri. R., 340, 342, 343). It should be added that when a loan of money is made in one State, and is to be repaid in the same State, the fact that the loan CONFLICT OF LAWS RESPECTIN& USUBT. 89 is to be secured by a mortgage on lands in another State will not change the rule in respect to the laws of the place which are to govern the transaction. In such case, the statutes of usury of the State where the contract was made, and not those of the State where it is secured by mortgage, are to govern it, unless there be some other circumstance to show that the parties had in view the laws of the latter State. This question has been set at rest by repeated decisions, one of which was at an early day by the Supreme Sourt of the United States. The court observed : " The point is established that the mere taking of foreign security does not alter the locality of the contract with regard to the legal interest. Taking foreign security does not necessarily draw after it the consequence that the contract is to be fulfilled where the security is taken. The legal fulfillment of a contract or loan on the part of the borrower is repayment of the money, and the security given is but the means of securing what he has contracted for, which, in the eye of the law, is, to pay where he borrows, unless another place of payment be expressly designated by the contract " {De Wolf v. Johnson, 10 Wheatonh E., 367). The matter of security for the loan has, of itself, nothing to do with the question of the laws by which the validity of the transaction is to be determined ; as to that, it is wholly immaterial. It has been recently held by the Supreme Court of theState of New York that an agreement for the loan of money, made and consummated in New York by residents thereof, by which the borrower is to give a bond accompanied by a mortgage upon lands in Wisconsin, no place of payment being specified, is governed by the usury laws of New York, and not by those of Wisconsin. Mason, J., who delivered the opinion of the court, said : " The question presented for our decision is, whether this is a contract to be governed by the laws of the State of New York or those of Wisconsin, and I entertain no doubt but that it must be regarded as a New York contract, where the lex loci oonbracifws controls. Every concomitant to make it a New York contract seems to exist in the case. The parties reside here ; the loan was made here ; the securities were executed here ; the money is certainly payable here, where the parties reside. Upon such a state of facts I am unable to discover any principle of law upon which this can be pronounced a Wisconsin cpntract ; and no adjudged case has been referred to upon the argument, nor have I been able to find any 12 90 i-^W" (f^ USURY. which holds it such " {Gope v. Alden, 53 Ba/rb. B., 350-352). This is in accordance with the doctrine laid down in the same case, when it was before the court for review upon a previous hearing {MoCrcmey v. Alden, 46 Ba/rl. E., 272). And a case decided by the Supreme Court of Wisconsin is directly in point upon the same question. The suit was brought to foreclose a mortgage in Wis- consin. The parties both resided in New York, where the loan was made, and the bond and mortgage were executed on lands in Wisconsin. Dixon, Ch. J., in giving the opinion of the court, said : "We have no doubt that this contract is to be governed by the laws of New York. * * * In this case, the parties all resided in New York ; the loan was made there ; was to be repaid there ; and the laws of that State must govern the contract as to its validity and effect " {NewmoMN. Kerson, 10 Wis. E., 333, 840, 344). The distinction made by the authorities as to the parts of a con- tract which are to be governed by the laws of the place in which it is entered into, and those which are to be governed by the laws of the place in which the payment was intended, is so well marked that any further discussion of the subject might be considered unnecessary and superfluous. Much might be said in respect to the law of domicile, and the laws which relate to the capacity, state and condition of persons contracting, all of which have more or less to do with questions of usury, and the statute under which the matter is to be determined. But the method adopted in this chapter for presenting the real question to be discussed, and the full statement of the general principles applicable to cases of alleged" usury in which a conflict of laws may arise, render any particular reference to tho^e incidental matters undesirable arid unimportant. Other matters relating to this question may be directly or indirectly touched upon in the further treatment of the main subject of usury, and in the examination of the eases which are, or are not, within the pale of the usury acts. It may be pertinent to add, that the statutes of the several States against usury are held to apply to loans made by banks organized under the act of Congress passed June 3, 1864, entitled " An act to provide a national ' currency secured by a pledge of State bonds, and to provide for the circulation and redemption thereof." In regard to the express provisions of that act, the Supreme Court of the State of New York has recently held that the federal government has exercised its sovereign power over CONFLICT OF LAWS BJSSPFOTING VSUST. 91 the law of these institutions; and to that extent its power and its enactment are conclusive. The court further declared, that although the statute has subjected national banks organ- ized under its provisions to the judicatories of the State, so that, as to the form of the action and the proceeding in its coiirts, the State system of practice is and must be adopted, the federal government not having in that particular expressly asserted- its power; yet, in whatever court the action maybe pending, the law prescribed in the express provisions of the act of Congress is sovereign and exclusive. Potter, J., delivered the opinion of the court, and, among other things, said : " It will be assumed to be a conceded point that it was within the power of Congress, under the Constitution of the United States, to enact the law in question ; and it is perhaps as fully conceded that an act of Congress, passed under the implied powers of the Constitu- tion, has as much potency as one enacted under the express power of the same instrument. It is equally within the Constitution, and such implied powers are also as much prohibited to the States as if they had been expressly forbidden. * * * And the •Constitution itself declares that it, and the laws of the United States which shall be made in pursuance thereof, shall be the supreme law of the land ; and the judges of every State shall be bound thereby, anything in tlie Constitution or laws of any State to the contrary notwithstanding {Const. U. 8., Art. 6). * * * That the national Legislature possessed the full power to legis- lafe in regard to these national banks, and, as to them, to exercise its jurisdiction in its enactments as to all things necessa/ry cmd . uprvper in order to carry its powers into execution ; and to regu- late the. exercise of such powers by such conditions, upon such considerations and by such rules and penalties as to prevent extor- tion, is a proposition too self-evident to require argument. In this respect the national Legislature is unlimited " {First National Bank of Whitehall v. Lamb, 57 JBa/rb., 429, 431, 432). This case, how- ever, was taken to the Court of Appeals of the State, and the judg- ment of the Supreme Court reversed ; the Court of Appeals holding that National Banks, organized under the act of Congress of June 3, 1864, are subject to the usury laws of a State, and the question may thus be regarded as settled {First National Bank of Whitehall v. Lami, 6 Alb. L. J., 382). 92 ii^w OF nsanr. CHAPTER VIII. THE OONSTirrENTS OF USUET THEEE MUST BE A LOAIT, EXPEESS OE IMPLIED THEEE MUST BE AIT AGEEEMENT THAT THE MONET LENT BHALL OE MAT BE EETTJENED. The usury laws of the different States in which such laws exist differ in many of their provisions, but what is usury in one State is usury in another, and there are certain principles which may be gathered from the adjudications, which may be regarded as prev- alent, if not universal. To constitute usury, it is requisite in the jBrst place that there be a loan of money, express or implied, for which a day of payment is given. It is not imperative that the contract be in the form of a loan, but it must be a loan in fact, and whether it be so or not is a question for the jury. The law looks to the substance and the effect of the transaction, and if the same be in truth and in fact a loan, it is sufficient, in whatever form the transaction may be placed. But there can be no usury where there is no debt contracted upon the loan of money. The rule is simple and decided, that the transaction must be one involving the loan or forbearance of money. A person may sell his credit, his responsibility, his goods or his lands ; and if he deals fairly, he may take as large a price for either as he can get, and there can be no usury in the case. The authorities are clear and explicit that to constitute usury there must be a loan, directly or indirectly, and that a real sale, without any intent to loan, though it may be oppressive, cannot be usurious. The inquiry often arises, whether the transaction was a real sale in the regular course of business, or a colorable sale, with intent to disguise a loan, and evade the statute against usury ; but if the case is proved to be that of a sale, and not a loan, the courts uniformly hold that usury cannot attach, and, indeed, a sale can in no case he primu facie evidence of usury ; for it is valid unless it be a loan in disguise, and the burden of proof lies on the party claiming it to be usury, and it is necessary for him to show the circumstances which bring it within the statute. A promissory note, valid in its inception, may be sold at a greater discount than the legal interest, without being usurious. In the case of a note given to raise money, the rule would be dif- ferent. Such a transaction would be regarded a loan, and if the note was sold at a discount exceeding the lawful interest, it would O0N8TITVENTS OF USVRT. 93 be jprvma fade usury. But in. no case, where the transaction assumes upon the face of it the appearance of a purchase and sale, will the court, as matter of law, pronounce the contract usurious, for the reason that there is ^rvma faoie no loan. "Whenever, therefore, a contract, upon the face of it, is a mere sale, and this is claimed to be usurious, the only question which can be made is, whether it was ionafide a sale, and if found to be such, it cannot be usurious, however wrongful the terms of the contract may be. A large number of authorities might be cited to sustain this posi- tion, but a few only need be referred to. In an early case in the State of South Carolina, which was an action by an indorsee against an indorser, on a note made for the accommodaUon of the maker, and sold at a. discount beyond legal interest, the court held the note void ; but Justice Colcock, in giving the opinion of the court, says : " When a note made ionafide for a valuable considera- tion is brought into market, it may, like any other property, be sold for less than its value. It is, then, always a question of fact for the jury, whether the note is one of that character, or made to evade the statute " {^Fleming v. MvlUgan, 2 MoCord H., 173). In a later case in the same State, it was declared by the court : " It is not usurious to sell or buy a negotiable paper founded on a legal consideration for less thaadts nominal value. When a note or a legal consideration is drawn to order and indorsed, no matter how often it has been polluted in the hands of intermediate holders, it is still valid in the hands of a ionafide holder. * * * Courts of justice have universally labored to untrammel the restraints on the circulation of negotiable paper as indispensably necessary to the existence of commerce. They constitute, indeed, the mainspring, the very sinews of all commercial enterprise, and without them all its operations would be greatly impeded, if not wholly obstructed. * * * Bonds, notes, bills of exchange, bank notes, certificates of stock, and even specie itself, are the common subjects of traffic, and their intrinsic value must always depend on such a variety of circumstances that no foresight or wisdom can regulate it. * * * To declare that the parties to such traffic had incurred the pains of usury, would convulse the whole commercial world to its center" {Johnson v. King, 3 McGord B., 365, 368). And in a still later case in the same State, the court reiterate their former doctrine, that notes originally founded on a good consideration, though afterward sold for less 94 I'-^W OF USURY. than they are nominally worth, do not make a case of usury {Rerrick v. Jones, 4 MoOord E., 40S). The same doctrine was declared by the Court for the Correction of Errors of the State of New York, at an early day, and it has been adhered to ever since. It was observed : "-To purchase a note is a perfectly legal transac- tion ; to purchase for less than its face is forbidden by no principle of law or morality. Whether there be in such a sale and transfer a violation of moral obligation, must depend upon the fact whether one party shall or not take an undue advantage of the circum- stances or necessities of the other. To constitute a violation of the statute against usury, there must be a loan. * * * The sale of a note being a legal transaction, it must be deemed valid until it shall be proven to have been done merely as a cover to a loan and an evasion of the statute " {Orcme v. HendrioTcs, 1 Wend. . JS., 569, 635 ; and vide Ra/palye v. Anderson, 4 HilVs E., 472). And in the Supreme Court of the United States, in a ease in which the question of usury was discussed at great length, it was held that a loan, express or implied, is indispensably necessary to constitute usury, and it was remarked: "If it were a hona fide purchase, there is an end of the question of usury " (Lloyd v. Scott, 4 Peters^ U. S. E., 205). Indeed, one general principle appears to govern all the standard cases, whether decided by the courts of the American States or of England, which is, that a note given for a valuable consideration, and free from usury in its originj cannot be tainted by any subsequent transaction ; but a note originally made for the purpose of raising money,' and which is sold or discounted for more than the legal rate of interest, is void. The difference between a note made for the sole purpose of raising money, and one given for a valuable consideration, is very obvious. The first, in its inception, is intended as security for a loan, and represents credit only, not property ; while the other is given for goods, or other valuable consideration, and is the representative of money or property, as truly as the note of a bank is such a representative; and it might as well be called usury to sell a bank note for less than its face as to call it usury to sell, on the same terms, a promissory note representing property. So essential is this ingredient, that the Supreme Court of the State of New York held, twenty-five years ago, that one may iona fide sell his credit, by way of guaranty, or by making a note for another's accommodation, though for a compensation exceeding CONSTITUENTS OF USURY. 95 the legal rate of interest, apd that there will be no usury if the transaction be unconnected with a loan between the parties. In giving the opinion of the court, Bronson, Ch. J., said : " The plaintiffs sold their warranty, or credit, to the defendants for a com- mission of two and a half per cent on securities payable in four months. The rate of compensation is a matter of no legal import- ance ; for, if the plaintiffs had a right to charge anything, they might charge whatever sum the defendants would agree to pay. There was no negotiation nor agreement for or about a loan; nor was any loan ever made. It was a sale of credit, and nothing more. The defendants may have made a bad bargain ; but there was no usury in the case " {More v. Howlcmd, 4 Denials R., 264, 268). This case has been uniformly recognized, and is regarded as well settled law ; and it seems that the transaction must be, in fact, exchisweh/ that of a loan, in order that it may be impeached for usury, subject, of course, to the proviso that there is nothing in it intended as a cover to a loan. Accordingly, it has been recently held by the New York Court of Appeals that the lender of money may lawfully receive from the borrower a reasonable compensation, in excess of interest, for services and expenditures in procuring the money to be loaned, provided the services were performed and the expenditures incurred at the request of the borrower, and upon his express promise to pay therefor. The compensation thus received is said to be distinct from that agreed to be paid for the loan or forbearance of the money. The latter is interest, and cannot lawfully exceed the statute rate. The for- mer is a stipulated price for work, labor and services done and performed, and for money paid, laid out and expended ; , as such, it constitutes a distinct demand, which might be recovered in a separate action, if not included in the security taken for the prin- cipal debt " (Thurston v. Oornelt, 38 JST. T. R., 281). And it had been previously held by the same court that when the agree- ment for a loan or advance of money or goods is only part of an entire contract, embracing other matters, and more than the legal rate is reserved, such a transaction is not necessarily usurious ; that it is never, in such cases, a necessary inference that the pre- mium was reserved solely for the forbearance ; and it was said that the amount to be paid was of no importance, except as it may bear upon the intent of the parties {Smith v. Ma/rvin, 27 iV. Y^ E.,1ZT). But further reference is unnecessary. The doctrine 96 i-^W- OF VSUST. has long been recognized by the court^, and appears now to be the well settled and established law of the laind, that, to constitute usurj, it is requisite that there must be either a direct loan, or there must be some device for the purpose of concealing or evading the appearance of a loan, when, in truth, there was one. The cpmponent parts of a loan are a voucher or contract, specify- ing the nature of the transaction, the time of payment or redemp- tion, the rate of interest for the use of the money loaned, and the intention of one to loan and the other to borrow ; and the real substance of the transaction, and not the color and form of it, will always be examined for the purpose of determining whether it be a loan, or something else. The second requisite of a usurious transaction is, that there be an understanding between the parties that the money lent shall or may be returned. For example, if a party make a loan of another, and agree to pay a specific sum, exceeding the lawful interest, provided he do not pay the principal by a day certain, it is not usury. By a punctual payment of the principal, he may avoid the payment of the sum stated, which the law regards as a penalty ; or, where a loan is made to be returned at a fixed day with more than the legal rate of interest, depending upon a casualty which hazards both prineipaland interest, the contract is not usurious; but if the interest only is hazarded, the rule is different ; it is then usury. In the latter case, the lender is sure to 'have the principal again, come what will ; and this brings the case within the rule ; but in the former, the lender may lose both principal and interest, according to the precise terms of the agreement, and hence the transaction cannot be usurious, if iona fide, because it lacks the requisite that the money loaned must be absolutely returned. Indeed, if the principal only is put in hazard by the arrangement, that is, if by the terms of the loan a contingency may happen on which the lender may have returned less than his principal, there is no usury. The authorities are very numerous and decided, both in this country and in England, holding that an agreement, in good faith, to pay even double the amount of money borrowed, or other penalty, on the non-payment of the principal debt at a certain day, is not usui'ious, because it is in the power of the borrower wholly to discharge himself, by repaying the princi- • pal according to the bargain. This doctrine is well illustrated in an early case in Massachusetts, where the action was assumpsit on CONSTITUENTS OF VSUBT. 97 a promissory note, made by, the defendant, by which he promised to pay and deliver to the plaintiff nine hundred and twenty-eight bushels of oats by the seventh day of October next after the date of the note. It appeared on the trial that the note was given for a debt which the oats would pay at twenty cents a bushel, whereas, in fact, the oats were worth at least thirty-seven cents a bushel at the time the note was made. But it also appeared that, at the time the note was given, the plaintiff stipulated that if the defendant would give the note he would discount upon it five bushels of oats for each silver dollar paid thereon, if the same should be paid one-half in thirty days and the other half in sixty days ; and on these terms the note was made. "Within the thirty days the defendant paid one hundred silver dollars, pursuant to the agreement, which the plaintiff indorsed on the note, in lieu of five hundred bushels of oats. The balance remaining unpaid, the action was brought. The court held that, by the terms of the contract, the defendant might, by making payment in thirty and sixty days, have avoided everything but the discharge of what was honestly due from him^ for which the note was given as secu- rity, and that therefore the note was not usurious {Cutler v. How, 8 Mfiss. H., ,257). In this case, however, the decision ' might have been different had it not been for the stipulation that the maker might discharge the note for the oats at their real value, for the same court held at the same term, in a case in favor of the same plaintiff, that a similar note without the stipulation was void for usury. The case was this : The defendant owed the plaintiff a sum of money and gave him his promissory note, payable in six months, in a specific commodity, at a much lower rate than its current value. The note not being paid at the time it fell due, the plaintiff put it in suit, and afterward adjusted the suit by tak- ing a new note for the balance of the former at the low rate of the commodity, and made the new note also payable at a ^ven day, in a specific commodity, at a lower rate than its current value. The last note was held to be usurious and void {Cutler v. John- son, 8 Mass. B., 266). According to the report of the case, tho court held, as a question of law, that the note was usurious ; but this is probably a mistake, for the court granted a new trial, doubtless to have the question passed upon by a jury whether the transaction was not really a shift to enable the plaintiff to get more than legal interest for the forbearance of his money, and if 1? 98 J^-^W OF USURY. it was, whatever its color and form, it was usurious. But if it was simply a contl-aet in goodfcdth to pay a bona fide debt in property at a stipulated price, the transaction could not be considered usuri- ous. In all such cases, therefore, it becomes a question of fact for the jury, whether it was an honest and fair contract, or intended merely as a cloak for usury. It should be stated, however, that it is not requisite that the principal loaned is to be returned in money, in order to make the transaction usurious. Although the principal and interest may be contracted to be paid in labor or property, still the transaction may be within the statute against usury, provided the other necessary ingredients are found in it ( Vide Earner v. Sarrell, 2 Stew. c& Port. R., 323 ; Richardson v. Brown, 3 BibVs R., 207; M'Qennes v. Hart, 4 id., 327; Woodr- ward y. Fitspai/riok, 9 Dana's R., 121 ; Lindsey v. Sharp, 7 Monroe's R., 248 ; Thorp v. Rw^, 1 Dev. S Rat. Eq^. R., 613). A very common case, illustrating the doctrine that in order to constitute usury there must be an understanding between the parties that the money lent shall be returned, is that of the sale of annuities ; for it has been determined in all the cases upon this subject that a purchase of an annuity, however exorbitant the terms may be, can never amount to usury. But, even in those cases, if the transaction respecting the annuity be only a cover for the advancement of money by way of loan, it will not exempt the security taken from the taint of usury. And in respect to those cases where the loan is attended by some contingent circumstances which subject the money lent to evident hazard, so that the trans- action is not within the statutes against usury, it must be remarked that a mere nominal contingency, attended by no real hazard of the principal of the money lent, will not divest the transaction of its usurious character. The ordinary risk of the death or insolvency of the borrower is not such a hazard as wiU have such efEect. But the doctrine is well settled that, in order to constitute usury, there must be in substance a loan or advance of money, and the borrower must agree to return the amount advanced at all events, and inde- pendent of contingency or hazard ( Vide DowdaU v. Lenox, 2 EdM. Ch. R., 267 ; Cotton v. Dunham, 2 Paige's Gh. R., 267). To repeat : in order to constitute usury, there must be a loan of a certain kind; that is to say, there must be a loan, properly so called ; a temporary letting, for profit, of the use of money or goods, to be absolutely returned by the borrower to the Iwder. CONSTITVENTS OF USVBY. 99 It is this quality of its being returnable that constitutes a loan, and hence there can be no usury in contracts which include risks or contingency. Such contracts may be unconscionable and oppressive, from which relief may be had in a court of equity ; but they cannot be regarded as usurious in a court of law. It is the intention of the law, while protecting from usury, not to endanger or impair contracts which are necessary to commercial dealing, and common in the intercourse of men ; and the statutes against usury are therefore never held to apply in cases where the principal and interest are put in hazard upon a contingency, and where there is a risk that the lender may have less than his principal. The reason which has been assigned for this rule is that such contingency is the main characteristic of contracts of trade ; and, therefore, taking such advance of money out of the form of a loan, it renders it a new contract, and much mischief might ensue if such contracts could be shaken. But, as before suggested, the court will always, in these cases, exercise a sound discretion, with the assistance of a jury, to ascertain whether the contingency be real and Ixma fide or a mere shift to elude the statute against usury. The contingency must, in all cases, be lawful, and it should also be fair and reasonable in order to rebut the presumption that it is only a cover for usury. And the mere circumstance that the contract has the form of a real contingency will not exempt the transaction from the scrutiny of the courts, who are bound to exercise a judgnaent whether the contingency be a real one or a shift and device to cover usury. The distinc- tions in eases of contingencies have often been taken and dis- cussed by the courts, and the authorities are uniform as to the principles governing such cases. A learned English judge well illustrates the doctrine in an early.case, taking the distinction thus : " First, if I lend ilOO to have £120 at the year's end upon a casu- alty ; if the casualty goes to the interest only, and not to the principal, it is usury, for the party is sure to have the principal again, come what will come. But if the interest and principal are both hazarded, it is not then usury ; and it was, therefore, judged in C. B. in Dartmuth's case, where one went to Ifew- foundlcmd and another lent him £100 for a year to victual his ship, and if he returned with' the ship he would have so many thousand fish ; and expresses at what rate, which exceeded the interest which the statute allows ; and if he did not return, that 100 LAW OF aSURT. then he ^yould lose his principal, it was adjudged to be usury. Secondly, if I have both interest and principal, if it be at the will of the party who is to pay it, it is no usury ; as if I lend to one £100 for two years, to pay for the loan thereof £30, and if he pay the principal at the year's end he shall pay nothing for interest, this is not usury, for the party hath his election, and may pay it at the first year's end, and discharge himself" {Rob- erts V. Tremange, Cro. Jac, 308). In order to constitute usury, there must, in fact, be a loan, and the principal loaned must, by understanding of the parties, be returned to the lender; but, though the- form of the transaction be that of a sale, if it was not the intention of the parties to buy and sell, but to borrow and lend, and if the ccmtract was, in truth, for a loan of money, it will be declared usury, though under the mask of a treaty for the sale of goods. And, on the contrary, though the form of Ihe security given may import a loan, it may not, in fact, prove to be so. The substance of the transaction is to be principally regarded, against which expressions in the instrument, which can only with strict propriety be applied to a loan, have but little weight. To be sure, in all such cases, every circumstance by which a contract is assimilated to a loan bears the aspect of corruption, and has a tendency to reveal the mala fides of a usurious contract; but the question whether the contract is in substance a loan, disguised in shape to evade the law, or a iona fide contract of another species, belongs to the decision of the jury ; and if it be found that the trans- • action is not that of a loan, the principal of which is to be returned, without hazard or contingency, it cannot be usurious. The doc- trine is unquestionable, and has been quite recently confirmed in a well-considered case in the Supreme Court of the United States, in which the rule, as extracted from the opinion by the reporter, was declared, that, when the promise to pay a sum above legal interest depends upon a contingency, and not upon any happening of a certain event, the loan is not usurious ; and it was held that usurious interest will not be inferred from a paper which, while referring to payment of a sum above legal interest, is "uncertain, and so curious" that intentional bad device cannot be affirmed {Spain V. Hamilton, 1 Wallace, 604). So it may be observed, that upon consulting all the authorities upon this subject, it appears that, when either the principal alone, or, a forUori, both principal and interest are hazarded, there can be no usury ; but this hazard CONSTITVENTS OF USURY. 101 must be real, and not colorable, and the rule only extends to eases where the principal is included in the contingency ; for, if the interest alone be hazarded, no favor is extended to the contract. That is to say, this is the general rule ; but there is a single excep- tion to it, viz., when the exorbitant profit or interest is reserved in the nature of a penalty to be paid upon some default, which the borrower may avoid by the payment of the principal, and so defeat the interest. Here the principal may be reserved, and the interest alone be subject to be defeated by the contingency, and still the transaction may be exempt from the operation of the statute against usury. The principle of hazard, which exempts a contract from the charge of usury, is well illustrated in the case of those contracts which are denominated post obits, by which a borrower, in con- sideration of a sum of money paid mstanter, agrees to give the lender a larger sum upon the death of some particular person or persons. So, also, the principle is illustrated in the case of tana fide annuities for life, or lives ; but these matters will be fully discussed in future chaptfos, and, so far as the objects of this chap- ter are concerned, perhaps enough has already been said. CHAPTER IX. CONSTITTTENTS OF TTSTJET ILLEGAI. INTEEBST MUST BE EESEEVED OE TAKEN — THERE MUST BE A COEEUPT AGEBEMENT TO TAKE MOEE THAN THE LEGAL BATE. To constitute a usurious transaction, it is requisite not only that there be a loan, either express or implied, and an understanding between the parties that the money lent shall or may be returned, but, in the third place, a greater rate of interest than is allowed by law must be paid, or agreed to be paid, as the case may be. When the security given for the money loaned expresses upon its face an illegal rate of interest, there can be no difficulty in determining the character of the transaction ; it must be regarded as usurious. But, in most cases, when usury is alleged, only legal interest is nominally reserved, so that an inquiry into the substance of the transaction must be made. The rule, however, is obvious, that, in 102 I'-^W OF USUBT. order that there be usury in a transaction, more than legal interest must be paid or reserved. It need not be in Hheform of interest, necessarily ; it may be included in the principal received, or be paid as a distinct honus ; but it must be, in effect, the payment or reserving of a greater rate of interest than, the law allows for the use or forbearance of money, or the transaction cannot be brought within the pale of the usury laws. An illegal rate of interest may be taken or reserved in various ways, when, upon the face of the transaction, everything appears fair and in accordance with the law. Illegal interest may be reserved when the legal rate is to be taken before the end of the term for which the money is lent ; for it is clear, that, if the lender of a sum of money, payable with interest for forbearance during a certain term, receive all or any part of the interest during that term, he will thereby have taken interest above the statutable rate. Again, illegal interest may be reserved in some cases, when goods are advanced instead of money. For example, when a man sells to a person, in want of money, an article of personal property at a price beyond its real value, which the individual purchases, not because he desires the article for his own use, but really to enable him, by selling the same for what it will fetch, immediately to relieve his necessities. Now, the contract under which such a sale is made, or the instrument taken to secure the purchase-money of the thing sold, may be just as obnoxious to the charge of illegal interest as though the vendor had, instead, actually lent the Tendee a sum of money just equal to the true value of the article sold, and taken his note for the amount at which it was sold by him. In the case supposed, the real object which the person had in taking the article of property was the immediate means of supplying his wants ; and the purchase was, therefore, merely colorable. So, also, illegal interest may be reserved in cases of transfers of stock, and indeed the temporary transfer of stock in the public or other funds is an engine of usury which is often resorted to. The loan or transfer of stock, if hona fide, is not usurious; and when stock is lent, and the dividends in the meantime are paid over to the lender, even though they exceed the legal rates of interest, may not render the transaction usurious. And perhaps usury can only attach to such a proceeding where the party transferring receives, or is likely to receive, more than the legal rates, and cannot by possibility receive less. It is never important to inquire as to the shape in which the profit upon CONSTITUENTS OF USUBT. 103 money lent is to accrue ; it is sufficient that such profit exceed the legal rate, in order to bring the transaction within the statute against usury. And yet it may be unqualifiedly affirmed that a vital element in every case of usury is, that a greater rate of inte- rest than is allowed by law has been paid or reserved, and that without this constituent no usury can exist. Finally, and in the fourth place, in order to constitute usury, there must be a corrupt intent to take more than the legal rate for the use of the money loaned. This is a very important ingredient to constitute the offense, and there can be no usury in any transac- tion in which the parties did not intend to do the thing forbidden by the law. The act of usury has long since lost that deep moral stain which was formerly attached to it ; and it is now generally considered only as an' illegal or immoral act, because it is pro- hibited by law. Ignorance of the law will not protect a party from the penalties of usury when it is committed ; but where there was no intention to eva,de the law, and the facts which amount' to usury, whether they appear upon the face of the contract or by other proof, can be shown to be the result of mistake or accident, no penalty attadies, and there is -in fact no usury. The agree- ment under which the illegal rate of interest is reserved must be corrupt, because it is a violation of law ; but it cannot be a corrupt agreement unless the act of violation of the law was intended. The authorities are uniform upon this point. It is the essence of a usurious transaction that there shall be an unlawful and corrupt intent on the part of the lender to take illegal interest ; in other words, there must be an intention knowingly to contract for or take usurious interest. For if neither party intend it, but act iona fide and innocently, the law will not infer a corrupt agree- ment. To be sure, when the contract upon its face imports usury, as by an express reservation of more than legal interest, there is no room for presumption, for the intent is apparent, res vpsa loqm1/u,r. But when the contract on its face is for legal interest only, then it must be proved that there was some corrupt agree- ment, or device, or shift, to cover usury, and that it was in full con- templation of the parties. It is not enough that the borrower intended to make a usurious agreement, but the intention to take the usury must have been in th« full contemplation of th'e parties, not of one party, but of both, to the transaction. There must be an aggregatio mentiwm. This is the rule as lately laid down by 104 LAW OF rrSTTRT. the New York Court of Appeals, and it is sustained by numerous authorities ( Vide Condit v. Balckoin, 21 If. Y. E., 219 ; Lloyd V. 8goU, 4 Peters' B., 205 ; Bank of the Umted States v. Wag- goner, 9 id., 399). The terms of a contract are always a matter of fact, and although more than the legal rate of interest may in fact be reserved or taken, if it appears from all of the circunistances of the case that it was not in the contemplation of the parties to reserve or take usurious interest, the transaction will not be tainted with usury. There must be an intent to take illegal interest, or, in the language of the law, a corrupt agreement to take it, and therefore the quo cmimo is an essential ingredient in all these cases of alleged usury. If it appears that illegal interest is reserved or taken, and it is manifest that the parties intended to do, and in fact did do, every- thing necessary to constitute a usurious loan, then the case is one of usury, and it will be in vain for the parties to allege afterward that they did not intend to violate any law. Ignorance of the law excuses no man, for all are held to know what the law is ; and if the acts of the parties are in violation of the law, the only question which can arise is, as to whether the acts were intended. If it be the real intention of the parties to receive or reserve a given rate of interest, and that rate turns out to be usurious, the transac- tion will be regarded as usury, whether the parties knew the inte- rest to be usurious or not. The legal character and effect of the transaction cannot be changed or evaded by any fairness of mere intention that may be ascribed to the parties, unless the intention have reference to facts of the transaction itself. No error of the parties, as to the effect of the transaction imder the law, can give validity to a contract made in violation of the law. "Where there is a controversy as to what the transaction is, the intention of the parties may have effect in determining its character ; \>\\% where the fact, and intention to do what was done are manifest, the law is only to be appealed to for the effects and consequences. Said Eyre, Chief Justice, in a case before the English Court of Comraon Fleas seventy-five years ago, in substance : " I will begin with stating my assent to the proposition, that where a pa^ty on a con- tract for a loan intentionally takes more than the legal rate of interest for the forbearance of the loan, he is guilty of usury. But I add to it this further proposition, tl^at whether more than the legal rate is intentionally taken upon any contract for such CONSTITUENTS OF USUBT. 105 forbearance, is a mere question of fact for the consideration of ■ the jury, and must always be collected from the whole of the transaction as it passes between the parties. And I am of opinion that it never can be determined that any particular fact consti- tutes or amounts to usury, till all the circumstances with which it was attended, have been taken into consideration. As, on the one hand, I am to carry into effect a law which the policy of all times has deemed useful, and which expressly provides against any sub- tle devices or evasions by which its penalties may be eluded (and had it not been so provided, I should have thought it my duty to use all the influence of my situation to prevent such devices and evasions from having any effect) ; so, on the other hand, common justice requires that the whole of the transaction should be before the jury, and should be taken fairly, with a just application of all the circumstances to every conclusion of fact which the evidence will warrant. * * * I repeat, that I cannot agree that in usury, more than in any other case, the whole transaction is not to be taken together; that it is not to be analyzed and reduced to all the fagots of which it is composed, and to all the conclusions of fact which fairly result from the whole of the evidence ; and that the law does not arise from a fact so considered. Whether more than the legal rate of interest be intentionally taken for the' loan and forbearance of money, is a question of fact to be decided by the jury" {Hammvett, Sir B. v. Sir W. Yea, 1 Bos. & Pul., 144, 151, 154). Where there has been no taking of usury, and no reservation of usury on the face of the transaction, then the- case r^olves itself into the inquiry whether, npon the evidence, there was any corrupt agreement or device, or shift, to reserve or take usury ; and in this aspect of the case the quo animo, as well as the act of the parties, is most important. This is the turn which most cases of alleged usury take. It is very seldom that a transaction occurs, on the face of which there is a reservation of any interest other than legal interest. The charge of usury, in most instances, attaches to pretended cases of exchange of credits or commodi-ties, or where a profit is realized for something besides ■ the use of the money loaned or the debt forborne. And if in such case it appears that no disguise has been used ; no seeking to cover a loan of money under the pretense of a sale or exchange ; no effort to obtain an exorbitant gain for the use or forbearance of money, under the guise of commissions, brokerage or the like, 14 106 LAW OF USDRT. but the transaotion is lona fide, what it purports to be, the la-v« will not set aside the transaction, for it is no violation of any pub- lic policy against usury. And, indeed, a transaction itself may reserve more than legal interest on its face and yet be free from the taint of usury. To be sure, if more than legal interest is reserved on the face of the affair, usury is made out prima faoie; for without further proof, the reservation of unlawful interest will be considered as evidence of a corrupt agreement, which is the foundation of usurious contracts. But it is competent for the party to repel the prima faaie evidence of a corrupt agreement, arising from the face of the transaction by showing, if in his power, that more than the rate of interest was reserved by mistake, and con- trary to the intent of the party. This has been frequently held. The doctrine is well illustrated in an early English case, where the agreement was to lend £50 ; and the scrivener, by mistake, drew a bond for more than legal interest, against the will and without the knowledge of the lender, yet he was held entitled to recover {Bush v. Budkvnghamh, 2 Yembris, E., 83). In such cases it makes no difference whether the scrivener be in error in fact or of law ; or, if the security bears a different construction in point of law from what the parties intended, such mistake will not prejudice the lender when his intention was incorrupt ( Vide Nevison v. WhMyy, Cro. Oar., 501 ; BuoTdey v. - ChaHdhamk, Cro. Jog., 677). It should be borne in mind, however, that if the parties intended to make the identical contract on which the ques- tion arises, n6 extrinsic evidence will be admitted to explain it away. Said Chief Justice Marshall, in delivering the opinion of the Supreme Court of the United States in an early case : " The counsel for the plaintiff has also contended, that although the paper writing produced would, on the face of it, import a usuri- ous contract, yet, as the jury might possibly have inferred from it certain extrinsic facts which would have shown the contract not to have been within the act, the jury ought to have been left at liberty to infer those facts. But in this case the question arises upon a written instrument, and no principle is more clearly settled, than that the construction of a written evidence is exclu- sively with the court" (Lemy v. Gadsby, 3 OrcmoKs B., 180). This is upon the assumption, however, that the instrument con- tains the unmistakable contract of the parties ; and even in such a case, if the contract is susceptible of a fair construction, not . CONSTITDENTS OF USURY. 107 at variance with the statute against usury, it is the duty of the court so to construe it; and it is a well-settled rule, in the interpretation of contracts, and is applicable in cases of alleged usury as in others, that, when a clause is capable of two significations, it should be understood in that which will have Eome orperation, rather than in that in which it will have none ; and, further, it should be understood in the sense which is most agree- able to the nature of the. contract ; and, in all cases, the agreement should be examined in reference to what was the common fntention of the contracting parties, rather than the grammatical sense of the terms. But, where there is no latent ambiguity in the agree- ment, no parol evidence will be admitted to explain it {Vide Pothier on 01)1., ^art 1, cha/p. 1, § 1, a/rt. 7 ; Cdk&r v. Giiy, 2 Bos. & Pull. P., 565). Sometimes it happens that, by an error in calcu- lation, an excess of interest may be included in the transaction ; but this will not necessarily make the transaction usurious. To constitute usury, as has been before stated, there must be an illegal agreement ; and this cannot be predicated of a ease in which an excess was the result of accident or inadvertence, without any know- ledge that more than the legal rate was secured by the cgntract. It must have been the intent of the parties that the excess of interest be included and paid. This has been repeatedly decided. Said Sutherland, J., in delivering the opinion of the old Supreme Court of the State of New York, in a case involving the precise question : " Nor does the fact that the note first discounted exceeded the debt due to the company to a small amount, and that the excess was paid to Butler, vary the case. It was evidently the intention of the parties that the note should be for the amount due only ; but upon stating the account, and casting the interest, there was found to be a trifling difference of twenty dollars " {N. IT. Fire- men's Insurance Go. v. Sturges, 2 Oow. P., 664, 677). A mere mis- take in calculation was never held to be usury, for the reason that there must be a corrupt agreement, of which that is no evidence. There must be an intent to take or reserve more than the legal interest ; and the quality of the intention, in order to* constitute usury, must be, that it is willful, or, in other words, there must be a corrupt agreement, and not upon a just and true intent. Hence, as we have seen, when more than the allowed rate of interest was reserved in the security by the mistake of the person who drew it, and contrary to the inteilt of the party, it was decided by the 108 ^^W OF USUBT. English courts not to be usury ; usury being a penal act, and no man being criminal by mistake ( Vide Booth v. CooJc, 1 Fre&mm^a R., 264 ; BucMm v. Miltm-d, 2 Yentrii E., 107). Indeed, from the very words of statutes of usury, it would appear that the law looks straightly to the intentions of the parties ; and it is accord- ingly upon those words that the courts exercise their discretion of examining what is the real substance of the transaction, and not what is the color and form. And, therefore, all loans, properly so called, upon which more interest is taken than is allowed by statute, and which interest is taken willfully and corruptly, that is, with a usurious intent, no matter in what shapej, are usurious contracts ; and when there i:S an absence of this intention to take or reserve the illegal interest, there can be no usury. To sum up upon this point, then, it is admitted by all the writers and in all the codes upon the subject, that the intention of the contracting parties is the principal subjeet of inquiry in determin ing whether a contract be usurious or not ; for, if the intention of the contracting parties be righteous, the intent cannot be within the statutes of usury. It is said by Mr. Justice Gould, of the English courts, that " the ground and foundation of all usurious contracts is the corrupt agreement " {Muvray v. Hm-ding, 2 Bl. S., 865). The cases all go upon the principle, that the corrwpt i agreement is the essence of the oflfense, and that a party shall therefore be permitted to show what that agreement was, and that it has not been correctly expressed in the written contract. The question of usury is always a question of intent ; and there can be no usury without an intention to take a greater rate of interest than is allowed by law. But mark, however, it is not necessary to the offense that there should be cm aelmal intention to violate ■ the statute. This has been referred to before. Usury may be committed by parties who, in point of fact, never heard of the statute. Whether the party intended to take more than the legal rate by way of interest, is a question of fact; and, if it be found that he did, it is an invariable inference of law that it was taken in pursuance 6f a corrupt agreement, which consummates the offense. The doctrine is well illustrated by a case in Massachusetts, in which the court say : " It is probable that, in this case, there was no inten- tional deviation on the part of the bank, but a mistake of their right. This, however, is Sf, consideration which must not influence our decis'ion. The mistake was not involuntary, as a miscalcula- CONSTITUENTS OF USURY. 109 tion might be considered, where an intention of conforming to the legal rate of interest was proved, but a voluntary departure from the rate. An excess of interest was intentionally taken, upon a. mistaken supposition that banks were privileged in this respect tO' a certain extent. This was, therefore, in the sense of the law, a corrupt agreement ; for ignorance of the law will not excuse " {Maine Bank v. Butts, 9 Mass. R., 55). The intent of the parties is a legal inference from established facts; but, in all cases of usury, it must actually appear that more than the legal rate of interest was intended to be taken, or that the amount intended to be taken was greater than the law allowed. It is not necessary that the party intended to act contrary to the statute ; but he must intend to take a greater rate of interest than the statute allows. "Where the parties adopt a mode of calculation which gives the creditor more than legal interest, and the parties show that such will be the result, the transaction will be usurious, although the parties may be ignorant that such taking of illegal interest was a violation of the law ; and where the parties adopt a theory which they suppose to be in accordance with the statute against usury, as they construe it, but which,, nevertheless, results in giving the creditor more interest for the use of his money than the law allows, the transaction will be considered usurious. This is not like the case of .an error in fact, by which more than legal inte- rest is reserved. In the latter ease the transaction is not vitiated by the error, while in the former it is ( Vide GJiilders v. Dean^ 4 EandolpKs H., 406). But there can be no usury where either of the parties remains ignor.ant of the usurious reservation. For example, when more than lawful interest is reserved, with the knowledge of the lender, but without the knowledge of the bor- rower, in such case the transaction is not usurious (Smith v. Beach, 3 Day's B,., 268). The question of usury is always put upon the intention and purpose of the parties ; and in order 'to make a contract usurious, it must be apparent, either upon the face of it or by evidence, that the intention of the parties in the creation of it was, by means of shift or device, to take more than legal interest for the loan or forbearance of money. It depends upon the im,tent of the parties, and they may show anything to make it appear that there was no corrupt agreement. The authori- ties, both ancient and modern, speak a language on thia point too uniform and plain to be mistaken. We cannot know the 110 LA-W OF V8URY. agreement unless we look at the intention. This is the essence of every contract, as well as of every crime. There must be a criminal intention or there can be no guilt. Upon any other principle the statute against usury would operate as a snare, in which the artful and designing might entrap their neighbors by setting up and establishing tisury where none was ever intended. But where a party deliberately and knowingly takes a greater rate of interest than the statute allows, the law fixes the interest and pronounces the transaction usurious. Thus it appears that, in order to con- stitute usury, there must be (1) a loan, express or implied ; (2) an understanding between the parties that the money lent shall or may be returned ; (3) that for such loan a greater rate of interest than is allowed by law shall be paid or agreed to be paid, as the case may be ; and (4) a corrupt injtent to take more than the legal rate for the use of the money loaned. Unless these four things concur in every transaction, it is safe to affirm that no case of usury can be declared ; and this may be regarded as a rule universally recognized in all of the States. ^ CHAPTER X. TEANSAOTION S NOT TADfTBD BT USURY CERTAIN RULES APPLICABLE TO USURY CONTRACTS NOT USURIOUS BECAUSE THERE IS NO LOAN ELEMENTS OF A LOAN SALES OF CREDIT GUARANTIES. The four prerequisites of a usurious transaction are well ascer- tained and well settled. A profit made or loss imposed on the necessities of the borrower, whatever form, shape or disguise it may assume, where the treaty is for a loan and the capital is to be returned at all events, has always been adjudged to be so much profit taken upon a loan, and to be a violation of those laws which limit the lender to a specified rate of interest ; but tliis can only be so because the four indispensable things concur to make it a case of usury. And these rules are applicable everywhere, and under the usury laws of every State. There are other rules appli- cable to cases of usury, but which are not uniformly recognized in all the States. For example, in the State of New York, a transaction, usurious in its inception, is absolutely void in whose TRANSACTIONS NOT USURIOUS. Ill soever hands it may be ; while in some of the States a contract and security are void for usury only as between the original pap ties, and not as against assignees and purchasers in good faith, without notice that the instrument was infected by usury. One or two other things, however, may be stated as of general applica- tion, in addition to the uniform rules already laid down ; as, for instance, a transaction which is usurious in its inception must always remain so, as between the original parties to it ; and, again, if a transaction be free from usury in its origin,* no usurious con- tract respecting it can taint it with usury ; that is to say, a subse- quent agreement to pay a usurious interest wiU not vitiate a con- tract legal in its inception. All of the preliminaries being settled, the way now seems to be open for the consideration of those eases which are and which are not usurious within the several statutes against usury. And first in order, those transactions which are not usurious will naturally come under notice, and herein first as to those transactions which are not usurious because they do not amount to a loan. Cases in which this element is wanting are those of sales, compensation for service, credits and the like ; and a reference to authorities will best illustrate the doctrine by which they are governed, premising, however, that, in order to constitute a loan, there must be a lend- ing, and it is essential to the nature of a loan that the thing borrowed is, at all events, to be returned; that is to say, the component parts of a loan are a voucher or contract specifying the nature of the transaction, the rate of interest for the use -of the money loaned, and the intention of one to loan and the other to borrow. It is not necessary, however, to the creation of a loan that money should be paid on the one hand and received on the other ; for the circumstance of a man's money remaining in another's hands, in consequence of an agreement made for that purpose, will equally constitute a loan. But in such case, it is necessary that the debt be absolutely incurred, and not merely resting upon an executory agreement, the execution of which depends upon circumstances that may never take effect. But more of this when the cases are considered. In all cases where property, goods or things in action, and the like, are 5(w-fflj/?r6bcmd/b was on them to show that the advances charged as commissions were loans in disguise. The evidence of usage, if such evidence existed, should come from the defendants " {Seymour v. Marvin, 11 Barl). R., 80, 83, 85). This case was decided upon authority, and mainly, perhaps, upon an early case in the old Supreme Court of the State, wherein it appeared that the. plaintiffs charged a commission of two and a half per cent on the amount of money advanced to meet drafts when the defendants failed to send pro- duce' in time, and interest on the items charged in their account, from the time they became due. But it was found that the gene- ral usage was in accordance with this charge. Chief Justice Spencer, in deliveriag his opinion, says that there is no pretense for saying that the commission charged by the plaintiffs for accept- ing and paying the defendants' drafts, when the defendants had no funds in their hands, was usurious. He puts his decision on the ground that the commission business was lawful; and that it was only when an exorbitant charge was made, under the color of commissions, showing that the party intended, under that device, to get more than seven per cent for the use of his ilioney, that the claim of usury could be supported {Trotter v. Curtis, 19 Johns. R., 161). This case has been usually quoted as a leading authority in similar cases which have arisen since it was reported. The judg- ment in the case in 11th Barbour was afi&rmed by the Court of Appeals {Smithy. Marvin, 27 iT. Y. R., 137). In a comparatively late case, in the Supreme Court of the State of New York, the same doctrine has been reaffirmed. A party held a bond and mortgage to secure $2,000, and, for the considera- tion of $l,800,-sold and assigned the same, and, in effect, guaran- teed the collection of the entire face of the bond and mortgage. » TRANSACTIONS NOT USURIOUS. 129 with interest. The mortgage was foreclosed^ but there was a defi- ciency on the sale of the mortgaged premises of some fourteen hundred dollars ; and an action was brought against the guarantor to recover this amount, with interest. The court held, that the contract of the defendant to the plaintiff, although in effect a con- tract to guarantee the payment of $2^000, with interest, when in hai only $1,800 was paid by the plaintiff on the assignment of the mortgage, was not void for usury, the transaction not assuming the form and character of a loan of money ; but that the liability of the defendant on his covenant was limited to the sum of money actually paid to him by the plaintiff for the mortgage, with inte- rest {Goldsmith v. Brown, 35 Ba/rb. R., 484). ■ The same general principle seems to govern in ease of exchange of promissory notes as in that of sales of such instruments. " In a case in the old Supreme Court of the State of New York, it appeared that A. and B. exchanged notes of equal amounts, for the purpose of raising money, and one procured the note of the other to be discounted at a premium exceeding the lawful rate of interest. The note not being paid, the holder brought his action against the maker, and was permitted to recover the whole amount, with interest, on the ground that such a transaction is not usurious, and cannot be set up in bar of a recovery by the purchaser of the note against the maker. Savage, Ch. J., in giving the opinion of the court, said : " The only question is, whether this was a usurious transaction. According to the uniform decisions of this court, it clearly is not. The note was given for a valuable consideration ; it was an available instrument in the hands of the original payees ; there was no usury in its original inception, and, therefore, a pur- chase of it, or discounting of it, at a sum less than the face, does not taint the note itself with usury. Usury, to invalidate the note,, must exist between the original parties to it ; but when, as between maker and payee, the maker has received value for the note he gives, it is of no consequence to him what price the holder gave for it. He had value himself, and, therefore, must pay it " {Rice V. Mather, 3 Wend, B., 62, 64, 65). And this same doctrine has been affirmed by the New York Court of Appeals ( Vide Gobb V. Titus, 10 iT. T. B., 198). And the Supreme Court of Alabama, in pursuance of the well recognized rule, has held that where parties make an exchange of promissory notes, or other securities, for woney, they may stipu^ 17 ' ■ ■ ■' 130 LAW OF USURY. late hona fide for an allowance of premium by one to the other {And/rews v. Jones, 10 Ala. B., 400). CHAPTER XI. TEAN8ACTI0N8 NOT USUEIOTJS FOE THE WANT OF THE ELEMENT OF A LOAN C0NTEACT8 IN THE FOEM OF COMPENSATION FOE SEEVICE^ — CHARGES FOE SEASON ABLE COMMISSIONS ON MAKING LOAN ^ LOANS UPON CONDITION THAT DEBT OF THIED PEESON BE ASSUMED, OE THAT A SUBSISTING DEBT OF THE BOEEOWEE BE PAID. The question of usury is often involved in cases where a commis- sion has been charged for labor and trouble in procuring a loan of money for the borrower, instead of nominally including the same as a provision for the loan. The disposition of the courts in respect to such transactions will be seen by a reference to some of the cases which have been held not to be usurious, because not necessarily involved in a loan. An important case of this description has been recently decided by the New York Court of Appeals. The facts were, that one Webb applied to the defendant, at his place of business at Elmira, to accept for his accommodation, to enable him to raise money. The defendant wrote his acceptance on the draft of Webb and delivered it to him. Webb then applied to one Dewey to indorse the draft and get it discounted for him, and agreed to pay him fifty dollars for the service. Dewey indorsed the draft, and then procured another indorser, and procured the draft to be discounted, and of the avails took out his fifty dollars, and paid over the balance to Webb. The draft not being paid at maturity, the defendant was fixed as an indorser, and sued for the amount of the draft. The defense was usury. The judge at the circuit instructed the jury to inquire whether the paper was nego- tiated in the first instance to Dewey, and said if it was, it was usurious in the hands of the plaintiff as subsequent indorser ; but, if it was discounted in the first instance by the bank, Dewey act- ing as agent, and indorsing for Webb's accommodation and pro- curing Smith's indorsement, the' exacting of fifty dollars for so doing did not make the draft usurious. The defendant's counsel excepted, and the jury found for the plaintiff. The judgment was afBrmed at a General Term of the Supreme Court, and the defendant appealed to the Cpurt of Appeals, where the judgment was affirmed ; TRANSACTIONS NOT XTSUBIOUS. 131 the court holding that the payment of fifty dollars by the drawer of the bill to an accommodation indorser for his indorsing, pro- curing another indorser, and obtaining its discount, did not taint the draft with usury. Denio, J., in delivering the opinion of the court, said : " The evidence is uncontradicted that Dewey acted in what he did as Webb's agent, and not as the purchaser or holder of the paper. It is true that, in making title to the bill, when pleadings were technical, the plaintiff would have set out an indorsement and delivery by Webb to Dewey, and by the latter to the bank, and would thus have stated, in effect, that Dewey was at one time the holder, and then, inasmuch as he paid fifty dollars for his connection with its negotiation, it might be said that the bill was infected, with usury. But, in inquiring at what stage of a transaction respecting a negotiable bill or note it became operative as commercial paper, successive indorsements are not necessiirily regarded as separate transfers of the paper ; but the inquiry is, in what hands it first became available in a sense which would enable that party to maintain an action upon it against the prior parties. One who indorses for the accommodation of a prior party does not thereby become the holder of the bill, nor can he maintain an action upon it until he has. taken it up by paying the amount to a subsequent purchaser. The fact that the plaintiff placed the pro- ceeds of the discount to the credit of Dewey was of no materiality, after it was shown that the latter acted in procuring the discount as the agent of Webb, and not as the owner of the paper. The defendant's counsel relies upon the case of Steele v. Whipple (21 Wend., 103), as showing that, under circumstances like those here disclosed, the paper would be usurious in the hands of the bank, and it must be admitted that the reporter's note favors that conclusion. But on looking into the case, it will be seen that the note overlooks the true point decided. * * * The princi- ple reaUy decided has been questioned, if not overturned, by sub- sequent cases ; but as the point is foreign to the present question, it is unnecessary to pursue the subject. * * * The court, in the present case, left it to the jury to say whether Dewey became the holder of the note by means of the loan to Webb while it was in his hands, and they found he did not. I doubt whether the evidence would have justified the submission, but the defendants have no cause to complain of it. * * * None of the defend- ants' positions appearing to be well-taken, the judgment of th§ 132 LAW OF USURT. Supreme Court must be affirmed " ( Vcm Duzer v. Howe, 21 N. T. B., 531, 533, 534, 539). This" case was followed in a later case in the same court, where it was ruled that, where the maker of a promissory note pays a consideration to a party to indorse said note, and to procure its discount at the bank, such transaction does not constitute a usuri- ous agreement, and that the bank discounting such note in good faith can recover the same of the maker thereof {phMham BrniJc V. JBetts, 3Y JSr. Y. B., 356). In the old Supreme Court of the State of Ifew Tork, where a creditor at the request of the debtor, and upon his express promise to pay the expenses, took a journey to the residence of the latter with a view to settle the demand, and afterward included such expenses in a security taken for the debt, in an action brought upon the security, the defendant set up as a defense usury, because the traveling expenses of the plaintiff were included in the bUl; but the court held that the security was not for that reason usuri- ous. Brongoh, Ch. J., in delivering the opinion, said : " We are referred to WilUa/ms v. House (7 Paige, 581), as an authority to prove the bill void for usury. But in that case one-half of the expenses of the creditor's journey were included in the mortgage when the journey had not been made at the request of the debtor nor upon any promise to pay the expenses, while here the journey was made at the request of the company, and upon its express undertaking to pay the expenses. The $7.50 might have been recovered.from the company, although no arrangement in relation to the original debt had been made. It was so much money paid, laid out and expended for the company upon request, and was as much a debt as was the original demand. There was no usury " {Harger v. McCuUough, 2 JDenid's B., 119, 121, 122). And in a very late case decided by the New York Court of Appeals, the principle laid down was even more emphatic. The action in the Supreme Court was against principal and sureties, on a promissory note for $412 and interest, payable in one year, made to the plaintiff for money loaned, but included the sum of twenty-one dollars and fifty cents reserved as compensation for the plaintiff's services and expenses in collecting the money necessary to complete the amount to be loaned ; and the plaintiff testified that such services were rendered at the request of the borrower, and upon his express agreement to pay therefor. The TRANSACTIONS NOT USURIOUS. 133 defense was usury. The evidence being closed, the defendants' counsel requested the court to direct a verdict for the defendant, on the ground that, as matter of law, and on the plaintiff 's own evidence, the defense of usury had been made out, which the court declined to do, and the defendant excepted. The court charged the jury that if the excess over seven per cent was taken exclu- sively for expenditures of time, services and money in obtaining the money to be loaned to defendant, without any intention to evade the statute against usury, and if the amount thus taken was not more than a reasonable charge for such expenditures, and if they were made at the borrower's request, and on his promise to pay therefor, then theliote was not usurious; to which the defend- ant excepted. The defendant requested the court to charge the jury that it was usury for the plaintiff to take even the actual expenses in collecting her own money to loan to defendant, when those expenses brought the sum paid for the loan to more than seven per cent ; also, that it was usury for the plaintiff to take anything more than the actual expenses as a personal compensa- tion for collecting the money ; also, that if the extra money paid was, in the mind of the plaintiff, ah inducement to make the loan, it was usury ; each 6f which requests was refused by the court, and the defendant excepted. The jury found a verdict for the plain- tiff for the full amount 6f the note, with interest. A motion for a new trial was made by the defendant at Special Term, and denied. The order denying such motion was affirmed at General Term, and the defendant appealed to the Court of Appeals. The case - was elaborately argued in the latter court, and the order appealed from unanimously affirmed. Dwight, J., in delivering the opinion of the court, said: "We have, then, in brief, the following case presented : The defendant, Cornell, a stranger to the plaintiff, pro- cures himself to be introduced to her, finds her sick in bed, and proposes to borrow $4Q0, offering satisfactory security. The plaintiff has but about half the desired amount on hand, and, when it is suggested that she has money due her in a neighboring village, she admits that she has, but says that it is in good and safe hands, and that she does not wish to change it; the defendant urges his pressing necessities, appeals to her to save him from the loss of his property, which, he says, must ensue if he does not obtain the loan, and offers to compensate for her trouble and expense if she will go to "Waverly and collect in this money, in order to loan it 134 M''^ oj" usuBT, to him ; she hesitates to undertake the task on account of her ill health, but finally consents to make the effort for five per cent on the amount. She goes to Waverly three times, hiring a convey- ance each time, sends a messenger twice, collects money from four different persons, is compelled to resort to borrowing to make up the full amount, and to apply to several persons before obtaining the loan, and then finally completed the amount to be loaned to Cornell. Her health having been injuriously affected ' by the travel and exertion involved in the business, which was more than she anticipated when she undertook it, she calls Cornell's attention to the fact, and suggests she ought to -have increased compensation. Cornell admits the justice of the claim, and consents to increase the compensation to six per cent. The money was paid, less the compensation agreed upon ($21.50), and the note is taken for the full amount, with interest. The plaintiff testifies, under objection, that her intention, in stipulating for this sum reserved, was to get compensation for her trouble and expenses- in running about and collecting and borrowing the money, and that she did not take it for the use or forbearance oi the money loaned. The court was asked, upon, this evidence, to direct a verdict for the defendant, on the ground that, as matter of law, the defense of usury was estab- lished, and the question is farly presented, by the refusal of the court, and the several refusals to charge, whether the lender of money may lawfully receive from the borrower a reasonable com- pensation, in excess of interest, for services and expenditures in procuring the money to be loaned, provided the services were per- formed and the expenditures incurred at the request of the borrower, and upon his express promise to pay therefor. Upon this question there can be no doubt. The compensation thus received is distinct from that agreed to be paid for the loan or forbearance of the money. The latter is interest, and cannot lawfully exceed seven per cent ; the former is a stipulated price for work, labor and services done and performed, and for money paid, laid out and expended ; as such, it constitutes a distinct demand, which might be recovered, in a separate action, if not included in the security taken for the principal debt. Indeed, in this case, there is no doubt it might have been recovered in an action on the agree- ment, if the principal debt had not been increased, or if, for any reason, the defendant had declined to,: accept the loan after the money had been raised for him by the plaintiff. * * * In the TRANSACTIONS NOT USURIOUS. 135 numerous cases where the owners of real estate, in growing com- munities, cut it up into lots and offer to purchasers to loan them money to be expended in improvements, the sale of the lots is a condition of the loan ; but, even though the price thus obtained for the property is larger than it would have brought but for the loan thus accompanying it, yet if the transaction be, in good faith, whatis here described, it would be absurd topronounce it usurious. So, too, the hiring of services may be made the condition of a loan for money; as, where a clerk or salesman, having some capital, and seeking employment, makes it a condition of loaning his money that he shall be employed at certain wages. The contract would not be usurious, unless it should be found that the price put upon the services was, in fact, intended as a cover for obtaining unlawful interest for the money loaned. In aU these cases we arrive at one result, viz., that the character of the transaction depends upon the intention of the parties, and that is a question for the jury. The rule applies to the case at bar, and the instruc- tion given to the jury was strictly correct. The same reasoning, also, disposes of all the defendant's exceptions to the several refu- sals of the court to charge as requested. The only one of these exceptions which it can be necessary to notice further is that to the refusal of the court to charge ' that if the extra money paid was, ia the mind of the plaintiff, an inducement to make the loan, it was usury.' This might seem, at first sight, to be substantially equivalent to the proposition that if the extra money was received by the plaintiff, in any manner, as compensation for the loan, then it was usury. The latter is a correct proposition, and was, in sub- stance, charged by the court. But the proposition contained in the request to charge was a different one. According to the testi- mony of the plaintiff, which the jury seem to have believed, the extra money paid was, in one sense, an inducement to make the loan, and yet was not received, in any measure, as compensation for the use of the money. It was an inducement to make the loan, in that it induced the plaintiff to incur the extra trouble and expense without which the loan could not have been made. But, in this view, it was distinct from the compensation for the loan itself, -and, hence, was not usury. This request to charge was, therefore, properly refused. * * * I do not think there was any error in the rulings of the court, in the admission of evidence. * * * In this case, to find a verdict for the plaintiff, under the 136 i-^W OF USUBT. charge of the court, the jury must have found that the sum reserved hy her, upon the face of the note, was taken exclusively for the expenditures, of time, services and money in obtaining the money to be loaned to Cornell, without any intent to evade the statute against usury ; that those expenditures were made at the request of Cornell, and upon his express promise to pay her there- for; and that the sum reserved was not more than a reasonable compensation for such expenditures. Such being the findings of the jury, and no error appearing in the rulings or the charge of the court, the motion for a new trial was properly denied " {Thurs- ton V. CorneU, 38 JS'. Y. B., 281, 283-288). These liberal extracts are made from the opinion in the case of Thurston v. Cornell, because of the importance of the case, and because certain princi- ples seem to be carried further, in the decision of the case, than in any previous cases to be found in the New Tort reports. To be sure, many interesting items in the opinion are obiter ; but, as none of the judges manifest any dissent, it is fair to conclude that they were concurred in, and that they will, most likely, be recog- nized in future aidjudications. The case itself, however, settles the principle that a party may lawfully take from the borrower a rea- sonable compensation, in excess of interest, for services and expen- ditures in procuring the money to be loaned, when there is no intent to evade the law; and that it is competent for the lender of the money to testify as to what his intention was. This doctrine is more clearly and directly presented in this than in any previous case ; but it is. nevertheless, quite reasonable, and in accordance with the general policy of the law. In a somewhat earlier case, in the same court, a similar doc- trine, in one of its aspects, was laid down. The action was brought in the Supreme Court, against the maker and indorser of a promissory note. The note in suit was bought in renewal of one for $600, made in July, 1857, by one Burpee and John P. Alger, and payable to one Clark, or bearer. The circumstances under which the last mentioned note was given were these : In July, 185Y, Clark (who resided at Newport, New Hampshire, but was temporarily staying at Saratoga Springs) was applied to by Burpee, at the Springs, to lend him $600, which he stated he wanted to pay a note he was then owing at the savings bank, Springfield, Vermont. The security he proposed was satisfactory, but Clark informed him that he had not the money with him; that it was at TRANSACTIONS NOT- USURIOUS. 137 Newport, in tlie bank ; and that it would be attended with con- siderable trouble and expense to go after it. Burpee inquired as to the probable expense, and was told twenty-five dollars at least, and he said he would give him (Clark) twenty-five dollars if he would go and get him the money, and, as he wanted it to pay out at Springfield, he would meet him (Clark) at Bellows Falls the fol- lowing Friday, and bring a note with one or more names to it of persons (among them John P. Alger) that had been suggested as sureties. Clark promised to go immediately, and did go the next morning to Newport, and from thence to Bellows Falls on Friday, and there remained waiting for Burpee until the next morning, when he went back to Newport, stayed there over Sunday, and returned to Saratoga on Monday. He paid twenty dollars for the expenses of the trip. On his return to Saratoga he met Burpee at John P. Alger's house, and let him have the money, taking a note therefor of $600, made by Burpee and Alger. After Burpee had received the money and was about leaving, Clark said to him, " Burpee, what about the matter of expenses ?" when Bui-pee replied, "I do not want to give you the money to-day, but will give you my note on demand, and pay it in a short time." Clark - wrote a note for twenty-five dollars, and Burpee signed it. The defense was usury, and on these facts the Supreme Court adjudged that the plaintiff had himself shown the note to be usurious, and accordingly nonsuited the plaintiff. The Court of Appeals held this to be a plain error. Wright, J., who delivered the opinion, said : " The evidence tended to show that the twenty-five dollar note (whici, it was claimed in the pleading, was without any legal consideration, and rendered the $600 note void for usury) was given to repay Clark for trouble and expense incurred by him, at the request of Burpee, the borrower, in going to Newport for the money, and that the amount of the note was only two or three dollars more than the actual expenses of the trip. If this were so, there was no usury. But, manifestly, the ease did not disclose a transaction usurious per se. Whether or not the trip to Newport for th^e money was intended as a cover for usury, was a matter for the consideration of the jury. If the jury believed that it was undertaken in good faith, at Burpee's special request, and upon his promise to reimburse for the trouble and expense of the journey, then the taking of the twenty-five dollar note did not render the transaction usurious. Even when the lender, without any special 18 138 LAW OF USURY. agreement with the borrower, in addition to lawful interest, takes a commission for trouble and expense necessarily incurred in and about the business of the loan, the transaction would be supported, provided such commission was not intended as a device to cover a usurious loan " {Eaton v. Alger, 2 Keyei B., 41, 46, 47 ; and vide Flint V. Sohomberg, 1 Hilton^s B., 532). The Superior Court of the city of New York has recently held that it is not usury for a lender of money on bond and mortgage, in good faith, and not as a cover, to take from the borrower the necessary disbursements for Searching the title to the premises mortgaged. The facts were these : Eeed made a mortgage to Wolcott, to be used by the latter to borrow money for the former; Wolcott transferred the mortgage to Eldridge, and received the full price thereof as a loan upon the security of the same, which money* he delivered to Eeed, less a certain sum retained by him for his ser- vices and expenses incurred in searching titles. The court held that the mortgage had no inception in the hands of Wolcott, and that a retention by him of such sum for services did not make the loan or mortgage usurious in the hands of Eldridge ; and it was declared that if the notes and mortgage in suit were, as was claimed by the plaintiff, not of a transaction virtually between Reed, the defendant, and Eldridge, the discounter of the notes, through Wolcott, the agent or middle man, in order to raise money to take up other notes, or for any other purpose, then, no matter how much money Wolcott might have stipulated for or received, it would not be usury as against the party taking the notes and mortgage and advancing the money thereon, unless he was also a party to the usurious contract. This was stated as a familiar prin- ciple, and well settled by authority {Eldridge v. Reed, 2 Sweeny'' s B., 155, 160). The same general doctrine of these New York cases has long been recognized in England. Thus, an indenture, assigning to the plaintiffs a contract for the purchase of timber, upon certain trusts for securing to themselves out of the proceeds the repayment of the purchase-money advanced by them, and also of a certain bal- ance before due to them, together with interest thereon, at five per cent, up. to the time of payment; and also the sum of £200, as compensation for the trouble that they might be put to ; and also all costs, charges, etc., which they might incur on account of the premises, was held by the English King's Bench not to be a TRANSACTIONS NOT USURIOUS. ^ 139 usurious agreement npoH the face of it ; that'it was not necessarily to be intended as a colorable reservation of further interest beyond the legal rate, but as a compensation for trouble, etc. ; neither was it so excessive as to be intended usurious upon that account {Palmer y. Baker, 1 Momle dh Selwyrt^s E., 56). A similar rule was laid down in the English Court of Chancery. A motion was made for an injunction to restrain the sale of a cargo in the London docks, and an objection was taken to a claim of lien for commission upon a transaction which, by the accounts that were produced, appeared to be of this nature. Hanson, the per- son making the claim of crommission, having advanced money upon the terms of receiving interest at five per cent, took bills upon Hamburgh, which bills he sent there for the purpose of procuring acceptance and payment, and a remittance of the amount. The commission was charged upon that transaction, and it vfas con- tended, in support of the motion, that it was usurious. The motion was denied, on the ground that a reasonable commission, beyond legal interest, for extra incidental charges and the like, is not usu- rious. The lord chancellor said : " I take the facts of this case, as far as I can understand them from the accounts that have been handed up, to stand thus : Hanson advanced money to these parties upon, the terms of receiving interest; desiring them, if they had bills upon Hamburgh, to put them into his hands for the purpose of sending them there to procure acceptance and payment, in order to bring himself home, taking a reasonable commission for his trouble in doing so. That, according to modern doctrine, is not usurious ; therefore, I cannot make the order prayed upon this motion " {Eaynes v. Fry, 15 Vesey''s E., 120, 121 ; and vide, also, Burden v. Pa/rry, 2 Term E., 52). ■ And, in the State of Connecticut, similar decisions have been made. In a comparatively late case, the Supreme Court of Errors of that State went the full length of the New York cases. The action was upon promissory notes indorsed by the defendant ; and the defense was usury. It appeared that the maker of the notes made an arrangement with the plaintifE to take the notes and get them discounted for him, for which he agreed to pay him a reason- able compensation for his trouble and expense. He took the notes and tried to get them discounted, but could not ; whereupon he got his own note discounted by pledging other securities, and received Uhe money and took the notes ; and, for his trouble and 140 LAW OF USUBT, expenses in procuring the money, the maker of the notes agreed to pay him fifty dollars, which was no more than a reasonahle com- pensation for his trouble and expenses. The arrangement was made in New York. The defendant requested the court to charge the jury that if the extra sura was paid to the plaintifi" to lend the money or to procure a loan, if he lent the money himself and received more than seven per cent for it, the loan was usurious and void. The court charged the jury as follows-; " The notes in ques- tion are governed by the law of itfew York, which makes all secu- rities void when more than seven per cent per annum is taken for the loan of money. It is essential, to. constitute the transaction usurious, that there should have been a corrupt agreement between the parties, with an intent to avoid the statute. The test of such a transaction is, whether it is merely a loan of money, whatever may be the form of the contract; for, when the substance of the transaction is a loan of money, no artifice, device or shift will evade the statute. Promissory notes are the subject of sale, like personal chattels; but if the note is made only to raise money, and is not to become effective until it is negotiated, a sale for less than its apparent value will be prima facie usurious, and it win devolve on the purchaser to show that the transaction is not tainted with usury. A charge of commission beyond the legal rate of interest, for the trouble of discounting a note or procuring a loan of money, is not usury, provided it be a fair and reasonable compensation ; but if such compensation should be unreasonable and extravagant, it will furnish a presumption that the transaction is usurious ; and whether the transaction be of this character or not is a question of fact for the determination of the jury." The jury returned a verdict for the plaintiff, and the defendant moved for a new trial, for error in the charge of the court. After full consideration the motion for a new trial was denied. Hinman, Gh. J., in giving the opinion of the court, said : " The only ques- tion in this case arises upon that part of the charge in which the jury were told that a charge of commission beyond the legal rate of interest, for the trouble of discounting a note or procuring a loan, was not usury. The facts to which the charge applied are very similar to the facts in the case of Hutchinson v. Horner (2 Conn., 341), where the same doctrine was expressly sanctioned by the court. And that such is the law of Connecticut is admitted by counsel, as it certainly ought to be after this express 'decision. TRANSACTIONS NOT USTTBIOTTS. 141 subsequently sanctioned and uniformly acted upon {De Forest v. St/rong, 8 Conn., 513 ; Becknoith v. Windsor Mawtjufaot/wrvng Co., 4: ih., 604). But as this was a New York transaction, it is claimed that the same rule does not exist there ; and the question arises, therefore, whether there is any difference in this respect between our own laws and the laws of New York. The general principles as to what constitutes usury are the same in both States, and also in Eng- land, though the rate of interest is different. Hence the English cases are always cited and relied upon in New York as well as with us ; and we suppose it to be very well settled thajt under the English statutes it is lawful to take the customary commission or exchange on bills or notes, and reasonable incidental expenses,- over and above the interest. * * * Thefact^of this case bring it clearly within this principle. The plaintiff did not charge the commis- sion for the loan as made by himself ; indeed, it was not, when the service was rendered, contemplated that he was to loan the money at all. He came to Connecticut for the purpose of raising the money from others on the defendant's paper, but, finding that he could not do this, he determined to raise the money himself. Now, why should he not be paid for the service rendered at the defend- ant's request, and for his expenses while engaged in it ? " {Bea- dle V. Munson., 30 Corm. R., 175, 178, 179). A similar doctrine has been recently declared by the Supreme Court of Illinois, in a case in which it was held that a bill of exchange stipulating for the payment of " costs of collecting, including attorney's fees, " is not usurious {ITie Fvrst National Bcmk of Ma/rtinsville v. Canatsey, 34 III. R., 149). And the. same doctrine has often been recognized by the Supreme Court of Indiana ( Vide Garnbril v. Doe, 8 Blackf. R., 140 ; BiUiMgsfyy v. Deem, 1 Ind. R., 331 ; 8rmth v. Silvers, 32 id., 321 ; Smith v. JTie Muncie National BamJc, 29 id., 158). Akin to this doctrine, the Court of Appeals of the State of New York have recently held, that the fact that upon a loaln of money the lender exacts, as a condition of his. making the loan, that the borrower should secure to him the payment of a subsisting and genuine debt due him from a third person does not, per se, render the loan usurious. The action in the court below involved, the validity of certain promissory notes given upon a loan of money, «which included not only the amount of the money loaned, but $483.02 claimed by the lender to be due him from a third 142 LAW OF USUItT. person ; and it appeared in evidence that the lender made it a condition of the loan that the borrower would undertake to pay the indebtedness of such third person, and include the amount in the securities, and the borrower assented to the arrangement. The transaction was held usurious and void by the referee before whom the trial was had ; an appeal was taken to the General Term of the Supreme Court, where the judgment of the referee was reversed ; and an appeal was taken to the Court of Appeals and the judgment of reversal was affirmed. Lott, J., in his opinion said : " Assuming that the' notes of the defendant were given to the plaintiff and accepted by him as a loan of money, the transac- tion as found by the referee cannot be considered usurious. He has fully set forth the facts on which he found, ' as a matter of law, that said loan of money and said notes given therefor, and the said mortgage, were usurious and void.' They are substantially that the defendants, on an application to them by the plaintiff for a loan of money to discharge an indebtedness by him to divers persons, including a debt to themselves, consented to lend the money wanted, among other terms, ' upon the' farther condition that the said plaintiff would in consideration of such loan undertake to pay, to the said defendants the sum of $483.02, claimed by the said defendants to be due from Henry Jones to them, the said defend- ants,' the particulars of whiqh claim were set forth, ' and then and there makes his promissory note for said amount,' and secures the same with the notes to be given for the amount of the said indebt- edness by the said mortgage^ that the plaintiff acceded to the said terms and made the notes and executed the mortgage which he seeks to. cancel. He' does not find as a fact", or set forth any cir- cumstances warranting or tending to warrant the conclusion, that the debt of Jones was not due, or that the assumption of it was demanded or insisted on in any way, as interest for the loan, or with the intention of taking usury, or as a shift or device to cover it. The fact, and the only fact on which, ' as a matter of law,' he decides the loan to be usurious and void- is, that the defendants refused to make the loan asked by the plaintiff unless the pay- ment of the Jones debt was assumed by him and secured by the mortgage. Such a refusal did not, per se, make the transaction usurious, and that fact being as before stated the only one found, no other will be presumed to sustain a conclusion that the agree- ment was corrupt and void. It must be considered the settled ■ TRANSACTIONS NOT USUBIOUS. 143 rule of law in this State, that the arms is iipon the party seeking to avoid ah. agreement as usurious, not merely to establish a usuri- ous intent, but to prove facts from which that intent is to be deduced" {Valentine y. Conner, 40 JUT. Y. ^.,248,252,253). And the Supreme Court of the State had previously held, that an agreement by a borrower to pay a subsisting debt of his own in consideration of a new credit is not usurious, if the promise is to pay only the amount actually due on the old debt, and the amount of the loan with lawful interest {Ma/rsh v. Howe, 36 Ba/rb. Hi, 649). The Court of Appeals of the State of Il^ew York have just held, in a case not yet reported (August, 1872), that a loan is not necessarily usurious by reason of its constituting part of an agree- ment between the parties, where, irrespective of the loan, both parties are desirous of entering into the contract for their mutual advantage. And further, that the mere fact that as part of the arrangement a loan is made by one to the other at the legal rate of interest to enable him to perform his part, does not present a case of usury, though the loan would not have been made except as a part of the contract, or even though the contract would not have been made without the loan. And it was also held, that the mere fact that a loan of money or interest is the consideration for another contract, is not in all cases conclusive evidence of usury. But it was said that if by the collateral contract some benefit is secured to the lender, for which the borrower does not receive an equivalent, and which the lender would not have obtained except for the loan, and which is intended as an additional compensation for the loan, it is usury {Gla/rk v. Sheehcm, 6 Alh. L. Jour., 126). CHAPTER XII. rSAlf&ACTIONS NOT TTSTTEIOTIS — COMPENSATION TAKEN ON ACCOUNT OF EXCHANGE — MAKING DEPOSITS IN CONSIDEEATION OP A LOAN TAKING INTEEEST IN ADVANCE. Cases involving similar principles to those considered in the preceding chapter are those in which charges are made over and above legal interest for exchange, and the universally settled rule of law seems to be that a charge for exchange, unless used as a cover for usury, is legal and not usurious. A few only of tlie leading' 144 I>-AW OF VSVET; cases holding this doctrine, and wherein the trail sactions were decided not to be tainted with usury, will be referred to. Several cases of this nature have been before the Supreme Court of the United States, in which the decision was in favor of the legality of the transaction. For example, in one case, a banking institu- tion, having power to deal in exchange, took a mortgage to secure the payment of a loan to the mortgagor, in which was reserved a certain amount over and above legal interest, alleged to be accord- ing to the usual and customary prices of exchange between Cin- cinnati, where the bills were drawn, and New Orleans, where they were payable at the times they were discounted, although it was conceded that the rates were higher than were charged- on sight bills. The Circuit Court of the United States for the district of Ohio, in which the action was brought, held that the transaction was not usurious, and declared that it, was not usury in a bank which has power by its charter to deal in exchange to charge the market rates of exchange upon time bills, and an appeal was taken to the Supreme Court of the United States, where the decree of the Circuit Court was affirmed. Mr. Justice Curtis, in delivering the opinion of the court, said : " The power of the banking corpora tions to deal in exchange is not controverted. There is no usury on the face of any one of these transactions. It is incumbent on the party who charges usury to prove it ; and where it is alleged to consist in taking excessive rates of exchange, or in resorting to the form of a bill of exchange in order to keep out of sight a usurious compensation for the simple loan of money, those facts must be proved. * * * The answer of each bank denies such intent, and avei's that the exchange charged in each case was the customary and regular rate at the time of the discount of such bill. There is no evidence to prove the contrary. * * * The counsel for the appellants urged that the rates were higher than were charged on sight bills. But these were time bills, and it is no proof of usury that the banks did not take the market rates on sight bills, which they did not discount, if they took only the market rates on those they did discount. It was also insisted that the banks did not buy those bills, but were the first takers, fpr loans of money made to the drawers. But we are unable to perceive how the fact that the banks were the firs't takers can be of any importance in this case, nor do we deem it material that the bills were discounted for the drawers. The reason why the addition of the current rate of TRANSACTIONS NOT USURIOUS. 145 exchange to the legal rate of interest does not constitute usury, is that the former is a just and lawful compensation for receiving payment at a place where the money is expected to be less valua- ble than at the place where it is advanced and lent ; and this rea- son exists when the lender discounts the drawer's bill as well as when he buys a bill in the market of the payee. In neither case is it usury to take the regular and customary compensation for the loss in value by change of place of payment {BuoMiighwm v. McLean, 13 How. U. S. R., 151, ITl, 1T2). The whole question was examined in an earlier case in this same court, and the same rules were laid down. The action was brought in the Circuit Court of the United States for the southern district of Alabama, to recover the amount of a bill of exchange which was taken, in New York, in payment of a debt due on a protested bill from one of the parties to the protested bill. The bill was drawn on parties residing in the State of Alabama, and payable and negotiable at the Bank of Mobile sixty days after date. The exchange between Mobile and New York was stated to be ten per cent, and was added to the bill, and the damages ia the protested bill were also added. The bill was sent to Mobile and placed to the credit of the drawees by the indorser, who received it before it came to maturity. It was afterward protested for non-payment. The defendants alleged usury in the bill ; the rate of exchange allowed in the bill, being ten per cent, was proven, and it being alleged that the highest rate of exchange in Mobile did not exceed fiye per cent. The defendant proved by one witness that the exchange between New York and Mobile at the time in question was from five to seven per cent, and by another that it was from three to five per cent ; three for short and five for long paper. The plaintiff offered to prove that there was no fixed rate of exchange between Mobile and New York ; that it varied from one to twenty per cent, according to the solvency, punctuality and risk of the parties ; that exchange was ever fluctuating, and was high or low, as the risk was great or small. The court refused to accept this testimony, and the plaintiff excepted. The plaintiff asked the court to instruct the jury that if they were satisfied that the excess over legal interest retained in this bill was taken and contracted for innocently by the parties, without intending to violate the laws against usury, they might find for the plaintiff. The court refused to give the instruction and the plaintiff excepted, Other 19 146 L-A.W OF USURY. instructions were asked by tlie plaintiff and refiised, which it is Txnnecessary to note, because not material to the question under consideration. Upon the whole case the court charged the jury that if they believed from the evidence that by the usages of trade between New Tork and Mobile there was an established rate of exchange between those places, the drawers and drawees of the bill of exchange here sued on had a right to contract for such rates of exchange ; and that even a higher rate to a small amount, if, under the circumstances, it did not appear to have been intended to evade the statute against usury, might be allowed by them ; but if they believed that no such usage existed, the parties had no right to contract for more than the actual expense of transporta- tion of specie from one place to the other, including interest, insu- rance, and such reasonable variations therefrom, as above stated; and further, if they believed from the evidence that the drawees of the bill of exchange contracted with the drawers in the State of New Tork, at the time the bill was drawn, for a greater rate of interest than seven per centum per annum for the forbearance of the payment of the sum of money specified in the bill, although it may have been taken in the name of exchange, the contract was usurious and they ought to find for the defendant ; otherwise for the plaintiff; to which charge the plaintifi" excepted. The jury found a verdict for the defendant, and the plaintiff brought error. The case was ably argued in the Supreme Court of the United States, and after due deliberation, the judgment of the Circuit Court was reversed, and it was held that, although the transaction, as exhibited, appeared, on the face of the account for which the bill was drawn, to be free from the taint of usury, yet if the ten per centum charged as exchange, or any part of it, was intended as a cover for usuri- ous interest, the form in, which it' was done, and the name under which it was taken, will not protect the bill from the consequences of usury ; and, if this fact was established, it must be dealt with in the same manner as if the usury had been expressly mentioned in the biU itself. But whether the charge of ten per centum for exchange between New York and Mobile was intended as a cover for usury, was a question exclusively for the jury. It was a ques- tion of intention; and, in order to enable the jury to decide whether usury was concealed under the name of exchange, evi- dence on both sides ought to have been admitted which tended tC TRANSACTIONS NOT USURIOUS. 147 show the usual rate of exchange between New York and Mobile when the bill was negotiated. But there was no rule of law fixing the rate which may be charged for exchange ; it did not depend on the cost of transporting specie from one place to another, although the price of exchange was no doubt influenced by it. Mr. Chief Justice Taney, who delivered the opinion of the court, said : " In fine, if the parties intended to allow no more than a fair rate of exchange, testing it by the market price of good bills of this description, it was not usury, and the plaintiff is entitled to recover ; if, on the contrary, more was intended to be taken, it was usury, and the plaintiff is not entitled to recover." And because the Circuit Court had excluded evidence offered by the plaintiff pertinent to this issue, and the case had not been sub- mitted to the jury in strict accordance with this view, the judg- ment of the Circuit Court was reversed {Andrews v. Pond, 13 Peters' P., 65, 80). The question has frequently been before the courts of the State of JSTew York, and the principle is there weU settled, that the including a premium in excess of interest in a contract, as the dif- ference in the rate of exchange between the place where the con- tract is entered into and the place of payment, does not render the transaction, ^er se, usurious. One of the earliest eases of this desgription arose in the old Supreme Court, wherein it appeared that the action was against the defendant as the indorser of a pro- missory note which was given for the balance of a previous note held by the plaintiff against one Petrie; which last mentioned note was given under the following circumstances : On the 12th of June, 1827, Petrie purchased of the plaintiff, at New York, where he carried on the business of a merchant, a bill of goods amounting to $308.77, for which he gave his note, payable in six months, 'including $10.82, the interest on the amount of the bill of goods. On the 12th March, 1828, the note remained unpaid, and the true amount due thereon at that date, including interest, was $325.18. Interest was then cast on that sum for sixty days, as the one-sixth of a year, and the amount thereof, together vsdth $3.03, the difference of excfumge between TJtica and Npw York (being one per cent upon the whole amount), added to $325.18, made the sum of $332.28. Petrie paid twenty-eight cents, and gave his note for $332, payable at Utica, for his accommodation, he residing at I^ittle Falls, in the vicinity of Utica. The defendant, 148 LAW OF USURY. who was an accommodation indorser, insisted that the note of $332 was void for usury ; first, on the ground that the interest included in it had been cast for sixty days, as the one-sixth of a yeair ; and, secondly, that it included one per cent, the difference of exchange, and that the note in question, having been given for the balance of the note of $332, was equally tainted with usury. No question was made on the trial but that one per cent was the true difference in the rate of exchange between Utica and New York. The defendant requested the circuit judge to charge the jury that the note was void for usury, which he refused to do, and charged that the plaintiff was entitled to recover. The jury found for the plaintiff the full amount of the note, and the defendant moved the Supreme Court for a new trial, which was denied. Savage, Ch. J., delivered the opinion of this court, and said : " There was no excess of interest included in the note of $332. The interest of $325.18, for sixty days, and three days of grace, which the plaintiff had a right to charge, amounted to $3.92, making the principal and interest $329.10, to which add one per cent, the rate of exchange agreed on, and the sum of $332.39 is given, from which deduct twenty-eight cents, the amount paid by Petrie, and the balance is $332.11, a sum exceeding the amount of the note, which, therefore, was not usurious as including a sum of interest greater than what is allowed by law. JSTor was the iaclu- ding the rate of exchange in the note, per se, evidence of usury. The payees resided in New York, the maker at Little Falls, and for his accommodation the payees agreed to accept the note pay- able at Utica, near the residence of the maker. For this accom- modation the maker agreed to pay, and such an agreement is valid and upon sufficient consideration. Such an agreement may be a shift to cover usury, but there is nothing to warrant such a con- clusion in this case " {Merritt v. Benton, 10 Wend. JR., 116, 117). It will be observed that two principles are laid down in this case ; (1) that casting interest on an amount for sixty days, as one-sixth of a year, or discounting a sixty days' promissory note, is not usury ; and (2) the including of a reasonable charge in a note as the difference in the rate of exchange between the place where the payee resides and the place of payment is not, per se, evidence pf usury. And this case has been uniformly recognized as autho pity since it was decided. A very interesting case, involving similar questions, was decided TRANSACTIONS NOT USUBIOUS. 149 by the Court of Appeals of the State of New York, -within the last few years, and the same may be referred to as a safe crite- rion by which such transactions may be tested. The action was tried in the Superior Court of the city of Buffalo, and was upon a promissory note for $2,500, made by one of the defendants and indorsed by the other, at Buffalo, payable in the city of New York in seventy-five days from its date. The note was discounted at , the plaintiff's bank in Buffalo for the benefit of the maker, the other defendant having indorsed for his accommodation. The defendantsj in their answer, set forth, and they offered to prove, on the trial, that when the note was discounted the exchange between the cities of New York and Buffalo was, and had been for a long time previous, one-half of one per cent in favor of the former place, and that both of the parties expected and believed it would continue so to be until the maturity of the obligation ; that both the maker and indorser resided at Buffalo ; that they had no funds or business in New- York ; that they had no expectation of funds there to meet the note when due, except as they should pro- vide the same at Buffalo for the particular purpose of pajang the ntote ; that those facts were known to the plaintiff's bank ; and, finally, that the transaction was entered into with the design and for the purpose, entertained by both parties,' of enabling the bank to realize, in addition to the legal rate of discoimt, the one-half per cent exchange on the sum of $2,500. The evidence offered was excluded by the court, and the defendants excepted. The jury found a verdict for the plaintiff, on which the court, at Gene- ral Term, ordered a judgment for the plaintiff, and it was entered accordingly. The defendants appealed to the Court of Appeals, where the judgment was afBrmed. Comstock, J., in his opinion, said : " The exchange between different countries is affected by the comparative weight and purity of the coin in each. It is also liable to sudden and considerable fluctuations in consequence of the revulsions in foreign trade and commerce ; and it is more or less influenced by political and other events, which can have little or no effect upon the course of trade and exchange between dif- ferent points within the sovereignty. The law-merchant, there- fore, in adjusting the rights and obligations of parties to foreign bills, takes notice of the prevailing rate of exchange, and allows it to be estimated as a part of the indemnity which is due for the non-performance of the contract. But the same causes do not 150 Ii^W OF VSUBT. operate upon the internal commerce of a State. The standards of currency are the same at all places within its boundaries ; inter- course and trade are uninterrupted, and a single jurisprudence pervades every part of it. It is true that slight irregularities in trade will occur, and that a small rate of exchange may arise, in the course of dealing, between different places. But these are facts unacknowledged in the system of commercial law. They suggest no principle, and they have never afforded the foundation for a legal conclusion. In the light of these principles, the ques- tion of usury involved in the present case is capable, I think, of a clear and satisfactory determination. The note in controversy was made and indorsed by residents of this State, and was payable within this State. It was strictly an inland or domestic obligation. If the note had been paid at maturity in the city of New York, and the rate of exchange had continued to be one-half of one per cent in favor of that place, the bank at Buffalo, which discounted and stiU owned it, would have realized an. advantage to that extent, because the fund in New Tork could have been sold at Buffalo, by a draft thereon, at a corresponding premium. Such would have been the practical result, if the maker of the note had paid it at the place specified when it became due. But there is nothing in the law of the contract which secured that result, because the rule of damages, in an action brought upon the dishonor of the note, allows no indemnity for the loss of exchange. * * * A pro- missory note may be given for money lent, or for goods purchased, payable at a place within the State to which the rate of exchange is favorable. In either case, the construction and effect of the instrument are the same. The measure of damages, and the legal extent of the obligation, are the face of the note and lawful inte- rest. In the one case no question of usury can arise, because there is no loan of money. In the other there is no usury, because, in judgment. of law, there is no agreement to pay more than the legal interest. * * * Upon the whole, we are of the opinion that the facts alleged in the answer had no tendency to establish the defense of usury, and, therefore, that the evidence was pro- perly excluded." Allen, J., who also delivered a wellrwritten opinion in the case, said : " The rate of exchange upon inland biUs is not fixed by law, as in the case of foreign bills. It depends upon the changes and fiuctuations of trade. Though probable, it is not absolutely certain, that the difference in favor of New York TRANSACTIONS NOT USDRIOUS. 151 would continue to be, as it then was, at one-half per cent. * * * It is ©f no consequence to say that making the note payable in New York imposed upon the defendants the additional burden and expense of transmitting funds there to meet the note at maturity. The place of payment is always as much a matter of agreement and regulation between the parties as the time. It is frequently a matter of accommodation to the maker to pay at a distant place, But suppose, in this case, it was not for the accommodation of the defendants, and they did not pay at maturity, what amount could have been reserved, or what amount is actually to be reserved, if the judgment is to be affirmed ? Simply the face of the note and interest ; and a tender of that sum before suit brought would have extinguished the note. * * * To constitute usury in this case, we are to assume that the rate of discount would be in favor of New York at the time the note became due ;, which, in our judg- ment, we cannot do" {Oliver Lee c& Oo.^s Bank v. Walbridge, 19 ]Sr. Y. B., 134, 137-139, 142, 144, 146). In a somewhat earlier case, decided by the same court, a similar question was involved as that in the case of the Oli/ver Lee & Go.^s BamJc V. WaJhridge, and the resiilt was the same. The action was upon a promissory note, which was given on the settlement and consolidation of several other notes against the defendants, held by the Delaware Bank, in Delhi, which the bank had discounted for the benefit of a firm by the name of Stewart & Frazier, who were doing business in the city of New York. Most of the notes, though not all, were made payable at the American Exchange Bank in the city of New York. The Delaware Bank gave drafts on its correspondents in the city for a portion of the avails of the notes at the time of making the discounts, and charged one-half of one per cent on such drafts, for the difference of exchange in favor of the city. The testimony was conflicting as to whether or not it was made a condition by the Delaware Bank to the discounting of the notes for Stewart that they were to be made payable at a city bank, and that Stewart should receive the avails in drafts of the Delaware Bank on some bank in the city, at one-half of one per cent premium thereon. The defendants insisted that the seve- ral notes which formed the consideration of the note in suit, and also that note, were, and each of them was, usurious and void. The court, at the circuit, decided otherwise, and directed a verdict in favor of the plaintiff, to which the defendants excepted. The 152 L-AW OF USURT. judgment was affirmed by the Supreme Court at General Term, and the defendants appealed to the Court of Appeals, by which court the said judgment was also affirmed ; the court holding that the transaction was not usurious. Denio, J., in his opinion, said : " At the time the paper in question was discounted by the Dela- ware Bant, the difference of exchange was against Delaware county. How it would be when the discounted paper should mature, the parties could not certainly know, though, from our knowledge of the course of trade, we may suppose that but little doubt could be entertained upon that point ; still, no one could legally know that the funds in New York would then be worth more than at Delhi. Again, suppose the discounted paper had been payable at Delhi ; in that case the law would be plain, that the payment of the proceeds in drafts chai'ging the premium would not be usury. * * * These considerations have led me to the conclusion that the transaction was not usurious on account of the payment of this premium of exchange. We do not intend to say what the law would be in a case where the lender should make it a condition of the loan that the borrower should make his paper payable in New York, and should, upon the discount of such paper, insist upon paying the proceeds in drafts, charging a premium of ' exchange. There is no evidence that such a condition was insisted upon in respect to this paper " {Marvme v. Hymers, 12 N. Y. JS., 223, 232, 233). All that this case really settles is, that where a country bank discounts a note payable in the city of New York, and, at , the request of the person for whose account it was dis- counted, pays him the proceeds in sight drafts upon its correspond- ents in New York, charging him therefor the current premium on exchange, the transaction is not usurious. This doctrine had been substantially held by the Supreme Court of the State some years before the case of Marvine v> Symers was decided ( Vide The Cayuga County Sank v. Hunt, 2 MilVs JS., 635 ; and vide Pwt- lamd Bamk v. Storer, 7 Mass. R., 433). And a similar doctrine was reiterated by the New York Court of Appeals at the very next term after the decision of the case of OUver Lee dh Co.'s Bank, v. Walbridge, in a case wherein it appeared that a bank in Buffalo discounted a note payable in the city of New York, and, in dis- counting it, sold to the parties getting the note discounted its drafts on New York for the amount, and received a premium, thereon of half per cent as exchange. The Superior Court of TRANSACTIONS NOT USURIOUS. 153 Buffalo held that the transaction was not usurious, and gave judg- ment in favor of the plaintiff for the amount of the note, and the defendants appealed to the Court of Appeals. The latter court declared that the question of usury, as presented by the case, had been disposed of by previous cases decided by the court, and, there- fore, affirmed the judgment of the court below ; and it was said that the court had had occasion before to consider the point, and had deliberately decided that it is not usnry, on discounting com- mercial paper, to take interest upon the full amount for which it was made, when it has not longer to run to maturity than is usual with paper discounted by bankers ; and that the exacting of a pre- mium of exchange on the drafts with which the proceeds of the discounted paper were paid was not usurioxis {International Bank •T. Bradley, 19 N'. Y. R., 245). And in a later case the same court laid down the general rule that usury cannot be predicated of the advantage obtained by the lender by means of the difference of exchange between the place of the loan and the place of the payment, when both places are within this State. It appeared that the plaintiff required, as a condition of the loan, that the note on which the action was brought should be made payable at Albany, where the maker had not and did not expect to have any funds, instead of Rochester, where he resided, and where the dis- counting bank was located, the motive for the requirement being to give the bank the difference of exchange, which exchange was then, and generally was, half of one per cent in favor of Albany ; . but the court held that the case of Olvoer Lee S Go.'s Bank v. Waliridge (19 If. Y. R., 134), was entirely decisive of the case then before them, and gave judgment accordingly {Eagle Bank of Rochester v. Rigney, 33 N. Y. R., 613 ; and vide Gvyler v. Samford, 13 Bwrl. R., 339). To the same import may be cited amother late case in the Supreme Court of the State of New York, in which Johnson, J., in giving the opinion of the court, said : " It seems to be well settled by several decisions in the Court of Appeals that the mere fact that a note has been discounted in the country, made payable in the city of New York, and a portion or the whole of the pro- ceeds paid tO' the borrower in a draft upon the city, at the usual price or charge for city drafts^ does not render such note usurious {Ma/rvine v. Mymers,. 12 W. Y. R., 225 ; Oliver Lee cfe Co.h Bank v. Waibridge, 19 «J. , 134; International Bcmk v. Bradley, 20 154 J^/Aw OF vsusr. Ih., 245). Perhaps it migit be held to be so, if both the place of payment of the note and the purchase of the draft were made thet condition of the loan. But nothing of that kind appears here, even conceding that the note was not in fact discounted until the borrower had received the avails. For aught that appears in the finding of facts', the borrower desired the drafts for his own con- venience. If the fact was otherwise, it was for the defendant alleging usury to prove it, and have the fact inserted in the find- ing of facts " ( Union JBamk of JSochester v. Oregory, 46 Ba/rb. B., 98, 102). And in the old Supreme Court of the State of New York, in an action by a country bank against the indorser of a bill of exchange, mentioning no place of payment, it appeared that the bill was discounted by the plaintiffs for the acceptors ; that the drawer, indorser and acceptors resided . in New York ; that the business was conducted by the plaintiff's through their cashier while in that city ; that the avails of the bill were paid in drafts on New York, equal in value to city funds ; and that the amount thus paid was the face of the biU, deducting the difference of exchange between country and city funds, in addition to the usual discount; the same doctrine was laid down as in the foregoing cases, and it was held that the bill in suit was not usurious. Cowen, J., in his opinion, says : " Thus the transaction involves, when we come to analyze it, two distinct bargains. It is, in effect, first, a loan by the agent and a delivery to the borrowers of bills upon the agent's own bank, corresponding in nominal amount with that of the pro- posed loan. Upon this, secondly, the borrowers buy the draft of the bank upon funds more contiguous to themselves, of a less nomi- nal amount, but really equal in value to the bank bills which they have obtained. This would indeed be usurious if the bank made a profit by the transaction beyond the lawful discount. But we know that, in general, country banks dealing in this way do not. In the thing, per se, we can discover no profit any more than in a like sale of exchange in London at the usual rate " {Cayuga Covmby Bank v. Swrvt, 2 HiWs R., 635, 640). A principle, similar to the one governing the foregoing cases, was laid down by the New York Court of Appeals in a recent case, wherein it was held that a contract or loan was- not rendered usurious by a separate and distinct undertaking between the parties that the lender is to receive the deposits of the borrower and to keep them -safely, and pay them over on demand on condi- TRANSACTIONS NOT USURIOUS. 155 tioa that the notes discounted shall be paid in the city of ISew York, by means of which an exchange of one-half of one per cent is , realized ito the lender on the amounts of the paper discounted ; and it was declared, that when the relation of the party as a bor- rower is distinct from his relation as a depositor, the two relations will not be confounded with each other to establish the existence of usury {Brady v. £er)jamin, 33 ISF. Y. B., 61 ; (md vide Utica Inswrance Co. v. Cadwell, 3 Wend. R., 296). And in the State of "Wisconsin the Supreme Court has recently held that it is not usurious for a bank to charge the current rate of exchange in addi- tion to the legal interest on making a loan ; and a loan made upon such condition was upheld {Genl/ral Bcmk v. St. John, 17 Wis. B., 157). And it may be added, although the statement may be regarded as unnecessary, that the taking of interest in advance, upon the discount of a note in the usual course of business by a banker, is not usury. This has long been settled, and is not now open for controversy. The question came before the Supreme Court of the United States fifty years ago, when the doctrine was plainly estab- lished. Mr. Justice Story, in delivering the opinion of the court, said : " The next point arising on the record is, whether the dis coimt taken in this case was usurious. It is not pretended that interest was deducted for a greater length of time than the note had to run, or for more than at the rate of six per cent per annum on the sum due by the note. The sole objection is, the deduction of the intei'est from the amount of the note at the time it was dis- counted ; and this, it is said, gives the bank at the rate of more than six per cent upon the sum actually carried to the credit of the Planters' Bank. If a transaction of this sort is to be deemed usurious, the same principle must apply with equal force to bank discounts generally, for the practice is believed to be universal ; and probably few, if any charters, contain an express provision, authorteihg, in terms, the deduction of the interest in advance upon making loans or discounts. It has always been supposed that an authority to discount or make discounts did, from the very force of the terms, necessarily include an authority to take interest in advance. And this is not only the settled opinion among professional and commercial men, but stands approved by the soundest principles of legal construction. Indeed, we do not know in what other sense the word discount is to be inter 156 X-AW OF V8UBT. preted. Even in England, where no statute authorizes bankers to make discount, it has been solemnly adjudged that the taking of interest in advance, by bankers upon loans, in the ordinary course of business, is not VL&\mx)yx&"{Flechnor v. The Bamk erf the United States, 8 Wheai. H., 457). The same question came before this same court a few years later and was decided the sanie way, and the doctrine declared to be settled {Thornton v. The Bamk of Washdngton, 3 Peters^ B., 36). And the State courts have also held that, to take out interest in advance, or discounting a note without regard to the rules of rebate or discount, is not usurious, and, farther, in this respect there is no distinction between bankers and others. That is to say, it is held that discounting a note at the legal rate of interest and taking the interest in advance is not usury, either in bankers or others ; and this is now the weH recog- nized rule ( Vide TJte New York Firemen^s Insurance Oo. v. Slm/rges, 2 Cow. B., 664; The TMea Insuroffice Oo. v. Bhodgood, 4 Wend. B., 652 : Bank of Utica v. Wager, 2 6ow. B., 712 ; Hawks V. Weamer, 46 B^i/rb. B., 164; Stribilmvg v. Bamk, 5 Bam>- doVpKs B., 132 ; Maine Bamk v. Butts, 9 Mass. B.,4k^, 57 ; Agri- cvXlmral Bcmk v. Bissell, 12 Pick. B., 586). OHAPTEE XIII. TEASrSACTIONS NOT TTSUEIOtrS BONUS TO AGENTS FOE NEGOTIATING LOAN. A DEVICE sometimes resorted to by the lender of money to realize more than the legal rate of interest for the use of his money is, to employ an agent to loan his money, with the under- standing that he shall charge the borrower a boniis, nominally for his own benefit, but really to enable him to get a share of the bonus received ; and whenever the transaction is, in point ol fact, of this character, it is declared to be usurious. But if the agent in good faith make a loan for another, and exacts a bonus, besides the legal interest, for his own benefit, without the authority or knowledge of the principal, the loan is not thereby rendered usurious. Many cases are reported in the books in which this doctrine is recognized, both in this country and in England, some of which will be referred to. TRANSACTIONS NOT USURIOUS. 157 In an early case in the EngKsh King's Beneli, the question wa& clearly 'presented and decided. The action was brought by the indorsee of a bill of exchange against the acceptors, and the defense set up at the trial before Lord Ellenborough, C. J., at Guildhall, was, that the bill was drawn for a usurious considera- tion, and was therefore void. It appeared that the defendants, wanting to raise money, applied to one Eimmer, a broker, to assist them in negotiating their paper, for which he stipulated to receive ten shillings, instead of the usual charge of five shillings per cent for brokerage ; and several successive bill transactions had passed between them, which the defendants who accepted these bills had provided for, as each had become due, by negotiating another for the amount of the former bill, with the addition of the legal dis- count and the brokerage agreed on, which latter Eimmer received and deducted out of the money raised on each successive bill. Lord Ellenborough, C. J., directed the jury that there was no actual loan of money here for a usurious consideration, by the party advancing the money on the bill ; and that the taking of exorbitant brokerage by Eimmer for getting the bill discounted by ■others, and which was deducted by him out of the money raised, would not avoid the security (by the statute 12 Anne, oh. 16) in the hand of an innocent indorsee ; and the jury thereupon found a verdict for the plaintiff. The attorney-general moved for a new trial, on the gromid that the words of the statute were broad enough, in that branch of it which avoids the security, to include this transaction ; but the rule was refused. Lord Ellenborough, C. J., in his opinion, said : " It does not appear that Eimmer's name was upon the bill at all ; nor was he to advance the money. It does not, therefore, strike me as a security given for a usurious consideration ; but Eimmer was to receive an exorbitant broker- age for his trouble in getting the bill discounted." Le Blanc, J., said : " If Eimmer had agreed to advance the money for which the bill was given, that would have been a different matter, but here he advanced nothing ; and the person who did advance the money, for the bill received no more than legal interest for dis- count. Eimmer, indeed, got more out of the money when obtained ; but that may be said to be for exorbitant commission or brokerage" {Dagndl v. Wigley, 11 East's R., 43). In a later case, before the same court, where a broker carried bills to be discounted, and allowed to the person discounting 158 I^'A.W OF USURY. interest • at , the rate of £5 per cent per annum, and in addi- tion, £1 per cent on the amount of the bills toward the pay- ment of a debt due from a third person, but which the broker thought himself bound in honor to pay, and the broker accounted to his principals for the whole amount of the bills, services, lawful discount and commission; the court held that the transaction was not usurious. Lord Tenterdon, 0. J., gave the opinion of the court and said : " The question in this case was, whether the bills on which the plaintiffs had commenced their action against the defendants as acceptors were tainted with usury. They had been discounted through the intervention of a broker of the name of Bramley, who before the discounting of the bills ha4 represented to Akedo, the bankrupt, by whoia they were dis- counted, that in consequence of his having recommended to the bankrupt, one "Wagstaffe, for whom Alzedo had discounted bills, but who failed, so that Alzedo had incurred great loss, he, Bramley, felt himself under an honorary, though not under a legal obligation to make good that loss. The mode which he pro- . posed in order, to affect this object was, that as he could not pay the whole at once (for he otherwise would have done so), he (Alzedo) should go on discounting for him, and should deduct from the sums to be paid to him (Bramley) on such discount £1 per cent; but, nevertheless, Bramley was not to deduct that £1 per cent from the persons who employed him, but to account to them for the full amount, deducting only ordinary interest. I left to the jury the question, whether they were of opinion that Bramley thought himself under an honorary obliga- tion, intimating to them as my opinion, that in case they thought Bramley acted under an idea, honestly formed in his own mind, that he was under an honorary obligation to pay the money, I was inclined to think that, in point of law, it was not a usurious con- tract. I still incliae to think that if Bramley did feel himself under an honorary obligation, the contract was not usurious ; and I believe some of my learned brothers are of the same opinion, though one of them differs from me. We are all, however„agreed that, notwithstanding I did intimate to the jury my opinion upon the subject, yet as I left it to them to exercise their own discre- tion, and to show their own conclusion from the evidence, we ought not to disturb their verdict, and that more especially as this is a case in which, if the usury be established, the penal con- TRANSACTIONS NOT USURIOUS. 159 sequences are heavy. The rule for a new trial must, therefore, be discharged " {Salarte v. MeMlle, Y Ba^n. dh Ores. R., 427 ; S. C, 14 Eng. G. L. H., 73). And of a similar import was a decision of the English Court of Chancery. An agent, authorized to settle a debt due the estate, took a note to the administrator for the principal sum due, and one to himself for usurious interest. The court held the first note was not void, unless the administrator knew of the usury and assented to it {Booster v. Buck, 10 Ves. E., 548). The American cases are quite as, if not even more, decisive upon the poiat. In an early case before the old Supreme Court ■ of the State of ITew York, the court adopted the doctrine of the English cases on the subject. The case came up on error from, the Common Pleas of New York. The action below was assump- sit by plaintifis as indorsees against one Coster, payee and indorser of a promissory note made by one Murgatroyd for $240, dated October 22d, 1825. The defense was usury ; and it appeared on the trial that the note was a renewal of one made for the accommo- dation of Murgatroyd, to secure the money which one Johnson, at the request of Murgatroyd, procured of one "Wendell at lawful interest ; but Murgatroyd agreed to pay Johnson three per cent a month, which had been done, and he put the three per cent into his own pocket. The question of fact at the trial was whether Johnson was employed by Murgatroyd as his agent, or was a principal pro- curing the money* on his own account and lending it to Murga- troyd. The jury rendered a verdict for the plaintiffs, and the defendant brought error on exceptions to the charge of the court referring the question to the jury. Curia, per Savage, Ch. J. : " The proper question was put to the jury, whose verdict cannot be reviewed here as to the weight of evidence. They have neg- atived the fact sent up by the defendant below, that Johnson was a principal, which leaves the case much like that of Dagnell v. Wigley (11 East., 43). In that case, a bUl of exchange, procured like the note now in question, was held not to be usurious, upon the ground that the person advancing the money received no more than legal interest ; the person receiving more, a broker, being the drawer's own agent. Judgment affirmed" {Coster v. Dilworih, 8 Cow. E,, 299, 301). And in a later case, before the same court, it was held that a note reserving interest, negotiated by a broker or agent, who obtains the money on the same for the ntaker from a 160 i-^T^ OF USUBT. third person, is not usurious in the hands of the holder, although the agent be the payee of the note and receives twelve and ^ half per cent for the negotiation, no part of such sum being paid or agreed ' to be paid to the person advancing the money. Savage, 0. J., gave the opinion of the court and said : " By the testimony of Corp it appears that he was the mere agent or broker of the defend- ant ; that he was not, in fact, a party to the loan, and that what is complained of as usury was a gratuity. There was no corrupt agreement between the plaintiff and the defendant. In- the lan- guage of Le Blanc, ia 3agwaU v. Wigley (11 East., 45), if Corp had agreed to advance the money, that would have been a different matter. But he has advanced nothing, and the person who did advance the money received no more than legal interest. Corp swears that the notes on which the money was received were discounted on the responsibility of the indorsers, and that he acted throughout as the agent for the defendant." The^ case showed that the question was submitted to the jury at the circuit, and the judge charged the jury that the verdict should be for the plaintiff if they believed the testimony of Corp. The jury found for the plaintiff, and a motion was made to set aside the verdict, which the court denied {Barretto v. &nowden,, 6'Wend. JR., 181, 186, 187). In aU of these eases the person taking the bonus for making the loan was held to be the agent of the borrower, and it did not appear that the lender was privy to the arrangement between the borrower and his agent, under which the amount was received. The next case in the State of New York involving the question, which it is important to notice, was originally decided by the present Supreme Court of the State, wherein it was held that an agreement, made by a borrower with the agent of the lender, that the agent shall have a commission for making the loan, does not. I'snder the transaction usurious and the security void if made without the knowledge of the lender, and it is in no respect foi- his benefit or advantage. It was declared that in such a case the agreement will be held to be that of the agent of the borrower only, or the private extortion of the agent, and that he alone is answerable for the wrong, The loan was negotiated by the agent of the borrower with the agent of the lender. The amount of the loan was $400, and for the service the borrower paid his ow-n agent $15, and the agent of the lender $25, and TBANSACTWNS NOT USURIOUS. 161 no charge was made by tlie lender's agent to his principal foi negotiating the loan. The action was originally tried at Spe- cial Term, where judgment was given for the defendants on the ground of usury, and the plaintiff appealed to the General Term, at which a new trial was granted. Johnson, J., who delivered the opinion of the court, said : " Upon the facts found by the judge at Special Term, was this transaction usurious, per se ? It was held to be so by the learned justice before whom the cause was tried, although the feet is distinctly found that the plaintiff had no knowledge of the charge of twenty-five dollars by his agent, and never received any portion of it. As the plaintiff never knew of the charge, and it was not made for his benefit but for the exclusive benefit of his agent, he cannot be held to have sanctioned it by bringing the- action, to collect the note. The deci- sion at Special Term goes farther, I think, thaA any court has yet gone in this direction. At least, I have been able to find no reported case which goes this length, and' upon principle I do not see how it can be sustained. * * * An agreement between the' lender and his agent, that the latter may exact a commission from borrowers may, 1 have no: doubt, be proved, and where the fact is established the inference may be- drawn that the lender authorized or sanctioned the exaction in any given case ; and, per- haps, this agreement may be inferred from the course of dealing between the principal and. agent. « * * I have no doubt that the agent of the lender, whether the principal agree to it or not, may lawfully take compensation of the borrower for any services actually rendered, for the latter at his request. If the amount exacted is fer beyond a fair compensation for other services, and it is shown to have been within the knowledge of the lender and part of the agreement to make the loan, a question of fact would arise for the jury whether the compensation exacted was not a mere cover for usury. Usury is a question of fact and ofintent. In the present, case there can be no pretense that the agent ren- dered any services to the borrower, or was acting in any sense as the borrower's agent. * * * All the plaintiff's agent' did was to receive, the note and give his check for the $400, the amount of the note. It will be seen, therefore, that he acted wholly for the plaintiff. The borrower drew the money and paid the twenty-five dollars afterward to the plaintiff's agent, in pursuance of the agreement between them. And the case turns wholly upon the 21 ■ 162 i^w^ OF vsusr. question whether this part of the agreement, for the commission or compensation to the agent, was the agreement of the plaintiff. It seems clear to my mind that, inasmuch as the plaintiff never authorized or sanctioned it, nor even heard of it, and derived no benefit or advantage whatever from it, it cannot be regarded as his agreement. Courts ought and wiU look with jealous scrutiny upon all such practices by the agents of lenders, and see that the statute is not violated and its provisions evaded under the cover of an agency. But they should be equally careful to protect the honest and innocent lender from the secret and exorbitant exactions of grasping agents, and the secret and unauthorized agreements between such agent and the borrower. My conclusions are that the note is a valid note and never imbibed any taint of usury, and that the action is well brought. The judgment of the Special Term must, therefore, be reversed and a new trial ordered, with costs to abide the event." "Wells, J., dissented, but Selden, J., concurred, and a new trial was denied {Gondii v. £ald- . win, 21 Barb. R., 181, 190). The ground was taken by the defendants' counsel in this case that the act of the agent was the act of the principal, and, hence, that the contract of the agent of thie lender to make the loan was binding upon his principal, the plaintiff, and that it was his contract. The counsel cited works and authorities on agency to prove his posi- tion ; but the court held that inasmuch as the agent of the bor- rower and the agent of the lender had made the agreement in respect to the commission, without the lender's knowledge, and in no respect for his benefit or advantage, it must be considered the agreement of the agent and the borrower only, or the private extortion of the agent, and that he alone,, if any one, should be held responsible for the wrong. It was also contended that although the act of the agent in taking the bonus was not authorized by the principal, that is, the lender, yet that she had ratified the ille- gal act by receiving the security and bringing her action upon it, thus claiming all the benefits resulting from the transaction ; but the court do not seem to have considered it necessary to take into accoimt that view of the case. An appeal was taken from the judgment to the Court of Appeals, and the judgment of the Supreme Court was affirmed ; the Court of Appeals laying down the rule that, where an agent, intrusted with money to invest at legal interest, exacts a bonus for himself as the condition of mpki^g TRANSACTIONS NOT USURIOUS. 163 a loan, without the knowledge or authority of his principal, the act of the agent does not constitute usury in the principal, nor affect the security in his hands. Davies, J., in the prevailing opinion of the court, said : " In the present case it is not alleged or pretended that the plaintiff has personally taken or received any illegal inte- rest on the loan made to the defendants, or that she had any know- ledge, until the trial of this cause, of the secret arrangement made by Mills, the agent of Baldwin, the borrower, with "Williams, her attorney and agent, whereby the latter received a douceur for his private and exclusive benefit. The plaintiff, a non-resident jof the State, sends her money here to invest, according to the laws of this State. All the authority given to Williams, as her agent and attor- ney, to transact the business of his prihcipal, must, in the absence of any counter proof, be construed to transact it according to the laws of the place where it was to be exercised. The law will never • presume that parties intend to violate its precepts. * * * The rule that when an agent commits a wrong in the transaction of the business of Jiis principal, the principal is liable for the injury pro- duced by such wrong, has no application to the present case. The rule cannot apply where the agent, when committing the wrong, is bargaining on his own account, for his own private advantage exclusively, and this is known to the person with whom he is bar- gaiaing. It could only apply where the person dealt with is deceived or wronged, which in no sense is the present case. * * • * But it is urged with great earnestness and ability that the plaintiff, by ■ accepting the note and commencing this suit upon it, has ratified all the acts of her agent connected with the loan and attendant upon its inception. We have carefully looked at all the anthori- ties cited by the learned counsel for the defendants, and we think they fail to sustain the proposition contended for. The plaintiff, by receiving and accepting the note for the amount of her money, and which she loaned through her agent, only ratified the contract of loan at the rate of interest expressed in the note. She had no knowledge of, and cannot be held to have ratified, the payment by Baldwin's agent to Williams of the twenty-five dollars usuriously by him taken, as is said. We think the cases fully sustain this view of the plaintiff's act, in receiving the note and commencing suit thereon." Comstock, Oh. J., dissented, and in a very able opinion contended that the loan was made in pursuance of a single contract, and that this contraet enabraced the whole transaction ; that there 164 LAW OF VSUBT. was but one original agreement, which included the whole subject ; and this being the case, it was insisted that more than lawful inte- rest was included in the loan. The chief judge further contended that the plaintifE could not be permitted to divide the contract into two parts, and adopt one part, while she rejected the other. This position was predicated upon the well-known elementary principle recognized by the authorities and laid down by Mr. Justice Story, that " the principal cannot, of his own mere authority, ratify a transaction in part and repudiate it as to the rest. He must either adopt the whole or none. And hence the. general rule is declared . that when a ratification is established as to a part, it operates as a confirmation of the wholeof that particular transaction of the agent" {Story on Agency, § 250). Applied to the case in hand, the result of this rule was thought to be that the plaintifij if she insisted upon the contract at all, must take it " with all its vices and infirmities." Denio and Welles, JJ., concurred in the opinion of Chief Judge Comstock, while Selden, Gierke, Wright and Bacon, JJ., concurred in the opinion of Judge Davies ; and the judgment of the Supreme Court was therefore affirmed {Gondii v. Baldwim,, 21 N. Y. E., 219, 221, 223, 225, 229, 231). , Soon after the decision of Gondii v. Baldwin by the Com-t of Appeals, a case came before the Supreme Court, in which it appeared that a broker loaned $2,000 belonging to his principal for thirty days, charging the borrower thereof a commission of seventy-five dollars, which was paid. A note was given for the $2,000 loaned, and when it became due another arrangement was made with the broker, under which the loan was continued for the space of thirty days longer and the broker received another extra sum of eighty dol- lars, and a new note was given to the broker to secure the originai loan of $2,000. This last note not being paid, the lender brqughi- suit, and the defense of usury was interposed. The case was properlv submitted to a jury at the circuit, and a verdict was found for the defendants. The plaintifE thereupon appealed to the General Term, where the verdict was set aside as being against evidence, and a new trial ordered. Ingraham, J., in delivering the opinion of the court, said : " The defense set up by the defendants in this case to the note pn which the action was brought was usury. That usury was alleged to be the payment of more than seven per cent to one Hardenburgh for originally obtaining the loan, and at subsequent times for renewal of it. Whether such payment was usurious or TRANSACTIONS NOT USURIOUS. 165 not depended on the character in which Hardenburgh was acting. If the original loan was for money, then the taking of more than seven per cent interest would affect the security with usury, and make it void in the hands of any subsequent successive holders. But if he was acting as a broker, and this commission was charged by himself, without the knowledge or participation of the lender, then it would not be a usurious transaction. This has been held by the Court of Appeals in Gondii v. Baldwin, at a recent term. The testimony of Hardenburgh is positive on this point ; and if it is to be credited, then it is very clear that he was only an agent, and what he received in no way passed to the lender, Hayward, nor was it to be considered as constituting usurious interest. On the contrary, it was merely a commission to the broker for his ser- vices, paid without the knowledge of the lender, and paid with the knowledge that Hayward was to loan the money, and not Harden- burgh " {North V. Sergecmt, 33 Bm-l. B., 350, 352, 353 ; and vide FeElo'ws V. CoTwndssioners, etc., of Oneida, 36 ib., 655). The ease of Gondii v. Bald/win has been fully recognized as authority by the ITew York Court of Appeals in a subsequent case, although an effort was made to induce the court to reverse its deci- sion in the former case. The action was brought by a Mrs. Earle, the payee of a promissory note given upon the loan of her money by her agent, one Glover. The defense was usury, and it appeared on the trial that application was made to the plaintiff's agent, on behalf of the defendant, to borrow Mrs. Earle's money on a note bearing interest, and it was agreed in substance between Glover and the party actibg for the defendant that, as a condition of mak- ing the loan on the note, the defendant should pay Glover fifty dollars. Accordingly, Glover went to Mrs. Earle's rooms, and there received from her $1,000 in gold, and brought it to the defendant and handed the same to him. The defendant and others counted the money, and afterward separated fifty dollars from the packages, and handed it to one Vedder. The note was delivered to Glover, and by him taken to Mrs. Earle. Vedder subsequently handed the fifty dollars to Glover. Mrs. Earle testified that she knew nothing of the arrangement by -which the fifty dollars were to be paid, or that such sum was paid to any one, and that she never heard of the fifty dollars transaction until after the suit was brought. The judge at the circuit charged the jury, among other things, that if they found that Glover was the general agent of the plain- 166 I'-^W OF USURY. tiff, and claimed and took the fifty dollars for the plaintiff as her agent, and for the purpose of obtaining more interest than at and after the rate of seven per cent, although the plaintiff was ignorant of the fact, and did not specially authorize it, yet she was barred by the acts of Glover, as her agent, and the defendants were in that case entitled to a verdict. To this part of the charge the plaintiff excepted. The court further charged that the principal is- bound by the acts of the agent in the loaning of money at a usurious rate of interest, although the same be done without the knowledge or consent of the principal. To this the plaintiff also excepted. The plaintiff's counsel asked the court to charge that if Glover took or received the fifty dollars without the knowledge or consent of the plaintiff, it was not usury, and the plaintiff would be entitled to recover on the note in suit ; but the court declined so to charge, to which the plaintiff's counsel excepted. The counsel for the plaintiff further requested the court to charge that, under the evi- dence, the plaintiff was entitled to a verdict ; the court refused thus to charge, and the plaintiff's counsel excepted. The jury found a verdict for the defendants. A motion was thereupon made on the judge's minutes at the same circuit for a new trial, and the court granted the motion. On an appeal, founded on case and exceptions, from the order granting the new trial, the order was reversed by the General Term; whereupon the plaintiff appealed from the judgment entered on the verdict, on the same case and exceptions, and the judgment was affirmed, and the plaintiff then appealed to the Court of Appeals, where the judgment was reversed and a new trial granted. It appears, however, from a note by the reporter, that a majority of the court were against reversal, if the principal point had been open to consideration as an original question, and two members of the court yielded to the authority of the decision in Gondii v. Baldwin only on the principle of st(we decisis. Only two opinions were delivered in the ease, and both of them were by judges who dissented from the judgment. Davis, J., in his opinion, said ; " The court below, in reversing the order for a new trial made by the judge at circuit, distinguished this ease from Gondii v, Baldwin (21 iT. Y. R., 219), and held that neither the charge as given, nor the request to charge, raised the point involved in that case. The conviction of the learned justice by whom the opinion of the court below was pronounced, that ' the doctrine of Gondii v. Baldwin is somewhat novel and difficult to sustain, and TRANSACTIONS NOT USUBIOUS. 167 for that reason should not be applied to cases not clearly falling ■within it,' led him, it is apprehended, to seek for a distinction where no real difference exists. * * * A careful examination of this question brings me to the conviction that, so far as relates to the question presented by the request to charge, this case is not justly distinguishable from ConMt v. Baldwovn ; and, if that case be con- clusive evidence of the law, the judgment in this should be reversed and a new trial granted. But I am not without hope that this court is prepared to revoke its decision in Gondii v. Baldwm. The error of that case has not become so inveterate that to adhere to it is better than to return to sound principles. The circumstances of the times, since its promulgation, owing to the inflation and character of the currency, have been such, that the usurer's ' occu- pation's gone.' It has wrought, therefore, little if any of the evil that ordiaarily would attend a practical amendment of the statute against usury. To retract the decision now, wiU be in time to guard to some extent against the ills of a future revulsion, in which avarice may prey upon necessity through the wide breach that case has opened in the law of usury. After the clear and forcible dissenting opinion of Comstock, Ch. J., in Gondii v. JBaldwIn, it borders on arrogance in me to assume to discuss the question. The few suggestions made can hardly escape the censure of being unnecessary repetitions. * * * A vital error of Gondii v. Baldwin lies in assuming that the agent can make this contract so that the bonus will belong to him, and not inure to the benefit of his principal. But that is an impossibility both at law and in equity. To hold the contrary, is • to assert that an agent, by violating his duty, can secure gains to himself greater than its performance could give him. It is a principle too well settled to be shaken, that an agent cannot so deal with the sub- ject-matter of his agency, whether within or without the scope of his authority, that the profit therefrom shall inure to himself. * * * To hold that a party employed to loan money for another may make it the condition of a loan that the borr#wer shall pay to him a sum of money in which his employer shall have no interest, is to subvert the fundamental principles upon which the doctrines of principal and agent, trustee and cestui que t/rust, rest. It would even overthow aU agencies, if the courts were to settle that an agent could, by departing from his authority, stipu' late for and hold advantages for himself. The personal gain of 168 XiAW OF USWBT. the agent would become the primary motive of his conduct, and thus thwart the policy of the law, which has ever been to pre- serve his truth and faith toward his employer by denying him all possibility of advantage, by fraud or treachery or departure from the plain line of his duty. * * * But it is argued there can be no violation of the statute against usury without an intent to violate it ; and that the intent in tliis case pertains solely to the agent, and in no sense aflfects the principal, because of her total ignorance of the illegal conditions of the contract. This position is undoubtedly sound, so fai-'as the (Question of intent affects the plaintiff crimimaliter. She could not be prosecuted criminally until she had knowingly ratified the transaction by receiving the stipidated usurious provisions. Until then the crime is the agent's alone. But in considering this question of intent we must not confound the personal intent, which is the essential ingredient of crime, with the legal intent which the law deduces from the acts of the parties independently of any guilty motive on their part. * * * The agent who effected the loan cannot be chargeable with usury unless he made a usurious loan ; and if he made such a one, then the evidences of it are void by statute, into whose hands soever they may come. It may be said the principai makes the loan, and the agent takes the usury ; but the usurious premium is the consideration of the making of the loan, no matter who makes it ; and as that fact cannot be expurgated by any argument, the taint of usury affects the loan, or there is no usury. It would have been better to have boldly said the transaction is not within the statute of usury at all, but mere extortion, than to uphold the loan as not void for usury, and condemn the bonus as evidence of crime under the statute against the agent. * * * If her agent had exceeded his authority in making the contract, the law gave her an election of remedies : to repudiate the contract and pur- sue her money into the hands of the party who had received it ; to prosecute her agent for a violation of duty, and recover such damages as she had sustained by his misconduct ; or to insist upon the contract he had made, taking it as in fact made, and of course, in that proceeding, estopping herself from raising the question of his authorily. Until Gondii v. Baldwin, I think there was no ease, entitled to be regarded as authoritative, that held she had any further rights." Brown, J., in his opinion, said : " I find myself unable to extract any general principle from the case of Gondii v. TRANSACTIONS NOT USURIOUS. 169 Baldwin (21 N'. Y., 219), which will aid us in afpplying the statute of usury to contracts for the loan of money. We cannot with safety accept it as an adjudication, that usurious contracts made by an agent for his principal, and without special authority in regard to the rate of intelrest, are free from the consequences denounced by the statute, and may be enforced, in the courts at the suit of the principal. The consequences of fiuch a rule would be to deprive the statute of any real vitality and living power, and reduce it to a mere hrwt'Mrb ful/men. There are no legal analogies to sustain it, foT where the contract sought to be enforced is that made by the agent, it is neither good nor bad, legal nor illegal. If the agent had power to make it, and it transgresses no rule of law, it is legal, and may be enforced ; but if he had no power from his principal to make such a contract, and especially if it be tainted with an element forbidden by law, the principal is not bound to accept it, and it cannot be enforced as an obligation against him, if in terms it creates an obligation, nor can he be affected or prejudiced by the consequences resulting therefrom. This is the most that can be said. He may repudiate and reject it as soon as its illegality comes to his knowledge ; he may treat it as a nullity, and occupy the same position he would have been in had it never been made, and seek bis reifiedy, for what he has lost or been deprived of, in some other form or against some other person. He cannot, however, accept a part of it and reject another part. It is entire and incapable of separation. * * * No one would doubt, I think, that if the agent himself was the party to the contract, in the place of the principal, that it would plainly be usurious. It does not cease to be so because the prin- cipal is the party and not the agent. It remains the same identi- cal contract in all its essential particulars, and usury is of its essence whichever may be the contracting party." It appears from the report of the case that all the judges, except Brown, J., concurred in the opinion that it was not distinguishable from Gondii v. Baldwin ; and that the judge at the circuit erred in not charging the jury as requested. Denio, Ch. J., and Porter, J., expressed their concurrence in the views of Davis, J., but acquiesced in a reversal on the authority of Gondii v. Baldwin, on the. principle of sia/re decisis. Porter, J., concurred with Davis, J., both in his views and conclusions {Bell v. Day 32 W. T. R., 165, 168, 170-1T4, 1T8, 1Y9, 182-185 ; smd vide Elmers 22 170 LAW OF USURY. Oakley, 3 Lans. B., 416). The questions discussed in the cases of Gondii v. Baldrnvn and Bdl v. Day are exceedingly, inter- esting and important, and enough has been extracted from the opinions delivered, both prevailing and dissenting, to present fairly the views of the members of the court. Of course, the questions' decided may be regarded as settled in the State of New Tork ; but from the strength of the dissenting members, and the able and well fortified opinions delivered in opposition to the conclu- sions arrived at in the cases, it is doubtful whether they will be readily acquiesced in by the courts of other States. Something akin to the doctrine of the last cases considered was enunciated in an early case in the State of Vermont. An agent who was authorized to settle a debt due to an estate took a note from the debtor to the administrator for the sum due, and another for a further sum to himself payable at a future day. The former note not being paid when due, the administratrix sued it, and the maker set up usury, but the court overruled the defense. The court said : " Inasmuch as there was a hona fide indebtedness to the estate of which plaintiff was administratrix, and the note received by plaintiff was only for the just amount due, the note in suit would not be void if Petrus Baxter (the agent), without her consent, received a note for himself for any further sum " {Ban- ter V. Buck, 10 Yt. R., 548). The principle of this case would seem to uphold the validity of a note to the principal, given under the same circumstances as in the cases of Gondii v. Baldwin and Bell V. Day / and although the case has never been directly over- ruled, yet in a much later case before the same court the same principle was involved, and the transaction was held to be usurious ( Yide Austin v. H&rrmgion, 28 Yi. R., 130). Nevertheless, the doctrine is well settled, and universally recognized, that an agent may lawfully take a reasonable commission or bonus from the borrower for his expenses and services in effecting a loan ; and whenever the lender is not privy to the arrangement between the borrower and agent, or in no way participates in the commission or bonus, the transaction will be regarded as free from the taint of usury. ' The Court of Errors and Appeals of the State of New Jersey have recently laid down the rule, in accordance with that recog- nized in the State of New Tork and elsewhere, that if an agent, in making a loan of money, accepts from the borrower a bonus TRANSACTIONS NOT USURIOUS. 171 beyond the legal rate of interest, such act of the agent will not render the contract usurious, if the bonus was taken without the knowledge of the principal, and was not received by him. An action was brought in the Court of Chancery for the fore- closure and sale of certain mortgaged premises to pay the balance claimed to be due on a bond and mortgage. The defendant set up as a defense that the transaction was usurious. It appeared that the bond and mortgage were given for a lc?.n of $5,000, made by the agent of the lender, and it was claimed that the loan was made by the said agent on condition that the lender should pay him a bonus of $100, which was paid at or about the time of the delivery of the bond and mortgage. The chancellor overruled the defense and ordered a decree in favor of the appellant, and the defendant appealed to the Court of Errors and Appeals, where the decree of the chancellor was unanimously affirmed. Elmer, J., delivered the opinion of the court, and said : " We are not satisfied that the first ground of usury thus set up is proved to be true. The defendant himself swears to the facts; but although the statute has made him a competent witness, his credibility is open to question, and we do not feel justified in deciding that a debt, secured by a bond and mortgage, shall be discharged, by the uncorroborated oath of the party who has made and is bound by them. In this ease, it appears that he has paid the interest for many years, and a part of the principal, and made no complaint of usury during the lifetime of Mott, who alone could contradict him. But if he did pay a ionus of $100 to Mott to obtain this loan, as he alleges, there is not only no evidence that he had any authority from the institution to receive it, or that the other members of the funding committee, by whose concurrence tlie loan was made, had any knowledge of the transaction, but it is found that they were ignorant of it, and that no part of the money went into the funds of the complainants. This ground of usury, therefore, entirely fails " (Muir v. The Newark Swvings Institution, 1& W. J. Eq. R., 537-539). And in another case, in the same State, it was held that the payment of illegal brokerage to an agent for effecting a loan, where no part of it is received by the lender, cannot taint the loan with usury {Gonover v. Yan Mater, 3 Greenes R., 481). In the State of Connecticut it has been held that a loan, which, if made by the principal, would be usurious, is not so if made by 172 L-AW OF USURY. an agent, and the excess of interest is paid, or stipulated to be paid, to the agent, for the use and benefit of the agent only, with- out prior authority from the principal, or subsequent ratification by him ; and it was further held, that authority to make a usurious loan will not be presumed when the agency is special and limited to a single transaction. It was said, however, that it may be pre- sumed when the agency is genehilj and embraces the biisiiiess of making, managing and collecting the loans of a moneyed man. But, it was added, it is presumptioin of fact, and may be rebutted {Rogers v. Buohmghwrn, 33 Conn. M., 81). And in the State of Virginia it was decided that whfen it was agreed between a debtor and creditor that, besides paying the principal and interest of the debt out of certain securities placed in the hands of the oreditbr's counsel, who was to collect and appropriate thein to the debt, the debtor should pay the counsel two and a half per cent commission on the debt, this was a reason- able compensation for that service, and that the transaction did not constitute usury (SqpMns v. Bah&r, 2 P. <& IT. M., 110). The general doctrine, then, is, that a bonus paid to an agent by the borrower, as a compensation for procuring a loan, when the same is not resorted to for the purpose of enabling the lender to procure more than the legal rate of interest for the use of his money, does not render the Iban usurious ; and the cases referred to in this chapter may be regarded as the leading ones illustrative of the subject, wherein the trainsactions have been upheld by the courts. CHAPTEE XIV. TEANSAOTIONS NOT UStTEIOtrS OASES DJ WHICH THE MONET LOANED IS NOT AGREED TO BE BBTUENED AT ALL EVENTS BOTTOMKT CONTRACTS — 00NTEACT8 IN THE FORM OF A POST OBIT TRANSAC- TIONS BETWEEN PARTNERS. It has been shown in a previous chapter that, in order to con- stitute usury, there must be a contract for the return of the money loaned at aU events / for, if the return of the principal, with inte- rest, or of the principal only, depend upon a contingency, there can be no usury. This is obvious ; because that which may never be received cannot be said to be forborne for any given time. TSANSA^WIQNig NOT USURIOUS. 173 But if the cpntingency extend only to the intprest, and the prin- cipal be beyond the reach of hazard, the lender or forbearer can, in such case, lay no claim to interest above the legal rate, without being guilty of usury. It has been shown, hove^^er, that a, distinc- tion is to be observed between a contingency merely affecting the interest and an option which the debtor has of defeating the pay- ment of any interest by a performance of some act stipulated foi? at the creation of the contract ; for, when such an option is given, and the debtor either neglects or refuses to avail himself of such condition, the law insists upon his paying auch additional interest as a penalty for his negl^qt or refusal. Cases in which the courts have sanctioned the agreement to pay a premium greater than the legal rate of interest, in consideration of _th,e hazard which affects the principal, are quite numerous ; but the doctrine is best illus- trated where money has been advanced by way of insurance, bot- tomry, post obit, and annuity. In all these cases, however, it must be clearly seen that no usurious transaction ip concealed beneath such as are thus favored by the law. For then no form will pro- tect the contract ; the substance must be taken into consideration ; and any usurious intenlion wilj, vitiate an insurance, or an annuity, as much as if there had been no such disguise assumed by the contract. But to the examination of cases which ha,ve been held to be free from; the taint of usury, because the return of the money loaned has dv^pended upon a contingency, or the principal has been subjected to hazard : One of the earliest English: cases reported, illustrating the doc- trine that usury cannot exist where, by the terms of the agreement, the principal and interest are hona fide put in jeopardy, was this : A ship went to fish in Newfoundland (which voyage might be performed in eight montljs), and the plaintiff delivered £50 to the defendant, to pay £60 upon the retijrn of the ship off Dartmouth ; and if the said ship, by occjasipn of leakage or tempest, should not return from Newfoundland to Dartmonth, t^en th^ defendant should pay the principal money, viz., £50 only ; and, if the ship never returned, he should pay nothing. Upon aii objection to the. legality of this contract, it was held unanimously by the court not to be usury within the statute ; for, if the ship staid at ISTewfound- land two or three years, the defendant should have paid at the return of the ship but £60 ; and if the ship never returned, then nothing ; so that the pkintifF ran a hf^za^-d of having less than the 174 LAW OF VSURT. interest which the law allows, and possibly neither principal nor interest would be returned {Sharpley v. Hwnt, Oro. Jac, 208). Another early case was where an obligation was made, condi- tioned that if a ship sent to sea, or the goods therein, or the obligor, should return safe, to pay him the sum, beyond the rate allowed by the statute, for the loan of £100, and also the £100. It was objected that this was a usurious contract, because pay- ment depended upon so many things, one of which, in all proba- bility, must happen ; though if it had depended on the return of the ship only, it might be good. But it was resolved by the whole court that it was a good bill of bottomry, and tolerable by the usage among merchants, and allowable by reason of the great perils of the sea {Sawyer v. Ohcm, 1 L&o. B., 54; xSl C, 1 Sid. B.,21). And another early English case was where a bond was condi- tioned to pay so much money, if such a ship returned within six months from Ostend to London, which was more by the third part than the legal interest of the money ; and, if she did not return, then the obligation to be void. It was alleged and con- tended that this was usury. But Hale, Chief Baron, said: " Clearly this bond is not within the statute, for this is the com- mon way of insurance;, and, if this were void by the statute of usury, trade would be destroyed. It is uncertain and a casualty whether such a ship shall ever return or not {Joy v. Kent, Rardr. E., 418). And stilly another early English case was where an obligation was entered into to pay the plaintiff £100 on the marriage of the daughter of one of the parties ; and if either the plaintiff or defendant should die before such marriage, nothing was to be paid. On action brought upon the bond, the defendant inter- posed the defense of usury, and that this was for the loan of £30 before delivered. The plaintiff demurred to the plea of the defendant, and the court sustained the demurer, holding that it was plain bottomry {Long v. Wharton, 3 Keb. B., 307 ; and vide Grigg v. Stoker, Forrest s B., 4). And in a comparatively late case in the English King's Bench, in debt on a bond, purporting to be a loan on respondentia on an East India ship, to which two sets of special pleas were pleaded, one set alleging usury and the other illegality, under the statute (19 Geo. II, oh. 37, § 5), it was left to the jury to say whether it TBANSlACTIONS NOT USWBIOUS. 175 was a lonaflde transaction on respondentia, or a loan on usury ; the jury found in favor of the plaintiff, and the defendant moved for a new trial, but the motion was denied. Lord Tenterden, 0. J., in his summing up to the jury, on the trial before him, said : " This is an action on a bond purporting to be on respondentia. The .question is whether it was really a loan at respondenUa, or was merely a loan to which the form of a respondentia was given, as a color to enable the plaintiff to get more than legal interest. On the face of the instrument it purports to be on respondentia. If the ship had been lost, the money would have been lost too. It is of no consequence to the plaintiff whether Wilkinson allowed Crosthwaite to have the money afterward or not. If you think it was hona fide a transaction on respondentia, then you will find your verdict for the plaintiff; if on the contrary, then you will find for the defendant." The court, in ha/nco, expressed the opinion that, in effect, the direction of the jury was sufficient, and, therefore, refused to grant the rule for a new trial (Tf^wwev. Orosthwaite, 4 Cwrr. & P. B., 178 ; S. C, 19 Ikg. C. L. E., 329, 336). These were all held to be cases of bottomry and respondentia, and, therefore, clear of the taint of usury. In our own country the law is equally decided that bottomry and respondentia bonds and contracts are not within the statutes against usury ; and some- times, as in the State of New York, the rule is incorporated into the law itself; that is to say, such transactions are expressly excepted out of the operation of the statute. It may not be inappropriate here to state that the general nature of a respondentia bond is this : The borrower binds him- self in a large penal sum, upon condition that the obligation shall be void if he pay the lender the sum borrowed, and so much a month from the date of the bond till the ship arrives at a certain port, or if the ship be lost or captured in the course of the voy- age. The respondentia interest is frequently at the rate of forty or fifty per cent, or in proportion to the risk and profit of the voyage. The respondentia lender may insure his interest in the suc- cess of the voyage, but it must be expressly specified in the policy to be respondentia interest, unless there is a particular usage to the con- trary. This is settled by authority. A lender upon respondentia is not obliged to pay salvage or average losses, but he is entitled to receive the whole sum advanced, provided the ship and carge 176 LAW OF USTTBT. arrive at the port of destination ; nor will lie lose tlie benefit ot the bond, if an accident happens by the defaalt of the borrower or the captain, of the ship ; nor will a temponary capture, or any damage short of the djestniction of the ship, defeat his claim.. Where bottomry bonds are sealed, andthe money paid, the person borrowing runs the hazard of all injuries by storm, fire, etc., befoiie the beginning, of the voyage, unless- it be otherwise provided. As that, if the ship shall not arrime at mJkch a placej at such a time, etc., then the contract hag a beginnijiig from the time of sailing ; but if the condition was that if such ship shall, sail from a given place to any port abroad,, and. shall not arrive there, etc., then, etc, the condition has not its beginning till the departure {Readeh Lex. Mero,, 143 ; P(wh., 626). A lender on bottomry or nespand^ntia is not liable to contri- bute, in the case of general average, nor is he entitled, to the benefit of salvage {Park., 627, 629 ; hut vide Marshal on Insu- ranoej. oh. 6, liooh 2). These are principles pertaining to bottomry and respondentia bonds, and are fully explained in works upon shipping and insu- rance ; and it is quite obvious that such transactions, when entered into, in good faith, cannot be considered usurious, for the want of certainty, which characterizes a case of usury. These stat6m.ent8 with, respect to bottomry and respondentia bonds seem paritinent, in tfcis place ; but the general subject will be more, appropriately discussed, when the law of maritime loans shall be considered. In the State of Massachusetts, an early case came before the Supreme Judicial Court, in, which it appeared that the defendant gave the plaintiff a bond for a loan of money, to use at bottomry on a. ship and: her freight, during the term of three years, at the interest of twelve per cent per anmim ; the defendant was to pay over to the plaintiff^ from time to time, half of the gross earnimrs of the ship, and to make other payments if he chose, in part sari.-; faction of the bond, and the interest was to cease immediately n, the amount of principal so discharged ; and the plaintiff was tc retaiui all payments made to him, whether the ship should be lost or not ; and the freights were to stand hypothecated for only the balance which should at any time remain unpaid ; and at or before the end of the three years the defendant was to pay the sum remaining due, with the interest, deducting, however, such sums as TRANSACTIONS NOT USURIOUS. Y!l the plaintiff would by law have been, held to pay for any general average or partial loss which should happen during the three years, etc., etc. ; and if the defendant fulfilled these conditions the bond was to be void. The defendant also gave the plaintiff a mortgage on real estate, which was to be void if the defendant performed the conditions of the bond. An action pf debt was brought for the penalty of the bond, and the defendant interposed the defense of usury. The counsel for the defendant insisted that the instrument was not a bottomry bond, because the payment of the whole money lent did not depend upon the contingency of the ship's performing a particular voyage ; or at all events, the whole amount of money was not to be at risk during the whole time ; and because, in addition to the hypothecation of the ship, the payment of the principal, with interest at twelve per cent, was made certain by a mortgage of real estate, by an assignment of the earnings of the vessel, and by personal security. But the court held that the bond was a lawful contract and not usurious ; for if the ship had been lost at any time during the three years, the plaintiff was to lose all the money which should be then due on the bond. Putnam, J., in delivering the opinion of the court, said : " It is argued that the payment of the money borrowed is secured in such manner as to make it a certainty that the plaintiff would receive his money, with twelve per cent ; that it is secured by a mortgage of real estate, as well as by a mortgage of the ship, and an assignment of half the freight and earnings for the term of the loan ; and it is further objected that the loan is upon time and not for a voyage, as it is usually made. But the answer to these objections is, that if the ship should be lost within the time of three years, for which the money was lent, the plaintiff was to lose all the money which should then be due on the bond. It is the essence of the contract of bottomry and respondentia, that the lender runs the marine risk to be entitled to the marine interest. The rate of interest and the manner of receiving the payment of what may become due upon such contract are to be regulated by the parties. These considerations are not to be regarded by the court, excepting only to ascertain whether they were colorably put forth to evade the statute against usury. "We do not see anything in the facts which would warrant that con- clusion. If the ship had been lost immediately after she sailed, it is perfectly clear that the plaintiff would have lost all bis 33 178 LAW OF USURY. money" {Thomdike v. Stone, 11 Pich. B., 183, 187). Thi» decision was pronounced over forty years ago, and when usurious contracts in that State were void- by statute, so that it may be regarded as a fair exposition of the law upon the question involved. And it may be added thait it has often been said by judges, both in England and this country, that these maritime contracts ought to be treated with great favor by the courts. The obtaining money on bottomry bonds, especially in foreign ports by the master, is often absolutely necessaiy, in order that the vessel may be repaired and proceed on her voyage. And at home, the owner may often be obliged to pledge his ship, in order to fit her out for sea, and put her in a condition to become available. The true definition of a bottoniry bond, according to Mr. Justice Story, " is a contract for a loan of money on the bottom of the ship, at an extraordinary interest upon maritime risks, to be loaned by the lender for the voyage, or for a definite period." The same principle of hazard exempts from the charge of usury those contracts which are denominated post obits. These are transactions in which the borrower, in consideration of a sum of money paid instcmter, assumes to give the lender a larger sum upon the death of some particular person or persons. Contracts in the form of &post obit have been recognized as binding obligations, both in this country and in England, from a very early period. And though, in some cases, it has been said that a post obit bond is a security of a questionable nature, and in point of fact there are instances in which the courts have relieved against such bargains, yet it does not seem that they have ever been considered as usuri- ous, however gross and extraordinary they may have been ; but merely looked upon as unconscionable bargains, against which relief can be obtained in a court of equity alone. In a very early case in the English courts, the question was fully presented, and the doctrine was sanctioned by the court. The defendant had agreed with the plaintiff, who was to have an estate fall to her after the death of two old women, to give her £350 in consideration of being paid £T00 at the death of the two women, and the plaintifE was to secure this £Y0O on a mortgage of her reversionary estate. It happened that both the women died within two years after the transaction, and a bill was filed to obtain relief against the bargain. The question was submitted without, discussion, except that a single case was cited, where TRANSACTIONS NOT VSVBIOJJS. 179 relief was given in a similar case to the one at bar ; only the plaintifE in that case had been prevailed upon through his neces- sities. Lord Keeper North said : " I do not see anything ill in this bargain. I think the price' was the fair value, though it hap- pened to prove well. Suppose these women had lived twenty years afterward, could Lloyd (the defendant) have been relieved by any bill here ? I do not believe you can show me any such precedent. What is mentioned of the plaintiff's necessities, is in all other cases. One that is necessitous must sell cheaper than those who are not. If I had a mind to buy of a rich man a piece of ground that lay near mine, for my convenience, he would ask me almost twice the value; So where people are constrained to sell, they must look to have the fullest price. As in some cases that I have known, where a young lady that has had £10,000 por- tion, payable after the death of an old man, or the like, and she in the meantime Tjecomes marriageable, this portion has been sold for £6,000 present money, and thought a good bargain too. It's the commpn case, pay me such interest during my life, and you shall have the principal after my decease " {Batty v. Lloyd, 1 Vern. B., 141). It does not appear that this reasoning of Lord North has ever been contradicted, at least not in the English courts, if it ever has been in any of the courts of this country. In a much later case in the High Court of Chancery of England, the same doctrine was laid down. John Spencer, in 1738, was pos- sessed of an income of £7,000 per annum, and a large personal estate besides ; and having contracted a debt of £20,000 to several per- sons, mostly tradesmen, by whom he was pressed, and which he was desirous to pay off, proposed to borrow money, and particu- larly a sum of £5,000, for that purpose. As he had a well-grounded expectation of a great increase of fortune on the death of his grand- mother, the Duchess of Marlborough, if he survived her, he resolved to contract thereon. He was above thirty years of age ; originally of a hale constitution, but impaired ; and although after- ward he lived more regular, yet he was addicted to several habits prejudicial to his health, which he could not leave off. The Duchess was seventy-eight ; of «- good constitution for her age, and careful of her health. Spencer publicly proposed that if any one would lend him £5,000 he would oblige himself to pay £10,000 at or soon after the death of his grandmother, if he survived her, but to be totally lost if she survived him. The. proposition was rejected bv 180 I^-AW OF USURY. several knowing persons as not sufficiently advantageous, but was finally accepted by the defendant, and a bond of £20,000 condi- tioned to pay £10,000 was given on those terms. She lived six years and three months; he survived her one year and eight months. About two months after the old lady's death, Spencer executed to the defendant a new bond, in place of the old one, in the penalty of £20,000 conditioned for the absolute payment of £10,000 at or before April following, and executed also a warrant of attorney for contessing judgment thereon, which was afterward entered. After his death the defendant sued out a sci/re facias against his executors for an execution, and they resorted to the High Court of Chancery for an injunction and for relief i on pay- ment of £5,000, with interest from the time of advancing it, on the ground, among other things, that the transaction was usurious. The case was elaborately and ably argued before Lord Hardwicke, Lord Chancellor ; Sir "William Lee, Chief Justice ; Sir John Strange, Master of the Eolls ; Sir John "Welles, Chief Justice, and Burnett, Justice ; and it was unanimously held that the agreement was not usurious. Burnett, J., said : " Upon the state of this case, three points are made. First, that the original contract is usuri- ous, contrary to the statutes, as being a gvo&ier premivmi than the law allowed ; and if so, the new security wiU fall to the ground as well as the contract itself. * * * As to the first point, whether the loan of £5,000 to be paid £10,000 on the death of the Duchess if he survived her, but nothing if he died before her, is usurious, or a mere casual, contingent bargain ? I hope I may be excused in calling it a loan ; because, although in a case where the capital is not in all events to be paid, the word may be improper in courts of law, this court at least has adopted the use of that word in respect of a mere contingent bargain, that of hoUomry. If this contract be usurious, it must be either because it is contrary to express words of the statute, or an evasion out of it. * * * To make a contract usurious within the express words of the sta- ttite, the reward must be taken for forbearance or giving a day of payment, and whatever shift is used it will be usury; but not within the statute when it is otherwise, if in truth it was a sum advanced by way of loan, and the reward in truth given for for- bearance, no shift will prevail. * * * If, therefore, a man gives or lends money, not to be paid if the event should be one '?ray, but double if the other,, and it is uncertain whiqh way it will TRANSACTIONS NOT USUMIOUS. 181 happen, it is not within the statute, for the reward is given for the risk, not forbearance ; but if under color of such a hazardous bar- gain the real treaty is for a loan, with a usurious reward for that loan, and to evade the statute the contingency inserted is of little moment, being no ingredient between the parties, the court or jury on the whole may pronounce such a contract usurious, not- withstanding the color of contingency, if they are satisfied the reward is given for forbearance, not for the risk ; as in the adding a single life, which is a healthy life, if that life should survive half a year : so they might as well add a contingency if any one of six 'persons was alive at the end of six months ; and one of the cases is, if any one of these persons is alive at that time. The intent of the bargain is the material thing : if that was borrowing the money, it is within the statute, whatever colorable contingency inserted ; and this is the sense of all the resolutions in the several cases. * * * But when the principal was fairly and truly put in hazard, and such as none would run for the interest the law allows, there is no case where it has been held within the statute. The slightness or reality of the risk seems to be the only rule directing the judgment of the court {Bedmigfield v. Ashley, Or. E., 741 ; cmd m Long v. Whwrton, 3 Keb., 304), which, though inaccurately reported, seems to me good law. I cannot see two contracts bearing a greater similitude than this and iottomry. A life may be insured, so may a ship, which may sink the day after, and so may the party die ; one is as much an adventure as the other. .* * * On the whole, therefore,! am, of opinion that this is not a contract founded in its origin upon usury, but a contingent bargain, and consequently within the Express words or intent of none of the statutes of usury." Sir John Strange, Master of the Rolls, said : " The questions upon which I am to offer my advice are three : 1st. Whether the ori^nal advancement of the £5,000 in the manner as deposed by Mr. Black- man, and disclosed in' the defendant's answer, and the bond taken upon it, are to be considered as usurious, and consequently void in point of law. * * * As to the first, I concur in opinion that this is not an illegal agreement inade void by the statute of usury. * * * The repayment of the money advanced depended on a contingency, which, if it happened one way, the whole was totally lost. During the pendency of this, no interest or profit could accrue to the defendant, but a mere wager or bargain upon contin- gency which died first ; so that the whole was at hazard. * * * 182 i^^ OF VSUR7. Whether a hazard or not is considered as the rule for determining whether a bargain or a loan. I am of opinion, therefore, this bond does not come within the statutes of usury, and cannot be declared void at law thereon." The lord chancellor said : " As three points have been properly- made at the bar, it is necessary to say something to each. The first is a mere question of law upon the statute of usury and on the rules of law, and the same as, in a court of law, if an action had been brought on the bond, and the whole matter had been disclosed in special pleading. If I had even now a doubt concern- ing it, I should have held myself bound by the opinion of the judges as a matter within their conusance, in like manner as if I had sent this to be tried at law ; in which case, the court always decrees consequentially to the trial. But I have no doubt about it ; and concur in opinion. * * * Consider the result of the cases cited on the statute of usury, which I will not- repeat, but only deduce natural and proper inferences from them. First, if there is a loan on contingency, in consideration whereof a higher rate of interest than the law allows is contracted for forbearance, if the risk goes only to the interest or proBmiwm, and not to the principal also, though real and substantial risk_ is incurred, it is contrary to the statute ; because the money lent is not in hazard, but safe at all events ; and no regard is then had whether the con- tingency is real or colorable. * * * Next, if the contingency extends to both, and there is a higher rate than the law allows, regard is had whether a iona fide risk is created by the contin- gency, or whether only colorable; for, if so, courts of law hold it contrary to the statute, because it is an evasion to get out of the statute, which is prohibited by the law itself. * * * But ■where the contingency has extended to principal and interest both, and not colorable only, but a fair and substantial risk is created by the whole, it takes it out of the statute ; though called a loan, it is considered as a bargain oi* chance, and differs little from wager. On this depends the case oHottom/ry / for I agree that the approv- ing thereof is from their being fair contracts on a real hazard, and not that they concern trade ; though trade and commerce is taken into consideration, but not alone relied on to support usury, for that cannot be" {Chesterfield \. Jmissen, 2 Fes. R., 125, 141-143, 146-148, 153, 154). In a still later case before the lord high chancellor, post obit TRANSACTIONS NOT USUBIOVS. 183 bonds were established, though upon terms of gross inequality, on the alleged ground that such securities are not liable to be impeached for usury ( Wheaton v. May, 5 Ves., Jr., R., 27). And in the Court of Common Pleas of England, at an early day, contracts of this description were recognized as lawful and binding, although the court required strict practice in proceedings relating to them, for the alleged reason that a post obit bond is a security of a doubt- ful nature. A motion was made to enter up judgment on a war- rant of attorney, on an affidavit stating that a bond for £1,800 was given by the defendant to the plaintiff in the year 1780, condi- tioned for the payment of £900, in consideration of £400 advanced at the time of the execution of it, on the death of the defendant's father, in case the defendant should survive, together with the warrant ; that the father died in September, 1788, and the son was still living. The court said that " in common eases, where judgment has not been entered on a warrant of attorney within a year and a day from that date, it was necessary to apply to the court for leave to enter it. As this was a post obit bond, a security of a questionable nature, which had been often disputed with success, leave to enter up judg- ment ought not to be granted without a rule to show cause. If judgment be entered immediately on giving the warrant, or within a year and a day after, transactions of this sort may probably be brought to the knowledge of the family of the obligor, and a guard raised against fraud and imposition. But if the obligee waits till the death of the father or relative, the court will prevent his hav- ing immediate execution, by which he might force the obligor to submit to such terms as he should think proper to impose, and will require him to give due notice of his intention." For the reason stated in the opinion of the court, nothing was taken by the motion {iMsJvmgton v. Waller, 1 H. Black. R., 94, 95). In an early case in the Court of King's Bench of England the question was presented, and z,post obit was sanctioned by the court. The action was upon a memorandum in these words : "Memoran- dum. In consideration of two guineas received of Aaron Lamego, Esquire, etc., I promise to pay him twenty guineas upon the demise of my present wife, Anne Grould." The only question made was whether the contract was usurious, the woman, at the time of making it, being then seventy years of age. It was argued by the plaintiff's counsel that it was not ; that there was no forbearance, nor any certainty of receiving either principal or interest ; that if 184 ^^W OF VSDRT. was a mere contingency. Lord Mansfield stopped him, under a doubt how it was possible to eome at the question of usury, saying: " Here is nothing at all stated about the loa/ii ai money ; it might, for aught that appears to the contrary, be a vol/wnta/ry gift, to be made to him upon this event. The matter of usury was never thought of at the trial." Mr. Justice Denison said : " We cannot intend this to be a usurious contract, which is a crime. * * * It is z, foolish bargain ; but not usurious. Here are no facts stated upon which we can say it is usurious" And Mr. Justice Wilmot added, that " ^'e.prue distinction was laid dotm in that case in Ore. Eliz., 643, between a real bona fide wager, not at all intended as a- loan, and a transaction which is riaWy a usurious loWn,. but dAs- guised as a wager, with intent to have a slvift " {Zamego v. Gould, 2 Bwr. B., 715). So where A., at B.'s request, advanced him £200, and took his warrant of attorney for payment as follows: £100 at Christinas, 1829, if both should then be living; £100 at Christmas, 1830, if both should be living then ; and £100 at Christmas, 1831, on the same condition ; the court, on motion to set aside a judgment on the warrant of attorney, refused to interfere, on the ground that there was a risk of the principal, the contingency being, if either of the parties happened to die. Sir James Scarlett argued for the plaintiff that the bargain was in the nature of a post obit bond, which is not illegal, however hard the terms may be ; that the principal sum was in jeopardy, and the risk considerable; that this was a common way of doing business in the city, which became material when the question was whether the interest was a real one or only color; that the mere circumstance of the defendant having asked for a loan in the first instance was unimportant, as the contract ultimately made must determine the real nature of the transaction. The attorney-general, contra, did not contest the general principle in respect to post obit bonds, but argued that on the face of the transaction it was plainly a cbveir for usury. Lord Tenterden, C. J., said : " We do not think this a case in which the court can interfere. There certainly was a risk of the principal. The contingency was if either of the parties happened to die" {FUght V. Chaplm,, 2 Bam,. t& AdoTph. R., 112 ; S. O., 22 Erig. C. L. S., 38). And so also where the annual payments to be made on annuity (exceeding five per cent on the sum advanced) were secured upon land', and the principal sum by a policy on the life of TRANSACTIONS NOT- USUBIOUA 185 one of the grantees, with a covenant for paytnent of the annual premium, the English Common Bench held that the transaction was not usurious, the principal being still placed in some degree in jeopardy {HowMns v. Bennet, 7 G. B. \_N. /S.] B., 507). And in an early case, a wager between two, to hive £40 for £20, if one be alive at such a day| was held not to be usurious {Button v. Bown- ham, Gro. EUs.-, 643). In many of thfe States, however, contracts of wager are declared void by statute ; but such is not universally the law. Upon the same priiiciple of contingency or hazard, where per- sons are actually in partnership, an advantage to be taken out of the trade may be measured in any way agreed on without subject- ing the arrangement to the charge of usury, for the money is not laying at interest, but employed in making profit, subject to losses ; and although one partner iretiresj still if he donUniies Ucuble to ie sued, the agreement for such advantiage cannot be usurious. The following case in the Court of King's Bench of England was decided in conformity to this prihcij>le': The action was brought oh a bond in the penalty of £200 conditioned for the due perform- ance of certain articles, which articles recited that Mary Morisset had leilt Daniel Bang the sum of £100, to be repaid to her at the end of four years without iMerest; but. in consideration that the said Daniel King, his executors and administrators, should find and provide for Mary Dubois', daughtei: of the said Mary Morisset, the obligOr, meat and drink ii the house where he dwelt or should dwell for four years, if the said Mary Dubois should so long live ; and that she should, during the said term, board with him, and that she should be co-partner with Mary King, wife of the said Daniel King, in the business of a milliner, and should at all times haiie one moiety of thte losses and charges of carrying on the trade ; and that they should be partners, and each do their utmost to carry on the trade, and should egualh/ dmide the profit / and also that the said Daniel King shoUd Mge the said Mary Morisset, she paying him £10 a year; and, At the end of the four years, Daniel King was to repay the £100 ; ahdi, in ease of the death of the said Mary Dubois, to pay the principal^ together with loMful inte- rest for the £100, to the fiaiid Mary Morisset. The only question in the case was whether the bond was usurious, and the report states that the Court were extremely clear that the case could not be within the statute of usury. Lord Mansfield Observed that it 24 186 LAW OF usury: was impossible to say that King might not receive as much advan- tage by this partnership as to be worth the consideration; it m,ight be a very advantageous bargain to King ; here might be recommendation, skill, labor or other benefits arising to him from it. He mentioned the case of a man who entered into a private rent partnership with another, who drew him into a bankruptcy thereby. So here the plaintiff 's daughter might have been drawn into a bankruptcy by means of this agreement, which would have been more severe to her, perhaps, than the penalty of the statute of usury would be. Mr. Justice Foster and Mr. Justice Wilmot concurred with the chief justice. They said it did not explicitly appear whether this was a prudent agreement or not, but it might be beneficial to King upon the whole ; at least it was not such a contract as could be adjudged by the court to be usurious within the statute, and judgment was given for the plaintiff {Morisset v. King, 2 Burr. E., 891, 892 ; and vide Anderson v. Maltby, 2 Yes. Jr. R., 248). The same general doctrine is recognized by the American courts. In a case in the late Court of Chancery of the State of New York, three persons, Leonard, Quackenbush and Webster, agreed to purchase lands for their joint benefit ; and they also agreed that Leonard should advance all the money upon the purchase, to be refunded out of the proceeds of the sale only, and that he should receive more than one-third of the land or the proceeds thereof. The court held that the agreement was not a contract for a loan or forbearance of money, and was not usuri- ous. Stress was put upon the fact that, by the agreement, Quack- enbush and "Webster were under no obligation to reimburse Leon- ard for the moneys advanced, in case there was a deficiency in the sales of the land foir that purpose; and it was declared, in sub-' stance, by the chancellor, that the transaction was neither within the letter nor the spirit of the usury laws {Quackenbitsh y. Leon- ard, 9 Paige's E., 346). In the old Supreme Court of the State of New York an early jase was decided on similar principles. Dagett and Kensett agreed with Hall that the former should carry on the business of preserving fresh provisions, and, in consideration of the use of $600 advanced by Hall, made him their only agent for selling the provisions in the city of New York for ten years ; agreed that he should be allowed twenty per cent on all sales made by him, or through his agency, in that city, or any other place where it might TRANSACTIONS NOT VSUEIOUS. 187 be advisable to go for the trade, and that he should be entitled to one-third of the net proceeds of sale, after deducting the twenty per cent, to apply on the amount advanced, until it should be liquidated ; Hall to furnish a repository at his own cost, and be responsible for his sales. The court held that the contract was not usurious. Savage, C. J., who delivered the opinion of the court, said : " The whole contract seems to me to show the com- mencement of a new adventure, a speculation, in which these par- ties were separately Interested ; and each was liable to loss, or, perhaps, might make large profits. * * * The lender here does not receive his interest and profits besides, nor is his princi- pal otherwise at risk than as it may depend on the solvency of the borrowers, or their compliance with their contract. * * * The lender in this ease renders personal services, and incurs other expenses in carrying on the business ; and, after all this, his com- pensation depends upon an untried experiment in this new branch of business. It seems to me, then, that this contract is above all suspicion of usury " {Hall v. Dagett, 6 Cow. B., 653, 656, 657). And, in the New York Court of Common Pleas, it was held that an agreement to contribute capital for a joint business, and receive a share of profits in lien of interest, is not usurious, unless it is a device to cover up the receiving of more than legal interest {Qwich v. Grant, 10 If. Y. Leg. Obs., 344; cmdvide (}iVpin V. Enderby, 5 Bwrn.' c& AM. JR., 954). The same general doctrine, as applied to transactions between, partners, has been recognized by the highest courts of England. The Frugal Investment' Association was formed in 1845, and was certified under the 4th and 5th Wm. IV, ch. 40. Its objects were to advance the society's funds to its members, and to accumulate them, and to divide the profits periodically. The advances were made by putting up a share at one of the meetings for competition among the members, and the member offering the highest pre- mium for it was entitled to that share, and as many more, to the number of twenty, as he chose to take at the same premium. For each share so taken he was to pay the premium agreed upon, and also eight shillings a month for 100 months (during which time only the society was to exist) as redemption money ; and, on these conditions, he might have an immediate advance of £100, the full value of his share, on giving security for the repayment of it, together with such premium and redemption money ; he was, also, 188 LAW OF nauRT. entitled to participate in the general profits of the society. B became a member, and obtained an advancement of five shares, at premiums of £71 for three and £73 for the other two ; and he gave security as required, and received an advance of £500. B. died, and, on the society pressing for payment of the moneys so secured to them, B.'s executrix filed a bill against them, alleging that the transaction was usurious and, the society illegal, and claiming to redeem the security on repayment of the £500, with legal interest only. The court held that the transaction, being between partners, was not usurious {Buriridge v. Cotton, 8 £!ng. L. & Eq. E., 67). GHAPTEE XV. TEAJ was valid and binding for the whole amount. "Wright, J., delivered the opinion of the court, and said : " The interest, at seven per«cent, for the time he had been kept out of his money, would have amounted to more than half the seventy- five dollars; and really, no one would say, that the additional thirty dollars was an unreasonable compensation for his delay ; and finally, when it was put in at the maker's instance, and not as the result of any contract to pay so much interest, it would be almost impossible to conceive of a case where there was a more complete absence .of a corrupt agreement " (Jones v. BerryMll, 25 Iowa JR., 289). Perhaps reference may as well be made here as anywhere to some cases settling the rule in respect to contracts for compound interest ; .that is, the adding of the growing interest of any sum to the sum itself, and then the taking of interest upon this accumula- tion ; and to cases in which the transactions have been h^ld not to be usurious. Sometimes the practice is regulated and sanctioned by statute, and in other cases it is settled by the courts. At an early (Jay in the history of English jijrisprBdence, such contracts TBANSAdTTONS NOT USURIOUS. 241 were COtisid'ei-ed illegal, and within the statute of usury; and courts of equity in this country have held to the same rule. That is to say, they have held that compound interest is not forbidden by the statute against usury, but that it is iniquitous and will not be allowed, though it was agreed^ to -by the parties. Indeed, it is doubtless settled in England, and in mbst of the United States, that this excess of interest cannot be collected by law, unless upon- an agreement to pay it, made after the day of payment has passed. But it is equally clear, from the authorities, that if it be paid vol- untaril/y it is not usury. In ah early case in the English High Court of Chancery, where upon a petition to be admitted to prove under a commission of bankruptcy that in settling accounts half-yearly interest had been turned into principal, and on the other side it Was contendedihat, admitting an antecedent contract for compound interest to be ille- gal, parties might settle accounts, even half-yearly, upon that prin- ciple, Lord Eldon, chancellor, said : " As to the question of compound interest, it is cl^ar we cannot, a priori, agree to let a man have money for twelve months, settling the balance at the end of six ihonths, and that the interest shall carry interest for the subsequent six months ; that is, you cannot contract for naore than five per cent, agreeing to forbear six months'; but, if you agree to settle accounts at the end of six months, that not being part of the prior contract^ and then stipulate that you will forbear for six months upon these terms, that is legal. So this is legal ■between merchants, where there is no agreement to lend to either, but they stipulate for mutual transactions, each making advances ; and that if, at the end of six months, the balance is with A., he will lend to B. and vice versa. That sort of transaction has taken place, I admit, generally. That cannot be applied to the case of a real secu- rity ; and you may not, when the debt comes to a certain sum, take a real security and is.\r per cent. I dp not know if that will do in a mercantile transaction. It is not enough to say, in this case, that their accounts have been settled from half year to half year, and, therefore, it is legal to take interest in this way, for the trans- actions may be evidence of previous agreements " {Expwrte Bevcm, 9 Yes., Jr., R., 233). So, where the defendants were sued by their bankers for a balance of an account, and it appeared that every quarter the bankers struck a balance, in which were included the principal gum of money adv^^nced, all interest due upon it and a 242 LAW OF USURY. commission of fivre shillings for every £100 advanced, which bal- ance at the end of the quarter having been handed to the defend- ants was converted into principal and made to convey interest, the Court of Exchequer declared themselves strongly of the opinion that this case was not usurious, but that the striking of a balance every quarter brought it to a fresh agreement at the beginning of each quarter to lend, the sum due {OaUot v. Walkei; 2 Austr. JR., 4:96). , And in another case in the Exchequer Chamber in Error it was held that a memorandum indorsed on a bond which was condi- tioned for the payment of £100 by quarterly payments of £5 each and interest at £5 per cent ; " that at the end of each year the year's interest due was to be added to the principal, and then the £20 rec^ved in the course of the year was to be deducted and the balance to remain as principal, and so continue, yearly, till both prin- cipal and interest were fully paid," was not usurious. Lord Chief Justice Eyre said : " The court must strain the words of the con- tract in order to make it usurious. It was not the interest on £100, but the interest due, that was to be added to the principal at the end of the year, and the interest due could only be taken to mean what was legally due" {JI(miiltonY. Le Orange, 2 E.. Black. R., 144, 145). In the old Supreme Court of the State of Ifew York an action of assumpsit wasbroughtonfourpromissory notes, given on settle- ment of accounts, made as follows : On the 22d November, 1819, the defendant was charged with a bill of goods amounting to $2,211.49, and after charging interest and deducting some items of credit, a balance was struck on the 5th February, 1821, of $2,217.31, the interest of which sum was then charged up to the 5th February, 1822, and added to the principal, making $2,374.64; on which last sum, composed of principal and interest, interest was charged for. one year seven months and thirteen days, up to the 18th September, 1823, the date of the not,es, and added to the last sum, making, together, $2,643.85, for which the notes declared on were given. The defendant insisted that the notes were usurious, and the judge at the Circuit so held, and, thereupon, nonsuited the plaintiff. The plaintlfiE then made a motion in the Supreme Court to set aside the nonsuit, which was granted and a new trial ordered, the court holding that a note given on the settlement of an account, jp which compou^4 interest is charged, is not usurious, TRANSACTIONS NOT USUMIOUS. 243 Sutherland, J., gave the opinion of the court and said : " Com- pound interest has nothing to do with the question of usury. It is illegal upon a different principle. Interest, annually compounded and added to the principal, does not give the creditor more than seven per cent per annum for his money ; and unless a rate of interest greater than that be taken, there is no usury. * * * Interest is justly and equitably due at the end of each yeai*, if pay- able annually ; and if the debtor, instead of paying it, gives his note or bond for it, there is no legal objection to enforcing its payment. If the interest is carried into an account-current, and the debtor gives his note for the balance of the account, it stands in principle upon the same footing" {Kellogg v. Hickok, 1 Wend. H., 521, 522). This case has been expressly recognized as authority by the present Supreme Court of the State, in which it was held that an agreement to pay interest upon interest, due at the time the promise is made, is not usurious and may be enforced. Sill, J., who gave the opinion of the court, said : " The objec- tion that the note is usurious is not tenable. One witness says that $100 of it is made up of interest upon interest. This does not constitute Msurj" {Tyler r. Tates, 3 Barb. E., 222, 225). The courts of North Carolina, at an early day, decided that, as a general rule, interest on interest is not allowable ; but that, when the sum is ascertained, and the annual payment forms a part of it, and it is so specific that the debt may be sustained, and interest is reserved by way of damages for the detention, it ought to be allowed {K&rmon v. Diohen, Cam,. & Norw. H., 357). So, without multiplying words, or referring to numerous cases, it seems to be well settled that, although compound interest will never be allowed, except in special cases, and the agreement there- for may never be enforced, yet a contract which includes a stipu- lation to pay it will not be, for that reason simply, usurious, so as to render the contract, in other respects than the agreement to pay the compound interest, illegal and void at law ( Vide Connecticut V. Jackson, 1 Johns. Gh. R., 14; Mowry v. Bishop, 5 Pa/ig^s R., 98). In this connection, reference may also be made to the settled rule in respect to contracts in which it is stipulated that the inte- rest shall be paid semi-annually, quarterly, and the like. And here it may be said that, stfictl/y, it is clear that if the lender of a sum of money, payable with interest for forbearance during a cer' 2A4: LAW OF USURY. tain term, receive all or any part of the interest during that term he wiU thereby have taken interest above the statutable rate. Whether such a transaction vras usurious or not, was a question about which the early English authorities did not agree ;. although it seems that a majority of opinions was favorable to the validity of such an arrangement. But, however the ancient authorities differ upon the subject, the law now is well settled that such con- tracts are perfectly valid. In a case in the late Court of Chancery of the State of New York, it was held that a note payable one year from date, with interest quarterly, was not usurious {Mowry v. bishop, 5 Paige's H., 98). And the question is set at rest by a recent decision of the Supreme Court of the United States,, which holds that, where a statute fixes the rate of interest per annum, a contract may law- fully' be made for the payment of that rate before the principal comes due,, at periods shorter than a year. The action was upon a bond of the city of Muscatine, in which the interest was made payable semi-annually at ten per cent ; and by statute the city had no power to issue its bonds agreeing to pay interest at a greater rate than ten per cent per annum. It was- insisted, among other things, that the bond was not valid, because, in the stipulation to pay the interest semi-annually, at the rate of ten per cent, the authority conferred by the vote which limited the rate of interest to " not higher than ten per cent per annum," was transcended, and a usurious rate agreed to be paid. Mr. Justice Swayne deliv- ered the opinion of the court, and disposed of this position of the defendant in a very few words. He said : " This objection has no foundation. When a statute fixes the rate of interest per annum, it has always been held that parties may lawfully contract for the payment of that rate, before the principal debt becomes due, at periods shorter than a year" {Meyer v. The City of Muscatine j 1 Wall. JR., 384, 391). This authority is decisive upon the subject, and further citations need not be made. The rule is well settled, and uniformly recognized in all of the States. TRANSACTIQNS NOT USURIOUS. 245 CHAPTEE XVIII. TEAlfSAOTfONS NOT TTSrEIOUS LOAN OS CHATTELS. > It has been held by the ITew York Court of Appeals, as was stfl'ted' in a previous chapter, that the statute prohibiting a greater rate of interest than a specified per cent per annum " for the loan or forbearance of any money, goods or things in action," is appli- cable only to those loans which are in substance and effect loans of money. The true construction of such a statute is held to be rhat no more than the prescribed rate of interest should be taken on a loan or forbearance of money, dweoily or indwectly, by way of loan of goodfe or choses in action, or in any other manner. In a word, it is held that the^ words " goods and things in action" do not change the true intent and meaning of the statute in the least,. and that the statute would be as comprehensive without the specification of those words as it is with those words contained in it. It is declared' that the terms " interest " and " forbearance " cannot be predicated of any other than a loan of money, actual or presumed. The meaning is, that interest is a certain profit for the use of the loan; and forbearance, the giving a further day, when the time origiaally limited for the return of the loan has passed. That both interest and* forbearance imply that the thing loaned has an estab- lished' value, so that the lender on its return, with the compensa- tion fixed bylaw for the use and risk, may receive a "certain profit." And it is argued that this is true only of moneys which is legally supposed to have a fixed, unchangeable value in itself, and to be consequently the true medium of the value of all other property. A' fixed rate per cent in money, therefore, in coritefli- plation of' law, is supposed to give to the lencjer a " certain prbfit,'' because the thing loaned is of the same value at the end -of the term as at its commencement. This, it is said, is not true in factj even of money, and the law does not affirm it to be true of any-, thing else. From this reasoning it is very properly concluded that a loan of goods is not within the statute, whatever may be reserved for their use. If this conclusion be correct, it follows, as a matter of course, that there can be no usury in a loan of chattels, whatever may be the per centage upon their value agreed to be paid for their use, 246 -Z>-4W OF USURY. unless such loan is intended as an indirect loan of money. And this is the doctrine of the authorities. A strong case illustrating the rule was early decided by the New Torfe Court of Appeals. An action of assumpsit was commenced, in 1842, by one Bell against a man by the name of Kice, in the Recorder's Court of the city of Buffalo, to recover the amount of a promissory note given by the defendant to the plaintiff for $337, on the 22d of June, 1841, payable one day after date. The defendant set up as a defense that the note had its origin in a corrupt and usurious agreement. On the trial it appeared that the note was given in payment of a balance due upon the following transaction : Bell loaned to Eice, on the 1st day of May, 1834, eleven cows, for two or four years, as Eice might elect, Eice to pay $50.75 on the 1st of May in each year for their use. Eice agreed to return the cows to Bell with calf or with calves by their sides, on the 1st of May, 1836- or 1838, as he should elect, worth $203, or pay that amount in cash. Bell was to sustain all losses that should appear providen- tial. The contract to this effect was in writing. .The defendant's counsel, among other things, asked the court to decide that the agreement was per se usurious, the hazard or- contingency being such as not to take the agreement out of the statute. The court refused, and decided that the question whether the agreement was a fair and honest, one, in consideration of such hazard, should be left, and was left, to the jury. The defendant's counsel excepted. The jury found a verdict in favor of the plaintiff for the amount of the note and interest, and judgment was entered in accordance with the verdict. The case was then carried to the Supreme Court on a bill of exceptions, where the judgment of the Eecorder's Court was reversed and a new-trial ordered. From that decision the plaintifE appealied to the Court of Appeals, where the judgment of the Supreme Court was reversed, and that of the Eecorder's Court aflSrmed. Gardner, J., delivered the opinion of the court and said: "According to the contract, as stated in the bill of exceptions, the parties had in view a loan of cattle, with liberty to the borrower to convert the loan into a sale, at the time and upon the terms prescribed in the agreement. During the continuance of the loan and untU the defendant made his election, he was to pay a stipulated sum exceeding seven per cent for the use of the property, which was to remain at the TEANSA.CTIONS NOT USURIOUS. 247 risk of the lenders for the time specified, as to all accident, not arising from the negligence or misconduct of the former. This, I apprehend, is the meaning of that clause in the contract by which the plaintiffi " was to sustain aU losses that shall appear to be providential." The agreement, in a word, contemplated a loan of chattels; and whether the compensation fixed by the agree- ment did or did not exceed seven per cent per annum upon their value was immaterial, as the subject of the loan was not within the statute in relation to usury. * * * Such loans may be resorted to as a cover for usury, and so may a contract for the sale of lands. And it is believed that the apparent confusion in some of the cases has arisen from not discriminating between a loan of chattels and evidence ten&mg to prove such a contract, in form, a nlere cloak for an usurious loan. * * * Without con- sidering the other questions presented, upon the ground that this was a loan in fact as well as in form, the subject of which is not within the provisions of the statute against usury, the judgment of the Supreme Court must be reversed, and that of the Recorder's Court affirmed" {Bell v. Mice, 6 W. Y. E., 315, 317, 319). The same doctrine has been repeatedly sanctioned and acted upon by the old Supreme Court of the State of New York. To take the cases in chronological order, the first to which reference is made was an action of assumpsit upon a written con- tract made by the defendants in these words : "April 15th, 1819. For value received, we promise to pay and deliver to John Spencer, or bearer, $360, or twelve good middling cows, and twelve good calves which come by said cows above mentioned, to be paid and delivered at the dwelling house of said Spencer now is in, four years from the date, in Verona ; said cows not to exceed eight years old, nor under four years old. As witness our hand." The defense was usury ; and the evidence to sustaia the defense was, that the plaintiff, a few days before the date of the agreement, agreed with the defendants to let them have six, cows for four years ; and that the defendants, at the end of the term, should return him twelve cows with calf, or with calves by their sides, or pay him thirty dollars each for the six cows. The plaintiff admit- ted it was more than the cows were worth ; but said he would put them at that sum so as to be sure and have the cows again. He said, at the same time, that his bargain was as good as twenty-five per cent interest. On the day the contract was executed, the 248 LAW OF USVRT. plaintiff reiterated substa^tiaIIy the same thing. The defendants also proved that the cows were not worth more than nin,eteen dollars each ; in the whole, $114:. The defendants also proved, under an objection, that twelve good middling cows, with calves by their sides, would, on the 15th April, 1823, have beon, wortli The plaintiff proved that, at the date of the contract, cows were worth about one-fifth more thaoi - in 1823 ; and that the usual practice of letting cows was to double in four years ; the party letting usually taking part of all risk of accidents. The defend- ants objected to the proof of usage, bi;t the objection was overruled. The judge at the circuit then said: That if it was agreed, or intended by the parties, that the plaintiff should receive above seven per cent interest, the note would be void for usury ; and he should consider that as a question of fact for the jury to decide. He held, however, if the plaintiff was entitled -to recover at all, the |360 was to be considered in the nature of a penalty ; and the plaintiff could not recover above the twelve cows and calves when they became due, with interest to the qua/rto die post, being |208 ; and therefore a verdict for that sum was taken for the plaintiff, subject to the opinion of the court on the case as presented, and under an agreement that the court should give judgment, or set aside or modify the verdict, according as they should hold th^ law to be. The case was very ably argued in the Supreme Court, and it was there held that the verdict was right. Savage, Ch. J., delivered the opinion of the court, and said: " The contract was not usurious ; though the plaintiff was a very hard and unconscionable creditor. The interest and principal were both put at hazard to a considerable extent. It was uncer- tain, in 1819, what would be the value of the cows in 1823. If the hazard be slight, and merely colorable, it will not take the case out of the statute ; but I do not consider it so in this case. Here was no negotiation for a loan of money. It was a bargain by which the plaintiff was pretty certain of making a handsome profit ; but by which he -might lose. I think the $360 in the contract must be considered as a penalty. The verdict is, therefore, right, and the plaintiff entitled to judg- ment for the $208 " {Spencer v. TUden, 5 Cow. B., 144, 148-150), The Supreme Court had, at a previous term, made a similar decision in a case which is reported in a note to the easeof /^ewce?- TBANSAOTIONS NOT USUBJOUS. 249 V. Tilden- Tlje case was a certiorari, to a justices' court. Wet- more sued Holmes in the court below on the following agreement : " Whitestown, August 26th, 1819. Ebenezer Holmes received of Ezra "Wetmore ten ewe sheep, for which I promise to deliver twenty sheep of as good' quality, three years from date. " EBENEZEE HOLMES." Plea, the general issue. On the trial, sheep, in August, 1822, were proved to be worth one doUar per head. The justice gave judgment for the plaintifE for twenty dollars damages and the cpsts; and his judgmpi^t was affirmed {SolmesY. Wetmore, 5 Cow. B., 14;9, ^ote, a). In, the case of Holmes v. Wei/more, usury was not interposed as a defense, to be sure; and yet from that fact, and from the fact that there is not an intimation that the case might be One tainted by usury, the inference is reasonably fair that the court considered i]ia.%.^^'b(^MX^fi^ letting of sheep, to double in three years, is not usurious, The, next cage in order was a, writ of error from the Oneida GJQmmon Pl^as, "Willianis snediGqrnmings in. a, justices' court, and dpelared: on a, contract bearing date 12th May, 1824, by which Cummings a,cknowledged tp have received of "Williams a two- year old heifer and; calf > and agreed within four years, to return the same heifer, and she to be with calf, and also another heifer three years old, a,lso to be with calf; WUliams only incurring the risk qf the, heifer received by Cumrnings being killed by light- ■ ning. The defendant pleaded usury, and a jury by whom the case was tried gave, a verdict for the plaintiff for twenty-seven dollars. The defendant appealed to the Common Pleas of Oneida, and on the trial the contractj was put in. evidence and proof given as to the value of the .property. The defendant moved for a nonsnitf on the ground that the con- tract was usurious. The motion was denied. The defendant then offered to prove, for. the purpose of showing that the contract was usurious, that the heifer received by him: was not worth, at the time of the contract, over ten dollars ; that cows six years old with calf were worth twice as much as two year old heifers with calf; and that three year old heifers with calf were worth one-third more, than. two year old heifers with calf. This evidence was rejected by the court, and the defendant excepted. The jury found a verdict 32 250 i-4Jf OF USURY. for the plaintiff, with thirty-five dollars damages, on which judg- ment was entered, and a writ of error sued out. The judgment of the Court of Common Pleas was aflflrmed by the Supreme Court. Marcy, J., delivered the opinion of the court, and said : " The facts of this case differ somewhat from those in Spencer v. Tildm (5 Gow., 144) ; but the difference is not so great (viewing it to be a loan, as that was) as to call for the application of a principle of law different from the one which controlled that case. There was, perhaps, more certainty in this case that the property to be returned at the end of four years would be worth that advanced, with the addition of seven per cent per annum to its value, than there was in the case of Spencer v. Tilden; but there was a contingency (a remote one, it is true) that the whole might be lost. There is great difficulty in laying down rules as to what shall constitute usury in the loan of specified articles of personal property of fluc- tuating value. * * * It is very desirable to discourage uncon- scionable bargains and deprive the extortioners of the anticipated fruits of their unjust and oppressive dealings ; but while indulging a solicitude to do this, great caution should be observed to avoid establishing rules of law which may restrict or interrupt the ordi- nary business intercourse of common life. I do not think we ought to pronounce the contract in this case usurious " {Owmmvngg v. WilUams, 4 Wend. B., 679, 681). The next and last reported case in the old Supreme Court of New Tork upon the subject came up on error from the Washington Common Pleas. Hall let Haggart & Keynolds have fifty merino sheep ; in consideration whereof, Haggart & Keynolds agreed to pay to Hall annually fifty cents per head for each sheep, and, on receiving a year's notice, return to him the same nvmher of sheep, and of the same quality and age, as nearly so as possible ; the eon- tract to continue for such length of time as Hall should choose. Hall brought a suit in a justices' court to recover twenty-five dol- .lars, due at the end of the first year, and obtained judgment. The case was removed into the Washington Common Pleas by appeal, and on the trial in that court the defendants offered to prove that the sheep, severally, were not worth a sum which, at an interest of seven per cent per annum, would produce fifty cents per year, and insisted that such fact, if established, would show the contract to be usurious. This testimony was objected to by the TRANSACTIONS NOT USHBIOUS. 251 plaintifE, but the court overruled the objection, and held that it was admissible, and that, if the fact offered to be proved should be established, the contract was usurious and void. The defendants thereupon proved that the value of the sheep was only from three to ,ftve doUars per head. The plaintiff offered to prove that the wool alone of the sheep was worth one dollar per pound, and that it was the universal custom to let sheep foi- a pound of wool per head ; which evidence was rejected by the court. "Whereupon the court nonsuited the plaintiff, and he sued out a writ of eri'or. The Supreme Court reversed the judgment of the Common Pleas, and ordered that a venire de novo be issued from the court below ; holding that the transaction was not necessarily usurious, as it appeared on the trial in the court below ; that the contract was not 'usurious if it depended upon contmgencies whether on the return of the property the lender would have received more than the value of the property at the time of the making of the contract, and the interest thereof at the ordinary rate ; and, further, that in suits on contracts of the kind involved in that case, the question whether the contract was a device or shift to evade the statute of usury should be' submitted to a jury. Cowen, J., delivered the opinion of the court, and said : " The question presented by this bill of exceptions is by no means free from difficulty. There are several cases which clearly sanction the contract, looking at its face, so far as the mere loan of the sheep is in question. * * * In the case at bar, the sheep were loaned for one year certain, and so from year to year, so long as the lender chose, with a stipulation to return the same number, of the same quality and age, as nearly as possible, on one year's notice. So far there could be no chance of profit, except the rise of value in the market; and there, might be considerable loss from the depreciation in value. The direct and certain income lay in the fifty cents per head, which is con- ceded to have been more than seven per cent on the cash value at the time of the loan. * * * It appears to me that there is a series of cases in point, with regard to like dealings in other pro- perty, against this transaction being considered usurious per se. * * * No doubt that, in any of the cases decided by this court, had the jury found that the doubling of the cattle or sheep to have been a mere shift for evading the statute, those contracts would have been adjudged void ; and a finding pf the jury seems to me to be the true way of settling such questions. 252 i-4W OF USURY. The court below held that the giving of fifty cents per annum, under this contract, for sheep worth less than the cash principal of that sum, avoided the contract, independent of aU question as to the present value or depreciation. The fall in the market might have led the plaintifE to exercise his right of election unfavorable for the defendants. "Whereas, there' could be no ground for unreasonable delay, if sheep had continued as valuable as the plaintiff proposed to show they were at the time. Agaiuj they might have suddenly risen in the market, so that the rent should have been more ; and yet, brfore the year's notice could call them in, have fallen to very little. This whole arrangement may well be regarded,, like the case of the final settlement certificates^ or the salt, as a mere bargain of hazard, or the jury might well have pronounced it a fraud on the statute, for aught I know. I think their opinion should have been takent" {Hall v. Haggmi, 17 Fem^. ^.,,280, 282, 284, 285). In this case, and in the case of G-wmmmg^ v. Williams (4 Wend. R.,, 680), the lenders, it will be perceived, were to receive the capital loaned, at all events,- with more than the' legal rate of interest for its use. This would have been usury in a loan of money, beyond question. It wonld have been usury in a loan of chattels, also, if they- were within the statute ; and yet the con- tracts in both cases were pronounced valid by the Supreme Court ; and the soundness of these decisions was not questioned, but rather sanctioned by the Court of Appeals in the case of B^ v. Bioe, before referred to^ The principle of the New York cases has been sanctioned in other States. A very strong case is found in the early Connecti- cut-reports. The case was one of a loan of $16,839 of final cer- tificates, to be repaid in the same kind and amount at six months, and the lender stipulated for the receipt of $1,000 besides the lawful interest. These certificates were notoriously in a rapid' course of depreciation ; and the court sustaihed the contract, and said : " To bring a contract within the statute, and the mischief it was made to prevent, it must be clearly for the repayment of a greater value than the amount of the loan,- with an advance thereon, at the rate of six per centum per annum. That it be a greater quantity, though of the same kind of article, is not suffi- cient. If the article be of a fluctuating value, and from such change or diminution of its value as from its nature or the course TRANSACTIONS NOT tfSURIOUS. 253 of trade it is subject to, it may not at the time of repayment "be worth more, or so much. A loan of 100 bushels of salt, for exam- ple, in the year 1783, when it was at twelve shillings, to repay double the quantity at the end of one year, when it might have been but f oxu* shillings, would not come within the statute, be the price what it might at the year's end. ISTor would it make a difEerence if it was to repay 106 bushels of salt and a sum of money besides, provided that both of them might not amount to more than the value of the loan and six per cent interest thereon. With regard to the final settlement certificates said to be loaned in this case, it is matter of public notoriety that they were, at the time of the contract, in a state of rapid depreciation ; and that, having no funds to rest upon for principal or iiiterest', it was wholly uncertain how low they might fall, and whether, at the end of six months they would, if considered as merchandise (as they must be, to bring them at all within the description of the statute), be worth half so much as they were when loaned ; in which case, the plaintiff, instead of giving £300 would lose that sum and the defendant gain it. The loss by the depreciation was at the plaintiff's risk. * * * The contract in this case, though in the form of a loan, was really in the nature of a specu- lation and bargain of hazard. It depended upon a contingency, to wit, that of depreciation, whether all or how much of the principal or value loaned should be repaid, and which of the parties the speculation should ultimately favor, which takes the contract entirely out of the statute." Dyer and Pitkin, JJ., dissented upon the express words of the statute, which prohibited the loan of other articles as well as money for more than the legal rate of interest ; and they denied that, where the principal is to be made good in kind, more than the legal rate of interest could be reserved, under prete.nse of indemnity for depreciation. A majority of the court, however, held that the contract, though in the form of a loan, was really in the nature of a speculation and bargain of hazard, and, therefore, not subject to the taint of usury {Hamlin v. Fiteh, Kvrby's B., 260). In some of the States, as in Massachusetts, while their usury laws were in force, and in Vermont, the statute of usury excepts from its operation the letting of cattle according to the custom among farmers. But it seems, from an early case in Yermont,, without 254 LAW OF USURY. such exception, their courts wotild feel themselves bound to deny the application of the statute. Collamer, J., delivered the opinion of the court, and said : " In relation to the letting of cattle, etc., which the provision of our statute permits to be done, agreeable to the usage of farmers, it was decided by this court in the county of Franklin, while Ch. J. Skinner presided, and in a more recent case in the county of Chit- tenden, that such letting is not usurious, though the risk of the lives of the cattle be on the hirer, and though an unqualified note to deliver a certain number of cattle be taken, if such was the usage. This is not only within the proviso of the statute, but is sustained by the case of Spencer v. Tilden (5 Cowen, 144), where it was decided that selUng cows, etc., on a contract to return dou- ble the number atthe end of two years, is not usurious ; also the • same point as to sheep, in Holmes v. Wetmore, 5 Oowen, 144, note ; ( Whipple V. Powers, 7 Vt. B., 457). The same general doctrine was recognized by the Supreme Court of the State of Iowa, in a case involving the validity of an agreement by a purchase of a lot of sheep, to pay therefor a speci- fied sum of money and " two pounds of wool per year for each sheep so sold and delivered for two years," the court held that the agreement was not necessarily usurious, and sustained the transac- tion {First National Ba/rik v. Owen, 23 Iowa B., 185). And the Supreme Court of Florida has held that a contract to pay a bushel and a half of corn within a year in return for one bushel, is not within the statute of usury, owing to uncertainty and fluctuating character and value of the article {Morrison v. MoKvnnon, 12 FU. B., 552). It is well settled by the authorities, therefore, that there can be no usury in cases of a sale or loan of chattels, provided the trans- action be in good faith, what it purports on its- face. The cases all proceed upon the doctrine that the value of everything which can be the subject of a loan, except money, is subject to fluctuation ; and consequently that an individual who loans five bushels of wheat to receive ten after harvest, or who loans any other chattel to be returned in kind again, may, at the end of the term, from the depreciation of the commodity, receive in value less than he parted with, interest included, and, consequently, such transactions are excepted from the statute against usury. TBANSACnONS NOT USURTOUS. -255 CHAPTEE XIX. TEAN8AOnON8 NOT USUEIOrS — MISCELLAIfEOFS OASES HELD TO BB FEEE EBOM THE TAINT OF tTSTEET. Theee are numerous eases, important in their nature, which have been held by the courts not to be usurious, and which cannot pro- perly be classed under the heads named in any of the preceding chapters, but which, nevertheless, illustrate transactions constantly arising in practice, alleged to be tainted with usury. A separate chapter will, therefore, be devoted to the consideration of these cases, without particular regard to their nature or where they were decided ; but they will, nevertheless, be set down in their chrono- logical order. The first to which reference will be made was decided by the English- Court of King's Bench, in 1803. The action was for usury against the acceptor of a bill of exchange drawn on the defendant and payable to the order of the drawes, thirty days after date. The bill was presented to the defendant for acceptance eighteen days before it was due, when it was agreed between the parties that the defendant should then pay the bill upon an allowance of six- pence in the pound, which he said was his usual charge upon such occasions ; and he accordingly paid the amount upon those terms to the holder, who thereupon gave up the bill. Subsequently a qui tarn action was brought for the usury, and these facts appear- ing at the trial before Lord EHenborough, C. J., it was objected on behalf of the defendant that this was no loan or forbearcmoe, as between these parties, which it was laid in the declaration, and which was necessary to constitute usury ; that there could be no borrowing unless there was an obligation to repay, which was not the ease here ; but that the transaction was nothing more than an anticipation of payment, for which accommodation it might be even admitted that the defendant had taken more than an ade- quate consideration, but that would not constitute usury. His lordship thought the objection well founded, and nonsuited the plain tifE. A motion was made to set aside the nonsuit, when it was argued that if the transaction was not to be considered usuri- ous, on the ground that it was only an anticipation of payment, for which a party was at liberty to take what rate of interest he pleased, it would be very wrong to evade the statute of usury by 256 hAW 'OF USURY. framing the securities in this form. . But the court, in l(mo, took the same view of the case as the chief jiistice did at the trial, and the rule for a new trial was refused {Ba/rclwy v. Walmaley, ^EosUb B., 55). The next case in order to which reference will be made was decided by \k& old Supreme Court of the State of NeW York, in 1832. The action was upon a promissory note given for the con- sideration of a note which was made for the payment of 'a particu- lar sum, with interest from a day certain to the date thereof, and which was sold to the maker of the note in suit for the face of it, principal, and interest computed from its date to the day of sale. The defense was usury, and it was insisted that the note whicli was the consideration of the note. in suit was usurious on its face ; and it was further insisted that the note in suit was usurious, because a rebate of interest had not been made oh the interest charged on the note taken by the defendant, which had not become due at the time of the transaction between the parties. The judge at the circuit decided that neither of these facts afforded evidence of usury, to which the defendaiit excepted. The plain- tiff obtained a verdict, and the defendant moved the Supreme Court for a new trial, insisting that the decision of the circuit judge was erroneous ; but judgment was ordered for the plaintiff. Savage, Ch. J., delivered the opinion of the court, and said: " The first objection is, that the" original notes were usurious upon their face, and, therefore, the present plaintiffs had notice of usury. It is true that the notes promise the payment of interest from a time anterior to the date of the notes, and if the notes were to be considered as evidence of money lent at this date, there would perhaps be more than seven per cent reserved ; but it is well known that notes are given for property sold, and upon business transactions, as well as for money lent; usury is a defense which must be strictly proved, and the court will not presume a state of facts to sustain that defense, where the instrument is consistent with correct dealing, * * * Another ground of iwury relied on is, that interest was cast upon the notes which had not become payable, and included in the defendants' notes. The answer is that no interest was cast Which, had not in fact accrued, though it was not payable because the principal was not payable ; but there was no usury" {Martin v. Feeter, 8 Wend. B., 533, 534). The third case which will be considered was decided by the preseat TBANSAGTI0N8 NOT USURIOUS. 257 Supreme Oourt of the State of ISTew York in 1847. It was a ease in equity, and came before the court upon exceptions to the master's report. It appeared that the defendant had procured the loan of uncurrent money, and the debt contracted for snch uncurrent money had gone into a judgment against the defendant, and the plaintiff therein claimed to have certain surplus moneys, iuTolvedin the case before the master, applied ta the payment of his judgment. The claim was resisted by a subsequent judgment creditor of the defend- ant, on the ground that the former judgment was for a usurious loan, and therefore void ; and the master so decided, and accordingly reported that the plaintiff in the latter judgment was entitled to the surplus moneys to apply on his judgment. To this report the plaintiff in the former judgment excepted. The evidence before, the master was that the party kept an exchange office, and was in the habit of lending uncurrent money, to be paid in current funds ; that from time to time he had loaned to the defendant uncurrent money ; and the condition of the loans was generally that they should be repaid in current money in a week; that the dis- count upon the money thus loaned would not average over three- fourths of one per cent, and that it could pass current in the mar- ket in the way of trade. The court decided that the transaction was not usurious, and therefore allowed the exceptions to the master's report. Harris, J., who decided the case at Special Term, said : " I do not think the facts furnish sufficient evidence to jus- tify the court in attaching to the transaction the taint of usury. There certainly is nothing upon the face of the transaction that imputes usury, nor do I think the evidence warrants the conclusion that there was any corrupt agreement or device to receive or take more than the legal rate of interest. There is nothing in the case to show that the uncurrent money received by Duff and Ivers was not the bills of specie-paying banks. Indeed, the small dis- count at which these bills might be converted into specie furnishes satisfactory evidence that the bills were such as would be promptly redeemed, when presented at the counter of the banks by which they were issued. Such bills, it is well known, are, for all the ordinary purposes of money, equivalent to the same amount of specie. And unless there is something in the transaction from which it is to be inferred, as a matter of fact, that the transaction was a mere contrivance to obtain more than the legal rate of interest, by loaning bills which were not intrinsically worth their 258 LAW OP USUMT. nominal amount, the statute has hot been violated. * * * j think the transaction under consideration may fairly he regarded as a mere exchange of credits. Benters held the notes of certain banks which to him were of par value, because payment could have been enforced, and which to Duff and Ivers were equal in value to gold and silver, because they would pass current in the payment of their debts. The exchange was a mutual accommo- dation to both parties. * * * There was no disguise in the transaction. It was in fact what it purported to be, a mere' exchange of bank bills, held by one of the parties, whose market- able valae was a little less than par, for the check of the other party payable at a future day, an exchange in which both parties supposed they had obtained an equivalent value. I can see no ground upon which a legal objection to the transaction can be founded" {Slossen v. Duf, 1 Bari. E., 432, 434^-436). The fourth case which will be referred to was decided by the New York Court of Appeals in 1851. The action involved the validity of certain promissory notes dated at Appalachicola, in the State of Florida, payable on time, with interest at eight per cent per annum. The Superior Court of the city of New York, in which the cause was commenced and tried, gave judgment in favor of the -plaintiff, holding that the notes were not usurious; the Supreme Court afiBrmed the judgment, and the defendant appealed to the Court of Appeals, where the judgment of the Supreme Court was aflSrmed. Gardner, J., delivered the opinion of the court, and said : '* Another point made is, that the notes are usurious upon their face. The answer to this point is found in the facts stated in the declaration, to wit: that' the notes and the assumpsit of th§ defendant were made at Appalachi- cola, in the State of Florida. That the rate of interest was regu- lated by statute in that State, or that the common law prevails there, are mere matters of conjecture. Suspicion alone wUl not invalidate a contract, and there is nothing else in the case" {bmis V. Garr, 6 N. Y. R., 124, 133, 134). The fifth case which will be considered was decided by the Supreme Court of the State of New York, in February, 1853, and was an appeal from the report of a referee. The defendant had a drover's bill against a butcher for three head of cattle, amounting to $187.50, payable strictly in twenty-one, but according to ordi- pary usage in thirty days, applied to the plaintiff to collect it for TRANSACTIONS NOT USURIOUS. 259 him, and in the meanwhile to make him an advance. The plain- tiff charged him $1.87, as for commissions on collecting; $1.09, as for thirty days' interest ; and gave him in cash $184.54 ; taking his promise to pay the $187.50, if not collected from the butcher within thirty days. The defendant interposed the defense of usury; but the referee overruled the defense, and gave judgment for the plaintiff, from which the defendant appealed to the Gene- ral Term of the Supreme Court, where the judgment was affirmed. Roosevelt, J., delivered the opinion of the court, and said : " This case presents a question of usury so small as to be imperceptible to the naked eye. A technical microscope, and one of no ordinary power, is indispensable to enable the observer to discover it. A charge of nine days interest — possible, but neither- probable nor contemplated — on $187.50, is one of the usurious items complained of." After stating the facts, the learned judge proceeds : " Such a transaction, in my view, is substantially an assignment of a demand not yet due for a consideration estimated upon the basis of the probable loss of interest and the certainty of trouble, risk and responsibility; accompanied, however, oh the part of the assignor, by a guaranty for the payment of the demand. " The action now brought is virtually on the guaranty, and unless it can be shown that the form of the assignment with guaranty was resorted to as a mere cover for usury, any inadequacy of con- sideration, if it really existed, can only be set up by way of reduc- tion of the recovery. * * * There is still, however, another view of the case. The plaintiffs may be considered as making a loan of the sum actually advanced in cash, and of the sum of $2.96, charged by them for trouble, responsibility and delay of payment. That they might demand their pay before they undertook the ser- vice, cannot be disputed. Payment of rent, school bills, board, etc., in advomce, is a thing of every-day oj3currence, We may then consider the $2.26 as so much paid in advance by the defendant to the plaintiffs, and then by them loaned to the defend- ant. What objection can there be to the allowance of interest on that portion of the loan, more than on the residue ? Can it be said that this charge was a mere cover ? " Let us see what the plaintiffs were to do and to be subjected for this sum of $2.26. They were to advance in cash $184.54 for twenty-one days certain, and for thirty days probably ; that being the -usual delay. They were tQ (Jun the batcher, no very agree 260 ^^fl^ OF nSXTRT. able duty, as the proof shows, for" payment of the bill. If guilty ' of neglect or oversigbt, and the debt should thereby be lost, they and not the defendant were to be responsible for the loss ; and in case of a difference of opinion, which on such a subject was not only very likely but almost certain to arise, they were to take the risk of a troublesome and expensive litigation. " To contend that a charge, whether it be denominated ' interest' or ' commission,' or both, of $2.26, for such a service and such a liability, is unreasonable, would be simply preposterous, unless by unreasonable he meant unreasonably inadequate. How, then, without shocking common sense, can it be stigmatized as a shift or contrivance to evade the statute of usury ? * * * The true character of this transaction, however, as before stated, is that of a sale and transfer of the demand, accompanied by a collateral obli- gation in the nature of a guaranty by the vendor. * * * Our conclusion is, that the report of the referee in favor of the plain- tiffi was right, and ought to be affirmed, with costs " {Hv/rd v. Hunt, 14 Ba/rb. R., 573-576). The sixth case in order, which it is proposed to consider, was decided by the New York Court of Appeals, in June, 1853. The action was brought to foreclose a mortgage made by the defend- ant, and by the mortgagee assigned to the plaintifiF, which was given to secure the payment of $500. The defense was usury, on the ground that only $450 was loaned, for which the mortgage was made. The proof showed that in fact only $450 was paid over to the mortgagor at the time of the execution of the mortgage. The justice charged the jury at the circuit that, to constitute usury so as to avoid an obligation, a corrupt agreemfent to pay and receive more than the lawful rate of interest must be proved ; that the mere omission of the lender of the money to pay all the $500 at the time of the execution of the bond and mortgage, in the absence of any agreement, did not make out this usury ; that in his opinion the evidence fell short of proving the defense of usury, and that if the "jury found for the plaintiff they must find the whole amount of the bond, with interest. The defendant requested the judge to charge the "jury, that if they found that the lender intentionally withheld fifty dollars at the time oi the execution of the bond and mortgage, it was evidence, unexplained, of a corrupt and usurious agreement. He declined so to charge, but instead (jharged that the presumption was in favor of the legality, of the TRANSACTIONS NOT tISUBIQUS, 261 trangaetion, to which refusal, and to the whole charge, the defend- aot excepted. The jurj found a verdict for the plaintiff for $585.69, upon which a judgment was entered, and on appeal the judgment was- affirmed at a Creneral Term of the Supreme Court. The defend- ant then appealed to the Court of Appeals, where the judgment of the Supreme Court was affirmed. • Morse, J., delivered the opinion of the court and said : " Was the intentional withholding from the mortgagor by the mortgagee of fifty dollars of the sum expressed in the condition of the bond and mortgage made to secure the payment of $500, with lawful inte- rest, if unexplained, evidence of a corrupt and usurious agree- ment.? The manner in which the term evidence was used by the defendant in his request of the judge to charge, evidently shows that it was intended to be used in the sense of proof or full and sufficient evidence, so that a verdict given against the defense of usury upon that evidence alone and unexplained would he set aside as against the weight of evidence. * * * It is manifest that there may be various other causes than ' a corrupt and usurious ' agreement for which a mortgagee might ' intentionally withhold ' a part of the sum received by the bond and mortgage, and which would be perfectly lawful in themselves. The law wUl not pre- sume ' a corrupt and usurious ' or any other unlawful agreement from a fact which is equally consistent with a lawful purpose. It is not an unfrequent ease for a mortgagee to retain a part of the money loaned until the completion of a building, which is to form a part of the mortgage security. There are other contingencies, to guard against which a part of the amount included in a mort- gage might be sustained, or to cover a balance of an unsettled account between the parties. Besides, he who affirms of another an unlawful act, is bound to affirmative proof of that which makes the act unlawful, and cannot insist upon a legal presumption of guilt from an act just as consistent with innocence as with guilt. * * * I am of opinion that the judgment of the Supreme Court should be affirmed " {Booth v. Buoezey, 8 W. T. B., 2T6, 278-281, 283). The seventh case to which reference will be made was decided by the Supreme Court of the State of New York in April, 1855. The case was an appeal from a judgment entered at a Special Term upon the report of a referee. The action was brought to 262 L^w OF vsusr. recover a large amount of collateral notes and stock transferred ro the defendant in a certain transaction which it was alleged by ihe plaintiff to be usurious. The notes and stock were deposited with the defendant as collateral security for the payment of promissory notes given in obtaining a loan of money upon an agreement that the amount of the collaterals should be appKed to the payment of the loan when the notes given therefor became due. The notes deposited as collateral security, as affirmed, were numerous and for small amounts against various individuals; and the defendants gave notice to such individuals when their respective notes fell due, and attended to the collection of the same.' A portion of the notes became due, and some of them were paid at various dates prior to the time when notes given for tibe loan became due, and the amounts credited to the borrower, but treated like other funds of the defendant held on deposit. Interest was deducted at the legal rate from the loan when made, but no interest was allowed by the defendant upon the moneys received, although they were applied on the note given for the loan when the same became due. The referee decided that the transaction was free from usury, and that the plaintiff was not entitled to have the collaterals delivered up. A judgment was entered for costs in favor of the defendant, and the plaintiff appealed to the General Term, where the judgment was affirmed. Morris, J., delivered the opinion of the court, and said : " There was no agreement or understanding that usury should bo taken. The agreement established was the usual and legal one when col- laterals are deposited as security, and their avails are to be applied to the payment of the notes when the notes become due. If the , collaterals were paid before the notes became due, and the bank used the money, then upon a settlement of accounts the bank should allow Piatt's estate interest on such moneys. The use of the money paid on such collaterals cannot be deemed usury in the notes given by Piatt, unless, at the time of giving his note, the use oi the money paid upon collaterals, without interest, was a part of the agreement. The facts reported by the referee show that such was not the agreement" {Morgcm v. Meohcmio^ Bwnh- ing Association, 19 Bari. B., 584, 586, 587). The eighth case in order which will be referred to was decided by the Superior Court of the city of New Tork, in October, 1857. The case came before the court, at General Term, on appeal from TliANSACTIONS NOT USUMIOUS. 263 an order modifying au injunction. The plaintiffs filed a bill to recover back securities pledged by them to the defendant, for alleged usurious loans. It was charged in the bill that the plain- tiffs borrowed money of the defendant, for which they gave their promissory note, which note was renewed from time to time, on. the payment of extra sums of money, under the name of commis- sions, or for "extra trouble." The question presented was, whether a voluntary payment of a mere gratuity by the borrower to the lender, on the return of a sum of money legally loaned, necessarily made the next loan between the parties usurious, or raised a presumption that it was so. The court held that it did not. It was declared, however, that a long series of successive loans, running through a period of fifteen months or upward, and an invariable payment of large premiums on the return of the money or renewal of the period of credit, would be so suspicious as to raise a presumption that both parties understood that the payment of an exorbitant sum was the condition of the successive loans {Storer v. Goe, 2 Bosw. E., 661). The ninth case which wiU be considered was decided by the Supreme Court of the State of New York, in November, 1857, at a Special Term of the court. The action was brought to fore- close a mortgage, dated August 1, 1846, but was not, in fact, exe- cuted, nor the principal sum of money borrowed received by the defendant, the mortgagor, until the 24th of August, 1846. The defendant had paid the interest upon it regularly for nine years. The defendant interposed the plea of usury, predicated upon these facts. The plaintiff moved fpr judgment on account of the frivo- lousness of the answer, and the motion was granted. Roosevelt, J., said : " In the present case the defendants allege that the mort- gage sought to be foreclosed, although dated on the first of the month, was not, in fact, executed until the 24th of August, 1846 ; that it was so dated on the first of the month for the purpose of reserving a greater rate of interest than seven per cent ; and that the plaintiff did thereby reserve to himself, for the loan, fourteen dollars above the lawful rate. There is no averment, it wiU be observed, that the fourteen dollars, which constitute the grievance of the offense charged, were ever exacted or paid, and no interest is now claimed as due for the nine years prior to 1855. The defendants, in fact, admit that eighteen installments of interest, whatever they were, accruing prior to that day, were satisfactorily 264 i-4W OW USURY. arranged and paid. The idea of a recovery, therefore, is clearly an afterthouglit, and savors strongly of the nature of what the law denominates ' stale demarnd,^ and which the courts, especially when sitting in e^iiity, invariably discharge. Besides, the defendants' answer, so far as it alleges facts, and not inferences, may be per- fectly true, and yet the loan may have been, as it possibly was, engaged, and the money actually set apart in the first days of the month, the intermediate three weeks being devoted to the prepa- ration of the papers and examination of the title. * * * Judgment for the plaintiff, with costs " {Bomhs v. Van Anlwerp, 15 How. Pt. R., 29-31). The tenth case in order which will be referred to was decided by the Court of Appeals of the State -of New York in 1859, on appeal from the Supreme Court. The action in the court below was upon two promissory notes. The defense was, that the notes were usurious and void. The cause was tried before a referee, who reported that the two notes were given for the balance of a bank account, due from the defendant to the Exchange Bank of Buffalo ; that the account was for the repayment of checks drawn by said defendant on said Exchange Bank, payable by their terms in west- ern and Canada bank bUls, and which were thus paid ; that neither such western nor Canada bank bills were received by the bank, or the plaintiff, at par, and they were not bankable at Buffalo, but were received by merchants in their ordinary deal and in trade, at their nominal value ; that there was no agreement between the .plaintiff and defendant that the defendant should draw his checks payable in Cahada and western bills. On these facts the referee overruled the defense of usury, and reported in favor of the plain- tiff. Judgment was entered on the report of the referee, which was affirmed, on appeal, by the General Term of the Supreme Court, and the defendant appealed to the Court of Appeals, where the judgment of the Supreme Court was affirmed. Grover, J., in his opinion, said : " The payment of the defend- ant's checks drawn for western and Canada currency by the plaintiff in such currency, was not a violation of the statute against usury. No agreement whatever between the parties, in relation to these checks, is found by the referee " {Godd v. JSathbone, 19 ]V. Y. R., 27, 38). The eleventh case which will be considered was decided by the same court in January, 1854, on appeal from the Supreme Court. TRANSACTIONS NOT USTTRIOUS. 265 The action was on a promissory note made by one defendant and indorsed by the others. The defendant set up the defense of usury, and on the trial at the Circuit it appeared that the maker of the note was indebted to one Hyde on a note, and went to him, telling him he wanted to give another note for it; that Hyde said he would do it on the same terms as before, which was two and a half per cent per month ; that he afterward took the note to him and Hyde put his name on the back of it and told the maker to take it to the bank and get the money, which he did, and with the money paid the former note. The money was raised by the dis- count of the- note indorsed by Hyde by the bank. On these facts the plaintiff requested the judge to hold that there was no evi- dence to show that the note in suit had ever been the property of Hyde, and that the plaintiff was entitled to recover. The judge refused so to decide, but submitted the case to the jury, to which the plaintiff excepted. The jury found a verdict for the defend- ant and a. judgment was entered on the verdict, which was reversed and a new trial ordered at the General Term, and the defendant then brought an appeal to the Court of Appeals with the usual stipulation. The Court of Appeals affirmed the order of the Supreme Court, and ordered judgment absolute for the plaintiff. Denio, Ch. J., in his opinion, said : " The plaintiff derives title to the note from the Auburn Exchange Bank, and if that bank could maintain an action upon it, the plaintiff is entitled to recover in this suit. The bank discounted it in the usual course of busi- ness for Sehenck, the maker, and knew nothing respecting the transaction between Sehenck and Hyde. If the defense of usury can be sustained, it must be because the note had a legal inception in the hands of Hyde before it was offered to the bank for dis- count by Sehenck. The jury here found that it h^A such an inception, and the precise question is whether there was any evi- dence tending to establish that fact suitable to have been submitted to the, jury. I think there was not.- All that passed between Sehenck and Hyde was that tie former handed the note to the latter, who indorsed it and handed it back. Then Sehenck took it to the bank and procured it discounted for his own benefit. This was a usual transaction between maker and accommodation Indorser. * * * It follows that this note had its first inception when the bank discounted it for the maker, and the finding 34 266 ^^W OF USURY. of the jury was without any, even the slightest, evidence to sup- port it" {KitoheU. Schmclc, 29 N. T. E., 515, 517-519). The twelfth case to which reference will be made* was decided by the Supreme Court of the State of New York in May, 1864. The action was upon a promissory note, and the defendant inter- posed the defense of usury. The case was tried before a referee. It appeared that the note was given for the consideration of the plaintiff's interest in some land. The note was dated back to the time of the making of the deed for the land, so that it thus drew interest for some time prior to its date. The referee held that this did not constitute usury, and gave judgment for the plaintiff. The defendant appealed to the General Term, where the judgment was affirmed. Miller, J., delivered the opinion of the court and said : " The note was dated back and provided for interest by the agreement of 'both the parties, and without some positive evidence to estab- lish that tihiis was intended as a cover for a usurious transaction, such an inference must be drawn. * * * The defendant had been in possession of the farm for some time prior to the execution of the note, and there would seem to be a propriety in datiQg the note on the same day as the deed. As the contract provided no time of payment at the time it was signed by the plaintiff, it was open for negotiation and arrange- ment. It is evident that the plaintiff was not aware that any alteration had been made, and in claiming interest she did not intend to demand more than she was entitled to. In order to constitute usury both parties must be cognizant of the facts which make out the usurious contract " {Poiiodl v. Jones, 44 Barb. R., 521, 524). The thirteenth case which will be referred to was decided by the New York Court of Appeals in June, 1864, on an appeal from a judgment of the Supreme Court. The action was upon a pro- missory note by an indorsee against the maker and an indorser ; the defence was usury. It was in proof on the trial at the Circuit that the note, which was for |265, was made by the maker for the accommodation of the indorser and held in his hands to raise money upon for his use. It was first negotiated to James and Ames Eay, under whom the plaintiff claimed as indorsee. They advanced to the first indorser, in a few days after the date, the sum of $250. The TRANSACTIONS NOT USURIOUS. 267 defendants claimed that the difference between this sum and the amount of the notes was a nsurious premium. The said ^first indorser testified that he sold the note to the Eays for $250, and that the business was transacted with James Ray, and he denied any recollection of any other amount. James Ray testified, among other things, that the said first indorser pretended to him that he wanted to raise money for his own accommodation, and indorsed the note to him for $250, with the understanding that the fifteen dollars could be arranged fbr at a future time. He positively denied that he was to have the fifteen dollars for advancing the money,' and said he did not buy the note, but took it by way of voucher for the money advanced. On this evidence the defendants asked the judge to instruct the jury to render a verdict for the defendants, which he refused to do, and the defendant excepted. The judge charged the jury that the note, first had an inception when negotiated by the first indorser, and if it was sold or discounted at a discount of fifteen dollars, it was nsurious. But he further charged that if they found, from the evidence, that the arrangement was that Eay should discount the note in part, and to the extent of $250, by advancing that amount upon it, with the understanding that the note should be held for that sum and interest thereon only, the transaction would be a valid one, and in legal effect it would be the same as if the note had been reduced by indorsement to $250 and interest, and then transferred for that sum, and in such case the plaintiff would be entitled to recover to the amount of $250 and interest thereon. The defendants excepted to the charge. The jury found for the plaintiff for $250 and interest ; and the judgment was affirmed at the General Term. The defendants thereupon appealed to the Court of Appeals, where the judgment was unanimously affirmed. Denio, Ch. J., in his opinion, said : " It is quite usual for notes and mortgages to be drawn, dated and executed preparatory to a loan, and providing for the payment of interest from their date, and afterward made operative by delivery and the advancing the amount of the principal sum mentioned in them. In such cases an amount would, prima facie, be secured to the lender greater than the sum loaned and the legal interest, and the securities would be liable to the charge of usury ; but if it could be shown that such was not the intention, but, on the contrary, that it had been 268 XfAW OJP USVBT. .expressly agreed between the parties that interest should be pay- able only from the time the money was advanced, the defense of usury would be repelled. It very frequently happens that notes and bills, prepared for the purpose of being discounted, are made for a larger amount than the bank or other party which is expected to be the lender is willing to advance. H, in such case, it be agreed that only a part of the amount should be lent, and that the paper should be Hiegotiated for the security of that amount only the transaction is not usurious. * * * The note, on its face, contain? no feature of which usury could be predicated. That was attempted to be made out by the parol evidence. There is . nothing respecting interest, whether lawful or excessive, in it. The defendants made out by parol a prmoa facie case of usury ; but this was subject to be met and disproved by the same species of evidence. * * * I am satisfied the Supreme Court was right, and that the appeal was without substantial merits, and am for affirming the judgment appealed from." Hogeboom, J., in his opinion, said : " The judge charged that if the transaction was a loan of $250 for that amount of money advanced, and the note was not to be held for any larger amount, and such was the understanding of the parties, the transaction was lawful, and the plaintiff could recover as upon a loan for that amount. This charge was excepted to, first, as not being within the range of the fact ; and second, as the action was brought upon the note as an entire contract to recover the whole amount, and not a portion of the note, but not specifically upon the ground that it was not within the issue of the pleadings. I think the charge was correct, and was unexceptionable in point of law. There were also suflaicient facts in the testimony of James Eay to justify its being submitted to the jury in that aspect of the case. * * * The judgment should be affirmed " {Sohoop v. Glarke, 1 KeyesR., 181, 184, 185, 188, 189). The fourteenth case which will be considered was decided by the Supreme Court of the State of New York in 1865. The action was upon a promissory note, made by the defendants, for $300, payable three days after date. The evidence showed that the plaintiff in the first place, purchased a note of $300 of the defendants, for $280, which was made by one of the defendants, and indorsed by the other defendant and another person. That note was made for the purpose of raising money upon it. When TBANSACTTONS NOT USURIOUS. 269 the note was nearly due, tlie defendants made the note in suit, and the plaintiff wrote upon it a guaranty of the payment and collection thereof. This note was delivered to the payee, a third person, who paid to the defendants the full amount thereof in mpney, less the interest for the time it had to run, that is, he lent the defendants the amount of money specified in the note, less the interest which the note would have drawn if it had been made payable with interest. The plaintiff paid the amount of that note to the said payee before it became due, and received it from him. The defendants paid the money which they borrowed of the payee named in the note in satisfaction of the first mentioned note. The defense was usury. The cause was referred to a referee, and on the trial these facts appeared, and the defendants insisted that the plaintiff paid the same identical money, which they paid to him, to the payee, for the note in suit. The referee found that the note in suit was valid in the hands of the plaintiff, and reported in favor of the plaintiff for $358.15, the whole amount thereof. A judgment was entered on the report of the referee, and the defendants appealed to the G-eneral Term, where the judgment was affirmed. Balcom, J., delivered the opinion of the court, and said : " The transaction was far from usury as between Ballantine and the defendant, and the note was clearly valid in the hands of the for- mer; and if he had kept it, he could have maintained an action upon it, against the defendant, or he could have maintained an action upon the guaranty of the payment of it against the plaintiff. " Granting that this note was made at the request of the plaintiff, and negotiated at his request to Ballantine, by the defendant, and that the money the latter obtained on it of Ballantine was paid by them to the plaintiff, in satisfaction of a note against one of the • defendants, that was indorsed by the others, which was void for usury in the plaintiff's hands, the transaction did not make the note in suit against the defendants usurious or void, when it came into the plaintiff's hands. Being valid in its inception, and when it was first negotiated, it remained valid, and the defendants had no defense to it "{HcmhsY. Weaver, 46 Bm-l. R., 164, 166, 167). The fifteenth case to which reference will be made was decided by the Court of Appeals of the State of New York in 1866. The action was brought in the Supreme Court, for the foreclosure of a mortgage, and the facts of the case were, in brief, as follows : 270 LAW OF USJTRT. In 1842, the defendant owned a large amount of real estate in Wayne county, New York, and was largely indebted to divers persons, some of whom were secured by mortgage on portions of the land, but most of the indebtedness was to creditors residing in the city of New York, who had perfected judgments, and issued executions to the sheriff of "Wayne. The plaintiff resided in the State of New Jersey, and. owned a large amount of stocks, with which it was supposed he might pay up the indebtedness of the defendant, although the stocks were, in point of fact, below par; and 'an arrangement was made between the defendant and plain- tiff, by which the plaintiff bought up the mortgages, judgments and other demands against the defendant, a portion of which hie got at discount, raising the money by a transfer of his stocks, in some instances, below par. The defendant, to secure the plairttifi for the full amount of such indebtedness, executed the mortgage ' in question. There were many other facts in the case, but the above is the substance of those on which the defense of usury was predicated. The referee held that the defense of usury failed, and/ reported in favor of the plaintiff, and ordered judgment of fore- closure ; his judgment was affirmed at a General Term, and the defendant appealed to the Court of Appeals, where the latter judg- ment was also affirmed Porter, J., delivered the opinion of the court, and said : " The mortgage which the defendant seeks to impeach was for the pay- ment of an antecedent debt. It was given to secure the precise sum legally due to the plaintiff. It represented the amount of certain outstanding claims, which he had purchased with his own means, and for his own benefit, from the creditors, by whom they were previously held. His legal rights Avere in no manner impaired by the circumstance that he did this at the request of the defendant, and for the purpose of averting a forced sale of his property. " It is a misnomer to speak of the transfer of a demand by one creditor to another as a loan of money to the debtor, within the intent of the usury laws." After detailing certain efforts which had been made by the plaintiff to assist the defendant, which, did not succeed, the learned judge says : " On the failure of the proposed arrangement, the plaintiff did not relinquish his purpose to aid the defendant. * *• * He purchased and took assignments of the outstanding plaims, making up, by the discount on some of the TRANSACTIONS NOT USUBIOUS. 271 purchases, for loss on others, by the transfer of -his stocks, at less than par. He accepted a mortgage for the precise amount due from the defendant, payable five years from date, with annual interest. * * * It would be a gross perversion of the statute to sustain a, defense of usury where no unlawful gain or advantage is either bargained for or secured by the creditor, and where no loss can be entailed on the debtor, by fulfilling the terms of his engagement. The law applicable to the facts is clear; the defense is without merit, and the judgment should be affirmed, with damages for delay" {Grcme v. Price, 35 N. Y. B., 494, 498, 499). The sixteenth case which will be referred to was decided by the Supreme Court of the State of Pennsylvania, in 1868. The case involved the validity of a security under the usury la^s, which included a stipulation to pay certain attorneys' commissions, in case tlie security had to be prosecuted, and it was held that such a stipu- lation did not render the security usurious. Sharswood, J., delivered the opinion of the courtj and said : "It ought to be considered as fairly settled by the former decisions of this court, that a creditor, on taking a security from his debtor, whether mortgage, judgment, bond or note, may lawfully include a stipulation that in the event of his being compelled to resort to legal proceedings to collect his debt, he shall be entitled to" recover also with it the reasonable expenses to which he may be subjected, or a reasonable sum or commission on the amount to cover such expenses. In Hulmg v. Dremel (4 Watts, 126), the mortgage pro- vided that in case of default the mortgagee might sue forth a writ of scire facias to recover the principal and interest, ' and all costs, charges and expenses of every kind ' to which he might be put. It was held not to be usurious, nor was it an unlawful stipulation. * * * In Fhtzsimmons v. Bcmm (8 Wright, 32), there was included in the amount to be recovered, ' all fees and expenses of such proceedings, including an attorney's commission of five per centum,' and so was the judgment which was afterward affirmed without any exceptions having been made as to that mat- ter. In Robinson v. Loomis (1 P. F. Smith, 1), which was also a mortgage, the clause was simply ' with five per cent attorney col- lection fees,' and this court, in affirming the judgment, merely say : ' The five per cent stipulated to be recoverable as fees to the attorney for collection can in no sense be regarded as a penalty. It was an agreed compensation for expenses incurred by the mort- 272 LAW OF VSTTtlT. gagees in consequence of the default of the mortgagor/ I have recited these cases at large to show that this court has set the seal of its approbation on such agreements " {MoAlUster's Ajpped, 59 Perm,. E., 204, 306, 207). The seventeenth case to which reference will he made under this head was decided by the Supreme Court of the State of New ■ York in 1869. The action was brought to recover a sum unpaid on an agreement, and the defense of usury was interposed. The cause was tried before a referee, and on the trial it appeared that the defendant toot a mortgage from the plaintiff, and gave back the agreement in suit, by which the defendant agreed to pay the mortgagor the amount reserved, with interest, and also to dis- charge the interest on the mortgage, The bond and mortgage were then transferred by the mortgagor to the superintendent of the banking department, as security for circulating notes issued to the former, equal in amount to the sum secured, and it had 'been given for the purpose of such transfer. The referee decided that the contract was not tainted with usury on the facts stated, and reported in favor of the plain tiff. Judgment was perfected on the report of the referee, and the defendant appealed from the judgment to the General Term, where the judgment was affirmed. E. Darwin Smith, P. J., delivered the opinion of the court, and said; "Whatever is the form of a particular transaction, there must be in substanee and effect a loan of money to bring the case within the terms and intent of the statute. In this case there was no loan of money. It clearly was not the object or purpose of the agreement between the parties to effect or cover up a loan of money. The transaction may, perhaps, be regarded as an exchange of securities. The plaintiff executed and delivered his bond and mortgage for the defendant's agreement to pay him $920 and inte- rest, and pay the interest on his bond and mortgage. An exchange of securities, even though one party makes a profit by the trans- action, is not usurious unless connected with a loan of money, and designed to cover such loan {DvMham v. Dey, 13 Johns., 40; Swydcmi v. WestfaM, 4 Hill, 211 ; Ketchmn v. Barber, 4 ib. , 225). But I think the transaction may more properly be regarded as an arrangement for the execution and delivery of the said bond and mortgage for the consideration of $950, the amount of its face, to be paid in the currency to be received from the banking depart- TRANSACTIONS NOT USUBIOVS. 273 ment upon the same. The bond and mortgage were made to be, and were, immediately transferred to the superintendent of the banking de'partment in exchange for circulating noteg. This would make the mortgage a valid mortgage immediately as between the parties. * * * At least there was no loan of money between the parties, and none intended, and we cannot say, as a matter of law, that the transaction was designed to cover a usurious transae tion, and was in law in violation of the statute " {Perrme v. Sotoh- Tciss, 2 Lans. B., 416, 418, 419). The eighteenth case to which reference will be made was decided by the Supreme Court of the State of New York in Sep- tember, 1871. The plaintiff's testator loaned his individual funds to the defend- ant's testator on bond and mortgage, with knowledge that the money was borrowed to pay the borrower's notes due to a bank of which the lender was president and financial officer, but without any agreement in that respect, and the money was actually used f&r that purpose. In an action to enforce the bond and mortgage, by a foreclosure and sale of the mortgaged premises, and the reco- very of any deficiency which naight remain on the bond, the defendant alleged that the bond and mortgage were, by reason of the fadts stated, void for usury. The case was tried by a referee, who reported in favor of the plaintiffs, and the defendant appealed to the General Term of the Supreme Court, where the judgment of the referee was affimied. The court held that the defendant could not defend the action on the ground of the alleged usurious consideration taken by the bank on negotiating the notes ; and it was declared that there was no rule of law which makes it unlaw- ful or usurious to loan a borrower money to pay the usurious debt of such borrower to another. Johnson, J., delivered the opinion of the court, and,, among other things, said ; " Where a new secu- rity is given to the same lender, to secure a usurious debt formerly contracted, it will partake of the taint of the original debt, even though given by a third person, if there is no other consideration than the original usurious indebtedness ( Yickery v. Dickson, 35 ^arb., 96 ; Bell v. 8cott\ 24 Wend., 230). Here, however, the mortgage is given by the borrower of the bank to a third party, and upon receiving from such party the full face of the bond and mortgage in money belonging to him. There is no element of usury in siiph a transaction, * * 1^ There was ro legal, privity 35 274 LAW OF U8URT. between Eich and the bank, in the transaction in question, so far as the evidence goes " ( Wilson v. Ha/rvey, 4 Lcmsing'a E., 507, 509, 510). "And the nineteenth and last case which will be referred to, on this head, was decided by the Court of Appeals of the State of New Y k, also in September, 1871, being a very late case in that court, and but recently reported. The doctrine qf the case is expressed in the head-notes of the report, viz. : That where an advance is made in one place, upon a check drawn upon a bank in another, no question of usury can arise out of the transaction, because there is no loan or forbearance of money for any time whatever. The court declared that, had there been a loan for any time, they would have had no difficulty in seeing usury under the facts of the case, unless the statute on that subject be regarded as repealed, of which there is no pretense {Crocker v. Colwell, 46 iV. Y. E., 212, 217). Other cases might be referred to, from the reports of the differ- ent States, involving the question of usury, wherein the trans- actions have been upheld by the courts ; but, perhaps, they would illustrate no new principle, nor shed any new light in addition to that contained in the cases already examined. It will be observed that most of the cases referred to in this chapter arose in the State of Wew York ; and, as the statutes against usury in this State are more stringent than the laws of most of the remaining States, those authorities may be regarded as sufficiently exacting for any of the States where usury laws may exist. CHAPTEE XX. TEANSAOnONS HELD TO BE USUEIOtrS OASES OP ALLEGED MISTAKES -7- CASES OE PTJEOHASE OF NEGOTIABLE PAPER MISTAKE m C0N8TEU0- TION OF STATUTE. Having considered the leading cases involving the question of usury, in which the transactions were judicially declared to be exempt from the taint of usury, it remains next to refer to some leading authorities wherein the contract was held to be within the statute against usury, which may serve as precedents from which to determine the question in any given case. It has been asserted aijd demonstrated in the preceding chapter^ TRANSACTIONS HELD USURIOUS. 275 that a contract made usurious by mistake of the parties will not be invalidated thereby, because in such case there is lacking the important element of a corrupt intent ; but it is not all cases of mistake in reserving illegal interest th.at will have this effect, for if the agreement be clearly usurious it is subject to the statutory taint, though the parties did not intend it, and were ignorant that such would be the effect. The criminal intent is always a matter of legal inference where once the fact is found. This doctrine is illustrated by an early case before the Supreme Judicial Court of Massachusetts. The notes of a bank at sixty-three days would be payable at the end of the ninth week ; but the officers of the bank were in the habit of receiving renewed notes the week before, charging interest for nine weeks, thus allowing in fact only eight weeks. It appeared that this was merely for the convenience of calculation, and the bank had no intention to violate the law ; but the court declared the practice usurious. Sewall, J., who delivered the opinion of the court, concludes in this manner : " It is probable that in this case there was no inten- tional deviation on the part of the bank, but a mistake of their right. This, however, is a consideration which must not influence our decision. The mistake was not involuntary, as a miscalcula- tion might be considered, where an intention of conforming to the legal rule of interest was proved, but a voluntary departure from the rate. An excess of interest was intentionally taken, upon a mistaken supposition that banks were privileged in this respect to a certain extent. This was, therefore, in the sense of the law, a corrupt agreement, for ignorance of the law will not excuse " {Maine Bank v. Butts, 9 Mass. E., 49). The doctrine of the case of the Mains Bcmk v. Butts seems to be, in a few words, that if a greater rate than legal interest be reserved or taken by a party to a contract, upon a mistaken sup- position of a legal right to do so, it is, nevertheless, a corrupt agreement within the statute. The case conforms to the English doctrine, and is in accordance with well recognized rules of law. The same question, in its present aspect, came early before the old Supreme Court of the State of ISTew York, and a similar decision was made as in that of the Massachusetts case. The action was brought to recover the amount of a promissory note, discounted by an incorporated company supposed to be possessed of banking powers, a,nd given to take up another note, the amount 276 LAW OF USUBT. of which was ascertained and determined upon the theory that ninety days were the fourth of a year and three days the tenth of a month, the conceded effect of which was to give the lender inte- rest of 365 days upon a forbearance for 360 days. The defense, among others, was usury. Upon the direction of the judge at the circuit, the jury found a verdict for the plaintiff for the amount of the note, subject to the opinion of the Supreme Court on a case to be made, with leave to either party to turn it into a special verdict or bill of exceptions. The case was fully and ably argued in the Suprenie Court, and judgment was ordered for the defendant, the court holding that the transaction was within the statute and usurious. Sutherland, J., in his opinion, said: ""Was the note usurious in conseq^uence of the interest having been calculated upon the supposition that ninety days were the fourth of a year, and thyee days the tenth of a month? * * * It is admitted, by all writers and in all the cases upon this subject, that the intention of the contracting parties is the principal subject of inquiry in determin- ing whether a contract be usurious or not, for if the intent of the contracting parties be righteous the contract cannot he within the statute of usury. * * * 'Yhe payment and receipt of usurious interest is, prinna fade, evidence of a corrupt agreement (1 Sawnd., 295, 296, in note). It must be con- ceded that more than seven per cent per a/rmvm, was received upon the discount of the note in this case. How is this presump- tion of law, that it was received in pursuance of a corrupt agree- ment, sought to be repelled ? Not by showing that the sum paid .for interest was greater than the parties intended should be paid, that there was a mistake in telling the money, or that the clerk who counted the interest had fallen into an arithmetical error, but by showing that the excess arose from the adoption of a prin- ciple of calculation which the parties knew would give more than seven per cent, though they believed it was not a violation of the statute. In other words, the plaintiffs received more than seven per cent, because they believed that they" had a legal right to receive more. If they adjudged erroneously; it was a mistake in point of law and not in point of fact ; • and unless there be some- thing in the case of usury to distinguish it from all other cases, the ignorance or mistake, in relation to the law, can afford them po protection, * * * That the principle of cp^lcnlation adopted TRANSACTIONS HELD USURIOUS. 277 by the plaintiffs was the one in general or universal use among banks, cannot alter the sense of the case. A statute cannot be obviated by the custom or usage of a particular trade. * * * Where the law is clear, no usage can control it. * * * The custom or usage of banks or individuals cannot shorten a year to 360 days. But a different mode of calculating interest on notes payable at sixty or ninety days and notes payable in two or three months, is established and practiced ( Vide tables m, Ohitty on Bills, last ei., 608, 609). " I cannot, therefore, resist the conclusion that the note in this case was usurious in consequence of interest having been calcu- lated and taken upon the principle that ninety days were the fourth of a year" {New York Firemen Insurance Compamy y. Ely, 2 Cow. B., 678, 704r, 705, 707, 708). The doctrine of this case is, that casting interest upon the prin- ciple that thirty days are the twelfth of a year, sixty days the .sixth of a year, ninety days the f oiu-th of a year and the three days of grace the tenth of a month, and discounting a note upon iSuch a calculation, is usurious, and the note, consequently, void. A case was decided, by the late assistant vice-chancellor of the first circuit of the State of New York in which the same doctrine was enunciated, and a transaction declared to be usurious where a party had taken, in addition to legal interest, a certain per cent under ithe name of exchange, under the mistaken impression that such sum was legal, when, in fact, the case was not one in which a charge for exchange could be properly made. A bill was filed to compel the defendant to deliver up to be canceled sundry promis- sory notes, alleged to be usurious, and to surrender the collateral security thereto. The notes were given for a loan of money in the city of New York under a contract by which the borrowers agreed to pay the lender for the use of his money seven per cent interest — five per cent more under the denomination of "the exchange from Savannah," and two and a half per cent upon all sales of watch movements made by them. The lender was a resi- dent of Savannah, in the State of Georgia, from where he had brought his money, but the loan was made in New York. The court held that the transaction was usurious and granted the relief prayed for. Sandford, A. Y. C, in his opinion, said : " The case itself is one of immitigated usury. The loan was made in this city in 1840, 278 LAW OF USURY. and tlie borrowers agreed to pay Mr. Mchols for the use of the mcmey seven per cent interest — ^five per cent more under the denomination of ' the exchange from Savannah,' and two and a half per cent upon all sales of watch movements made by them. " The money loaned was here. True, it had been remitted to this city from Savannah, in Georgia, some time before, and upon this fact the defense is founded. It is said that the charge of five per cent was for 'fixmg out the fimd' by transporting it from Georgia in order' to make the loan, exchange on New York at Savannah, being at the rate of nine per cent premium, and that the legality of the charge is sustained by the decision of the chan- cellor and the Supreme Court in Swydam v. Booth (10 Paige, 94), and Suydam v. West/all (4 Hill, 211, 219). * * * But there is no foundation for the charge of any exchange. Not only was the money already here, but it had been sent here without the slightest reference! to this loan. The circumstance that it had come here from Savannah made it worth no more to the borrower. Even if it had cost the defendant twenty per cent to bring it here, it would buy for him no more property after it arrived, nor did our statute permit him, for that cause, to loan it at a greater profit than seven per cent. " As well might a merchant who had brought Mexican dollars from the interior of Mexico, at an expense of ten per cent paid for insurance, freight and protection from robbers, insist, on loaning therii here, that the borrower should pay him those expenses in addition to the interest. * * * It is true that there must be an intent to reserve or taUo more than seven per cent. In this instance the lender secured twelve per cent for the use of his money, and he intended to obtain it. The statute declares that to be usury, however ignorant he may have been of its provisions, or deceived by the use of the word exchange. •* * * The complainants are entitled to the relief prayed for in their bill " {Jacks v. Nichols, 3 8amd. Gh. R., 313, 3lV, 320). The doctrine of this case, upon the point under consideration, is that there is an intent to take unlawful interest, within the mean- ing of the New York statute against usury, when more than seven per cent is reserved, although the lender took the surplus under a mistaken idea that he had a right to charge the borrower for expenses or trouble. The case of Jacles 'i. Nichols was taken to the Supreme Court TRANSACTIONS MELD USUSIOUS. 279 ttf the State by the defendant by an appeal, and the decree of the assistant vice-chancellor was reversed and the plaintiff 's bill dismissed. Hurlbert, P. J., in giving the opinion of the court, said: " "We think there can be no reasonable doubt that the contract for ' a loan between the parties was tainted with usury, if not in its inception, certainly upon the" renewal of the securities given by the Messrs. Jacks ; and the only ground of defense set up against the plaintiff 's bUl, which we esteem capable of being urged by the defendant, is based upon the allegation that the subsisting con- tract between the parties was made in the State of Connecticut, and that effect would be given to it according to the laws of that State, which, for the purposes of this case, are silent on the subject of usury. * * * This contract, in the absence of any proof to the contrary, is to be intended as legal and binding upon the parties. Having been made in the State of Connecticut, and therefore to be construed by the laws of that State, it is for the plaintiffs to show that by those laws the contract is void, before they can be entitled to the relief prayed for in their bill " {Jacks V. Nichols, 5 Barb. B., 38, 39, 43). It will be perceived that the Supreme Court did not difi'er with the assistant vice-chancellor in his conclusion that the case was one 01 "unmitigated usury;" but' the decree was reversed upon the ground that the contract was made in the State of Connecticut, and that it was not shown to be usurious under the laws of that State. But the complainants appealed from the judgment of the Supreme Court to the Court of Appeals, where the last mentioned judgment was reversed and that of the assistant vice-chancellor was affirmed. Gray, J., delivered the opinion of the court, and concluded thus : " The fact that the note was dated in New York is alone presumptive evidence that the maker not only resided at the place of its date, but contemplated payment there (3 KenHs Com., 96). And for the purpose of charging the indorsers upon the notes, the makers must have been sought at their residence or place of busi- ness in this State. In doing that, reference must have been had to the days of grace given by the laws of this State (2 Kenfa Com., 459 ; 3 id., 96 ; BamJe of Orange v. Colby, 12 N&w M. B., 520). It is therefore manifest that the continuance of the loan, made here upoin sulwtituted securities, practically agreed upon 280 LAVI OF USURT, in this State, and consummated in Connecticut, was all done with reference to the laws of this State, and that it was but the con- tinuance of the original usurious loan, aggravated by each renewal and void by our laws " {Jacks v. Niehols, 5 N. Y. R., 178, 186). And a similar doctrine was laid down by the Court of Appeals of the State of New York in an important case decided in 1865. The action was brought to recover the amount of two drafts, indorsed by the defendant and discounted by the plaintiff, at that time one of the safety fund banks, and subject to the provisions of the act of 1829. The drafts were discounted at the rate of seven per cent per annum, and interest at and after that rate was taken by the teller of the bank at the time. The net proceeds of the drafts were paid to the drawers, and the discount retained by the plaintiff at the time of the discount. The defense interposed was that the drafts were usurious because they were discounted after the rate of seven per cent, when by the statute of 1829 safety fund banks were not authorized to take more than six per cent interest in advance on paper discounted in the ordinary course of business, which became payable within sixty-three days of the time at which it was discounted. It appeared that these drafts were made payable in' eighteen and thirty-five days after their respective dates. The only question litigated on the trial in the court below was in respect to the validity of the contract under which the plaintiff claimed to recover. The defendant had judgment in his favor at the circuit, which was afterward aflSrmed at the General Term of the Supreme Court for the fifth district, and the plaintiff there upon appealed to the Court of Appeals, where the judgment of the General Term was afiSrmed. Brown, J., in his opinion, said : " It is thought by the counsel for the plaintiff that the charge of seven per cent by the bank originated in a mistake of the teller in estimating the amount of the discount, and, therefore, the transaction is not to be treated as a breach of the statute. The proof shows that the cashier of the bank passed the paper to the teller, Thonias J. Leach, with direc- tions to discount it, without further instructions; and that he estimated the amount at the rate of seven per cent, and retained that amount from lihe proceeds, giving the balance to Perry, who said nothing to him about it. He supposed his figures and esti- mate were right, and did not know of the provision of the statute TBANSACTI0N8 MELD USUBIOUS. 281 at the time. He made no error or mistake in what he did. He accomplished Just what he intended, which was, to take the dis- count at the rate of seven per cent. A mere error of figures, an innocent mistake of fact in estimating the amount of figures, would not constitute usury ; because there must be an intention, a corrupt agreement, to take more than the law allows, to make out what is understood by nsury. The rcorrupt agreement spoken of in the books is an agreement to do what the statute forbids. * * * The intention to take the forbidden rate of intel-est, as well as the taking of it, is established beyond a doubt." "Wright, J., in his opinion, said : " If the taking of the seven ■ per cent was a mistake, or unintentionally done, it would not afiect the validity of the transaction. But this is not pretended. The plaintiffs intended to take seven per cent interest on the discount of the drafts ; and had this been a usury case, intentionally taking more than legal interest would have been, per se, usury. There must be a corrupt agreement, it is true, to violate the statute against usury ; but when more than legal interest for the forbearance of money is intentionally taken, whether the party acts in ignorance of the law or not, it is conclusive evidence of a corrupt agreement within the statute" (Bank of SaUna v. Almord, 31 N. Y. R., 473, 475, 479). ^ The doctrine of the case, so far as the question of usury is con- cerned, is laid down in the concluding paragraph of the opinion of Judge Wright, which is also in harmony with the opinion of Judge Brown, that, " when more than legal interest for the forbearance of money is intentionally taken, whether the party acts in igno- rance of the law or not, it is evidence of a corrupt agreement, within the statute," and the contract is void. The fact of ignorance is not available, under the statutes of New York, in another class of cases, one only of which is it necessary to consider. The doctrine is well laid down in a comparatively late case, decided by the present Supreme Court of the State. The action was brought to recover the balance due upon a pro- missory note made by the defendant. The only defense which the evidence tended to prove was the defense of usury. The facts established on the trial were, that on the 14th of March, 1855, one John Earnest, the father of the defendant, John J. Earnest, exe- cuted his bond and mortgage to his son, George W. Earnest, for the sum of $650, bearing interest from the 1st day of April, 1855, 36 282 LAW OF USVBT. for the purpose of raising that sum of money. Failing to raise the money upon the bond and mortgage, he applied to his son John J. Earnest, one of the defendants, to give him his note and take the bond and mortgage, to which he assented ; and about the Ist t)f June, 1855, in pursuance of the agreement, the defendants made their promissory note for $650, and dated it back to the time the mortgage began to draw interest, payable to John Earnest, the father of one of the defendants, or bearer, and delivered it to the payee, who at the same time delivered the bond and mortgage to the defendant, John J.' Earnest, with the promise to have it assigned to him when the grantee in the mortgage came out from Allegany county, where he resided, which was done about the 1st of July following. On the 8th or 9th of June, 1855, John Earnest sold the note to one Kingsley for $605, at the same time representing it to be given for a valid consideration. The defendant, John , J. Earnest, afterward sold and assigned the bond and mortgage to Henry C. Van Duzer, representing the same to be " his own," and that it was " all right in every way." On these facts the defend- ants recovered a verdict, and the plaintiff moved for a new trial at a Special Term before the same justice, which motion was denied, , and the plaintiff then appealed to the General Term, where the order of the Special Term (Rnying a new trial was affirmed. E. Darwin Smith, J., delivered the opinion of the court, and said : " A promissory note, to be the subject of a sale, must be an existing, valid note in the hands of the payee, and given for some actual consideration, so that it can be enforced between the origi- nal parties. The doctrine is too well settled to be questioned, that such a note, not valid in the hands of the payee, cannot by him be rendered valid by a sale thereof to a hona fide purchaser at a rate of interest exceeding seven per cent. To be the subject of such sale, it must have a pre-existing validity. Its breath of life cannot be imparted through a usurious transaction. * * * The fact that indemnity was given to the accommodation maker did not render the note any the less usurious. The charge was clearly right on this point. The argument that there can be no usury where there is no corrupt agreement, and that there can be no corrupt agreement to take usury when the party discounting bhe paper is ignorant that it was merely made for the purpose of rais- ing money thereon, and is, in fact, informed at the time that it is valid business paper, is not sound, if the legal effect of the TBANSACriONS HELD UBUBIOUS. 283 transaction involves a usurious agreement, for the law will not allow men to assert their ignorance of the laws or disclaim an intention to do what their express contracts imply. Odious as the taking of usury has ever been, in the scale of crime the offense is mere malum ;prohibitMm, not ma1/u,m in se. In many cases of decided usury^ there was not even an intent to evade the statute. In many cases the contracting parties did not suppose, at the time, that they were violating any law, and such, I doubt not, was this case. * * * So far as Kingsley vras concerned, there was clearly no intention to evade the statute, or to take usury. * * * He supposed he was pul-chasing business paper, as he lawfully might do, at a discount exceeding seven per cent. He knew, however, that he was stipulating to get more than seven per cent for the use of his money. * * * This doctrine in regard to the usuri- ous character of a promissory note, nominally sold upon a false representation that it was business paper and given for value, had its origin before usury was made, as it is by our statute of 1837, a criminal offense, and is hardly reconcilable with the principles which would govern the questions upon the trial of an indictment for usury. * » * * Independently of adjudged cases, I should think in the sale of an accommodation note, like this, that there was nt) usury in the transaction, and that it presented simply a case of fra/tid, where the money was obtained by fraud and false pretenses. * * * The objection of the defendants' counsel that the makers of the note in controversy in this action are estop- ped from setting up the defense of usury, I think cannot be main- tained. I think it would be entirely just. * * * But no adjudged case has extended the doctrine so far as to preclude the defendants in this action from making the defense of usury here interposed " {Hall v. Earnest, 36 Barb. B., 586, 588-591). The doctrine of this case is, that an accommodation note, having in fact, as against the maker, no validity, and never having had any legal inception, is incapable of sale ; and one who buys it of the payee takes the precise place of the payee in respect to the defense of usury, although he purchased the paper in ignorance of its true character and upon the false representation that it was business paper, and given for value, and hence when such a note is sold to a bona fide purchaser at a rate of interest exceeding seven per cent the transaction is usurious, and the note cannot be enforced. The courts of North Carolina have decided that a mistake in the 284 IjAW of usury. construction of the statute of usury, if it results in taking more than legal interest, will render the contract void, although it was admitted that such would not be 'the effect where the error was one of fact. Euffin, J., delivered the opinion of the court, and said : " The discounting of a bill or bond, and taking the general indorsement of the holder, does not ex vi termmi constitute a loan, and if the rate of discount exceed that fixed by the statute, it is a usurious loan. It is said, non constat, that these parties knew that the indorsejcs were secured thereby, without which there was no corruption. It is to be taken they knew it, and that the indorsement expresses their contract, until the contrary, as a mis- take in the writing, or the like, be shown. If a person miscon- strues the statute or law, he must abide by his error. If he mis- takes the fact, as the amount reserved, he may show it" {ColM&r V. IfeioiU, 3 D&o. E., 30). CHAPTEE XXI. TEAHSACTIONS HELD TO BE USTTEIOITS WHEBE THERE WAS AN ALLEGED HAZARD ATTENDING THE PRINCIPAL CASES OF SEA RISK — CASES BETWEEN COPARTNERS CONTRACTS IN THE FORM OF A POST OBIT CONTRACTS IN THE FORM OP AN ANNUITT — OTHER ALLEGED RISKS. It has been heretofore shown that the circumstance of a hazard attending the principal wiU exempt the transaction from the opera- tion of the statute against usury, and cases have been referred to illustrating the doctrine. But it is not every slight contingency,, where the substance of the contract is that of borrowing and lend- ing, which will take the case out of the statute ; and it has often happened that parties who have sought to get more than legal interest for the use of their money, under cover of this principle have failed, and the transaction has been held to be usurious. An early case in the English courts illustrates the point. One Henry Wilson borrowed £2,000 of one Morse, and on' being pos- sessed of two shares, calculated to be of the value of £1,000 each share, in a brew-house, the business of which was then carried on by him and two partners, which two shares were expected to pro- duce a larger surplus of profits to him than would be. sufficient to TRANSACTIONS HELD USVBI0V8. 285 satisfy the interest of £2,000 after the rate of legal interest, had agreed with Morse, that in consideration of his forbearing the £2,000 till the 11th of June, 1789, he would pay him, Morse, not only the interest, but also such surplus profits as should arise from two shares of the brew-house during the time of forbearance, and the shares should be assigned over to him so as to be his own piroperty ; the Court of King's Bench held the transaction to be tsurious. Lord Kenyon, C. J., observed : " The simple question is, whether this is not an agreement to receive more than five pounds per cent allowed by law for the forbearance of a loan ? Most unquestionably it is. It has been argued, however, that this was not a usurious contract, because the principal was put in hazard, as it was liable to the partnership creditors ; but it was no further hazarded than in the case of every other loan, namely, by the risk of the borrower's insolvency ; for as between the plaintiff and the partners in the business^ he was not liable to contribute to the losses in the trade." Buller, J., said : " In this agreement provision is made to receive the profits, but none to engage for the losses of the trade. And therefore it is not true that the plaintiff's principal was at stake, since by the terms of the contract the trade is to be carried on by the other partners, and the plaintiff is only liable to make good the losses of the trade in the event of the insolvency of the other partners. But as between these parties, if there be any losses, they must be'borne by the defendant and the other partners, and if there be any profit, the plaintiff is to receive his proportion of it " {Morse v. Wilson, 4 Term B., 353). Another early English case may be referred to on the point. One Eenolds brought an action of debt against one Clayton for £60 upon a bond, the condition of which was, that if the defend- ant should pay £33 to the plaintiff on the 1st of June, if Chris- topher^ the son of the plaintiff, was then aUve, or, if he died before that day, £26, then the obligation should be void. The defendant set up the defense of usury, for that it was agreed, as above stated, upon a loan of £30 by the "plaintiff to the defendant. The court held the case to be one of usury under the statutes, for it was the intention of the makers of the. statutes that such subtleties should not be practiced. And it was said that here the condition might as well have been, if twenty persons, or any of them, be alive at one 286 LAW OF TTSXTBT. day, as to have been as it was ; and in this opinion both Popham, 0. J., and Periam, 0. B., concurred (Renolds v. Ulwyt07i, 5 Goh^g R., 70, 1 ; 8. C, 2 And., 15, pi. 8; and vide Button v. Down- holm, Ore. EUz., 643). And still another very early English case may be cited. The case was this : The obligor was bound in a bond of £300 to pay £22 10s. premium at the end of the first three months after the date of the instrument, and sixpence in the pound at the end of six months as a further premium, together with the principal itself, in case the obligor should then be living, but, in case he died within that time, then the principal was to be lost. This was adjudged to be a case of usury. Holt, 0. J., said : " This is not a bottomry bond, by reason of the danger of the sea ; for they who lend on bottomry bonds are as merchant adventurers." Aad at another day, Thompson was urging the hazard that the plaintiEE ran in the case, when the chief justice observed, " I am of your opinion. Brother Thompson ; for you run a great hazard, not of the casualty of death, but of the loss of your money ; for it is manifestly usurious, for dying within half a year is no hazard ; and if it should not be so, the statute would be easily evaded, and signify nothing" {Mason v. Abdy, 3 Salk. E., 390). Several American cases niay be cited, in which the same distinc- tion is recognized as in the English authorities. A leading case is one recently decided by the Court of Appeals of the State of New York, where the transaction was attempted to be sustained on the ground that it was, in substance, a bottomry bond, and, therefore, taken out of the statute. The action involved the validity of an agreement which was substantially this : Hoppock, the defendant, was to advance $1,500 on the brig Sophia, loading in New Tork, and bound for San Francisco ; and the plaintiff, Braynard, agreed to pay him, for the use of the money, twelve per cent commission and interest at seven per cent per annum from date (May 16, 1850), until the said amount was paid to said Hoppock in New Tork. Braynard further agreed to transfer to Hoppock the policy of insur- ance on the brig, for $8,000, also the policy of insurance on the freight, and the bills of lading of cargo, together with a bill of sale of the vessel. The brig was to be consigned to Mr. Eidle- man, in San Francisco, who was to collect her freight, charging the customary commissions at that place for doing the business. He was to remit to Hoppock, from the proceeds of the vessel's account, TBANSACTIOm HELD USURIOUS. 287 the amount loaned and twelve per cent commission, and. interest added until the funds could be placed in Hoppock's hands in New York, holding the balance subject to the order of Braynard. On receipt of the funds in New York, Hoppock was to return to Braynard the policy of insurance on, the vessel and bill of sale. In case of the loss of the vessel, the insurance upon her was to be collected by Hoppock, and after paying himself the principal loaned and interest, and twelve per cent commission, as agreed, the balance was to be paid to Braynard. In pursuance of this agreement, the loan of May, 1850, was made, and subsequently a further loan of $366, and Braynard assigned to Hoppock two poli- cies of insurance on the vessel for $2,000 each, and a policy on the freight for $4,000, and also executed and delivered to him a bill of sale of the brig. Hoppock collected from the insurance com- panies about $1,000 on account of policies on the vessel, and $133 on freight policy, and Braynard brought his action to recover from Hoppock these sums of money, on the ground that the original transaction was usurious. The Superior Court of the city of New York held that the agreement was usurious, and gave judgment in favor of the plaintiff for the amount claimed. The defendant thereupon appealed to the Court of Appeals, where the judgment was affirmed. "Wright, J., who delivered the prevailing opinion, said : " The transaction, then, was a loan of money, with a charge of a premium for a loan largely in excess of legal interest. It was clearly usu- rious, unless of such a nature as to take it out of the statute. This is conceded ; but it is claimed that the contract under which the loan was made was, in substance, a bottomry bond upon the brig Sophia. In this I cannot concur. * * * Bottomry is a contract by which the owner of a ship hypothecates or binds the ship as security for the repayment of money advanced for the use of the ship. It is defined by Marshall to be a contract in the nature of a mortgage of a ship, on which the owner borrows money to enable him to fit out the ship, or to purchase a cargo for a voyage proposed, and he pledges the keel or bottom of the ship, pars pro tcmto, as a security for the repayment ; and it is stipu- lated, if the ship should be lost in the course of the voyage, by any of the perils enumerated in the contract, the lender also shall lose his money ; but if the ship should arrive in safety, then he shall receive back his principal, and also the interest agreed upon, 288 LA.W OF USUST. generally called marme interest (2 Marshall on Inswrance, T33). An essential character of bottomry is, that the money lent is at the risk of the lender during the voyage, and that the repayment thereof depends on the event of the successful termination of the voyage. It is the very essence of the contract that the lender runs the risk of the voyage, and that both principal and interest be at hazard. * * * It is no bottomry when the money is payable at all events ; for the principal and extraordinary interest reserved is not put absolutely at hazard by the perils of the voyage. The lender must run the maritime risk to earn the maritime interest. * * * Now look at this case in the light of those peculiar characteristics of a bottomry transaction. It seems to me there is no ground for considering the agreement a contract in the nature of bottomry, or the loan one on bottomry. * * * The lender took no risk whatever, and intended to take none" {Brayna/rdiY. M&pfoch, 32 iT. T. E., 571-574). An early case in the State of Pennsylvania may be referred to as illustrative of this principle of hazard in transactions between copartners. The action was brought in the Court of Common Pleas of the county of Alleghany, by Evans against Ifegley, to recover upon an agreement between the parties under the follow- ing circumstances : The plaintiff and defendant were partners in the erection and business of a steam-mill, on terms of dividing the profits and bearing equal parts of the eixpense. Shortly after the mill was in operation, they agreed that ISTegley should take all the profits, pay the debts (except a debt due by the firm to Evans himself), and pay Evans $8,500 fop his interest in the property, when it should he convenient, and in the meantime pay him a " yearly rent," as the parties expressed it, of $640, being a sum greater than the lawful interest for the putchase-money. It was further stipulated that any part of the purchase-money which might be paid should abate the rent pro tanto / and that Negley was to release all demands which he had against Evans, and that Evans should convey the steam-mill immediately. The contract was reduced to writing. The defense was usury ; also perform- ance. The judge who tried the cause directed the jury that the transaction was usurious, and the plaintiff excepted, A verdict, however, was rendered in favor of the plaintiff^, but for a sum less than he demanded, and the case was taken to the- Supreme Court on bills of exception, where the judgment was affirmed. tRANSACTIONS HELD USUBIOVS. 289 Gibson, J., delivered the opinion of the court, and said : " The only diffictdty in the case arises from the parties having called the sum annually to be paid by Negley a rent. Strike out that word and the contract will present as clear a case of usury as any that can be imagined. But could a rent in fact be reserved? A rent for what J Ifot for the steam-mill, for that -is to be conveyed to Negley in fee. It could not be a rent-charge, purchased with the $8,500, for there was nothing definite or permanent in the estate or interest that might be saipposed to be given in return for it, as Negley could at any time repay the $8,500 and disciharge himself from the payment of the annual sum. And besides, ■ it is incon- sistent with the notice of a rent-charge, that after the estate of the grantee ,is spent, the consideration which he gave for it should be returned to him. * * * '^q one who reads the agreement can hesitate to pronounce, that by the name of a rent, they in fact meant to stipulate for a compensation for the use of the purchase- money, which was to be retained. * * * And if this be the true construction of the contract, there is an end of the question" {Evans v. Medley, 13 Serg. & RawUs E., 218, 222, 223). In this case it would seem that the fact that the transaction was between pairtners 'did not aflPect the question in the least, because, after all, the transaction was held to be a loan of money at interest, or at least that it was equivalent to a loan, with an agreement to pay exorbitant interest for the use of money. The Supreme Court of the State of Wisconsin, where a partner, upon the dissolution of a firm, agreed to leave with the remaining active partners a certain sum, he to receive a certain amount every six months, whether there were profits or not, for the use of the money, for which notes were given, with the right, in case the firm shoiild becom« embarrassed, to coUect the principal at once, held that the transaction was a loan, and not a partnership, and therefore usurious. The fact that the transaction was between partners did not take it out of the question of the statute against usury. To have that efiect, it must be a pa/rtnersMp transaction {^Cooper V. Twppom, 9 Wis. R., 361). In the State of Yirginia, ijx a ease where a debtor owing a cer- tain number of shares of bank stock agreed with his creditor to pay him, at a fiiture day, the market price of the stock on that day, or $150 per share, at the creditor's option, with the dividends, the court held the contract usurious. The doctrine laid down by 37 290 LAW OF VSTTRY. the ' court was, that where, Upon a loan of money, the lender, besides his principal, contracts to receive, in lieu of interest, some- thing which may be worth more than the legal interest, though it may, perhaps, prove to be worth less, the contract is usurious ; and the case before the court was held to be one of that character, and was, therefore, declared to be usurious {Smith v. Nichols, 8 Leigh^s R., 830). A late English case may be referred to, holding a transaction to be usurious, although the same was in the form, and partook somewhat of the nature, of &post obit contract or bond. By a deed, dated in 1819, A., in consideration of £500 paid to him by B., conveyed a reversion of real estate, expectant on the death of 0., the trustee, upon trust, if he should die within five years, to raise and pay to B. the sum of £1,500. At the date of the deed, C. was sixty-one years of age ; but he survived until 1844, when he died. The court held that the deed of 1819 was void for usury {Mansfield v. Ogle, 31 JEng. Law am,d Ec[. R., 35Y). A hona fide annuity is exempted from the operation of the statute of usury, because of the hazard which the grantor runs of ever receiving an equivalent to his principal. This has been here- tofore shown ; but cases nomi/nall/y in the .form of an annuity have been declared by the courts to be tainted with usury, notwith- standing the form of the transaction. An early case in the English courts was of this character. The action was trespass, de cla/uso facto, in N^orthall. Plea, not guilty. A special verdict was found, that Cyprian Cory was seized in fee of the land in question ; and that it was agreed that one Mary Addington should lend him £150, and, for the security of the repayment thereof, Cory leased to the said Mary his store for sixty years, to commence at the end of two years, upon condition that if he paid the £150 at the end of two years the lease should be void ; and it was further agreed between them that the said Cory, for the deferring and giving day of payment of the said £150 for two years, should pay to the said Mary for interest yearly £22 10«., quar- terly, if the said Mary should live so long ; that in performance of this agreement she lent the said Cory £150, and he made the said lease for sixty years, and granted by fine to the said Mary an annual rent of £22 10«., to be paid quarterly, if she lived so long, and aftei> ward conveyed the inheritance to the plaintiff ; and that the said £150 was not paid ; and that the said Mary took to husband Tre- TRANSACTIONS BELD VSURI0U8. 291 nayne, who entered for non-payment, et si sv^er toimm, etc. The first question was, whether it was a usurious contract within the statute, because it was a mere casual bargain ; for if she dies before any day of payment of the rent, the rent was gone, and yet he should retain the £150 for two .years and pay nothing for it. It was resolved that it was a usurious contract ; for by intendment she might live above two years, and it is an apparent possibility that she should receive that consideration whereby the case was within the statute {Roberts v. Trenayne, Cro. Jog., 50T). Another early English case was this : The action was on the statute of usury. At the trial, Richard Heighway, who was the , borrower of the money, and the only witness as to the transaction, swore that he borrowed of the defendant £200 in the year 1769, which was settled six months after ; that on the 5th of September, 1"770, he applied to the defendant to lend him £600, saying he was owner of £2,042 bank annuities vested in trustees, to be trans- ferred to him upon making out his title to an estate which was very clear; and showed Brown the declaration of trust. The defendant said he would lend him £600, or £1,000 ; and supplied him with £200, for which Heighway gave him a bond, and deposi- ted the declaration of trust as a collateral security; and Brown promised he should have the remaining £400 in a fortnight's time. On the lYth of September, Heighway called for the £400. The defendant then told him " money was very scarce, upon the prospect of a Spanish war." Heighway pressed him very much ; upon which he said he would see what could be done, and bid him call the next day. Heighway did so in the morning, but the defendant was not at home. He called again in the evening, and then saw Brown, who said he was afraid he could not raise it himself, but would try to get it of a friend in the city, who never was without money, ^ but he was a very hard mam,. Heighway asked what his terms were. The defendant said they were so exorbitant he was almost ashamed to name them. Heighway said he would rather pay twenty or thirty guineas than not have the money. The defendant said his friend was not so hard as that; but that he never lent money but v/pon am/rvwities at six years' purchase. " However," said the defendant, " if you will take the money on those terms, I will engage to furnish you with money to redeem in three months' time. The grantee's annuity will come but-to £17 10s., which wiU be better than giving twenty or thirty guineas." This being 292 LAW OF USWBT. ' agreed to, on the 20th of Septemher, 1770, Heighway called upon ' Brown for the money, and found a bond and warrant of attorney etc., prepared for receiving an annuity from him to one Waters. Heighway executed it, and Brown signed it as the subscrihing witness. After the bond was executed, Brown said he was always used to have £5 per cent proouraUon money / but, as Heighway was distressed, he would only take two a/nd a half per cent, and accordingly took fifteen guineas, and Heighway left the declaration of trust with him. Heighway said, " the defendant first proposed an annuity ; he himself would not have granted one." When the first quarter's annuity was due, Heighway applied to the defendant and pressed him for money to redeem, as he had promised ; but Brown refused. He then asked for the declaration of trust ; the defendant said if he insisted upon it. Waters would enter up judg- ment. Heighway insisted upon it ; and judgment was entered up. Heighway paid the defendant one quarter's annuity, and one quar- ter to the defendant's partner. The defendant often denied that he had promised Heighway money to redeem ; and said he won- dered how he could expect him to lend money at five per cent, when others made sixteen and a half per cent of their own money. Afterward, BroWn acknowledged he was himself the principal that advanced the money and enjoyed the annuity, and said that Mr. Waters, whose name he had made use of, was his trustee. Waters swore that the defendant had sometimes purchased annui- ties in his name, but that he knew nothing of this. The trial was had before Lord Mansfield, who told the jury, if they were satisfied that, in the true contemplation of the parties, this transaction was a purchase by the one, and a sale by the other, of a real annuity, how much soever they might disapprove of or condemn the defendant's conduct, they must find a verdict for him. But, on the contrary, if it appeared to thfem to have been, in real- ity and truth, the intention of both parties, the one to borrow and the other to lend, and that the form of an annuity was only a mere fraud on the necessity of the borrower by the lender, under color of which he might take a usurious and exorbitant advantage, then they might find for the plaintiff, notwithstanding the contingency of the annuitant dying within three months, more especially as it was understood by both that the annuity, at the expiration of three months, was to assume the direct shape of a loan. The jury failed at once to agree, but, coming before the court, the former direction TBANSACTIOffS BMLD USUMIOUS. 293 was repeated to them ; they retired again, and at length found for the plaintiff. The defendant made a motion for a new trial, and the case was f^rgued at considerable length. Lord Mansfield, after adverting to the facts and the direction he gave to the jury, said : " The ques- Jtion is, what was the substance of the transaction, and the true intent and raeaning of the parties ? For they alone are to govern, and not the words used. The Substance here was plainly a horrow- mff and Imddng / Heigh way had no idea of selling an annuity ; but his declared object was to borrow money ; and accordingly he deposited the declaration of trust, which was an ample security for the sum he wanted. He goes further, and says, ' rather than not have the money, he would give £20 or £30 premium for it.' Brown tells him it must be by annuity ; that his friend never lent money in any other shape ; and in that method he might have it for legs, viz., £17 10s., as after the first quarter he would let him have money to redeem. On the assurance that the annuity should be turned into a loan at the end of three months, the treaty pro- ceeds. It came out that the defendant himself advanced the money. That alters the case entirely. If "Waters indeed had been really the principal, this promise of Brown would have amounted to no more than a promise^to lend at the end of three months. But Brown himself being the principal, the promise to lend him money to redeem must be understood to be a promise to permit him to redeem. It is true there was a oontmgency during the three months. It was that which occasioned the doubt whether a contingency for three months is sufficient to take it out of the statute. As to that,, the eases have been looked into, and from them it appears that, if the contingency is so slight as to be merely an evasion, it is deemed colorable only, and consequently not suffi- cient to take it out of the statute. Here the borrower was a sale money man, and, therefore, we are of opinion that there was no substantial risk to take this case out of the statute" {Bicha/rds, qui tarn, v. Brown, Cowp. B., 7T0). A case decided by the English Court of Common Pleas, early in the present century, is also a very good illustration of the point under consideration. The action was debt on a bond, and the defense was usury. The case was tried before Lord Alvanley, C. J., where the jury found a verdict for the plaintiff, subject to the opinion of the 294 I'-^w OF osusr. court upon a special case ; at the same time declaring that they believed the plaintiff, Sir Charles Marsh, did not think that" he was acting contrary to law. The material facts of the case may be stated thus : The grantor of an annuity having agreed with the grantee to redeem, drew a bill of exchange for £5,000 at three years, which the grantee dis- counted in the following manner : He took £4,083 6s. 8d. as the amount of the purchase-money and arrears, advanced £166 13«. id. to the grantor in cash, and took £750 as interest for three years upon £5,000. The court held the transaction to be usurious. Lord Alvanley, 0. J., delivered the opinion of the court, and said : " It is contended, on the part of the plaintiff, that the transaction, as it appears upon the case, is neither more nor less than the pur- chase of an annuity, and not in the nature of a loan or sum taken for the forbearance of money due ;" and if that could be made out the plaintiff would be entitled to recover. * * * Then, is this transaction the purchase of an annuity, or is it not ? I admit that if the annuity had been irredeemable the plaintiff would have had a right to say that he would not seU it under £5,000. But here Colonel "Wood was entitled to redeem the annuity on payment of the several sums stated in the case, amounting to £4,083 6s. 8^. It was, then proposed that Sir Charles Marsh should advance £166 13s. 4:d., making, Avith the purchase-money of the annuity, £4,250, and that he should discount a bill of £5,000 at three years. What is this but forbearing for three years to take the sum of £4,250, for which forbearance he was to receive interest on £5,000 ? The jury were impressed with a notion that a bill at three years was such a bill as no reputable man would discount, though it was said that some East India bills of two years' date had been dis- counted. * * * I think, therefore, that the discount of such a bill as this, not coupled with the transaction respecting the annuity, would have been almost sufficient to have afforded a pre- sumption of usury ; but, coupled as it is with the redemption of this annuity, it is impossible to wink so hard as not to see what the real transaction is " {Mot/rsh, v. Ma/rtindaU, 3 JBos. dk Pul. B., 154, 158-160). In a leading case before the Supreme Court of the United States, the distinction between those transactions, in the form of an annuity, which are and are not usurious, is discussed, and the true doctrine laid down. The facts of the case, in a very few words, TRANSACTIONS HELD USUBIOUS.' 295 (rere these : Schofield being seised in fee of certain property, in consideration of $5,000, granted to Moore an annuity of $5,000 to him and his heirs, with a right to distrain for non-payment. In the deed granting the rent-charge Moore covenanted that, at any time after five years, on the payment of $5,000 with all arrears of rent, he, Moore, would release the rent-charge. Schofield con- veyed the property to Lloyd subsequent to the payment of the rent. Moore, the rent being unpaid, levied a distress on the same, and Lloyd brought replevin and set up a defense that the transac- tion was usurious. The cause was tried before the Circuit Court of the United States for the county of Washijjgton, in the District of Columbia, and the transaction was found to be usurious. -The defendant brought error to the' Supreme Court of the United States, where the judgment of the Circuit Court was reversed on the sole ground that error was committed in allowing a certain witness to be sworn and give evidence who was held to be incompetent. An elaborate and very able opinion was delivered by Chief Justice Marshall, who examined the authorities upon the subject and laid down the rules by which such cases were to be determined {Scott v. Lloyd, 9 Peter's E., 418). The chief justice, in the course of his opinion in the case of Soott V. Lloyd, refers with approbation to an important case decided by the lord chancellor of England. The case was briefly this : Thomas Lawley being entitled to an annuity of £200 a year for life, sold £150, part thereof, to Eowland Davenent for £1,050, with power to repurchase, on giving six months' notice. After the death of Davenant, Lawley brought this bill against his execu- tors for an account, and that upon payment of what should be due, the defendant might reassign the annuity to the plaintijBE. In giving his opinion, the lord chancellor said: "There has been a long struggle between the equity of this court and persons who have made it their endeavor to find out schemes to get exor- bitant interest and to evade the statute of usury. The court very wisely hath never laid down any general rule beyond which it will not go. * * * In this case there are two questions to be considered : 1. Whether this assignment is to be considered as an absolute sale or security for a loan. As to the first, I think, though there is no occasion to determine it, there is a strong foundation for considering it a loan of money, and I really believe 296 LAW OF USURY. in my conscience that ninety-nine in a hundred of these bargains are nothing but loans, turned into this shape to avoid the statute of usury." The lord chancellor then proceeds to state the circum- stances under which the contract was made, and the character of the contract itself; and although there was no treaty about a loan, he concludes with saying : " Therefore, upon all the circumstances, I think it was, and is to be taken, as a loan of money, turned into this shape only to avoid the statute of usury ; but I do not think I am under any absolute necessity to determine this point, for I am of opinion that this is such an agreement as this court ought not to suffer to stand, taking it as an absolute sale." And the ruling asked by the plaintiff in his bill was granted {Lamley v. Hofrper, 2 Atlc. R., 2Y8). Other approved English authorities are referred to by the learned chief justice of the United States, in his opinion, which recognize the doctrine that loans, on a fair contingency to risk the whole money, are not within the statute against usury ; that a man tnay purchase an annuity as low as possible, but if the treaty be about borrowing and lending, and the annuity only colorable, the contract may be usurious, however disguised ( Vide Imhwm v. GhiU, 1 Bt. Ch. R., 93 ; Drew v. Power, 1 Sch. andJLef. R., 182). In conclusion upon this point of hazard, a late case may be referred to, which was decided by the Court of Common Pleas of the city of New York. The case was this : A., at the request of B., advanced to him the amount of a month's salary, which B. had to earn, and agreed to pay at the expiration of the month, and took an assignment from B. of his salary as security. The amount of the month's salary was $67.94, for which B. received only $62.53, the sum of $5.42 being the interest allowed, which was more than the legal rate. The court held the transaction to be usurious. Brady, J., delivered the opinion of the court, and said : " "When th.e lender of money assumes a risk upon the loan, by which repayment is hazarded, the contract will not be usurious, although an exeeessive rate of interest be charged. * * * This is not such a case. The security alone was one which depended upon a contingency, but the principal was not hazarded, the defendant being liable, though that security should fail to yield anything. * * * At first blush it appears to be one in. which the plaintiff assumed the risk of the defendant's earning the salary. TRANSACTIONS HELD USURIOUS. 297 * * * The case, on a full understanding of it, is one of a loan at an excessive rate of interest " {Rowe v. Oimaon, 26 Sow. Pr. B., 360, 362). CHAPTEE XXII. TRANSACTIONS HELD TO BE USTTKI0U8 CASES OF ALLEGED PBNALTT — TAKING INTEREST IN ADVANCE ANTEDATED INSTRUMENTS — CASES IN WHICH GOODS ABB ADVANCED INSTEAD OE MONET. Where the exorbitant profit for the use of money is reserved in the nature of a penalty to be paid upon some default, which the borrower may avoid by the payment of the principal, and thus defeat the interest, if the transaction is made in good faith, it will be exempt from the operation of the statute against usury. It occasionally occurs, however, that a transaction supposed to be within this principle is held by the court to be otherwise. A ease of the character supposed was, some time ago, decided by the courts of the State of Kentucky. A judgment was recovered against a principal and surety. Then, in pursuance of an agree- ment, the surety signed the replevin bond, and the principal gave him a note which included the full amount of the replevin bond, with about thirty per cent added to it, and the surety agreed in writing to credit the note with the same amount, provided the principal paid the replevin bond himself. It was conceded in the pleadings in the cause that the arrangement was intended not merely to have the effect of a penal bond, but as an indemnity to the sarety, in case the payment of the replevin bond should devolve on him. The court held that this contract was not an agreement for a loan of money, in a certain contingency, at a future day, upon an agreement that more than legal interest should be paid for the loan, and was usurious {Morns' Executors v. Yance, 8 Dands R., 362). "Where the lender receives the interest upoa the sum, but before the end of the term for which the money is loaned, he clearly receives more than the legal rate ; and yet cases have been referred to in preceding chapters where the practice was held not to be usurious. There are instances, however, of this character, which the courts have decided to be within the statute of usury. And a distinction was early made between the receipt of interest before the end of ' 38 298 LAW OF USURT. tke term and a reservation of the interest for the whole term, pay. able at certain periods within that term. The majority of opinions formerly were adverse to the legality of the first, and favorable* to the validity of the latter. But the later cases do not seem always to have been decided in the light of this distinction. With regard to the taking of interest at the time of the loan, the most of the old cases hold such transactions usurious ( Vide Barnes v. WorUch, Cro. Jac, 25 ; Anonymous, 1 Bulstr. M., 20). The courts uniformly hold, at the present day, that the inte- rest for ordinary paper having the usual time to run, such as is the practice by banks, may be taken in advance, by way of discount, and not subject the paper to the taint of usury. It is obvious, however, that the length of time the paper has to run must have a controlling effect upon this question. If the note has a short time to run the interest may be taken in advance, whereas the time may be so lengthened out as to make the taking of the interest, in advance, palpably usurious. A case might easily be supposed where this practice would give to the lender fifty per cent interest for the use of his money ; and, indeed, the absurdity of an unyielding rule upon the subject becomes very apparent by increasing, the number of years the paper has to run. It might be extended until it will be found that the person coming to get a bill discounted, for example, for a period of twenty years, instead of having anything to receive will have something to pay.' A late case in* the State of Arkansas, where a bond was given to an internal improvement commissioner, in his official character, for money borrowed, "with ten per cent interest per annum, semi-annually in advance," the court held the transaction usurious and void, on the ground that the statute limits the rate to ten per cent per annum, and the stipulation for payment in advance increases the rate beyond that amount {Hoga/n v. Ha/nsl&y, 22 Arh. B., 413). Cases have been heretofore referred to in which it has been held that the antedating an instrument, payable with interest from the date, is not necessarily usurious ; but this depends entirely upon the circumstances of the transaction. A case came before the vice-chancellor of the first circuit of the State of New York, in 1842, where it appeared that a bond for money loaned was dated previous to the transaction, and the lender at the time insisted that interest should be paid from the date of TRANSACTIONS HELD USURIOUS. 299 the instrument, and the negotiation was accordingly completed with that understanding. The court decided that the bond was usurious {Lynde v. Stoats, 1 if. T. Legal Ohs&rver, 89). A very easy and ready way of evading the statutes of usury has been the expedient of a pretended sale of wares, while, in reality, the wares were furnished to the buyer at a price beyond their real value, to enable him to sell them for what he could get to relieve his necessities ; and when such a proceeding has come before the courts, they have universally held it to be usurious. An early case in the English Court of Chancery well illustrates the doctrine on this point. The plaintiff, who was a student of Wadham College, Oxford, desiring to raise a sum of money immediately after his coming of age, applied to Alcan, a Jew, through whom he was introduced to James Yansommer and Paul; and they, upon inquiring into his circumstances and finding him entitled to some reversionary property, agreed to let him have silks to the amount of £2,224, for which Baker gave a promissory note, payable a year after date. Alcan officiated as the adviser of Barker during the negotiation, and the silks were delivered to and sold by him on Barker's account for £799. In the meantime James Vansommer and Paul indorsed the note over to John Yansommer, one of the defendants, who had had no share in the previous transaction. A bill was afterward brought in the Court of Chancery to compel the defendants to deliver up the plaintiff's note, upon payment of what the silks really produced upon sale ; and it was contended for the defendants that there was an absolute sale. But the court held the transaction to be usurious. Lord Chancellor Thurlow said: "I am to inquire whether,, under the mask of trading, this is not a method of lending money at an extraordinary rate of interest. There is no doubt that if they had talked of this as a loan of money there would have been an end of the case. The question, then, is only, whether there is any method of showing the court that they meant so, short of their treating of it as such in plain language. There is not a doubt that in this ease the transaction was merely for the purpose of raising money to supply the necessities of this young man. Do they deny knowing the goods were to be sold ? I take it, therefore, as an advancement of goods, instead of money, to supply his necessities " (Bar'ker v. Vansommer, 1 Br. Ch. R., 149). A case of a similar nature vas decided in the English Court of 300 JC'AW OF UB.UBT. King's Bench about the time that Barker's case was decided lay the Court of Chancery. The defendant, Waller, had employed one Lemon, a money broker, to raise the sum of £200 for hinj. Harris & Stratton hearing of this, sent their broker to Lemon to inquire whether Waller wanted money, and to say that they would advance hjm £100 in money and £100 m goods., but that the goods should be choice sorts and he should not lose by thera, for he should have them at the warehouse price. Waller accordingly went, in eorn- company with Lemon, to the warehouse of Harris & Stratton, who made an apology for having then no money, but goofils., and desired the matter to rest a few days. Upon another application by Waller, they told him they could not let him have money, but if he would take the whole in goods, he should have thenj directly. , Waller a,greed, and the goods (hosiery ware) were sorted out by one Stratt, a broker who was present, and delivered to Waller, who gave to Harris & Stratton a bill of exchange for £220. Strutt and Lemon then carried the goods to an auctioneer, ,who sold them for £117 2«. 2^. An action was broinghfrupon the bill of exchange, and the defense of usury was interposed. The question was submitted to the jury whether the transaction was a loan of money for more than the legal rate of interest;, under colpr of a sale of goods, and the jury found the contract to be usurious. A rule, however, was obtained for a new trial, on the gronB^' that the transaction was not a loan, but a sale oi goods ; and, there- fore, though it might be fraudulent, it was not within the meaning of the statute of Queen Anne. But the court expressed the opin- ion that, in all these cases, the question is, what is thp real substance of the transaction, not what is the color and form, and that here there was no other idea than a loan of money ; and, hence, the transaction was usurious. The rule was, therefore, discharged {Lowe V. WaUer, 2 Doug. B., 736). The rule is, therefore, well established by ancient authorities, and the same is recognized at the present day, that where usury is disguised under a sale of merchandise, the property in the goods passes to the vendee, but the excess of price over the just value is considered as a premium for the forbearance of the debt, founded on a presumed loan of so much of the purchase-money as is equiva lent to the cash value of the commodity sold. It will be observed, however, that, in all these cases, the object with which the person TBANSAOTIONS BSLD USUBTOUS. 301 taking the goods entered into the transaction was the immediate means of supplying his wants ; and that the sale adopted was only colorable, and not in the common course of trade. The same rale applies to a sale or exchange of choses in action, or credit, or where a part only of the consideration is a transfer of chattels, when the real object is a loan of money, although, in fact, no money is received by the borrower. The law, looking at the substance of the transaction, converts the substitute agreed upon bf the parties into money according to its cash value. So that, in every instance where the object of the parties is a loan of money, and something else, under the form of an exchange or sale, is substituted for it, the principal of the loan, and consequently of the debt contracted by the nominal vendee, will be the value in money of the substitute received by him ; and any consideration paid or reserved to the vendor beyond that will, in general, be con- sidered as interest for its forbearance ; and, if exceeding the legal rate, will be regarded as excessive and usurious. A reference to a few of the leading American authorities will further illustrate the doctrine. An early case in the late Court of Chancery of the State of New York is to the point. An applica- tion was made for a loan of money, and the lender imposed, as a condition of the loan, that the borrower should purchase certain shares in ah insurance company, at par, when the shares were, in fact, below par, and it was, at the time, impossible to ascertain the cash value of the shares, the corporation having failed ; and the loan was accepted upon that condition. The court held that the transaction was usurious ; and, in accordance with the law as it then stood, when relief was sought in equity against a usurious trans- action, the court rescinded the sale and ordered a re-transfer of the stock, and that the sum agreed to be paid for it should be deducted from the security {Eagleson v. ShoPwell, 1 Johns. Oh. B., 536). And to the same import is an early case decided by the old Supreme Court of the State of JSTew York. A. lent B. $687, to be repaid on a certain day, with interest, and B., in consideration of the loan and forbearance, purchased of A. sixteen shares of turnpike stock, for the sum of $400. The evidence showed that the turnpike stock was not, in fact, worth over $250 at the time of the purchase ; but B. gave his bond for the $687, together with the $400 for the stock. The court held that the sale of the stock was merely colorable, and that the transaction was, therefore, usu- 302 -LAW OF USURY. rious, and the bond given for the money loaned and stock trans- ferred was void {Rose v. Dickson, Y Johns. M., 196). Another strong ease upon the point may be refeixed to, which was decided by the same court, at a much later date. One Collins entered into a written agreement with the Bank of Rochester, by which he covenanted to assign to the bank, bonds and mortgages on real estate to the amount of $13,000, payable in five years, with interest semi-annually, and to guarantee the payment of them; ia consideration whereof, the bank agreed to transfer to Collins cer- tain stock to the amount of $6,500, at its nominal value, and to pay him the balance in money. Afterward, the bonds and mort- gages not having been assigned, the bank transferred the stock and paid the money, on receiving two notes for $6,500 each, agreeing to take the bonds and mortgages in payment, if delivered before the notes became due. The assignment of the stock and payment of money formed the only consideration of the notes. An action was brought to recover the amount of one of the notes, and the defendant interposed the defense of usury. It appeared on the trial that the stock, which was that of the Rochester Cotton Manu- facturing Company, was, at the time it was transferred to the bor- rower, twenty-five per cent below par. The judge at the circuit charged the jury, among other things, that if they should be satis- fied the transaction was intended by the parties (Collins and the bank) as a cover for a usurious loan, the defendant would be enti- tled to a verdict ; but if, on the other hand, they thought the eon- tract between the parties such as the two written agreements and the note imported on their face, and nothing more, they should find in favor of the plaintiff. The jury rendered a verdict for the plaintiff, and the defendant moved for a new trial on a ease. The court held the transaction usurious, and set the verdict aside. Cowen, J., delivered the opinion of the court, and said : " The various agreements, notes and other arrangements were all parts of one transaction, and the effect of them was to secure more than seven per cent per annum to the bank for the loan. The whole was radically and necessarily vicious because of such a usurious effect, by which the intent of the parties must be judged, and there was no question for the jury " {Seymour v. Si/rong, i mWs R., 255, 258). A case in the North Carolina courts was this : The plaintiff purchased a bond of the defendant at a discount of more than legs^ TRANSACTIONS EELD USURIOUS. 303 rate of interest, the defendant indorsing the bond in a form which bonnd him to guaranty the payment of the whole money due upon it. The court held the transaction usurious. Taylor, C. J., said : " The character and substance of this trans- action bespeak it to be a loan of money,' although the parties con- stantly speak of a sale, and not a whisper is heard relative to a loan." He further observed, that if it had been a sale in truth, the assignor would have nothing to do but receive the price, and leave the assignee to obtain the money as he could from the obli- gors. The money was to be received for the assignor's benefit, and, the learned chief justice added, " if he had meditated a sale of the bond, he would undoubtedly have withheld his indorsement. But by adding that to the bond, he undertook on his part to repay the money, which should be seized on in the event of the obli- gor's delinquency. This appears to me to be the unequivocal characteristic of a loan, that the money is in. all events to be repaid with interest by the borrower himself, or out of his funds " {Muffin •V. Armstrong, 2 KawTSs R., 411). In the State of Kentucky, where a party made a contract for the purchase of a slave at half price, and at the same time to lend the owner another sum, with a condition that if a sum, larger than the purchase-money, the loan and the interest combined, should be secured, the slave should be restored and the lent money con- sidered as paid, the court held the transaction usurious {Shanks v. Kennedy, 1 A. K. Marsh. B., 65). A transaction similar in its nature was brought before the courts of South Carolina, and declared to be usurious. A. asked $1,000 for a negro, which B. was willing to give, but could not pay cash, and A. was willing to give B. any time which he might want if he could have the price increased by the addition of ten per cent per annum until payment. After consultation as to the best method of carrying out their bargain and avoiding usury, they agreed that B. should fix the time and A. the price. B. said he must have three years, and A., the plaintifi^, said he must have $300 more. Accordingly a bill of sale was drawn expressiog the consideration to be $1,000, and a note was given by B. to A. in the following words : " Three years after date I promise to pay A. or bearer $1,300, to be paid at such time as I please, and to deduct ten per cent per annum off of the amount paid at each payment." The 304 LA^ OF VSVEY. court held that the transaction was usurious {Thompson v. Nesbit, 2 Rich, E., 73). In the State of Illinois, a case came before the courts, substan- tially thus : A. being embarrassed in his circumstances, was told by B, that C. would like to purchase certain real estate, of which A. was proprietor, upon the same terms as he had been informed that another person had purchased from A. and B., to wit : Upon receiving a guaranty that the estate would rise in valae fifty per cent per annum. A. offered the same to C, who refiised to pur- chase, saying he had no confidence in the property. A. then said that he wanted to raise $500, and would sell 0. to that amount, and guaranty a rise of fifty per cent a year for two years. C. replied, that if he would procure B. to become a guarantor to that effect, he would advance the sum required, and that A. might select the lot. A. selected and conveyed a lot by deed of warranty, received the money, and entered into a bond with B. to C, which , contained the following recital and conditions, that is to say : " The said C. being seized in fee of the following town lot " (describing it) " if the said C, shall, on the 11th day of May, A. D. 1839, tender to the said A. and B. a good and sufficient deed of the aforesaid lot, the said A. and B. shall pay to the said C, his heirs, etc., the sum of $1,000. It is agreed that, if the said deed is not tendered as aforesaid, this agreement is void." The court held that the transaction was clearly usurious ; that the deed, bond, etc., should be taken together; and that, thus construed, they were merely a mortgage to secure the sum advanced with exorbitant interest {Delamio v. Rood, 1 Oilman's R., 690). Another case may be cited from the same State, and decided by the same court. A. and B. having made improvements upon pub- lic lands, applied to C. for a loan of $1,110, in order to purchase them. An agreement was made that C. should advance the money, and purchase the lands in his own name as security for the loan, and that they should pay him $330 per year for three years, and $1,430 at the end of four years, when C. was to sell and convey the lands to them. It was further agreed that, in default of any of the payments, 0. was authorized to declare the contract at an end, and all previous payments were thereupon to be forfeited; and A. and B. were thenceforth to be considered as tenants-at-will of C, at an annual rent equal to ten per cent interest on the $3,400, pay- able quarter-yearly. On a bill in equit;^ for relief brought by A. TRANSACTIONS BELD USURIOUS. 805 and B. against p-, they bringing into court $1,100 and legal inte- rest, it was held that the contract was usurious, and 0. was ordered to convey the premises to A. and B. in fee {Fm-guson v. Sutphen, 3 Oilman's E., 547). In the State of New Jersey, a case came before the courts, in which it appeared tha,t a party made a loan of money to a corpora- tion, on condition that the lender should be employed by the cor- poration in an official position, where he was not needed, and paid a very large salary, though the place was,- in fact, a sinecure. The transaction was held to be usurious {Or'^ffm v. I^ew Jersey, etc., Company, 3 Stooktoinls R., 49). And in another case in the same State, wherein it appeared that A. agreed to loan to B. $2,000, on condition that B. would receive from A. $8^0 in goods, at prices fixed by A., and pay, or allow A. to detain, five per cent, or $100, on the remaining $2,000, and give . A. hie bond and mortgage for $2,800, with lawful interest, the 'Court of Chancery held and declared that the bond and mortgage were usurious {BrolesTcy v. Miller, 4 Halst. Ch. B., 626). In the State of Mississippi it has been held, where the terms of a sale were cash, but a promissory note was taken for a part from the purchaser, reserving, in terms, more than legal interest, that the transaction was usurious; although it was declared by the court that it would have been held otherwise if the note had been for a gross sum, according to the terms of the original agreement, compounded of a smaller sum, and interest exceeding the legal n\B {Mitchell V. Griffith, 22 Miss. R., 515). In an action brought upon a promissory note in the State of Connecticut, the defendant stated in his defense the following facts : That the plaintiff loaned to the defendant $800, and received as security an absolute deed of a piece of land of much greater value, upon ah agreement that the defendant might redeem the land upon paying the sum loaned, with twelve per cent interest ; that the defendant should remain in possession of the land, and pay therefor forty-eight dollars per year, being the simple interest, as rent, for which rent the note in question was given. And, it appearing to the court that this was a true statement of the case, it was held that the transaction was usurious, and the note in suit void {Mitchdl v. Preston, 5 Bay's R., 100). The late Court of Chancery of the State of New York held, where the condition of a discount by a bank was that the borrower 39 306 . J^AW OF aSURY. should receive bills of exchange in payment, at more than their cash value, instead of money, that the loan was usurious ; and that a custom among sellers of such bills to charge more for them when sold on credit than when sold for cash could not purge the trans- action of usury. And it was declared that selling uncurrent bank notes, which are two or three per cent below par. in the market, for their nominal amount in current money, to be paid in thirty days, if a cover for a loan, is usury {Pratt v. Adams, 7 Paige's B., 615). Another very important case came before the same court, and was disposed of upon similar principles by the assistant vice-chan? cellor of the first circuit. The case was this : A bank, which had . stopped specie payments, and wanted money to enable it to resume and save its corporate franchises from forfeiture, applied to a trust company for q. loan ; and an agreement was made to the effect that the bank should deliver to the trust company their own bills of credit, or bonds, for $250,000, payable to the latter in sterhng money, at five dollars to the pound, at a banker's in London, in installments, to become due in 1842 and thereafter, with interest at six per cent per annum, payable semi-annually, and secure the £50,000, with the interest, by a trust conveyance of lands situate- in New York, worth double the amount ; that the bank should accept therefor the trust company's certificates, or obligations, for £48,000, payable in London in 1839 and 1840, with interest at five per cent ; and that the bonds of the bank, with the interest at seven per cent, should, in fact, be paid to the trust company in ilfew York, and that the company was to guarantee the payment of the bonds of the bank. Each certificate issued by the company in pursuance of the agreement, recited that it was part of a loan of ;^0,000, and the trust deed professed to be security for a loan from the trust company. The court held that the transaction was a loan of choses in action, that there was no ground for the deduc- tion of the £2,000, consistent with the innoceney of the transac- tion, and that the contract was usurious and void {Wew Yorh Pry ,Poch Ba/nJc v. American Life Insuram.ce a/nd Trust Co., 4 Sand. Oh. E., 215). The decree in this last case was reversed, on appeal to the Supreme Coijrt, sitting in the first district, and the bill dismissed, with costs. From that decree the complainants appealed to the Court of Appeals, where the decree of the Supreme Court was reversed, and that of the assistaijt yiee-chancellor affirmed. TRANSACTIONS HELD USUBIOm. 307 Gardiner, J., in his opinion, said : " The trust company advanced their post notes (for their certifi'ates are nothing else) as cash, at their nominal value, which I assume to be their true value in money, in the same manner that a bank of issue would receive and discount a note for a customer. In both cases there would be an ;exchange of promises. In each the property in the notes issued would vest in the receiver, and in neither would any money be paid ; but, in both cases, a substitute, by the understanding of the parties, is advanced by the lender, and accepted as money by the borrower. Every transaction of the kind, when analyzed, will be found to be a loan of money, whether designed or not, under the form of exchange. If, then, the transaction was a locm, as the agreement asserts, it follows that the $10,000, above mentioned, must be held as compensation for the forbearance of a debt incurred by the complainants as iorrowers of money, for which the certifi- cates were substituted at the nominal, which was the true value, by the understanding of the parties. This being in addition to the seven per cent reserved by the contract, was usury, and the bUls of credit and trust deed are consequently void" {The Dry Dock Bmik V. The Ainericcm Life Insurance cmd Trust Co., 3 iT. Y. B., 344, 361, 362). Eeverting to the English authorities upon the phase of the sub- ject now under consideration, where the defendant had applied to the plaintiff to discount a bill of exchange for £700, which the plaintiff refueed to do, except on the following conditions : that is to say, that the defendant should take a banker's check for £250, a promissory note at two months for £286 12s., and a landscape in imitation of Poussin, to be valued at £250, to which the defendant acceded ; Lord Ellenborough laid down this rule : " "When a party is compelled to take goods in discounting a bill of exchange, I think a presumption arises that the transaction is usurious. To rebut this presumption, evidence should be given of the value of the goods by the person who sues on the bill. In the present case I must require such evidence to be adduced ; and I wish it may be understood that, in all similar cases, this is the rule by which I shall be governed in the future. When a man goes to get a bill discounted, his object is to procure cash, not to encumber himself with goods. Therefore, if goods are forced upon him, I must have proof that they were estimated at a sum for which he could render them available upon a resale, not at what might possibly be a fail 308 LAW OF USURY, price to charge to a purchaser wjio stood in need of them" {Dmis V. HcMfdacre, 2 Gamp. N. P. O., 375). And in a case decided by the English Court of Common Pleas in which the action was for the penalty of the statute 12 Anne, ch. 16, the declaration stated a specific sum of money to have been lent (in which the usury consisted) ; but the evidence was, that the loan was part m money, and the rest in good's of a known value, which the party recei ving the loan agreed to take as cagh ; it was held that it was clearly a usurious transaction, and that the evidence was competent to support the declaration. Heath, J., said : " The declaration seems to me to be well framed and sufficiently proved. It would make a great difference if the delivery of the goods was to be a part of the shift, and no part of the original contract. I do not see two contracts, as it was said ; there appears to me to be but one; and a piece of bullion was substituted as coin" {Burke V. Pmle&r, 1 E. Black. B., 283, 284). And in another case, at nisi prius, it was held that if, in dis- counting a bill of exchange, the discounter gives goods in part, which are taken for above their real value, it is usury. And, fur- ther, that it is the province of the jury to decide whether, on the ■ evidence, the difference of the value for which the goods were taken in the discounting, and the price for which they were sold by the party taking them, is so great as to make it apparent that they were taken only as a cover for usury {Pratt v. Willey, 1 .Esp. If. P. 0., 40; Bich v. Topping, per Lord Kenyan, ii., 176). In the State of Mississippi, the taking of more than eight per cent interest on any contract fOr the payment of money, founded on any bargain, sale or loan of merchandise, goods and chattels, lands and tenements, is made illegal; but the taking of ten per cent for a bona fide loan of money is legal. A promissory note was given for the price of a lot of land, sold fcfr cash, at six years, with ten per cent interest ; and the court held that it was usurious {Torry v. Qramt, 10 Smede & Ma/rsh. B., 89). TRANSACTIONS SELD USURIOUS. 309 CHAPTEK XXIII. TEANSAOTIONS HELD TO BE USmRIOUS OASES WHEEE STOCK 18 TBAKS- FEEEED WAEEAl^TS OF A MTJITICIPAL OOEPOEATION — DEPEECI- ATED BANK NOTES 0EETIIT0ATE8 OF TEUST AND DEPOSIT EXCHANGE OF DEAFT8 AND OBLIGATIONS. The temporary transfer of stock in the public funds, or in cor- porate bodies, is an engine of usury frequently resorted to ; although it, has been shown in a previous chapter that the mere loan of stock is not usurious, nor the payment of the ' dividends in the mean- time, even though they exceed the legal rate of interest, provided always that the transaction be one of good faith, and not a device qr cover for usury. There are frequent cases, however, where the contraiCt was in the form of a loan or sale of stocks or securities, and nevertheless held to be usurious. The earliest case which is found upon the subject is this : The defendant. Dr. Battie,lent the plaintiff several sums of money upon mortgage, and, the plaintiff having occasion for more, the defendant advanced him £1,000 in the following manner : By selling him £1,000, South Sea annui- ties, which at that time were undet par, and sold at a loss of £76 upon the whole, and, paying him the money for which they sold, took 3, mortgage for the whole £1,000, at £5 per cent interest, with covenant to reduce the interest to four per cent, if paid within such a time, He afterward advanced the plaintiff £1,400 more in the same manner, by sale of so much South Sea annuities, which were then ^Iso under par, and sold at the loss of £267 15^. upon the whole, and took a mortgage for £1,400, at five per cent inte- rest, with a power for Moore to reinstate the £1,400 at any time , within two years, which was done. A bill was brought by the defendant to foreclose ; and Moore, in his answer, admitted the mortgage, and submitted in general to pay what was due. The master, in taking the account, considered those sums as £1,000 ^nd £1,400, and computed interest upon them accordingly. The plaintiff paid the principal, interest and costs, and then brought his bill, inter alia, to be pa,id the several sums of £76 and £267 15s. and interest, insisting that he ought not to have been charged with them in the account. The defendant pleaded the proceedings under the decree in bar; and two questions were raised: 1st, whether it was. usury; and, 2d, whether the court would relieve. 310 J^-^w OF ususr. Sir Eobert Henley, Lord Keeper, said : " As to the first, I am clear of opinion it is a shift within the statute. The plaintiff had .hut £924, instead of £1,000, in the one case, and £1,132 5s., instead of £1,400, in the other. He has paid as much interest as is equal to £5 per cent for £1,000 and £1,400, which is more than the statute allows, being more than £5 per cent for the money he received. Suppose stocks at £15 per cent ; if a person takes at par, he pays £6 5s. per cent. The case of the £1,400 is not dis- tinguishable from the other. Not so on the footing of the risk; for defendant took interest for £1,400, though, in fact, the plaintiff , received but £1,132 5s." His lordship decreed- payment {Moore V. Battie, Ami. B., 371). Mr. Comyn, in commenting upon this case, remarks: "Now, independent of any consideration of the power which was given to the borrower of replacing the stock, and so of defeating the excess of interest, it appears that the lender, in this case, was sui- jeot to severe loss, whether the stock were replaced within two years or not ; for if the stocks fall within two years, it might have been replaced for less money than it had been sold for. If they rose after the two years had expired, the money paid to him would not have enabled him to purchase as much stock as he originally had." And if this be correct, he thinks it difficult to reconcile the case with the cases of Tate v. WelUngs and Pike v. Ledwell, subse- quently decided, and which are considered in a previous chapter of this work. He intimates, therefore, that the case of Moore v. Battle may be regarded as overruled by the later cases (fiom. on TJsv/ry, 107, 112). And, although the doctrine of contingency is carried to a considerable extent in the cases of Tate v. WeWmgs and Pike v. Led/well, it is believed that the doctrine of those cases is more in harmony with the tenor of modern decisions than that , of Moore v. BatUe. Certainly, in the latter ease the transaction was, inform, a transfer of stocks; and there- seems to be no inti- mation that it was proved to be a device to obtain usury, except, so far as the fact that more than legal interest was actually received,' tended to establish that position. And the rule is, that a simple lonaflde transfer of stocks is not usurious, even though more than legal interest may be thereby realized. Another stock transaction was declared usurious by the English courts in 1809, which may be noted. The case was this : The defend- ant being indebted to the plaintiffs, his bankers, in nearly £30,000, TRANSACTIONS BELD USURIOUS. 311 about £21,000 of which was secured by bonds, a considerable' part of which was advanced by them when stocks were below fifty pounds, agreed with them that they should place £25,000 to, his credit in account, for which he was to purchase £50,000 stock, then at fifty-one one-fourth, in their names, and account to them for the dividends .upon such stock as from the last dividend day. After which agreement, the plaintifis acting upon the basis of it, iJiough the defendant never purchased the stock so agreed upon, entered in their books the sum of £25,000 to the credit of the defendant, and continued to honor his drafts from time to time, crediting him also with other sums actually paid by him, and wrote ofi" the amount of his bonds to his credit, and delivered them up to him. The Court of King's Bench held that this agreement to repay the new credit of £25,000 by the purchase of stock as at fifty pounds, when, in fact, it was more at the time the agreement was made, though it had been less when a considerable part of the, money was actually advanced upon his general credit, was usuri- ous and void. It was decided, nevertheless, that the sum of £25,000 credited under that agreement by the plaintiffs to the defendant in his banking account was to be reckoned against them upon balancing the account of debtor and creditor between them. It seemed to be admitted on all sides that the agreement for the purchase of the stock was illegal add invalid ; but it was contended by the plaintiffs that the account should be taken between the par- ties upon the real advances and payments which had taken place, because the whole account, as it stood upon paper, was unreal ; that an invalid agreement had been made upon the basis of a fictitious advance, which, in truth, was not made. But the court held that the £25,000 having been entered in the plaintiffs' books as an article of credit to the defendant's account, and the defendant drew for it as he wanted it, the credit could not be said to be fictitious ; and, hence, although the agreement was usurious and void, the credit must be allowed {Boldero v. Jackson, 11 Easfs B., 612). In an early case in the old Supreme Court of the State of l^ew York, a transaction relating to the purchase of stock was declared usurious and void. It was an action of debt on a bond dated Octo- ber 20, 1808, conditioned to pay $1,08Y. The defendant pleaded that it was corruptly agreed between the plaintiff and defendant that the plaintiff should lend the defendant $687, to be repaid on the 1st of November, 1811, and for such forbearance the defend 312 LAW OF uscmr. ■ ant should purchase of the plaintiff sixteen shares of turnpike stock for $400, when, in truth and in fact, the shares were worth only $250 ; and that, pursuant to sneh corrupt agreement, he did purchase the said shares, and that the defendant executed thehond as well for the $687 as for the $400 to be paid for the shares and the forbearance of the $68Y. The plaintiff demurred to the plea, and the defendant joined in the demurrer. The court held the bond to be usurious and toid. Van Ness, J., delivered the opinion of the court, and said : " Upon this statement of facta there can be no doubt that the bond is void. The cash lent to the defendant was upon the ground that he should pay double thei real value of the stock, and interest is reserved upon the whole apiount. Whether this was a hona fiie sale of the stock, or colorable only, is a f^ct which the plaintiff may put in issue if he pleases, and it is for the jury to decide upon it. If they find that it was a fair sale, then the defendant may be liable to psy the whole amount of the plaintiff's demand. But ifj on the contr^jry, they shall be of the opinion that the transfer of the stock was a mere device to obtain an extravagant and unlawful interest, the bond is usurious, and, consequently, void " {Rose V. Dickson, 7 Jahlns. M., 196-198 ; cmd vide Seymour v. Strong, 4 MUVs B., 255). To the same purport was an early case decided by the courts in the State of Virginia, wherein a contract to lend a portion of the money wanted by the borrower, on condition that he would receive stock at a price much above the market value, to make up the deficiency, was held to be usurious {SiriJMmg. v. B(vnk, 5 Rand. B., 132). And in another case in the same State, where a proposition was made to a bank to purchase its stock at par, when its actual market value was much less, upon the consideration of which the bank was to loan nloney to the purchaser^ and the purchaser's notes were made and discounted in pursuance of the agreement ; it was held by the court that the sale and the loan were one entire con- tract, inseparably connected with each other, and that the transac- tion was usurious ( Valley Bamk v. Stribiling; 7 Zeifh's B., 26). In the State of Mississippi, a party made an arrangement by which he loaned to another certain stock and bank notes, which were below par, for which he took the borrower's note for the nominq,l value of the stock and notes ; and the court held that the TBANSAOTIONS MMLD USURIOUS. 313 contract was . usurious, without regard to the use the borrower might make of the 'thing borrowed. The court, however, declared that, where the legal rate of intereet upon a loan of stock is eight per cent upon its actual value, a loan at the rate of six per cent on its nominal value is not necessarily usurious. Whether usurious or not, will depend on whether this was a greater rate of interest than eight per cent (the legal rata) on the actual value. It was, therefore, held to be error to instruct the jury in such case that the loan was not usurious, unless they believed the loan of stock was resorted to, to cover a usurious contract. The doctrine was also properly laid down in the case, that, in respect to usury, contracts are to be governed by the laws existing at the time when they wei:e made {Archer v. Pv,tnam, 12 Smede (& Marsh. R., 286). In the State of South Carolina, an incorporated building and loan association advanced, in conforniity to the provisions of its constitution, to one of its members, who owned ten shares of its capital stock, $2^000 at a premium of thirty-five per cent, equal to $700, paid him $1,300, being the amount advanced less the pre- mium, and took his bond, secured by a mortgage of real estate and an assignment of his shares of the stock, for the amount advanced (|2,000), payable, with interest at the rate of six per cent per annum, in monthly instaUmients of twenty dollars each. The Court of Chancery held the contract to be usurious {Columbia, ek:, Association v. Bellvnger, 12 Sich. Eg.. B., 124). In the State of Virginia, in a case where a bond and deed of trust were executed for a loan of money, the amount of which was made up in part of a pre-existing valid debt, and in part of stocks passed at a price considerably above the market value, the court held the transaction to be usurious. It was declared, however, that, though the bond and deed of trust were usurious and void, yet as a part of the consideration thereof was a pre-existing, valid debt, a court of equity would not compel the obligor to establish his claim at law before proceeding to enforce his security ; and upon a bill framed for compelling the obligor to establish his debt at law, the court, refusing that relief, held that relief would be granted upon equitable principles {Bank of Washington v. Arthv/r, 3 Gratt. R., 173). The Supreme Court of the State of Iowa hel^, in a case which came before the court, that where a municipal corporation issues warrants in payment of a judgment, at the rate of one dollar in 40 314 JOAW OF USURY, warrauts for every seventy-five cents due on the judgment, such warrants were usurious and void {Glwrk v. Dea Moines, 19 Iowa R., 199). In the State of Mississippi, where a bank loaned the notes of other banks, which circulated in payment of debts, but were in fact from twenty to twenty-five per cent below par, the court held that tlie contract was usurious, and that the bank was only entitled to recover the specie value of the notes at the time they were lent without interest, in accordance with the provisions of the statute of the State relating to usury. And it was further held that the use which the borrower makes of the money cannot change the result, and is not a proper subject of inquiry {BurdMsmit v. Grnn- rnerdal Bank of JTatchez, 8 Smede di Ma/rsh. E., 533 ; ami vide Cook V. Bank of Lexington, lb., 543 ; Orcmd Gulf Bank v. Archer, lb., 151). Cases in which certificates of trust and certificates of deposit issued by moneyed corporations, and loaned upon interest above the legal rate, have been decided to be usurious. For example, in the State of New York, one C. H. CarroU proposed to the Farmers' Loan and Trust Company to create a trust with the company of certain land in the county of Livingston and other property in the city of Rochester, the company to advance him $75,000 in their certificates of trust running twenty years at an interest of five per cent. Before any arrangement between the parties was completed,' Carroll submitted a further proposition "to borrow from the Farmers' Loan and Trust Company $95,000, and to convey in trust, to secure the same," real estate valued at $190,853.90. A few days afterward Carroll proposed to divide the trust, so as to make a trust in his own name of certain property estimated at $103,794.40, and to receive thereon, in the company's certificates of trust, $52,000, and to create a trust, as executor of Charles Oar- roll, of other property estimated at $87,059.50, and to receive thereon $43,000 in similar certificates. The company thereupon consented to the creation of two distinct trusts, as proposed, by Car- roll. Accordingly Carroll, by a deed absolute on its face, expressing the consideration of $52,000, and containing the usual covenants, conveyed the land in the county of Livingston to the company in fee. On the same day the deed was given the parties entered into and executed certain articles of agreement and declaration of trust, whereby the company covenanted, promised and agreed that they TRANSACTIONS BELD USURIOUS. 315 would, in consideration of such trust, igsue and deliver to Carroll their certificates of trust to the amount of $52,000, payable to him or his assigns, and to bear an interest of five per cent, redeemable in twenty years. And it was agreed that Carroll should apply such an amount of the certificates as should be required, or of the proceeds thereof, in payment and liquidation of the liens and incumbrances on the land. The company covenanted to make sales, and to grant, execute and deliver all conveyances of the said real estate to purchasers, whenever authorized and requested by Carroll, and to receive the purchase-moneys. It was also stipu- lated that all securities and conveyances, leases and sales, to be made and entered into, should be made to and with the company only, who were to receive all moneys payable on such securities, etc., and to account for the same to Carroll. Carroll agreed to pay and allow to the company interest at the rate of seven per cent for the said sum of $52,000 ; the difference between the interest agreed to be paid by the company on their said certificates (5 per cent) and the interest agreed to be paid by Carroll, viz., two per cent, being declared and agreed to be the only compensation, allowance or commission to the company for undertaking and executing the trust. It was also provided that whenever the com- pany should have raised the said sum of $52,000, with interest, they should come to an account and settlement with Carroll of the said trusts, and pay over the balance due to him, if any. And Carroll covenanted that in case the trust property and securities should be insufficient to pay the company the $52,000 and interest, he would pay such deficiency, and that he would indemnify the company from all loss. There were other stipulations in the con- tract, but these here given are sufficient to present the question of usury. Similar instruments, were executed by the parties in respect to the trust of $43,000 to Carroll as executor ; and thereupon the company issued to Carroll ninety-five certificates of trust under the seal of the company, for $1,000 each, fifty-two of which were to CarroU in his own right, and forty-three to him as executor. Each certificate certified that Carroll h&.d deposited with the company $1,000 in trust for twenty years, which sum the company agreed to pay to Carroll, or his assigns, with interest at the rate of five per cent, payable semi-annually. At the time the certificates of 316 LAW OF USURY. trust were issued by the company they were worth, in the market, less than their nominal value. On a bill filed to enforce the instruments on the part of Carroll, the defense of usury, among others, was interposed, and it was contended by defendant's counsel that the transaction was usurious, whether it be called a loan on mortgage, or a trust, or power in trust, and that it could not be enforced for any purpose or to any extent : (1) In the difference of two per cent of interest between the certificates loaned and the securities received; (2) In the loan of securities that were worth much less than their nominal value. On the contrary, the counsel for the plaintiffs contended that there was no usury in the transaction. The case was very ably argued on both sides, before the Supreme Court at General Term, where it was held that the transaction could not be enforced. 1st. Because the company did not possess the power of making loans ; and, 2d. Because the loan, and all the securities relating to it,i were illegal and void, as being in violation of the usury laws; that the transaction was usurious upon its face, in making a' difference of two per cent between the interest to be paid by the company upon their certificates, and that agreed to be paid by Carroll. In other words, that it was, per se, usurious, and the plaintiffs'' bill was dismissed, with costs. Wells, J., delivered the opinion of the court, and said : " The nominal value of the certificates, at the time they were.issued and delivered to Carroll, was not equal to the amount which Carroll was to pay for them by just the difference in the interest between the two. * * * I think the weight of evidence is decidedly that, at the time the loan was made, the certificates were not worth in market their par value. A number of witnesses were examined on this point, and most of them testify, in substance, that at the time this loan was effected they were at a discount of at least twelve and a half per cent, and not a witness, as I believe, shows them to have been of their par value at any time during the spring of 1838, when the negotiations were consummated. That the depreciation might have been owing, in part or in whole, to the pressure of the money market at the times to which the witnesses refer, does not, in my judgment, alter the case. Carroll bound himself to return their nominal amount in money, with lawful interest. It turned out that they were sold by Carroll, in order to raise money, at a ruinous sacrifice, * * * I am, therefore, of TRANSACTIONS HELD USUBIOUS. 817 the opinion that the holders of the certificates are not entitled to any decree in their favor. If I am right in holding the transaction a loan, and that it is affected with usury, then no one is entitled to any benefit from anything connected with or growing out of it. In other words, the court will not aid a party who has been con- nected with it, or who stands charged with notice. Poti&r est con- ditio possidentis" {The Fa/rmer^ Loan and Trust Oompawy v. 'Gaff'rdl, 5 Bath. R., 613, 657, 659, 661). The doctrine of the case, expressed in the fewest words possible, is, that a loan of trust cer- tific£|,tes of deposits, worth in market much less than par, upon an engagement to repay the par amount with interest, is usurious. And that if, for a loan of A.'s note at five per cent, he takes secu- rity from B. to repay the amount of it with seven per cent interest at the time it shall become due, it is usury per se. A similar case in some respects to that of the Farmers' Loan and Trust Company v. Carroll, subsequently came before the Court of Appeals of the State of New York and was similarly disposed of. The case was this; The plaintiff, an incorporated insurance and trust company, took from the defendant a bond and mortgage upon real estate to secure the payment of $3,000, with' interest semi-annually, for which the company gave the defendant twenty-five per cent in cash and seventy-five per cent in the com- pany's certificate of deposit, payable in twenty years, with interest at four and. a half per cent. The plaintiffs filed their bill in the late Court of Chancery of the State to foreclose the mortgage, and the defense of usury was interposed. The case was heard upon pleadings and proof at a General Term of the Supreme Court, where a decree was made dismissing the bill of complaint ; and then the plaintiffs appealed to the Court of Appeals, where the judgment of the Supreme Court was affirmed. Welles, J., delivered the opinion of the court, and said : "Assum- ing the right Of the company to loan their certificates of deposit, and the transaction a loan, it was illegal and void for usury. The bond and mortgage bore interest at seven per cent and the certifi- cate only four and a half per cent, making a difference in favor of the company of two and a half per cent or $57.25 per year on the amount of the certificate. It is not doubted that if the certificate were actually worth in money its nominal amount at the time it was loaned, potwithstanding it bore a rate of interest less than the respoad- 318 i^Aw OF usnsr. ents agreed to pay for the forbearance of the amount, the transac- tion would have been exempt from the imputation of usury. But this was not attempted to be proved. On the contrary, there is evi- dence in the case, which is uncontradicted, showing that the certifi- cate was not intrinsically worth and would not sell in the market for its nominal value, which was known to the appellants. It is proved that they were in the habit of purchasing similar certificates issued by themselves at a discount. If they w^e loaned as money at their nominal amount, according to a well-settled principle it was usury. * * * There can be no doubt, from the evidence, that the bond and mortgage were given by the respondents and intended by them as security for a loan, nor 'that "they received the proceeds thereof as a loan from the appellant. This was scarcely denied upon the argument. It was, in point of fact, a loan and nothing else " {]!few York Life Insuromce cmd Trust Company v. Beebe, 1 1T. Y. R., 364, 367, 368). And where A., for the purpose of obtaining funds, proposed to B., a banker at Washington, to sell him three drafts, each for $6,666.66, on the post-oflSce department of "Washington, and made •payable, one at six, one at nine and one at twelve months from date, and to take therefor $16,000, the drafts to be made payable to the order of C, and renewed by his indorsement and the hypothecation of bank stock, and B. accepted the proposal, advanced the money and received the draft and securities, it was held by the Supreme Court of Ohio that the transaction was prima faeie a loan and not a sale ; and by the law of Maryland, in force at Washington, such contract is utterly void for usury. And it was said that, in determining the character of contracts of this kind, a distinction is well taken between business and accommodation paper ; that a bill or note, valid in .its inception and furnishing a good cause of action as between the original parties to it, may be sold as a marketable commodity at such rate of discount as the parties may think proper, without subjecting the purchaser to the imputation of usury ; but that it is otherwise where the bill or note claimed to have been sold is mere accommodation paper, void in its inception, fictitious in its character as between the original parties, and on which no action could be maintained till after its transfer to a third party ; and that collateral securities, taken on a contract void for usury, are void in the hands of the usurer {Corcorom v. Powers, 6 Ohio If. 8. JS., 19). TRANSACTIONS BELD USURIOTTS. 319 The principles involved in these cases are the same as those which govern cases of the exchange of obligations ; and it has been shown in a previous chapter that parties may exchange with each other their personal obligations, within certain rules, without sub- jecting the transaction to the charge of usury. But there are cases of this nature which have been held by the courts to be usurious, and rules have been laid down by which the question may be deter- mined. A very important case may be referred to upon this point, which was originally decided by the Sapreme Court of the State of New York. The case was this : Certain parties having contracted with the Holland Land Company for the purchase of a large tract of land belonging to the latter, and being unable to make their pay- ments upon the contract, they applied through Schermerhorn, one of their number, to several moneyed corporations for money. Being unable to obtain it elsewhere, Schermerhorn applied to the American Life Insurance and Trust Company for means or aid to enable the associates to fulfill their contract. Schermerhorn received encouragement that, on perfecting arrangements to establish suita- ble correspondents in London, the company would be able to take a deposit of the bonds agreed to be purchased, and advance, by their certificates or bonds, the funds necessary to pay for it. In the meantime an arrangement was made by which bonds or certifi- cates were issued by the Trust Company to Schermerhorn and his associates for £12,000 sterliag, for the security of which a bond was given, made by Schermerhorn and his associates, payable in a short time. It was known to both parties that those certificates could not be immediately converted into money at par, but that the amount of money required could be raised on them by hypo- thecating them ; and they were hypothecated to Nicholas Biddle for that purpose. In the course of the same yeiar and the next, an arrangement was made between the parties for a further advance of certificates by the American Life Insurance and Trust Company to an amount suifieient to enable the associates to pay off their debt to the Holland Land Company and entitle themselves to a conveyance of the lands, which were to be conveyed to other par- ties in trust to pay the Trust Company its advances, with interest and charges, and then to convey to the associates. The certificates were to bear an interest of five per cent, and be payable in London in pounds sterling, in twenty years from date, with interest payable 320 LAW OF USUBt. there, semi-annually. In July, 1838, the Trust Company issued to the associates further certificates, to the nominal amount of £36,T00 which, with those before issued, amounted to the sum of £47,700. They were estimated and paid to Schermerhom at a premium of six per cent upon $4.44 to the pound sterling, which was about $4.Yl for the pound sterling, and were all, pursuant to a previous arrangement known to the officers of the Trust Company, sold by the associates to Biddle at $4.44 to the pound sterling, and the proceeds, or sufficient for that purpose, were paid to the Holland Land Company upon the contract. The associates had previously agreed upon an equitable surrender and partition of the lands, etc., among themselves, according to their respective interests therein ; and their respective portions of the debt due to the Trust Com- pany were ailso liquidated and settled, so that each one owed his portion of the debt in severalty. Each of the associates then, for the purpose of securing the debt due to the Trust Company, gave his individual bond to the Trust Company for his portion of such debt. The plaintiff, who was one of the associates, gave his bond, dated July 10, 1838, conditioned for the payment of $151,933.44: in ten yeaffl, with interest at the rate of seven per cent per annum, payable semi-annuaJlly. And further to secure the Trust Company, the associates directed the Holland Land Company to convey the land directly and absolutely to the other parties before referred to, in trust, to be held and disposed of, first for the payment to the Trust Company of the amounts due on the bonds of the associates. Duer, Kobinson and Seward, the other parties referred to, then executed a declaration of the trusts upon which they held the land, specifying the amount of each associate's part of the debt, as men- tioned in his bond, and his individual share of the property, and contaiining covenants to convey his share of the property to the owner, when his share of the debt should be paid. Many other , facts were in the case, but these are sufficient to present the ques- tion of usury, which was raised. Schermerhorn filed his bill in equity aga;inst the American Life Insurance and Trust Company and others, for the purpose of set- ting aside the bond given by him to the Trust Company, and of having the conveyance made by the Holland Land Company to Duer and others declared void, on the ground that the considera- tion of such bond and conveyance was usurious, and.the transactions on which they were founded unauthorized and illegal. TRANSACTIONS HELD USURIOUS. 321 The coart held that the contract between the associates and the American Life Insurance and Trust Company wa,s, on the part of the Trust Company, usurious and void as against, the plaintiff; that- the bond given by the plaintiff to the Trust Company was void as against the plaintiff, and it was ordered to be given up and canceled ; that the trust claimed and attempted to be raised in favor of the Trust Company upon the deed from the Holland Land Company to Dner and others was void, and the trustees were directed to con- vey to the plaintiff his share of the property, and to account to him for the money or property received by them under the trust. Mr. Justice Mullett, in a very able and exhaustive opinion, reviewed the authorities upon the subject, and gave the reasons by which the court came to the unanimous conclusion that the trans- action was usurious, and made the disposition they did of the case {Sehermerhorn v. The Americcm Life Inswrance and Trust Com- pany, 14 Ba/rh. B., 131). The defendants took the last mentioned ease to the Cotirt of Appeals of the State, where the judgment of the Supreme Court, so far as the transaction was held to be usurious, was affirmed ; but the judgment was modified in some particulars, not pertinent to the inquiry here. The transaction was regarded by the Court of Appeals as ^bstantially an exchange of obligations, and the doctrine enunciated was this : " When on an application for the loan of money, the borrower in lieu thereof and in exchange for bis own obligation receives the negotiable obligations of the lender for the amount, which the parties intend shall be and which are used by the borrower to raise the money, the transaction is a loan within the usury laws. And if by the obligations exchanged the amount ultimately to be paid by the borrower is greater than that to be paid by the lender, the transaction is usurious ; otherwise, if the obligation of the lender is at a premium and the amount agreed to be paid to him is not greater than its cash value in the market with legal interest thereon." Selden, J., in his opinion, said : " The true rule on this subject I hold to be this : That whenever the question of usury arises, no valne can be put upon the promises or obligations of either party different from that which they import upon their face. This is usually conceded in respect to the obligations of the borrower. * * * It may be said that, admitting a mere exchange of obli- gations not to be a sale, neither is it a loan ; and hence that it is 41 322 LAW OF USURY. entirely without the statute of usury, unless brought within it by extrinsic evidence that an evasion of the statute was intended. It is true that literally the transaction is neither a sale nor a loan, but an exchange. I apprehend, however, that, legally, in refer- ence to the question of usury, it must be regarded as one or tie other. No other distinction has ever been applied to such transac- tions by the courts. * * * Any difference in the nominal amount of the securities exchanged has been repeatedly held in England to constitute usury ^e?- se. * * * It makes no dif- ference whether the discrepancy is in the principal or the interest. If it appears that, at the end of all the payments, the lender will have received more than his principal with lawful interest, the contract is usurions. * * * I consider these cases as resting upon a i firm basis of principle, and as tending to establish the doctrine contended for here, that whenever the question of usury arises between the parties to any transaction, the obligations of the parties themselves cannot be estimated otherwise than at their nominal amount, and that consequently upon every exchange of note or other obligation the question of usury becomes one of mere com- pntation. * * * I deem the conclusion inevitable, therefore, that the transaction was usurious." Denio, 0. J., in his opinion, said : " Without going over the evi- dence in this case, which, however, has been carefully examined, I am quite satisfied that the transaction between the, associates and the Life and Trust Company was a loan by the latter to the former. The associates wanted money or securities which would immediately produce money. They did not desire to purchase, exchange or to procure an investment. The company had not, indeed, any ready money to loan, but they had credit, which enabled money to be raised on their engagements, and they consented to issue such engagements, upon being secured, by means of the difference of interest, considerably more than the amount which that engagement would require them to pay. Their credit, how- ever, was not so good as that their paper of this description would command a premium in the market. On the contrary, it was con- siderably below par. They could not, therefore, loan such paper for more than its real value, and that value must be measured, as has already been stated, by the amount of money which it would oblige them to pay. I am, therefore, of opinion that the transaction of July, 1838, was void for usury; and if Schermerhorn could be TRANSACTIONS BELD USURIOUS. 323 considered as a borrower, he would be entitled to relief against the securities executed to effect that arrangement, without the. performance of any condition." All the judges except Mitchell, J., who was of the opinion that the transaction was not usurious, and Comstoct, J., who took no part in the decision, concurred in the opinions of Selden, J., and Denio, 0. J. {Schermerhorn v. Tdkncm, 14 JST. Y. E., 93, 118, 119, 121, 123, 138, 143 ; and vide Dunham v. Qould, 16 Johns. JR., 367). An early case, decided by the Supreme Court of the United States, may also be referred to on this point. The case was this : Corcoran & Company discounted their notes with the Farmers' and Mechanics' Bank of Georgetown, at thirty days ; and, in lieu * of money, they stipulated to take the post notes of the bank, pay- able at a future day, without interest, which ^os^ notes were at a discount of one and one-half per cent. in the market at the time of the transaction. The court held that the transaction was usurious, and further, that the indorsement of a promissory note of a stran- ger to the transaction, which was passed to the bank as a collateral security for the usurious loan, although the note itself was not tainted with the usury, yet the indorsement was Toid, and passed no property to the bank in the note ; and that the subsequent pay- ment of the original note, for which the security was given, and the repayment of the sum received as usury, would not give legality to the transaction {Gaitten v. The Fa/rmers' and MechoMics' Banh of Georgetown, 1 Peters' S., 44 ; am,d vide Bomk of the United States v. Owens, 2 ih., 527). In these cases, then, the rule would seem to be, that where notes or other obligations of the parties in equal amounts are exchanged, one is equal in value to the other, and there can be no usury in the transaction ; but when either party makes an advantage in the arrangement, over and above legal interest, then the ease is one of usury, if the transaction was designed as, or connected with, a loan of money, or is in point of fact a loan. 324 LAW OF UStfRT. CHAPTER XXIV. TEANSAOTIONS HELD TO BE USUEIOtTS CASES WHEEE SOMETHIHO BESIDES INTEREST IS PAH) FOE THE LOAN EXTEA SUM PAID FOE BEOKEEAGE — EXTEA SUM PAID AS COMMISSION EXTEA Srai PAID AS EXCHANGE. It has been well said that it signifies not in what shape the profit upon the money lent is to accrue ; it is sufficient that such profit should exceed the legal rate, in order to bring the transactioE within the statute. A device often resorted to for the purpose of evading the statute is to let the money at legal interest, upon con- *dition, however, that the borrower shall take something with the. money, at a given price, when the real value of the thing taken is much less than the price allowed. Several cases of this character are collected by Mr. Comynin his little work on usury. Where a bankrupt, 'having borrowed a sum of money of the defendant for one quarter of a year, had agreed; to give legal interest to the defendant for every £100 ; and having deposited some silk with him as a security, agreed further to give, him an additional sum, as for the use of his wa/rehouse ; the ques- tion was, whether the interest was usurious, and the jury having found that it was not usury. Lord Holt, Chief Justice, thought that the verdict was wrong {Le Blame v. Harrison, Holies R., T06). So where an information stated that the defendant, by way of corrupt bargain made between him and one Edward Hayns, received of John Hayns, the administrator of the said Edward, £65 ; viz., . for the use and occupation of a hall in Clerkenwell, in the county of Middlesex, from Midsummer (14 Jac. I) to Michaelmas (14 Jap. I), £15,'and for the forbearance of £1,000 from the 16th of April, , 1614, for six months then following, £50 ; whereas, the said house was really worth but £20 per annum, the jury found for the plain- tiff {Bedo v. Sanderson, Cro. Jac., 440). And in like manner, an agreement, by the borrower to allow the lender a salary as a clerk in his brewery, which would yield him more than legal interest for the use of his money, it not being intended that he should perform any services, was admitted to be corrupt and Ulegal {Wright v. Wheeler, 1 Camp. E., 165, n; ani vide Com. on Uswry, 117, 118). A similar doctrine was held in a recent case which was decided TBANSACTiONS MBLD USURIOUS. 325 Dy the Supretnte Court of the State of Yermont. The directors of an incorporated eompaily made an agreement with a persdn that if he would take the office of treasurer and provide money to carry on the business of the company, he should -be paid $300 a year atid one per cent a month for money advanced, which was accepted and took efifect. The court hdd thfe contract to be usurious as to the payment for money advanced, but that the other part of the cofl- tTact was not invalidated ( Waite y. Wiridham,, etc., Gompcmy, 37 Yt. B., 608). And in another case, decided by the same court,, wherein it appeared that A. loaned to B. a certain sum, and, as a part of the same transaction, B. purchased a mill of A., giving much more than it was ■ft^orth, of which fact both parties were aware, though nothing was said as to the real value of the mill, the court held that the loan was usurious {Low v. Prioha/rd, 36 Vt. R., 183). In the State of Kentucky, an individual loaned to aiiother a sum of itloney to be paid in one year, under an agreettient that the lender should have the use of a negro belonging to the borrower, iMtead of interest, although the hire of the negro ^eatly exceeded the legal interest of the money loaned. The lender took from the borrower an absolute bill of sale of the negro, .but gave him a wri- l5ikg specifying that if he returned the money in one year he inight redeem the negro. The court held the contract to be usurious ; and, as the lender had kept the negro for some years, it was ordered and adjudged that he should account for the hire of the slave, to be set off against the nioney loaned, and interest {McJennes v. Hdri, 4 Bihi's M., 327 ; (Mid vide Riaha/rdsorH s Administrators V. Brown, 3 ib., 207). And in the State of Louisiana, where the use of slaves was given In lieu of interest for money loaned, and there was a great dispro- portion between the value of the services of the slaves and the rate Of conventional interest, it was held that the presumption was that the contract was intended to secure usurious interest, and was, therefore, within the statute against usury {Succession of Hick- inan, 13 La. Annual B., 364 ; dnd vide Galloway v. Logan, 4 La., B. 8., 167). Jn the State of New Jersey, where it was agreed that A. shoiild lend B. $2,000, on interest^ and that B., for the loan, should give A., before receiving all the money, a wagon of the value of $100, over and above the legal interest, and that, to secure the repay- 326 LAW OF DSVRT. ment of the $2,000, with legal interest, B. should give A. a bond and mortgage, and the husiness was closed up accordingly, the Court of Chancery held that the transaction was usurious {Cunr mins V. Wire, 2 Hoist.. Gh. B., 73). In the State of Virginia, where A. assigned to B. a bond exe- cuted by C, who was in doubtful circumstances, for considerably ' less than was due on it, and A., at the same time, executed a. deed of trust on property, with condition that if the bond, with its interest, was not paid in twelve months, the trustee should sell and pay the full amount then due on the bond to B., it was held that the transaction was usurious {Bell v. Calhoun, 8 GratU B., 22). In a case decided by the Superior Court of the city of New York, where it was proved that a bank discounted a note at the full legal rate of interest for the time it had to run, and required the indorser to give them his check for $200, in pursuance of an agreement to that effect, on which it was discounted, and the next day charged this check against this credit given on this discount, the jury found the transaction usurious, and the court, at General Term, sustained the verdict. The court held that 'charging the check in account showed that the indorser was to have the use of only $300, less the discount on $500, and was to pay therefor inte- rest on $500 ; and that the transaction was usurious per se. Upon such facts, it was declared that it would be proper for the court to instruct the jury to find for the defendant. Woodruff, J., delivered the opinion of the court, -and said : " That a corrupt agreement to lend $300 and charge the borrower the interest on $500, is usurious, we think clear ; and the delivery to the lender of a promissory note, in execution of such an agreement, passes no title. * * * It is obvious that the fact, proved without contradiction, that the bank charged Pearce the $200 check at .once, and so took the money, to that extent, from his account, ^nd had it in hand to use for its own purposes without restriction, pretty effectually contradicted such an explanation of the trans- action. And, besides, we are not here to be regarded as bonceding that any such explanation was warranted by the evidence, or could affect the legal character of the transaction, so long as Pearce was only allowed the use of $297.12, and the $200 was, in fact, in the possession and at the use of the bank, and the check protected them in that possession and use." {Butterworth v. Pea/roe, 8 Bosw. B., 671, 675, 677.) TRANSACTIONS BELT) VSORIOUS. 327 In the old Supreme Court of the State of New Tork, a trans- action was held to be usurious, where it appeared that the maker of two promissory notes which were just due, in order to obtain a renewal for three months, agreed with the holder to give him a new note for the aggregate amount of principal, and pay the dis- count upon it, and the back interest, and, m addiUon^ to transfer to the holder, at pa/r, drafts on New Tork and Albany worth three-fowrths of one per cent prermum, to an amount equal to the debt, the court were unanimous in the opinion that the new note given pursuant to the arrangement was void for usury, and so declared {The Seneca County BamJc v. Schermerhom, 1 Den. R., 133). The present Supreme Court of the State of New York has held that an agreement by borrowers to pay the holder one-third of the profits of their business, as copartners, in addition to the legal interest, for the use of the money loaned, was usurious and void ; and it was declared and decided that a promissory note, given by the borrower in pursuance of such an agreement, being void, fur- nished no consideration for a note given by a third party to the lender, on the purchase of the original note by him {Sweet v. Spence, 35 Ba/rb. M., 44). And in a case in the late Court of Chancery of the State of New York, where, on a loan of money, the principal and interest were secured by a pledge of stocks, and the contract stipulated that the lender might keep the stock in payment, at its then market value, if he chose, without accounting for a rise in value or the dividends, the court held that the transaction was usurious, and laid down the rule, that whenever the lender stipulates, even for the chance of an advantage beyond the legal interest, the contract is usurious, if he is entitled by the contract to repayment of the money lent, with the legal interest, at all events {Glevelcmd v. Loder, 7 Pa/ige's B., 557). So, also, where a creditor traveled, of his own accord, to his debtor's residence, and there agreed to give a further credit, upon the debt being secured with interest by a mortgage, and upon the debtor paying the creditor's traveling expenses from his to the debtor's residence, and the mortgage was executed, including a sum for such expenses, the same court held that the mortgage was usuri- ous {WilUams v. Hvrnn, 7 Pmgis R., 581; hut vide Harger V. MbCuUough;2 DertJufs B., 119). ^ 328 I'AW OF USURY. A case of similar import was decided by the old Supreme Court of the State of ]S"ew York, and held to be usurious. The %cta were thpse : Dutcher having lent to Jackson $250, the latter brought to him a no);^ foy %^Q^, drawn by one Holdridge, pay^blp to Jackson, ii^dorsed by him and a firna of livery-stable keepers an(4 desired Dutcher tp procure the same to be discoimted. Dutcher took the note to a bank, and was there told if he would indorse it. it would be discpuntfsd ; he accordingly indorsed it, and receive^ the avails, which he applied by appropria1;ing $250 to refund him- , self for' the money lent Jackson, thirty dollars for his indorsement and thp trouble he had in the piatter, and the residue he paid to Jackson. His own account of the affair was : " I took out $250 ^^hich belonged tp rpp ; then I took ^hirty dollars for my trouble apd for indpr^ing ; I dp not indprse for nothing." And, again : " I told Jackson I charged ten dollars for going to Norton (the president of the bank) to get the note discounted, ten dollars fpr having used my name upon the note, a,nd ten dollars for the bother I had ab.out the $250 ; and he took the baknce con- tentedly." Butcher tpok up the note from the l»iik, then trans- ferred it to the plaintiff, who brought suit upon it, ai^d the defense of usury was interposed. The question was submitted to the jury, and a verdict was found for the plaintiff. The defendant moved the court in ba-nc for a new trial, an(J it was granted. The court held th^t, as between Dutcher and Jackson the transactioEi was usurious as a question of law, and because the jury were not told so by the judge a new tria,l was granted {Steele v. Whipple, 21 . Wend. B., 103). I^ order to arriye at the cpnclusion the court did in this case, they had ip find that Dutcher was, in fact, the lender of the n^pney, a;^d perhaps the evidence clearly showed that he was ; but, it has bepn well said of the case, that it " stands near the line which divides two well settled classes of cases, one adjudging a trapsactiojo, to be usurious, jje/* s^, and the other that it is not, but ^o fraught with, suspicions of usury, in disguise and in. intent, that a jury may find it." The same principle governs in those, cases where an extra sum is tp be paid ^or brokerage as compensation to an agent. It is a,dmitted that w;here a broker or agent advaiices. money for hia principal he ma,y lawfully take an extra sum or allowance for hia trouble and attention, in addition to the legal interest on the money TRANSACTIONS HELD USURIOUS. 329 advanced. Cases of this character, which have been upheld by the courts, have been referred to in a previous chapter. It seems to be the rule in these cases, that unless the jury find ,that the commigsion was a cover for usury, the court cannot intend that it was so, if it appears that there was really any substantial trouble upon which a compensation might be claimed. For, according to the language of Lord EUenborough, the court has no scales nice enough to balance the trouble imposed upon the party ; and with- out some proof to the contrary, the compensation must be taken to be a fair one. All commissions, where a loan of money exists, must be ascribed to and considered as an excess beyond legal interest, unless as far as it ip aseribable to trouble and expense Jona ^de incurred in the course of the business transacted by the persons to whom such commission is paid ; but whether anything and how much is justly aseribable to this latter account, is always a question for the jury {Palpier v. Bake/f, X Maule & Selw. R., 56 ; and vide Ciisfairs V. iStein, 4 ib., 192), But cases have ofte^i been before the courts, which were, in form, transactions of commission and compensation for trouble, yet never- theless found to be colorable or excessive, and declared usurious. It was held by Lor4 Tenterden, in a well considered English case, tlji^t where the lender stipulates with the borrower that the latter shall pay a commission to the lender's agent, it is usurious, although the lender himiSeJf retains nothing but the legal dis- count {M^.o6 V. SmvfnonSy 1 Moodiy. & MoXkMs R., 121). Jt haiS been held by the Supreme Court of Pennsylvania that where it appeared that the holders of certain judgments, by assign- mept, were to receive, as commission merchants, from the defend- ants, who were iron masters, iron for sale on commission, that they were entitled to interest upon the judgments and to commis- sions on sailes and guai^anties of paper received, but not to an addi- tional commission of two and one-half per cent on advances ; that the charge of additional conxmi^sions on advancements was usurious, and could not be enforced at law, either upon evidence of a promise by the defendants to pay it, or in consequence of their failure to comply with theif agreement in furnishing iron according to their cpnt;Fact, Thompson, J., who delivered the opinion of the court, said: "The judgments which the plaintiffs received by assignment, and which they undertook to pay and did pay, bore interest, and this 42 330 L-^T^ OF USURY. was all the interest they could recover. They had commissions on sales of iron and guaranties. This was a proper charge in the accounts current, but the two and a half per cent for advances was not. It is true there was evidence of a promise to allow these commissions ; but as they are usurious, the agreement cannot be enforced. If the defendants chose to fly from their promise in this respect, the law permits them to do so. It is a matter entirely within the cognizance of their own conscience" {Orubb v. Brooke, 47 Pe7hn. B., 485, 488 ; and vide La/rge v. Passmore, 5 Serg. <& Rawle's It., 51). In the State of West Virginia, a case came before the- courts, in which it appeared that B. agreed to purchase and raise for T., during the next year, about 8,000 hides ; to tan them in Yirginia and deliver them in IsTew York. For those purchased by B. the drafts of B. at three months were to be accepted by T., and T. waS to be allowed five per cent commission or advance on the cost of the hides, whether purchased by himself directly or by B., and to sell the leather at his discretion, and be allowed six per cent com- mission and guaranty on the gross amount of the sales ; and after deducting the cost of the hides and expenses thereon, with interest on the same from the time they became due, or were paid for by T., together with any expenses he may have had to pay on the leather, as well as any advances he may have made, together with the advance on hides and commission on leather, as specified, to pay over to B. the net proceeds of the same ; the property in aU the hides and leather to be in T., who was to pay the insurance and charge the cost thereof to B. T. purchased 801 hides and B. 10,154. T. was a New York leather dealer, and B. a Virginia tanner. The court held that the transaction was usurious {Brdkely,, V. TuttU, 3 W. Va. B., 86). The old Supreme Court of the State of New York, where goods fraudulently obtained were deposited with an auctioneer, who made an advance upon them, and charged five per cent besides the usual commissions, held that the transaction was usurious ; and for that cause the auctioneer was declared not entitled to be con- sidered as a hona fide purchaser, in an action of trov&r brought against him by the party from whom the goods were obtained, although he was wholly innocent of the fraud. The court* seems almost to have taken it for granted that the transaction was usuri- ous, and only discussed the question as to whether the auctioneer TRANSACTIONS BSiLD USURIOUS. 331 ffas liable in trover to the owner of the goods, because he receiyed theui under an arrangement which was usurious {Rarm'dell v. Morgan, 16 Wend. B., 5T4). And in a certain case before the same court, it appeared that E. was applied to by P. for a loan of money, but not having it, referred him (P.) to his son-in-law, whose usage he said it was to receive seven per cent, besides legal interest ; and, by arrangement between himself and P., received P.'s note with an indorser, and procured the money of his son-in-law, at the rate mentioned by him, on his own note, which he afterward paid, and gave P. credit from time to time on P.'s successive indorsed notes, held by E. him- self. The court held that R. must be considered the lender of the money ; that he did not stand in the light of a mere security of P., and that the notes taken by him were usurious and void. It was further held by the court that, where the original loan is- usurious, all the securities therefor, however remote or often renewed, are void. The doctrine was also declared that, where one, as agent, lends money for another, at a usurious rate of inte- rest, and afterward pays him, and takes security from the bor- rower in his own name, it is void, though he derive no benefit from the loan and the premium go to the exclusive benefit of the principal. Sutherland, J., in delivering the opinion of the court, said : " The only supposition upon which the usury can be got rid of is, that Parker's note was not given for the loan, but was given inpayment of the $800, which the plaintiff had paid Eoswell Eeed. Every fact in the case is at war with such a supposition. The plaintiff did not pay Eoswell Eeed until about a year after the loan was made. But Parker's note was given either the day before 'or the very day that he received the money. It could not, there- fore, have been given in satisfaction of an advance which had not been made. " In every point of view, I consider this one of the clearest cases of usury that was ever presented to a court of justice ; and if the miserable contrivance which has been resorted to, to screen this transaction from the operation of the statute, should prove effec- tual, either the law itself, or the administration of it, would be brought into deserved dishonor" {Beed v. Simth, 9 Cow. B., 6i7, 651, 652 ; cmd vide Levy v. Gadsby, 3 OrancKs B., 180). In the State of Yermont, in a case decided by the Supreme Court, it appeared that an agent, in negotiating a loan, sold his 332 IiAW OF USUBT. property to the borrower at a price much above the true value, and it was clear that the purchase was made in order to procure the loan, though without the actual knowledge of the lender; it was held, in a suit by the principal to enforce a security for the loan, that the transaction was usurious ; that is to say, that, under the laws of the State, the price of the goods above the true value thereof was usury {Austi/n, v. Ha/rrmgton, 28 Vt. H., 130; lut vide Baxter v. Buck, 10 id., 548). And in the State of Yirginia, where it appeared that F. & N, were indebted to a bank, for which the bank had recovered a judg- ment against them, whereupon they applied to the bank for indul- gence, and the bank agreed to give them a long indulgence, upon condition that they would give real security for the debt, and more- over to pay the attorney of the bank all the costs of the suit, and the commission which the bank had agreed to give him for collect- ing and receiving the debt, to which they acceded ; and, accord- ingly, the debtors gave the real secm-ity for the debt, and one of them paid the costs and part of \he commissions oi the attorney, and a note was given to the attorney for the balance of the com- missions ; the attorney having full notice of the terms of the agree- ment between the bank and the debtors ; the court held that the agreement between the bank and the debtors, and, therefore, the note given for the commissions to the attorney, were usurious, and could not be enforced {Toole v. Stephen, 4 LeigKs R., 581). An interesting case may be referred to, which came before Lord Kenyon, of England, and by him held to be usurious,, but which has since been the subject of considerable discussion. The case was this : The defendants were bankers at Portsmouth, and on the 21st of December, 1792, Thomas Knott, the servant of a Mrs. Stewart, drew a bill for £600 on Sedley, her agent in London. The bill was payable to the defendants, or order, thirty days after date, and, immediately after it was drawn, it was taken to the defendants, who gave their note for £600, payable three days after sight, in London.- For this the defendants received a discount of five per cent, calculated on the thirty days the bill had to run, but making no deduction on account of the three days the note had tc run after sight, or of the three days' grace which the bankers took thereon. Knott, on cross-examination, admitted that the money to be received on the draft was to be remitted to London, but swore that no money was offered to him by the defendants, but that they TRANSACTIONS BELB USURIOUS. 333 gave him the note at three days' sight, without asking any questions as to the mode in which he would be paid the money. All the other transactions between the parties were of the like nature ; and another witness proved that these notes, payable at three days' sight, were discounted when they arrived in London. Lord Kenyon said he was clearly of opinion that this was U usurious contract, whether the person discounting the bill chose to receive a note or money. If Mrs. Stewart chose to have a note payable in town, the defend- ants should not have taken interest for the time the note had to run, but should compute the interest from the time it was payable ; and on Mr. Lubback, the banker (who was on the jury), saying that, whenever he sent a bill to Bristol, the drawee sent a bill on Lon- don, payable at thirty days after date, his lordship said that the law in this case was clear, and that no usage whatever could control it. On this the parties compromised the catise, arid agreed to withdraw a juror ; which done. Lord Kenyon said : " Now the cause is over, I must say one word for myself. I am most clearly of opinion that this is usury. Whether the party consented or not can make no difference. She was entitled to receive in money the amount of the bill, after deducting the interest for the time it had to run. The defendants could not give a note payable in six days without deducting from the discount the interest for those six days. There may be eases where a country banker may be entitled to receive more than five pounds per cent ; such was the case of Sudbury Bank, which came on in this place some years ago, and in which my opinion concurred with that of the jury. But all men, lawyers or not lawyers, must agree on this case, because here was a second discount paid on the notes. The case is so clear that no two men in the profession can entertain different opinions on it " {Matthews, qui tarn, v. Griffiths, Peake's N. P. C, 200). And, according to a manuscript note of this case, Lord Kenyon, in the course of his opinion, used the following expressions : " When a party takes five pounds per cent, discount as for ready money, and yet does not pay for ready money, but bills payable at a future day, though both parties consent to this transaction, and though it may be for the convenience of bothj I am clear that it is usury." And " this is an offense, against the statute of usury, for taking five pounds per cent for that which was incapable of being converted into money's worth up to the extent for which the discount was taken " {Hamimett v. Yea^ 1 Bos. <& Pul. H.j 153, note a). 334 ZAW OF USURY. Three years afterward, Lord Kenyon, adverting to this case, said that he knew his opinion had been questioned by mercantile men; but, after all the consideration he had been able to give to the case, he thought it was rightly decided {Maddooh v. Ha/mmett, 1 Term R., 185). Soon after this, Lord Kenyon's opinion was canvassed in the English Court of Common Pleas, in a case of discount and remit- tance, which came before the judges on a motion for & new trial. In adverting to the case with reference to the one before him. Chief Justice Eyre said : " The authority of a case said to have been determined at nisiprius has been very properly pressed upon us in the argument. Certainly the opinions of the judge who is said to have decided that case are at all times entitled to the highest respect from me, and from every judge in Westminster Hall; and I will never hastily decide against the advised opinions of that great lawyer. * * * According to the letter of that case, as it has been reported to us, it was said that unless the payment is made in ready money, the transaction is usurious ; this would at once put an end to the banker's business " {ETammett v. Sir W. Yea, 1 Bos. S Pul. B., 144). The authority of the case of Matthews v. Griffiths may be con- sidered somewhat shaken by the later decisions, and yet it is impor- tant as a reference on account of some of its features, and on account of the distinguished ability of the judge who decided it. The Supreme Court of the State of New York, at Special Term, has held that where a lender received from the borrower a security for the payment of the sum loaned, with interest, and thereupon gave him his check for the amount loaned, less the amount of a note which the lender held against the borrower, which check was payable in six months, without interest, the transaction was usu- rious {Lane v. Losee, 2 JBarh. H., 56). And to the same effect is the decision of the Court of Appeals of the same State, wherein it appeared that a bank, in discounting a note for a customer, made it a condition that he should pay the interest on the note for the fuU time it had to run, and that he should keep on deposit in the bank a portion of the proceeds until the maturity of the note. The court held it to be a bold case of usury. Potter, J., in his opinion, said : " If the statute prohibiting usury can be evaded by such a subterfuge as has been offered in this case, TRANSACTIONS MBLD USURIOUS. 335 it has become a dead letter, and better be repealed at once. By such a contrivance, an individual or a bank, in the loan of one-half their capital, may draw interest upon the whole. The device in this case, lacks even the merit of ordinary skill in its consumma- tion; it is an act of cupidity, an extortion tha't is not provided with even the decencies of a cloak to cover its nudity" {East River Bank v. Hoy% 29 How. Pr. R., 280, 285 ; 8. G., 32 W. T. R., 119). • In all these cases it is a question of fact for the jury whether the con- tract was made fairly and honestly, or whether it was intended merely as a cloak for usury. As for acts of general agency, where money is advanced by an agent, so for the discounting and negotiating of bills of exchange, the law, under certain restrictions, allows a rea- sonable commission as a recompense for trouble, and a reimburse- ment for expenses. But the transaction will in no case be upheld when it appears that the compensation or commission was unrea- sonable, or when the particular form of the contract was adopted for the purpose of enabling the lender of the money to realize more than the legal rate of interest. Every case must depend principally upon the circumstances attending it ; and it very seldom occurs that one case of this character will be found which is entirely decisive of another. And yet every decided case may involve principles and discussions which will aid in the determination of others of the same class. The rule is now universally recognized that, for the convenience of traders, a reasonable compensation to bankers and merchants, for the trouble and expense they may incur in the various negotiations incident to paper credit, will be allowed, in addition to the regular interest. But when the trouble and expense are not incurred, then the remuneration cannot be claimed. A case in point, upon the subject of exchange, has been hereto- fore referred to, under another head. The case was finally decided by the New York Court of Appeals, wherein it appeared that the borrower of money in ITew York agreed to pay, for the use of it, seven per cent interest and a part of the difference of exchange paid by the lender (a resident of Savannah, Georgia), on the transfer of the money from Savannah to E^ew York, immediately previous to the loan. The court held that the contract was usurious, and that the notes given for the money so loaned were void. From the fact that the lender's money, at the time of the loan, was in New York when the loan was contracted, the court declared it not a 336 IiAW OP tfStTRT. proper case for any charges on account of exchange {Jacks v. Nioh- ols, 5 W. Y. B., 178). The Supreme Court of Wisconsin has held that an agreement for the payment of exchange in New York upon a note, in addi- tion to the highest amount of legal interest thereon, when the note is made, and is payable in the State of Wisconsin, is usurious {Towslee v. Durkee\ 13 Wis. ^.,480). The same court held in another case that the provisions of the statute against usury apply as Wfell to banks as to natural persons, and that where a claim for exchange is a mere pretext for the obtaining extra interest, the contract will be usurious {Dwrltee t. City Ba/nk, 13 Wis. B., 216). And so also the same court held in still another case that where a note is executed in the State of Wisconsin and payable there, the demand and payment of exchange upon New York, as a device to cover the taking of illegal interest, renders the transaction usuri- ous ; and. in the same case it appeared that A., to obtain from a bank of the State of Wisconsin forbearance on his indorsement of B.'s note, procured and indorsed to the bank a new note of B. for the same amount, and. paid a sum greater than ten per cent interest on the same, the court held that the transaction was usurious, and that under the law of 1859 no recovery could be had upon such indorsement, nor upon any subsequent note executed by A. to take up the note so indorsed {Eoeh, etc., BomkY. WooUscr&pt, 16 Wis. B., 22). Ah important case upon this subject was recently decided by the New York Court of Appeals, and the decision was adverse to the right to the receipt of exchange under the circumstances of that case. The facts were these : In November, 1855, the plaintiff was indebted to the Lyons Bank, a banking incorporation, doing, busi- ness at Lyons, in the county of Wayne, in the State of New York, in the sum of $4,000, in three promissory notes payable at the Albany City Bank, in the city of Albany ; one for $1,000,- due October 31st; one for $2,000, due November 6th; and one for $1,000, due November 8th of the same year. In renewal of the two last named notes for the brief period of twenty-five days, the plaintiff was required to give and did give his new note for $3,000, payable at the Albany City Bank. He was also required to pay the discount at the rate ef seven per cent per annum, and one-half of one per cent for the difference of exchange between Lyons and TBANSAOTIONS BELD USUBiqUS. 337 Albany, which he paid at the time of the renewal. The transac- tion was held to be usurious. Brown, J., in his opinion, said : " The facts present a clear and unequivocal case of usury. It is condemned' to this category by the clear and logical argument of the case of OU/oer Lee <& Go.^s Bamk v. Wailhridige {srwprob), cited in its support ; for if it be an indisputable proposition that a given sum of money is of the same legal and theoretical value in all patts of the State, then whenever the Lyons Bank assumed the converse of the proposition, and took from the plaintiff one-half of one per cent in addition to the legal rate of interest, upon the theory that after the lapse of fifteen or forty-five days a given sum of money at Lyons would not be of the same value as it would be at Albany, it converted what was speculation into absolute reality, and it introduced a vicious ele- ment into the transaction which brought it within the prohibition of the statute which forbade of taking of more than seven per cent for the loan or forbearance of money." Wright, J., in his opinion, said : " The plaintiff made the $3,000 note, paid the discount at seven per cent on that sum for the twenty-fiv© days, being fourteen dollars and thirty-eight cents, and fiifteen dollars in addition, under the name of exchange. Now, if this was not a usurious transaction, it would, in my judgment, be difficult to conceive of one within the statute. The two notes, in renewal of which the $3",0G0 note was given, though payable at the Albany City Bank, belonged to the Lyons Bank, and hadl no value to the Lyons Bank beyond the amount expressed On their face, although payable in Albany ■ {pVimer Lee cfe Qoh BanJt v. Walbridge, 19 N. Y., 134). To obtain a forbearance of twenty-five days for the payment of the $'3,000, the amount of those notes, the plaintiff paid th6 discount at seven per cent on that sum for the twenty-five days, and fifteen dollars in addition, called exchange, amounting in all to the sum of twenty-nine dbllars and thirty-eight cents. This sum was, in fact, paid for the twenty-five days' forbearance, being over fourteen per cent, as the Lyons Bank had no right to demand exchange. That this rendered the whole usurious and void, seems very clear. * * * The $3,000 note was, therefore, usurious and void, and all the securities which followed and grew out of it in the regular line of descent, including the bond 43 338 LAW OF USURT. and mortgage, were void. Usury contaminates all subsequent securities. ■ " A majority of my brethren, however, are not inclined to go the length of holding -that ithe evidence disclosed a case of usury in law, but are of opinion that the referee,dnstead of nonsuiting the plaintiflF, should, under the proof, have passed upon the question whether the transaction was or was not intended as a device for evading or violating the statute. From this view I am not dis- posed to dissent " {Price v. The Lyons Bank, 33 N. Y. E., 55, 57-60). CHAPTEE XXV. TEANSACTIONS HELD TO BE 1J8UEI0US CASES WHEEE EXCEBirANT INTEEEST IS TAKEN TOSTDEE THE FOEM OP DISOOHNTS — CASES OF OONTINGENGT OE PEOMPT PAYMENT. It is well settled that both banks and private money lenders are authorized to make discounts ; and, hence, they may receive interest, in ordinary cases of commercial paper, in advance, although, strictly speaking, the practice of deducting the interest out of the loan, at the time it is made, deprives the borrower of the use of the whole money for the time the debt is forborne. But, in all eases where more than legal interest is deducted, by way of discount, the transaction is held to be usurious. A few of the leading cases of this character will be referred to. In the State of Maryland a case came before the courts in which it appeared that A., being insolvent and desirous of raising money, applied to B. and obtained his promissory note for $250, payable to the said A. in sixty days after date, for the purpose- of selling it to raise money. No consideration was paid for the note. A, indorsed the note in blank and sold and delivered it to C, who was ignorant of the important fact that it was a note for |200.' It appeared that B. was in good circumstances. In an action on the note by 0. against B., it was held that the note was usurious and void {Oockey v. Forrest, 3 Gill, da Johns. H., 482). A similar case, in principle, came before the Supreme Court of North Carolina and was decided in a similar manner. The case was this : A- indorsed a promissory note payable to TRANSACTIONS HELD VSUKtOUS. 339 himself and delivered it to his clerk to sell to B., with directions to conceal from him the fact that the note was A.'s property. The clerk sold the note to B. at a discount of thirty-three and one- third per cent, representing it as his own, and indorsed it to B. without reserve. In a suit by B. against A., it was held that the transaction was usurious (Rvffm v. Armstrong, 2 Hawks, R., 411). And the Court of Chancery of North Carolina has held, that although the sale of a negotiable security for a price less than its value is valid, yet, if a greater discount than legal interest be ■ made, and the purchaser holds the person, from whom he receives it, responsible for its payment, it is, in fact, a loan upon the secu- rity, and the transaction is usurious {Bellvnger v. Edwards, 4 Ired. Eq. B., 449). In the State of New York, however, a trans- action of this character is not regarded as usurious. The note would be good for the whole amount as against the origiaal par- ties ; and the assignee of the note, if he guaranteed or indorsed it, would be liable for the amount he actually received for it with interest. The rule in North Carolina, however, is in accordance with the doctrine of the English courts. In an early case, decided first by Lord Kenyon at nisi jprius, and then by the English Court of King's Bench, it appeared that a bill of excliange, payable to A. or order, which was legal in its inception-, was by A. indorsed to B. for a usurious consideration, who passed it to a third person for a valuable consideration, without notice of the usury, by whom it was paid to B.'s assignees after his bankruptcy, in satisfaction of a debt owing to the bankrupt estate. The court held that the indorsement of A. to B. on a usurious account did not avoid the bill, in the hands of an innocent holder, by virtue of the statute of usury ; and that B.'s assignees, being clothed with the right of such innocent indorsee, were entitled to hold the bill against A., although it was expressly held and declared that, as between A. and B., the security was void {Pa/rr v. EUasen, 1 East., H., 92 ; and vide Ferrcdl v. Shaen, 1 Saund. B., 294 ; Cuthhert v. Haley, 8 Term R., 390). A similar point was decided in Massachusetts, where, as in Eng- land, it was held that usury between the indorser and indorsee, in the transfer of a negotiable promissory note, afEects only the promise of the indorser, and canoot be set up as a defense to an actioji by 340 LAW OF USURY. the indorsee against the maker {Knight v. Putnomi, 3 Pich B:, 184 ; and vide Foltz v. Mwy, 1 Bay's R., 479). But in the State of Conneeticut it has been held that the maker of a promissory note, sold by the payee to th& indorsee upon a usnrious consideration, may avail himself of such usury in an action against him by the indorsee. Although it was declared that tie sale of a promissory note, indorsed by the seller, at a discount exceeding the lawfiil rate of interest, was not necessarily usurious, and that it was incumbent on the party claiming that it was usuri- ous to show the circumstances which make it such {Lhyd v. Keeeh, 2 Qorm. M., 175). A case came before the late Court of Chancery of the State of Kew York, where, by agreement between A., B. and C, A. and B. were to exchange, notes for the same amount, .and A. was to sell B.'s note to C at a discount greater than the legal rate of interest, and the agreement was carried into effect. The court held that the whole transaction, was usurious and void {National Insurance Gompamn/' V. SmTceM^ 11 Forge's M., 660). In the State of Ohio, this Supreme Court has held that where, under the pretext of discounting an instrument in the form of a bill of ' exchange, a bank took more than l«gal interest, the contract was void for usury {Qilhert v. Sewels; 9 Ohio N. 8. H., 4.61)> A very decisive case upon this point was recently before the Court of Appeals of the State of New York, wherein it appeared that a note was given without any consideration by the defendants, and proper indorsers procured, with a view of having the same discounted at the bank ; and before the note had a legal inception an arrange- ment was made between the plaintiff and the defendant by which the plaintiff was to discount such note at seventeen per cent, and the note was left with one of the indorsers thereof, who was to receive the money thereon and deliver the note to the plaintiff, which he did. The Supreme Court and also the Court of Appeals held that the transaction was usurious and the note void. And it was further held and declared that the fact that the plain- tiff, at the time of discounting the note, withheld seventeen per cent, and at the same time, without the knowledge or consent of the defendant, gave his own note for ten per cent of the note dis- counted, which note never came to the possession of the defendaBifc and which he never paid, did not change the character of the trans^ action, TRANSACTIONS HULD USURIOUS. 341 Potter, J., iwho delivered the opinion of the Court of Appeals, said : " In carefully looking at the whole case, the report of the referee can be sustained upon the evidence in each of his findings 'of fact. This being assumed to be true, the conclusion of law is right. If the plaintiff knew, as the evidence justifies the conclu- sion, that he was discounting this note and not buying a previously negotiated busioiess note, it presents a shameful case of the viola- tion of the statute concerning usury. The judgment is right and should be affirmed " (^eweZ^ v. Doty, 33 if. Y. B., 83, 94, 95). In an early case decided by the old Supreme Court of the State of New York, it appeared that A. made a note payable to the defendant or order, which was (indorsed by the defendant for the purpose of being discounted at a bank for the accommodation of A. The defendant took the note to the bank to get the same dis- counted pursuant to the arrangement, but the bank refused to discount it. He then negotiated the note to a third person, who discounted it at a higher premium than the legal rate of interest. When the note :became due an action was brought upon it against the defendant as first indorser. The court held that, inasmuch as none of the parties Whose names were on the note could, as between themselves, maintain a suit upon it when it became pay- ;able, if it had not been discounted, the note was usurious and void. Spencer, C J., delivered the opinion of the court, and was very decided that the transaction was usurious, but discussed, principally, questions relating to the admissibility of certain evidence offered on the trial, arriving at the conclusion that a verdict in favor of the plaintiff foi: the amount of the note should be set aside, and a new trial granted {^Powers v. Waters, 17 Johns. M., 176, wnd vide Munn v. The ' Commission Gompcmy, 15 ih., 55). And in a subsequent case before the same court, wherein it appeared that a note was made payable to A. or bearer, though never delivered to the said A., but passed by the maker to one H. as a security for a usurious loan, or rather it was sold to the said H. at a discount from the sum due thereon at the time of the sale, the court held that the note was usurious and void, and laid down the rule that a promissory note has no legal inception until it is delivered to some person as evidence of a subsisting debt {Marvin V. MeGullum, 20 Johns. B., 288). In the State of Maine, a case came before the Supreme Court, wherein it appeared that a person holding the note of another. 342 - i-^PT OF USURY. which was made for his accommodation, passed it td a money lender, who discounted it at a usurious rate of interest, knowing the purpose for which the note was made. The court held that the note not being valid as a contract until negotiation, and therefore the retention of more than the legal rate of interest upon discount- ing it was usurious {Tufis v. Shepard, 49 Maine JS., 544). A case was decided by the Supreme Judicial Court of Massachu- setts, in which it appeared that the defendant made his promissory note payable to his own order, indorsed it, and employed an agent to sell it for him. The agent accordingly sold the note for the maker for less than its face to a person who supposed that he was merely purchasing the note in the market, and knew nothing of the fact that the seller was acting only as an agent. The jury, under instructions of the judge in the Superior Court, found a ver- dict for the plaintiif for the full amount of the note, and the defendant alleged exceptions. The Supreme Judicial Court held that the transaction was usurious, and sustained the exceptions. Bigelow, C. J., in his opinion, said : " The transaction proved at the trial, by which the note in suit was negotiated to the person who received it as the first holder for value, was in legal effect equivalent to a delivery of the note by the promisor directly from his own hands in consideration of the money advanced to him therefor. It was a loan of money to the defendant on the nate. The fact that the money was obtained through an agent of the defendant does not in any degree change or affect the legal ' character which attaches to the dealings of the parties. Until the note was negotiated by the defendant's agent, it did not become a binding and operative contract, upon which the promisor could be held liable. * * * It is not, therefore, made to appear that any deception or fraud was practiced in the negotiation of the note, or that by the use of due diligence and proper inquiry the person who first advanced the money on the note might not have ascer- tained the real nature of the transaction. Under such circumstances it cannot be said that there was no loan of money on the note at a usurious rate of interest, unless we are prepared to aflirm the pro- position that an advance of money to a promisor on his note, through his servant or agent, at a greater rate of interest than is allowed by law, does not constitute usury. Such a doctrine would be inconsistent with first principles, and contrary to the well setr TRANSACTIONS HELD USURIOUS. 343 tied course of judicial decisions" {SyVoester v. Swcm, 5 Allen's R., 134, 135 ; hit vide Mitchell v. Oakley, 7 Paige's JR., 68). And the same learned court of Massachusetts held in a later case that if an accommodation note is disposed of by the payee for less than its face, the transaction is usurious, although the indorser takes it without notice that it is an accommodation note. Bigelow, C. J., delivered the opinion of the court, and said: " The note did not become an operative contract, binding on the defendants, until it was negotiated by the payee to the broker, who advanced upon it a sum less than the amount due them, after deducting lawful interest. Previous to such negotiation no action could have been maintained upon the note by any one. Such advance of money was in legal effect a loan, and not a sale of a negotiable note in the hands of an indorsee. If a greater rate of interest than six per cent was reserved upon it when it was thus negotiated, the contract was usurious, and the defendants were entitled to a deduction of three-fold the amount of the interest so unlawfully reserved under Gren. Stats., ch. 53, § 4, even in the hands of a bona fide indorser " ( Whitten v. Hayden, 1 Allen's B., iOl; and vide Kendall v. Bohertson, 12 Gush. B., 156). A quite significant case upon this point was decided by the old Supreme Court of the State of New Tork just previous to the change in the judiciary of the State under the Constitution of 1846. The action was upon a promissory note made by the defendants, dated April 16, 1841, for $253.84, and was payable to the plaintiff or bearer in six months from date, with interest. The defense was' usury. It appeared that in January, 1840, the defendants gave their note to one Southard or bearer for $250, payable in one year, with interest, which he transferred to the plaintiff with his guaranty indorsed on it, at a large discount beyond the legal rate of interest. It was not paid up when it fell due, and the note in suit was afterward given for the balance due upon it, in order to take it up. The plaintiff gave evidence to show that when Southard transferred the first note to him, he represented it to be a business note. The judge charged the jury, at the circuit, that the defendants are not liable on the note. The > jury found a verdict for the defendants, and the plaintiff moved for a new trial on a case ; but a new trial was denied. Beardsley, J., delivered the opinion of the court, and said : "An accommodation note is invalid in the hands cd the person for 344 I'AW OF USURY. whose benefit it was made, and if discounted for him at a usuri- ous rate, it is equally invalid in the hands of the person who thus receives it. The legal attributes of accommodation paper are not changed by a promise, performed or unperformed, to give security for its payment by the person for whose benefit it was made. It is still but accommodation .paper. The person for whom it was made cannot collect it. As to him, the maiker is but- a surety, and if the note is transferred 00 usurious terms, it is void in the bands of the person who thus receives it " {Dowe v. Schuti, 2 Benio's E., 621, 623, 624; and vide Williams v. Stonen, 2 Bmr's JS., 52). And in a somewhat earlier case, the same distinguished court held that a party who buys in accommodation note, before it has been used for any business purpose, stands in the same situation in respect to the defense of usury as if he were the payee named in the note ; and this, though he took the note supposing it to be business paper. Cowen, J., in delivering the opinion of the court, said: "The notes were given while the provision of the Revised Statutes was in force declaring usurious notes, etc., void, but that this • should not extend to an indorsee in good faith, for valuable con- sideration, and without actual notice that the note had been originally given for a usurious consideration (1 H. S., T60, 761, § 5), They, however, had their inception by the act of discount ; and the case was, therefore, as if they had been directly payable to the plaintiff on his advance of an usurious loan. The statute does not protect a man who participates in the original concoction of usurious paper ; a man who is himself the prominent actor ia the, usurious transg-ction. The two cases of Satterwevn v. Brun- ner (1 JS^ar. (& Gill., 4:77), and Cockey v. Forrest (3 Oill & John., 483), settle the question. The New York cases were there con- sidered and applied on a course of legislation exactly like ours, the latter case being the same as the one at bar" {Aeby v. Bafdye, 1 HilVs E., 9-11:5 lut vide, contma, Whitworth v. Yancey, 5 Baml. E., 333). In the State of South Carolina, an action was brought by the indorsees against the indorser on a note for $1,878.63, drawn by Brown and Moses, payable to the defendant, and by him indorsed. It appeared in evidence that Brown, of the firm of Brown & Moses, on or about the. 24th of December, 1818, borrowed of the plaintiffs the sum of $3,500 ; for the use of which, for fifteen TRANSACTIONS SI!LD USUBIOUS. 345 days, lie paid $92.50, being at the rate of sixty-five per cent, or thereabouts; that sometinre previous to that, Brown & Moses drew the. note in suit, and it was indorsed by the defendant as a friendly act, to enable Brown to pay for certain merchandise which he had purchased, but was never used for that purpose ; and when Brown borrowed the $3,500, for which he paid the usurious interest, he passed away this note, with others, to the plaintifi's as collateral security for the, loan. The court held that the note was usurious in its inception, and set aside a verdict for the plaintiffs in the action upon the note, and it was declared and decided, that the fact of the note in the action having been originally intended for a legal purpose could not vairy the case, as it was never used for that purpose ; that it had no legal existence until paissed by Brown to the plaintiffs ; that no consideration had ever been paid for it ; and that it was in fact no more than a earte lilcmohe until put in circulation {Smiih's Administraiors v. Payne, Sice's digest, 37). It has been shown in a previous chapter, upon authority, that where ai debtor may avoid the payment of exorbitant interest by :promptly paying the principal, the excessive interest contingently agreed to be paid will not be usurious; exceptia^' those cases where the abatement may have been iatended as a cover for usury. But cases, fixed in this J^orm, have sometimes been held to be within the statutes against usury. For example, in the State of .Kentucky a case came before the courts, in which it appeared that a judgment had been recovered against a principal and surety ; then, upon an agreement, the surety signed the replevin bond, and the principal gave him a note which included the full amount of the replevin bond, with about thirty per cent added to it ; and the surety agreed in writing to credit the note with the same amount, provided the principal paid the replevin bond himself. It was, however, agreed in the pleadings that the arrangement was intended not merely to have the effect of a penal bond, but as an indemnity to the surety in case the payment of the replevin bond should devolve Upon him. The court held that this was but an agreement for a loan of money in a certain contingency at a future day, upon the understanding that more than the legal rate of interest should be paid for the loan, and that the contract was usurious. It was decided, nevertheless, that the surety might •enforce the judgment he had on the note to the amount actually 44 346 LAW OF USURY. paid by him in discharge of the replevin bond, with legal interest from the time he paid it. From the balance the principal was reliered {Moore's EaieGutor v. Vance, 3 DcmdJs B., 362). • As a general proposition, it may be affirmed that the original taint of usury attaches to aU consecutive obligations- and securi- ties growing out of the original vicious transaction; that is to say, it attaches to all renewals of the original security whenever made or given ; and it also vitiates every new security into which the original usurious consideration enters. In one easej decided by the present Supreme Court of the State of New York, it appeared that D. executed his mortgage to secure the payment of a usurious loan. Subsequently the defendant, at the request of D. and without any consideration therefor, made and executed a mortgage upon his land to the lender, as a substi- tute for the mortgage of D., which was given up and canceled. The court held that the mortgage of the defendant was void for usury. Allen, J., delivered the opinion of the court, and reviewed the authorities ; and a liberal extract from his opinion will present an intelligent view of the doctrine upon the subject. The judge says : " The rule is, that any security given in payment or discharge of a usurious security is equally void with this (Pars, on Cont., 396). The original taint of usury attaches to all consecutive obligations and securities growing out of the original usurious transaction; and none of the descendent obligations, however remote, can be free of the taint, if the descent can be fairly traced {Dunning v. Merrill, 1 Claris G. B., 252). It would not have been ques- tioned that the mortgage of the defendant would have been void for usury if it had been given upon the making of the loan and to secure its repayment, and as an original security. And the statute of usury would be very easily evaded if a security of a third per- son, taken a few days or a few months after the loan, in lieu of the obligation of the borrower, would be valid; A new security of the borrower for the same debt would have been vitiated by the usury, and the obligation of a third person stands upon no better foundation. Harrison v. Hannah (5 Tav/nt., 780), was this : A., being indebted to the plaintiff in ninety pounds, and twenty pound? upon illegal consideration, and in a large sum on usurious loans, in consideration of the plaintiff advancing him £150 more, on legal interest, procured him the defendant's acceptance for £100, £110, and fifty pounds, for securing the whole balance due from A. to TRANSACTIONS HELD USURIOUS. 347 the plaintiff; and it was held that these bills were tainted by the usurious transaction, and could! not be enforced against the defend- ant, the acceptor, to the. extent of the debts untainted by usury. Heath, J., says: 'Suppose these acceptances had been given by the son instead of the. father. There could be no doubt that they would have extended to the whole, and, therefore, would be void. And if the giving these acceptances by the father could alter the case, it would be a shift or device by which the statutes of usury would be defeated.' That the defendant's mortgage was a security given for the usurious loan is plainly alleged, and was given upon no other consideration, and to secure no other debt. And it is declared in all the books, that every subsequent security given for a loan originally usurious, however remote or often renewed, is void {Wallace v. Bank of Washington, 3 How., 62). A change of security, either as to character, form or parties, does not purge the illegal consideration, so as to give a right of action on the new security ; as, where a new note, without any new consideration, was given by a third person, a stranger, to take up a note in the hands of the original party to the contract, it is tainted by the illegal consideration of the first note {Tuthill v. Davis, ^Q Johns., 285). That the new security was a mortgage, rather than a note, cannot affect the question. Neither the renewal of an old, nor substitution of a new security, between the same parties, can efface usury, nor further security, nor a guaranty given subsequently by a stranger {Brinkerhoff v. Foote, 1 Hof., 291 ; Ruddock v. Boyd, id., 294; and see, expressly, iy Hoffman, Yiee- Chancellor, at pp. 306-308). In Bridge v. Hubbard (15 Mass. B., 96), which was an action upon a note given in place of the borrower's note given up, Parker, Ch. J., says : ' It is true that the borrower's name does not appear upon this note ; but we cannot perceive that this cir- cumstance is essential, when the object and views of the party for whose use the note was made are such as appear in the report of the case. That the parties liable on the note were not privy to the usurious bargain is not a fact of importai ce, if the true destination of the note was to secure such a bargain made by others for the use of .him who was to reap the fruits of the bargain ' {And see Steele v. Whyople, 21 Wend., 103 ; Fowell v. Waters, 8 Gowen, 669, 001, 692 ; Reed v. Smith, 9 id., 647). Upon the facts alleged in the answer, the mortgage of the defendant was void for usury" {Vickeryw. Dickson, 35 Barh. R., 96, 98-100). S48 J^AW OF USUBT. Here is a case directly upon the point under consideration, in the decision of which we have a judicial construction of a number of other authorities on the point, which supersedes the necessity of any further reference to the cases examined by the judge in his opinion. And it has been held by the same learned court, in a more recent case, that, where a bond and mortgage are usurious and void, a subsequent bond and mortgage, for which the former securities constitute the greater portion of the consideration, will also be usurious and void {MeOrmiey v. Alden, 46 Bm"!). B., 272). So, also, the Court of Appeals of the State of New York held, at an early day, that, where a borrower, on obtaining a loan of money at an illegal rate of interest, assigns to the lender bonds and mortgages, in consideration of such loan, the assignment was void, and that trover might be- immediately ndaintained for them by the assignor {Sohroep^el v. Gornmg, 6 JV. Y. R., 107). The Supreme Court of the United States, as early as 1810, in a case wherein it appeared that an agent, who had, by permission of his principal, sold eight per cent" stock, applied the money to his own use, and, being pressed for payment, gave a mortgage to secure the payment of the amount of stock, with eight per cent interest thereon, held that the mortgage was usurious {Butts v. Bacon, 6 GrancKs B., 252). In the State of South Carolina, at a very early day, in a case wherein it appeared that a bond had been given to secure the payment of usurious interest by one who died before it was taken up, after his death his friend, who was igfiorant of the usury, in order to prevent a lawsuit to recover the sum due on the bond, gave his own bond in lieu of the bond given by his deceased friend. The court held that the second bond was void for usury {Edwards V. Skming^ 1 Br&oard^s R., 548). In the State of Iowa, in a case in which it appeared that money was borrowed at usurious interest, and a part thereof, with the usury, was paid, and a note given at a legal rate of interest for the balance, the court held that the note was tainted with usury ; and it was further held, in the same ease, that under the Iowa statutes a contract is usurious wherein unlawful interest in any way enters, whatever the nature of the consideration, whether for the loan of money or for the purchase of real estate {Gallanam, v. Shaw, 24 Iowa B., 441 ; and vide Omnpbdl v. MoHarg, 9 il., 354 ; Smith V. Gooper, ih., 376 ; Garth v. Cooper, 12 ib., 364). TRANSACTIONS HELU USUMIOUS. 349 In the State of Massachusetts the Supreirie: Judicial Court has held that it is a good defense to an action by an indorsee against the indorser of a promissory note, indorsed for the accommodation of the mater, that the indorsee received the note as security for the payment of a usurious contract between him and maker {Duns- cwnb V. Btmker, 2 Met.. B., 8) ; and the same doctrine has been leeognized and adopted by the courts of Missouri ( Vide Weinser V. SMton, 1 Mo. B., 23?). In some of the States, negotiable paper, which is usurious in its iaeeption, may be enforced in the hands of a bona fide holder. Such was the law in New York prior to. the usury act of 1837. Where such is the law, it becomes important to. u usunr. among those hereinbefore considered, in whieh no loan originally occurred, yet, by some subsequent agreement between the debtw and creditor, usury was held to have been generated. And Mr. Comyn well says that it should always be remembered that the statute lays stress upon the word " forbearance," as well as upon the word "loan." And however some of the older cases have been con- strued, it appears clear,- fi-om the moderti' authorities, that where money is owing upon any kind of contract, and forbearance is given for such debt upon the condition of receiving, more than the legal rate of interest, such forbearance is as much usury as if the sum of money had been absolutely lent upon w contract to pay more than legal interest. "It is not necessary " (says an ancient authority) "to the creation.' of a loami thai! moiley should be paid on the one hand and received on the othrar'; for the circumstance of a man's money remainiug in another' S'-hamdy in consequence of agreement made for that purpose, Will equally constitute a loan " {Roger v. Eckoards, Cowp. R., 113). In such case, however, it is necessary that the debt be absolutely incurred, and not merely resting updn an executory agreement) the execution of which depends upon circumstances that may take effect {Sfvm-i&r v. Mayoss^ 4 Br. Oh. R., 28).. But, though forbearance upcm a debt incurred by any legal means will give equal roora for usury, a distinction must be made between a loan and a sale. For there can be no usury in a sale of any description, provided it be real and not intended as a cover for taking exorbitant interest. In case of an actual sale, the mere circumstance of inequality of price will never bring the transac- tion within the statute. And this rule applies as well to the sale of "credit " as to sales of property, choses in action and the like. The cases show that usury cannot be predicated of the use which one person may be allow^ed or authomed to na:a,ke of another's credit, because credit, a " capacity of being trusted," is neither raoney,. bonds, nor a chose in action. Credit may be a; benefit to- the possessor as a means of procuring pro|)erty, but is not itself recognized as property by the law. It cannot be loaned, for a loam implies that the thing borrowed is to be returned, after a tem- porary use, to the owner, in specie or in kind. The credit of one person may be made available to another by gift or sale^ and in no other way. Its value depends upon opinion, and is, of all other things, perhaps, the most ea{)riciGUs and fluctuating. Bat a DOCTRINE OF TEE CASES. 36.5 sale of credit is no more within the prohibition of the statute against usury than a sale of merchandise ; and no transaction that is in good faith a sale can be usurious, because the important ele- ment of a loaa is wanting as one of its ingredients. And, as ibefore suggested, the New Tork courts hold that the statute of usury of that State applies only to .a loan of money, or to a trans- fer of something else as money, or for the purpose and as a means of obtaining money on time. Every loan which falls within the New York statute is, therefore, virtually, if not in form, a loan of money ; and the same rule is recognized in most of the other States. Such loans are express where the money is advanced by the lender, and implied where something else is parted with for the purpose of obtaining money. And it has been repeatedly held that every such transaction, the real object being to procure money on time, no matter what fojm it is made to assume, is a loan within the statute' of usury. It often happens that the transaction assumes the foira of a sale or exchange, when, in point of fact, it is a loan in disguise ; in which case it is always held to be within the intent of the statute. A loan may be disguised in the form of a sale of goods or other property ; and it has been held that a transfer of debt and credit, time being given, is a loan. So there may be a loan, part in money and the residue by a sale of property ; or a loan disguised by a sale of an annuity; or a loan made in terms at legal interest, but usury disguised in the form of dry exchange ; or the loan may be made at legal interest, in terms, when the usury is reserved in some collateral matter ; or usury may be disguised in the sale of depreciated paper at par. All these peculiarities relating to the matter of a loan are fully illustrated by the authorities hereinbefore examined. And in the language of Lord Mansfield, " in all ques- tions, in whatever respect repugnant to the statute, we must get at the nature and substance of the transaction ; the view of the par- ties must be ascertained, to satisfy the court that there is a loan and borrowing ; and that the substance was to borrow on the one part, and to lend on the other" {Flayer v. Edmards, Gowp. M., 112). The authorities considered also show that whenever the transaction is in the form of a sale, and it is alleged that it is a disguise for a usurious loan, the party impeaching it must, by evi- dence, remove the covering, and exhibit the transaction as a loan of money. AAd it spmetimes happens that parties adopt the form 366 LAW OF USURY. of a sale, when in truth the real transaction is a mortgage to secure a usurious loan ; and there is frequently great difficulty in deter- mining whether a contract was intended by the parties as a mort- gage or as a conditional sale. In such cases it seems to be a gene- ral rule that where the agreement is made upon an application for the loan of money, the court, for the purpose of preventing usury and extortion, will construe the agreement to be a mortgage, in case the person to whom the application for a loan is made agrees to receive back his money and interest, or a larger sum, and to reconvey the property within a specified time, whatever form the writings may be put in, if the real object appears to have been a loan of money. In such case, also, the relative values of the property and of the price actually paid or advanced are to be taken into consideration, to determine the intent of the parties ( Vide Robinson v. Cropsey, 6 Podge's R., 480). So, also, it may sometimes happen that the transaction may assume a form which may induce suspicion, though the parties may have been very wide of any usurious intent. In such case the question of a culpable intention must always be open to the opinion of a jury ; while it is the exclusive province of the court to decide as to the legality of the transaction itself. When more than the legal rate is received or bargained for by the terms of the contract, no doubt can exist as to the fact, and it matters not whether the parties knew that they were engaged in a usurious transaction or not ; it is all the same ; but where a contract has been made which, though it be of a suspicious aspect, may yet by . possibility be fair and honest, it will be necessary to call upon a jury to determine its character; and the authorities prove that where a transaction is susceptible of two constructions, one favor- able to the innocence of the parties and the other against its legality, the transaction will be upheld. ' The authorities examined clearly hold, also, that usury can never be predicated upon a loan of chattels, unless the transaction is a cover for a loan of money ; if the transaction is proved to be a disguise, as in some of the cases examined, then it may be declared usurious. And the only criterion by which to detect usury, where anything other than money is loaned, is the market value of such thing, and the consequent gain to the lender in charging or obtain- ing more than such value ( Vide Mumford v. Tfie Americcm Life Insurance and Trust Company, 4 iT. Y. R., 463). If the court, BOCTRINB OF THE CASES. 367 in looking at the whole transaction, can see that the value secured to the vendor was in good faith but the price of the thing sold or exchanged by him, there can be no usury, whatever the price may be, or the imode of its reservation ; but, where the object of the parties is a loan of money, and something else is substituted for it, ■under the form of a sale or exchange, the principal of the loan is held to be the value in money of the thing substituted, and any consideration paid or reserved beyond such value will be considered as interest for forbearance ( Vide Dry Dock Compcmy v. The American Life Inswrcmce cmd Trust Company, 3 N. Y. R., 344). But the doctrine of all the authorities examined is that, in order to constitute usury, the first requisite is that there be a loan, express or implied. Again, it may be affirmed, upon the authorities considered, that in order to constitute usury there must be, in the second place, a contract or understanding that the money loaned shall be returned at all events, without substantial contingency or hazard. For, if the return of the principal with interest, or of the principal only, depend upon a contingency, there can be no usury ; because that which, may never be received cannot be said to be forborne for any given time. But if the contingency extend only to the inte- rest, and the principal be beyond the reach of any hazard, the lender or f orbearer can, in such case, lay no claim to interest above the legal rate, without, as a general rule, being guilty of usury ; although a distinction is to be observed between a contingency merely aifecting the interest, and an option which the debtor has of defeating the payment of interest by a performance of some act stipulated for at the creation of the contract ; for, when such option is given, and the creditor either neglects or refuses to avail himself of such condition, the law insists upon his paying such additional interest, as a penalty for his neglect or refusal. This doctrine is abundantly illustrated by the authorities examined. Upon the consideration of the hazard which affects the princi- pal, the advance of money by way of insurance, bottomry, post obit, or annuity has been sanctioned by the courts. But in all these cases it must appear that no usurious transaction is con- cealed beneath such as are thus favored by the law, for then no favor will protect the contract ; the substance must be taken into consideration ; and any usurious intention will vitiate an insur- ance, or bottomry, ov post obit or an annuity, as much as if there 368 LAW OF USURT. had been no such disguise assumed by the contract. Among the cases examined will be found transactions in the form of insurance, bottomry, post obit, and annuity, some of which have been upheld as being free from the taint of usury, and others which have been declared to be simple shifts, or disguises for the purpose of con- cealing the taking of illegal interest, and hence usurious. . But all the authorities agree that to constitute usury there must be a loan, and that it is essential to a loan that the principal must, at all events, be returned. No particular rules in this regard, by which the character of the transaction is to be determined, can be extracted from the cases ; and yet an examination of the cases hereinbefore referred to will enable the student or the practi- tioner to ascertain the view which the courts have taken of trans- actions in the form of hazard or contingency. Especially will he have the benefit of the judicial discussions upon the subject, and the rules which have been laid down by which bottomry and the like may be determined, where the money lent is at the risk of the lender, or the repayment of the principal is at hazard, so as to enable the lender to take more than the legal rate of interest, and not come within the provisions of the statutes against usury^ So also it may be affirmed, in the third place, upon the authori- ties considered, that in order to constitute usury there must not only be a loan and a contract that the money loaned shall be returned at all events, but that it shall be returned with more than l^al interest. This illegal or exorbitant interest may not be received m reserved in the form of interest necessarily. The authorities show that it may be included in the principal secured, or it may be paid or agreed to be paid as a distinct bonus ; and the various ways by which this result raay be attainted a^-e fully disclosed in the authorities examined. For example, where, upon the loan of money at an illegal rate of interest, separate notes are taken, one for the sum loaned with legal interest, and the other for the excess of interest, both notes are infected with usury. Or where, on such loan of money at an exorbitant rate of interest,, a note is given for the sum loaned with lawful interest, and the excess of interest is agreed to be paid by parol, the whole transaction is nsxirious, to "the same extent as though the whole, principal and unlawful interest, had been secured in one note or other- security. So also the authorities show that illegal interest may be reserved DOCTRINE OF THE CASES. 369 in the sale of pergonal property, choses in action, in the transfer of stock, and in the esfchange of personal securities. Indeed, it matters, not as to the form the transaction assumes, provided the result is that the lender by the agreement, in fact, reserves, to himself more than the legal rate of interest for the use of his money, it is all tlie same ; if the transaction contain the requisites of usury, it will be considered usurious. The question in every such case is, whether the lender gains more than the lawful rate of interest for the use of his money. Yet it fully appears that, where trouble or expense or incon- venience is sustained by the party advancing the money, the law allows qf a reasonable compensation for this, in addition to the interest becoming due ; as in the case qf brokerage, or in the negotiation of bills of exchangp. Ap.d though a slightly excessive interest may 'be received where the lawful interest is paid in advance by way of discount, or is received before the expiration of the time for which the principal is forborne, yet the mercantile custom of discounting bills of exchange has long been sanctioned by the courts ; that is to say, unless in a given transaction the doctrine is carried into the extreme, so as to enable a party to advance g,nd receive a large sum of money without any adequate forbearance ; and this more especially where the character of the parties is other than mercantile. By the older authorities, it appears that, on discounting conimerQial paper, none but banking institutions could exact the payment of interest in advance ; but the later authorities have well settled the principle that, upon the discounting of commercial paper not having a longer time to run to maturity than the notes and bills which are usually discounted by bankers, interest on ,the wkole amount of principal agreed to be paid at maturity, not exceeding the legal rate, may be taken in advance. The doctrine which these authorities establish is at variance with the natural reading of the statute, and the practice which it sanctions seems to stand altogether upon the ground of judicial decision ; and yet it does not stand less firmly than it would do if it had the sanction of legislative authority. At all events, the principle is well established by the decisions, and has been uniformly acted upon for a periqd of over fifty years, and during that time has been frequently affirmed by the highest courts qf the country. ■ And sq, also, it may be affirmed, in thp fourth and last pl3,pe, 47 370 LAW OP usuet. upon the anfhorities examined, that in order to constitute usury there mlist be a corrupt intent to take more than the lawful rate of interest for the use of the money loanedl This corrupt intent is declared by the authorities to be really the gtavamen of the offense of usury, without which no usury can exist ; and this is not unfrequently the most important subject of inquiry in the case. The authorities examined establish the principle that the agreemeht to take more than lawful interest must be with the full consent and knowledge of the contracting parties ; otherwise it cannot be said that there was a corrupt intent to evade the statute. To constitute usury there must be an illegal agreement, and the authorities clearly show that this cannot be predicated of a case in which the excess of interest was the result of accident or inadvertance, without any knowledge that more than the legal rate was secured by the con- tract. Upon this principle, a mere mistake in calculation is never held to be usury. The authorities unifdrmly hold, however; that where a transaction is entered into, which is, in point of law, usurious, it will not avail the parties that they were ignorant of the law, provided they entered into the contract with their eyes open. It is only excusable mistakes of foot that will justify the agreemSrit to reserve more than legal interest ; and some of the cases herein- before referred to have held the contracts involved to be usurious in law, whatever the intention of the parties may have been proved to be. But nothing short of a corrupt and illegal contract in vio- lation of the law will constitute usury ; and, hence, there can be no usury where the contract is not, in point of fact, what the par- ties designed it should be. And the authorities show that this principle is carried to the extent that both parties must be impU- cated in the. corrupt intent to evade the law. It is not enough that illegal interest is reserved with the knowledge and intent of the lender simply ; both lender and borrower must be cognizant of the facts, and intend the effect, of the agreement which they have entered into ; and this corrupt intent of the parties is always a question of fact for the jury, or of the court trying the case in place of a jury. The authorities examined also demonstrate that when a contract for money, legal and innocent in itself, is once made and consummated, it cannot be made usurious and illegal by any subsequent transactions of the parties. These subsequent transactions may of themselves be illegal and forbidden by law ; but they cannot impart the taint and the consequences of usury to DOCTRINE OF.TBE CASES. 371 an antecedent agreement fair and just and upright in itself. If the obligation under it is topay a debt, the obligation, with the legal rights resulting from it, remain in all their force, and cannot be discharged by engrafting upon it some subsequent agreement obnoxious to the' chalrge of usury. If the subsequent agreement has the effect to annul and rescind the antecedent contract, that is quite another thing; and yet such a case very seldom occurs. And so long as the antecedent contract remains in force, usury cannot be imparted to it by the subsequent agreement. And hence the authorities show that when a usurious security has been given to take up an antecedent security which was valid in its inception, and an action is brought upon it,- to which the defense of usury is interposed, sometimes the plaintiff will be defeated in his action upon the usurious security, but permitted -to recover, vn the same aoPion, upon the original contract which constituted the considerar tion bf the one held to be tainted with usury. The authorities examined also settle the rules by which interest must be calculated, and the time which constitutes the year, and the aliquot parts of a year; and show in what cases the transac- tion will be declared usurious, because the parties may have reserved interest in violation of these rules. They also declare that every instrument which upon its face reserves more than legal interest is prima facie usurious ; but even in those eases it is sometimes held that it is competent for the plaintiff to reTpel'thia prima facie evidence of a corrupt ' agreement by proving that more than the legal rate of interest was -reserved by mistake, and contrary to the intent of the parties ; and in some instances where a trifle more than the legal interest has been reserved by the instrument, the courts have held the transaction free from usury, upon the maxim, de mvnimis non curat lex. The foregoing are the principal points settled and illustrated by the authorities examined ; but the points are elaborated, and every aspect of the question will be found to be discussed in the opinions, and the doctrine of the cases has been extracted in the con- sideration of them in the preceding chapters, 372 LAW OF USURY. CHAPTEE XXYin. HOW USmtT LAWS AEE C0N8TEUED BY JUDICIAL TEIBTOALS — DIFFERENCE BETWEEN REMEDIAL AND PENAL STATUTES — USUET LAWS, SOMETIMES PENAL AND SOMETIMES REMEDIAL, AND AEE TO BE CONSTRUED AOOOEDINGLT THE CONSTRUCTION MUST BE SEN- SIBLE USURY LAWS NEVER RETROACTITE. In some respects laws against usury are regarded as peculiar, and they are viewed by tlie courts in a little different light than are the enactments relating to many other subjects. It may there- fore be well to note, in a few brief passages, the manner in which these statutes are construed by the courts.' It has been shown, in a previous chapter, that the general rule in respect to the payment of interest is, that it is to be paid on contracts, according to the law of the place where they are to be performed, in all cases where interest is expressly or imphedly to be paid ; so that the question whether a contract is usurious or not, depends not upon the rate of the interest allowed, but, upon the validity of that interest in the country where the contract is ■ made and is to be executed. And a contract made in one place and payable in another may be-made to draw interest according to the legal rate in either place. In a word, it may be laid down, as a general rule of the common law that the lex loci contractus will govern, as to the rule of interest, in accordance with the doc- trine of the civil law. But if the place of payment or of perform- ance is different from that of the contract, then the interest may be validly contracted for at any rate not exceeding the ratp allowed in either place. The rule and all of the embarrassments found to attend it was fully considered in the appropriate place, and it is not needfal to dwell upon the subject here ( Vide wnte ch., 7). But, with respect to the construction to be put upon the different statutes of usury, very little has been said; and some remarks upon that particular phase of the subject may be proper in this place. It has been truthfully remarked that there are subjects of legis- lative regulation where no one, from reading the statutes, could even guess what was the actual state of the law on those subjects. It is a fact that the courts have sometimes gone very far toward taking the place of law-makers ; and occasionally the provisions CONSTRUCTION OF- USXTRT LAWS. 373 of the laws against usury have been construed in such a way as to well-nigh destroy their effect. But it is best first to affirm that at the present day the current of authority is in favor of reading statutes of usury, as well as all others, according to the natural and most obvious import of the language, without resorting to subtle and forced constructions for the purpose of either limiting or extending their operation. It seems to be now understood that courts cannot correct what they may deem either excesses or omis- fiions in legislation, nor relieve against the occasionally harsh operation of statutory provisions, without the danger of doing vastly more mischief than good. This is, certainly, the appropriate sphere of action for every court. Where the plain and unequivo- cal language of the law is rigidly followed, there are, to be sure, a few cases of hardship; but let it be once imderstood that statutes are not to be limited in their operations by over refined and artificial interpretations, men are able to understand and govern themselves by the law of the land, and an incalculable amount of legal controversy is thus avoided. In the construction of a statute, it depends much whether it is remedial or penal. Remedial statutes are those which are made to supply such defects, and abridge such superfluities in the common law as arise either from the general imperfection of all human laws, fi-om change of time and circumstances, from the mistakes and unadvised determinations of unlearned (or even learned) judges, or from other sources whatsoever. Penal statutes are those which subject or render, the party liable to a penalty for a viola- tion of its provisions. Statutes that are remedial and not penal, the courts hold are to receive an equitable interpretation by which the letter of the act is sometimes restrained and sometimes enlarged, so as more to meet the beneficial end in view, and prevent a failure of the remedy. They are always construed liberally, and uUra, but not contra, the strict letter. Penal statutes must be construed strictly. So rigidly has this rule been adhered to that an ancient Eng- lish statute having enacted that those who were convicted of stealing horses should not have the benefit of clergy, the judges con- ceived that this should not extend to him that should steal but one horse, and, therefore, procured a new act for that purpose in the following year. Since that, however, it was decided that when statutes use the plural number, a single instance will be compre- 374 i-4»r OF usuBT. hended. Thus, an English statute enacted that it should be felony to steal any h&vik notes, and it was determined that the offense was complete by stealing one bank note {HasseVs case, Leach! sOth Loajd, 1). ' ' • '" ' • ' If a statute inflicts a penalty for doing an act, the penalty implies a prohibition and the thing is unlawful, though there 'be'n© prohibitory words in the statute. And this rule has been applied to the case of a statute inflicting a penalty for making a particular contract^ such as a simoniacal or usurious contract ; and Lord' Hdt held that the contract was void under the statute, though there was a penalty imposedfor making it {Bartlett v. Viner, Garth. R., 251; S. C.,8kmder'sS.,&22). •> The principle is now settled that the statutory prohibitidn is equally efficacious, and the illegality of a breach of the statute the same, whether a thing be prohibited absolutely or only under! a penalty ( Vide Bv/r-sley v. Bignold, h Bcirn. <& Aid. R., 335 ; The 8tate \.FUteh&r, hN. E..R.,'m; \ Kent's Com,., 467). The statutes of usury in some instances are strictly penal, and in otheM not. In those States where the reserving of usuribuB interest involves, by way of penalty, the' loss of ^ the whole' debt, or even the lawful interest upon th,e principal, the statute is penal, and must be construed like other statutes which are penal in theii- nature ; although it has been declared by judicial authority that the rule giving to defendant, in favor of life or liberty, the benefit of every reasonable doubt, should not be extended to civil actions in cases of alleged usury (Porfe?- y. Mownt, 45 Barb. M., 422^ 427). "Whenever usury is an offense, it is so because it is malum pro- hibitum, rather than malum in se. But it is declared that the distinction between statutory offenses, which are mala prokihita only, or mala in se, is now exploded, and a breach of the statute law, in either case, is equally unlawful, and equally a breach' of duty ; and no agreement founded on the contemplation of either class of offenses will be enforced at law or in equity {Aid>ert v. Maze, 2 Bos. c& Pull. li., 371 ; Gannon v. Bryce, 3 Ba/m. & Aid. R., 179 ; Daniels, ex parte, 14 Yes. R., 191). A very important case came before the Circuit Court of the United States for the district of Maryland, and was decided by the learned chief justice of the United States Supreme Court in 1857, which involved the construction of legislative enactments upon the subject of usury ; and on account of the distinguished CONSTRUCTION OF USURY LAWS. 375 ability of .the jurist who decided it, as well as the novel character of the case, a full statement of the authority may well be inserted in this place. . The action was brought by the indorsee of a bill of exchange, drawn upon the defendants, and accepted by them, for $1,000. The defendants pleaded that the bill was given to secure the pay- ment of money loaned by the plaintiff to the payee of the biH, upon which an interest exceeding the legal rate was reserved ; and that such contract was usurious, and the plaintiff not entitled to maintain an action upon it.- To this plea the plaintiff demuiTed ; and the question submitted to the court on the pleadings was, whether tmder the Constitution of Maryland, adopted in 1851, an action could be maintained upon a contract for the loan of money, where an interest of more than six per cent was reserved or received. ' In order to understand the decision of the court, it is necessary to observe that the Constitution of the State contained a clause in the following words : " That the rate of interest in this State shall not exceed six per cent per annum, and no higher rate shall be taken or demanded ; and the legislature shall provide by law all necessary forfeitures and penalties against usury " {Const, of 1851,ari!. 3'y§49). ■ By the third article of the declaration, all acts of Assembly in, force on the first Monday in Ifovember, 1850, which had not expired at the adoption of the Constitution, and were not altered by it, were continued in force, subject, nevertheless, to the revision of, and amendment and repeal by the legislature of the State. The acts of the Assembly, material to the question, which were passed previously to the adoption of the Constitution, were those of 1704 and 1845. The' first section of the act of 1704 declared that no person should exact or take above the rate of six per cent per annum, upon the loan of any money, goods or merchandise, or other commodity, to be paid in money; the second section declared that all contracts by which a higher rate of interest was received should be void ; and the third section infiicted penalties for taking or receiving more than the rate of interest limited by that act. The provisions of this law were materially changed by the act of 1845 ; by that act the lender was entitled to secure the amount actually loaned, with six per cent interest upon it, although' '376 I"iW OF USURY. tihe contract was usurioiis, andstipulated for a higher interestj and it repealed altogether the third section of the act of 1704. The act of 184:5 was still in force when the Constitution was adopted, and • the point in issue between the parties, upon the demurrer, was whether the provisions of this act were inconsis- tent with the clause of the Constitution before recited, and there- fore repealed by it. This recitation presents fairly the question before the court in the case. Taney, C. J., in his opinion, said : " In determining this ques- tion, the wisdom or piolicy of usury laws is not a subject for the consideration of the court ; that was a question for the people of Marylaind, when they adopted the Constitution. It is the dnty of the court to carry into effect the provisions of that instrument according to its true intent, to be gathered from its own words ; and referring to the previous legislation of the State only so far as it may contribute to illustrate the meaning of doubtful or ambiguous language, if any such be found in the Constitution, and to ascertain what previous acts of Assembly are still in force. It would be difficult, we think, to raise a doubt as to the mean- ing of the prohibitory part of the section of which Ve are speak- ing. It declares ' that the raite of interest shall not exceed six per cent per annum, and no higher rate shall be taken or demanded.' These words are free from all ambiguity ; they prohibit in plkjn, positive and direct terms the taking or demanding of more than "six per cent interest ; and on this point it refers nothing to future legislation. The Constitution itself makes the prohibition, and all future legislation must be subdrdinate and conformable to this provision. "Whoever takes or demands more than six per cent while this Constitution is in force, does an unlawful act ; an act forbidden by the Constitution . of the State. Nor do the words which follow qualify or restrain, in any degi-ee, the meaning of the words above quoted ; they declare that ' the legislature shall provide by law all necessary forfeitures and penalties against usury.' itfow, usury consists in taking an interest for money - above that allowed by law ; the taking of more than six per cent, is therefore usury ; and the words last quoted treat it as an offense, and direct the legislature to punish it with penalties and for- feitures. The words do not merely give the power tb punish ; they are mandatory, and. make it the duty of the legislature to punish disobedience to that provision by forfeitures and penalties. CONSTBTfOTION OF USVSY LAWS. 37* Certainly, if the taking or demanding of more than six per cent was not intended to be absolutely prohibited by the preceding part of the section, thel-e would be no propriety in commanding it to be punished. " The words last quoted, therefore, do not qualify or restrict the meaning of the preceding words ; on the contrary, they show that the framers of the Constitution, after fixing the amount of interest which a party might lawfully take or demand, proceeded to make that provision more effectual by requiring the legislature to enforce it, and to inflict forfeitures and penalties upon any one who should thereafter take or demand an amount of interest exceeding that prescribed by the Constitution. This being the evident meaning of the language of this section, can a contract by which a higher interest is taken or demanded be inferred in a court of justice'? It is true the Constitution does not say, in express terms, that such a contract shall be void, nor was such a provision necessary to invalidate it ; for it is well settled, by a multitude of decisions in this country and in England, that a contract to do an act forbidden by law is void and cannot be enforced in a court of justice. We do not stop at preseiit to refer to judicial decisions to support this proposition ; many eases to that effect are cited in the opinions delivered by the Supreme Court of the United States in The Bcmk of the United States v. Owens (2 Peters, 527) ; and we are not aware of any decisions, in any court, in which a contrary doctrine has been held. Indeed, in a State where the legislative, executive and judicial departments are separated, it would render all law uncertain and ineffectual if the judicial power enforced, in whole or in part, the performance of a contract to do an act which is altogether forbidden to be done by the Constitution or laws of the State. And as the Constitution has forbidden the taking or demand- ing of more than six per cent, no contract, made in this State, can be enforced where a higher rate of interest is taken or demanded by the contract. " This view of the subject is fully supported by the decision of the Supreme Court in the case of The Bank of the United States V. Owews, hereinbefore referred to. * * * The absence of any provision inflicting a penalty (say the Supreme Court) does not give the party a right to maintain an action on the contract, if the law forbids the contract to be made ; and the reason of the rule laid down is, that the contract being forbidden, the party can 48 ' . . 378 L^W OF VSURT. acquire no legal right under it, and consequently cannot maintain an action in a court of justice to enforce- it. This incapacity to maintain an action upon it is no forfeiture or penalty^ for he acquires no right under it, and therefore there is nothing to forfeit. The money he loans is not forfeited ; for if he chooses to rely on the promise of the borrower, and the borrower repays him the money, he. may lawfully keep it. It is not forfeited to the State, nor to any one else. But a court of justice cannot lend its aid to recover it, because the contract for the loan is one entire thing, and con- sequently is altogether invalid or void ; and it would be contrary to the duty of a court of justice to assist a party in consummating an act which the law forbids. The absence of any penalty, there- fore, is no argument in support of this a,ction. " But in this case there is something more than the absence of penalties and forfeitures. It is made the duly of the legislature to inflict them; and the prohibitory clause of the Constitution must be construed now in the same nianner and have the same effect as" if the legislature had performted' the duty enjoined upon it. * * * The act of no future legislature can alter the mean- ing of the words used in the Gonstitution;' they remain the same, and must always be construed and admiuistered in courts of justice according to their legal import as they stand in that instrumentj whether future legislatures do or do not obey its mandates and pass laws to enforce its provisions. It follows from what we have . said that the first four sections of the act of 1845 are no longer in force. * * * The act of 1845 does not, therefore, prohibit a usurious contract, but sanctions and supports it to the extent above mentioned. The Constitution, on the contrary, by the prohibitory words used in it, makes the whole contract illegal, and thereby incapacitates the party from maintaining a suit upon it for the money he actually loaned or any part of it ; andj moreover, treats the taking or demanding more than six per cent as an offense, and commands the legislature to provide forfeitures and penalties against it. The provisions of this act of Assembly, and those contained in the Constitution, are consequently inconsistent with each other, and the former is repealed. In relation to the act of 1704, the plaintiff claims nothing under it ; but inasmuch as the first section of that act, like the Constitution, prohibits the taking of more than six per cent, and the second section contains an express pro- vision making void the contract when more is taken, the plaintifi CONSTRUCTION OF USURY LAWS. 379 contends that the omission of the second provision in the Consti- tution proves that it was not intended to make void the contract^ but to leave it as provided for and legalized in the act of- 1845.i ■ ' " But it is evident that the second section of the act of 1704, like siiflilar provisions in the English statutes against, usury, was intended to remove any doubt which might be raised upon the words ' exact or take,' and to show that the prohibition was intended to apply tb contracts in which usurious interest was reserved, to be. paid at a future day, as well as to cases in which it was actually exacted anditaken or received at the time of the loan. It was introduced for greater caution, and to prevent nice distinctions upon the words used. This is constantly done in acts of legislation ; and the omisr sion in the Constitution of a provision of this description,, con- tained in a previous act of Assembly, would hardly j ustif y the court in inferring that it was intended to authorize an action on a con- tract which the Constitution itself prohibited. "In .expounding an instrument so solemn and deliberate as a Constitution containing the fundamental law of the State, we are hardly at liberty to suppose that either those who framed, it or those who adopted it intended to recognjze or sanction the prin- ciple that, an action might be maintained upon a contract to do an act which the law forbade. *! * * The Constitution does not use the prohibitory words of the first section, but provides that no higher rate shall be ' taken or demamded^ Now, these words clearly embrace a contract by which usurious interest is to be paid at a future day, as well as contracts in which it is taken and received. It does not mean usurious interest demanded in the negotiation previous to the loan, but demanded by the contract itself when actually, made. And if so demanded,- it is evidently included in the constitutional prohibition, even although the words ' exacted and taken ' should be regarded as confined to the actual receipt '' {Dill v. Ellicott, Tomey's dr.. Ct. Deo., 233, 236, 239, 241.) ' , : The doctrine of this ease is, that. a contract to do an act forbid-; den by law is void, and cannot be enforced in a court of justice ; that there can be no civil right where there is no legal remedy, and there can be no legal remedy for that which is itself illegal. And this doctrine was applied to the case of a usurious contract in those States where the law is similar to that which was in force in Maryland at the time the case at bar was decided. But the 380 LA'W OF USURY. decision and opinion of the distinguished chief justice is valuable principally, for the rules laid down by which the statute should be construed. And it may he added that a close construction will be given to statutes which work forfeitures or confiscations of property. And all gtaitutes in derogation of the common law and contrary to the general policy of the public are to be strictly construed ; at the same time full effect will be allowed to the legislative will, and where the words of a statute are plainly expressive of an intent, the interpretation must be in aocordamce therewith ( Vide Bradhv/ry v. Wagenhorst, 54 P&rm. R., 180 ; Esterley's Appeal, lb., 192 ; United States v. Athjens Armory, 35 Ga. It., 344). So, also, it may be affirmed that it is well settled that every statute must be held to be prospective and not retroactive in its operation, unless a different effect is clearly to be gathered from its terms, even though general language is used which might include past transactions {State v. AudAtor, 41 Mo. JR., 25 ; Fim,- Tiey V. Ackermcm, 21 Wis. B., 268). In respect to usury laws, however, the legislature of the States, in passing their general acts upon the subject, have inserted a clause which puts it beyond doubt that the statutes are not retrospective, and it is safe always to act upon the principle, in th* construction of statutes, that the act must receive a sensible construction, even though such construction qualifies the universality, of the language ( Yid^ People V. Ad/riene, 39 III. B., 251). It has been held that although a statute, simply modifying the rate of interest or the penalties for usury, cannot apply to a loan made before the act took effect, it may apply to a subsequent agreement by which the parties extend the time for payment of the loan, the terms remaining unchanged {Story v. Kimbrough, 3 Oa. E., 21). And the Supreme Court of Illinois has held that a law simply reducing the penalty for usury, as prescribed by the law as it existed at the time the contract was made, and permitting it to be enforced to the extent that it was lawful at that time, does not violate the obligation of a contract {Parmelee v. Zawrenoe, 48 lU. B., 331 ; Drake v. Latham, 50 ib., 270). EFFECT OF USURY. 381 CHAPTER XXIX. EFFBOT OF USTTET UPOlsr THE CONTEAOT OE SEOUEITT TAINTED BY IT WHEN THE rSUEIOTJS SEOUEITT IS VOID AS BETWEEN THE PAETIE8 — WHEN AS TO STTBSEQrENT HOLDEES OE ASSIGNEES. The effect of usury upon a contract or other security, as between the parties to the usury, is oftentimes quite different from what it is as to strangers to the original transaction. In some instances, as in New York, the statute itself declares, in substance, that every conceivable security or obligation, except bottomry and responden- tia bonds and contracts, founded in usury, is ipso facto void. When such is the law, it matters not whether the usurious instru- ment is attempted to be enforced by the usurer himself or by a subsequent owner or holder of the usurious instrument. In either case the contract is void and cannot be enforced. And in all cases where the usurious transaction is absolutely void, it can never be rendered valid by the subsequent act of the parties ; and it matters not whether or no the contract be carried into execution so as to render the receiver amenable to the penalty of the statute, the usurious contract or security is extinct at its inception. But when the statute declares the transaction, under certain cir- cumstances, simply usurious, it may be void as to the usurer him- self, but valid in the hands of a hona fide holder or assignee. Sometimes the statute declares a usurious contract void as between the original parties, but makes an exception in favor of l)ona fide holders without notice of the usury at the time of the transfer. And in other cases the statute declares what shall be the effect of the usury upon the contract or security, by making it valid for the true amount of the money loaned, or the debt secured, and void as to the usury. But it may be laid down as a general proposition, that where the statute does not expressly declare what shall be the effect of the usury, the usurious contract or security will be held to be void in the hands of the usurer himself, and cannot be enforced. So that, as to the original parties, when the transaction is found to be usurious, the question is settled. The contract or security is absolutely void, and can be available for no purpose whatever. If the instrument is given to secure a usurious loan, the lender loses the money loaned ; and if the usurious instrument be given to secure a valid debt, the instrument itself is void and BS2 LAW OP ustrsT. of no account, although the debt purported to be secured by it may still exist. The authorities to this effect are numerous and to the point, and it has been held that this is not the effect of the statute alone, but even at common law usury avoided the contraet {OUver V. Oliver, 2 Jiol. B., 469; and vide Scmderson ^f. Warner, Jb., 239; S. 0., Palm.. E., 291). ' It has been suggested in some quarters that there is an excep- tion to this rule; that is to say, that in a ease where a mortgage is given on lands in a foreign State, according to the law of that State^ it is said that such mortgage will be sustained *MTe?ra, notwith- standing the contract of loan may be invalid in every place where it is sought to be enforced {Blyd. on Usv/ry, 8T). This suggestion seems to have been made upon the authority of a case decided by the late Court of Chancery of the State of New York. It is difflcuTt, how'ever,t6 extract that precise doctrine from this case. The fact that the loan was secured by a real estate mortgage executed in the State where the lands lay, and where the borrower resided, doubtless made it a proper ease in which to -apply the principles governing in cases of conflict of laws, while if the loan' was made upon personal security alone it would not he/ve been such a case. But the case hardly holds that the mortgage could be enforced, when the bond, thfe foundation of the debt, was absolutely void and of no effect. A brief reference to the authority will show what was therein decided. The facts were theBe: The defendant Robertson, a resident of the State of New York, being in England in the summer of 1833, where the complainant resided, applied to the latter at his residence for the loan of £800 sterling upon the security of his (Robertson's) bond and mortgage on his lands in the State of his residence, and the complainant then offered to loan him that sum Upon the security offered, at an inte- rest of seven per cent per annum, the interest to be paid annually. It was further agreed between the parties that upon the return of Robertson to this State, he should execute his bond and mortgage to the complainant and have the same duly recorded, and should transmit the same to the complainant in England, who, upon the receipt of such securities, was to deposit the £800 with Robert- son's' bankers in London for his use. The securities were exe- cuted and sent to the complainant accordingly. He deposited the money with Robertson's bankers for his use, according to the agreement. Default having been made, the complainant filed his EFFECT OF USURT. 383 bill to foreclose the mortgage, and the defendant set up the usury laws of England in his answer as a defense to the suit. The court held that the mortgage was not usurious, but on the contrary was a valid security for the loan according to the laws of New Tork, and that the usury law of England could not be set up as a defense to defeat it. ' Walworth, Chancellor, in his opinion, said: "It is an established principle that the construction an.d validity of contracts which are purely personal depend upon the. laws of the place where the contract was made, unless it was made in reference to the laws of some other place or country where such contract, in the contemplation of the parties thereto, was to be carried into effect or performed (2 KenSs Com., 457 ; Story^s Confi. of Lams, 227, § 272). On the other hand, it appears to be equally well settled by the laws of every State or country that the trans- fer of lands or other heritable property, or the creation of any interest in or lien or incumbrance thereon, must be made according to.\the lex situs, or the lacal law of the pl^ce where the property is situated. And it, has been decided that tlie lex loci rei sitce must also be Resorted to for the purpose of determining what is or is not to be considered as real or heritable property, so as to have the locality within the intent and meaning of this latter principle (Newlcmds v. Chalmers^ Trustees, 11 Sha/w (& Dowl. Sess. Cos., 65). The case under consideration would have come clearly within the first of these principles, if the land of Robertson had been the only security for this loan, although he resided in this State, and intended to use the money here, where the legal rate of interest is seven per cent, as specified in the bond. There is- nothing in the bond from which it can be inferred that the parties contemplated the payment of the money in this State. And as no place of pay- ment is mentioned, the legal construction of the contract is that the money is to be paid where the obligor resides or wherever he may be found. His residence being in England at the execution of the bond, that must therefore be considered the place of pay- ment, for the purpose of determining where that part of the con- tract is to be performed. I lay out of view the fact that the bond itself was signed and sealed in this country, because as a mere personal contract it would be wholly inoperative until it was received by the complainant in England, when the money was there to be deposited with the banker for the use of the borrower. * * * I have very little doubt that a security like that which 384 iiAW OF U8URT. is now under consideration, actually executed in the country where the mortgaged premises are situate, by a person domiciled at that place, for the repayment of a loan to be made upon the faith of such foreign securities, and for the purpose of being used by the borrower in the country of his residence, would have been con- sidered as valid by the courts of England, even if this statute had not been passed. And if this was a valid mortgage by the laws of England, so that a recovery might have been had in that coun- try upon the covenant for the repayment of the money, or upon the bond given therewith as collateral security, it is unquestionably a valid security here to give a lien upon the mortgaged premises for the payment of a rate of interest authorized by the lex sit/us. * * * If no rate of interest was specified in the contract, it might perhaps be necessary to inquire where the money was legally payable when it became due, for the purpose of ascertaining what interest the mortgagee was entitled to receive {Quin&p v. Gallen- der, 1 DeobcorCs M., 16f) ; Scofidd & Taylor v. Day, 20 Johns. R., 102). But if a contract for the loan of money is made here, and upon a mortgage of lands in this State, which would be vaUd if the money was payable to the creditor here, it cannot be a violation of the English usury laws, although the money is made payable to the creditor in that country, and at a rate of interest which is greater than is allowed by the laws of England. This question was very fully examined by Judge Martin, in the case of D&pea/u, v. Humphreys, in the Supreme Court of Louisiana {^Q.MarUn's B., 1) ; and that court came to the conclusion, in which decision I fully concur, that in a note given at New Orleans, upon a loan of money made there, the creditor might stipulate for the highest legal rate of conventional interest allowed by the laws of Louisiana, although the rate of interest thus agreed to be paid was higher than that which could be taken upon a loan by the laws of the State where such note was made payable. Here the verbal contract for a loan upon the security of a mortgage upon lands in this State was wholly inoperative until the mortgage and other written security were executed in this State, and which agreement was consumma- ted by the deposit of the money to the order of the borrower. It was a contract partly made in this State and partly in England, and being actually made in referenqe to our laws, and to the rate of interest allowed here, it must be governed by them in the con- struction and effect of the contract as to its validity. * * * EFFECT OF USURY. 385 The usual decree for a foreclosure and sale must, therefore, be entered" {Ghwpman v. Robertson, 6 Paigis R., 627, 630-635). The soundness of this case has been questioned by high autho- rity, although it does not seem ever to have been expressly over- ruled, and the decision itself does not sanction the idea that when a loan is made between parties of the same State, and in the State where they reside, and the loan is contracted to be repaid in the State where the loan is made, with interest at a rate above what is allowed by the laws of the State where the contract was made and is to be performed, and the payment of the loan is secured by a mortgage on lands in a foreign State, where the interest reserved would be legal, the transaction is not usurious, so far as the moft- gage is concerned, and that the mortgage can be enforced. But, ratlier, the chancellor holds that the conPract in that case was made with reference to the laws of New York, and as the transaction was not usurious by those laws, the mortgage was a valid security, and could be enforced. The decision of the chancellor was doubt- less correct, whatever may be said of the reasons which he assigned for it. The fact that a 'usurious loan is secured by mortgage on real estate in a country where the loan would not be usurious will not probably change the nature of the transaction. It is true that when a mortgage is given, the laws of the State where the land is situated must control as to the form of the mortgage, its manner of execution and acknowledgment ; but those laws may not necessarily control with respect to the question of usury in the case. The rule adopted in cases of real estate, called lex rei sitcg, does not govern the question of usury involved in a contract secured by real estate collaterals. The fact that a mortgage is given upon real estate as a collateral security for the payment of the contract of loan, does not restore the co^ntract to validity, for collaterals cannot affect the original inception of a contract of loan, because they are mere dependent incidents, and subsequent in their nature. For this reason, it would seem quite reasonable that if the original contract of loan was void for usury, the security collateral to it, whatever its nature, wotild also be usurious and void, and could not be enforced. So, after aU, it may be affirmed that mery contract, assur- ance or security, which is founded in usury, as between the origi- nal parties to the transaction, at least, is ipso facto void, and can never be rendered valid by the subsequent act pf the par- 49 386 LAW OF USTIBT, ties ; whether the same is void as to other parties will depend upon circumstances which it becomes necessary to refer to. As has been before suggested, where the statute declares that the usurious instrument shall be void, it will be so regarded, into whosesoever hands it ma,y go, or whoever may attempt to enforce it. But in some instances the statute excepts certain parties from its effects, who may not be connected with the original usurious transaction. In such cases, however, the statute usually exempts only sucli parties as may be entire strangers to the usury, and who may have become possessed of the usurious security lonafide, and without any notice of the original usury, and upon a good and valid consideration. So that in those cases, after the original usury is established, the question to be litigated is, whether the party is a lona fide holder of the tainted security, and whether he paid legal value therefor. The rules by which these questions are determined 'will be best understood by a reference to a few of the leading authorities upon the subject. Under the old English statutes of usury, it was well settled that a stranger must "heed to his assurance at his peril," and he could not set up his ignorance of the corrupt contract in support of his claim to recover upon a security which originated in usury. So that but little light would be obtained upon the subject by a reference to the authorities under those statutes. Previous to the Eevised Statutes of 1830, in the State of New York, the old Supreme Court of the State held that where a usurious note had been transferred for a valuable consideration and without notice of the usury, and a new note had been taken by the holder, the usury of the iirst note could not be set up in bar of a recovery on the second note. Savage, C. J., gave the opinion of the court, and said : " The other point is equally well settled. Even although it had been shown that the first note was tainted with usury, and therefore void in the hands of the Franklin Bank, who had paid value for it without notice of the usury, yet the giving a new security to an innocent holder for valuable consideration constitutes a new transaction, and the usury of the first note does not affect the second. In Powell v. Waters (8 Oowen, 681), Chancellor Jones, speaking of the proposition that a new security, taken in renewal of a prior usurious contract by a iona fide holder, is not avoided by the usury of the original transaction, says, ' that principle EFFECT OF USURY. §87 applies to the case of an innocent holder of a usurious contract, for which he has given a valuable consideration without notice of the usury.' Colden, senator, expresses the same sentiment at page 696 ; among the principles which he considers well settled, he says : ' If an original note or security be usurious, a subsequent note or security, taken in the place of the original note or security by an innocent and iona fide holder thereof, ignorant of the original usury, is not usurious, unless more than at the rate of seven per cent was taken upon the new note or security.' This ■was the doctrine asserted by the learned judge at the circuit, and is sound law " {Kent v. Walton, 1 Wend. B., 256, 258). This decision was made when the Revised Laws of KTew York were in force, by which usurious securities were declared void. The provisions of the Revised Statutes of the State, which pro- tected lonafide indorsees of negotiable paper, did not take effect until 1830 ; and this case was tried in 1829. The provision of the Revised Statutes of ITew York upon the subject of usury as originally passed, declared usurious notes, etc., void, but that this should not extend to an indorsee in good faith, for valuable consideration, and without actual notice that the note had been originally given for a usurious consideration. Under this statute it was held, by the old Supreme Court of the State, that a party who bought an accommodation note before it had been used for any business purpose, stood in the same situation, in respect to the defense of usury, as if he were the payee named in the note ; and this, though he took the note supposing it to be business paper, and therefore that such a party was not entitled to be protected as an indorsee or holder in good faith, within the meaning of that provision {Aeby v. Rapeh/e, 1 HilVs M., 9). And it seems that the courl^ of the State of Maryland have held the same doctrine, imder similar provisions of law {Gockey v. Forrest, 3 Oill. <& John. R., 483). This would seem, at the first glance, to be contrary to the intpnt and spirit of the statute. But the argument was that the note had its inception by the act of discount, and the case was, therefore, as if it had been made payable directly to the indorsee on his advance of a usurious loan ; and it was said that the statute did not protect a man who participated in the concoction of usu- rious paper — a man who was himself the prominent actor in the usurious transaction, 388 L^w OF nsvBT. In the State of Maine, under a similar statutory provision, the Supreme Court held that wherever a note is purchased after the day of payment shall have elapsed, the maker is entitled to the defense of usury in a suit by an indorsee, as ftiUy as if the notfe had remained in the hands of the payee (^ing v. Jhmn, 11 Shep. ■ E., 128). It was held in the same State, however, that in an action by an indorsee against the maker of a note, usury between the indorsee and indorser cannot be set up in defense {Glwpp v. Hamr sen, 3 Shep. B., 345). It has been held, both in Massachusetts and Missouri, that it is a good defense to an actibn, by an indorsee against the indorser of a note, indorsed for the accommodation of the maker, that the indorsee received the note as security for the performance of a usurious contract between him and the maker (Bimseomb v. jBwnker, 2 Met. E., 8 ; Wmser v. Shelton, 7 Mo. B., 237). And in the State of Mississippi it has been held that a note or other security given in renewal of a usurious note was usurious ; and that an indorser of a note, who takes it with notice that it is tainted with usury, takes it subject to that defect, and that,, although the maker, before the indorser took it, promised him that he would not take advantage of it ; that the consideration being illegal, the waiver was not binding on the maker. But that it would be otherwise where there was a mere failure of con- sidei'ation {Torry v. Grant, 10 Smede c& Marsh B., 89). Under the stringent usury laws of New York it was held by the late Court of Chancery of the State that the innocent indorsee of a usurious promissory note, after maturity, would be protected, and a new security given therefor by the maker would be valid. The facts of the case were these : "W., as indorsee, held a note made by S. and attached his goods, but d.ischarged the attachments on S.'s giving him a new note, and S. set up usury between him- self and the payee of the fomier note, and insisted that the new note was thereby tainted. The court held that the new note was valid, if, as was the presumption, W. was a bona fide holder of the old one for value, and without notice of the usury {Smedb&rg v. Whittlesey, 3 Sand. Oh. B., 320). And it was distinctly declared, in a case before the Superior Court of the city of New York, that where a party to a usurious note gives a new security for it to one to whom it has been transferred for a valuable consideration without notice pf the usury, the security is valid, although the holder could not EFFECT OF USURY. 389 ' have recovered on the note, and although he had notice of the usury after the maturity of the note, and before receiving the gecurity {Smedbv/ry v. Smvpaom,, 2 Scmd. R., 85). It was held in this last case that the indorsee of a negotiable Bote will be presumed to have received it before maturity, and without notice that it was tainted with usury before he received it. This doctrine is important in its application to the point under consideration. In the State of North Carolina, the Court of Chancery has held that a note made with intent of being usurious, by being discounted, for the accommodation of the maker or the payee, or both of them, will not be obligatory between the parties, and is void in the hands of one who discounts it at a usurious rate ; and it was said that there was no difference between a man's making his own note to the lender and getting a friend to make a note to himself, and his passing that to the lender ; and it seems not to be material in such case, under the statute of North Carolina, whether the lender knew the intention of the parties to the note or not {Simpson V. FuUmuoider, 12 Ired. Eq. E., 334). Biit the Supreme Court of the same State has held that the assignee of a bond, valid between the obligor and obligee,- may recover of the obligor tte full amount of tbe bond, although he purchased it at ^ discount and claims through a usurious indorse- ment. Euffin, J., in giving the opinion of the court, said : " The bond was available between the obligor and obligees, The former is not privy to the usurious agreement between the latter and the present holder. If the security be in its origin usurious, it is void, into whose hands soever it gets, by the words of the statute. If it be good in its origin, a subsequent usurious agreement between the same parties does not avoid it, though it may subject the one party to the penalty, if anything be received under the corrupt agreement. And if it be good in its origin, the subse- quent transfer of it, usuriously, does not affect it as against the maker. No redress can be had on the indorsement as between the parties to it. The very object of the statute is to protect the bor- rower as an oppressed man. But there is no oppression on the obligor, who is a true debtor. The law was not intended for his protection" {GolUer v. Nevill, 3 Dev. R., 30). Under the statute in force in Georgia in 1852, it was held that 390 LAW OF USUET. when a judgment not tainted witli usury was transferred and the transferrSe agreed with the defendants to forbear its collection for a terra of time, in consideration of usurious interest paid him, such subsequent agreement was usurious, and affected the judg- ment so far as to make the principal due thereon only collectible " {Troutman v. Barnett, 9 Geo. R., 30). This is different from the rule at common law, for, according to that, a contract which is not tainted with usury in its inception is not made usurious by a sub- sequent agreement to pay usury in consideration of forbearance. The subsequent agreement would be void for usury, but the origi- nal contract would remain intact. The Court of Chancery of the State of Maryland decided, in 1853, that the' statute against usury could not be evaded by any shift or device, and that no matter what the form of the transac- tion might be, the courts would explore the real truth, and if they discovered that the object was a loan of money at more than the legal interest it would be condemned, and it was held that a renewal of the usurious contract between the same parties par- takes of the infirmity of the original agreement ; but that if the latter' is discharged, or is made the consideration of a contract entirely new, as being with a third party, not a party to the origi- nal contract, or to the usury paid, or as combining other parties and considerations than those in the original contract, and with no proof that it was a contrivance to evade the statute, theTule would be different. The chancellor in the case refused to set aside an agreement made more than eight years after the alleged usurious contract, carried into execution on both sides, and combining other parties and considerations than those in the original contract, and with no proof that it was a contrivance to evade the statute {Brown v. Waters, 2 Md. Ch. Beds., 201). In the State of Yirginia the following case was declared not to be affected by the usury of the contract, as against an assignee of the contract : A. took the oath of insolvency at the suit of B., and surrendered a bond on C, upon which the sheriff, for the benefit of B., brought suit against C, who plead, in off-set, a judgment he had recovered against A. upon a bond that had been assigned to him. He sued A. upon this bond before he took the oath of insolvency, but the judgment was not recovered uptil after the oath, but before the suit against him by the sheriff. The sheriff replied that the bond upon which the judgment was recovered was EFFECT OF USUMT. 391 usurious. The court held that usury in the bond, upon which the judgment was recovered, could not be set up to the judgment, and that it was a good set-off {Sope v. Smith, 10 Grait. B., 221). It has been held by the Supreme Court of Maine that an indorsee of a note, given entirely for usurious interest, whose agent was cog- nizant of all the circumstances, is not an innocent indorsee who' wiU be protected. And it was declared that a note given entirely for extra interest above the legal rate on a sum loaned, has no legal consideration {Goodrich v. BuzzeU, 40 Maine B., 500). It has been held by the Supreme Coua't of Connecticut that by the law of the State of New York, where a debtor gives a new security for his usurious debt to the 5t>«.»^& assignee of such debt, who took the original debt and takes the substituted security, with- .out any knowledge of the usury, such debtor cannot afterward set up the usury as a defense to a suit brought by such assignee upon the substituted paper {Houghton v. Pm/n, 26 Conn. B., 396). This is in accordance with the decisions in the State of New York, to which reference has been hereinbefore made. But in the State of Kentucky the indorsee of promissory notes was held to be affected by usury in the original transaction. The facts were these : A member of a firm assigned to his son, as an advancement, a note made to the firm, which note was subsequently taken up by the obltgor, he giving two other notes, payable to two other persons, who indorsed them to the son. The two notes not being paid when due, the son brought an action against the maker to recover the amount of them, and the obligor alleged and proved, as a defense, that the members of the firm were the beneficial owners of the notes, and that he had paid them usury on the trans- action. The court held that he was entitled to a credit on account of the usury paid {Humphreys v. Pearoe, 1 Dv/vaWs B., 237). In the State of Indiana, usury was made available as against an iadorsee under the following circumstances : A borrower, in con- sideration of a loan, executed a negotiable promissory note, with interest for a sum greater than the amount of the loan, promising to give a mortgage to any holder of the note, and the payee indorsed the note to a third party upon the execution of a mort- gage by the maker to the latter. The court held that the maker could set up the defense of usury in an action on the note {Jfus- sehncm v. McMhenny, 23 Ind. B., 4). S92 L-A^W OV VSURT. And in ttie State of Iowa it has been held that the defense of usury may be set up to an action on a note by an indorsee, not- withstanding a promise to pay it, made by the maker to such indorsee after indorsement {AlUson v. B(Mrrett, 16 Zowa, B., 278). In the State of Vermont, in an action to recover back money paid as usury, it appeared that the defendant ageeed to . obtain a loan of money for the plaintiff, and did obtain it of H. at a usuri- ous rate of interest, and that he received seventy-five dollars from the lender as a part payment of the tranfiaction. Subsequently he purchased the plaintiff's note of H., and the plaintiff paid him the principal and the usurious interest. H. admitted that he received one-half of the extra interest included in the note, and settled with the plaintiff therefor. The court held that the defend- ant was a party to the usurious contract, so as to be liable to repay the usury he had received. The theory of the decision of the court was, that the plaintiff's cause accrued when the payinent was made by him,.and not when the defendant received theseventy- five dollars from H. ( WUUams v. Wilson, 37 Vt. R., 613). In the State of Iowa, usury in the original transaction was held not to be available under the following circumstances : Y. loaned the maker of a note, which was usurious, money to take it up, and received the note and the security for its loan. The Supreme Court held that the usury could not be set up as a defense to the note in Y.'s hands, whether Y. had notice of the usury or not . ( Wendlfibone v. Pa/rlcs, 18 Iowa It., 546). The Supreme Court of the State of Illinois has held that when a note tainted with usury is assigned by the payee to a creditor as collateral security for a pre-existing debt, he is a holder for a valu- able consideration, but only to the extent of the debt due him ; and it was decided that the same defense might be made to the residue of the note as if it had not been assigned (Taylor v. Dcmiels, 37 III B., 331). The Court of Appeals of the State of New York have lately given a construction to the laws of Ohio on the subject of usury, and decided tHat, in respect to purchasers of commercial paper in good faith and for value, it is no defense, under the laws of that State, that the contract was usurious as between the original parties {Fm-mers' cmd Meehanics' Bcrnh v. ParTcer, 37 N. Y. B., 148). The precise doctrine had been previously settled by the Supreme Goiirt of Ohio, and the reasoning and conclusions of the court EFFECT OF USUBT. '393 -would seem to be conclusive upon that subject {Picka/wa/y Gownty Bank v. Prather, 12 Ohio St. B., 497, 511). CHAPTEE XXX. EFFECT OF TTSUKT UPON PEIOB AOTJ SUBSEQUENT SEOUEITIES, OOLLAT- EEAIi TO THE CONTEACT INFECTED WITH THE OEIGINAL TAINT KEFOEMING THE OEIGINAL CONTEACT JUDGMENT UPON THE U8UEI- ODS TEANSACTION, AND THE LIKE. The effect of usury upon, instruments entering into the usurious itsaus^ction, or upon instruments which are predicated in whole or in part upon the contract infected with usury, depends upon principles which are well defined by the eojirts, and may be under- ;stood by a refereiice fo some of the leading authorities upon the subject. The statute of New York declares void all contracts and securi-, ties affected with usury, without any reference to the source from which the objection comes or the consequences which may follow. But the courts have been disposed to fix some limit to the influence of this sweeping provision, even, and it seems necessary that they should do so, for otherwise the greatest injustice would often be done to innocent third parties. It has accordingly been held that a Swifl! ^(^(3 purchaser, under a eta tnte foreclosure of a mortgage void for usury, will acquire a good title. This was so held by the old Supreme Court of the State of New York, in a case in which the precise question was involved. Kent, C. J., in delivering the .opinion of the court, said : " The principles of public policy, and the security of titles,, are deeply concerned in the protection of such a foreclosure. If the purchase was to be defeated by the usury in the original contract, it would be difiScult to set bounds to the mischief of the precedent, or to say in what sequel of .transactions, or through what course of successive eliminations, and for what tune 'short of that in the statute of limitations, the antecedent defect was to be deemed cured or overlooked, so as to give quiet to ,the title of the hona fide purchaser. The incon- venience to title would be alarming and enormous. The law has :always had regard to derivative titles, when fairly procured ; and thjOugh it may be frue, as an abstract principle, that a derivative title cannot be better than that from which it was derived, yet 50 394" LAW OF VSURT. there are many necessary exceptions to the operation of this principle" {Jacjeson v. Henry, 10 Johns. R., 185, 197; and vide Ellwtt V. Wood, 53 Ba/rb. H., 285). The same doctrine was early advanced by the English courts, in cases which arose under a usury statute similar to that of New York. In one case, it appeared that A. made a usurious note to B., who transferred it to C. for a valuable consideration, without notice of the usury, and A. thereupon gave a bond to 0. for the amount. The court held that the bond was not affected by the usury in the original transaction. And Lord Kenyon observed, in the case, that if the defense " were to succeed, it might affect most of the securi- ties in the kingdom '; for if, in tracing a mortgage for a century past, it could be discovered that usury had been committed in any part of the transaction, though between other parties, the conse- quence would be that the whole would be void. It would be a most damning proposition to the holders of all securities " {Guth- lert V. Haley, 8 Term R., 390). And in a still earlier case, wherein it appeared that the defend- ant was indebted to one Alder in £100 on a usurious contract, and Alder was indebted to the plaintiff in £100 of just debt, and the defendant, for the payment of the iisurious debt to Alder, joined with Alder in a bond for £100 to the plaintiff, and the bond was held good, because the debt to the plaintiff was a just debt, and he was ignorant of the usury ; and the court said, " for as on the one side it may be said to be the means to defraud the statute, so on the other side it may be a greater mischief to a true creditor, where he shall take security by way of bond with sureties for monfey, if it should be examined whether there were any corrupt agreement betwixt the creditor and his surety, whereof he cannot by intendment have any conversance " {Ellis v. Wa/res, Cro. Jac, 33). The doctrine of these cases seems to be, that as long as the usurious contract remains executory, so long the borrower may avail himself of the usury ; but not after the contract is executed. If the lender comes into a court to enforce the contract, the bor- rower may object that the contract is usurious ; or if the borrower seeks relief in a court, he can obtain it only on terms. But where the contract is executed, and rights vested under it in due form of law, the borrower can never raise the objection of usury. And yet this doctrine is not of universal application. EFFECT OF USUBT. ' 395 The old Supreme Court of the State of New York decided that where upon the foreclosure of a usurious mortgage the mort- gaged premises were purchased by the mortgagee himself, his title might be impeached. The case was where a mortgage was given as security on a usurious contract, with a power of sale, and the mortgagee, by virtue of the power of sale, sold the land, under the act of the State concerning mortgages, and became the pur- chaser through an agent for that purpose. An action of eject- ment was then brought against such mortgagee, by a purchaser of the equity of redemption, and the defendant set up a title acquired by the sale under his mortgage. The court held that the plain- tiff might prove usury in the mortgage, and recover, notwith- standing the mortgage. And the court further held that a fore- closure of a mortgage, by virtue of a power of sale under the statute, was not founded on any judgment or decree of any ^ourt, bat that it was the mere act of the mortgagee ; and he, being party to the usurious contract, was in no better situation than if no foreclosure had taken place {Jackson v. Dominick, 14 Johns. M., 435). And the probability is that the same doctrine would be held in respect to any other purchaser who had notice of the usury at the time of the sale. The courts seem inclined, so far aa they can, to protect an innocent party who has no notice of the usury. But in all cases where a new security is substituted for a usurious one, by the same parties, the original taint of usury will affect the new security. Under the stringent provisions of the Ifew York statute it has been held that contracts affected by usury are not so utterly void but that they may be ratified ; and upon this principle it has been declared that if a borrower repay a loan, which he might have avoided for usury, he cannot recover the money back again ; though, under the statute, he may recover the excess which has been paid beyond legal interest. So, it has been decided that if a debtor make a conveyance of his land to the creditor, in satisfaction pf a usurious debt, the deed cannot be avoided for the usury. The original taint of the consideration does not, in such a case, affect the conveyance {Denn v. Dodds, 1 Johns. Cas., 158 ; and vide Pratt V. Adams, 7 Paige's B., 615). And under the old English statute of u^ury it was held that where a man has conveyed his property upon a usurious contract, the deed will stand good until the grantor or some one claiming under him chooses to avoid it ; 396 LAW or ususr. that is to say, the conveyance is declared not to be a mere nullity ( Whelpdale's Case, 6 GoMs B., 119 ; 8. C, BvlWa N. P., 224), The doctrine, however, is well settled, that where the original loan is usurious, all the securities therefor, however remote or often renewed, are void, as between the original pairties ; and, according to the New York statute against usury, as against third parties a£ well. A mere change of securities for the same usurious loan, to the same person who committed the usury, or to a party who had notice of it, can never purge the original consideratioti, or give a right of action {Twthill v. Bamis, 20 Johns. B., 285; Price v. Jjyons Bank, 33 N. Y. B., ,55 ; amd vide Bimnmg v. Merrill, CIO/rice's Gh. B.^ 253 ; Wales v. Well, 5 Conn. B., 154 ; Hammond, V. Bangs, 1 Kelley's B., 416 ; Torry v. Grant, 10 Sniede & Marsh. B., 89 ; Jackson v. Jones, 13 Ala.. B., 125). If the usu- rious contract be mutually abandoned by the parties, and the secu- rities are canceled or destroyed so that they can never be made the foundation of an action, and the borrower subsequently make a contract to pay the amount actually received by him, this last con- tract will not be tainted with the original usury, and can be enforced. But there is no possible mode in which a usurious security can be made good. The vice, as to such security, is incurable. Still, the parties to a usurious transaction may doubtless reform it ; and by canceling the usurious security and giving a new obligation for the real sum which ought to be paid, excluding all usury, the party will be bound ( Vide Hanvmond v. Sopping, 13 Wend. B., 505 ; Kilhourn v. Bradley, 3 Day's B., 356 ; McGlwre v. Williwm,s, 27 Yt. B., 210). But it has been held that a security founded upon the abandoiJment of a usurious agreement is invalid, unless the usurious contract was abandoned with a full knowledge in both parties of the precise situation of such contract; and such know- ledge must be brought home to the borrower by positive proof (Bank of Monroe v. Strong, Clarke s Gh. B., 76). And where money was lent in the city of New York, and notes taken therefor payable in New York at a usurious rate of interest, both parties being residents of that city, and when the notes were maturing the lender of the money and the holder of the notes were temporarily in Connecticut, whose laws did not recognize the usury, and there renewed the loan by taking new notes of the borrower and others residing in New York, without any deduction of the usury ; the courts held that the usurious contract was not refoaoedj but that EFFECT OF USUBT. 397 the renewal was to be judged by the laws of l^ew York, and that the new notes were void {Jacks v. Wichols, 5 N'. Y. B., 178, aff/rmmg 3 Sandf. Gh. B., 313, and reversing 5 Barh. B., 38). But the moral obligation which the borrower of money at usurious interest is under to pay the principal sum due and legal interest, is a sufficient consideration to support a promise by him to pay such principal and interest ; and, hence, a new security, given for the true amount, in place of the usurious one, can be reformed ; but the subsequent security in place of the old one must not include any of the taint of the excessive interest, or it will be infected with the original taint. Where money was loaned on a usurious contract, and, on matu- rity of the note given for the loan, it was partially paid, and a new note, similar to the former, given for the balance, it was held that the new note was void for usury ; and, in the same case, it appeared that the borrower was not a party to the usurious note, being nei- ther maker nor indorser, but the security was such, both as to par- ties and time of payment, as had been previously agreed between the borrower and lender ; and the court held tnat the indorser, in an action against him, might show the usury in bar of the action ( Wa/rren v. Ordbtree, 1 Ghreenleafs B., IBY ; and vide Ohadhoum V. Watts, 10 Mass. B., 121). And where A., being the maker of a note to B., which was void for usury, asked for credit beyond the maturity of the note, and B. agreed to give further credit if he could obtain other security, and A. obtained and furnished, for that purpose, a new note, made by C, payable to and indorsed by D., which was received by B. in exchange for the former note, which was given up and canceled, it was held by the Supreme Judicial Court of Massachusetts that this latter note was void in the hands of a bona fide indorsee without notice, the same being a mere sub- stitute for the first note (Bridge v. HiMa/rd, 15 Mass. B., 96). So, also, where a surety upon- a usurious note, who was a party to the same, applied to the holder for the note, that he might secure it out of the estate of the maker, who was in failing circumstances, and gave his own note to the holder in lieu of it, the Supreme Court of Connecticut held that the note so given was a substitute for the other, and therefore usurious. But the court decided that if a surety upon a usurious note, who is a party to the same, obtains payment of it from the maker, and is thereby fully indemnified, and gives his own note to the holder for the amount, the latter 398 iATf OF USURY. note is not usurious {Botsford v. Scmford, 2 Conn. M., 27^ ; ACTIONS AT LAW AGAINST THE HSUEBK — THE ACTION AT LAW TO EBCOVBK BAOK USUEIOUS INTE- EEST WHEN PEOPEETT DEPOSITED OE TEANSBEEEED UPON USU- EIOUS CONTEAOTS MAT BE EECOVEEED. The actual penalties of usury are given by statute, but an action is given, under certain circumstances, to the borrower against the party taking the illegal interest. The forfeitures created by statute in eases of usury may be regarded as penalties, as they are always penal in their results; but other actions are given, besides the action for the forfeiture, in cases where the usury is actually paid. A party who has paid excessive interest may, at common law, recover the excess, in an action- for money had and received. The law considers the borrower rather as a victim than an aggressor. Statutes are passed prohibiting usury, in order to protect needy and necessitous persons from the oppression of usurers, who are eager to take advantage of the distresses of others,. and who violate the 422 IiAW OF VSURT. law only to complete their ruin. At least, this is the theory on which these enactments are made. In such case, therefore, the maxim of potior est conditio def&ndentis — the defendant's con- dition is the more preferable — has never been applied. This doctrine is well settled. But the party injured by the exactions of the usurer cannot, at common law, recover any part of the prin- cipal and interest ; and, to entitle him to maintain his action, he must show that he has done all that equity requires (5 BacorCs Ahr., Ut. Usv/ry, G). And it seems that when the statute gives the remedy, without a negation of the common-law remedy by the statute, either express or implied, the party aggrieved may resort to his common-law remedy, instead of 'the remedy, given by the statute, if he prefers to do so. As before suggested, when a person seeks to recover back excess- ive interest, he must pay the principal and legal interest before his action can be sustained. That is to say, when he has paid the excess merely, and any part of the principal and legal interest remains unpaid, the action for the excess will not be entertained. . But oftentimes this rule is changed by the statute. This, however, will be referred to in another connection. The statutes of New York authorize any person or his personal representatives who shall, on any loan or forbearance of money, have paid or delivered any greater sum than is allowed by law, to recover from the person to whom the same was paid, or by whom the same was received, the amount so paid, provided the action is brought within one year after siich payment (1 R. S., 772, § 3 ; 1 Stat, at La/rge, 725, § 3). And if such suit is not brought within the year, then the said sum may be sued for and recovered with costs at any time within three years after the said one year, by any overseer of the poor of the town where such payment may have been made, or by any county superintendent of the poor of the county in which the payment may have been made (1 R. 8.,%^; 1 Stat, at Large, 726, § 4). This statute does not take away the common-law remedy of the borrower, but it has been held that such remedy is suspended dur- ing the three years given to the overseer or county superintendent of the poor to bring the action ; for both the common-law and sta- tute remedies cannot be resorted to ( Vide Wheaton v. IliMard, 20 Johns. R., 290). And if the borrower fails to bring his action within the first year, and the official person above named shall THE ACTION FOB VSUBT. 423 prosecute under the statute within the three years specified, the borrower's right to bring the action may be lost, because the usurer is only liable to one action for the excessive interest taken. But before the action shall be commenced by such ofiicial, the borrower may bring his suit within the three years, and at any time within the general limitations of action. His right to the excessive interest is fixed by bringing suit, and such official cannot afterward sue, though within the three years (Palmer v. Lord, 6 Johns. Ch.R.,^b). The old Supreme Court of the State of New York, in the case of Wheaton v. Hihlard, held that the statute of 1T87, which was substantially the same as the present statute of the State, giving to the party paying usurious interest the right to sue for and recover the excess within one yea/r after such payment, did not take away the common-law remedy of the borrower to recover such excess, as has been before suggested. But Justice Spencer, delivering the opinion of the court, said : " The injured party can- not have both remedies, and if he neglect to pursue the statute remedy for more than a year, his right of action at common law would be suspended during the second year, for, peradventure, a third person may prosecute." The present Supreme Court of the State seems to have vibrated somewhat upon this question. The court, at a General Term' held in the seventh judicial district in 1863, decided that the provision of the statute is cumulative, and does not take away the common- law remedy of the borrower, and that he may bring his action to recover the excess of interest paid by him at any time within six years after the sum was paid {Porier v. Mount, 41 Pwrb. H., 561). On the contrary, the Supreme Court, at a General Term held in the first judicial district in 1866, decided that usurious interest cannot be recovered back except under the statute, and that unless the action to recover it back is brought within the time prescribed by the statute, that is to say within one year from the time of pay- ment, it cannot be sustained. George G. Barnard, J., who delivered the opinion of the court, said : " I- do not understand that usurious interest may be recovered back without this statute. TJsuiy is created by statutes. Penalties are given and rights of action created by statute for violation of the usury laws. The case of Wheaton v. Hibha/rd (20 Johns., 290) was decided under a different statute from, the present one. One 424 ii4.w or usvBT. portion of the opinion in it is questioned in 41 Barb., 561 ; the first case holding that the plaintiffs right of action was suspended after one year, for the next three years, when the overseers may sue, and the latter case holding that the plaintiff may sue until the overseers do sue. It seems to me quite plain that neither case can be upheld under Meeoh v. Skmer (19 If. Y. Bep., 26). A right is in that case hpid vested, becaase given by statute. ' If the right is not asserted within the time, it is gone.' The overseers may then sue. They have a vested right, upon the same principle " {Palm V. Johnson, 46 Barb. B., 21, 23, 24). In the case of Porter v. Mount (41 Barb. R., 567), Justice James C. Smith regards the remark of Jiidge Spencer, in TF)^eato V. Hihbard (20 Johns. B-, 290), as ohiter dictum, and he is inclined to think is not wholly correct. He thinks the borrower's common- law right of action is not c^salufely suspended during the three years given to the public officexe by the statute ; but that he may sue during that period, provided neither of such officers has pre- viously sued for the same matter, and not otherwise. This is in harmony with, the doctrine laid down by the chancellor in the case of Palmer v. Zord, before referred to. But the two cases in Barbour are entirely in conflict, one with the other, upon the other' question, as to whether the statute supersedes the common- law remedy of the borrower to recover back the usurious interest paid ; and they are both General Term decisions, and each decided by three judges, and each decision seems to be concurred in by the fuU bench. The ease of Meeoh v. Stover, in the New York Court of Appeals, which Judge Barnard considers conclusive against the decision in the 4ist of Barbour, arose under the statute against betting and gaming; and Judge Comstock, wlio wrote the opinion in that case, said: "If the statute had not given an action to recover money lost at play, it is quite certain that on general principles of law a suit for such a purpose could not be maintained." This he holds, on account of the maxim recognised in such cases, as " in pari delicto potior est conditio defendentis; " that is to say, where both parties are equally in fault, the condition of the defendant is the more preferable. The defendant ha.ving the money won is permitted to keep it, because the law will not be heard in the particular case. But it has been expressly held, and it is believed never controverted, that this max;ina. d,QQS not apply TEE ACTION FOR VSUST. 425 in a case of usury ; and it has frequently been held, and perhaps never controverted, that the borrower has his remedy at common law for usurious interest paid by him, without the aid of any statute. The case of Butterworik v. O'Brien (23 N. Y. M., 275), which Judge Barnard also thinks favors his position, simply decides that the act of the legislature repealing the defense of usury, as to banks, has the effect to deprive banks of the benefit of the statute, and besides that, a corporation cannot maintain an action to recover back money paid by them in excess of legal interest. In other words, it cannot be salid that there is any usurious interest as to a corporation, and if this is so, a corporation cannot most certainly sustain such an action. But these are the two conflicting decisions of the Supreme Court of the State upon the point, and consequently the question cannot be considered settled until it shall be passed upon by the Court of Appeals. Tlie Supreme Court of Alabama held that the act of 1819, of that State, which prescribed the rate of interest and prohibited the taking of usury, impliedly abrogated the common law, which allowed the borrower to recover back, in indebitatus assumpsit, all interest he had paid above the rate prescribed ; and that since the passage of the statute, he could only maintain a qui tarn action in such case, and then the amount reserved by him was required to be paid into the treasury for the use of the State {Carlisle v. Gray, 10 Ala. E., 302). The Supreme Court of Pennsylvania has held that a payment of usurious interest was not such a voluntary payment as would entitle the receiver to retain it; that in such case, the money is paid under the constraint of a forced, though illegal contract, - obtained by oppression, and by taking advantage of the necessi- ties of the borrower ; and that therefore the same may be recovered back by action. And the court declared that, to enable the bor- rower to recover back a sum paid for usurious interest, other evi- dencerof duress or oppression is necessary than is involved in the act itself of taking the money under a usurious contract {Philan- thropic, etc., Associatiem v. McKnight, 35 Penn R., 470). And the Supreme Court of Texas laid down substantially the same doctrine, in a case where the usurious interest was allowed as a set-off, or appropriated to the reduction of the principal ( Ware v. Bennett, 18 Texas R., 794) ; while the Supreme Court of Illinois decided that usurious interest, once voluntarily paid^ cannot be 94 426 LAW OF USURY. recovered back as money advanced or received. The ground upon which the decision was based was, that the Illinois statute gives a defense for usury, but not a cause of action ; and one of the judges dissented from the decision {Hadden v. Irmes, 24 III. R.^ 381). The Supreme Court of Wisconsin decided that the borrower may recover the amount paid for usury in an action for money had and received, after the lapse of the year within which he can recover under the statute threefold that sum, and that he may also off-set it in a suit brought for the recovery of the principal {Wood v. Lake, 13 Wis. B., 84). By the former statute of Massachusetts, a party paying usurious interest was permitted to recover of the usurer threefold the amount of interest p^d {Rmnsed Statutes, oh. 35, § 3). This is different from the remedy at common law, and, of course, a party who had paid a greater rate of interest than allowed by law, could not recover back the threefold amount of interest paid, except in the manner and form' prescribed by the statute ( Wiley v. Tale, 1 Met. E., 553). The Supreme Judicial Court of Massachusetts decided that neither the giving of a negotiable note in settlement of an account which contained a charge for unlawful interest, nor the giving of . a memorandum check in settlement of the note, was such a pay- ment of unlawful interest as would enable the party giving the note and check to recover back threefold the amount of interest paid in an action on the statute of the State above referred to {Stevens v. Idncohh, 1 Met. R., 525). And it was held, under the IliTorth Carolina statute against usury, that ' the penalty given by the statute could not be recovered, unless the usurious interest or some portion of it had been actually received, either in money or money's worth {Stedmam, v. Bland, 4 Ired. R., 296). But it was held that in the action to recover such penalty, it was not necessary to prove that the principal money had been paid {Seawell v. Shomherger, 2 Mwrph. 5., '200). And the court held in another case, where payment of usurious interest, or of a usurious contract, was made by the note of a third person, that the usurious contract was complete before the note became due. So that the statute penalty for usury could be recovered {Cavam^ss v. Noy, 10 Ired. R., 315). Under the Vermont statute it was decided that although the payment of usury upon a note would, in law, be deemed a part THE ACTION FOB USVBr. 427 payment of the note, if the note included both the money loaned and the usury, whether at the time of negotiating the loan or after- ward, and the usury, when paid, was applied upon such securities, the debtor was at liberty to treat such a payment as having no con- nection with the legal demand, and bring his action to recover it back {Nicliols v. Bellows, 22 Yt. B., 581). In tlie State of Greorgia it was held that if a surety to a usurious contract pays usurious interest, knowing it to be such, he cannot recover it back from his principal {James v. Jeyner, 8 Ged. H., 562). Usurious interest was paid upon a note executed in Ohio, in 1846, payable in thirty days, and it did not appear that it was paid before September, 1850. The legislature of Ohio passed an act which took effect March 1, 1848, by which usurious interest might be recovered back, or set off. In a suit brought in Indiana on the note, the Supreme Court of the State held that the usury might be set off . against the note, both at common law and under the statute of Ohio {Smead v. Green, 5 Ind. R., 708). Where a contract was made in Massachusetts, alleged to be usu- rious by a statute of that State, which provided that a deduction of threefold the amount taken should be made from the sum found due, an action was brought upon the contract in the State of New Hampshire, and a plea of usury under the statute was interposed. The court held that the statute, applying to the remedy merely, could not be enforced in- New Hampshire; declaring, in general terms, that statutes against usury, which apply only to the remedy, can be enforced in those States only where the contract is made {Watriss Y. Pierce, 32 N. H. R., 560). In the State of Louisiana it was held that, under the statute of 1844 of that State, money paid for usurious interest could be reclaimed if suit was brought within one year after the payment {Keane v. Bromdon, 12 La. An. R., 20). And the same court held that where usurious interest was stipulated before the passage of the act of the 20th March, 1856, " relative to the rate of interest," but paid since the promulgation of that act, the whole of the interest paid could be recovered back under the second section of the act of February 19, 1844; that the contract relative to interest was void at the time it was entered into, and that it remained unaffected by the subsequent law in existence when the pavment was made (Mer- mlle v. Le Blame, 12 La. An. R., 221). 428 I'Aw OF usasr. The Supreme Court of Ohio has decided that where usurious interest has been paid, the borrower may waive the forfeiture', and require such excess to be applied to the payment of the legal interest {Zookwood v. Mitchell, 7 Ohio J!f. S. R., 387). Under the Massachusetts statute before referred to, the Supreme Judicial Court of that State held that one who, in consideration of a loan of money, gaye his note for a larger amount, bearing inte- rest and secured by a mortgage on real estate, and afterward con veyed the real estate to one who agreed, as part of the considera- tion of the conveyance, to pay the amount of the note, might, upon the grantee's paying the note accordingly, maintain an action on the statute against the payee of the note, to recover three times the excess of the amount of the note above the loan {Ounnvnghami V. Hall, 1 Gray's H., 559). But the same learned court held that •the giving of a negotiable note for $1,000 and interest, with col- lateral security, for a loan of $900, and the payment of interest thereon at the legal rate annually on the $1,000 for two years and a half, and of part of the principal, were not such a payment of unlawful interest as would enable the party to maintain ah action to recover back threefold the amount of unlawful interest paid. Bigelow, J., delivered the opinion of the court, and said : " This case clearly comes within the principle laid down in Stevens v. Lm- coln (7 Met., 525). The locus jpoemtembioe still remains open to the defendants. They may hereafter reKnquish their claim to the unlawful interest, and surrender the note and mortgage which they received from the plaintiffs, without receiving anything more than the original sum of $900 which they actually advanced to the plain- tiffs, with lawful interest thereon. In that event, no usury will have been received by them. The payments already made by the plaintiffs have been appropriated by the parties in payment of the lawful debt, and not in satisfaction of the claim of usurious inte- rest. If there had been no appropriation of those payments, the law would apply them in payment of the lawful rather than of the illegal demand " {Saunders v. Lambert, 7 Grwy's R., 484, 486). In the Court of Appeals of the State of Kentucky, a case was decided, in which usury in the debt sought to be collected was known to the p'arty before the judgment by ordinary proceedings was ren- dered against him, and was then available as a defense either at law or in equity ; he failed to rely upon it, however, but sought an injunction or modification of the judgment to the extent of the TBE ACTION FOR USVRT. 429 nsury. The court teld that he was not entitled to the relief sought ; but decided, nevertheless, that if he had paid the usury he might sue for and recover the amount from the party receiving it {Chinn V. MiteheU, 2 Met. B., 92). In the State of Michigan the Supreme Court has decided that the statute concerning usury, in force in that State, does not con- template the recovery back or allowance of unlawful interest once paid, unless in a snit upon the contract under which it was exacted ; that the statute does not absolutely avoid contracts for usury, and that if parties perform them they are remediless {Smith v. Slod- dmrd, 10 Mich. JR., 148). The same is decided to be the law in the State of Iowa. Usurious interest once paid in that State can- not be recovered back {Smith v. Coopers, 9 Iowa R., 376 ; Nichols V. Skeel, 12 ib., 300). And the law is held to be the same in Illi- nois {Tompkins v. Sill, 28 III. M., 519 ; Mcmney v. Stockton, 34 ik., 306). It has been held by the Supreme Court of the State of Illinois that a mortgagor cannot maintain an action to recover usurious interest collected by the sale of the property under a power of sale in the mortgage. That the payment was involuntary, was held not to help the mortgagor {Perkins v. Conant, 29 III. R., 184). In the State of Yermont, in an action to recover back money paid as usury, it appeared that the defendant agreed to obtain a loan of money for plaintiff, and did obtain it of, H. at a usurious rate of interest,, and that he received seventy-five dollars from the lender as a part of the transaction. Subsequently he purchased the plaintiff's note of H. and the plaintiff paid him the principal and usurious interest. H. admitted that he received one-half of the extra interest included in the note, and settled with the plaintiff therefor. The court held that the defendant was a party to the usurious contract, so as to be liable to repay the usury he had received. It was declared that the plaintiff's cause of action accrued when the defendant receive4 the seventy-five dollars from H. ( Williams v. Wilder, 37 Vt. R., 613). The Supreme Judicial Court of Massachusetts decided that a usurious lender does not subject himself to the statute penalties for usury if h,e actually receives no more than the sum lent, with lawful interest. But upon a bill in equity to redeem a mortgage made to secure a usurious contract, the court held that if the defendant by his answer claims the perfarmanca of such contract, 430 I'^W OF VSURY. .the mortgagor is entitled to a deduction of the forfeiture for usury from the amount due from him upon the contract {Smith v. Rol- . inson, 10 Allen's R., 130). The Supreme Court of Missouri has decided that if a party •ooluntiwily pays interest as usury, an action cannot be maintained for its repayment {Romsom v. Hays, 39 Mo. R., 445). The Supreme Court of the State of "Wisconsin has held that under a statute which provides that no interest shall be recovered upon usurious contracts where money has been paid as interest at an illegal rate, only the excess above the legal rate can be recovered in a commonjaw action for money had and received, or set-ofE by the borrower in an action for the principal, nor will equity enforce the forfeiture except for such excess (-f(3sy v. Zovejoy, 20 Wis. E., 403). It was held in Tennessee that no creditor or surety has made • out a title to recover the usury he has paid, until he has esta- blished his demand by judgment at law or decree in equity. And that, until this is done, his bill or suit for the usury under section 1955 of the Code of the State, providing for the recovery of usu- rious interest paid, is- wholly unwarranted {Battle v. Shute, 3 Read's R., 547). It has been decided in the State of Georgia that the right of a debtor to, recover back usurious interest paid by him is a personal privilege, and not a right which a surety of such debtor has a right to set up by way of set-off to the debt on which he is liable as surety {Mordecai v. Stewart, 37 Ga. R., 364). But the remedy of the borrower who pays usurious interest is not always confined to his action for the recovery of the excess in money. For example, when, in a usurious contract the delivery of personal property by the borrower to the lender is a part of the transaction, it seems to be settled that the possession of such pro- perty by the lender is regarded as tortious from the beginning, and that trover will immediately lie against him at the suit of the bor- rower without a demand or other evidence of a further act of conversion. In accordance with this doctrine the old Supreme Court of the State of New York held, where it appeared that the defendant lent money to the plaintiff, and to secure usurious inte- rest sold to him at the same time certain real estate at an exorbitant price, and for a part of the amount to be paid received from the borrower, at the time of the loan, an assignment and delivery ol TBE ACTION FOR UBURT. 481 several bonds and mortgages, that the act of receiving the bonds and mortgages was a conversion by the defendant, and that trover by the borrower, brought after six years from such delivery, was barred by the statute of limitations; and the doctrine was laid down that the law regards everything done by a borrower to obtain money upon usurious terms as involuntary, and the result of con- straint and compulsion. Beardsley, Ch. J., in his opinion, said : " The contract upon which these securities were received by the defendant, being usu- rious, was wholly void, and he thereby acquired no right to them (1 B. S., 772, § 5). Nor was his possession, although by manual delivery from the plaintiff, a rightful possession. On the contrary, it was not only acquired in violation of positive law, but, as respects the plaintiff, was compulsory and o»ppressive. The law regards whatever is done to obtain money on usurious terms, not as a vol- untary act, but as the direct result of constraint and violence on the part of the usurer. The borrower on such terms is the slave of the lender ; nay, more, a slave in chains, and utterly incapable of resistance. As to the usurer, anything is held to be oppressive and tyrannical to which an unresisting and passive submission is yielded by his victim. It is on this principle alone that the law gives redress to one who submits to usurious exactions. He is not looked upon as a free agent, nor as a violator of the law. And to such a case the maxims volenU nonfit injuria, and in pari delicto potior est oondiMo defendentis have no application " (Sohroeppel Y. Corning, 5 Denio's JR., 236, 240, 241). This doctrine is well sustained by the English courts. In an action brought in the English Common Pleas to recover in trover for goods deposited to secure a usurious loan, the rule was clearly upheld. The report of the case does not show that any demand had been niade, nor was the objection taken on the trial. The only point left to the jury was whether the goods had been deposited on a contract to pay more than the legal rate of interest for money advanced. The jury found that such was the fact, and the plaintiff" had a verdict {Tregoning v. Att§nborough, 7 £ing. R., 97). And a subsequent case of the same character in the King's Bench was disposed of in the same way, no objection being taken that a demand of the property had not been ina,de {H^argreaves V. Hutchinson, 2 Adolph. d; Ems' H., 12). In both these cases the entire value of the goods sold was recovered in trover from the 432 LAV OF USUBT. lender, without any deduction on account of the sum actually loaned and legal interest. And the same principles were decided in an early case in the present Supreme Court of the State of New York. It appeared that bonds and mortgages against third persons were transferred and delivered to the lender by the borrower, in payment and satis- faction of a usurious debt, or in execution and discharge of a usuri- ous contract ; and the court held that no action could be maintained by the borrower to recover the excess of usury alleged to have been paid by him, unless the same was brought within one year after such transfer of securities was made. And it was farther held that the right of 'action in the borrower, under the statute, for the excess of money or property paid by him beyond the sum actually due, is perfect upon the receipt by the lender of bonds and mort- gages transferred to him iu payment of the debt, and the appro- priation thereof to his own use ; that the borrower need not wait until the money has been actually received by the lender upon such securities before commencing an action. Allen, J., in his opinion, among other things, said : " The statute regulating the interest of money (1 R. S., T72, § 3) does n6t restrict the cases in which a party is entitled -to receive the excess paid beyond the legal interest to those in which money, or that which has been taken and received as money, has been paid ; bat embraces every case where a party has paid or delivered any greater sum or value than is allowed by law to be taken. The form of the action, it is true, may depend upon the medium in which satisfaction lias been made. If money has been paid, Uie action for money paid and received will lie. If property has been delivered, then the vendor's action to recover that property or its value must be resorted tij, and in either case the declaration must be under the statute ' {Sohroeppel v. Corning, 10 Barb. B., 576, 580). This last case was taken to the Court of Appeals of the State, where the judgment of the Supreme Court was affirmed on the ground that more than six years had elapsed since the bonds and mortgages were transferred, and therefore the statute of limita- tions was a perfect defense to the action. And .the following rules were laid down by a majority of the court : "Where a borrower, on obtaining a loan of money at an illegal rate of interest, assigns to the lender bonds and mortgages in consideration of such loan, the aesignment is void, and trover may be immediately maintained TSE ACTION FOR USURY. 438 for them, by the mortgagor. The statute of limitations is a bar to such action after six years from the time of such assignment. The same statute is a bar to. an action of assumpsit commenced against the lender more than six years after the assignment of the bonds and mortgages to him, to recover moneys received by him thereon within six years prior to the commencement of the action. Judges Paige and Foot dissented from this view, and held that the receipt of the money upon the mortgages created a new cause of action, which was not barred until six years from the time of its receipt ; and Judge Paige was of the opinion that, the assign- ment of the bonds and mortgages being void, the assignor had a right to treat the assignee as holding them in trust for him, and to claim their proceeds as money paid to his use, and that the assignee could not in answer to such claim set up his own tortious act to prevent a recovery. Judge Paige also expressed the opinion that the remedy given by statute for the recovery of usurious interest paid to the lender is merely cumulative ; that the statute, in providing this remedy, does not take away the common-law remedy of assumpsit for money paid and received. And this position would seem to be in harmony with the principle which governed the majority of the court in the disposition of the case {Soh/roeppd Y.Oorning, 6 N. Y. R., 107). The old Supreme Court of the State of !N"ew York held, in am early case, that where goods fraudulently obtained are deposited with an auctioneer, who makes an advance upon them, and charges five per cent besides the usual commissions, the transaction is usuri- ous, and for that cause the auctioneer is not entitled to be con- sidered a honfijide purchaser, in an action of trover brought against him by the party from whom the goods were obtained, although, he is wholly innocent of the fraud,' (EomsdeU v. Morgan, 16 Wend. R., 574). And in a later case the same learned court held that where notes are delivered on collateral security for the payment of another note upon a usurious agreement, the party depositing the notes may repudiate the agreement under which they were deliv- ered, and bring an action of replevin for their recovery ; but that there must be a dema/nd before suit. Nelson, Oh. J., delivered the opinion of the court, and said : " I entertain no doubt that a demand was necessary to enable the plaintiff to sustain the suit. The possession of the notes by the 55 434 LAvr or jtsurt. defendant was not unlawful or tortious because they were delivered by the plaintiff himself. As it was lawful for him to deliver the notes, it surely was so for the defendant to receive them. True, the agreement under which they were delivered was not binding, and hencte the plaintiff had a right to repudiate it ; but this did not render the acts done under the agreement tortious" {Boughton V. £ruce, 20 Wend. B., 234, 235). The remarks of the chief justice in this case would seem to countenance the idea that where property has been transferred, to secure a usurious contract, an action will not lie to recover the property until demand and refusal to restore the property, or something amounting to an actual conversion had taken place. But the action of Boughton v. Bruce was an action of replevin in the deUnet, and there may be a distinction between such an action and an action of trover; at all events it is plain, upon authority, that the remarks made in the case cannot be taken as controlling in an action of trover. And especially must this be the rule under the New York statute, which provides that " all deposits of goods or other things whatsoever, upon a usurious consideration, shall be void" (1 B. S., 772, § 5 ; 1 Stat at Lwrg&, 726). The Supreme Court of the United States have decided that where a party distrained property for unpaid rent, under a usurious instrument or lease, tke tenant may maintain replevin for the property distrained. Mr. Justice McLean, in delivering the opinion of the court, said : " If usury may be shown in the inception of a bill, to defeat a recovery by an indorsee, who paid for it a valuable considera- tion without notice of the usury, may not the same defense be set up where, in a case like the present, the party to the usurious contract claims by virtue of its provisions a summary mode of redress. The court entertain no doubt on this subject" {^Lloydy. Soott, 4 Peter^ B., 205, 230). SQITITABLE BELIEF FOB VSVBT. 435 CHAPTEK XXXIII. BELIEF m EQUITT or CASES OF U8TIET ^ WHEN THE PEOOBEDINGS MAT BE MAINTAINED — GENEEAi EULES UPON THE SUBJECT. In addition to the remedies wliich the borrower has against the lender, at law, on account of usurious interest and usurious trans- actions, the common law, and in general the statutes enacted against usury, give the party relief against usury in a court of equity, There are certain rules, however, which prevail in such cases in a court of equity which do not, as a general thing, apply to a proceeding at law. Unless a statute exists to the contrary, the principles upon which a party to a usurious contract can, in a court of equity, obtain relief against the usurious premium are well settled. The. invariable rule jn equity is, that a bill or other proceeding in equity to set aside or affept a usurious contract, whether filed for relief or discovery, or for both, cannot be main- tained without paying or offering to pay the amount actually loaned. Neither discovery nor relief can in any case be obtained in the Court of Chancery, or by proceedings in equity, without a • repayment of the sum actually lent, with lawful interest, because the borrower cannot, in any case, sor under any circumstances, be equitably entitled to keep the money which he has actually received from the lender, and for which the lender has received no con- sideration. As a general rule, therefore, the borrower ig met by that cardinal maxim of a court of equity, " that he who asks for equity must do equity," and can obtain no aid from that jurisdic- tion in getting rid of or recovering back the amount which has been improperly exacted from him, until he repays the amount which in justice and equity is due froni him to the lender. Relief under such circumstances, where the complainant does not ask for or need a discovery, is refused exclusively upon this principle ; but where he has no legal evidence of the usury, and the object of his bill is to compel the defendant to disclose or admit the fact^ he has an additional diflSculty to encounter, to wit, that a court of equity will not compel a defendant to answer upon oath, and thus become a witness for his adversary and against himself, when such answer may subject him to a criminal proceeding, or to a penalty or forfeiture, or to any loss in the nature of a forfeiture!. 4®6 J^AW OF USUBT. In sucli a case, therefore, he is bound to waive the forfeiture, and pay the amount actually loaned, not only because it is just and equitable, but in order to guard against the possibility of the defendant's answer being made the means, of subjecting him to a forfeiture. The borrower may have relief in a court of equity against the usurious premium, and may also compel the defendant to disclose the transaction upon oath, in order to prove the usurious contract ; but, as a general rule, the relief is granted only upon the princi- ples stated. This is the general rule, although it is sometimes waived by express provision of statute. For example, by the statute of the State of New York' it is provided that, whenever any borrower of any money, goods or things in action shall file a bill in chancery for a discovery of the money, goods or things in action, taken or received in violation of the statute, against usury, it shall not be necessary for him to pay, or offer to pay, any interest whatever on the sum or thing borrowed ; nor shall any court of equity require or compel the payment or deposit of the principal sum, or any part thereof, as a condition of granting relief to the borrower, in any case of a usurious loan forbidden by the statute (1 B. 8., ITi, § 8 ; 1 Stat, at Za/rge, 7m). As th6 law stood in New York before the revision of the statutes, every usurious contrtot, and every instrument, of whatever kind or description, taken as the evidence of such contract, were abso- lutely void ; and when sued upon such contract, all the borrower had to do was to prove such usury, and no recovery could be had against him ; he defeated the recovery, not only of the usurious excess, but of the sum actually loaned. If he had Itegal and suffi- cient evidencfe of the usury, his defense was perfect at law, and he had no occasion to invoke the aid of a court of equity. If the knowledge of the usury was confined to himself and the lender, then it became necessary for him to go into a court of equity, and by a bill of discovery to call upon the lender to adinit or deny the usury. He was then obliged to Waive the forfeiture, by paying, oi" offering to pay, the sum actually loaned, with interest. And in some cases, where the form of the security was such as to enable the lender to collect it without a suit, either at law or in equity (as a bond and warrant of attorney, or a mortgage), the borrower, although he had competent evidence of the usury, still, as he had no opportunity, froni the form of the procefeding, to avail himself EQUITABLE BELIEF FOR USUBT. 437 of it at law, was compelled to file his bill, and ask relief in equity. In such a case, also, although he sought and required no discovery, a court of equity would not relieve him from the usurious excess, except upon the equitable condition of his repaying the sum actu- ally loaned. This was the rule, not by reason of any express statu- tory provision, but according to the established principles upon which a court of eqidty always exercised its jurisdiction in grant- ing relief. The Court of Chancery invariably exacted of the party who asked relief against a usurious transaction that he pay, or offer to pay, both principal and interest, as a condition precedent to the compelling of the defendant to answer and make discovery. A bill which did not contain such offer was bad upon its face, and might be demurred to. The power and authority of a court of equity to impose those terms, as the condition of compelling dis- covery, are not conferred by any statutory enactment. Such authority belongs to the court by virtue of its general equity juris- diction ; and unless a statute exists providing that the party may have relief without the imposition of those terms, the rule will be invariably enforced. To guard against the possibility of the defendant's answer in a case of usury being made the means of subjecting him to a forfeit- ure or other punishment, the New York Revised Statutes provide that every person who shall discover and return the money, goods or other thing, taken, accepted or received, or the value thereof, contrary to the usury laws, shall be acquitted and discharged from any other or further forfeiture, penalty or punishment which he may have incurred by taking or receiving the money or thing so discovered and repaid or returned (1 B. S., 772, §4; 1 Stat, at Za/rge, 726). And, as the law was amended by the act of 1887, it is further provided that the testimony given by any plaintiff, or the answer of any defendant, made pursuant to the statute, shall not be used against such person before any grand jury, or on the trial of any indictment against such person (La/ms of 1837, cha/p. 430, §8; ^Stat. at La/rge, 460). It will be observed that this exemption applies only to the party to the suit ; and it has been held that where a person is called as a witness to prove the usury, aot a party on the record, if his testimony may be used against him in a criminal prosecution, he cannot be compelled to testify in respect to the usury, until it is shown that he is a party in inte- rest (The Bamk of Salvia v. Eenry, 2 Denials E., 155). 438 ijAW OF USURT. The statute of New York, however, provides a relief for the " horrower" and considerable discussion has been had as to who are iorrowers, within the meaning of the statute. But the late Court of Errors of the State settled the doctrine that the term embraces not only the party to whom the original loan was made, but also his sureties, heirs, devisees and personal representatives. The court held, however, that a subsequent grantee of premises covered by a usurious mortgage is not a "borrower," and therefore cannot maintain a.suit in equity to set aside the mortgage, without paying or offering to pay the sum actually loaned. Lott, Senator, in his opinion, said : " The term iorrower has ?, well-known and definite meaning. It is used in contradistinction to lender, and is intended to designate one of the parties to a con- tract for a loan, and may be extended to those standing in his place in a representative capacity, as heirs-at-law, executors or adminis- trators ; but I think it is a forced construction to treat him as a iorrower who is entirely disconnected with the loan, and not bound in any way to pay the sum borrowed." Wright, Senator, closes his opinion in these words: "The result at which I have arrived is, that a grantee of land covered by a usurious mortgage is not a ' borrower ' within the fourth section of the act to prevent usury, passed in May, 1837. I think the vice-chancellor of the fifth circuit properly allowed the demurrer to the complainant's bill, for want of an allegation or offer of pay- ment of the money actually due upon the mortgage of Post, and that the decree of the chancellor should therefore be reversed" {Post V. The President, etc., of the BamJc of Utica, 1 HilVs -ff., 391, 397, 408). It was conceded on all sides, in the case in the 7th of Hill, that, according to the law of the Court of Chancery, as it was adminis- tered in England and in the State of JSTew York previous to the adoption of the Revised Statutes, the usurer was made secure in the amount of money he actually lent, even in a case where a bill was filed to set aside a security taken for the loan, though the sta- tute laws of both countries had declared expressly that not only the security but the contract for the loan was absolutely void. The complainant was required to pay or offer to pay the sum lent before he could entitle himself to relief or discovery on the ground of usury. This disregard of the plain provisions of the statute was always Justified upon the strength of a maxim in that court that EQUITABLE BELIEF FOB UStTBT. 439 "he who asks for equity must do.equity," and hence the court would neither allow a discovery nor grant a relief without a repay- ment of the sum actually lent, with lawful interest. Such is belfeved to have been the invariable rule, and such is believed to be the rule at the present time, in the absence of statutory pro- vision to the contrary. That a purchaser from a borrower is not included in the term borrower within the provision of the act of 1837 of the State of New York, before referred to, has been repeatedly decided by the Court of Appeals of the State. A party occupying that position, therefore, is not entitled to relief as a borrower within the mean- ing of that provision. Hence, according to the settled princi- ples of equity, he must " do equity " before the court will interfere in his behalf to relieve him from a usurious transaction, to which his grantor was the suffering party ( Vide Hexford v. Widger, 2 iV. Y. B., 131 ; ScJiermerhorn v. Tahncm, 14 ib., 93 ; Bullard v. Rayrbor, 30 i5., 131 ; Chamberlain v. Dempsey, 36 ih., 144^ 149). The law is well settled that in all eases where a party has not the power to avail himself of the defense of usury at law, he may have relief in a court of equity against the usurious transaction, and he may also take measures in a court of equity to make the lender discover the usury upon his own oath. But in all these cases, where there is no statute to the contrary, the general rule of courts of equity "that he who asks for equity must do equity" applies, and to entitle the borrower to relief he must pay or offer to pay the money actually borrowed. The party in such a case is in the same condition as any other person who seeks the aid of a court of equity to enable him to discover the means of a defeat to a suit at law, and is subject to the general rules that regulate a court of equity in granting relief. It has been truly suggested that the effect of this rule is, that a party making a secret usurious contract has little or nothing to fear ; the absence of proof makes him safe at law. And if the debtor resorts to equity, the most he can lose is the usurious excess reserved in the security. And to compensate him for this loss, he is sure to receive back the money actually lent and the legal interest more promptly than he other- wise could collect it. Eeasons of this nature, doubtless, have induced the legislatures of some of the States to provide by express statute, that parties seeking relief against usurious transac- tions shall not be subject to the ordinary maxims of courts of 440 LAW OF USUBT, «qidty, which require the payment or tender of the money bor- rowed as a condition of obtaining relief by proceedings in an equity prisdietion. But without some statutory provision waiving the conditions, the ordinary rule will be enforced, even though statutes may exist allowing parties to testify in their own behalf, or to call their antagonists to give evidence in the case. Another rule in equity may be stated, which is applicable to a case for relief from usury, as well as others of which a court of equity will take cognizance ; and that is, that after a verdict at law a party comes too late with a bill of discovery, unless it is a clear case of accident, surprise or fraud. Said Lord Chancellor Eldon, in an important and well-considered case before the English Court of Chancery : " If a defendant has a good legal defense, but the matter has not been tried at law, it becomes a serious question whether a party, who, being competent, does not choose to defend himself at law, can come into equity and change the juris- diction. Consider the effect ; he might not have succeeded at law, but by coming into equity he secures so much additional time. * * * Lord Thurlow was very tenacious of the doctrine, that a party who had an opportunity of a trial at law, and would not avail himself of it, could not come here " {Prothew v. Furman, 2 Swanston's S., 227). Such now is the established doctrine in England, and has been for a longer time the general doctrine in the American States. And the doctrine, as applied to a ease for relief from usury, is, that a defendant sued at law on a contract alleged to be usurious will not be entitled to a bill of discovery if he suffers a nonsuit and jud^nent to be taken against him, and especially when he does so without making a defense at law ; and it has been held, accordingly, that an injunction will not be granted against a judgment where a party seeks a discovery of usury and claims a return of the excess beyond the legal interest. The reason of the rule is, that the proof of usury is a good defense at law ; and when it is in the knowledge of the defendant, no^ satisfactory rea- son can be given why the discovery was not sought while the suit was pending. Whenever a party making a discovery had know- ledge of the facts during the pendency of a suit at law, equity will not permit him to do so afterward to enjoin a judgment. This doc- trine is well settled by adjudications in both the State and federal courts, and is uniformly adhered to in cases of alleged usury, as EQUITABLE BELIEF FOB USUBT. 441 ivell as in all others of an equitable nature, where the matter at issue may be made available in a court of law. Where the plaintiff was held at law on notes alleged by him to be usurious, and suffered a verdict and judgment to be taken against him without making any defense or applying to the Court of Chancery on a bill of discovery in due season, the late Court of Chancery of the State of New York held that he was concluded, and not entitled to relief {Thompson v. Berry, 3 Johns. Ch. R., 396). And the same court held, in a subsequent case, that after payment of a judgment recovered against him in a litigated suit at law, the defendant cannot recover the money in equity upon the ground of usury. It was declared that he should interpose that defense at law, and, if necessary, file a bill for discovery ; and if the plaintiff is beyond the jurisdiction of the court of law, so that he cannot be examined as a witness under the act of 1837, the defendant may have an injunction staying proceedings until full answer {Bartholomew v. Yam, 9 Pcdge^s E., 165). But it was subsequently held by the same learned court that where the borrower can establish the defense of usury by a competent wit- ness, without a discovery from the real plaintiff, but is so situated that he cannot avail himself of the testiniony of the witness in the suit at law, he may resort to Chancery for relief. Where the principal debtor, being discharged under the bankrupt law, in a suit brought against him and his surety, plead his discharge, and issue was taken thereupon by the plaintiff", the court held that the surety could file his bill to set aside the security in suit, and call the principal as a witness {Morse v. Hovey, 1 Barl. Oh. E., 404). The Court of Appeals of the State of Kentucky have held that where usury in the debt sought to be collected was known to the party before the judgment by ordinary proceedings was recorded against him, and was then available as a defense either at law or in equity, and such party fails to rely upon such defense, he is not entitled to relief by injunction against the judgment to the extent of the usury, nor to a modification of the judgment to that extent in a court of equity {Ohinn v. Mitchell, 2 Met. E., 92). The same doctrine was recognized in an early case before the Court of Appeals of the State of New York. The complainants were sureties for C. upon a note given to J. for a usurious loan of money. An action at law was brought upon the note against the 66 442 i^ir OF VSURT. complainant, and C, in the name of P., an indorsee. The complain- ants pleaded the general issue and gave notice of the defense of usury, but did not verify the notice as required by the usury act of 1837, so as to entitle them to examine the plaintiff as a witness. On the trial they called as a witness J., the payee of the note, who stated on his voire dA/re that he was the owner of the note and the plaintiff in interest, and objected to testifying in the cause, and his objection was sustained by the court. A verdict was taken for the amount equitably due on the note, and judgment was perfected against the complainant and C. The court held that a bill filed by the complainants, after judgment at lorn, for the purpose of obtaining the testimony of C, and the ruling against the judg- ment, on the ground of usury, dould not be sustained. And the court held further, that after judgment at law the hill could- not be sustained on the ground that the complainants, as sureties, were discharged by reason of the holder of the note having extended the time of payment to the principal debtor, in consideration of a usurious premium paid by him in advance, it not being shown that the complainants were prevented from setting up this defense in the action at law by any fraud or accident, or by the act of the opposite party ( Yilas v. Jones, 1 N. Y. B., 274). The doctrine in respect to the jurisdiction of courts of equity, in cases of usury, underwent examination several years since in the Court of Appeals of the State of New York, and the following points were affirmed : Usury does not, of itself, constitute a ground of jurisdiction in a court of equity, and the act of the legislature of the State, passed in 1S37 to prevent usury, does not enlarge the powers of courts of equity in this respect. Where an action at law was commenced to recover upon a contract alleged to be usu- rious, and the defendant in the action filed a bill in chancery pray- ing for an injunction to restrain the proceedings, but alleging no defect in the means of establishing his defense at law, the court ,held that the bill could not be sustained. Harris, J., delivered the opinion of the court, and said : "The most general description of a court of equity is, that it is a court having jurisdiction in cases where a plain, adequate and complete remedy cannot be had, at law. There are exceptions and limita- tions to this general proposition, but none, I think, which can give such a court jurisdiction of this case. The plaintiff filed his bill to arrest a trial at law, and transfer the litigation to the, Court of EQUITABLE BELIEF FOB USUET. 443 Chancery. He asks for no discovery, and alleges no defect in the means of establishing his defense at law. The defendants, in their answer, object to the jurisdiction of the court on the ground that the remedy at law is perfect. The objection was in timey and unless there is something in the grounds upon which the plaintift has sought the interposition of a court of equity, which gives it concurrent jurisdiction with a court of law, the objection must prevaiL " Assuming that the transactions between the parties are cor- rectly stated by the plaintiff, and that they make out a case of usury, yet before he can transfer the litigation from the court of law in which it had been commenced to a court of equity, it must appear that he will be deprived of some legal or equitable right if the action at law is suffered to proceed. The mere allegation of usury has never been regarded as a ground of equity jurisdiction. No instance can be found in which a court of equity has inter- fered upon that ground alone. " It seems to have been supposed by the plaintiff's counsel that the statute of 1837 {Sess. £., 1837, j). 486, §§4, 5) enlarged the jurisdiction of the Court of Chancery so as to embrace such a case. But such has never been the construction of that statute. * * * The object of the act of 1837, undoubtedly, was to enable a bor- rower, where for any reason he found himself unable to make his defense at law, and was thereupon obliged to resort to a court of equity for discovery or relief, to do so without the former pre- requsite of paying or tendering the sum aetu'ally borrowed. The act did not enlarge the class of cases in which a bill in chancery might be filed, but merely changed the terms upon which the borrower might obtain relief in that court. * * * There is ■ nothing in the act which indicates an intention to extend the jurisdiction of the Court of Chancery beyond the cases which were before cognizable in that court " {Minturn v. The Fa/rm&r^ Loan and Trust Company, 3 J!^. T. B., 498, 500). The late Court of Chancery of the State had previously held that the Court of Chancery was not compelled by the act of 1837 to take jurisdiction of every case of usury, and decided that it would not entertain jurisdiction where both discovery and relief could be had at law ; as where the security was a note negotiable, and the payee was within the jurisdiction of the court of law, so that he could be called as a witness under the act {Perri/ne v. Stry- 444 L-^w OF nsuBT. her, 7 Paige^s R., 698). And in a later case the same court hel^ that the act of 1837 did not confer upon the Court of Chancery concurrent jurisdiction with courts of law in all cases of usury but merely gave that court power to exercise its jnrisdictioji in those cases where it is necessary to aid the defense of usury, or to remove usurious securities which are a cloud upon the complainant's title to real property, or which may be used at law to his iirjury, or in such manner that he cannot interpose a legal defense to them in a court of law {Morse v. Sbvey, 9 Faige^a M,, 197). But in a still later case, the same court held that where a mort- gage is usurious, and a cloud upon the title of the mortgagor, he has a right under the act of 1837 to come into the Court of Chancery for the purpose of having it canceled ; although it was decided that he was not entitled to an injunction to prevent the mortgagee from trying the question of usury at law, unless a dis- covery was necessary, or some other obstacle existed to making the defense at law {Hartshorn v. Damenport, 2 Barb. Gh. R., 77). The same court, in a case betbre the vice-chancellor of the first circuit of the State of New Tork, decided that though usury may be proven at law and a legal suit is pending for the loan, the court will take jurisdiction where the borrower seeks not only to have the contract declared null and the suit enjoined, but also the sur- render to him of valid collateral securities {Peters v. Mortkne/r, 4 Edw. Gh. R., 279). Eeverting again to the familiar doctrine in courts of equityj that " he who seeks equity must do equity," reference may be made to a late case involving that question, decided by the New Tork Court of Appeals, in which it was determined that where a contract or obligation is given for two or more separate and independent things having no connection with each other, and one of those objects is the security of a usurious debt, although the contract is void altogether, under the New York statute against usury, and no action at law or in equity could be maintained thereon, nevertheless, if the party comes into a court of equity to ask that such contract be surrendered, all the statutes of usury have done affecting the complainant's right to relief is to forbid that any payment on account of such usuri- ous debt shall be made a condition of relief. It was further held and declared that, where a mortgage has been given upon lands in Ohio to secure the payment of several promissory notes, a part of wMch notes are usurious, and a part of which are lorm fide- EQUITABLE BELIEF EOH VSURT. 445 although, the mortgage is void, a court of equity will require the complainant to do equity by paying or tendering payment of the valid notes covered by the mortgage, before it will entertain a suit to cause the mortgage to be delivered up to be canceled, as a cloud upon title. This is substantially the syllabus, or points decided by the ease ; but the importance of the question discussed in the able opinion of the court seems to justify some liberal extracts from the opinion. WoodrufE, J., who delivered the opinion of the court, said : " Bills by borrowers to remove usurious securities, which are a cloud upon the complainant's title to real property, have uniformly been entertained. * * * It is no answer to such a bill that the mortgagor has a good defense to a bill for the foreclosure of the mortgage. It is an apparent encumbrance on the land. Its invalidity depends upon extrinsic facts. * * * The mortgage is an impediment to a sale of the land for its value. The mort- gagor is not bound to wait until the mortgagee attempts a foreclo- surej not only for these reasons, but because, in the meantime, it may become impossible to prove his defense. * * * The mere circumstance that the land is in another State can, upon no prin- ciple that I can discover, furnish a reason for denying the jurisdic- tion of our courts, or for questioning the propriety of its exercise. * * * It follows, that where a contract or obligation is given for two or more separate and independent things or objects, having no connection with each other, and one of those objects is the security of a usurious debt, although the contract or obligation is altogether void for reasons above given, and no action at law or elsewhere could be maintained thereon, nevertheless, if the party comes into a court of equity to ask that it be surrendered, all that the statutes of usury have done affecting the complainant's right to relief is to forbid that any payment, on account of such debt, shall be made a condition of relief As to other conditions the statute is silent, and the court is left to administer relief upon those principles which govern the subject generally. " Where, therefore, the plaintiff asks that a mortgage be canceled as a cloud upon the title to his lands, and that a court of equity shall so direct, in virtue of its power and its disposition to enforce his equitable rights, the court may not require that he pay a usu- rious debt, or any part thereof, or any interest thereon, but it may 446 LAW OF V8URT require. the performance of any other duty which is just to the adverse party, unembarrassed by the statutes in question. " In equity, the mortgagor in such case stands, in reference to debts not usurious secured by the mortgage, in the same attitude as a complainant seeking to redeem. He must pay what at law and in equity he owes. Nor is this a,ny departure from the doctrine already stated, that the mortgage, being void in part, because given to secure a usurious debt, is void altogether. " Upon that doctrine the plaintiff, if he sees fit, may rely ; and on that ground he may, if he can, defend himself and the title to his lands, wherever and whenever assailed. But if he asks affirmative action and interference from a court of equity to set aside, the mortgage and adjudge its surrender, he must do equity by paying his just debt, not impeached for usury" {WiUiams^. Fitshugh 37 JSr. Y. B., 444, 448, 449, 455, 456). And the Supreme Court of New York, in a well considered case decided so late as November, 1871, laid down the doctrine that the usury act of the State, passed in 1837, was not designed to require a court of equity to entertain a suit which, according to its settled practice, it would not have entertained before that act, but only to relieve a borrower, under a usurious contract, from the obligation to repay the money actually borrowed in cases where a resort to a court of equity was necessary, either for discovery or relief. It was declared that the former rule of courts of equity, requiring a complainant who sought relief in that court against a usurious contract, obligation or security, to repay the money actu- ally loaned, with interest, as a condition of granting the relief, was abrogated by the statute of 1837 only in behalf of the hir- rower ; that the rule is not abrogated as to the grantee of the borrower. Where such grantee, as such, commences a suit for relief, the rule requiring him to do equity, as a condition of relief, is held still to apply. But the court further held that if there is no offer by such grantee, before suit or in his complaint, to do equity, according to the practice of the court, the omission to make such offer now goes only to the question of costs. If the defendant, to recover his equitable rights, has been compelled to defend the suit and to appeal, the court declared that he is entitled to his costs. Other important questions were considered in the case, but no others upon this particular point {Bisaell v, Kellogg, 60 Barb. B., 617). SqUITABLE BELIEF FOR USURY. . 447 The English courts held, while their statutes of usury were in force, that a mortgagor impeaching a security for usury could only be relieved on payment of what was justly due ; and if the contract was that he should pay what- was due on a banking account, that he must, according to this rule, pay what was due, according to the account as usually kept between banker and cus- tomer {Tumough v. Cooper, 31 Mig. Law and Eq. M., 526). Under the statutes of Wisconsin against usury, it has been held that a bill which sets up a usurious contract is not defective for want of equity, even though it does not contain an offer to pay the sum equitably due ; that is to say, such w^as declared to be the rule in that State in 1857, which is substantially the same as under the statutes of the State of New York {Cooper v. Tappan, 4 Wis. JR., 362). A difEerent rule prevails in the State of Arkansas. The courts of that State have held that although the statute makes all bonds, notes, conveyances, etc., void when taken on a usurious consideration, yet, if the debtor comes into a court of chancery to set aside such bonds, etc., on account of usury, he must, before he shall be enti- tled to relief, whether the usury shall be established by answer or other proof,, pay or offer to pay the principal actually borrowed or advanced to him, with legal interest, or that the court will, on. demurrer, dismiss his biU ; but, if the defendant answer- the bill generally, that the court will proceed to render such decree as may be consistent with equity ai)d good conscience {Suddell v. Ambler, 18 Ark. Ji., 369). And, substantially, the same rule prevails in the State of Ala- bama. It has been there held that, in a suit in equity to obtain relief against usurious interest, the relief will be granted only on payment of principal and lawfal interest {Noble v. Walker, 32 Ala. R., 456). And in an early case before the same court it was held that where a debtor comes into equity for relief against a judgment at law or other legal security, on the ground of usury, when he has, by his own voluntary act, deprived himself of the opportunity to appear and plead the usury in the character of defendant, he is required to pay principal and legal interest. But it was declared that this rule does not apply, in the absence of such voluntary act, where the heirs of the mortgagor came into equity to redeem the mortgaged premises, to set aside a decree of foreclosure which 448 LAW OF uauRT. was obtained by the creditor in a suit so conducted as to deprive tliem of the opportunity to appear and plead the usury, and to remove the cloud on their title created by the proceedings in the foreclosure suit. It appears, however, that Walker, J., dissented from the judgment of the court {Hvmt v. Acre, 28 Ala. B., 580). The Court of Chancery of New Jersey holds that a party seeking relief in equity against a usurious contract must offer to pay the sum actually due, thus recognizing the ordinary rule m equity, where there is no statute modifying the rule ( Ware v. Thompson, 2 Bemley's B., 66 ; cmd vide Gwewns v. MoMurbry, 1 Green?» B., 468 ; fferdit v. JVa^t, lb., 550). The Supreme Court of Ohio holds that the doctrine, that a party seeking affirmative relief in a court of equity against a usuri- ous contract, either by way of original or cross-petition, must first do equity by tendering the amount due, exclusive of the usury, does not apply to a defendant acting strictly on the defensive ( Union Banh v. Bdl, 14 Ohio If. S. B., 200). And the Supreme Court of Iowa has held to the same doctrine, deciding that a defendant in proceedings to foreclose a mortgage may set up the defense of usury without first tendering to the plaintiff the amount admitted to be due (Buhner v. Butler, 11 Iowa B., 364). The Supreme Court of the United States have held that tlie. general doctrine of equity, that a party complaining of usury can have relief only for the excess above lawful interest, applies to the case of a person standing in the position of a claimant, through bill in equity of priority in a fund, another claimant upon which, as defendaofc, is the alleged usurer ; and the fact that the suit is a mere contest between different parties for a fund, and a contest, therefore, in which each claimant may, in some sense, be consideied an actor, does not force the alleged usurer into the position of com- plainant or plaintiff, and so expose him to the penalty incurred by a person seeking as plaintiff to recover a usurious debt ; that is, expose him to the loss of the entire claim (,pp. 525, 530, 542). ' In Montagu on Liens, it is said, that " it is usual to speak of lien hy contract, though that is more in the nature of an agreement for a pledge. Taken either way, however, the question always is, whether there be a right to detain the goods till a given demand shall be satisfied," citing Gladstone v. Birley, 2 Mervo. R., 404. (Montagu on Liens, 36, note c.) Judge Story says : " By the Roman law, not only property of which the party was at the time in possession, or to which the party was at the time entitled to possession, or to which be had then a present title, might be pledged, but also property of which he had neither a present possession nor a present title, and which might be acquired by him only m fvMro, and when the title was so acquired im, futuro, the right of the pledgee attached immediately upon it. But in such cases it was more properly an hypothecation than a pledge. In our law, a pledge is strictly con- fined to property of which there may be a present possession and title, or in which there is a present vested right or interest. But although, by the common law, there cannot be a technical pledge of property not then in existence, or to be acquired infuUi/ro, yet there may be a contract for an hypothecation thereof; and when 512 LAW OF PLEDGES. the title is acquired, or the property comes into existence, the right of the pledgee will immediately attach to it " {Story on Bailm., § 294). The learned author also refers to the case of Macomher v. Parker (14 Pick. P., 297) in the same section, and states the law to be as therein declared ; but in a note says : " It is not easy to reconcile the doctrines of this case, in some of its bearings, with that of Bonsey v^Aunoe (8 Pich P., 236)." A very importantand well-considered case, involving theques- tion of the sufficiency of a delivery in case of pledge, was recently decided by the New York Court of Appeals. It appeared that the defendants, stock brokers, at the request of the plaintiff, and for him, but in their own names and with their own funds, purchased certain stocks, the plaintiff depositiiig With them a " margin " of ten per cent, which was to be " kept good," and they " carrying" the stocks for him. The court held that the legal relation between the parties by this transaction was necessarily that of pledgor and pledgees, the stock purchased being the property of the plaintiff, and, in effect, pledged to the defendants as security for the repay- ment of the advances made by them in the purchase. Hunt, Ch. J., who delivered the prevailing opinion of the court, on this point said : " "While it is true that the dealer, in the present case, never had actual possession of the property which he claims to have pledged, he had it sufficieiitly to bring his case within the principles of the law of pledge. The substance of the first branch of the transaction is this : The plaintiff calls upon the defendants, who are brokers, to purchase for him certain shares of railroad stock, and furnish him with $1,000 for that purpose, agreeing to pay interest on advances he shall make in the purchase, and eom- niissions. The defendants made the purchase, having themselves advanced ninety per. cent of the purchase-money. They bring to the plaintiff the certificates of the stock thus purchased by him and for him, and deliver them to hiln, as the owner thereof. He thereupon hands them back to the defendants, to hold as security for their advances on the purchase, with interest and commissions. If these precise forms had been used, no one would deily that tlie redelivery of the certificates would have constituted a strict, formal pledge. In my opinion, the transaction, as it took place, amounted to the same thing. To have delivered the certificates to the plain- tiff, and that the plaintiff should then have returned them to the defendants, to be held by them as security for the advance in their TBE BEUVERY OF THS PLEDGE. 5l3 purchase, would leave the parties in precisely the same relation as if the defendants had retained them for that purpose ; the fofm of a deUvery to the plaintiff, and a redelivery by him to the defend- ants, being waived by agreement of the parties. It comes fully within the principle I have already quoted from Story on Bailments, that, where the pledgee has the thing in his possession, the contract of pledge operates as a delivery the moment the contract is com- pleted {Story Bail., § 297). The certiflcatefe are appropriated as security for an engagement, to wit, the payment of the advance, with interest and commissions. The possession and the delivery are complete, in the abbreviated manner I have described." Two of the judges dissented from the conclusion to which the court came in the case, and wrote elaborate opinions, arguing that the legal effect of the contract between the parties was not to create the relation of pledgor and pledgee, but, on the contrary, that the transaction was an executory agreement for a pure speculation in the rise and fall of stock, which the broker, on condition of perfect indemnity against loss, agreed to carry through in his own name and oh his own means of credit, accounting to his customer for the profits, if any, and holding him responsible for the loss; and that the title to the stocks was never, in any sense, in the supposed pledgor. But five of the judges concurred with the chief judge in his views of the legal relations of the parties in the transaction, and in the final disposition of the case in pursuance of those views {MarMam v, Jaudon, 41 JST. T. E., 235, 241, 242, 246-258). The discussion of the question of pawns or pledges, in the last two cases considered, was important, in order to determine the rights of the parties, which depended much upon the decision of the question. The distinction between a pledge and some other securities has not been regarded as of much moment, nor has it often been sharply defined ; but it is, in frequent cases, of great importance. It is of every day's occurrence to give personal pro- perty, and especially choses in action, as promissory notes and stocks in incorporated companies, to secure loans of money or debts. This may be regarded as a mortgage or as a pledge, according to the contract of the parties ; but the rights and obligations of the parties are quite different in the one case from the other. The reason is, that, in the case o:f a pledge, the property passes at once into the possession of the pledgee; while, in the other case, the property may remain in the possession of the mortgagor. Hence, 65 514 LAW OF PLEDGES. the matter of possession is oftentimes very important, in order to determine the question whether the transaction is a pledge or other- wise, for the purpose of ascertaining the legal rights and obligar tions of the parties. A pledge and a mortgage are securities of a similar nature, and, when applicable, the same rules will be applied in the interests of creditors ; but, as between themselves, very dif ferent rules are applied. What is sufficient evidence in the case of a pledge, may be gathered from a recent case before the Supreme Court of the State of New York. One Roche, a produce forward- ing and commission merchant, on applying to the plaintiffs to discount his promissory note, attached to such note, as collateral, a paper or receipt, signed by him, as follows : " Eeceived in store, for account of Messrs. Parshall & Shanzlia, subject to their order, the following named property, as security to my note, given this day, for fourteen hundred and eighty dollars, for twenty days from date, 55 tons fine middlings, @ $24 $1,320 00 10 " bran, @ $20 200 00 $1,520 00 (Signed) JOHN ROCHE." Roche then inlornied Parshall, one of the plaintiffs, that the property was in his warehouse. This was all that was said or done concerning the property named in the receipt, at that time ; and this was at the banking house of the plaintiffs. The plaintiffs received the note and receipt from Roche, and advanced him the avails of the note. The day before the note matured Eoehe absconded, and the day it did mature, between three and four o'clock in the afternoon, one of the plaintiffs went to the store of Roche- and found it in possession of Roche's clerk. He looked over the store, and then showed the receipt to the clerk, saying: " There is the paper that shows our right." Thereupon the clerk handed him the keys to the store. He locked up the store, taking the keys away with him, and about six o'clock the sheriff went to the store, found it locked, got a smith to open it, went in and made a levy, by' virtue of an attachment against Roche, on all the goods in the store, among which was a part of the bran and mid- dlings mentioned in the receipt. The question for the court was as between the plaintiff's and the sheriff, as to the effect of the transaction, TBE DELIVERT OF THE PLEDGE. 515 The court held: 1. That the receipt was not a chattel mortgage. 2. That the transaction, in its legal effect, did not constitute a pledge, the subject thereof not having been delivered ; and that, although the plaintiffs had, in a lawful manner, before a levy made thereon under the attachment, obtained the actual posses- sion of the property, they were not entitled to the right and pro- tection of lonafide pledgees; and, 3. That the possession of the storehouse, gained by the plaintiffs, with the consent of Eoche shortly before the property was levied on under such attachment, did not constitute a good delivery, as against the attaching creditor. Barker, J., delivered the opinion of the court, and said : " The plaintiffs insist that it is an instrument in the nature of a mort- gage, and if it is not that, then it is a pledge valid in law. * * * It is not a chattel mortgage; it contains no words of sale. * * * The next proposition presented and urged by the plain- tiffs' counsel. is that the transaction, in its legal effect, constituted a pledge, and that the plaintiffs having in a lawful manner secured the actual possession, prior to the sheriff's levy by attachment, they are entitled to all the rights and protection of a iona fide pledgee. All there is in the plaintiffs' case, upon which an argu- ment can be based, is in' this precise point. * * * In this ease there was not at the time of making the agreement, on the 13th of December, any manual or constructive delivery of the goods sought to be held as a pledge. The goods remaining in the very place where the owner stored and kept them, not even being viewed by the pledgee, and Eoche continued to keep open the store and transact business, as he did before the pledge, there can be no pretense that there was a symbolical delivery. If he had closed up the store and handed over the keys to the plaintiffs, there would have been such a delivery, * * * Did the pos- session of the storehouse, gained by the plaintiffs one hour before the levy, constitute a good delivery as against the creditol-s ? I think not. And hence I assume that they got possession of the storehouse with the assent of Eoche. * * * I think the reasons for holding that delay in filing a chattel mortgage makes it absolutely void as against creditors, though filed before judg- ment and execution, are applicable to a case of non-delivery of goods pledged, and refer to authorities hereinbefore cited on that pomt. A pledge and a mortgage are securities of a similar nature, and, where applicable, the same rules should be applied, ' N<5 516 LAW OF PLEDGES. class of securities known to the law can be so miich and so easily used in creating and keeping on foot secret and fraudulent agree- ments, if it be tolerated that a pledgee, as against the creditors of the pledgor, can delaj' the taking- of possession of the subject of the pledge until the same be procured by creditors with legal pro- cess. The interests of trade require that there should be an actual and continued change of possession of the goods, and such is the law " {ParahaU v. Egga/rt, 52 Ba/rh. R., 369, 371, 372, 374^376). It will be observed that the transaction in this case was held not to amount to a pledge as to the creditors of the pledgor ; not but that it might be a valid pledge as between the original parties to it. Doubtless, as to them, the transaction would be held to be a valid pledge from the moment the pledgee got possession of the property by the consent of the pledgor. The reasons for the strictness of the rule in regard to delivery do not apply with the same force 'as between the original parties to the transaction, as between the creditors of the pledgor and the pledgee. The deliv- ery need not be to the pawnee himself; a mere formal and tem- porary possession in the hands of a third person on the pawnee's account has been held to be a substantial compliance with the rule, and deemed sufficient. But the possession must be actually changed from the pawnor to the pawnee, or to some third person on his account. Delivery and possession are essential to a pledge, but the delivery may be symbolical, and the possession according to the nature of the thing pledged. And such delivery will be good as against a subsequent foreclosure (Nvoan v. Bowp, 8 GlarMs [/owa] R., 207). Although the pledge will not be complete until delivery of the thing pledged, yet it is not requisite that the delivery be siinultar neous with the agreement to pledge, or the incurring of the obli- gation for which the pledge is given to secure. That is to say, the money for which the pledge is made to secure, may be received by the pledgor one day and the contract of pledge be completed on the next, although there are some English decisions which would seem to indicate a different position. But, in the language of one of the judges of the New York Court of Appeals " to say, in such a case, that the advance is made on the faith of the promise to pledge, and not on the faith of the pledge, is a nicety of reining, far too nice for the ordinary, common-sense dealings of business meft " {Gariniyright v, Wilmerdm^, 24 iT. T, R., 521, 533, 534). THU DELIVEBT OF TBB PLEDGE. 517 Undoubtedly, if the time between the loan and taking possession of the property agreed to be pledged for its security be such as to throw doubt on the transaction, such as with connecting circum- stances to excite suspicions that the advance was really a loan with- out security, and the pledging the goods an after-thought, then, the transaction is not within the protection of the law relating to pledges. But, in the language of the same learned judge already quoted, " it surely will not do to hold, as a rule of law, that a man on receiving the money cannot go around the corner to sign an order for the delivery of the goods, without changing the nature of his contract and depriving the delivery of its agreed character of a pledge." In the State of Massachusetts, manufacturers of cloth agreed to give A. security for a debt, and for that purpose authorized one of their workmen to select and hold a number of pieces of cloth for the use of A. The workman afterward, at A.'s instance, selected and removed the cloths to another room in the factory, and gave notice to the manufacturers and to others. The court held that this was a valid pledge {Sumner v. Hamlet, 12 Pick, i?., 76). The delivery must be actual or constructive and continued ; and under ordinary circumstances the redelivery of the thing pledged to the pawnor by the pawnee terminates the contract, and the pawnee loses his lien upon the property, though his claim or debt may continue against the pledgor. This is the general rule ; still, if the thing pledged be delivered back to the owner for a tem- porary purpose only, with an agreement to redeliver, the pawnee may recover it on the owner's refusing to restore it {Roberts v. Wyatt, 2 Taimt. B., 268). Where a captain had pledged his nautical instruments with the defendants, who afterward redelivered them to him under a written agreement that he might have the use of them for the voyage upon which he was then starting, the captain afterward pledged the instruments with the plaintiff. On the trial of an inter- pleader issue, the Court of Common Pleas, of England, gave judgment for the defendants. Tindall, C. J., in his opinion, said : " "We agree entirely with the doctrine laid down in Eyall v. RoUe (1 Aik., 165), that, in the case of a simple pawn of a personal chattel, if the creditor parts with the possession he loses his property in the pledge; but we 'think the delivery of the chronometer to Wilson, under the terms 518 JCiAW OF PLEDGES. of the agreement itself, was not a parting with the possession, but that the possession of Captain Wilson was still the possession of Messrs Capper. The terms of the agreement were that 'they would allow him the use of it for the voyage,' words that, gave him no interest in the ch;ronometer, hut only a license or per- mission to use it for a limited time, whilst he continued as their servant and employed it for the purpose of navigating their ship. During the continuance of the voyage, and when the voyage terminated, the possession of Captain Wilson was the pos- session of Messrs. Capper, -just as the possession of plate by a but- ler is the possession of the master ; and the delivery oVer to the plain ti£E was, ,as between Captain Wilson and the defendants, a wrongful act, just as the delivery over of the plate of the butler to a stranger would have heen, and could give no more right to the bailee than Captain Wilson had himself" {Eemes v. Capper, 5 £mg. N: G., 136 ; S. C, 6 Scotfs S., 877 ; S. C, 35 Ung. Ck R, 64, 56). There was no question of fraud made on the trial of this case, and the case seems to have been decided upon the same prin- ciples as though the litigation had been between the original parties. Upon argument before the court, in banc, it was contended that the transaction between Wilson and defendants was a mere pledge of the chronometer as a security for the repayment of the money advanced ; and that, by redelivering the instrument to Wilson, the defendants lost their lien, and were left to their action on the agree- ment. But the court were of the opinion that the facts did not bring the case within the principle that when .the party to whom a personal chattel is pledged parts with the possession of it, he loses aU right to his pledge. The case is important as indicating what may be regarded as possession of property by the pledgee under his contract of pledge. The rule is undoubted, as settled by all the authorities, that if the pawnee, except conditionally, parts with the possession of the pawn or pledge, he loses the benefit of his security ; and the case of Hemes v. Capper was not designed to conflict with this doctrine. By the common law, however, the pawnee may deliver the pawn into the hands of a stranger, without consideration, for safe custody, or indeed convey the same interest conditionally by way of pawn to another person, without destroy- ing or invalidating his guaranty. Where the pledgee of an omnibus delivered back the possession to the owner for a temporary purpose only, -and after the accom- TBE DELIVERY OF THE PLEDGE. 519 pliehment thereof the property was retarned to him, and the pledgor Buhsequently, and while the property was in the possession of the pledgee, mortgaged it to a third person, the Supreme Court of Illinois held that the mortgage lien thus acquired was subordi- nate to the title to the pledgee {Cooper v. Bay, 47 lU. B., 53). The Supreme Court of Maine lately held that in order that a pledgee may be able to keep good his security as a pledge, he must retain possession of the property. If he permits it to go back into the hands of the pledgor, and he sells it, the court holds that the vendee wiU acquire a good title thereto {Day v. Swift, 48 Maine B.', 368). And the same court held, in a much earlier case, that a delivery of personal property for security is not a transfer on con- dition, and does not constitute a mortgage thereof, but a pledge merely ; and that if the pledgee voluntarily relinquishes the pos- session of the property to the pledgor and does not regain it, his right thereto against third persons ceases {Easbman v. Avery, 10 Sh&p. B., 248). . And the same court reiterated the same doctrine at a later date, holding that a pledge is not perfect unless the chat- tel be delivered, nor does it subsist any longer than possession be retained by the pledgee {Beewxm v. La/wton, 37 Maine B., 548). The Supreme Court of North Carolina has frequently decided that property delivered as a pledge to secure a debt, and redelivered by the pawnee to the pawnor, is liable to be seized and sold under execution against the pawnor, or sold by him, and a good title passes (Ba/rrett v. Cole, 4 Jones' La/w B., 40 ; Smith v. Sasser, lb., 43). The same court has gone so far as to decide that by giv- ing up the thing pawned to the pawnor, though for a special pur- pose, the pawnee loses his lien, as between himself and the pawnor {Bodenhamner v. Newsmi, 5 Jones^ Lano B., 107). The Supreme Court of New Hampshire has decided that posses- sion is essential, not only to the creation, but also to the continu- ance of the lien created by a pledge, and that such lien wUl be forfeited by a voluntary delivery of the property to the pledgee. It was held, however, that possession and control of the property by the wrongfvl act of the pledgor, without-the assent of the pledgee, will not create a forfeiture of the lien, nor defeat his right of action to recover damages for an injury to, or a conversion of, the pledge ( Walcott v. Keith, 2 Foster's B., 196). The Supreme Court of Tennessee has held that a lien on a pledge may be waived by voluntary surrender of the pledge with 520 liAW OF PLEDGES. intent to abandon the lien, or by agreeing that it may be attached at the suit of a third person, but not by the pledgee's attachment to be made on the property pledged to enforce his lien and as a mode of sale {Arendale ^'Morgan, 5 Sneed's £., 703). The doctrine of the Superior Court of the city of New York, as laid down over twenty years ago, when the bench of that court was graced by as able judges as ever sat upon any bench, would seem to be decisive upon this subject. The court held, in con- formity with the general rule, that the essence of the contract of pledge is that there shall be an actual dplivery of the thing to the pledgee, and tihe common-law rule was recognized that as a gene- ral proposition the positive delivery back of the possession of the thing with the consent of the pledgee terminates his title. . But the court decided that the delivery of the pledge to the pledgor, for a temporary purpose, as agent or special bailee for the pledgee, does not impair the title or possession of the latter, as between the parties, nor even as to third persons. {Hays v. Riddle, 1 Sandf. B., 248 ; and vide Jones v. JBal4win, 12 ^Pipk. B., 316). This, doubtless, is a correct view of the question, and may be regarded as of quite general a,pplication. The subject may be touched upon incidentally in a subsequent chapter. CHAPTEK XL. THE PEKSON OF THE PAWNOE OE PLEDGOE — THE POWEE OF MIN0E8, MAEEIED WOMEN, FAOTOES AND OTHEE AGENTS TO MAKE A PLEDGE OB PAWN. It has been intimated in a previous chapter tnat any person, baying a general capacity to contract, may enter into the engage- ment in respect to a pawn or pledge. Persons under disabilities are affected by the lack of capacity in this as in other cases of contract. Lunatics, and i^on compotes mentis from age, debility or otherwise, are wholly unable to make a valid pledge or receive one. Minors are not entirely disqualified from making contracts; they are sometime^ absolutely bound by their contracts, but their contracts are generally voidable, and probably this would be. the rule in all cases in respect to pledges or pawns, but their voida- ble contracts are only to be avoided upon their own election, WBO MAT MAKM A PLEDGE. 521 At tlie common law, married women are incapable of making or receiving a pledge, as they may not enter into a personal obliga- tion of any kind. But by the statutes of many of the States, femes covert are made capable of binding themselves by contract in certain cases, and disposing of their personal property ; and in these cases they are qualified to make or receive a pledge the same as a/eme sole. In respect to pledges by persons under legal age, they may be affirmed or disaffirmed in the same manner and under the same circumstances that the contracts of infants for the sale of their chattels may be affirmed or avoided. Perhaps there is nothing pequliar in this con'tract to make it an exception to the general rule. Persons incompetent to enter into, the contract, for themselves (aS; infants and married women), may be agents for othersj pro- vided tiiey have the maturity and mental qualifications to enable them to. do business of -this nature. A married woman may act as the agent of her- husband, and as such, with his consent, biijd himby her contract or qther act ; or she may act as the agent, of another in a contract with her own husband, although it, is noC clear that she can act as the agent of a third person against the express dissent of her husband {Story on Agency, § 7)., But a married woman or minor, capable of doing business as an agent in 1 other matters, may act as the agent of another, in the matter of a pledge. A person non compfls mentis, who is, nevertheless, apparently of sound mind, and not known by the other contracting paxty to be otherwise, if he enters into a contract for the purchase or pawn of property, which is fair and hona fide,, and which is, executed and completed; and the property, the subject-matter of the contract, has been paid for and fully enjoyed, and cannot be restored so as to put the parties, in stoi^w ^MOj, such contract cannot afterward be set aside {MoUon v. Gamroux, 4 Ex. R., 17). There may be cases in which the pawneei will lose his right to the pawn or pledge, even, though the pawnor be a perso,n under no disability, An instance of this kind was supposed to be where it was held ,that a faetor or agent who jpfo%e«? the goods of his prin^ cipal, muBt,^wrea/acie, be taken to have acted in excess of his authority, and, therefore,, the principal was held not bound by his agent's acts, u-jdess; the. pledging was made under the eoipress autho- rity of the principal. The usjial employment of a factor being ic 66 522 li^W 01 PLEDGES. mil, it has been repeatedly held that he cannot pledge the goods intrusted to him ; and that the mere circumstance of a principal drawing bills on his factor, to whom goods were consigned, to be provided for out of the proceeds of such goods, would not autho- rize the factor to pledge them for the purpose of raising money, to meet such bills. On this ground, where a factor had become bank- rupt, and a person to whom he had pawned goods sold them, the principal recovered the entire proceeds of the sale in an action for money had and received, though the factor had appropriated part of the money advanced by the pawnee or pledgee to the payment of one of the bills drawn by the principal or his agent, the pawnor. There are several English cases holding this doctrine, although it was observed by Lord EUenborough, in the decision of one case, that it was a hard doctrine when the pawnee was told that the pledgor of the goods had no authority to pledge them, being a mere factor for sale, and yet he declared that, since the case of Paterson v. Task, that doctrine has never been overturned {Pick- ering V. Busk, 15 EasGs P., 38). A factor, though clothed with an apparent ownership of the goods, has no power to pledge the property consigned to him for sale. And this rule has been applied even where advances had been made on a bill of lading in the factor's favor, by a person who did not know that he was not the owner of the goods. Where goods were consigned on the joint account of the con- signors and consignee, and a bill of lading was sent to deliver the goods to the consignee or his assigns, who afterward indorsed and delivered the bill of lading to the defendants, upon condition of their making an advance to them on it, which they failed to do, but claimed to retain it as a security for prior advances, the Eng- lish Court of King's Bench held that such indorsement and delivery of the bill of lading did not divest the consignor's right, to stop the goods in transitu, upon the insolvency of the con- signee, who had not paid for them. And the doctrine was declared that a factor cunnot pledge the goods of his principal by indorse- ment and delivery of the biU of lading, any more than by the delivery of the goods themselves, though the indorsers knew not that he was factor. Lord EUenborough, C. J., in his opinion, said : " BTow, this was a direct pledge of the bill of lading, and not intended by the par- ties as a sale. A bill of lading, indeed, shall pass the property WBO MAT MAKE A PLEDGE. 523 upon a honafide indorsement and delivery, where it is intended so to operate, in the same manner as a direct delivery of the goods themselves would do, if so intended. But it cannot operate further. Ifow, if the factor had been in possession of the goods themselves, and had purported to sell them to the defendants hona fide, the property would have passed by the delivery ; but not if he had meant to pledge them, because it is beyond the scope of a factor's authority to pledge the goods of his principal. The symbol, then, shall not have a greater operation to enable him to defraud his principal than the actual possession of that which it represents. The principal who trusts his factor with the power to sell abso- lutely shall so far be bound by his act ; but the defendants shall not extend the factor's act beyond what was intended at the time ; and here only a pledge was intended, which he had no authority to make." Grose, J., said : " It is admitted that a factor cannot pledge the goods of his principal by delivery of the goods themselves ; then is it not inconsistent to say that he may do so by delivery of the bill of lading ? If his delivery of the goods themselves as a pledge will not .pass the property, much less shall his delivery of the bill of lading operate in that manner." Le Blanc, J., observed ; " I do not know that the trade of the country will suffer much risk by our holding that in a case where if the goods themselves had come into the factor's hands he could Tiot pledge them, he shall not be able to pledge them by means of the instrument which gives him authority to receive the goods. Some of the cases, indeed, state the opinion of the judges generally, that no indorsement of a bill of lading will pass the property, but that must be taken with reference to the circumstances of the case, and is not to be applied to the case of a i'iatoY pledging the goods of his principal, but to that of a vendor selling goods in which he has a property. The cases show, indeed, that where either vendee or factor intend to sell the goods, the indorsement of the bill of lading for that purpose will bind the vendor or principal. The case of Wright v. Comipbell appears, I think, to be that of a sale ; for it was agreed that Scott, the indorser of the bill, should sell the goods. But at least we may say of it, -that it is not an authority for holding that a factor vaaj pledge the bill of lading, though he could not pledge the goods themselves. And our now determin- ing that a factor cannot make such a pledge will not break in at 524 LA W OF PLEDGES. all upon the doctrine of Lickharrow v. Mason^ that the indorse- ment of a bill of lading upon the sale of the goods will pass the property to a bona fide indorsee, the property being iiitended to pass by such indorsement " {Newson v. Thorton, 6 Eas^s R., Ifjt The common-law doctrine, that the possession of a factor or broker does not authorize him to pledge the property, is clear and well settled. As before intimated, the English authorities are uniform upon the subject, and the doctrine has been frequently recognized by the American courts. It was said in an early case in the State of New York, that although a factor cannot pledge the goods of his principal as his own, yet he may deliver them to a third person as security, with notice of his lien, and as his assent to keep possession for him in order to preserve that lien {Urqvi hart V. Mclver, 4 Jolms. B., 103). And it has been repeatedly decided in Massachusetts that a factor has no right to pledge the goods intrusted to him {NeweU v. Pratt, 5 Gush. ^.,111 ; Kinder V. Shano^ 2 Mass. R., 398 ; Jarms v. JRogers, 15 »J., 389 ; amd Hide Odiorne v. Maxey-, 13 *5., 178). And the Circuit Court of the United States for the district of Massachusetts decided' that a factor could not pledge the goods of his principal for his own debt ; and if he does, that the principal may, after a demand and refusal, maintain trover for them against the pawnee {Van Arwrmge v. Peahody, 1 Mason's R., MO). The courts of the State of South Carolina have recognized the same doctrine, holding that a consignee or factor cannot pledge the goods of his principal for his own debt; although it was declared that a sub-agent might have a lien upon the goodfr for advances made by him (Bowie v. Na/pier, 1 MoGord^» B., 1). And in an early case in the State of Pennsylvania it was held that no custom for factors to pledge the goods of their principals could be pleaded (Newbold v. Wright:, 4 BoaMs B.<, 195 ; and vide Laussatt v. lAppineott, 6 S&rg. de BaiMs B., 385). And the Supreme Court of Alabama held, so late as 1853, that a factor or commission merchant is not authorized by law to pledge the goods of his principal for his own use, and that his pledgee can acquire no title to them, as against the principal, whether he dealt with the factor in ignorance of his title or not ; that the principal, in case of such attempted pledge, may bring trover against the factor and his pledgee, or either of them, at his elec- tion. It was, however, declared that the factor is estopped by his WHO MAT MAKE A PLUDOK 525 own tortious acts, and that he cannot take advantage of the viola- tion of his duty or authority to set aside the contract. And it was further 'held that a subsequent purchaser of the factor acquire? no better title than the factor himself had, and cannot recover the goods from the pledgee, although the sale was made within the scope of the factor's authority {Bott v. MoCoy, 20 Ala. R., 578). This is the common-law doctrine upon the subject ; but the rule has been changed by statute in England, and in many of the American States. By the present statute of England, the taking of goods or bills of lading in pledge from the consignee thereof is rendered lawfnl, but the consignee cannot thereby give any better or greater right to the goods than he himself possessed (4 Stalmte of Geo. IV, ch. 83, a/mended % stabwte 6 Geo. IV, ch. 94, mnmonh/ called the Factors' Act, amd also amended by statute 5 and 6 Vict., ch. 39). Under these statutes the factor has power to pledge the property consigned to him to the extent of the interest which he has in the goods, which is a right to be indemnified against the biUs he has accepted, and nothing more ( Vide Fletcher v. Heath, 1 Mam,, cfe Ry. R., 335). And the court have held that the right of the fac- tor, under the statute, to pledge the goods of his principal depends on the question whether, on the face of the whole account between them, the principal is indebted to the factor. Therefore, where a factor kept both a joint and separate account with his principal, and upon the two accounts was indebted to him, but on the sepa- rate account against which the draft was drawn the balance was in the factor's favor, it was held that the factor had no right to pledge, and that the pledgee could not retain the goods against the principal, even though the principal, for some time after notice of the pledge, forbore to make any demand upon the pledgee, unless it could be shown that the effect of such forbearance had been to alter the position of the principal for the better, or of the pledgee for the worse {Robertson v. Kensington, 5 Mam,, cfe Ry. R., 381). And in another case, where the pledge was by a factor for an ante- cedent debt, the court held that the defendants, being the pawnees, could not hold the proceeds against the real owner, but that, in estimating the damages, they were entitled to credit for any bal- ance due from the owner to the factor {Taylor v. Freeman, 1 Mood. & Mai. R., 453). Under the English statute a pledge by a pawnor, who is known 526 LAW OF PLEDGES. to have received the goods or documents as the agent of the owner for the purpose of sale, will be perfectly valid. In order to vitiate such a transaction, it is not sufficient that the owner should have transmitted the articles simply with directions to sell, and that this was known to the pawnee, but there must have been a prohibition of pledging by the owner, and notice of it to, or mdla fides on the part of, the pawnee making the advance. Mere suspicion, oi a slight suspicion, wiU not take away the protection of the statute, indeed, it has been declared that no suspicion will afEect the trans- action. If there is not mala fides, there is an end of the case. The evidence for the jury, where there is no evidence of direct communication, is, whether the circumstances were such that a reasonable man and a man of business, applying his understanding to them, would hoiow that the goods were not the property of the pledgor. If so, the pledgees are not entitled to retain {Navulr shaw v: Brownrigg, 1 Sim. N. S. R., 573 ; 8. C, 2 Le G., M. c& Q. R., 441 ; Evans v. Freemam., 1 Mood. (& Mai. R., 10). "Where A. pledged goods with B., a broker, who repledged them to C, to secure advances of which, unkno',vn to C, A. was to have the benefit, it was held that A. had no equity to restrain C. from selling immediately on B.'s default. A person holding bills for the purpose of getting them discounted has no power to pledge them, or to mix them with bills of other customers and pledge the whole in a mass to secure a loan to himself {Mwynes v. Foster, 4 Tyr- wMtt's R., 653). The pawnor who claims the benefit of the statute must have acted bona fide, and without corrupt agreement or understanding with the pledging factor. Therefore, where a plaintiff had con- signed goods to his agent, who was liable, together with the defend- ant, on a bill of exchange which had become due, obtained from the defendant £300 to take up the bUl, and at the same time depos- ited with him some of the plaintiff's goods, the judge told the jury that if they thought the transaction, was only a circuitous mode of paying the bill on which the defendant was liable, it was not within the protection of the act. The jury found for the plaintiff, and the Court of Exchequer unanimously upheld the ruling {Zea/royd V. Robinson, 12 Mees. di Welsh. R., 745). But when there are no mala fides, the principal may be bound by the acts of his agent, even when acting under an authority defective in form. As when B. authorized R., by power of attor WBO MAT MAKE A PLEDGE. 527 ney, to borrow money and grant a mortgage, E. employed, with leave, a sub-agent, who got the money from D., on producing tbe power of attorney and a declaration signed by B. The power of attorney was invalid, and R. failed to account to B. The court held that B. was estopped from setting this up as against D., and was bound by the acts of E., for the borrowing was not upon condition of the mortgage being valid {Dewysson v. Botha, 2 L. T., JSf. S., 126). And the rule is as applicable in cases of persons making pledges as in other matters, that, where authority to an agent is general, it will be construed liberally, but according to the usual course of business in such matters ; when it is given by parol and is ambiguous, it is to be construed according to the course of trade in such matters ; and when it is unexpressed, it is to be ascertained by investigating the course of dealing pursued by the several par- ties to the transactions {Pale v. Leash, 28 Beav. R., 562). Where bankers advanced money in the way of their business and lonafde, as security of goods deposited with them, to Sydney Linnet, by agreement with or at the request of John Linnet, and John being afterward entrusted by Sydney, as agent of the plain- tiff, with jewels, which he deposited with the bankers as security for past advances to Sydney, and for further advances to be made to Sydney on John's request, and that John should receive back the goods first pledged, the court held that the case was within the factor's act (5 and 6 Viot., ch. 39), and that proof given by plain- tiff of his agent's fraud would not take it out of the meaning of the statute [Sheppwrd v. Union Bank of London, ^ L.T., ISF. S. Ex. R., 757). But one partner of a firm cannot legally deposit in pledge shares of capital stock belonging to the firm to the bank to secure the pay- ment of money advanced to him individually, if the bank is cogni- zant of all the facts. And where one member of a firm deposited shares on his own private account, the court held that this did not give the bank the right to retain such shares as security for a debt due from him jointly with other members of his firm (Ex ])arte McKenna, m re MorUmer, 7 Jwr. N. S., 588 ; 8. G., i L. T. N. S., 164). And as modus et conventio vinount legem, so they will also override any custom to which they are repugnant, as where a cus- tomer deposited a deed of conveyance with his bankers, giving at the same time a memorandum, pledging one of the properties as security for a specific sum, and also for his general balance, it was held that as the deposit of the deed was for the special purpose of 528 LJiW OF PLEDGES. giving a security on one property only, the bankers could claim no general lien, by the custom of bankers, on the properties ( Wylde V. Radford, 33 Z. J., ch. 51; S. C, 9 Jwr.j N. S., 1169). But perhaps these statements are not as pertinent to the discussion of the question of the person of the pawnor or pledgor as to some other aspect of the subject of pawns and pledges. Similar legisla- tion to the English, in respect to the power of factors to pledge property in their possession, has taken place in several of tlie American States ; and in all cases where the question is regulated by statute, the statute must be consulted for the rules governing the subject. In this coTinection the question is examined solely in its relations to the person of the pawnor or pledgor; In subse- quent pages, pledges by factors will be considered in other of its phases in connection with the subject of pawns or pledges in its more general features. Upon this subject the statute of 'Eem York provides that every person in whose name any merchandise shall be shipped shall be deemed the true owner thereof, so far as to entitle the consignee of such merchandise to a lien thereon for any money advanced, or negotiable security given, by such consignee, to or for the use of the person in whose name such shipment shall have been made ; and for any money or negotiable security received by the person in whose name such shipment shall have been made, to or for the use of such consignee ; provided, however, that the lien shall not exist when the consignee shall have notice, by the bill of lading or otherwise, at or before the advancing of any money or security by him, or at or before the receiving of such money or security by the person in whose name the shipment shall have been made, that such person is not the actual and 'bona fide owner thereof. The statute further provides that every factor or other agent intrusted with the possession of any bill of lading, custom-house permit, or warehouse keeper's receipt for the delivery of any siicli merchandise, and every such factor or agent not having the docu- mentary evidence of title, who shall be intrusted with the posses- sion of any merchandise for the purpose of sale, or as security tbv any advances to be made or obtained thereon, shall be deemed to be the true owner thereof, so far as to give validity to any contract made by such agent with any other person, for the sale or disposi- tion of the whole or any part of such merchandise, for any money advanced, or negotiable instrument or other obligation in writing WMO MAT MAKE A PLEDGE. 529 given by Biich other person upon the faith thereof. But it is decliwed that every person who shall accept or take any such mer- chandise in deposit from any such agent, as a security for any antecedent debt or demand, shall not acquire thereby or enforce any right or interest in or to such merchandise or document, other than was possessed or might have been enforced by such agent at the time of such deposit. In all cases the true owner of any merchandise so deposited may demand and be entitled to the possession of the same, upon repay- ment of the money advanced, or on restoration of the security given, on the deposit of such merchandise, and upon satisfying any lien that may exist thereon in favor of the agent who deposited the same (Laws o/1830, oh. 179, 4 Stat, at La/rge, 461, 462). Under this statute it has been held that a person making advances to a factor upon property in his own possession, for the purpose of sale, will not be protected by the provisions of the sta- tute ; provided he had knowledge at the time of the advances that the factor was not the owner of the goods. The court referred to the commoti-law rule, that a factor co.uld not pledge the goods so as even to transfer his lien to the pledgee, and then decided that the provisions of the statute, taken in connection with the previous law upon the subject, evidently protected pledgees who had advanced their money or given their negotiable note or acceptance or other written obligation, upon the faith or belief of the fact that the person with whom they dealt was the real owner of the pro- perty. It was thought that any other construction of the statute would authorize the agent or factor to commit a fraud upon his principal, with the connivance of the purchaser or pledgor, who had notice of the iiduciary character of the vendor or pledgor. And it was further declared tha;t the statute of New York does not, like the English statute, authorize the agent or factor to pledge the goods of his principal, to the extent of his own lien, to persons who are aware of his fiduciary character, and without any authority for that purpose from his principal {Stevens v. Wilson, 3 Denio's JR., 472). But even under the British statute it has been held that a 'mere liability of the agent or factor, upon acceptances for his principal, is not suiBcient to give such agent or factor a lien which will autho- rize him to pledge the goods to a third person, without the consent of the principal. In two important cases, especially, th? factor 67 ■ 530 LAW OF PLEDGES. was under acceptances for his principal at the time he pledged the goods for advances thereon, but which acceptances the principal afterward duly paid or provided for. And it was held that the pledgee could not hold the goods to the amount of the acceptances for which the factor was liable at the time the goods were pledged but which he was not afterward compelled to pay {Fletcher v. Heath, 1 Bwrn. <& Cress. R., 51T ; Blcmdy Y.Allan, jjawson a/nd LloyWs Mercantile Cases, 22). This is a distinction important to be borne in mind, even in cases where parties deal with reference to the protection of the statute. A simple trustee has no power to pledge the property of the cestui que trust as a security for his own personal debt or obliga- tion, nor ordinarily to secure the payment for advances in favor of the cestui que trust himself. And if such trustee should thus. pledge the trust property to a person having knowledge of the trust, the transaction would be void. In a late case decided by the Supreme Judiciar Court of Massachusetts, it was held that one holding stock as trustee Yiw prima facie no right to pledge it to secure his own debt growing out of a transaction independent of the trust. And it was declared that if a certificate of stock issued in the name of " A. B., trustee," is pledged by him to release his own debt, the pledgee is, by the terms of the certificate, put on inquiry as to the character and limitations of the trust ; and if he accepts the pledge without inquiry, he does so at his peril. Foster, J., delivered the opinion of the court, and on this point said : " It cannot possibly be material whether the manual delivery of the certificates was by Mellen or by Carter himself Unless the word ' trustee ' may be regarded as mere descri/ptio jpersonm, and rejected as a nullity, there was plain and actual notice of the existence of a trust of some description. A trust, as to personalty or choses in action, need not be expressed in writing, but may be established by parol. And that the mere use of the word ' trustee,' in the assignment of a mortgage and note, imports the existence of a trust, and gives notice thereof to all into whose hands the instrument comes, has been expressly decided by this court {Stur- tevant v. Jaques, 14 Allen, 523 ; see, also, Bancroft v. Cousen, 13 Allen, 50 ; and Trull v. Trull, lb., 407). It is insisted, on behalf of the defendants, that even if there was actual notice of the existence of a trust, there was no notice of its character, and that the trust might have been such as to authorise th^ transfer which WHO MAY MAKE A PLEDGE. 531 was made by Carter. But, in our opinion, the simple answer to this position is that, where one known to be a trustee is found pledging that which is known to be trust property, to secure a debt due from a firm of which he is a member, the act is one prima fade unauthorized and unlawful, and it is the duty of him who takes such security to ascertain whether the trustee has a right to give it. The appropriation of corporate stock held in trust as col- lateral security for the trustee's own debt, or a debt which he owes jointly with others, is a transaction so far beyond the ordinary Bcope of a trustee's authority and out of the common course of business, as to be, in itself, a suspicious circumstance, imposing .upon the creditor the duty of inquiry. This would hardly be con- troverted in a case where the stock was held by ' A. B., trustee for C. D.' But the effect of the word ' trustee,' alo'ne, is the same. It means trustee for some one whose name is not disclosed ; and there is no greater reason for assuming that a trustee is authorized to pledge for his own debt the property of an unnamed cestui que trust, than the property of one whose name is known. In either ease it is highly improbable that the right to do so exists. The apparent difference between the two springs from the erroneous assumption that the word 'trustee,' alone, has no meaning or legal effect. " Inasmuch as such an act of pledging property is prima fade unlawful, there would be little hardship in imposing on the party who takes the security, not only the duty of inquiry, but the bur- den of ascertaining the actual facts at his peril" (Shaw y. Spencer, 100 Mass. R., 382, 389, 390). This case was very ably argued and carefully considered by the court, and is important as settling, beyond controversy, the doc- trine that the pledging of trust property by the trustee, for the security of his own debt or obligation, is unlawful, and also as throwing light upon the doctrine of constructive notice, in such a case, to the pledgee. Substantially the same doctrine was incidentally recognized in the decision of a case before the Circuit Court of the United States for the district of N"ew Jersey {Vide Martin v. The Somerville Water Power Compamy, 27 How. Pr. R., 161). It has been before suggested that a married woman may act as the agent of her husband, under a proper appointment, so that a pledge of her husband's property, by her, m^y be valid and binding on 532 LAW OF PLEDGES. the husband. But she has no such power simply from he* relations to her husband as his wife. "Where a debtor left the State on account of his pecuniary embarrassments, having given verbal directions to an individual to assist in the settlement of his affairs it was held by the Supreme Judicial Court of Massachusetts that such individual was not thereby authorized to pledge the debtor's property as security for a debt, and that neither had the wife of the debtor, who had the care of settling the debtor's affairs in his absence, any such authority to make the contract of pledge of her husband's property to secure his debts {BmeU^.Brown,^Pick. B., 178). The result is, that any person, competent in general to make a valid contract, is capable of pledging his own goods, chattels and personal effects , as a security of a debt or obligation ; and also any person duly authorized to act as the general agent of the owner of the property, or who has special authority to make the pledge, may pledge the property of his principal in good faith, so as to make it binding on the principal. The wife cannot ordinaply make a valid pledge of her own property or that of her husband, although she may act as the agent of her husband ; and, where the authority is general, or specially extended, to such business, she may make a valid pledge of his property ; and in those cases where the statute empowers a feme covert to hold personal property and deal with it as a feme sole, and the like, she may make a valid pledge of her own property the same as a feme sole. In respect to a fector, he has no power, at common law, to affect the property consigned to him by pledging it as a security or satisfaction for a debt of his own ; and it is of no consequence that the pledgee is ignorant of the factor's not being the owner. When goods are so pledged or disposed of, the principal may recover them back by action against the pawnee, without tendering to the factor what may be due to him, and without any tender to the pawnee of the sum for which the goods were pledged, or indeed without any demand of such goods, according to some of the cases ; and it is no excuse that the pawnee was wholly ignorant that he who held the goods held them as the mere agent or factor, unless the prin- cipal has held forth the factor or agent as the principal or owner of the goods so pledged. The common-law rule has been changed in some cases by statute, and in those instances the subject will be governed by the provisions of the statute ; some rules THE TITLE OF TUE PLEDGOR. 538 respecting which' have been hereinbefore referred to. And with respect to minors, their contracts of pledge of their own property are voidable at their own election ; and when they elect to avoid them, they must proceed as in other cases where they seek to dis- affirm their own acts. This is probably all that is necessary upon th6 iiMportaht subject of the person of the pawnor or pledgor. CHAPTEE XLI. THE TTTLE OF THE PAWNOR OB PLKDGOE, AND HIS PEOPEETT IN THE THING PLEDGED OE PAWNED HIS OBLIGATIONS AND DUTIES HT EESPEOT TO THE THING PAWNED OE PLEDGED. From the very nature of the contract of pawn or pledge, it is pite obvious that the pawnor does not lose all right to the pawn when he parts with the possession. Indeed, the real distinction between a pawn or pledge and a chattel mortgage is, that in a' pledge the legal property continues in the pawnor, and only a spe- cial property passes to the pawnee ; whereas, in a chattel mort- gage, the legal property is in the mortgagee, subject to being defeated by performance of the conditions of the instrument by the mortgagor. It was said by the chief justice of the Court of King's Bench of England, that " pledging does not make an abso- lute property, but is a delivery only tiU payment, and may be redemanded at any time upon payment of the money ; for it is delivered only as a security for the money lent ; and there is a difference between the mortgaging of land and pledging of goods ; for the mortgagee has an absolute interest in the land, whereas thd other has but a special property in the goods to detain them for his security." And in another place it is observed : " The delivery is nothing but the bare custody, and it is not like to a mortgage, for then he that has interest ought to have the money ; but in the case of a pledge it is only a special property in him that takes it, and the general property continues in the first owner," quod non fmt negatum {Ratdiff v. Dams, Cro. Jac, 245 ; S. C, Yelvertonh E., 178). This doctrine is well settled and often reicognized by the courts {Vide Oortebyou v. Lwnsin^, 2 Gm. Gas, 200; Bwrrow'y. Pih ed., 135). CHAPTEE XLII. THE EIGHTS OF THE PAWNOR OK PLEDGOE IN EE8PECT TO THE PEO- PEETY PLEDGED THE PLEDGOe's EIGHT TO TEANSFEE HIS INTEREST IN THE THING PLEDGED HIS EIGHT TO EEDEEM THE ARTICLE PLEDGED — THE EXTINGUISHMENT OF THE CONTRACT OF PLEDGE. In respect to the rights of the pledgor of the property pledged, it may be affirmed, in the first place, that he may sell or assign his interest in the pawn ; and in such case the vendee or assignee will be substituted for the pledgor, and the pledgee will be obliged to allow him to redeem and to account with him for the pledge and its proceeds. If he refuses to recognize the rights of the vendee or assignee of the pledgor, an action at law will lie for damages, TBE BIOMti OF TBS PLEDGOR. 545 or a bill in equity will be sustained to compel a redemption and iKjcount {SUyi^ on Bailm., % 350). This doctrine is well settled by a large number of authorities. In the State of South Carolina, the coarts held, at an early day, that if the pawnor sell the property to a third person while it is in the pawnee's hands, and the pawnee refuse to give it up to. the vendee on being tendered the amount of the debt for which it was pledged, the vendee may maintain trover against him {Bat- cliff V. Yance, 2 Const. Ct. B., 239). And the same principle was recognized in an early case before the old Supreme Court of the State of New York; wherein it was held that, to warrant trover, the plaintiff must show a present right of possession in the chattel ; and if it appear to have been pledged by the plaintiff's vendor, before the sale, in order to secure a debt or dnty to^ a third person, the plaintiff cannot recover unless he show such debt or duty to have been discharged, or that the operation of the pledge has ceased in some other way ; obviouisly approving the doctrine, that it is competent for the pledgor to dispose of his general pro- perty in the thing pledged, when the vendee will stand iffl! the tracks of bis vendor before the sale, and must take the same measures to avail himself of the benefit of the residuary interest of the pledgor in the thing pledged {Bush y. Lyon, 9 Cow. B., 52). A comparatively late caise in the State of Kentucky illustrates the same doctrine. A. pledged to B.. certain bills of exchange for his indemnity, and afterward miortgaged the same bills of exehange, together with other property, to G. ; the court held that an assign- ment was not necessary to constitute a valid pledge, and that th© only interest transferred to the mortgagee was the surplus remain- ing .after B.'s claim was satisfied ; conceding, however, that it was competent for the pledgor to mortgage the articles pledged^ sub- ject to the rights of the pledgee {Sanders v. Daois), 13 B. Mon. R., 432). In an early case before the Supreme Jndicial Court of Massa- chusetts it was held, where a mare in: the stable of A., who had a lien for her keeping, was sold to B., and the vendor and B. wrote to inform A., of the sale, who thiereupott held himself ready to deliver her to B., that the sale was valid, even as against an attach- ment by the vendor's creditor {Trmsworth v. Moore, 9 Pick. B., 347). • Where a stranger comes into possession of the |)roperty pledged. 546 LAW OP PLEDGES. under a wrongM title from the pawnee, the owner has a right to consider the contract at an end for many purposes, and may there- fore recover against the stranger, and hold him liable for damages ( Vide Martini v. Coles, 1 Mcmle c& Seha. JR., 140). But where there is an injury or conversion to or of the article pledged, by a stranger, for which an action lies both by the pledgor and pledgee, a recovery by either of them will oust the other of his right to recover ; for there cannot be a double satisfaction. This is true ae a general rule. But Judge Story very properly suggests that it deserves consideration whether the owner can, by his recovery of the pledge itself, or of damages for the conversion of it, against a stranger, oust the pledgee of his security in the pledge or its pro- ceeds. And if the pledgee has recovered damages against a stran- ger only to the extent of his own lien, the learned judge suggests that it may further deserve consideration whether, upon suitable proofs, the owner may not also be entitled to recover for the sur- plus. However, he add§, .these are propounded merely as matters open to further inquiry ; but there would seem to be but little doubt as to the inclination of the learned authqr upon the subject, nor as to what will be the decision of the courts in respect to the matter whenever the question shall be properly presented {Story on Bail/m., § 352). It may be affirmed in the second place, in respect to the rights of the pledgor, that he may redeem the property pledged ; and inasmuch as he has never parted with the general title, he may at Imiy redeem, even though he has not strictly complied with the condition of his contract of pledge. And it was expressly held by the English Court of Chancery, at a very early day, that where no time is given or specified for the redemption of the article pledged^ the statute of limitations does not run against the pledgor, and he has time during life to redeem the property pledged, provided the pledgee has not in the meantime exercised his right to sell the pledge or foreclose the rights of the pledgor to redeem. The lord chancellor said : " It is something like the case of a remainder, man, expectant on an estate for life or years, to whom a right to enter or bring an ejectment is given by the forfeiture of the tenant for life or years, yet he is not bound to do so ; therefore, if he comes within his time after the remainder attached, it will be good ; nor can the statute of limitations be insisted on against him for pot coming within twenty years after his title accrued by forfeiture. THE BiaSTS OF THE PLEDGOR. 547 I will not say in general that there is a right to come into equity in every case to redeem pledged goods, yet there are cases where it may he " {Kemp v. Westbro'oh, 1 Yes. H., 278). And the American (lases are to the same purport. The late Chancellor Kent, the learned American commentator, many years ago laid down the rule that, where no time is fixed for redeeming a pledge, the pawnor may redeem at any time ; and further, that the right of redemption survives on the death of the pledgor to his legal repre- sentatives against the pawnee and his representatives ; declaring, however, that the pawnee may acquire absolute property in the pledge by requiring the pawnor to redeem and by his refusal {Cor- tdyou V. Lansing, 2 Game's Oases in Er., 200). And the Supreme Court of Mississippi, at an early day, recog- nized the same doctrine, holding that, where no time is mentioned, the pawnor has his lifetime to redeem in, unless the pawnee hasten the time by request ; but that if, after request by the pawnee, the pawnor neglect to redeem in a reasonable time, the pawnee may sell the pledge. (Perry v. OraJig, 3 Miss. R., 516). And Judge Story, referring to this subject, observes : " If the pawnee does not choose to exercise his acknowledged right to sell, he still retains the property as a pledge, and, upon a tender of the debt, he may at any time be compelled to restore it ; for prescription or the statute of limitations does not run against it. However, after a long lapse of time, if no claim for redemption is made, the right will be deemed extinguished, and the property will be held to belong absolutely to the pawnee. Under such circumstances, a court of equity will decline to entertain any suit for the purpose of a redemption. A like rule is adopted in the common law in cases of mortgages " {Story on Baihn., § 346, referring to Zockwood V. Ewen, 2 Ath. R., 303 ; Mathews on Premrryptim Evidence, 20, 331 ; Powdl on Mortgages, Coventry dh Rand's ed., Coventry's note, 401). After " a long lapse of time," the authorities declare ; and, as has been pertinently remarked, the term " a long lapse of time " is too uncertain to be of much practical value as a guide to pawnees who may wish to realize their security. And as the pawnee cannot be a purchaser, the long lapse of time referred to may not justify a sale of the property pledged without notice to the pledgor or his representatives. For without such notice, the pawnor does not .lose his right to redeem eyen after the "lapse of p. long time,'^ 548 LAW OF PLEDGES. unless at the time of making the contract of pledge the time was fixed or some act agreed upon, by the lapse or performance of which he was to be taken to have surrendered his right. The true rule upon the subject is doubtless laid down by Story, when he says : " The Koman law also has declared that prescription shall not run against the pawnee in respect to the pawnor, for the pawnee is always considered to hold his title as such until some other title supervenes. * Jfemmem sibi vpswrn, ccmsampossessionis muta/re posse.'' But, nevertheless, where the title of the pawnee has remained undisturbed for a great length of time, it seems that such an extraordinary prescription may be insisted on as a bar for the sake of the repose of titles founded on long possession. But where no time of redemption is fixed by the contract, then upon general principles of law the pawnor has his whole life to redeem, unless he is previously quickened, as he may be, by the pawnee, through the instrumentality of a court of equity, or by notice in pais to the party " {Story on Baihn., §§ 347, 348). With respect to the question whether the right of the pledgor to redeem the pledge survives in case of his death, there have been authorities both ways; some holding that the right to redeem expired with the pawnor's life; others deciding that, if the pawnor dies without redeeming the pledge, the right to redeem survives to his personal representatives. The better opinion seems to be, that the right survives in case of the death of the pawnor, and that the right may be enforced by his personal representatives ; and such is the current of the later authorities {Yide Demcmdray v. Mekdf, Free. Ch., 420 ; Ycmdersee v. Willis, 3 Bro. Cfh. R., 21). The pledgor does not, clearly, lose his right to redeem the pledge by the death of the pledgee ; in case of the death of the pledgee, the pledgor may redeem the pledge against his personal representatives {Com. Dig., tit. Mortgage, B). Upon this subject it is said, in Bacon's Abridgment :' " There is a great difference between a pawn and a mortgage of lands ; for if goods be pawned without mention of time for redemption, they may be redeemed after the death of the pawnbroker; * * * when goods are pawned, the pawnbroker hath but a qualified property; the absolute ownership is in the person that deposits them ; and this property cannot be extended beyond the intent for which it was created, and that is only for securing the money lent ; for should the property be thus extended, it would be to the injury of him THE BIGHTS OF THE PLEDGOR. 549 that has the absolute ownership. Now, the intent of the parties in not limiting a time of redemption was plainly in ease of the pledgor, and therefore the time of redemption must be during his life ; and he cannot be confined to the life of the pawnbroker, for that might fall more to tbe disadvantage of the person pledging than if a time had been limited ; and there are no absolute words to evidence such a rigorous construction, contrary to the design of the parties ; but if the pledgor doth not redeem during his own life, his executors cannot redeem, for then the words and intent both agree to make an absolute property to the pawnbroker" (Bog. Ah"., tit. Bailment, B). This is regarded, in the main, as trtiBtworthy authority ; but the last clause in the paragraph quoted is not generally followed at the present day. Where there is a specified time, by the contract, in which the redemption is to be made, the same authority lays down a different rule. He says : " But if time be set for the redemption of a pledge, and before the time the pledgor dies, his executors may redeem it, and it shall be assets in their hands ; for when there is a time lim- ited, then by the express words the party hath till the time appointed ; and the time appointed is indefinite, and not during the life of the pledgor, and, therefore, if he dies, his executors shall redeem; and, therefore, the death of either party cannot prejudice" {Boo. Abr., Ut. Bailmmt, B). A case was decided by Lord Hardwicke, in 1745, wherein he held that a deposit of chattels, as a pledge, upon condition not to sell them until failure of payment on a certain day, was a trans- action that might be affected by the statutes of limitation {Gage v. Bulkdey, Ridg. Gases Temp., Ha/rdnoicke, 278). But where there is no certain day for redemption, and the pawn remains with the pawnee, then, as before stated, the statute would not operate ; and yet, ui that case, evidence in support of the presumption that the pawnor had abandoned his right to the pawn might, nevertheless, be given. Judge Story observes that " the pledgor is not ordinarily barred of his right to redeem the pledge, so long as the pledgee may be presumed to hold it as a pledge. * * * If a very long period has elapsed, and the pledge has continued in the possession of the pledgee, it affords a presumption of the abandonment of it by the pledgor ; and if any presumption of an extinguishment of the debt 550 J^AW OF PLJEDGES. arises in such case, it is an extinguishment by receiving tlie pledge in satisfaction" {Story on Bailm., §362). The following case of considerable interest came before the Supreme Court of the State of Vermont, involving the right of a pawnor to redeem the article pawned: E., for himself and P., contracted with F. for the occupation of certain premises owned by F., and gave to him a written agreement to cut the hay on the premises, put it in a barn there, and that it should remain F.'s property ; but if E. should pay F. twelve dollars before October 1, then the hay was to become the property of E. The court held that the transaction was a pledge of the hay to secure the twelve dollars, and that E. and P. had a right to redeem until F. had proceeded in chancery to foreclose, or had sold the hay in the manner prescribed by law. The court further held that the assignee of F., who took the hay with notice that E. had some right to it, was put upon inquiry, and would have found, if he had inquired, that P. was jointly interested. Therefore, P. had a right peace- ably to take the hay from the assignee's possession, after tendering him what remained unpaid of the sum secured by the pledge (Tag- gAW OF PLEDGES. satisfying the pledgee's claim. And, further, if the goods com- prised within the bill of lading be pledged along, with other goods belonging to the pledgor himself, the vendee will have a right to have all the pledgor's own goods appropriated to the discharge of the pledgee's claim, before any of the goods comprised within the biir of lading pass. This doctrine was expressly laid down in a well considered English case. It appeared that L. & Com- pany had given bills for oil purchased of the plaintiffs, and had pledged the bills of lading with H. & Company, as security for further advances. The vendee's became bankrupt, and their bills were dishonored. At the time of the bankruptcy, H. & Company held, besides the bills of lading, goods of L. & Company to the value of £9,961 \s Id. The coui-t held that the plaintiffs who had given notice to stop in transilm, had a right to insist upon the proceeds of L. & Company's own goods being first applied to the discharge of H.'s lien, because the transfer of the property and right of possession to H. were in the nature of a pledge only. That being so, the plaintiff Westzinthus, by his attempted stoppage in transitu, acquired a right to the goods in equity, subject to H.'s lien thereon, as against L. & Company's assignees, and as the goods proved sufficient to satisfy the lien, the plaintiff received the entire proceeds of the oils he had sold to the bankrupts ( Westzinthus, In re., 5 Ba/rnw. & Adolph. R., 817). A still later case in England confirms this last case and recog- nizes the same doctrine, and shows that goods under such circum- stances cannot be retained as security for a general balance of account, but only for the specific advance made upon the secun'ty of the bill of lading. The consignor's remedy against a factor thus claiming a general balance, is not, it seems, by the last case, at law, but in equity {Spalding v. Reeding, 6 Beav. R., 376). But though a consignor of goods may stop them in transitu before they get into his consignee's liands, in case of the insol- vency of the consignee, yet if the consignee assign the bills of lading (whether by sale or pawn) to a third person for a valuable consideration, the right of the consignor, as against such assignee, is divested entirely or pro tanto, whether the indorsement be in blank or to a particular person, for the consignee of a bill of lading has such a property that he may assign it over {Lickharrow V. Mason, 3 T. R., 63 ; Eoam.s v. MarUett, 1 Ld. Raym. R., 271). An assignee acting malajide will stand in the same position, as RIGHTS Of TUB PLEDGEE. 567 to stoppage im, trwnsiiM, as his assignor had previously stood {Cum- ming v. Brown, 9 EasSs R., 514:, per Lord Ellenborough, G. J.). And a condition contained in or indorsed on tlie bill of lading, as that the goods are to be delivered, provided E. F. pay a certain debt, wUl bind every indorsee who takes it, and he will have no title to the goods unless the condition be performed {Barrow v. Coles,3Camp.Ii.,92). It has heen stated in a previous chapter that the pledgee has the right to repledge the goods he holds, and that the second pledgee would, upon such repledging, take the interest of the pledgor and hold the same, together with the possession of the pledge, until it was redeemed by the first pledgor. This doctrine, though broadly asserted by Story and others, had not been fully recognized in England, and perhaps not uniformly so in the American States, until the decision of an important case in the English Court of Queen's Bench in 1866, by which the right to repledge was fully established. An early English case had been often cited as an authority for this proposition, but that appears rather to justify the liberty to repledge, on the inference drawn by and stated in the reporter's marginal note, than to lay it down as a proposition already established by authority. The facts of the case decided in the Court of Queen's Bench, according to the construction put by the court upon the pleadings, were, that the plaintiff had deposited certain debentures with one Simpson, as security for the payment of a bill of exchange drawn and indorsed by the plaintiif, and discounted by Simpson as pawnee, upon an agreement that he should have " full power to sell, or otherwise dispose of" the debentures if the bill was not paid at maturity. These debentures Simpson pledged with the defendant Suckling ; and, as against the latter, it was assumed by the court that the pledge took place before the bill it was originally given to secure fell due, and was made also to secure a greater Slim than that represented by the said bill. Under these circum- stances the plaintiff sued the defendant, the sub-pledgee, in detinue. The defendant pleaded these facts, and to the plea the plaintiff demurred, bringing the question before the court whether this sub-pledge was or was not a lawful exercise of the pawnee's dominion over the pledge. The point seems to have been treated to a great extent as a new one, and was twice elaborately argued by very able counsel on both sides. The court took time to con 568 LAW Of FLEDGES. flider; and ultimately, by a majority, the case was decided in favor of the defendant, thus establishing the right of the pawnee to repledge. Mellor, J., in his opinion, said : " There is a well recognized •distinction between a lien and & pledge, as regards the powers of a person eiititled to a lien and the powers of the person who holds goods upon an assignment of deposit by way of pawn or pledge • for the due payment of money. In the case of simple lien there can be no ^ower of sale or disposition of the goods which is incon- sistent "with the reteDtion of the possession by the person entitled to the lien ; whereas, in the case of a pledge or pawn of goods, to secure the payment of money at a certain day, on default by the pawnor the pawnee may sell the goods deposited and realize the amount, and become a trustee, for the overplus, for the pawnor 5 or, even if no day of payment be named, he may, upon waiting a reasonable 'time, and taking the proper steps, realize his debt in like manner. * * * It appears, therefore, that there is a real distinction between a, deposit by way of pledge for securing the payment of money, and a fight to hold by way of lien to secure the same object. * * * It appears to me 'that considerable confusion has been introduced into this snbjecJt by the somewhat indiscriminate use of the words 'special property,' as alike applicable to the right of .personal retention in case of a Hen, and the actual interest in the goods created by the contract of pledge to secure the payment of money. In Legg V. Evans (6 M. <& W., 42), the nature of a lien is defined to be a ' personal right which cannot be parted with ; ' but the con- tract of pledge carries no implication that the security shall be made effectual to discharge the obligation.' In such case, the general properiry remains in the pawnor ; but the question is, as to the nature and extent of the interest, or special property, passing to the bailee in the two cases. * * * In a contract of pledge for securing the payment of money, we have seen that the pawnee may sell and transfer the thing pledged on condition brbken ; bnt what implied condition is there that the pledgee shall not in the meantime part with the possession thereof to the extent of his interest ? It liiay be that, upon a deposit by way of pledge, the express contract between the parties may operate so as to make a parting with the possession, even to the extent of his interest, before condition broken,' so essential a .violation of it as to revest the rigfit RIGSTS OF THE PLEDOME. 569 jf possession in the pawnor ; but in the absence of such terms, wliy are they to be implied? There may possibly be cases in wJiicli the very nature of the thing deposited might induce a jury to believe and find that it was deposited on the understanding that tlie possession should not be parted with ; but in the case before us we have only to deal with the agreement, which is stated in the plea. The object of the deposit is to secure the repayment of a, loan, and the effect is to create an interest and a right of property in the pawnee, to the extent of the loan, in the goods deposited ; but what is the authority for saying that until condition broken the pawnee has only a personal right to retain the goods in his own possession ? * * * I think that when the true distinction between the case of a deposit, by way of pledge, of goods, for securing the payment of money, and all cases of Hen, correctly so described, is considered, it will be seen that in the former there is no implication, in general, of a contract by the pledgee to retain the personal possession of the goods deposited ; and I think that, although he cannot confer upon any tliird person a better title or a greater interest than he possesses, yet, if nevertheless he does pledge the goods to a third person for a greater interest than he possesses, such an act does not wrmihilate the coniraot of pledge, between himself and the pawnor ; but that the transaction is simply inoperative as against the original pawnor, who, upon tender of thx sum secured immediately hecomes entitled to the possession of the goods, and can recover in an action for any special damages which he may have sustained by reason of the act in repledging the goods." iBlackbum, J., in his opinion, said: "I think that, both in prin- ciple and authority, a contract such as that stated in the plea, pledging goods as a security, and giving the pledgee power, in case of default to dispose of the pledge (when accompanied by an actual delivery of the thing), does give the pledgee something beyond a mere lien ; it creates in him a special property or interest in the thing. By the civil kwEueh a contract did so, though there was no actual delivery of possession ; but the right of hypotheca is not recognized %y the common law. Till possession is given, the intended pledgee has only a right of action on the contract, and no interest inthe thuig itself (Rowes v. JBall, 1 B. & C, 481 ; E. C. L., vol. 14). -I mention this because in the argument several authorities, which only.go to show that a delivery of possession is, 72 570 . LAW OF PLEDGES. aceordini^ to the English law, necessary for the creation of the spe- cial property of the pawnee, were cited as if they determined that possession was necessary for the continuance of that property. * * * In England there are strong authorities that the contract of pledge, when perfected by delivery of possession, creates an inte- rest in the pledge, which interest may be assigned. * * * Now, I think that the sub-pledging of goods held in security for money, before the money is due, is not in general so inconsistent with the contract as to amount to a renunciation of that contract. There may be cases in which the pledgor has a special personal confi- dence in the pawnee, and therefore stipulates that the pledge shall be kept by him alone, but no such terms are stated here ; and I do not think that any such term is implied by law. In general, all tliat the pledgor requires is the personal contract of the pledgee, that on bringing the money the pawn shall be given up to him, and that in the meantime the pledgee shall be responsible for due care being taken for its safe custody. This may very well be done, though there has been a sub-pledge." Mellor, J., read the judgment of Cockbum, C. J., who said : "1 think it unnecessary to the decision in the present case to determine whether a party, with whom ah article has been pledged as a security for the payment 'of money, has a right to transfer his interest in the thing pledged (subject to the right of redemption in the pawnor) to a third party. I should certainly hesitate to lay doMTi the affirma- tive of that proposition. Such a right in the pawnee seems quite inconsistent with the undoubted right of the pledgor to have the thing pledged returned to him immediately on the tender of the amount for which the pledge was given. In some instances it may well be inferred from the nature of the thing pledged, as in the case of a valuable work of art, that the pawnor, though perfectly willing that the article should be intrusted to the custody of the pawnee, would not have parted .with it on the terms that it sliould be passed on to others and committed to the custody of strangers. " It is not, however, necessary to decide this question in the pre- sent case. The question here is, whether the transfer of the pledge is not only a breach of the contract on the part of the pawnee, but operates to put an end to the contract altogether, so as to entitle the pawnor to have back the thing pledged, without pay- ment of the debt. I am of opinion that the transfer of the pledge does not put an end to the contract, but amounts only to a R10BT8 OF THE PLEDGEE. 571 breach of contract, upon which the owner may bring an action, — for nominal damages, if he lias sustained no substantial damage ; for. substantial damages, if the thing pledged is damaged in the jiaiids of the third party, or the owner is prejudiced by delay in having the thing delivered to him on tendering the amount for which it was pledged. We are not dealing with a case of lien, which is merely the right to retain possession of the cliattel, and whioli right is immediately lost on the possession being parted with, unless to a person who may be considered as the agent of tlie party having the lien, for the purpose of its custody. In the contract of pledge, the pawnor invests the pawnee with much more than the mere right of possession. He invests him with a right to deal with the thing pledged as his own, if the debt be not paid and the thing redeemed at the appointed time. "It seems to me that the contract continues in force, and with it the special property created by it, until the thing pledged is redeemed or sold at the time specified. The pawnor cannot treat the contract as at an end until he has done that which alone enables him to divest the pawnee of the inchoate right of property in the thing pledged which the contract has conferred on him." Mr. Justice Shee differed from his learned brethren, assuming, on the facts set out in the pleadings, that Simpson, the original pawnee, had put it out of his power to apply the debentures, by sale or otherwise, in discharge of the plaintiff's liability on his bill of exchange, in accordance with his contract. His lordshii? regarded the position, that the pawnee had a power over the pawn so extensive as that claimed on his behalf, as a proposition fur. which there would be no authority whatever but- for a case decided by the English Court of Common Pleas, to which he referred, but which he argued was not really an authority for the proposition. The definitions of a pawn, given by Sir William Jones and other authorities, including Judge StoJ j, were deemed by the learned justice to exclude the idea that the pawnee could place the pawn out of the pawnor's power, and out of his own power, to redeem it by payment of the amount given to him as security. "Pawnees, like factors, have an absolute right of possession, as against all the world but their principals, and against them to the extent of their security. This gives them a right, under certain circumstances, to sell, but none at all to pledge ; for that is to put the goods out of their own power,- and, except by the factor's acts, to leave pawnees 572 LAW Of PEEDGES. from them defenceless against the suit -oi the xe^ owners." In great measure the judgment of the eminent dissentient member of the court rested upon the basis that though the pawnee has " a real right " ovjus in re, a right of possession until default made, hg has no right of sale until after defignori acceptwm,- is the 616 LAW OF PLEDGES. language {Dig., lih. 50, tit. 17, I. 23). Sed uli utriwque uHUtaa vertitur, ut in empto, ui in locato, ut in dote, ut in pignore, ut'in sooiatate, et dolus et culpa prmstatur, is another passage from the same Digest (Dig., lib. 13, tit. 6, 1. 5, § 2, Ih., tit. 7, 1. 13, 14). Sx igitur, quae diligens paterfamiMas in sida rebus prcsstwre solet, a cimditore exiguntur, is still another pas sage from the same great work {Dig., Uh. 13, Ut. 7, 1. 14). And a fourth passage may be quoted : Quia pignus utriusgue gror tia datur, etc., placuit suffidre, si ad earn- rem custodiendam exacta/m dnMgentia/m adMbeat {Inst., hb. 3, tit. 15, § 4 ; Ayliffe, Pond. B, Ut. 1, p. 531). Judge Story says that the same rule of ordinary diligence is understood to be adopted in modern times in the principal countries of continental Europe and in Scotland, and it has the express sanction of Pothier and other writers of acknowledged authority {Story on Bailm., § 832, a/nd authorities cited). Sir John Holt, who is always quoted with respect, and from whom no English lawyer Tentures to dissent without extreme dif- fidence, has taken a comprehensive view of the whole subject of what is required of the bailee in respect to the property in his care, in his judgment in a celebrated case which is often cited, and upon the point under consideration h^ says : " As to the fourth sort of bailment, viz., vadium,, or a pawn, in this I show two things ; first, what property the pawnee has in the pawn or pledge ; and, secondly, for what neglect he shall render satisfaction. As to the first, he has a special property ; for the pawn is a secimng to the pawnee that he shall be repaid his debt, and to compel the pawnor to pay him. But if the pawn be such as it will be the worse for using, the pawnee cannot use it, as clothes, etc. ; but if it be such as will be never the worse, as if jewels for the purpose were pawned to a lady, she might use them. But then she must do it at her peril ; for, whereas, if she keeps them locked up in her cabinet, if her cabinet should be broke open and the jewels taken from thence, she would be excused ; if she wears them abroad, and is there robbed of them, she will be answerable. And the reason is, because the pawn is in the nature of a deposit, and, as such, is not liable to be used. And to this efiect is Ow., 123. But if the pawn be of such a nature as the pawnee is at any charge about the thing pawned, to maintain it, as a horse, cow, etc., then the pawnee may use the horse in a reasonable manner, or milk the OBUQATIONS OF THE PLSBQEE. 617 , etc., in recompense for the event. As to the second point, cton, 99, b, gives you the answer : Creditor, qvn,;pignus aooepit, Uigatur, et ad illam restituendamn, tenetwr ; et cum hujusmodi in pignus data sit utrvusque gratia, soilicet debitorig, quo lis ei fecunia crederetwr, et creditoris quo magis ei in tuto oreditum, sufficit ad ejus rei cusiodia/m diUgenUa/m exaetam,, Sbere, qua/m si praestierif, et rem casu a/ndserit, seourus esse sit, nee impediehi/r creditum petere. In effect, if a creditor es a pawn, he is bound to restore it upon the payment of the t ; but yet it is sufficient if the pawnee use true diligence, and svill be indemnified in so doing ; and notwithstanding the loss, he shall resort to the pawnor for his debt. Agreeable to this J9 Ass., 28, and Southcote's case. But, indeed, the reason en in Southcote's case is, because the pawnee has a special pro ty in the pawn. But that is not the reason of the case ; and re is another reason given for it in the Book of Assize, which ndeed the true reason of all these cases, that the law requires hing extraordinary of the pawnee ; but only that he shall use ordinary care for restoring the goods. But, indeed, if the Qey, for which the goods were pawned, be tendered to the race before they are lost, then the pawnee shall be answerable them ; because the pawnee, by detaining them after the tender the money, is a wrong-doerj and it is a wrongful detainer of the ids, and the special property of the pawnee is determined, d a man that keeps goods by wrong must be answerable for m at all events ; for the detaining of them by him is the reason the loss. Upon the same difference, as the law is in relation to ras, it will be found to stand in relation to goods found " {Coggs Berna/rd, 2 Id. Ban/m. B., 909, 915 et seq.). Tpon this point Sir William Jones observes : " As to the ;ree of diligence which the law requires from a paminee, I find self again obliged to dissent from Sir Edward Coke, with whose nion a similar liberty has before been taken in regard to a deposi- y; for that very learned man lays it down, that 'if goods be ivered to one as a gage or pledge, and they be stolen, he shall discharged, because Ae hath a property in them ; and, therefore, ought to keep them no otherwise than his own ' (1 Inst.j 89, a • iep., 83 b). I deny the first proposition, the reason and the elusion. Since the bailment, which is the subject of the pre. fc article, is beneficial to the pawnee by securing the payment 78 618 LAW OF PLEDOEH. of his debt, and to th.e pawnor by procuring him credit, the rule which natural reason prescribes, and which the wisdom of nations lias confirmed, makes it requisite for the person to 'whom the gage or pledge is bailed to take ordinary care of it ; and he must <;()nsequently be responsible for ordinary neglect. This is expressly holden by Bracton {Bract., 99) ; and when I rely on his authority, I am perfectly aware that be copied JusUniam, .aliriost word for word; and that Lord Holt, who makes considerar ble use of his treatise, observes, three or four times, ' that he was an old author ;' but although he had been a civilian, yet he was also a great common lawyer, and never, I believe, adopted the rules and expressions of the Homans, except when they coincided with the laws of Miglamd in his time ; he is certainly the best of our juridical classics ; and as to our ancient authors, if their doe- trine be not law, it must be left to mere historians and antiquari- ans ; but if it remains unimpeached by any later decision it is not only equally binding with the most recent law, but has the advantage of being matured and approved by the collected sagacity and experience of ages" {Jones on JBadhh., 86, 87). This doctrine will be found to be the recognized rule at the present day, as illustrated by the cases, a few of which may be referred to. When the pledgee of a note, after obtaining a judgment upon it, and taking out a fieri facias, which was returned unsatisfied, omits to sue out a capias ad satHsfaciendv/m, against the debtor, the Supreme Court of Louisiana held that he will not, in the absence of any proof of injury from such omission, or of any request by the pledgor to take out the latter process, be considered as having thereby rendered himself responsible for the amount of the note. It was also decided, in the same case, that where it becomes necessary for a pledgee, in the exercise of the diligence required of him, to employ an agent, on account of his particular profes- sion and skill, he will not be responsible for the neglect or mis- conduct of the latter, where reasonable care was shown in the choice of the agent, as to his skill and ability {Succession of JBUlegs- hurg, 1 Za. An. R., 340). This is undoubtedly a correct rule as to the liability of the pledgee for the acts of the agent or attorney he may employ in respect to the pledge, and it is very important to the safety of the pledgee. The general rule is declared to be, by the Supreme Court of OBLIGATIONS OF THE PLEDGES. 619 eorgia, that where a party receives a note as collateral security r a debt, without any special agreement, the party receiving eh note must use ordinary care and diligence in collecting it;, id if any loss should happen to the other party by reason of a ant of such care and diligence, the law will compel him to make )od the loss ; but if there is any special agreement between the irties, then they will be bound by such special agreement, and )t by the general rule {Lee v. Baldwin, 10 Geo. E., 208). In an early case before the present Supreme Court of the State ' New York, the fects were these : One Wilbur, being indebted the Blngston Bank, borrowed of the plaintiffs their notes, hich he left with the bank as collateral security for his indebted- !ss, with notice to the bank that they were mere accommodation )tes. He also left with the bank, as collateral security for the me debt, a note of one Swift, which was business paper. Sub- quently the bank discounted the Swift note for Wilbur, and )plied the avails toward Wilbur's debt. The Swift note not iiBg paid when due, it was sued by the bank, and an arrange- ent was made between the bank and the parties to that note, hereby the note was .discharged, and a bond taken in its place, he bond Was conditioned for the payment of a sum certain, at a ture day, but was given with a secret agreement that it should i satisfied if the bank should recover of the plaintiffs the debt ring by Wilbur. The bank did so recover of them ; then, on IB plaintiffs' requisition, assigned to them the claim against Swift, hat claim was unavailable to the plaintiffs, because the note of ffift had been discharged by taking the bond, and the bond was scharged by the subsequent act of the bank. The plaintiffs, iving paid their notes in ignorance of the arrangement as to the svift note, "brought their suit to recover of the bank the amount Te on the last mentioned note. The court held, 1st. That the ink held the claim of the Swift note primarily for their own curity, and next for the indemnity of the plaintiffs ; and that 16 bank had no right so to deal with it as to impair that indemnity. i. That having impaired the indemnity to which the plaintiffs ere entitled, by so treating the Swtft claim as to make it entirely lavailable to all parties, the bank was bound to account to the aintiffs for the amount of that claim {Chester v. The Kingston 'mlc, 17 Barb. B., 271). This case would seem to have been decided correctly, beyond 620 L-A.W OF PLED ass. reasonable doubt, but it was nevertheless taken to the court of last resort, and there very ably argued, and the judgment of the Supreme Court unanimously affirmed. The doctrine of the case, as decided in the Court of Appeals, appears to be, that where a creditor makes an agreement by which a security is rendered yalueless to a surety who is entitled to be subrogated in respect thereto, the surety who has paid the creditor, after a judgment obtained against him in ignorance of such agreement, is entitled to recover from the creditor the amount of the defeated security {Ghestev v. The Kingston Bamk, 16 N. Y. B., 336). The Supreme Court of the State of Alabama has declared the following doctrine : If a debtor deposits with his creditor, uncon- ditionally, notes against a third person as collateral security, the latter thereby acquires the control and direction of their collection^ and it becomes his duty to take all necessary measures to prevent the discharge of any of the parties thereto, and in such case notice to bring suit on them should be given to him. And if the credi- tor receives the notes under a special agreement, by which he is not to sue, but to collect in any other mode, he must, as to all persons without notice of the extent of his powers, be regarded as the general holder, and notice to sue may be given to him {Pickens v. Yarborough, 26 Ala. R., 417). And the same court held in another case that, under such circumstances, the pledgee is bound to the use of due diligence in the collection of a note so taken, and is responsible to his debtor for any damages caused by his laches ; but if the note is on an insolvent person, its retention for never so long a time wUl not authorize the inference of pay- ment of the original debt {Powell v. Hemry, 27 Ala. R., 612). The Supreme Court of California has laid down the rule that a pledge is a bailment which is reciprocally beneficial to both par- ties, and therefore the law requires of the pledgee the exercise of ordinary diligence in the custody and care of the goods pledged, and he is responsible' for ordinary care. And it appeared in the case before the court that the bailors agreed that the goods should be stored in a certain warehouse at their risk and expense ; it was held that their removal, by an agent of the bailees, though with- out their knowledge, made them liable for the safe keeping of the goods after their removal {St. Loshy v. Damidson, 6 Cal. R., 643). The Supreme Coiirt of Illinois recently made a decision which incidentally involved this point. It was held that a pledgee of 0BIAGATI0N8 OF TBE PLEDGEE. 621 stock is not bound to sell the pledge on a default, nor is he liable because it afterward depreciates; that the power to sell is his privilege only; to protect himself against a depreciation the pledgor should redeem (Rozel v. MoOlellcm, 48 III. B., 345). And the Supreme Court of Pennsylvania has held that where a creditor holds a chose in action as collateral security for the pay- ment of his debt, he is not bound to pursue its coUeotion ; and if lost, that it is the loss of the debtor {Smouse v. Bail, 1 Oranfs Oases, 397). The Supreme Court of Georgia holds that a creditor receiving a note as collateral security from his debtor and suing it in his own name does not therefore become surety for the maker, but is only bound to use due diligence in the collection {fJardm v. Jones, 23 Qeo. R., 175). But the Supreme Court of Tennessee has very properly decided that a creditor who takes from his debtor an assignment of claims in favor of his debtor against third parties as collateral security for his debt, to be applied to the payment of the same, is liable for any of those claims that are lost by reason of his Eegligence (Wa/rd v. Morgam, 5 SneecPs R., 79). The Supreme Court of Maine has recently decided that a bank is bound to take ordinary care only of United States bonds, which are pledged by the owner as collateral security for the payment of a note discounted by the bank {Jenkins v. The National Village Bank of Bowdovnham, 10 Am. Law Reg., N. 8., 598 ; S. C, 58 Maine R., 275). The Supreme Court of Pennsylvania has decided that where a creditor, holding collateral seciirity as a consideration for extension of time, accepts additional collaterals, which he agrees to prosecute to collection or insolvency, and to apply the proceeds as fast as col- lected to the extinguishment of the original debt, and to surrender and give up the same amount of the original collateral bonds, it is the duty of the debtor to demand the surrender of the bonds ; and that without a demand on the creditor or the offering him an opportunity to surrender the bonds, he is not liable to the debtor for any depreciation of the bonds during the time they remained m his possession after they might have been demanded ( WilUam- son V. McOlure, 37 Penn. R., 402). If a pawnee or other person having charge of the property of another so confoupds it with his ovm that it cannot be distin- guished, he must bear all the inconvenience of the confusion. If 622 i-AW oy PLBDass. he cannot distinguish and separate his own, he will lose it. And if damages are given to- the plaintiff for the loss of his property, the utmost value will be taken [Runt v. Ten Eych, 2 Johns. Gh. R., 62 ; Same ^prinovple, Brnggold v. Ringgold, 1 Hm,. de Gill's R., 11). Story lays jiown the rule in general terms that, in every case where the pledge has suffered any injury by the default of the pledgee, the owner is entitled to a recompense in proportion to the damages sustained by him. But, he adds, in estimating the damages, no compensation is to be made for any injury which has arisen by accident or from the natural decay of the pledge {Story on Bailm., § 351). It is the duty of the pawnee, as before stated, to return the pledge and its increments, if any, after the debt or other duty has been discharged (Isaack v. Clarke, 2 Bulst. R., 306). But this duty is by the common law extinguished when the pledge is lost by casualty or other unavoidable accident, or where it perishes through its own intrinsic defect, without the default of the pawnee. This doctrine was clearly stated by Lord Holt in the celebrated case before referred to {Coggs v. Berna/rdi, 2 Ld. Raym. R., 909). The same rule applies where the pawn is lost by robbery or by superior force, or even by theft, if the pawnee has exercised reason- able diligence. This was also Lord Holt's view of the law, and the doctrine seems to be fully established. Sir William Jones, how- ever, maintained that private theft is presumptive evidence of negligence, and that in case the pledge proves to have been stolen and the circumstances of the larceny are not shown to exculpate the pawnee from blame, he will be responsible for the loss. But in this he is probably in error. The true principle, supported by the authorities, seems to be that theft, p&rse, establishes neither responsibility nor the reverse in the bailee. If the theft is occa^ sioned by any negligence, the bailee is responsible ; if without any negligence, he is discharged. Ordinary diligence is not disproved, even presumptively, by mere theft; but the proper conclusion must be drawn from weighing all the circumstances of the particu. lar case {Story on Bailm., § 338). And this is the doctrine laid down by the learned commentator. Chancellor Kent, in his world- renowned Commentaries upon American Law (2 KenCs Com., ^ A:Q,pp. 580, 581, 4:th ed.). Sir "William Jones, on the authority of Mr. Justice Cottesmore, says : " Now, it has been proved that ' a OBLIGATIONS OF THE PLEDGEE. 623 lee cannot be considered as using ordinary diligence who suf- i the goods bailed to be taken by stealth out of his custody ;' I it follows that ' a pawnee shall not be discharged if the pawn simply stolen from him ;' but if he be forcibly robbed, of it without fault, his debt shall not be extinguished " {Jones on Bailin., . But the rule, as at present recognized, is, as before stated, in pact to the fact of theft being presumptive of neither negligence ' the reverse. \\x William Jones very properly advances the doctrine ; " If, eed, the thing pledged be taken ojpenly and 'violently through fa/ult of the pledgee, he shall be responsible for it ; and after ',nder and refusal of the money owed, which are equivalent to ual payment, the whole proj>6rty is instantln/ revested in the dgor, and he may, consequently, maintain an action of trover. is said, in a most useful work, that by such tender and refusal thing pawned ' ceases to be a pledge, and becomes a deposit.' But 5 must be an error of impression, for there can never be a deposit ;hout the owner's consent, and a depositary would be eharge- 6 only for gross negligence ; whereas the pawnee, whose special »perty is determined by the wrongful detainer, becomes liable, cdlpossiMe events, to make good the thing lost, or to relinquish Aeht" {Jones on Bailm., 91, 92). The learned author refers Buller's ISTisi Prius, which declares that in the case suggested the idge " becomes a deposit." But in the subsequent or later editions that work, the words, " and becomes a deposit," are omitted. [t may not be amiss to state, in tliis connection, that jurists have tinguished care or neglect by three different degrees, namely, m, ordinary and sli^ght / and the law on this head, which pre- ledin the ancient Roman empire, and still prevails in most ilized countries, constituting, as it were, a part of the law of tions, is substantially as follows : Gross neglect, lata culpa, or, as the Roman lawyers most accu- iely call it, dolo proxima, is, in practice, considered as equivalent dolus, or fraud itself; and consists, according to the best inter- sters, in the omission of that care which even inattentive and mghUess men never fail to take of their own property. This lit they justly hold a violation of good faith. Ordinary neglect, levis culpa, is the want of that diligence lich the generality of mankind use in their own concerns ; that of ordi/aa/ry care. 624 LAW OF PLEDGES. Slight neglect, levissima culpa, is the ormssion of that care which very attentive and vigilant persons take ofihei/rown goods • or, in other words, of very exact diligence. In contracts redproaally beneficial to loth parties, as of those of sale, hiring, pledging, partnership, and the contract implied in joint-property, such care is exacted as every prud&nt man com- monly takes of his own goods ; and, by consequence, the vendee, the hirer, the taker in pledge, the partner and the co-proprietor, are answerable for ordimary neglect {Jories on Bailm,., 24, 26). These principles were recognized in an early case before the • English courts, which was an action on a bond to account for money which hfid come to the defendant's hands as agent. The defend ant pleaded that he locked up the money in his master's warehouse and it was stolen from thence (not saying without default on his part). And it was adjudged that it was a good bar to the action, and a sufficient accounting within the condition of the bond ( Yere V. Smith, 1 Ventr. R., 121). And a case is mentioned in Fitzhar- ris's Abridgment, where goods were locked in a chest and left with the bailee and the owner kept the key, and the goods were stolen ; the bailee was held to be discharged {Fitzh. Ahr., %th ed., tit. Det. 59, amd Viner's Ahr., fit. Pawn). And in a more recent case, in the English Court of King's Bench, Lord Kenyon held that a bailee of goods kept for hire was not liable for a theft committed by his servants, though there were some prior suspicious circumstances impeaching their fidehty. His lordship said : " To support an action of this nature, positive neg- ligence must be proved. It has appeared in evidence that the goods were lodged in a place of security, and where things of much greater value were kept. This is all that is incumbent on the defendant to do ; and if such goods are stolen by the defend- ant's own servants, that is not a species of negligence of a descrip- tion to support this action, inasmuch .as he has taken as much care of them as of his own " {Finucane v. SmaU, 1 -Esp. N. P. B., 315). The reason of this rule is stated by Lord Holt to be that " the law requires nothing extraordinary of the bailee, but only that he shall use ordinary care in storing of the goods." Therefore, in each case of this nature the inquiry really, is, has the defendant used such ordinary care ? And it is incumbent on the plaintiff, before he can recover, to support his declaration by proper proofs ; OBLIGATIONS OF THE PLEDGHE. 625 it may be added that the onus proiandi as to negligence will in him ( Vide Deem v. Keate, 3 Camp. Jf. P. Oases, 4 ; Cooper 3wrton, Ih. 5 ; Ma/rsh v. Howe, 8 Bow. c& Ey. B., 223 ; Ha/r- V. Paekwood, 3 Tcmnt. B., 264). >ut there are authorities upon the point in. the American )ortg. The Supreme Court of Alabama has recently laid down rule that if a pledge is stolen, the pledgee is not absolutely le nor absolutely excusable. If the theft is occasioned by his ligence, he is responsible. If without any negligence, he is ihaiiged, being bound for ordinary care and answerable for ordi- ^ neglect {Petty v. Ovemall, 42 Ala. B., 145). !he Supreme Judicial Court of Massachusetts has held that a ositary for hire or reward is answerable only for ordinary leet. If he uses due care, and the property deposited is never- less stolen, he is excused {Foster v. Essex BwnTc, 17 Mass. B., ). And substantially the same doctrine was laid down in a i some time since decided by the Supreme Court of Indiana lapp V. Grayson, 2 Blackf. B., 130). 'he Supreme Court of Alabama, in a much earlier case than that Patty Y. Overall, held that warehousemen not chargeable with ligence are not answerable for goods intrusted to them in ease robbery, or where embezzled by their storekeeper or servant ; that the onus of showing negligence is on the owner {Moran Uayor, etc., of Motile, 1 Stew. B., 284). And precisely the e doctrine was laid down by the old Supreme Court of the ;e of New York. Sutherland, J., who gave the opinion of court in the case, said : " It appears to be well settled that a •ehouseman or depositary of goods for hire is responsible only ordinary care, and is not liable for loss arising from accident in he is not in default. * * * In Finvsam v. SmaU (1 . N. P. B. 315), it was held that if goods be bailed to be kept for i, if the compensation be for house^oom, and not a reward for and diligence, the bailee is only bound to take the same care 18 goods as of his own ; and if they be stolen or embezzled by his atit, without gross negligence on his part, he is not liable ; and onus of showing negligence seems to be upon the plaintiff, !ss there is a total default in delivering or accounting for the is " {Sohnddt v. Blood, 9 Wend. B., 268, 271). And in a much ier case, the same court held that one who receives goods for ird into his store, though standing upon a wharf, the goods tc 79 626 LAW OP VLEDOES. remain there for the purpose of being forwarded, subject to the bailor's order, is liable merely as a warehouseman, and that he is bound to exercise no more than ordinary care in preserving the goods. And it was further held that public storekeepers receiving and storing goods for hire are not liable to the same extent as com- mon carriers, nor are they bound to take better care of the goods than a prudent man would ordinarily take of his own property. And it was declared that where goods so received are, of them- selves, well secured, the mere circumstance of receiving goods of another sort into the same store, which invite thieves into the store, who set it on fire and consume the former goods, will not make the bailee liable, unless the receipt of the latter goods will probably produce such a consequence {Piatt v. Hihbard, 7 Cow. B., 497 ; and vide Foote v. Storrs, 2 JSaa'h. E., 326 ; Harrington V. Snyder, 3 i5., 380). These are cases arising under another spe- cies of bailment than that of a pledge, but the same rule would seem to apply so far as the care and diligence of the bailee are concerned. Upon this point Mr. Justice Story remarks : " By our law, a bailee is in many cases excusable where the loss is by theft ; but never where that theft is occasioned by gross negligence. So long ago as the reign of Edward III {Year Booh, 29, Liler Assisarum, 28), it was held that if a person bail his goods to keep, and they are stolen, the bailee is excused. The reasoning of the court in Coggs v. Bernard (2 Ld. Raym., 909) shows that the coiirt did not consider theft as ^prvma fade presumptive of negh- gence. In short, our law considers theft, like any other loss, to depend, for its validity as a defense, upon the particular circum- stances of the case, and to be governed i by the general nature of the bailment, and the responsibility attached thereto. It raises no presumption either way from the mere fact of theft. It neither imputes the theft to the neglect of the party, nor, on the other hand, exempts him from responsibility from that fact alone. But it decides upon all the circumstances of the case, and thence arrives at the conclusion that there has or there has not been a due degree of care used " (Story on BoaM,., § 39). And in a note in another part of his work he says : " It may, perhaps, after all, admit of doubt whether, as a general rule, theft was \ieemed even in the civil law as necessarily per se importing negligence, or presump- tion of negligence. The text of the Digest relied pn by Sir Wil- OBLIGATIONS OF THE FLBDGEE. 627 [iam Jones to establish it is that which makes a partner liable for a. loss by theft of a flock of sheep left with him ]by his partner to depasture. * * * Now, in the ease of a flock of sheep, it may be that there could scarcely be a loss by theft without some negli- gence, or even without gross negligence, where in other cases theft might be without any the slightest negligence. * ' * * There are many cases where theft may be committed, against which no reasonable diligence could guard the bailee. * * * Besides, in many cases, where the thing bailed is valued, the Eoman law presumed that the party took upon himself extraordinary risks" [Story on Baibn., § 334, note 2). Lord Holt says, in the case heretofore referred to: "If the bailee puts the horse lent into his stable and he is stolen from thence, the bailee is not answerable ; but if he leaves the stable doors open, and thieves steal the horse, he is chargeable, because the neglect gave the thieves occasion to steal the horse" {Coggs v. Bemwrd, 2" Id. Baym. B., 909, 912). These remarks of his lordship were made in respect to a gratuitous loan of the article stolen, but they are quite pertinent to the point in hand, and have been recognized as sound in cases of pledge ( Vide Clarfse v. ^(wn- shaw, 1 Govj'a B., 30). CHAPTEE XLYIII. DUTIES AND OBLIGATIONS OF THE PLEDGEE UPON THE TERMINATION OF THE PLEDGE — LIABILITY UPON REFUSAL OR NEGLECT TO RESTORE THE PLEDGE — PRINCIPLES GOVERNING THE QUESTION OF THE It hae been before remarked that the pledgee is bound to return the pledge and its increase, if any, after the debt or other duty has been discharged. If the pledge has been lost or destroyed through any of the various ways which will excuse the pledgee from restoring the pawn, this duty is extinguished. And the Roman law, which is followed by Pothier, required the pawnee, on the debt or duty being discharged for which the pawn was held, to make due proof of the accident or other matter which caused the loss, when that was claimed as a reason for failing to 628 LAW OF PLEDGES. make restitution of the pledge, and, f urthei', that he was unable to prevent it. Mr. Jnstiee StOi^ says that the common law does not differ from the Roman law in this respect, where a suit is brought for the restitution of the pawn after a due demand and refusal. In such a case, the demand and refusal would ordinarily be evidence of a tortious conversion of the pawn ; and it would then be incumbeht on the pawnee to give some evidence of a loss or casualty, or by superior foirce, independent of his own statement, unless, indeed, upon the demand and refusal, he should state the circumstances of the loss ; and then the whole statement must be taken together, and submitted to the jury, who would, under all the circumstances, decide whether it was a satisfactory account or not. But, if a suit should be brought against the pawnee for a negligent loss of the pawh, then it would be incumbent upon the plaintiff to sup- port the allegations of his jdeelaration by proper proofs, and the onus probandi, in respect to negligence, would be thrown on him. In sttch an action foi: a negligent loss, brought against the bailee, it seems that his acts and remarks, cotemporaneous with the loss, are adniissible tevidende in his favor, to establish the nature of the loss. These positions of the learned author are fortified by refer- ence to elementary writers and judicial authorities, both American and English, and they are doubtless correct {Story on Bailm., §339). In an action against a bailee without hire, brought before the old Supreme Court of the State of New York, the court held that, in such a case, the bailee was liable for gross negleet only ; but declared, nevertheless, that if, on dema/nd, he refuses or ormts to deliver the article received, he is answerable, unless he can show its loss without fault or negligence on his part. The article delivered in this case to the bailee was a sealed letter containing a $100 bank bill ; and it is possible that the rule was held a httle more stringently against the bailee, or rather that presumptions were indulged in a little more freely, than though the subject of the bailment had been of a different nature. The iTile, however, can be very correctly applied to the case of a pledge. The pre- sumptions, on demand and refusal, or neglect, perhaps might be the same in both cases {Beardslee v. Richardson, 11 Wend. R., 25). In an action brought in the Supreme Court of Pennsylvania against a mandatory for loss of property bailed to him, it was held OBLIGAVlONa OF THE PLEDGEE. 629 lat his eonGomitant acts and declarations, immediately before and ter the loss, are admissible in evidence to disprove his negli- snce, but otherwise of his own testimony {Tomphins v. Salt- msh, 14 S&rg. <& Rawlis B., 2Y5). If the party who pledged 16 goods was not the owner of them, the pawnee may defend ■mself by showing that he has delivered over the goods to the lal owner, unless the pawnee has a special property, which he is ititled, imder the circumstances, to assert against the owner. The saeral rale in such cases, subject, however, to some exceptions, is lat of the Eoman law : Nemo phis jv/ris ad aUimi 1/ransferre )te3t, qua/m ifpse hdb&ret. The exceptions are founded upon the iblie policy of protecting hona fide purchasers, under peculiar roumstances. If the pawnee held the pledge, merely as a pledge, cm the owner, the second pawnee may discharge himself from ly obligation to the owner by delivering it up to his own pledgor ; any time before an oflfer to redeem by the owner. The pawnee makes himself responsible for all losses and acci- jntB, whenever he has done any act inconsistent with his duty, ' has refused to perform his duty. If, therefore, the pawnor lakes a tender of the whole of the debt for which the pawn is iven, and the pawnee refuses to receive' it, or to redeliver the ledge, the special property which he has in it is determined, and 3 is henceforth treated as a wrong-doer, and the pawn is at his lie risk. The same rule applies to all cases of a misuser or con- jrsion of the pawn by the pawnee. The rule, however, must be aderstood with the same qualifications as in other cases, that the me loss or accident would not otherwise have inevitably hap- jned ; for if it would and must have happened at all events, len, perhaps, he might not be liable for the loss. These state- lents are taken from Mr. Justice Story's work on Bailments, but i&y were extracted largely by him from the work of Pothier, the ninent French jurist and author, interspersed with an occasional iference to an Americap or English case pertinent to the subject ; id the clearness and general accuracy of the statements would !em to supersede the necessity of any attempt at improvement, id will justify their insertion here {Story on Bwilm., §§ 34:0, 341). Connected with this question of negligence in respect to the ^edge, Sir WiUiam Jones mentions a provision contained in the icient laws of the "Wisigoths, and in the capitularies of Gharle- lagne and Louis the Pious, by which a depositary of gold, silver 630 I'AW OF PLED&m. or valuable trinkets is made chargeable, if they are destroyed by fire, and his own goods perish not with them ; a circumstance which some other legislators have considered as conclusive evidence of gross neglect or fraud. He also mentions a provision in the north- ern code which he had not seen in that of any other nation, namely, that if precious things were deposited and stolen, time was given to search for the thief; and if he could not be found within the time limited, a moiety of the value was to be paid by the depositary to the owner, ut dam/nwm ex medio uterque susti- nent {Jones on Bail/m., 118). It hag been held by the Court of King's Bench of England that pawnees are not liable for loss or damage by fire, without proof of negligence ; and the same doctrine, doubtless, would be recog- nized in this • country, where no statute exists estabhshing a con- trary rule {Peers v. Sampson, 4 Dowl. & By. B., 636).' Some cases from the American Reports, bearing upon the lia- bilities of pledgees, may be referred to as giving light upon the subject. A late case before the Supreme Court of Connecticut exhibits the view which courts are apt to take upon these ques- ' tions. A bank held certain stocks as collateral security for the • plaintiff's indebtedness, with the right to sell them if the indebt- edness was not paid within a reasonable time, but with no arrange- ment as to the time, place or manner of sale. Some months after, the bank, without previous notice to the plaintiff, made a condi- tional sale of the stocks, which was to take effect if the plaintiff did not, on that day, pay or satisfactorily secure his indebtedness, and gave notice, that unless his indebtedness was paid or satisfac- torily secured on that day, the stocks would be sold. The plaintiff remonstrated, and asked to be allowed one day more for the pur- pose, and, in fact, the next day procured the means of paying the greater part of the debt, but the bank closed the sale on that day. The court held that the conduct of the bank was unreasonable and wrongful, and that it was liable to the plaintiff in damages {Ste- vens V. Hurlbut Bank, 31 Cown,. B., 146). The Supreme Court of Ohio has held in a recent case that, where a party receives a note as collateral security for an existing debt, without any special agreement, he is bound to use ordinary dili- gence in collecting it, and is responsible for any loss which may hap- pen to the other party by reason of a want of such diligence. But where a debtor assigns to his creditor as collateral security anego- OBLIGATIONS OF THE PLEDGEE. 63]. tiable promissory note of a third party, before maturity, and by the terms of the assignment waives demand and notice of non-pay- ment, such creditor, acting in good faith, is not bound to demand or insist upon payment of the security before its maturity, though he may show at the trial that payment would be made, if insisted on [Bdberts v. Thompson, 14 Ohio B. JV. S., 1) . The Supreme Court of Alabama has lately held that, where a party who has transferred a note by indorsment as collateral secu- rity pays the original debt, the pledgee is bound to redeliver the note to the pledgor, upon demand ; and if he refuse to do so, he is liable in an action of trover by the pledgee for the conversion of the same {Overstr'eet v. JVunn's Executors, 36 Ala. B., 649). While slavery was legalized as an institution in the southern States, the Supreme Court of Mississippi held that the hirer of a slave is not responsible for him if he runs away, unless by the fault or negligence of the hirer. And it was declared that what will constitute reasonable diligence and care must depend upon the circumstances of each case {Perry v. Bea/rdslee, 10 Miss. B., 568). The rule is the same, so far as this point is involved, in case of a pledge o'f similar j)roperty. The Superior Court of the city of New York has decided that, upon tender of the amount due for which a pledge is held as secu- rity, the lien of the pledge is destroyed, and the pledgee is bound to return the same to the pledgor on demand [Haskms v. Kelly, 1, Rob. B., 160), And in another case it was held by the same court that pledgees of stock to secure the payment of a promissory note, given on a loan of money, are liable for a wrongful conversion of such stock, if not redelivered on demand and tender, although . they may be excused by a stipulation in such note from returning the identical certificate of stock delivered on such pledge, where they set up, as the only groand for their refusal to deliver, a lien for money due by a third person {Hardy v. Peyton, 1 Roh. R; 261). The case, however, was taken to the Court of Appeals of the State, where the judgment seems to have been reversed, unless the plaintiff remitted $911 ; if so, then the judgment was affirmed without costs of appeal. The case is not reported in the Court of Appeals, but it is presumed that the prmci/ple of the decision in the court below remains undisturbed ( Yide 41 N. Y. B., 619, Mfe). In the late Court of Chancery of the State of. New Tork a case 632 LAW OF PLEDGES. was decided in which it appeared that D. pledged stock to J. for a loan, and G. gave his due bill as collateral. The stock was equal in value to the debt, when D. tendered the amount to J., who refused to receive it, but retained the stock, which became worth- less. The court held that these facts discharged Gr. from his obli- gation to J. ; and the rule was distinctly laid down that if the amount of the debt for which a pledge is made is duly tendered to the pledgee and refused by him, and it sinks in value in his hands, he must bear or respond for the loss {Griswold v. Jackson, 2 Mw. Ch. R., 461). The Supreme Court of California has recently decided that, where a debtor has paid a debt which was secured by a pledge, the pledgee must account for all income, profits and advantages derived, by him from the bailment {Svmsaher v. Stwrgis, 29 GaL. R., 142). And the same court held that where a party, who has pawned arti- cles under a contract to pay greater interest on the money borrowed than the law allows, tenders to the pawnbroker the principal and lawful interest thereon, he is entitled to the possession of his pro- perty, although the statute, establishing the rate of interest in such cases. Only provides a penalty for, and does not prohibit, the charging of more than lawful interest {Jackson v. Shand, 29 Cal. R., '267). The Supreme Judicial Court of Massachusetts, not many years since, made a decision of more or less interest upon this point. It was decided that where stock is held as collateral; security for the payment of a note^ and the agreement to reconvey it, upon the payment of the note, recites that the loss on a certain house " is bound " by the transfer of the stock, and the holder of the note has foreclosed a mortgage on such house, the value of which is less than the amount of the mortgage and interest, he is not boimd to return the stock until he has been paid for the loss on the mortgage, including interest, and without being charged, with any rent which he did not receive. And it was further held to be immaterial that the maker of the note subsequently guaran- teed the defendant in a new contract against loss on the house, and the parties at that time computed the amount thereof. And, still further, that the holder of the note in such case is not guilty of laches in not selling the house, when the maker authorized him to rent it until it was sold, when the sale was deferred by the lat- ter's consent, and he never requested that a sale should be made {Bartlett v. Johnson, 9 Allen^s R., 530). OBLIGATIONS OF TBE PLEDGEE. 633 Dp&n the debt or obligatian, to secure which a pledge is made, ng paid or discharged, it is the duty of the pledgee to redeliver the ne to the pledgor on a proper demand to do so ; and care should taken that the pledge be delivered to the proper person. The jsent Supreme Court of the State of New York has held, in a le where the principle would apply in a case of pledging, that an action of trover against the bailee of a chattel it is no defense show a delivery of the chattel to a person not authorized to seive it. It results, from the very nature of a bailee's contract, it if he fails to return the article to the rightful owner, but livers it to another person not authorized to receive it, he is ilty of a conversion. And it was held, when the parties to a itract of bailment reside in the same city, that the property )uld be returned to the bailor, at his residence, unless there is ne agreement to the eoatrary. The fact tliat, at the time of ! bailment, the property was stored by the bailor with a third rson, was held not to authorize the bailee to return the property such third person after he bad ceased to be the agent of the [der. It was declared, however, that when property, bailed, nains in the possession of the bailee, trover cannot be main- ned against him by the bailor until the article bailed has been manded, and the bailee has neglected or refused to return it. it if the property has been delivered by the bailee to a third rson, such delivery amounting to a conversion, it was held that )of of demand and refusal is not necessary. This was the case of a loan of a chattel, to be returned on (uest ; and the only difference, in this respect, between sucli a lE and an ordinary pledge is, that in the ease of the loan the lee might be bound to take the property to the bailor, while in it of a pledge, the pledgee need only redeliver the chattel to (pledgor, on demand, at the place where he may have it in store miay v. -Fcmning, 9 Barb. E., 176). Where no place was ■eed upon between- the pledgor and pledgee, or bailor and lee, as to the place where the property should be redelivered? I civil law provided tha* the bailee might restore the property the place from which he took it. But this rule has not been )pted in this country ; aud in any event the pledgee is liable le delivers the pledge to a person unauthorized to receive it, so t it is out of his power to deliver it to the proper person on uand. 80 634 LAW OF PLEDGES. A few years ago an interesting case was before the Court of Queen's Bench, of England, involving the question of the liability of the pledgee in respect to the -property pledged. Goods pledged with a pawnbroker were lost through a burglary on his premises, caused by his negligence. The owner laid a complaint before justices, under 40 Geo. Ill, ch. 99, § 14, against the pawnbroker for refusing, without reasonable cause, to deliver up the goods upon tender of the proper amount. The justices made an order that the pawnbroker, not having shown reasonable cause to their satisfac- tion to the contrary, should deliver up the goods, or, ia default, , compensate the owner. The court held, on a case stated, that the order was bad ; § 14, under which the order was made, in effect applying only to cases of willful refusal by a pawnbroker to deliver up goods actually in his possession ; and that the justices should have made an order under § 24, which empowers th^ to award compensation to the owner, if, "in the course of any proceedings" under the act, they shaU find that the goods were lost "through the default, neglect or willful misbehavior" of the pawnbroker ' {ShacMl^. West, 2 MUs and E. JR., 326). It will be observed that no question was made in this case as to the liability of the pawnbroker, upon the facts proved. The only question really made was one of practice under the English statute, which had nothing to do with the merits of the case, and is, therefore, not important here. The question of negligence may depend on the nature of the thing, bailed. In an early case in England, where the owner of a cartoon, painted on paper and pasted on canvas, deposited it with a gratuitous bailee, who kept it in a room next a stable, in which there was a well that had made it damp and foul, it was left to the jury whether this was gross neglect. They found this ques- tion for the plaintiff, with thirty pounds damages, and the court refused a new trial, because on a bare leaving a thing in another's custody the law raises a promise not grossly to neglect or abuse it' (Myttoon V. Cock, Stramgis R., 1099). In another more recent case in England, where the plaintiff had given £32 10«. to the defendant, a coffee-house keeper, in whose house he was staying, to keep safely for him without reward, and the money was stolen, together with a larger sum of the defendant's own money, the judge left it to the jury to say whether the defend- ant was guilty of gross negligence, and he told them that Ihe loss OBLIGATIONS OF TSB PLEDGEE. 635 the defendant's own money did not necessarily prove reasonable re. The jury found for the plaintiffj and the direction of the idge was upheld {Doorman y. Jenkins, 2 Adolph. cbEl. R., 256). These last two mentioned cases were those in which the defend- ts were grat/witous bailees ; but they shed light upon cases where e bailment is beneficial to both parties, as cases between pledgor d pledgee. In the last case, it was held no answer to the action at the defendant had exposed his own goods to the same peril as e plaintiff's, and, of course, it could not be expected that under nilar circumstances the same plea would protect a remunerarted ,wnee or pledgee. The evidence of negligence in the case of ShacTedl v. West (2 llis & K a., 326), was that the pawnbroker had left his luse, without any person in it, on the night of the burglary ; and jckbum, C. J., said that it was a s.tronger case to impute culpable 3hes on the part of the pawnee than the case of Healing v. Coir dl, to which he referred, where the question was whether leaving luable goods in the appellant's house during the night, without y person on the premises, was a careful dealing with the goods r the pawnbroker, in which case the judgment was against the ipellant. A bailee dealing negligently with goods entrusted to him does not areby necessarily lose his character of bailee, so as to be liable as r a conversion. To make such a conversion, there must be some pudiation by the defendant of the owner's right or some exer- ie of dominion over them by him inconsistent with siich right, pon- this principle, the removal of goods in transitu by a ship- ng agent to a warehouse for his own convenience was held by e English Court of Common Bench not to be an excess or breach duty which should render him liable in trover for the loss of e goods by an accidental fire {Heald v. Carey, 11 Com. Bench .,,9T7; S. a, 16 Jwr., 197; 21 S. J., HT. S. C. P., 97). But the bailee is always held to be liable where he has deter- tned the bailment by an active wrong, as by selling the goods iled, by misusing them, by treating them in a manner incon- itent with the bailment ; and, a fortiori, by destroying them, for e bail is thereby determined and the possessory title reverts to e bailor, so that the right of possession is sufficient, without hav- % actual possession ; and where the bailment is determined in any inner, trover will lie at the suit either of the pawnor or of a 636 L^W OF PLEDGES. 3)urchaser from him against the pawnee. These are points which are well settled, espedaily by adjudications in the English courts { Vide Cooper v. Willmatt, 1 Oom. Bench H., 672 ; Jfrnn v. Biitle ■Stan, 1 Ex. B., 152 ; Franklm v. iVeasfo, 13 Mees. <& Welsh. B., 481, 485 ; Sehoyn's Md Brim, 12th ed., 1340^ 1841). So, also, the law is well settled that if, on demand, the money or other thing necessary for the redemption of the pawn he ten ■dered to the pawnee and he re&ses to give it up, such demand, tender and refusal would ordinarily be evidence of a tortious con- version of the pawn, which is considered as being instantly reduced into the possession of the pawnor, who may therefore in such a case maintain trover for it. And it would be for the pawnee to give evidence of a loss by casualty or otiierwise. These points have been decided in cases already referred to, and others may be cited to the same import ( Vide BateUfe v. Damis, Cro. Jac, 244 ; S. O., YeU. B., 178 ; Isaac v. Clarlc, 2 Bids. B., 306). But when the action is for loss or damage, it has been before shown that the onus will be on the pawnor to show negligence on the part of the pawnee; and the question of negligence is always for the jury, provided there is any proper or sufficient evidence on the sub- ject {Doorman v. Jenkins, 2 Adol/ph. <6 El. B., 256). But the matter of the pledgor's remedy against the pledgee ia respect to the pledge wUl be more appropriately considered in a subsequent chapter. The editor of the Pawnbrokers' Gazette of London has fur- nished some opinions given by eminent counsel on the pawnee's liability for loss of or injury to the pawn, under particular circum- stances, which are inserted by Mr. Turner in a note in his little work on the Contract of Pawn ; the substance of which may be taken to conclude this chapter. The late Common-Sergeant, Newman Knowlys, in 1819, was asked his opinion in a case where a coat, which had been twenty months in pawn, was found, upon its redemption, to have been seriously injured by moth. The magistrate at Shadwell Police Court thought that the pawnbroker was liable, but consented to suspend his decision until the learned common-sergeant had been consulted. Mr. Knowlys said : " I am of opinion the pawnor must fail on the facts here stated. This case must be decided upon the ground of the right of the parties to recover. Supposing an action at OBLWATI&m OP 1BE PLWDOES. ggj J had been brought, and the same proof given by competent taesses, the great case of Goggs v. Bernard (in 2 Lord Ra/y- lad, 916), which is univergally acted wpcm, decides the case in or of the pawnbroker. Lord Holt, in delivering his judgment that case, mentions the different cases of bailment, and applies J law distinctly to each ; and in speaking of the fourth sort of ilment, viz., Vadium orpo/uon, he considers in the second place mhat Mglects the pawnee shall answer, and he says in that case '.lawregwres noihJmg extraordma/r'y qfthe pa/wnee, only that shall use an ofdinary coA'e for restoring the goods. The miee is not like the common carrier, an insurer at all events, jept for the act of God and the king's enemies ; if the pawnee js the same care respecting the goods pawned as men generally ;respecting their own property, he is not answerable for any mage or deterioration that the goods may undergo whilst under I care. If he has suffered his warehouse to be out of repair, i the goods have received damage by weather, that would be a fault, and he must answer for it ; or, if he leaves his doors and ndows open all night, and the goods are stolen, he must answer, it in this case the pledge has received damage from moth in the irse of twenty months' keeping, and I conceive that cannot be d to be a default. I happen to know by experience in my own oily, and in those of several of my friends, that after the utmost •e and attention toward that particular mischief, silks, furs and lolens have suffered considerable deterioration in less than a arter of the time here specified. The pawnee is not an insurer linst all possible loss or deterioration, as is clearly established the case cited. The words of the statute 39 and 40 Geo. Ill, 99, do not express any such obligation, and, when construed on legal principles applicable to the cases of pledge, do not, in ' opinion, render the pawnbroker liable in any case circum- nced like the present." The case was sent back to Mr. Common-Sergeant for reconsid- rtion, but he adhered to the view before given, saying : " I take that on the principle of the pawnee's having a qualified pro- rty in the goods, it is, that if he takes the same care of them as aan would take of his own goods, he is not only excused in a al loss, but can, even after a total loss, still maintain his action linst the pawnor for the money advanced even upon lost goods, le terms d/efmtlt andnegleet, used in the act of parliament, must 638 LAW OF PLEDGES. be construed seeundum subjectwm materwn, as the law tten bore upon it, and must be confined to such damage or loss by default or neglect as would have sustained an action against the pawnee by the pawnor at common law. Such action, upon the aBthority of Cdggs v. Bernard, could only be sustained upon proof of crassa negligentia, and wduld be defeated if it appeared that the pawnee had used the common and ordinary care that a man would use with his own concerns. So much for the law. If it shall be held that the pawnee, in all cases of woolen or silk or linen goods being' deposited with him, is to be at the trouble and expense of having them all daily or weekly unfolded and brushed, or otherwise dealt with, for fear the moth should either have deposited its eggs in it at the time they were brought in, or dur- ing 'their abiding in pawn, I apprehend it might very probably induce the pawnbroker to decline the taking in of goods of that description, and so the means of raising an occasional supply of money (so indispensable to the poor), would to that extent be cut off, which in my opinion is an argument in point of policy, in addition to what has been urged upon legal principles, in support of the opinion I have conceived on the subject. In the case of a large stock of woolen garments the pawnbroker would actually be obliged to become a scourer by trade as well as pawnbroker. If the defendant in the present case has kept his woolen clothes as fairly as the rest of the trade have done theirs, I cannot but con- ceive that he has done all that the law requires." On the same principle. Lord Campbell, when attorney-general, advised that where a pawnbroker, in answer to a summons for compensation, showed a loss by robbery, the plaintiff could not recover : " I am of opinion that the magistrates have no power under the act 39 and 40 Geo. Ill, ch. 99, to compel the pawnbroker to make satisfaction to the pawners of goods lost under the cir- cumstances stated. The action only applies where the pawnbroker does not show any reasonable cause for not returning the goods, and a reasonable cause is stown by the goods having been stolen " [without negligence on the part of the pawnee]. In a similar case, heard at Worship street in 1818, at the sugges- tion of the sitting magistrate the late Mr. Adolphus was asked for his opinion on this question of liability. The learned gentleman said : " I have bestowed much attention on this case, and have well considered all the authorities on the subject, not so much GBLIBATIONS OF THS PLED&EE. 639 because I felt any great difficulty about it on the first perusal, as out of respect to the worthy magistrate who does me the honor to believe that my opinion can assist in removing any doubt which exists in his mind. " Viewing the pawnbroker, first, in the light of a bailee at com- mon law,,! am clearly of opinion that, under all the circumstances above stated, he is not answerable to the pawnor for the goods which have been stolen by robbers. It is too loosely stated in 3ome books that if a man pledge goods and they are stolen, the bailee shall not answer for them, or that the bailee shall not, in such case, answer for them, if he took as much care of them as he did of his own goods. A man who takes in pavm for profit, has a bigher duty thrown upon him. The pawnee is answerable for all defects of care, diligence or negligence by which the property is lost ; and, therefore, if it was conveyed away by sleight, embezzled by a servant, or snatched from his hand, his counter or his vsdndow by a thief who came in suddenly, he would be answerable for it. But if it was taken from his person by robbery, or from his house by burglary, he would not be answerable ; and in the present case he is not answerable. Robbery or burglary can b,e no more prevented by him or by care taken, than those accidents by tempest, flood or fire, which are called- the acts of God, or those invasions of the enemy, or tumultuous risings of the people, which can only be restrained or impeded by the public, and not by individual force or foresight. This distinction, which governs this case, is recog- nized by all writers. Indeed, there is hardly a difference among them. (See'Bacon's Abridm., Gwillim's ed., Bailm. B., and notes ; the learned and ample opinion of Holt, C. J., in the case of Coggs V. Bernard [2 Lord Maym., 909], particularly at page 917, with the marginal notes and references by Mr. [afterwards Judge] Bay- ley. See, also, Jones on Bailments, p. 44, n., for the difference between private and forcible stealing, with the authorities ; also the same work, p. 75, for the general law on the subject.) If the law has varied in more recent times, it has rather been relaxed than strengthened against the bailee ; for where a man undertook, for hire, to keep the goods of another, and they were stolen by the bailee's own servant. Lord Kenyon held that an action against him Bould not be maintained, even where it was proved that he had been told that his servant was dishonest {Finucane v. Small, 1 Esp., 315)- "I come now to consider how the pawnbroker is affected by the 640 LAW OF PLEDGES. statute 39 and 40 Geo. Ill, ch. 99. In respect of his duty as bailee, I think it makes no alteration ; it only gives summary remedies in certain cases. The fourteenth section is made to govern cases where the pawnbroker, having possession of the pledge, or having parted with it within twelve months or fifteen months, under certain cir- cumstances, neglects or refuses to deliver it up to the pawnor, and for such neglect or refusal does not show reasonable cause to the satisfaction of a justice ; I say that the fourteenth clause governs those cases, because the twenty-fourth clause provides a remedy where pawns are embezzled or lost, or damaged through the default, neglect or willful misbehavior of the pawnbroker." Although the statute of 39 and 40 Geo. Ill, ch. 99, is referred to in these opinions, it will be observed that that statute has reference only to ihe proceedmgs to enforce the liability of the pledgee, and does not, in the least, affect the question of the pledgee's liability itself. It is obvious, therefore, that these opinions of the eminent English lawyers are just as suggestive in their application to the subject here as in Great Britain. These opinions are not authority, of course, because not jwUciall/y declared, and yet they are enti- tled to very great respect, on account of the conceded ability and distinction of the gentlemen who gave them. The law has, doubt- less, been correctly expounded by these learned counsel, in the mam / but their opinions are, nevertheless, open to criticism in two or three of the positions taken. In respect to the case of damage by moths, it would probably be requiring too much of the pawnee, as Mr. Knowlys suggests, that he should " be at the trouble and expense of having all pawns of goods, liable to be destroyed by moths, daily or weekly unfolded and brushed." Still the pawnee should be bound, in such a case, to resort to some of the known means, such, as using camphor or other drug which kills these troublesome insects, or, as most people know by experience, there would not be much left of any woolen garment or article of fur at the end of twelve months. It seems less than ordinary care to store goods of this nature, wi out taking any such precaution ; and it is, at least, as unreasonable for the pawnee so to store the goods, as it would be for the pawnor to require the pawnee to keep a staff of persons incessantly employed in unfolding and brushing them. The only defect in Mr. Knowlys' view, therefore, would seem to be that, in the particu- lar case before him, he does not require quite enough of the pawnee 0BLI&4TJQN$ OF TSM fJUW^DGEE. 64J And Mr. Adolphns certainly errs in the opposite direction when e says: "A man who takes ia pawn for profit has a higher duty irown upon him. The pawnee is answerable for all defects of ire, diligence or negligence by which the property is lost ; and, \erefore, if it was conveyed away by sleight, embezzled by a ser- ant, or snatched from his hand, his counter or his window by a lief who came in suddenly, he would be answerable for it ; but if ; were taken from his person by robbery or from his house by urglary, he would not be answerable ; and in the present case he 1 not lanswerable, for the cases there put are eases in which no egligence can be imputed to the pawnee, and in which, there- )re, he ought not to suffer." The mistake in this view of Mr. idolphus is in assuming that the _fdot of the loss of the property 1 any of the ways supposed is conclusive upon the, question of lia ility of the pawnee. The rule is that in all such cases the ques- ion still is one of negligence, to be settled by the circumstances of bieparticular case. The difficulty is not so much in stating the rule 8 in applying it. It is very easy to say that the pawnee is liable Dr gross negligence, but it is not at all easy to draw the line at rhich gross negligence begins. The solution of this nice and deli- ate problem is very properly left to the decision of the jury, who, 5 men of the world, and with a knowledge of business, are pecu- arly fitted to express an opinion. If they find that the pledge as been lost in the case before them through the fault of the ■ikdgee, he will be held responsible for it, however the loss ccurred ; but if, on the contrary, they find that the loss was not rom a want of proper and reasonable care and diligence on the art of the pledgee, he wiU be excused. The pledgee must in all ises abide the loss, where it occurred from any cause which a ireful and vigilant man could not have avoided. In addition to what has already been said, it may be added that 16 Superior Court of the city of New York has very recently ecided that if, to a demand for the return of loaned property, the >anee answers that he has used the property, and has obtained loan thereon (the property not having been lent for that purpose), lis is sufficient evidence of a conversion. And it was held in the ime ease that the measure of damages in ah action for the conver- on of property is its highest market value between the date of the aversion and the trial {lifavmcm v, Oaldwell, 2 Sweeny's R,, 212) 91 642 LAW' OF PLSDSES. OHAPTEE XLIX. EEMEDIES OF THE PLEDGOR T^ EESPECT TO THE PLEDGE — WHEN HH MAT BEDTG HIB ACTION OF TEOVEE OE EBPLEVIN — HIS ACTION IN EQUITT TO EEDEEM HIS ACTION WHEN THE PLEDGE 18 WrTHOUT LEGAL CONSIDEEATION. The rights, remedies, duties and obligations of the pledgee, in respect to the pledge, and the debt or obligation for which the debt was made, have been fully considered, and the rights of the pledgor in respect to the property pledged, have been heretofore dis- cussed. But it is necessary to dwell more directly upon the sub- ject of the remedies of the pledgor after the termination of the contract of pledge. Where the thing pledged is an ordinary chattel, such as a watch, a carriage, a horse, or the like, and the contract has been termi- nated by the payment or tender of the debt or obligation which the pledge was made to secure, or in any other. way than by the sale of the pledge, the pledgor has a remedy at law, on demand of the pledge, by an action of trover or replevin. And it has been held that the pawnor may sue a pawnee, through whose negligence the pawn has been injured or lost, in assumpsit, for breach of contract, for, in all cases of bailment, the promise is implied by law that the bailee was to use reasonable care {Hoss v. SUl, 2 Eng. Com. "■ Bench B., ^11). So where the bailment has been determined by any active wrong of the bailee or pledgee, as by selling the goods pledged, by mis- using them, or by treating them in any manner inconsistent with the bailment, trover will lie, at the suit either of the pledgor or of a purchaser from him, against the pawnee, for a wrongful conver- sion {FrmUin v. ITeaU, 13 Mees. dbWelsi. R., 481, 485). And the same would be the rule where the money or other thing neces- sary for the redemption of the pawn has been tendered to the pawnee. On the pledge in such case being demanded by the pledgor of the pledgee, and the latter's refusal to give it up, the pledgor may maintain trover against the pledgee for the value of the same {RatcUffe v. Da/ois, Oro. Jog., ?44). It was, at a very early day, held by the courts of England that the remedy of the pledgor against the pledgee was in accordance with this statement ; and it was (iecided th»t if a bailee of jewels REMEDIES OF THE PLEDGOR. 643 r safer custody pawn them to another, the owner may maintain jver against the pawnee {JJartop v. Scare, 2 SPr. E., 1187). If the goods are injured by a stranger or taken by him from the iwnor, the pawnee may sue for damage to his reversionary interests ,d the bailee to his possessory rights. And it has been held by 8 Court of Common Pleas of England that the pawnor may main- in trover against a purchaser of his goods from the pawitee, even ough the purchase was hona fide {Oooper v. WiU^matt, 1 Com. ench B., 672). But this, of course, must be qualified to the :ect that the sale of the pledged goods by the pledgee was void, so irregular and unjustifiable that no title could pass. In respect to the damages recoverable in these cases, when the tion is in trover, the general rule is that the value of the pro- rty converted is the measure of damages. But this rule is sub- ct to many exceptions. If the defendant be clearly a wrong- er, omnia proBsunvwrvt/ur contra spobiatoremh applies ; as where e defendant detained a jewel, the jury were told to presume the •ongest against him, and make the value of the best jewels the 3asure of their damages (Armory v. Dela/miric,, 1 St. M., 505). ad special damagesi may be recovered for the detention of the operty over and above its value, as in trover, by a carpenter for s tools ; whereby, it was alleged, he was prevented from working his trade {Bodby v. Reynolds, 8 QueerCs Bench R,, 779). When the goods have fluctuated in value, it seems very much the discretion of the jury to say at what point of time the value all be taken, whether at the time of taking, or at the day when 3 value was highest or lowest; although, in a case heretofore 'erred to, the Superior Court of the city of IS'ew York held, as itter of law, that when the loanee of property pledged the pro- fty to secure a loan, the owner might bring his action for the aversion of the property, and that the measure of damages in 3 action was the highest market value between the date of the iversion and the trial of the action {Navman v. Catdwell, 2 ieeney^s B., 213). tf the taking of the property was not only wrongful, but willful, in the measure of damages in the action for the conversion is ! value of the articles at the highest estimate between the date conversion and the trial. But it seems to be understood that 8 should never be the rule when the pp^rty has acted ionajid^ ide Sedgwick on JBmmges, 478,'495), 644 LAW OF PLEDGES. It has been heretofore stated that, in cases of pledge, if the pledgee tortiously sell or deal with the pledge, the pledgor's right of recovery is clear ; hut that the pledgee has a right to have the amount of his debt recouped in the damages {Story on Bedim., § 315). And a case quite recently came before the English Court of Common Pleas, where A. deposited a dock warrant for certain goods with B., as security for a loan, to be repaid on a certain day, with liberty to B. to sell the pledge on default. A. became bankrupt, and B., before the day of payment, entered into an abso- lute contract for the sale of the goods ; he handed the dock war- rant to the dock company on the day of payment, and the vendor took actual possession of the goods the day after. The court held that this was a wrongful conversion of the goods by B., but {dis- sentiente, Williams, J.) that the measure of damages was not the full value of the goods, but the damage which A. had actually incurred by the premature sale, which, in this ease, was merely nominal {Jphmon v. Stear, 33 L. J., K S. C. P., 130). In detinue the damages are, in general, merely nominal, but the jury find the value of the articles detained ; and the common-law judgment is, that the plaintiff recover the articles or their value, together with the damages and costs found by the verdict, and the costs of insurance {PhilUps v. Jones, 16 Queen's Bench R., 85&). And special damages may be recoverable for the detention, if laid in the declaration {WilUwms v. Archer, 5 Com. Bench R., 318). But it seems that if no special damages be alleged, or only colora- bly so, the defendant may, in general, obtain an order for a stay of the proceedings on delivering up the goods or deeds in ques- tion, and paying nominal damages and costs ; or if the plaintiS insists on proceeding for damages, the order will be for the deliver- ing up of the deeds or goods, and that the plaintiff shall bte subject to the costs of the action, unless he recover damages beyond nominal damages for the detention of the goods ( WiUiami< v. Archer, swprci) ; but not, in general, where the goods have been sold, and it is imcertain whether they were sold for the real value or not (Gibson v. Humphrey, 2 Bowl. R., 68). At least, it has been held in accordance with these statements in Eiigland, and a similar practice is recognized in this country. An action for the recovery of chattels detained is an action to try a right, beside the mere right to recover damages, and, there- fore, has been held not to be within the English common-law pro- KEMEBIES Of THE PLED GOB. 645 jdure act of 1860, which enables a judge, in any action for an leged wrong, to certify to the contrary, in order to deprive the iaintiff of his costs npou recovery of less than £5 (23, 24 Vioi. ip., 126, § 34; Dcmh/ v.Zamb, 31 Z. J., If. S. G. P., 11). It has been held by the English courts that in trespass for dis- aiiiing goods (as pawns), which are not distrainable, the tenant m only recover for the actual injury he has sustained {Harvey v. ^OGOck, 11 M&es. and Welsh. B., 740). If the seller of the goods itake them from the buyer before they have been paid for, it is jld that the buyer may, nevertheless, recover the entire value as mages in trespass, and the jury can allow any deduction on icount of the debt the buyer owes the seller for the price unpaid rillcmd V. Brittam, 8 Mees. and Welsh. £., 575). And it is held lat, in an action of debt, the plaintiff is to recover the sum in umero, and not a compensation in damages, as in those actions Mch sotmd in damages only, as assumpsit. The damages given r the detention of the debt are merely nominal {/Seheyn's Nisi 'rius, 570). In trespass, where no circumstances of aggravation are shown, (6 action is to be regarded as one of trover, and the value of the •operty, with interest, furnishes the measure of damages {Sedg- ich on Damages, 530). But Alderson, baron, in one case iserved that it was entirely a question for the jury what damages ey would allow. " Juries have not much compassion for tres- issers; and I do not think they were bound to weigh in golden ales how much injury a party has sustained by trespass " {Lookley Pye, 8 Mees. and Welsh. R., 135). In debt or in, assumpsit between the parties to this contract Jtice is immaterial, and indeed is held to be irrelevant to the 5ue raised ; and the damages should be limited to the pecuniary 38 resulting from the breach of contract {Broom! s Gom/mentaries, I ed., 613, Omd vide Fletcher v. Taylewr, 17 En^. Gom. Bench. '.,21, 29, per Willes,J.). The foregoing authorities are mostly from the English Eeports, it the doctrine of those cases is similar to the decisions of the merican courts upon the subject. The Supreme Court of Indiana, taewhat recently, held, where it appeared that the pledgee of a fotiable promissory note settled with the maker for less than e face, that the pledgor may sue the pledgee for the value ol 646 LAW OF PLEDGES. the pledge without a previous demand {Dejmy v. Clark, 12 Ind. R., 427). It was held at a very early day, by the courts of New York, that where the pawnee has incapacitated himself from performing the contract on his part, as by selling the pledge, the pawnor need not tender the sum borrowed, in order to entitle himself to an action. So held by Kent, 0. J., in a ease before him, but which was settled by the parties before judgment, although his opinion, to this effect, was prepared and reported {Gortelyou v. Zansmg^2 Gaines' Gases, 200). And the Supreme Court of Indiana held, also at an early day, that on payment of the debt for which a note was pledged the absolute property therein vests in the pawnor ; and if the pawnee afterward converts it to his own use, the pawnor may maintain an action of trover for the note {Elliot v. Arin- strong, 2 Blackf. R., 198). A case came before the Supreme Judicial Court of Massachu- setts, in which it appeared that the certificates of the stock of a company were, by a vote of the company, made transferable by indorsing on them the name of him to whom they issued ; and one of the company, who held such certificates, indorsed and pledged them as collateral security for a debt, which was after- ward paid from his funds by his agent, who received the certifi- cates, and afterward pledged them so indorsed as security for his own debt. The court held that the last pawnee, who knew not the pawnor's defect of title, might hold them, as against the ori- ginal owner, till the debt for which they were pledged to him should be paid. And on tendering tjie amount of that debt the original owner of the certificates was held entitled to recover the value of the stock, deducting the amount of the debt which had been tendered, though an action was pending against the pawnee by an agent of the pawnor, who claimed the ■ certificates under a supposed lien of the principal thereon, arising from a debt of the original owner incurred before the pledge was made to the defend- ant. Two of the judges dissented, but the judgment of the majority of the court was in accordance with this statement {Jwr- vis V. Rogers, 13 Mass. R., 105 ; S. G, 15 ii., 389). Although the pledgor has in all cases the right to redeem the pledge, still, if the pledge is sold, and there is a surplus over and above the debt of the pledgee, this surplus belongs to the pawnor, ■ and he may bring his action of assumpsit against the pawnee to BEJUUDTES OF TBE PtEDGOB. 647 Bover the same. Where the pawnee exercises this liberty of lling the pledge to pay himself, and there remains a surplus, he comes the trustee of the pawnor in respect to it ; and the latter ly at all times waive his right to redeem the pledge, if he is to ,ve the . surplus {Stevens y. Bell, 6 Mass. R., 343). On the Jemption of the pledge by the pledgor, the pledgee is bound to turn the pledge to the pledgor, and account to him for the rents ,d profits, if any, of the thing pledged; and the pledgor may jover the same by the proper action against the pledgee. So Id by the Supreme Court of North Carolina many years ago, d the doctrine is in accordance with law {Horton v. Eolliday, Murph. S., 111). The Supreme Court of New Hampshire Id, several years ago, that where notes have been pledged to 3ure a claim upon which judgment has been recovered, interest ould be cast, on the notes so pledged, to the time of their pay- 3nt; also upon the judgment to the same time. And that in an tion brought by the pledgor to recoTer back the surplus, the lintiff is entitled to interest upon the excess of the proceeds of e notes over the amount received fqr the judgment up to the ndition of his judgment. Notes which had been pledged to 3nre a claim upon which, afterward, judgment was recovered, as ey became due were paid to the pledgee. The court held that e money so received would be treated as having been applied in Maction of the judgment, and would not be regarded as a fund be recovered back by the pledgor, subject to be reduced by the dgment as a set-off {Kmg v. Hutchins, 8 Foster's R., 561). The Supreme Court of California, not long since, held that a rty by pledging negotiable securities, .transferable by delivery, 168 aU right to the secixrities when transferred by the pledgee good faith to a third party, and the pledgee in such a case 3uld be treated in the transaction as the agent of the owner, and 3 owner should be bound by his acts in the premises. But, of urse, the pledgor can bring his action against the pledgee to upel him to account for the disposition of the securities by him oit v. Eumh&rt, 5 Cal. E., 260). Besides the legal remedies of the pledgor referred to, the pledgor ly, if he please, go into a cotirt of equity for relief. And if a le for redemption of the pledge is fixed by the contract, still the idgor may redeem it afterward if he applies to a court of equity thin a reasonable time. If no time is specified for payment, the 648 LA W OF FLED&ES. pledgor may redeem it at any time during his life, unless he is called upon to redeem by the pledgiee ; and if he fails in so redeeming it, his representatives may redieem it. But the remedy is at law, unless' some special ground is shown, as if an account or discovery is wanted, or there has been an assignment of the pledge {Story^sEq. Jur., % 1032 ; 2 Spence's JSq. Jwr., §§ 637, 772, 773 ; Kemp v. Wesihrook, 1 Yes. R., 278 ; Si/rst v. Peirse, 4 Prions U., 339 ; Demcmd/ray v. Metcalf, Prcui. Gh., 419, 420 ; Glennie v. Irwm, 3 You. (& Coll. P., 436 ; Jones v. Smith, 2 Ves. Jr.'s P., 373). There are several American! cases holding, in general terms, that a bill in equity may be filed by the pledgor to redeem goods pledged for the payment of a debt, notwithstanding that there is a remedy at law on payment or tender of the sum due [Herat v. Ten Eyck, 2 Johns. Gh. P., 62 ; Oha^pman v. Turner, 1 GaWs P., 280 ; Flowers V. SprouU, 2 Marsh. P., 56). But the courts of North Carolina have held that the remedy of the pledgor to redeem his pledge is, in general, at law, on tender of payment and not by bill {Doak v. Bank of the State, 6 IredelVs P., 309). The Superior Court of the city of New York has held that although the pledgor cannot, in ev6ry case, come into equity to redeem the pledged goods, yet, where any special ground is shown, as if an account of dividends received by the pledgee is wanted, or there has been an assignment of the pledge, a bill in equity will lie (Hashrouck v. Vandervoor^, 4 Sandf. P., 74). The Supreme Court of Nevada has recently decided that where goods are pawned as security for a running account, it is not essen- tial that the pawnor should tender the amount of the account before filing a bill in equity to redeem. If the pawnor proffers to account with the pawnee, and pay whatever is found due on such accounting, and that proffer is refused, the court held that the pawnor may bring his complaint tor accounting and redemption at the same time ; and if the pawnee has sold the goods, he may have a decree for the balance due him from the proceeds of the sale. In the case before the court it appeared that county warrants were pledged to a merchant as security for a running account, and there was an agreement that the merchant might, at any time, sell the warrants at fifty cents on the dollar, or take them himself at that price. The court held that the pawnee would not be allowed to hold the warrants at that price, unless he should 'clearly show, either that he notified the pawnor of his intention to take them at REMMDIES OF THE PLEDGOR. 649 the rate of fifty cents, or actually gave him credit at that price on his books {Beatty t. SyJ/aest&r, 3 Nev. R., 228). In an action before the present Supreme Court of the State of New York, at a Special Term, it appeared that on a loan of monej the borrower pledged cerUfioates of stock to the lender as security, t\iQ full par value of which was equal to the amount of money loaned, and the stock, thereupon, was transferred to the pledgee on the books of the company ; and it was agreed that, in default of payment of the half-yearly interest by the pledgor, or of the prin- cipal sum loaned, as in the agreement specified, the stock was to become absolutely and exclusively theproperiy of the pledgee, and nothing had been paid on account of either principal or interest for a number of years, and both pledgor and pledgee had treated the stock m forfeited, under tbe agreement, to the pledgee, who then held it bat had never taken any proceediflgs to foreclose the pledge, the court held, in an action by a jvidgmetht creditor qf the pledgor, brought more than four years after the pledge, that so long as the stock remained with the pledgee the debt existed and the pledge was collateral to it, and the stock liable to be redeemed by the pledgor ; that to this iguity of redemption the plaintiff was entitled, as the creditor of the pledgor, having exhausted his remedy at law ; and that the rights and equities of the pledgee were precisely those of the ^]m.i\S {Stoker v. CogsweU, 25 Sow. Pr. R,, 267). The English Courts held, at a very early dayj that where the pawn has a special and peculiar value to the owner, specific delivery of it will be deereed at the suit of the pawnor, on the same prin- ciple as was recognized in the case of the Pusey horn {Pusey v. Pusey, 1 Vern. R., 273). And it was held that a bill lies to com- pel the delivery of an altar-piece {Duke of Somerset v. Cookson, 3 P. Wms. R., 389). And, indeed, where there is no peculiar value to the pledge, a delivery of the same would probably be ordered between pawnor and pawnee, on the ground of fiduciary relation. This doctrine has been recognized by several English cases ; one (vhere furniture was deposited in trust ( Wood v. Rowcliffe, 3 Harems R; 304) ; and another, where an agent had deposited mortgage leads {Jadcson v. Butler, 2 Atk. R., 306). And the Supreme Donrt of Wisconsin has decided, in general terms, that the pledgor jf securities, having paid the debt secured by them in equity, may iompel a specific delivery of them to himself {Brown v*. Runals, \.^Wis. R.,%m). 82 650 ^-Aw OF PLEve:Es. The Supreme Court of Pennsylvania has 'decided, where a party ■assigned certain shares of bank stock as collateral security for the payment of a promissory note, with authority to sell in case of non-payment, that the assignor's equity of redemption was barred at the end of six years from the maturity of the note, the stock being then of less value than the debt, and the assignee. having treated it as his own, instead of selling. And it was held that a court of equity will not grant relief in such a case after a lapse of eleven years, the stock having risen in value after the assignee's right on his note was barred by the statute of limitations ( Water- itnan v. Brown, 31 Penn. B., 161). And the Supreme Court of the State of New York has held that, where stock is pledged as security for a note, the pledgor's equitable action to redeem com- mences when the note became due ; and if it is not brought within ten years from that time it wiU be barred by the statute. It was declared that such a case comes within the section of the Eevised Statutes relative to bills for relief in cases of trusts not cognizable by the courts of law. And it was held that tlie court would not, to relieve a pledgor from the statute, assume, in the absence of any allegation or proof on the subject, that there was an agreement between the parties that the pledgee should keep the stock untU he should have repaid himself out of the dividends and proceeds. It seems from the decision of the court that the legal remedy of a pledgor, by trover, is limited by the New York statute of limita- tions to six years after the maturity of the note, for the payment of which the property is pledged {Boberts v. Sykes, 30 Barh. B., 173). It has been before stated that, where there is no contract on the part of the pledgee requiring him to sell the pledge, he cannot be compelled at common law to do so, and this is the general under- standing of the law ; and yet a court of equity might interfere in favor of the pledgor and compel a sale where there are circum- stances which seem to make it proper, provided it is reasonably clear that the property would produce more than sufficient to satisfy the debt, or the property is of a perishable nature ( Vide Kemp V. Wesa>roo\ 1 Yes. B., 275 ; 2 Story's Eq. Jur., §§ 1031, 1032, 1033). Upon the subject of the right of the pledgor to come into a court of equity to redeem the pledge, the Superior Court of the city of New York, in a miich later case than that of Hasbrowck v. Vamder BEUESIMS OF THE PLEDBOB. 651 mart, before referred to, declared that a court of equi^ has no general jurisdiction over actions to redeem personal property pawned, without some other circumstances rendering its interfe- rence necessary. The remedy at law is held to be ample, by ten- der of the amount due and a possessary action to recover the arti- des pledged, or damages for their detention. The only ground of equitable jurisdiction over an action for the redemption of personal property pledged, besides the necessity of a discovery, and perhaps an assignment of the pledge, is the necessity of taking an account. It seems to be fully settled that the accoimt on which equity bases its jurisdiction must be really one ; that is, not having only one item on one side and a number of set-ofEs on the other, but a series of transactions on both sides. And the, court held, that where an action is brought to redeem certain securities in the hands of the defendants, as stock brokers, upon paying the amount due thereon, and for an injunction order restraining the defendants fromselling such securities until an account can be taken of the amount due the defendants, it cannot be sustained where it appears that the claim on the part of the defendants can only consist of one item : the original advances by them, or so much of it as remained unpaid. The court held, further, that every sum paid or to be credited in that account forms a subject of set-off in an action at law, even induding any liability of the defendants, as alleged in the com- plaint in the case before the court, for selling any of the original pledged stock below its market price, as such liability forms a sub- ject of counter-claim in an action for the loan under the first sub- livision of section 150 of the Code of Procedure, and, it was held mMquidated damages for an entirely unauthorized sale of pledged itocks or securities can form no part of an account to give jurisdfc- :ion to a court of equity. These questions of practice were very ully and ably discussed by Kobertson, C. J., and he showed very sonclusively that the positions taken were entirely sound, both upon mnciple and upon the authority of cases which he examined, and rhich are cited in his opinion. The chief judge also discussed the question of the UaMlity of he pledgee in cases like the one at bar, and held that sales of the toek below the market price, when duly authorized, would not nake the pledgee liable for the difference, unless made with intent to BJure the pledgor beyond the mere realization of the amount due 652 ^^ W OJS- PLEDGES. the pledgee, as in other cases of abuse of lawfal authority, and that something besides a mere sale below the market price is necessary to show such intent. And it was argued that brokers, who are mere pawnees, are not bound to use even the same dili- gence as an agent to obtain the best price for the pledge sold ; and an agent would not be held liable except for extraordinary negli- gence, which must be proved, not presumed. It was stated that •there must, at least, be such recklessness shown in the mode or time of selling as to establish an intent to injure the pawnors before the pawnees can be made liable for any loss {JDurant v. HmsUiai, 35 How. Pr. B., 223 ; S. C, 5 Bob. B., 423). A pledgee accepting goods from the pawnor is ordinarily estopped from denying the title of the pledgor at the time of the bailment, but may assert that his title has been defeated {Thorne v. Ti^ku/ry, 3T L. J. N. 8. Ex., 407). In some cases where a pledge has been made to secure an illegal demand, the courts have held that the pledgor is not entitled to have restitution of the same, except upon the usual terms of redemption. For example, the Supreme Court of Tennessee held, where a person had borrowed money at usurious interest, which the contract did not exhibit on its face, and gave a pledge for its repayment, that he could not treat such contract as illegal, and sue for the recovery of the pledge, without a tender of the money actually due, and legal interest thereupon. There being ho statute to the contrary, the general rule in equity in such cases is enforced there, that he who desires equity must do equity ; and that requires payment of the money actually borrowed, before the pledgor can claim the restoration of his pledge [Gauaey v. Yates, 8 Kwnyph. B., 605). And the Supreme Judicial Court of Massa- chusetts has decided that one who has voluntarily made a pledge, to secure the payment of an illegal demand against him, is not afterward entitled to reclaim the same without payment of the demand. In this ease the contract was declared to be illegal because it was made on Sunday, and Chapman, J., who delivered the opiaion of the court said : " Under the instructions given by the judge, the jury may have found that the plaintiflE delivered the watch to the defendant voluntarily. He seeks to recover it back on the ground that he delivered it as a pledge for the payment of a debt which he was not legally liable to pay, because it was for the use beMedieb of tbe pledgor. 653 )f a horse and wagon which the defendant had let to him to (nable him to violate the law for the observance of the Lord's lay. It is true that the law wonld not enable the defendant to ■ecover such a debt ( Way v. Foster, 1 Allen, 408). But neither iyill it enable the plaintiff to recover back his property given in )ledge for the debt, any more than to recover back the mon£iy ifter paying it. In all such cases, the maxim jjofe'o?" est conditio wsddends is applicable. The plaintiff has, at least, as little ilaim to the aid of the law as the defendant " {King v. Green, 6 men's B,, 139, 140). It is possible that the decision in the case of Canisey v. Yates, night have been placed upon the same ground as that in the case if King v. Green ; but it is probable, that the more appropriate eason found for it is the one suggested ; that is,, the well settled ule in equity, that he who seeks equity must first do equity. )n the contrary, the present Supreme Court of the State of New fork has recently held thjit a provost marshal could not, under he act of congress entitled " An act for enrolling and calling out. he national forces, and for other purposes," passed March 3d,. .863, exact of drafted men, volunteers, or those offering substi- utes, the deposit of money or property to be forfeited to the gov- irnment if such drafted men, volunteers or substitutes did not eport themselves at the proper rendezvous; and that such a, lower could not be conferred upon a provost marshal by either he war department or the provost marshal-general; nor could ither adopt, and by adoption ratify and make valid, a pledgfe xacted by a provost marshal for such a purpose. The court held that congress, only, could confer such a power, r adopt and ratify such a pledge where taken without its uthority, and it was further held, that a public officer who acts nthout uuthority, or exceeds his authority, is liable as is a private gent, on the contract made, or for the act done without or in xcess of his authority ; and that the ratification by the principal fin not relieve him from such liability to the injured party. There, therefore, such an agent exacts a pledge of property with- at authority of the government, and an action is brought by the ledger to recover it back, while it is in the possession of such jent ; the decision of the court is, that he is liable for such pro- erty ; and even the adoption of the act by the principal will not 654 LAW OF PLEDGES. shield him from liability. The judgment entered at the circuit; upholding such a transaction, was accordingly reversed. The opinion of the court was pronounced by Mullin, J., who examined the case with great care and legal acumen, and the judges seem to have been unanimous in the result which the reasoning produced {Rioha/rdson v. Grcmdall, 47 Barb. R., 335). When this case was before the Circuit Court, the judge held that the pledgor was not entitled to his action for the restitution ot the pledge, for the reasons : 1st. That the act of requiring indemnity was not only not within any inhibition in the case of public policy, but was entirely justifiable by the circumstances, if not one eminently meritorious. 2d. That the act of taking the pledge ■did not come within any statutory prohibition of a thing done by color of office, nor within any definition of it regarded as an offense .against law or merit. 3d. That the agreement was exe- •cuted ; and on the principle that in case of an executed contract, Tvhere the parties are in pa^i delicto, the condition of the defend :ant is always preferred, the pledgor could not have his action foi the pledge without redeeming it; and finally, the Circuit Court held that there was nothing in the objection that the agreement was void for wam,t of consideration. It was argued that the action was not brought upon the agreement; and after a party has vol- iuntarily performed an agreement, it is too late for him to urge «uch an objection {Richa/rdson v. Grandall, 30 How. Pr. R., 134). iBut the court, at General Term, held the agreement was execu- tory, and could not be said to. be executed until the right of redemption was foreclosed. It was said, that as well might the ^awnbrok«r insist that he could hold the pawn upon the ground of the contract being executed ; that in both cases the property is left in pursuance of a contract which is in one sense executed when tiie pawn or pledge is delivei'ed, on terms agreed upon betweea the parties, but it is not executed in the only sense in which th« term is used in the law where the party is estopped from asseiiing a claim to the property pawned or pledged. And it was also held at General Term that the pledge was wholly with- out consideration, and for that reason the pledgor might recover the property pledged. And in opposition to the decision in 8 Humphrey, the Superior Court of the city of New York has decided that under the usury laws of the State, where the owner of stock pledges it Sfwect of banks upt la ws. 655 IB collateral seeiirity for the payment of a usurious loan, he may, )n demand of the stock and a refusal to return it, recover its value :n an action of trover. But it will be recollected that, by the statute of New York, a usurious contract is actually void, and this nakes the rule different from that which prevails in Tennessee 'Gomland v. Dwois, 4 Bosw. E., 619). CHAPTEE L. THE OPERATION OF 3ANKRTJPT LAWS IH OASES OF PLEDGE — THE DOCTKINE OF THE ENGLISH AUTH0EITIE8 UPON THE SUBJECT THE DOOTEINE OF THE AMERICAN CASES ON THE POINT. Theee has been considerable discussion and not a little litigar ion, especially in Great Britain, in respect to the effect of bank- rupt laws upon the rights of the parties to a pledge. It was, at me time, doubted whether a pawnbroker was a trader subject to ;he provisions of bankrupt laws ; but the doubt seems to have seen removed, at an early day, by the holding of the judges that 1 pawnbroker remained liable to them, as such, even though he lad ceased to take in pledges, but con tinned to sell the unredeemed pledges he had on hand {Highmcm v. Molloy, 1 Atk. R., 205 ; Ecmlinson v. Pea/rson, 5 Barnw. & Aid. R., 128). In 1861 the British parliament passed an act to amend the bank- ruptcy laws, which has been held to control the question and place t at rest (24 cmd 25 Yict. ch. 138). But at common law and in i^uity a pledge deposited as a security for money advanced is n tlie nature of a mortgage, and can only be redeemed on payment )f the money due, so that, in most cases, the property of the bank- nipt in pledge must be sold, and the deficiency proved as a debt Expwrte Twogood, 19 Ves., Jr., R., 231). There can be no tack- ng, however, by the pawnee against creditors or assignees for valu- ible. consideration ( Adams v. Glaxton, 6 Ves., Jr., E., 226 ; V parte Price, 3 Mont. Dea. & Be G. E., 586 ; and vide ex parte Bennett, 1 Be ' Gex's E., 194). In one case a bond was executed to secure payment of bills of exchange. The bond was mortgaged, together with the bills which were indorsed. The bonds and bills were deposited by way of sub-pledge, and no notice of the sub-pledge was given to the obligor. Under these circumstances, it was held that the sub- pledge was good against the assignees {Ex parte Bennett, 1 Be Gex's E., 194). The bare possession of goods intrusted to the bankrupt for a EFFECT OF BANKRUPT LAWS. 661 ymfio fv^ose (as' a pledge), without any power given him to Ispose of them, is not suificient to make it a case of reputed irnership, unless, indeed,, the owner has been guilty of laches, and IS thus allowed the bankrupt to gain a false credit ( West v. Skip, Yes., St., R., 243). But goods sent on sale or return, and kept adistinguished with the rest of the bankrupt's stock, pass to the isignees as being in his order and disposition, notwithstanding lY alleged custom or usage of trade by which goods so deposited id not lead to the belief that they belonged to the trader {Ex \a/rte ^e&plcmd, m re Qla/pham, 4 L. T., JSF. S., 808). A deUvery of goods cannot be qualified by any secret under- anding between the parties so as to defeat the claims of their 3signees {Hol/royd v. Owynne, 2 Tcuu/nt. E., 176). If the removal ikes place on the very same day when the act of bankruptcy is ummitted, although in point of time it is prior to the actual com- lission of it, the rights of the assignees have been held to attach Arbowm v. Williamis, 1 My. <& Mon. JR., T2). And if a person rhohas given a bill of sale or instrument remains in possession of lie goods therein enumerated, the registration of the bill of sale idll not prevent the goods from passing as goods in the order and isposition of the bankrupt, with the consent of the owner {Bradger : Shorn, 2 Ell. (& Ell. E., 472). There are some modes of pledging property which have been leld under the British bankrupt laws to be in themselves acts of lankruptcy ; as, for instance, the assignment of the whole or prin- ipal part of the bankrupt's property by tfill of sale, even though nch bill of sale was not executed spontaneously, if it appear that he provisions of the deed must necessarily have the effect of delay- ng or defeating creditors, or to render it immediately impossible or the bankrupt to carry on his business, or whether it was simply m endeavor to put all his property out of the reach of liability to )ay the debt {Exjxwte Wensley, 1 Be Oex, Jam. the date of the commission, but in the latter the interest stops ■om the time of the deposit {Bromley v. Child, 1 Atk. R., 259). ' the security be insufficient, the mortgagees cannot prove for iterest beyond the date of the adjudication, even though the sale as postponed at the request of the assignees, and for the benefit E the bankrupt estate {Ex parte Badg&r, 4 Yes., Jr. R., 165 ; le Ughtfoot, 18 Z. T. R., 54 ; Ex parte Baldwin, 33 il., 263). he same doctrine was held by Commissioner Evans on the autho- ty of a case in wliich, pending an appeal by an equitable mort- igee, it was agreed between the parties that the property should 8 sold, and the proceeds invested by the assignees to abide the 664 LA W OF PLEDGES. result of the appeal, which was accordingly done, though the assignees, against the wish of the mortgagee, deposited the money in a bank which paid only two and a Jialf per cent interest. The court held that, though the mortgagee was entitled to the interest actually made for the investment, he was not entitled to have interest calculated on his debt subsequent to the date of the first, for there was no mention of interest in the agreement, and interest is not allowed in bankruptcy, except in the case of bills and notes, unless it is provided for in the contract, or unless it arises from the dealings of the parties constituting an itnplied agreement to pay interest on the posting of merchants' accounts ( Vide EsspaHe Ken- smgton, 1 JDea. E., 58 ; S. C.,% Mont, da Ayr. B., 300). Goods pledged expressly to secure a creditor, who has previ. ously accepted and paid bills drawn on him by the bankrupt, are released from further charge as to other bills taken up and paid subsequently, if the amount of the original sum paid on account of the bankrupt has been repaid to the creditor, without the goods being sold {Birdwood v. Baphael, 5 Price's B., 593). So also where a creditor's right to retain property was disputed on the ground of preference, the court refused his application to take it at a reduction, to prove for the difference, and vote in the choice of assignees {Md parte Barclay, 1 Glyn <& Jameson^ s B., 272). And the court, also in the exercise of its discretion^ refused to order the sale of a bond, but allowed the creditor to prove fot his whole debt, because if it had been sold at the time it would have produced nothing, though it might afterward become valuable {Mb parte Smith and StricMand, 2 Glyn tfe James. B., 105). The foregoing principles and rules are settled by the English authorities, but thby will generally be recognized as in point, upon the same subjectj in the American States. The courts of the United States have laid down similar principles in cases aris- ing under the federal bankrupt act of 1841 ; and they are prbba- bly equally pertinent to cases arising under the present law; and indeed to cases, as a general rule, arising under the insolvent laws of the severial States. Bj the second section of the bankrupt act of 1841, it was provided to the following effect : " Nothing in this act contained shall be con- strued to annul, destroy or impair any liens, mortgages or other securities or properties, real or personal, which may be vklid by the laws of the States respectively." And by the bankrupt act EFFECT OF BANKR UPT LA WS. GG.S now in force, it is provided as follows : " "Where a creditor has a. mortgage or pledge of real or personal property of the bankrupt^ or a lien thereon for securing the payment of a debt owing to him from the bankrupt, he shall be admitted as a creditor only for the balance of the debt after deducting the value of such pro- perty, to be ascertained by agreement between him and the- assignee, or by a sale thereof, to be made in such manner as the court shall direct ; or th6 creditor may release or convey his claim to the a,ssignee upon such property, and be admitted to prove his- debt" {U. S. Bankrupt Act o/1867, §20). Upon this point, Mr. Justice Story, who gave the prevailing- opinion of the Supreme Court of the United States, in a case , arising under the act of 1841, said : " Where creditors are spoken 'of ' who claim a debt or demand under the bankruptcy,' we- imderstand the meaning to be that they are creditors of the bank- rupt, and that their debts constitute present subsisting claims upon the bankrupt's estate, unextinguished in fact or in law, and capa- ble of being asserted under the baiikruptcy in any manner and form which the creditors might elect, whether they have a security by way of pledge or mortgage therefor or not. If they have a pledge or mortgage therefor, they may apply to the court to have the same sold, and the proceeids thereof applied toward the pay- ment of their debts ^w tanto, and to prove the residue; or, on the other hand, the assignees may contest their claims ill the courtj. or seek to ascertain the true amount thereof, and have the residue of the property, after satisfying their claims, applied for the bene- fit of the other creditors" {Me parte Christie, 3 How. JJ. S. R., 292, 315). It is laid down by a writer on bankruptcy, that " if a creditor has a security or lien, he is not compellable to come in under the commission ; he may elect to stand out, and rely on his security or lien. * * * But if he does prove, he relinqui^es his security for the benefit of all" {GuUen on Bankruptcy, 145, 149). And this doctrine is in accordance with the general terms of the Eng- lish authorities hereinbefore cited ; and the only difference between this doctrine and the rule adopted in this country is, that the assignee of the bankrupt may contest the rigtit of the pledgee, and the court has the entire control of the subject, which in reality is not much different from the English rule. A case came before the United States Circuit Court, under the ' 84 666 LAW OF PLEVOES. bankrupt act of 1841, in which it appeared that A. and B., being engaged, in 1839, in the manufacture of cutlery, borrowed of C, a sum of money payable in four years, with Interest semi-annu- ally, and on the same day gave him a -deed of all the machinery in their manufactory, with all the tools and implements of every kind thereunto belonging and appertaining, together with all the tools and machinery for the use of the said manufactory which they might at any time purchase for four years from that date, and also all the stock which they might manufacture or purchase during the said four years. On the 26th of August, 1842, A. and B. filed their petition to be declared bankrupts, and subsequently were so declared, and an assignee appointed. On July 16th, 1842, for breach of the conditions of the mortgage, the agent of C. took posses'sion of the property, including the machinery, etc., which were in the possession of the factory when the mortgage was made, and also machinery, tools and stock in trade which had been made and purchased after the execution of the mortgage. On petition of the assignee in bankruptcy of A. and B. for an order of court authorizing him to take possession, it was held by the court, 1st. That the mortgage and the possession taken on July 16, 1842, constituted such a lien in favor of the mortgagee to the property acquired subsequently to the time of executing the mortgage as was protected under the provision in the second sec- tion of the bankrupt act. 2d. That such stipulations in a mortgage, in regard to property subsequently acquired, protected such pro- perty from other creditors of the mortgage {Mitchell v. Winslow, 2 Story's H., 630). And the same court held in another case that ■where property was attached upon mesne process, and after judg- ment was obtained, the defendant filed his petition to be decreed a bankrupt, the right of the attaching creditor had attached absolutely to the property, and by the law of Massachusetts remained a fixed' and permanent lien for thirty days after the judg- ment, by means of which the creditor at his election might obtain a preference of satisfaction out of the property attached over aU other creditors (In the matter of Cook, 2 Story's R., 376). The Supreme Judicial Court of Massachusetts decided that where a creditor attaches his debtor's property on mesne process and seizes the same on execution within thirty days after he recovers judgment, he has a lien or security on the property, which cannot be annulled, destroyed or impaired by his debtor being EFFECT OF BANKRUPT LAWS. 667 declared a bankrupt under the United States bankrupt act of 1841, on a petition filed after such seizure of the property, though before the time when by law it could be sold on execution {Ames V. Wentworth, 5 Met. R., 294). Under the bankrupt law of 1841, it has been decided by the Supreme Court of the United States that the District Court, when sitting in bankruptcy, had jurisdiction over liens and mortgages existing upon the property of bankrupts, so as to inquire into their validity and extent', and grant the same relief which the State courts might or ought to grant. The control of the District Court over proceedings in the State cdurts upon such liens was held to be Mt over the State courts themselves, but upon the parties, through an injunction or other appropriate proceeding in equity {Ex parte Christy, 3 Hi)w. U. 8. B., 293 ; and vide Mo parte Foster, 2 Story's H., 131). And the provisions of the bankrupt act now in force in this regard are substantially the same as those of the act of 1841. Of course, a pledge or other security given in fraud of the bank- rupt act cannot be sustained, and this question may always be raised in the court having cognizance of the bankruptcy proceed- ings ( Vide Bolamder v. Oetz, 36 Cal. E., 105). The courts of Maryland have held that in an action by a trustee in insolvency for the conversion of the insolvent's property, evi- dence by the defendant to prove that before the insolvent's appli- cation for the benefit of the insolvent law the property alleged to be converted was delivered by the insolvent to the defendant and held by him as security for the insolvent's indebtedness to him, is admissible. In other words, the law is such that a honafide pledge made by a debtor, before proceedings have been initiated in behalf of the debtor for the benefit of the insolvent laws, will be sus- tained, and in such a case probably the right of the pledgee would be declared to be similar to that of a pledgee umder the Federal bankrupt laws {Dowler v. Cuslvma, 27 Md. B., 354). The Superior Court of the city of New York has held that a mortgage upon a bankrupt's real estate is not such an adverse claim as requires an action to be brought by the assignee in bankruptcy under the eighth section of the United States bankrupt law now in force, nor will the foreclosure of the mortgage and the sale of the property in a suit to which the assignee is not a party consti- tute such an adverse claim where it does not appear that the 668 , LAW OF PLUBGES. assignee had notice that the purchaser claimed adversely to his own title. This is an important decision, and will apply in prin- ciple as well to the case of a pledge of personal: property, as to that of a mortgage of real estate {Price v. PMUips, 3 Boh. B., 448). A case to the following effect came lately before the Supreme Judicial Court of Massachusetts. A maker of a promissory note, executed to an indorser a mortgage, which was recorded, the condi- tions of the instrument being to secure the indorser and not to pay the note. The maker failed, and the indorser also, after his lia- bility was fixed. The court held that an indorsee of the note who proves it against the estate of the indorser, and votes for his dis- charge, is not entitled to have the mortgage assigned to him upon his withdrawing his claim. It seems, however, from tlie decision, that the indorser could claim such assignment if he had not proved the note in insolvency {Wew Bedford InsUl/atwn, for Savings v. Fom" Hamen Bank, 9 Alienee B., 1Y5). The same court, how- ever, had previously held that a creditor of an insolvent manufac- turing corporation, who holds collateral security from a stoohhold^ therein, may prove his whole debt against the corporation in insol- vency without first applying the security in payment, or surrender- ing it to the assignees {Cabot Bank v. Bodman, 11 Graffs B., 135). The cases are very numerous in the State reports in respect to this point under the State insolvent laws, but it is not compatible with the plan of this work to go into a general or special examina- tion of them, and perhaps the foregoing is all that is necessary to be said upon the subject. CHAPTER LI. EFFECT OF THE DEATH OF THE PAETIE8 TO A PLEDGE — MEACfS OF DETERMINING THE PAKTT ENTTILED TO THE PEOPEETT PLEDGED IN DOUBTFUL OASES SOME MISCBLLAlJEOtrS POINTS IN EESPBOT TO PLEDGES EEFEEEED TO. The effect which the death of one or both of the parties to a pledge produces upon the subject of the pledge, may be inferred from some of the statements hereinbefore made ; but it is well to dwell a little upon the point in this place. THE DEATB OF THE PARTIES. 669 It was said, in some old English cases, tliat where goods are pawned generally, without any day of redemption, and the pawnor dies, the pawn is absolute and irredeemable ; but that if the pa/wn'ee dies it is not so. In an early case, it was said that though the person that takes the pawn delivers it over to a stranger, yet if the pawnee dies the tender of the money must be to his executor, and not to the stranger ; for the delivery makes but the naked custody of it ; and if the delivery had been on consideration it does not alter the case, for the stranger is not privy to the first contract of pawning nor to the condition {RatcUffY. Dcmis, Gro. Jac., 244, S. C, Yel/o. R., 178). JVIore recent decisions in England, however, show that the right to redeem is not lost by the death of the pawnor, but goes to his personal representatives. For example, where A. borrowed £200 on pawn of some jewels and plate, worth about £600, ta,king a note from the pawnee, and afterward borrowed, at several times, three other sums of money of the pawnee, for which he gave his note, without referring to the jewels, the court permitted, the executors to redeem, but only on payment of the money due on the notes as well as on the pawn {BemOMd/ray v. Metcalf, Pre. Ch., 419). And in another case, in the English Court of Chancery, the executrix of a deceased .pawnor was allowed to redeem securities pledged with the defend- ants, the testator's bankers ( Yanderzee v. Willis, 3 Brown^s G. G., 21). It may therefore be taken as well settled, by the English authori- ties, that the personal representative may sue on the contract of pawn, as on all other contracts made with the deceased, of which the breach occasions an injury to the personal estate, whether broken in his lifetime or subsequently to his death ( Vide Webb v_ Qowddl, 14 Mees. am.d Welsh. R., 820). And, in like manner, the personal representatives are liable, as far as they have assets, on the contract of pawn as on other contracts of the deceased broken in his lifetime {JMorgcm v. Ramey, 6 Hurl, and Nor. R., 26o> 276). And, indeed, the personal representatives are in like man- ner liable, on such contracts of the deceased as are broken after Ms death, for the performance of which his skill or taste was not required, and which were not to be performed by the deceased in person ; for the executors, as was said by Parke, B., in a case before the Court of Exchequer, are in truth contained in the per- son of the testator, with respect to all his contracts, except such 670 LAW OF PLEDGES. . as depend on personal skill ( Wills v. Murray, 4 Exchequer H., 866 ; and vide Broom's Legal Maaoims, Aih ed., 870, 872, 874). The doctrine of the English courts upon this subject is recog- nized in all its effect by th§ American courts. This is abundantly- apparent from authorities in a previous chapter referred to. lu accordance with this doctrine, an action of trover was permitted by the Supreme Court of Illinois in favor of the pledgor against a party holding a promissory note under the administratrix of the deceased pledgee to recover said note {Henry v. Edd/y, 34 lU. R.y 608). And the rights of the personal representatives of a pledgor, in such a case, were recognized without apparent question by the Supreme Judicial Court of Massachusetts, where it was decided that the pledgee held the property pledged as a collateral security after, the same as before, the death of the pledgor {Middlesex Bamk v. Minoty 4 Met. B., 325). And in other cases it has been expressly held by the American courts that there is no time fixed for redeeming a pledge ; the pawnor may redeem at any time ; and that the right of redemption survives, on his death, to his legal representatives, against the pawnee and his representatives ( Vide Cwtelyou v. Lamsing, 2 Gaines' Cases in Error, 200). It has been stated in a previous chapter that, uplon the pay- ment of the debt, or discharge of the obligation to recover which a pledge is made, the pledgee is bound to return the thing pledged to the pledgor or other person entitled to the same ; and it was added that the pledgee must be careful to deliver the same to the proper person ; for if he should deliver the same to a wrong person he would, nevertheless, be liable to respond iii damages to the true owner. Now, while it is of the utmost importance that the sub- ject of the pledge be delivered to the proper person, it is not always easy for the pledgee to determine who the proper person is ; and it frequently happens that the property pledged is claimed by several adverse claimants. In such a case, it is but just that the pledgee should have some means of resort to ascertain, judicially, to whom the pledge should be delivered without involving himself in a bill of costs; and the law has provided the remedy, which is by a proceeding known as an interpleader. An interpleader will be sustained where it is necessary for the protection of a person from whom several persons claim, legally or equitably, the same thing, debt or duty, but who has incurred no independent liability to any of them, and does not himself claim THE ACTION OF INTESPLJEADME. 671 an interest in the matter. A bill of interpleader, strictly so called, is where the complainant claims no relief against either of the defendants, but only asks that he may be at liberty to pay the money or deliver the property to the one to whom it, of right, belongs, and be thereafter protected from the claims of both {Bedell v. Hoffman, 2 Paige^a B., 199). And the allegations in every bill of interpleader should be : 1. That two or more persons have preferred a claim against the plaintiff. 2. That they claim the same thing. 3. That the complainant has no beneficial interest in the thing claimed ; and, 4. That he cannot determine, without hazard to himself, to which of the two or more defendants the thing of right belongs {Atkinson v. Mwriks, 1 Cow. R., 691, 703). And the party bringing the action must be ignorant of the rights of the respective parties (Wilson v. Dimocm, 11 Abb. Pr. P., 3; BellY. Hunt, 3 Parb. Oh. P., 391; Showy. O&ster, 8 Paige's P. ^ 339). Therefore, the action cannot be maintained where the plain- tiff is prepared to deny the liability to either of the defendants {MoHenry v. Hazard, 45 Barb. P., 657). A party deposited money in a bank and soon after transferred his interest to another. ' A receiver of the property of the depositor claimed the deposit, and the one to whom it had been transferred brought an action against the bank therefor. The Supreme Court of the State of New York, at Special Term, held that, on payment of the money into court, the receiver should be substituted as defendant, in place of the bank. The bank held the money for the true owner, and had no interest in the question to whom it belonged. Under such circumstances the court thought that it would be obviously unjust to compel the defendant, against its own will, to remain a defend- ant in the action, and, perhaps, become liable for the costs of the litigation {Fktoher v. Troy Samtigs Panic, 4 How. Pr. P., 383). And where money was deposited with a party to be paid on cer- tain conditions, and an action was brought against the bailee of a third party, the Court of Appeals of the State of New York decided that the proper way for the bailee to protect himself and the one who was entitled to the money was by obtaining an order of substitution under section 122 of the Code of Procedure. {McKay v. Drajper, 27 N. y.i?., 256). But this is under a spe- cial 'provision of the New York Code, which has provided a con- current remedy with the action of interpleader, which is mad® available .after action has been commenced. ■672 LAW OF PLEDois. They have a similar practice in England, where it is provided l)y statute that parties may have relief, under certain circumstan- ces, as in a procedure by interpleader. And it has been decided that where a defeindant is held in msuTnpsityd&tii, detinue or trover for a matter in which he does not claim any interest, and also in cases of cross claims on the same' subject-matter, parties may take the benefit of the statute as to procedure in interpleader {Farr v. Ward, 2 Mees. dt Welsh. R., 844). But it has been held that the •court cannot give relief under this act to stockholders who are •only threatened with proceedings. In such a case an action must be brought and the plaintiff declare before the court can interfere. ■Still the stockholder, acting in good faith, is entitled to his costs irom the party ultimately unsuccessful {ParTcer v. Zimiett, 2 J)owl. a., 562). Again, it has been, held that the English act does not apply •where the defendant has, by his own act, incurred a personal liability in, respect to the subject-matter {Hbrtonv. Earl of D&oon, H Bow. <& Low. R., 206; S. C, 4 Exchequer R., 497). And the courts of If ew York have held substantially in the same way ; and the. courts of New York, as well as the English courts, have ideelared that the action of ijiterpleader cannot be maintained •where the plaintiff has rendered himself liable to two suits by his own act {Morgam, v. Fillmwre, 18 AUb. Pr. J^., 217 ; Wnited. States -v. Yiei&r, 16 ih., 153; and vide Desbrough v. Harris, 31 Eng. Jmw amd Eg. R., 592, 595 ; Gra/rvsley v. Thornton, 1 Sim. R-, 391 ; Oljgnn v. Locke^% Dru. e& Wa^Ks R., il ; JBelchsrY. Smith, S Bim^. R,, 82). And both the New York and the English courts have lield tltat the action cannot be maintained, even where the plaantiff has incurred a personal liability to either of the contend- ing parties i(J^c6^raw v. Adorns, 14 Mow: Pr. R., 461 ; Shaw v. €osteir^ 8 Paige's R., 339; Patomi v. Campbell, 12 Mees. cf' Welsh.. R., ^7Tj. Indeed, the New York courts hold that the provision of tlieiv Cede j&i Procedure, for the substitution of parties, is founded o tl^e English statute ; and thcideeisions under that seem to have sei- itled the rale ^tfcit it is only where no other question than the right of jpmperiy is to be litigated, that an interpleader can be allowed {Sherman w. Partridge, 1 Ahi. Pr. R., 256 ; S. C, 11 Row. Pr. R., 154). Tlie Englifik ©ourts have held that th§ir act does not apply where THE ACTION OF INTEBPLEASER. 673 3 declaration contained a count in case, as well as in trover awrence^. Mathews, 5 Dowl. R., 149). JSTorto claims set up eonsequeBce of proceedings in equity {Stit^gess v. Claude, 1 Old. R., 505). Nor where the defendant has identified himself til the claimant by taking an indemnity from him (Tncker v. orris, 1 B&wl. R., 639). Nor where A. has given a promissory te to B. and B. has deposited it with C, who brings an action lOO it, is it any grouncj for obtaining relief under the act that an tion is anticipated at the suit of the creditor {Newton v. Moody, Dml. R; 582). But where two plaintiffs each claimed to be the lawful owner of e note, an interpleader issiie was ordered {Regan v. Serle, 9 Dov)l. ., 193). And it would seem that where the defendant's claim is the nature of a lien or pawn, he may interplead as to all but e value of his lien or claim to the property {Rest v. H&yes, 3 98. ds Finl. R., 113 ; S. C, 32 L. J., M. S. Ex., 129). It has len declared in England, however, that the act is seldom useful pawn transactions, inasmuch as the general rule is, that it will rt apply where the defendant claims amy interest in the subject- atter of the suit {Lvndsay v. Bofrron, 6 Com. Bench R., 291; 'raddock v. Smith, 2 Bimg. R., 84). On execution in a county court in England, against the goods ' a defendant in a suit of A. against B., goods in the hands of 0. ere seized, C. paid money to release them, and proceeded by terpleader. The goods originally belonged to B., but previous the execution had been pawned with a pawnbroker (it did not )pear by whom), and the duplicate had been deposited in the mds of C, byL., to redeem them, and hold them as security for le money advanced, and L. redeemed accordingly. There was 3 evidence to show the time at which or the circumstances under Met L. became possessed of the duplicate, or that he had any iterest therein. The court held that C. was entitled to the money lid to release the goods {Furlh&r Y.Sturmy, 5 Jur. If. 8., 45 ex). ; may be affirmed, on the whole, in opposition to the view before Epressed, that the principle of interpleader may be quite useful I many cases of pledge ( Vide Cody v. Potter, 55 Barb. R., 463). here are some other points settled by authorities, in respect to ledges, independent of statutory provision, which might have 3en noted under.previous heads, had the authorities been observed : the proper time. These points will now be noted without par- 85 674 IiAW OF PLEDGES. ticular regard to the order in which the decisions are referred to. The courts of New Jersey have held that, where coupon honds of a corporation are deposited as collateral to secure notes on , short time, it is presumed, in the absence of all special agree- ment, that they are not deposited as choses in action, to be col- lected by the pledgee, but as a pledge, to be sold after demand and notice, as in the case of a pledge of any article having a market value {Morris Cwnal, etc., Compamy v. Lewis, 1 Beas. R., 323). The courts of Kentucky have held that the deposit of bills of lading for cotton with a bank, without assignment or other writing, and without actual delivery of the cotton, is a sufficient transfer ' to pledge the cotton to the bank as security for the payment of money advanced by the bank upon the faith of the security so given, and that the lien acquired by the bank is paramount to a subsequent attachment lien {Petitt v. First, etc., Bcmk, 4 Bush's a., 334). But in the State of Californiaj where it appeared.that a chose in action was assigned and delivered as collateral security for the payment of a debt . due the assignee, the Supreme Court held that the assignment and delivery to the assignee of the chose in action was necessary to give the latter full authority to readily control the security and make it available. But it was decided that this did not necessarily constitute the transaction a chattel mortgage, as distinguished from a pledge, and that, under the cir- cumstances, the transaction was a pledge. It was further held in the case that the pledgee, of a chose in action pledged as security for the payment of a debt, is not authorized to sell the pledge without calling on the pledgor to redeem, and giving him reasonar ble notice of his intention to sell ; ordinarily, the chose in action could not be sold by the pledgee, but must be collected {Gay v. Moss, 34 Gal. R., 125). In a late case in the English Court of Common Pleas it appeared that A. was indorsee of a bill of lading, drawn in a set of three, of cotton, which had been lately landed, under an entry by A., at a sufferance wharf, with a stop therein for freight, which rendered it liable to the captain's lien for freight under 11 and 12 Vict., ch. 18, §4. On March 4th, A. obtained from M. an advance on the deposit of two copies of the bill, M. assuming the third to be in the master's hands ; on March 6th, the stop for freight being then removed, A. obtained from B. an advance on the deposit of the third copv of the bill which A. had fraud n- MISCELLANEOUS POINTS 675 ■ lently obtained. On March llth, B. knowing of M.'s prior advance, sent his copy of the bill to the wharf, and had the cot- ton transferred into his own name, and afterward sold it and received the proceeds. The court held that the bill of lading, when deposited with M., retained its full force, though the cotton had been landed and warehoused ; that there was a valid pledge of the cotton to M., and he could sue B. either for conversion of the cotton or for the proceeds of the sale. The case was taken to the Exchequer Chamber, and the judg- ment of the Common Pleas was affirmed, and the foregoing views reiterated {Meyersicdn v. Ba/rber, 2 Law R., 661 ; 2 Com. Bench B.; 38). A ease of considerable interest was recently decided by the Supreme Court of Indiana, which involved principles in relation to the subject of pledges. The case was this : A., being indebted to the Crescent City Bank, assigned, by an instrument in writing, to B., who was cashier of the bank, five hundred shares of the stock of the bank in trust, for the purpose of securing the debt. B. was not described in the writing as cashier, nor did he sign it • as such. It was stipulated in the writing that, in case of a failure to pay the debt in*installments, at specified dates, B. might sell the stock after giving twenty days' public notice. To a writ by C, to whom A. had. sold the stock, subject to the payment of the debt to the bank, alleging a tender of the amount of the debt, and a refusal to transfer the stock to him, it was answered that, upon a failure' to pay one installment of the debt, B., after giving the notice required, had sold the stock to the bank. The court held that the assignment of the stock was not to the bank, but to B,, personally, and not as cashier, and the sale to the bank was consequently valid. Gregory, C. J., dissented, but the decision of the court was as here stated {Crescent CityBanh v. Cwpjpentev., 'iloInd.R., 108). Taking a bill of sale of personal property at a price less than its estimated value, with an agreement that the original owner shall have the same again at any time after a fixed day, upon refunding the price, with a small additional sum for. trouble in trying to sell the same, was held, by the Supreme Judicial Court of Massachu-- setts, to amount only to a pledge, which is lost by giving possession of the property to the general owner {Kiniball v. Hildretji, 8 Allen^s B; 167 ; and iiide Walker y, Staples, 5 ii., 34), 676 JjAW of pledges. The Superior Court of the city of Kew Tork, sortie time since, decided that a mortgage of real property (with the bond to which it is collateral) is the subject of a pledge. Mortgages are now regarded as mere securities and chattel interests^ and may be pledged like other chattels and things in action (Oampbdl v. Far- her, 9 Bom. E., 322). A city) in the State of Indiana, pledged its stock in a railroad company as security for its bonds, issued in aid of the road ; and the bonds provided that the holders might exchange the same for a like amount of the stock, and be substituted as stockholders in the place of the city. The Supreme Court of the State held that the bondholders had a lien upon the whole stock, but that one bond could not bind more than one share of stock {Aurora v. Cobb, 21 Irvd. R., 492). The Supreme Court of Louisiana has held that, in order to create a pledge, it is necessary not only that delivery should accom- pany the private deed, but also that the instrument should exhibit the nature and extern uf the reciprocal rights and obligations of the contracting parties. And the same case holds that the assign- ment of a warehouse receipt, in the absence of an express stipula- tion that the property is given in pledge to secure the payment of a principal obligation, the amount of which is specified, does not confer a privilege upon the transferee {^Martin v. Creditors, 15 La. An. R., 165). By an act of the British parliament a penalty is imposed upon any person who shall detain the certificate of a vessel's registry, called the merchants' shipping act, and passed iii 1864 (17 and 18 Vict, ch. 104). The Court of Queen's Bench has recently decided that the effect of this act is to make any pledge of the certificate, for any purpose whatever, though for a good considera- tion, illegal and void; and, consequently, any detainer of the certificate, so pledged, illegal. And it was held that when the person entitled to the custody of the certificate for the purposes of navigation is also the owner of the ship, he has a right of action against the party so detaining the certificate, in addition to his remedy in the former character, by a complaint before a justice ; and this, though he be himself the pledgor, and for a good con- sideration. But the court questioned, whether an action at law would lie, by the party merely entitled to the custody, for the detainer, m^ide unlawful by the penal enactment ; and its seems MISCELLANEOUS POINTS. G77 that, if it would, the declaration should, in that case, aver absence of reasonable cause ( Wiley v. Grcmford, 1 Ellis, Best cmd SmitKs ff., 253, 265). It is oftentimes quite difficult to determine whether a given transaction is a pledge or otherwise. The following was held by the Supreme Court of Wisconsin not to be a pledge. A. gave his note, to which was annexed the following : " Having deposited ■with B. (the payee) school-land certificates, numbers, &c., with authority to sell the same, on non-payment of this note, at either public or private sale, and apply the proceeds herein without fur- ther notice." X^e certificates were assigned in blank, and, on maturity, and nonrpayment of the note, were sold to the highest bidder for a small sum, less than the amount of the note, which was credited thereon. B. afterward assigned the note to C, who recovered judgment thereon against A., which remained unsatis- fied. A. sued B. ior the conversion of the certificates. It was held that the transaction was not a- pledge of the certificates, and that A.'s interest in the land and certificates could not be extin- guished or converted by a sale, as in the case of chattels ; but that it was an equitable mortgage of A.'s estate in the land, upon which B., upon default in payment of the note, could take ^vasatageonly by a suit in equity for establishment of his lien, and for sale, if A. njeglected to pay principal and costs by a giyen day Qbmry v. Wood, 12 Wis. B., 413). A resent decision made by the Supreme Court of the State of New York inyolves the question as to wh9,t constitutes a pledge.. The pjaintiff employed a brokpr to procure a loan for him upon ste^k, Xhe broker applied to the defendant, who refused to make a loan. After informing the plaintiff of such refi^sftl, the broker went a second time to the defendant, who then said he would Ivy ths stpck. The plaintiff being told by the broker that the only way he could gpt the money was to sell the stock, said he would sell it. The broker and the plaintiff then went to the defend- ant's office and made a sale .of the stock to him, and a bill of sale was executed and the money paid. It was then agreed that if the plaintiff brought the money back in ten days the defendant would return the stock. The court held that the trans- action did not constitute a pledge, and that an action woidd not lie against the defendant to recover damages for a conversion of the stock, pjthough the amount of the loan was offered to the .678 LAW OF PLEDGES. defendant on the morning of the eleventh day after it was made ; but it was neither repaid nor tendered within the ten days. The eourl also held that if the transaction was & pledge, the defendant was entitled to interest on the loan, unless the agreement was that he would accept the principal without interest, if tendered within the time ; and that the tender of the principal, after the day, without offering to pay the interest which had accrued after the day, was insufficient. But it was expressly declared that the transaction was either a conditional sale or a mortgage; and that in neither case could trover be maintained, for a failure to return the property, upon a tender being made after the day limited for payment. Brady, J., dissented, and expressed the opinion that the stock was deposited in a way which constituted the transaction a pledge only and not a mortgage ; and that the offer of the plaintiff to pay the amount of the loan, on the morning after it became due, was sufficient to justify the action, unless the defendant had, at that time, lawfully sold the stock, which it was for him to show. But the opinion of the majority of the judges was adverse to this view, and the judgment was in favor of the defendant { Woodworth V. Morris, 56 Barl. E., 37). An important case has, quite lately, been disposed of by the Commission of Appeals of the State of New Tork, not yet reported, involving the question of pledges. The action was brought to recover the value of a cargo of com shipped from Chicago to Buffalo and thence to New Tork by V., consigned to the defend- ant. At Chicago Y. made his bill of exchange for $3,500 at sight, directed to defendants at New York. The plaintiff dis- counted the bill for Y. upon his transferring and delivering, as surety therefor, a bill of lading of the com. The defendant received the corn but refused to pay the biU, although notified of the transfer to the plaintiff before receiving the corn. The defend- ant claimed to hold the corn for a balance due them from Y., and that a draft for $1,220, paid by them for Y., should be deducted from the amount of recovery as money advanced to purchase the corn. The court held that the transfer of the bill of lading to the plaintiff, under the circumstances, transferred also the title to the corn therein described, conditioned upon the acceptance of the draft. Upon such acceptance the title would pass to the acceptor; but upon refusal to accept, the plaintiff's title continued unimpaired^ MISCELLANEOUS POINTS. 679 and the defendant was liable to the plaintiff for the money advanced npon the security of the bill of lading. And it was declared that, where the eotisignor is indebted to the consignee for advances, and has agreed to give him a prior security upon the property, the lien of the latter is good as against the former ; but that the consignee does not thereby obtain any right to the property, as against a Imafide pledge for vialue of the bill of lading made prior- to the delivery of the property to the consignee {Marine Bamik of GKir oago V. Wright, 6 Alhamy L. J., 241). The Superior Court of the city of New York has held that the cashier of a bank having the general charge and management of the business of the bank, by permission of the directors has the authority to transfer to another bank, as security for a loan, notes and drafts discounted by the bank ; and that the bank to whom such transfer is made has the right to collect such notes and bills, and the acceptors and indorsors cannot set up the defense of want of title. And it was further decided, that if the loan was made in good faith to the bank, the right of recovery on the notes and drafts is not affected by the fact that the. cashier gave his indi- vidual note, payable- to himself as cashier, for the amount of the loan ; and that the fact that the cashier misapplies the money so loaned to his own private purposes will not invalidate the contract, nor prevent the lending bank from collecting the securities {City 'Bmh V. FerJeins, i Bosw. R., 420). Under an arrangement between the Bank of Pennsylvania and certain other city banks, the bank delivered to them notes and bills of exchange -to about the sum of $800,000 as collateral secu- rity, on condition that the other banks should advance to the Bank of Pennsylvania $600,000 by redeeming its notes. The Supreme Court of the State of Pennsylvania held that this transaction was a pledge, and that the arrangement was not equivalent to an assign- ment for the benefit of creditors under the act of 1818, and was not, therefore, void because unrecorded {Griffin v. Rogers, 38 Bemrh. R., 382). The Supreme Court of Michigan has held that a writing given hy a debter to his surety, providing that, on the failure of the debtor to pay -within thirty days, the said surety might take immediate possession of the goods, etc., in possession of the debtor in the store and premises occupied by him, and out of the same sell so much as would pay the debt and a reasonable compensation for his 680 i^H^ OF PLEDGES. services and redeliver the balance to the debtor, is not a pledge, because no possession was given with it ; that it is a mere naked power, not coupled with any present interest, and cannot operate to give the surety any rights in the property itself until reduced to possession. And, therefore, it was held that the lien of an attachment, levied before possession taken under such instrument, must prevail over it {BoJ/mes v. Hall, 8 Mich. JS., 66). The Supreme Judicial Court of Massachusetts has held that one who has signed a note at the request of another, and received shares in a corporation as security, may bring an action on an agree- ment of the person at whose request the note is signed " to pay said note, and receive said shares in case the payee fail so to do," without offering to transfer the shares to that person {Tai/lor v. Cheever, 6 Gray's B., 146). The Supreme Court of Pennsylvania has held that a chose, which is transferred as collateral security, is put under the dominion of the creditor to make his claim out of it, and is notj in the nature or subject to the incidents of a pawn or pledge {Chamherabwg Im. Co. V. Smdth, 11 Pemn- B., 120). The Supreme Court of Indiana has beld that the holder of nego- tiable notes as collateral security for the debt of the payee is a holder for value, and may recover thereon against the maker, although he has paid the note to the payee without notice of the indorsement. But in such case he will be entitled to recover only the amount for which he holds the note as collateral security ( Valette v. Mason, 1 Smith's R., 89). And the same court held, where a judgment debtor deposited with the judgment creditor's attorney certain claims as securityj taking receipts therefor, in which the attorney engaged to apply so much of the profieeds as he should be able to collect to the payment ot the judgment in a suH in chancery by the debtor, that he was not entitled to a credit for said claims until they were collected, imless they had been lost or had remained uncollected through the creditor's negligenoe. The court held, also, that had the receipts purported to have been for actual payments, an allegation in the answer that they were for claims deposited as security, etc., would have required proof {Riser V. RuMidk, 8 BUcT^. R., 382). The courts have often held that a bill of sale, absolute on its face, may be shown to have been intended as a mortgage or a pledge by other writings and acts of th.e parties, and even by parol evi- MISCELLANEOUS POINTS. 681 denee, and shall, therefore, be so deemed and treated. In such ease, if the goods are delivered into the possession of the creditor, it will be regarded as a pledge, otherwise a mortgage ( Vide Dahunei^ V. Qrem,, 4 Har. dt MoH&n. R., 101 ; Ross y. Iforvell, 1 Wash. ^,,14; Brogden Y.Walker, ^ Ha/r. <& John. R., 285; Reed r. Jewell, 5 Greeid. R., 97 ; Walker y. Staples, 5 Attends R.j 34). The Supreme Court of Maine decided at an early day that the pyee of a n€gotiable note, who has indorsed it in blank and deliyered it in pledge to another as collateral security for his own debt, may still negotiate it to a third person, who may maintain an action on it, in his own name as indorsee, if the pawnee's liea be discharged before judgment {Fisher v. Bradford, 1 Qreenl. R., 28). A case decided by the English Court of Common Pleas, in 1862, involves some interesting questions in respect to a pledge, and is worth noting. The case was this : The plaintiff, Martin, being iadebted to one Bowers in the sum of forty pounds, entered into an agreement with him, whereby he agreed that Bowers should bave his horse, van, cart and two sets of harness "for what he owed him ; " and by the memorandum it was further agreed that Bowers should keep the articles mentioned until the plaintiff paid him the forty pounds ; and the niemorandum concluded thus : " The said Bowers has received into his possession said horse, van, cart, and two sets of harness, this 24th December, 1860." Bowers received into his actual possession the horse and van, and one set of harness ; but, having no place to put them in, he left the cart and the other set of harness with the plaintiff, ■vrith an understanding that he was to take them whenever he pleased. Bowers having become insolvent, the plaintiff got, back the horse, van and set of harness; but Bowers' assignee seized the whole of the things mentioned in the memorandum, and caused them to be sold by the defendant, an auctioneer. The court held, that being the only qjiestion raised at the trial, that there had been a sufficient delivery of the goods to Bowers to vest the pro- perty in him, subject to the right of the pawnor to redeem ; and that, consequently, the plaintiff was not entitled to recover. Although this was the result of the case, several questions of importance were passed upon and settled by the court in respect to the contract of pledge, not shown by the points, involved ir the flnal result. 86 682 LAW 01 PLEDGES. Erie, 0. J., in his opinion, said : " The effect of this arrange- ment was, that the goods were handed to Bowers as a pledge. Bowers stood in the position of a pawnee. Now, I take the law to be that, to constitute a valid pledge, there must be a delivery of the article, either actual or constructive, to the pawnee ; and inas- much as the memorandum purported to assign the property to Bowers, and as the horse and cart remained in the stable of Mar- tin, the question is whether there has been a valid pledge here. The evidence on this point was that Bowers, having no stable, requested Martin to allow the cart and harness to remain in his. In the written agreement the articles are stated to be in the pos- session of Bowers. Possession is an equivocal term; it may mean either actual, manual possession, or the mere right of pos- session. The question is whether, as between these parties, the words used constitute the premises of Martin the premises of Bow- ers for this purpose. I am clearly of opinion that the intention of the parties will be carried out by holding them to be so. It has, over and over again, been decided that the words of an agree- ment are to have effect according to the mind and intention of the parties. Thus, a delivery of goods . in satisfaction of a debt has been held to amount to payment {See Ca/rman v. Wood, 2 M. and W., 465). So, where goods have been purchased and left in the possession of the vendor, for a special purpose of the vendee, it has been held to amount to a delivery {^Elmore v. Stone, 1 Tamit., 488). So, where a horse was sold, but left in the stable of the seller, being only removed to another stall, that was held to amount, as between the buyer and the seller, to a delivery. And in many instances the warehouse of the vendor has been held to be the warehouse of the purchaser, in order to carry out the inten- tion of the parties. I therefore think there was, in this case, a sufficient delivery of those articles to the pawnee." The other three judges who sat in the case concurred in the opinion of the chief justice. Willes, J., incidently declared that it had been held that the debt may be taken into consideration in mitigation of damages in an action for converting the pledge ; that is to say, where the pledgee illegally disposes of the pledge, or otherwise converts it, in an action against him by the pledgor, the pledgor can only recover the value of the pledge, less the debt for which it was held in security. The question whether the pawnee may sell the pledge, where MISCELLANMOUS POINTS. 683 10 day has been fl^ed for the payment of the sum for which the ihattel is impignorated, was touched upon, but not definitely lecided. Willes, J., said : " As to the right of the pawnee to sell he pledge, whenever that question comes to be decided, it will be lecessary to refer to the civil law as stated in Mackeldey's Systema Turis Eomani, title Pledgee, from which, probably, Mr. Smith, pho was well acquainted with the Koman laws, drew what is tated in the note referred to, and for the application of which to he laws of England the case of Pothonier v. Dawson, Holt, 383, 3 an authority. It may be, on examination, that Mr. Smith is ight. I do not mean to express any opinion ; but I think it right say thus much'^ {Ma/rtin v. Peid, 11 Com. Bench P., N. S., ■30; S. a, 103 Eng. G. P.P., 730). In Pothonier v. Dawson, referred to, it was laid down by libbs, 0. J., thait if goods are deposited as a security for a loan f money, such deposit constitutes more than the right of Uen ; nd it is to be inferred that the contrrct between the parties is hat, if the borrower do not repay the advance, the lender shall be ,t liberty to reimburse himself by the sale of the deposit. In the n'otes to Coggs v. Bernard {\ SmitKs Leading Cases, th ed., 171), it is said : " A. pawn differs, on the one hand, from a Im, which conveys no right to sell whatever, but only a right to etain until the debt, in respect of which the lien was created, has een satisfied ; and, on the other hand, from a mortgage, which onveys the entire property of the thing mortgaged to the mort- agee conditionally, so that when the condition is broken the roperty remains absolutely in the mortgagee. Whereas,, a pawn ever conveys the general property to the pawnee, but only a peeial property in the thing pawned ; and the effect of a default 1 payment of the debt by the pawnor is not to vest the entire roperty of the thing , pledged in the pawnee, but to give him a ower to dispose of it, accounting for the surplus ; which power, ' he neglect to use, the- general property of the thing pawned con- nues in the pawnor, who has a right at any time to redeem it." !ut these questions have all been discussed in the proper pla<5e, id need not be dwelt upon here. It may not be amiss in this chapter to make a brief reference » a case lately decided by the Supreme Court of Indiana, in vol v ig the contract of pledge, which contained special provisions, he doctrine of the case is thus expressed : Where a person, being 684 LAW OF PLEBGhES. indebted to another on account, deposited with the latter as col- lateral security for such indebtedness a note and a mortgage to secure the same, executed to the pledgor by a third person, the deposit being made upon the express condition that said note and mortgage should not be sued upon or foreclosed until every legal effort to collect said indebtedness bad been made by th? pledgee, who also agreed to return the note and mortgage upon payment of said indebtedness ; in a suit on said note by the pledgee against the maker, the pledgor being made a defendant to answer as to his allied assignment by delivery, an answer setting forth these facts, and alleging that the pledgor at the time of paid deposit, and ever since, had owned property sufficient to pay said indebt- edness, and out of which the same might have been made, bu* that no effort had ever been made to collect said indebtedness, presented a good defense for all the defendants {Bwrr v. Kane, 32 Ind, M. ; and vide 3 JJh. E., 30). Another case, hereinbefore referred to upon another point, went off on the same prinoijAe. In that case the defendant, a pawn- broker, had advanced £200 to a trader on a deposit of silks, and had entered the transaction in his books as several advances, each of less than ten pounds. The trader became bankrupt ; his assignees sued the defendan'fr in trover, and obtained a verdict. Tindal, 0. J., ^ho tried the cause, directed the jury to find whether the goods had been deposited on a contract to pay more than five per cent interest. They found the question in the affirmative, and the plaintiff, consequently, had a verdict. On motion for a new trial, Park, J., referred to the case of Cowie v. Ha/rris (1 Mood. & Malk. R., 141), and citing Lord Tenterden's ruling in that case, said that it was a question for the jury whether the whole were really one transaction and a mere contrivance for obtaining the higher interest on the whole sum, in which case it was void, or whether the advances were really distinct. The court unanimously held the ruling to be right, and refused to disturb the verdict {Tregoning v. Attenborough, 7 Sing. M., 97). And in a case in the Court of Chancery of England, it was said by Cottenham, Lord Chancellor, that " there is a fraud in advancing money at different times," referring, doubtless, to loans under peculiar circumstances, like those in the case in 7 Bingham {Fitch v. Rochfort, 1 Hall cfe TwelU R., 255; S. C, 1 Mao. <& Gord. R., 184; S. C, 13 Jur., 351). The practical effect of the statutory restrictions on a pawnbro- ker's profits has, however, been greatly narrowed by the doctrine hereinbefore referred to, that they only affect him when dealing in his business as a pawnbroker. This was authoritatively settled in the case referred to where the assignees of a bankrupt sued to recover different articles which the bankrupt bad pledged wij;h the defendant, a pawnbroker. One such transaction took place on April 8th, 1841, and an entry had been made in a book belonging to the defendant (but not kept according to the requirements of the pawnbrokers' act) to the following effect : To be held by him as a security for £115 this day lent, with interest thereon from the date hereof, at the rate of fifteen per cent per annum until pay- ment ; and in default of payment on the 18th of October then STATUTES BELATIN^' TO PLEDGES. 689 text, I do hereby authorize the said E. Attenboroagh to sell and [ispose of such articles, either by public sale or private contract, ind to repay himself thereout." The defendant had made no mtry of this transaction, as required by the statute, nor did he give he bankrupt any duplicate ; and the question raised was, whether le was acting as a pawnbroker when he advanced the money. The lourt considered that by the statute 39 and 40 Geo. Ill, ch. 99, sec. 2, he pawnbroker was allowed to take twenty per cent on goods )awned, but it did not mention any case where the sum should be hove ten pounds, apparently assuiriing that no sum above that imount Would ever be borrowed of a pawnbroker. Looking at i and 3 Yict., clT. 37, the court considered that usurious loans of his d^seriptibn were lawful, as the statute 39 and 40 Geo. Ill, ch- 19, only applied to loans not exceeding ten pounds. Judgment .ccordingly was for the defendant {Pennell v. Atteniorough, 4 2'ueen's Bench H., 868 ; S. C, 5 Burn's Justice, 474). To the same effect is the decision of the Court of Chancery, tiade some years later than the case of Pennell y. Atteniorough, md which has been before referred to. The Yice-Chancellor of ilngland had granted, an injunction restraining the defendant from elling jewelry deposited with him as security for £1,383. The ffoperty had been pledged by the plaintiff, a married woman, and he plaintiff having paid all interest due up to a certain time, igned several contract notes setting, forth the terms of the deposit, nd duplicate copies of such contracts were given to her by the iefendant. These contracts stipulated for interest at the rate of hreepence per one pound sterling per month. Such interest, fter tlie first month, to be calealated half-monthly, with power to he defendant to sell twelve months after date, and to account for urplus or claim for deficiency, as the case might be, if demanded' pithin three years ; in fact, embodying in this contract nearly all he special conditions peculiar to a transaction under the Pawn- irokers' Act. The amount mentioned in each contract was above en pounds; and the contention wais that the transaction was an rdinary pawnbroking contract, and, therefore, void. But Lord /ottenham, on appeal, reversed the vice-chancellor's decision, and iSsolved the injunction without calling on the appellant's counsel a reply. His lordship held that pawnbrokers were under no disa- iHties, except that they were bound by the act if they advanced ams under ten pounds. Therefore, transactions aibove ten pounds 87 690 L-AW OF PLEDGES. were to be looked at just as if the Pawnbrokers' Act did not exist at all. The 2 and 3 Vict., ch. 37, provides that, as to all loans under ten pounds, pawnbrokers shall be confined to their own act; and as the repeal of the usury laws had left every one free, with respect to loans above ten pounds, and there was nothing in the act to incapacitate pawnbrokers, the act 39 and •lo Geo. Ill, ch. 99, ha,d nothing whatever to do with the transaction, which was just as binding as if the pawnee were not a pawnbroker. A pawnbroker, like every one else, may avail himself of the provisions of 2 and 3 Vict., ch. 37, for the purpose of obtaining a higher rate of interest than five per cent ; and a contract for that purpose, made upon the deposit of goods, will not be invalid merely because it contains stipulations usual in an ordinary pawnbroking transaction {Fitch v. Bochfort, 13 Jur., 351 ; 8. a, 1 Mac. and Qord. R., 184 ; S. C, 1 Hall and TwelW £., 255 ; and vide, also, Turquamd v. Mosedon, 7 Mees. amd Welsh B., 504). So generally is the doctrine laid down by Lord Cottenham now recognized and acted upon, that the pawnbrokers of England in large business constantly make-, advances, both above and below £10; the only practical difierence being that they do not give duplicates for goods pledged for sums above the limit fixed by statute. It appears, however, that by the act abolishing the Eng- lish usury laws, it is expressly provided that the rates of interest allowed by law to be taken by pawnbrokers are to remain unaf- fected by the repeal (2 and 3 Vict., ch. 37, § 3 ; 17 and 18 Vict, ch. 90, § 4). V f . As a question of practice, it has been decided that where an endeavor is made to avoid a pawnbroking contract, on the ground that it is forbidden by the statute, it is not sufficient to aver that it was made "corruptly and against the form of the statute agreed, etc." The illegality must be stated with certainty ; and if it depends on a particular statute, that statute must be pleaded {Twrquam.d \. Mosedon, supra.) The courts hold that the duplicate or declaration given to the pawnor, under the pawnbrokers' act, must generally be produced when the pawnor applies to redeem the goods ; but when goods have been stolen, or otherwise unlawfully obtained, and then pawned, the pawnbroker has no right to insist upoa the produc- tioq of the duplicate, nor is the real owner bound to produce it STATUTES RELATING TO FLEDGES. 691 {f>eet V. Baxter, 1 8ta/rk. B., 472 ; Packer v. GilUes, 2 Gamp. B., 336). As most of the American States have laws in respect to the business of pawnhroking, some of which are, douhtless, similar to the English pawnbrokers' act, these points decided under the provisions of the latter act may be nsefnl for reference in this country, and applicable to cases arising here. In the State of If ew York there seems to be one general enactment in respect to pawn- brokers and property pledged with pawnbrokers ; and there have been special laws passed relating to pledges or pawns, which are still in force. « In 1817 an act was passed concerning Indians residing within this State, which makes it unlawful for any white person, under any pretense, or on any account whatever, to receive from any Indian, residing on any tract of land belonging to or occupied by the Mohekonnic or Stockbridge Indians, or on the reservation lands of the Oneida or Brothertown Indians, any article or articles whatsoever, by way of pawn or pledge ; and provides that every person who shaU receive such pawn or pledge shall forfeit the sum of twenty-five dollars, to be recovered in an action of debt, in the name of the Indian from whom he shall have received such pawn or pledge, in any court having cognizance thereof, with costs. And that every such pledge or pawn, or the value thereof, shall also be recoverable, with costs, by the Indian from whom the same shall have been received, in an action of replevin or trover {Laws of 1817; oh. 143 ; 4 Stat, at La/rge, 359). By an act of the legislature, passed in 1847, it is provided that any person who shall receive from any Indian of the Seneca nation, either absolutely in payment or exchange, or in pawn or pledge, for the payment in whole or in part for any spirituous liquor or intoxicating drink, sold or delivered, or to be sold or delivered to such Indian, or to any other Indian of the said nation, any blanket, Tearing apparel, implement or other goods or chattels,. shall for- feit ten times the value of the article so received, to be sued for and recovered with costs by the attorney of the said Seneca nation and in their name ; and the amount recovered and collected shall be paid over for the benefit of the said Seneca nation ; and any Indian of the said Seneca nation is declared to be a competent witness to prove the receipt of such goods or chattels, or the sale or gift of £i,ny intoxicating drink to any Indian of the said nation. 692 LAW oil PLEJ)&]^S. And it is further provided that any article or property sold, exchanged, or pawned or pledged as aforesaid, for spirituous liquor or any intoxicating drink, may be reclaimed and recovered, by the Indian so selling or pledging the same, from the person to whom the same shall have been sold or pledged,, or from any other person to whom the same may have been delivered, assigned, sold or transferred ; and for the recovery of the same such Indian may maintain an action in any court having cognizance thereof; and in case such action shall not be brought or commenced within twenty days from the sale or pledge of such article or property, then it is made lawful for the peacemakers of the reservation to which such Indian belonged, if any such peacemakers shall be chosen accord* ing to the provisions of the act, to demand, sue for and recover the article or property so sold or pledged, in any court having cognizance thereof, in and by their name of office ; in which action the Indian who made such sale or pledge is made a competent witness for the plaintiffs {Lmos of 1845, ch. 150, § 4; 4 Stat, at Lwrge, 378). In 1849, the legislature of the State passed another act for the benefit of Indians, by which the provisions of the act of 1845, relative to pawns or pledges made by Indians for liquor, were extended to any and all Indians residing within the State, irrespec- tive of the tribe {Lam o/1849, ch. 420, § 2 ; 4 Stat, at Large, 392), And by an act previously passed in 1813, it. was enacted that no pawn taken of any Indian within the State, for any spirituous liquor, shall be retained by the person to whom such pawn shall be delivered ; but the thing so pawned may be sued for and recovered, with costs of suit, by the Indian who may have deposited, the same, before any court having cognizance thereof {Laws of 1813, ch. 29 ; 4 Stat, at Large, 342). By the the act of the legislature passed in April, 1842, to extend the exemption of household furniture and working tools from distress for rent and sale, under execution, it is provided that every assignment, sale or pledge of articles which are exempt by law from execution, and every levy or sale of such articles or pro- perty by virtue of an execution, by consent of the defendant therein, shall be void, where the consideration, or any part thereof^ for which such assignment, sale or pledge was made, or for the debt on which judgment was rendered in any court, and on which puch execution Was issued, was for the sale of intoxicating liquors ; STATUTES RELATING TO PLEDGES. 693 and in any fttJtion eominenced for the recovery oi the value of the property sold as aforesaid, the person for whose benefit such sale or transfer was made may be called and examined as a witness as to the fact of the sale of intoxicating liquors so made, in the same manner and subject to the same penalties as if called in any other case {Laws 0/184:2, ch. 157, § 3 ; 4 Stat, at Large, 626, 627). In respect to the business of pawnbroking in the State, it is enacted that no person shall carry on the business of a pawn- broker, by receiving goods in pledge for loans at any rate of iaferest above that allowed by law, except in those cities where by their charters the corporations have the power of licensing such pawnbrokers. A violation of this provision of the statute is deemed to be a misdemeanor. The statute further provides that whenever any person shall make oath, before any justice of the peace, police justice or assistant justice, that any property belonging to him has been embezzled or taken without his consent, and that he has reason to believe and suspect, and does suspect, that such property has been pledged with any pawnbroker, such justice, if satisfied of the correctness of such suspicions, shall issue his warrant, directed to any constable of the city or place, commanding him to search for the property so alleged to have been embezzled or taken, and to seize and bring the same before such justice. And the constable to whom any such warrant shall be directed and delivered is declared to have the same power to execute the same, and he must proceed in ■ the same manner, as in the case of a search warrant issued upon a charge of larceny. It is further provided by the statute that, upon any property so seized by virtue of such warrant being brought before the magis- trate who issued the same, he shall cause such property to be delivered to the person so claiming to be the owner thereof, on whose application the warrant was issued, on his executing a bond as specified by the statute ; and if such bond be not executed witliin twenty-four hours, the justice is required to cause the pro- perty to be delivered to the person from whose possession it was taken. The bond is required to be in a penal sum equal to double the value of the property claimed, with such surety as the justice shall approve, to the person from whose possession the- property was taken, with a condition that the person so claiming the same will on demand pay all damages that shall be recovered 694 I^AW OF PLEDGES. against him in any suit to be brought within thirty days from the date of such bond, by the pawnbroker from whose possession the said property was taken (1 E. S., paH 1, ch. 20, iit. 19, art. 3, §§ 9- 13 ; 1 Sjtat. at Zarge, 659, 660). These seem to be all of the statutes of a general nature, or of a general application in the State, now in force relating to pledges or pawns, pawnbrokers, or the business of pawnbroking ; but in several of the larger cities, like New York, Brooklyn, Albany, etc., the charters contain provisions for the licensing ot pawnbrokers, in which cases the business of pawnbroking is usually regulated by the ordinances of the municipal corporation. CHAPTEE Lin. STATUTORY PEOVISIONS IN EESPECT TO THE SUBJECT OF PAWNS OB PLEDGES LAWS OF THE NEW ENGLAND STATES UPON THE SUB- JECT DECISIONS OF THE COURTS UNDEE THE STATUTES. In the State of Maine, pawnbrokers are to be licensed by the municipal ofiBcers of the towns, and must be persons of good moral character, and their licenses must be renewed yearly, and they are subject to a penalty not exceeding $100 for doing business without a license. Every pawnbroker is required to keep a book, in which he must enter the date, duration, amount and rate of interest of every loan made by him, an accurate account and description of the property pawned, jand the name and residence of the pawnor, and, at the same time,; deliver to said pawnor a written memorandum signed by himr containing the substance of the entry, and, at all reason- able times", submit said book to the inspection of any officer authorized to grant the license ; and for every violation of this provision he will forfeit twenty dollars. No pawnbroker in the State must, directly or indirectly, receive any rate of interest greater than twenty-five per cent a year on a loan not exceeding twenty-five dollars, nor more than six per cent on a larger loan made upon property pawned, under a penalty of $100 for each offense. 'Na pawnbroker can legally sell any property pawned until it has remained in his possession three months after the expiration STATUTES RELATING TO PLEDGES. 695 of the time for which it was pawned. And all such sales are required to be at public auction by a licensed auctioneer ; and after notipe of the time and place of sale, the name of the auc- tioneer and a description of the property to be sold are published in a newspaper in the town where the property is pawned, if any ; and, if not, posted in two public places therein at least two weeks before the sale. And all sales, otherwise made, are declared void ; and the pawnbroker undertaking to make the same will forfeic twenty dollars for every offense. After deducting from the proceeds of any sale the amount of the loan, the interest then due and the proportional part of the expenses .of the sale, the pawnbroker is required to pay the balance to the person entitled to redeem such property, if no sale had been made ; and if not so paid on demand, he will forfeit double the amount so retained ; one-half to the pawnor and the other half to the use of the State {Rev. Stat, of 1871, ch. 35, §§ 1-5). The Supreme Court of Maine has held that if one pledges, as collateral, a demand on which interest is accruing at stated periods, some of which occur before his debt so secured becomes due, such pledge necessarily implies authority to the pledgee to collect and receive the interest as it becomes payable, and hold it on the same terms as the demand itself, especially if the collateral be a bond with interest coupons attached, which the pledgor does not cut off before the bond is pledged {And/roscoggin R. M. Co. y. Auburn Bcmk, 48 Maine R., 335). A case came before the Supreme Court several years ago, in which it appeared that the principal debtor in a promissory note conveyed to his surety certain timber, by writings in these terms ; " In consideration that D. has become my surety to W. for $3,000, I hereby assign to him all the timber," etc. The surety also bor- rowed money of the same lender ; and afterward, by indorsement, assigned all his interest in that instrument to O., whom he subse- quently directed to apply the proceeds of the timber, first, to the last mentioned debt of his own, and the balance to the debt of $3,000 due from his own assignor. The court held that the con- veyance to D. was not absolute, but a pledge and trust to pay the debt for which he had become surety, and that he had no right to appropriate the procieeds to his own debt ( Ware v. Otis, 8 Maine S; 387). 696 LAW OF PLEDGES. These authorities do not involve the constnaction of any of the provisions of the statute? of the State upon the subject of pledges ; but they are, nevertheless, of interest, as giving a construction to the particular transactions which came before the court for adjudi- cation. By the statutes of New Hampshire, no mortgagee of personal property is permitted to sell or pledge any such property by him mortgaged, without the consent of the mortgagor in writing upon the mortgage, and on the margin of the record thereof, in the oflSce where it is record,ed, upon pain of being fined double the value of the property pledged {Gen. Stat., 1867, ch. 123, §§ 13, 15). It is also provided by statute that, where no time is limited for the payment of the d.ebt secured by a pledge or redemption of the property pledged, the pledgee may sell the same, or so much thereof as is needful, at auction, notice of the sale being given by posting notice thereof in two or more public places in the town where such property is situated, and if the value of the property exceeds $100, by publishing notice thereof three weeks at least before the sale. A notice of such sale is also req[uired to be served on the pledgor or general owner, if resident of the county, the same number of days before the sale, stating in writing the time and place of sale, the property to be sold, and the amount of the lien thereon. The balance of the proceeds of the sale, if any, after payment of the amount of the pledge and the reasonable expenses incident to such sale, is required to be paid to the pledgor on demand {Gen. Stat., 1867, ck. 125, §§ 3-7). Personal property pledged in New Hampshire may be attached or taken on execution against the pledgor, the attaching officer or execution creditor paying or tendering to the pledgee the amount of his claim "on the property {Gen. Stat., 1867, ch. 205, § 17; ch. 217, §3). A case came before the Siipreme Court of the State, in which it appeared that two tables which were in a shed attached to the defendant's store were pledged by the owner to the plaintiff, both parties to the pledge being present. The plaintiff moved one of the tables nearer to the other. Tlie parties then left the shed without notifying the defendant. The defendant afterward con- verted the tables to his own use. The court held that the plain- tiff's possession was sufficient as against the defendant {Tiibets v Ilanders, 18 If. H. R., 290). STATUTES RELATING TO PLEDGES. 697 The Supreme Court Las lield that a pledgee of chattek sum- moned as a trustee is entitled to a fair compensation for expenses attending the keeping, and has a lien therefor against the creditor as well as the pledgor {Bills y. &mAth., 28 N. H. R., 36©). And the same court has held that a pledgee of personal property is answerable in a trustee process only for the balance which remains in his liands after satisfying his legal and. equitable claims. And it was further held that the power to sell a pledge is not affected by a trustee suit {Ghoupmam, v. Gale, 32 N. M. R., 141). The Supreme Court has also held that the payee of a negotiable promissory note, secured by a pledge, may transfer the pledge with the note, and will not be liable in trover for a subsequent conver- sion by the assignee (C'os* v. Emerson, 23 N. R. R., 38; and vide Green, v. Qrahcmi, 46 *&., 169 ; Bailey v. Colby, 34 ih., 35). And it was also decided by the same court that a pledge is not released by conjmitting the body of the debtor to prison upon an tasecution for the debt {Morse, y. Woods, 5 N. H. R., 297). And the same court has also declared, in opposition to the general rule upon the subject, that where one of several joint insolvent debtors pledges to the creditor the note, of an insolvent person, as collateral security without any restriction, the creditor has an implied authority to release the maker upon his paying a part .of the sxim due on the note {Eceter BamJc v. Gordon, 8 JSf. H. R., 66, 82). In the State of Vermont the only statutory provision found, upon the subject of pledges, is the one which declares that personal property, held by any person as pledgeCj may be attached and levied upon as the property of the pledgor, subject to the riglit, title and interest of such pledgee {Gen. Stat., 1870, tit. 15, ch. 33, §31). In the State of ]!4iassa.chusetts the mayor and _aldermen, oi selectmen of any city or town, which has adopted by-laws therefor, may license suitable persons, to carry on the business of pawn- brokers within their respective cities and towns. The license must designate the place where the business is to be carried on^ contain such conditions and restrictions as may be prescribed by such by-laws, and will continue in force one year, unless soonei revoked; and any person carrying on such business without being licensed is subject to a. penalty of fifty dollars for each oifense {Gen. Stat, oh. 88^ §§ 28-30). It is provided, by the statutes of Massachusetts that personal 88 698 i^AW OF PLEDGES. property of a debtor that is subject to a pledge, and of which the debtor has the right of redemption, may be attached and held as if it were unincuinbered, provided that the attaching dreditor pays or tenders to the pawnee the amount for which the property is so liable within ten days after the same is demanded. And it is made the duty of the pledgee, when demanding payment of the money due to him, to state, in writing, a just and true account of the debt or demand for which the property is- liable to him, and deliver it to the attaching creditor or officer. If the same is not paid or tendered to him within ten days thereafter, the attachment will be dissolved, and the property must be restored to him ; and the attaching creditor will, moreover, be liable to him for any damages he has sustained by the attachment {Gen. Stat., ch. 123, §§ 62, 63). The statute further provides that the holder of personal pro- perty, in pledge for the payment of money or the performance of any other thing, may, after failure to pay- or perform, give written notice to the pledgor that he intends to enforce payment or per- formance by a sale of the pledge ; which notice miist be served, and, together with an affidavit of service, be recorded in the clerk's office of the city or town where the pledgor resides, in the same manner, and with the like effect, as provided for notices of foreclosure of mortgage. And 'if the money to be paid, or other thing to be done, is riot paid or performed, or tender thereof made, within sixty days after the notice is so recorded, the pledgee may sell the pledge at public auction, and apply the proceeds to the satisfaction of the debt or "demand, and the expenses of the notice and sale; and any surplus must be paid to the party entitled thereto on demand. These provisions of the statute, however, do not authorize the pledgee to dispose of the pledge contrary to the terms of the contract under which it is held, nor limit his right to dispose of it in any other manner allowed by the contract or the rules of law {Gen. Stat., oh. 151, §§ 9-11). There is also a provision of the statute which declares that every factor or agent intrusted with the possession of merchandise, or a bill of lading, consigning merchandise to him for the purpose of sale, shall be deemed to be the true owner thereof, so far ^ to give validity to any iona fide contract made by him with any other person for the sale of the whole or of any part of such merchan- dise. And if any person takes such property as a pledge from STATUTES RELATING TO PLEDQES. 699 such factor or agent with notice that such factor or agent holds the same simply as factor or agent, then the pledgee will acquire the same interest as though such factor or agent had been the actual owner thereof, provided the pledge was taken in good faith, and with probable cause to believe that the factor or agent had autho- rity to make the pledge, and was not acting fraudulently. If, however, the merchandise is accepted in deposit or pledge for an antecedent debt due from the factor or agent, the perion receiving the same will thereby acquire no other or further right, or interest in, or authority over, or lien upon, the same, than the consignee or grantor might have enforced against the actual owner {Qen. Stat., ch. 54, §§ 2, 4, 6). And there is also a provision of the statute that, in transfers of stock as collateral security, the debt or duty which such transfer is intended to secure shall be substantially described in the deed or instrument of transfer; and, further, that a certificate of stock issued to a pledgee or holder of such collateral security shall express on the face of it that the same is so holden, and the name of the pledgor must be stated therein, who alone is made responsi- ble as a stockholder {Gen. Stat., ch. 68, § 12). No special statutory provision in respect to pawns or pledges is found in the laws of Rhode Island or Connecticut, and hence the subject is controlled by the rules of the common law in those CHAPTEE LIV. BTATUTOET PEOVISIONB IN EEBPECT TO THE StTBJECT OF PAWNS OE PLEDfJES LAWS OF THE TEEEriOEY OF AEIZONA EELATING TO PLEDGES AND PAWNBEOKING LAWS OF THE SEVBKAt STATES UPON THE SUBJECT, EXCEPTING THOSE OF NEW YOEK AND THE NEW ENG- LAND STATES, WHICH AEE CONSIDEEED IN THE TWO PEECEDING CHAPTEES. In the territory of Arizona, it is provided by statute that every person or firm engaged in the business of pawnbroker or pledgee, 3r of the purchase or sale of second-hand clothing, wares or mer- ihandise, shall keep a register book, of the size known by stationers w six quarto extra cap, in which shall be made an entry, with ink, in the English language, at the time of loan, pledge or purchase, a 700 L^W (f^ PLEIH}BS. true and accurate account and description of every article of pro- perty pledged or purchased, the name and residence of the pledgor or vendor, the date, duration, amount and rate of interest of every loan made, or the date and hour of purchase of any property pur- chased ; and shall, if any loan be made or property pledged, at the time of the loan or pledge, deliver to the pledgor a written or printed memorandum, signed by him, her or them, containing a copy of said entry ; and shall in like manner keep an account of all sales made by him, her or them. The rate of interest or per centage which may be lawfully charged by any pawnbroker or pledgee must not exceed five p ■;■ cent per month, in advance, on all loans exceeding twenty doUa ■ , which will include all charges for discount, commissions, storage, brokerage, wasting, and all and every charge or charges there- upon, nor can the interest at any time be compounded. And it is declared that any pawnbroker or pledgee who shall directly or indirectly charge or receive any interest greater than five per cent per month, or by charging commissions, discount, bro- kerage, storage, wastage, or other charge, or shall attempt to increase said interest, shall forfeit three times the value of the article pledged or to be pledged, to be recovered by the owner or pledgor in a civil action, which may be brought by the party aggrieved. The statute further provides that no pawnbroker or assignee shall sell or dispose of any article pledged to them and unredeemed until it has remained in his, her or their possession three months after the last day of redemption ; and all such sales must be at public auction, upon notice of five days, published in some news- paper printed at the place where the sale takes place ; and if no newspaper is there printed, then by printed notices in two public places five days before the sale, giving the place where the article will be sold, and a list of said articles, which sales are required in all cases to take, place in the town or city where such articles are pledged. Upon a sale of any pawn or pledge, the pawnbroker or pledgee may retain from the proceeds of the sale the amount of the loan, the interest thereon at the rate provided, and ten per cent on the loan additional for the expense of the sale, and the balance must be paid to the person entitled to redeem such property ; if no sale had been made, and if not so paid on demand, three times the value STATUTES BELATINQ TO PLEDGES. 701 iiereof will be forfeited, to' be recovered by the owner or pledgor in a civil action to be brought by him therefor. Every pawnbroker, or pledgee, or purchaser or seller of second- hand clothing, etc., is required to exhibit his, her or their register hook ; and all articles received in pledge or purchased by him, her or them, and his, her or their account of purchases or sale, to any sheriff, constable or police officer possessing the necessary writ or warrant to search for personal property ; and the register book must be produced to any sheriff, constable or police officer for inspection, whenever so required by the order of any committing isagistrate of the county, which order may be made whenever the magistrate deems it expedient for the purpose of ascertaining the place or concealment of any stolen property. Every violation of any of the provisions of the statute by any pawnbroker, pledgee, or purchaser or seller of second-hand cloth- ing, etc., is made a misdemeanor, punishable by a fine not less than $50 nor exceeding $300, or by imprisonment in the county jail for a term not exceeding six months, or by both such fine and impri- Pfinment. Such fines, when collected, are to be paid into the tueasiuy of the county where collected, to be applied to the support of the public schools of the county (Comp. Loads of 1864r-187l, ch. 88). In the State of California the statute requires every person or firm engaged in the business of pawnbroker or pledgee, or of the purchase or sale of second-hand clothing, wares or merchandise, to keep a register book of the size known by stationers as six quarto extra cap, in which shall be made an entry, with ink, in the Eng- lish language, at the time of loan, pledge or purchase, a true and accurate account and description of every article of property pledged or purchased, the name and residence of the pledgor or vendor ; the date, duration, amount and rate of interost of every loan made, or the date and hour of purchase of any. property pur- chased ; and if any loan be made or property pledged at the time of the loan or pledge, to deliver to the pledgor a written or printed memorandum, sjgned by him, her or them, containing a copy of said entry and an account of all sales made by him, her or them, must, in like manner, be kept. ■ Every pawnbroker, ox pledgee, or purchaser or seller of second- hand clothing, etc., is required to exhibit his, her or their register book ; and all articles receivedin pledge or foreclosed by him, her 702 LAW OF PLEDGES. or them, and his, her or their account of purchases or sales, to anj sheriff, constable or police officer possessing the necessary writ or warrant to search for personal property. And it is made the duty of every such pawnbroker, pledgee, purchaser or seller to produce his, her or their register book, for inspection, to any sheriff, con, stable or police officer, whenever so required by the order of any committing magistrate of the county ; and such order may be made by such magistrate whenever he shall deem it expedient for the purpose of ascertaining the place of concealment of any stolen property. And every violation of the statute by any such pawn- broker, pledgee, purchaser or seller is made a misdemeanor, pun- ishable by a tine not less than $50, nor exceeding $500, or by imprisonment in the county jail for a term not exceeding six months, or by both such fine and imprisonment (3 Oen. Laws 1864-1870, §§ 9077, '9079, sujyplermnt). It is further provided by statute that the rate of interest or per eentage, which shall be lawfully charged by any pawnbroker or pledgee, shall not exceed four per cent per month, in advance, on all loans exceeding twenty dollars, which shall include all charges for discount, commissions, storage, brokerage, wasting, and all and every charge or charges thereupon ; and the interest cannot at any time be compounded. And any such pawnbroker or pledgee who shall violate this provision of the statute will for- feit three times the value of the article pledged, or to be pledged, to be recovered by the owner or pledgor in a civil action which may be brought by the party aggrieved. No pawnbroker or pledgee can legally sell or dispose of any article pledged to him or her, and unredeemed, until it has remained in his or her possession six months after the last day of redemption ; and all such sales are required to be at public auction upon notice of five days, published in some newspaper printed at the place where the sale takes place; and if no newspaper is there printed, then by posting notices in two public places, five days before the sale, giving the place where the article will be sold, and a list of said articles, which sales must, in all cases, take place in the town or city where such articles are pledged. The pawn- broker or pledgee is entitled to retain from the proceeds of any such sale the amount of the loan, the interest due thereon, and four per cent on the loan additional for the expense of the sale, and the surplus, if any^ must be paid over to the person entitled STATUTES RELATING TO PLEDGES. 703 to redeem such property, if no sale had been made, and if not so paid on demand, three times the amount thereof will be forfeited, to be recovered by the owner or pledgor, in a civil action to be brought by him therefor (1 cmd 2 Gen. Lanos, 1850-1864, §§ 4827- 4830). These statutes apply in the ordinary cases of pledge, and in some respects they modify the common law upon the subject. The Supreme Court has held that the act prohibiting pawn- brokers or pledgees from charging more than four per cent per month on loana made on property pledged as security, is not in violation of section 29, article 1, of the Constitution, which pro- vides that " all laws of a general nature shall have a uniform operation." And it was further held that where a pawnbroker loans money upon property pledged, and the borrower contracts to pay him more than four per cent interest per month, he can recover possession of the property by tendering him the principal and four per cent per month interest {Jackson v. Shawl, 29 CaL R., 26Y). The common-law rights of the pledgee, except as modified by the statute, have been expressly recognized by the courts ; and it has been held that the common-la.w right of the pledgee to sell the pledge upon the default of the pledgor, and thereafter bring his action for any balance remaining unsatisfied, is wholly unaf- fected by chapter 17, title 8 of the practice act of the State. The plaintiff in the ease was not a pawnbroker, and the property pledged was sold on due notice, after the maturity of the obliga- tion, and after a demand of the money unpaid, but before the expiration of the six months provided by statute ; and the action was brought to recover the balance due over and above what was made by the" sale of the pledge {Mangue v. Ha^vnghi, 26 Cal. R., 577). It will be observed that there is a marked similarity between the statute of the Territory of Arizona and that of the State of California upon the subject of pawns, and it is evident that the first was formed from the latter ; but the provisions of the two enactments differ in some material respects, and, therefore, it becomes necessary to insert the substance of the statutes of each commonwealth. There do not seem to be any general statutes upon the subject of pawns or pledges in the States of Delaware or Florida, so that 704 LAW OF FLEDGES. the common law is in full force in those States. In the State of Georgia they have a statute by which a pledge, or pawn, is defined to be property deposited with another as security for the payment of a debt. Delivery of the property is made essential to this • bailment, but promissory notes and evidences of debt may be delivered in pledge. It is declared that delivery of title-deeds creates no pledge. The statute declares that the receiver in pledge or pawn of promissory notes is such a horia, fide- holder as will protect him under the same circumstances as a purchaser from the equities between the parties, but not from the true owner, if fraudulently transferred, though without notice to him. The pawnee is authorized by the statute to, sell the property received in pledge after the debt becomes due and remains unpaid ; but he must always give notice for thirty days to the pawnor of his intention to sell, and the sale must be in public, fairly con- ducted, and to the highest bidder, unless otherwise provided by contract. The statute further provides that the pawnee may use the goods pawned, provided the use does not impair their i^eal value. He has a lien on them for the money advpihoed, though not for other debts due to him. He may retain possession until his lien is satis- fied, and has a right of action against any one interfering therewith. The general property in the goods remains in the pawnor by the express provision of the statute ; but the pawnee has a special property for the purposes of the bailment, and it is provided that the death of neither party interferes with their respective interests. It is further provided that the pawnee may transfer his debt, aud with it possession of the thing pawned, and that the purchaser stands precisely in his situation. And property in pawn may be seized and sold under execution against the pawnor, but upon notice by the pawnee to the levying officer ; and the court in dis- tributing the proceeds will recognize his lien according to its dig- nity, and give such direction to the funds as shall protect his legal rights. The pawnee is bound by statute for ordinary care and diligence, and if the property pledged be promissory notes or other evidences of debt the pawnee must exercise ordinary diligence in collecting and securing the same. The pawnor is required by the statute to pay all necessary expenses and repairs upon the property ; but if STATUTES BJELATING TO PLEDGES. « 705 he pawn lias itself been profitable, or if the pawnee has used it to lis own advantage, the pawnor may require him to account for uch profit. And all! interest of property in pawn belongs to the lawnor, by the provisions of the statute {Revised Code q/" 1866, nrt 2, mt. 3, ch. 7, a/rt. 6, §§ 2110-^2119). The statute of Georgia makes but little modification of the com- non law, although in some respects it is slightly changed or more ilearly defined. No statutes exist, of a general nature, in relation to pledges or )awiis, in Illinois, Indiana, Iowa or Kentucky, and none in Kansas ixcept that by a general law, the cities of the State may levy and !ollect a Hen for tax on pawnbrokers doing business within their ■espeetive limits {Gen. Stat, of 1868, oh. 18, § 15,- sub. 5 ; and ch. L'9, 1 30, sub. 4). In the State of Louisiana, they have a peculiar statutory policy n respect to the subject of pledges, unlike that which exists in any )ther of the American States. The statute defines a pledge to be a jontract by which one debtor gives something to his creditor as a security for his debt, and the statute makes two kinds of pledge, the pawn and the antichresis. A thing is said to be pawned where 1 movable thing is given as security, and the antichresis where the security given consists in immovables. Generally it is declared that every lawful obligation may be 3nforeed by the auxiliary obligation of pledge. If the principal jbligation be conditional, that of the pledge is confirnied or extin- guished with it. If the obligation is null, so also is the pledge. The obligation of pledge, annexed to an obligation which is purely natural, is rendered valid only where the latter is confirmed md becomes executory. Pledge may be given not only for an obligation consisting in money, but also for one having any other object ; for example, a surety. ISTothing prevents one person from giving a pledge to fflothei*for becoming his surety with a third. And it is provided that a person may give a pledge, not only for his own debt, but for that of another also. A debtor may give in pledge whatever belongs to him ; but with regard to those things in which he has an ownership which may be iivested, or which is subjected to incumbrance, he cannot confer on the creditor by the pledge any further right than he had himself. To know whether the thing given in pledge belonged to the 706 ' LAW Of P LEDGES. debtor, reference must be had to the time when the pawn was made. If at the time of the contract the debtor had not the ownership of the thing pledged, but has acquired it since, by what title soever, the statute provides that his ownership shall relate back to the time of the contract, and the pledge should stand good. One person may pledge the property of another, provided it be with the express or tacit consent of the owner. But the statute provides that this tacit consent must be inferred from circumstan- ces so strong as to leave no doubt of the owner's intention ; as if he was present at the making of the contract, or if he himself delivered to the creditor the thing pawned, Although the property of another cannot be given in pledge without his consent, yet, so long as the owner refrains from claim- ing it, the debtor, who has given it in pledge, cannot seek to have it restored until his debt has been entirely discharged. Trustees of minors, and creditors of persons under interdiction, of vacant estates and of absent heirs, testamentary executors and other administrators, named or confirmed by a judge, are forbidden to give in pledge the property confided to their administration, without being expressly authorized in the manner prescribed by law. And an attorney cannot give in pledge the property of his principal without the consent of the latter, or an express power to that effect. Nevertheless, where the power of attorney contains a general authority to mortgage the property of the principal, this power is declared to include that of giving it in pledge. The property of cities and other corporations can only be given in pledge according to the rules, and subject to the restrictions} prescribed or established by their respective acts of incorporation. And a partner cannot, for his own concerns, give in pledge the partnership property without the consent of his associates; he cannot do it even for the partnership concerns without such con- sent, unless he be vested with the management of the copartner- ship. This rule, however, admits of exception in matters of com- mercial partnership. It is made essential to the contract of pledge that the creditor be put in possession of the thing given to him in pledge ; and, consequently, that actual deliyery of it be made to him, unless he has possession of it already by some other right. But this delivery is only necessary with respect to corporeal things. As to incorpo- STATUTES RELATING TO PLEBQES. 707 real rights, such as credits, which are given in pledge, the statute declares that the delivery is fictitious and symbolical. With respect to the pawn, the statute provides that one may pawn every corporeal thing which is susceptible of alienation. One may even pawn merely as a security for performing or refraining to perform an act. And one may, in fine, pawn incor- poreal movables, such as credits, and other claims of that nature. But where a debtor wishes to pawn a claim on another person, he must make a transfer of it in the act of pledge, and deliver to the creditor, to whom it is transferred, the note or instrument which proves its existence, if it be under private signature, and must indorse it if it be negotiable. The pawn invests the creditor with the right of causing his debt to be satisfied by privilege, and in preference to the other creditors of his debtor, out of the product of the movable, corpo- real or incorporeal, which has been thus burdened. But this privilege can take place against third persons only in case the pawn is proved by an act, made either in a public form or under private . signature : provided such act has been recorded in the manner required by law ; provided, also, that whatever may be in the form of the act, it mentions the amount of the debt as well as the species and nature of the thing given in pledge, or as a state- ment annexed thereto of its number, weight and measure. When a debtor wishes to pawn promissory notes, bills ot exchange, stocks, obligations or claims upon other persons, he must deliver to the creditors the notes, bills of exchange, certifi- cates of stock, or other evidences of the claims or rights so pawned ; and such pawn, so made, is declared, without further formalities, to be valid, as well against third persons as against the pledgors thereof, if made in good faith. The statute provides that all pledges of movable property may be made by private writing, accompanied by actual delivery ; and the delivery of property on deposit in a warehouse is made to pass by the private assignment of the warehouse receipt, so as to authorize the owner to pledge such property ; and such pledge, so made, without further formalities, is declared to be valid, as well against third persons as against the pledgors thereof, if made in good faith. But if a credit, not negotiable, be given in pledge, notice of the same is required to be given to the debtor. The acts of pledge in favor of the banks of the State, the statute 708 LAW OF -PLEOaES. declares, shall be considered as forming authentic proof, if they have been passed by the cashiers of those banks or their'branches, and contain a description of the objects given in pledge, in the manner directed as before stated. Where a thing given in pledge consists of a credit not negotiable, to enable the creditors to enjoy the privilege mentioned, it is made necessary, not only that the proof of the pledge be made by an authentic act, or by act under private signature, duly recorded, but that a copy of this act should have been duly served on the debtor of the credit given in pledge. On the other hand, this notifica- tion by the act of pledge to the person owing the debt pledge, is declared not to be necessary if the debt is evidenced by a note or other instrument, payable to the bearer or to order ; because, in that case it will suffice that the note or instrument shall have been indorsed by the person pledging it, to invest the creditor with the privilege before mentioned. In no ease does this privilege subsist on the pledge, except when the thing pledged, if to be a corporeal movable or the evidence of the credit, if it be a note or other instrument under private signature, has been actually put and remained in the possession of the creditor, or of a third person agreed on by the parties. Where several things have been pawned, it is declared that the owner cannot retake one of them without satisfying the whole debt, though he offers to pay a certain amount of it in proportion to the thing which he wishes to get. And the creditor, who is in possession of the pledge, can only be compelled to return it, but when he has received the whole payment of the principal, as well as the interest and costs. The creditor cannot, in case of failure of payment, dispose of the pledge ; but where there have been pledges of stocks, bonds or other property, for the payment of any debt or obligation, it is made necessary before such stocks, bonds or other property so pledged shall be sold for the payment of the debt for which such pledge was made, that the holder of such pledge be compelled to obtain a judgment in the ordinary course of law, and the same formalities, in all respects, must be observed in the sale of property so pledged as in ordinary cases. And any clause which should authorize the creditor to appropriate the pledge to himself, or dis- pose thereof without the formalities prescribed by the statute, it is declared shall be null. STATUTES RMLA21N0 TO FLEDGES. 709 It is provided that, imtil the debtor be divested of his property, . he remains the prpprietor of the pledge, which is in the hands of the creditor only as a deposit to- secure his privilege on it; and the creditor is answerable agreeably to the rules which have been gs^sblished under the title bf coniiersional obligations, for the loss or decay of the pledge, which may happen through his fault. On his part the debtor is bound to pay to the creditor all the useful and necessary expenses which the latter has made for the preser- vation of the pledge. The fruits of the pledge are deemed by the statute to make a part of it, and, therefore, they remain, like the pledge, in the hands of the creditor, but he cannot appropriate them to his own use ; he is bound, on the contrary, to give an account of them to the debtor, or to deduct them from what may be due to him. If it is a credit which has been given in pledge, and if this credit brings interest, the creditor is required to deduct this interest from that which may be due to him ; but if the debt, for the , security of which the claim has been given, brings no interest itself, the deduction is required to be made on the princi- pal debt. If the credit, which has been given in pledge, becomes due before it is redeemed by the person pawning it, the creditor, by virtue of the transfer which has been made to him, is declared to be justified in recovering the amount, and in taking measures to recover it. When received, he must apply it to the payment of the debt due to himself and restore the surplus, should there be any, to the person from whom he held it in pledge. The pawn cannot be divided, notwithstanding the divisibility of the debt between the heirs of the debtor and those of the creditor. The debtor's heir, who has paid his share of the debt, cannot demand the restitution of his share of the pledge, so long as the debt is not fully satisfied; and, respectively, the heirs of the creditor, who has received his share of the debt, cannot return the pledge to the prejudice of those of his co-heirs who are not satisfied. If the proceeds of fhe sale exceed the debt, the surplus is required to be restored to the owner ; if, on the contrary, they are not sufficient to satisfy it, the creditor is entitled to claim the bal- ance out of the debtor's other property. The debtor who takes away the pledge without the creditor's consent, commits a sort of theft, in thie language of the statute. "Where the creditor has been deceived in the substance or quality of the thing given in 710 i^ Vr OF PLBDQES. pledge, the statute provides that he may claim another thing in its stead, or demand immediately his payment, though the debtor be solvable. And the statute provides that the creditor cannot acquire the pledge by prescription, whatever may be the time of his possession. The antichresis is required to be reduced to writing, and the creditor by it acquires the right of reaping the fruits of the immovables given to him in pledge. The creditor is required to pay the taxes on the property pledged unless the contrary be stated in the contract. He is required also under penalty of dam- ages to provide for the keeping, use, and neces8a,ry repairs of the pledged estate. The debtor cannot, before full payment of the debt, claim the enjoyment of the pledge. But the creditor may compel the debtor to retake the enjoyment of his immovable. The rights of the parties in the antichresis are similar to those in an ordinary pawn or pledge. The creditor, who is in posses- sion by way of antichresis, cannot have any right or preference on the other creditors ; but if he has by any other title, some pri- vilege or mortgage lawfully established or preserved thereon, he will come in his rank as any other creditor {Revised Civil Code of 18Y0, tMe 20, ch. 2, 3). In the State of Maryland there seems to be no statute in respect to pledges or pawns. And in the general statutes of Michigan, the only provision upon the subject, is that which declares that the interest of the pledgor in the thing pledged may be sold on execution against him, and the purchaser will be entitled to the thing on complying with the terms of the pledge (2 Comp. Laws, ch. 131, § 23, general section 4461). No statutes upon the subject of a general nature exist in the States of Minnesota, Mississippi, Missouri, Nebraska, Nevada and New Jersey. In the State of Ohio it is provided by statute that any person or persons carrying on the business of pawnbroker, or of loaning money on jewelry, goods, chattels, or other personal property, in any city of the first or second class, shall be required to take out a license from the city in which they may do business ; the cost of such license not to exceed $200 per annum, to be fixed by ordinances of the cpuncil of such city. Pawnbrokers are required to keep a correct list and description, in a book for that purpose, of any and all articles pledged or STATUTES RELATING TO PLEDaES. 711- deposited with them, or on which advances of money have been made, or which may be purchased by them, which list and descrip- tion must at all times be open to the inspection of the chief of police of the city, or of a police officer deputed by him, or by the mayor, to make such inspection. They must, at all times when BO required by the chief of police or such police officer or mayor, produce and show to him any article so listed and described, which may be in their possession. And any person violating any of the provisions of the statute, upon conviction thereof, is subject to be ^ned in any sum not less than ten nor more than $100 {S'wp. to B. S., 821, 822). The State of Oregon has no legislative enactments in respect to pawns or pledges, or pawnbrokers or the business of pawnbroking, and consequently the common law governs the subject in that State. In the State of Pennsylvania, it is provided by statute that any goods or chattels of any defendant in a writ of fieri facias, which shall have been pawned or pledged by him as security for any debt or liability, shall be liable to sale upon the execution, but subject nevertheless to all and singular the rights and interests of the pawnee to the possession or otherwise of such chattels or goods by reason of such pledge {Pwdon^s Big., 432, § 13). The statute further provides that persons advancing money on pledge of goods by a factor, without notice that such factor is not the actual owner of such goods, shall acquire the same interest and authority in and over the goods as he would have acquired thereby if such factor had been the actual owner thereof; and that if the pledge was taken with notice that such factor is a factor only, then the pledgee shall acquire the same interest he had against his prin- cipal. The owner of the goods thus pledged may, however, redeem such goods by paying or tendering the amount advanced thereon to such factor {Pwdon^s Dig., 453, §§ 3-5). There seems to be no special statutory provision in respect, to pledges or pawns in the States of South Carolina,, Tennessee, Texas, Virginia or West Virginia. And in the State of Wisconsin there is only a provision that where goods and chattels shall be pledged for the payment of money or the performance of any contract or agreement, the right and interest in such goods of the person making such pledge may be sold on execution against him, and the purchaser shall acquire all the right and interest of the defendant in the execution, and 712 L-AW OF PLEDGES. Bhall be entitled to the possession of such goods and chattels on complying with the terms and conditions of the pledge {Rev. Stat., ch. 134, § 21). This concludes the statutory provisions of the several States upon the subject of pawns or pledges and the business of pawn- broking, and here closes the discussion of the general subject of pawns or pledges in the United States. The Law of Usury, Pawns or Pledges, and Maritime Loans. Part III, THE LAW OF MARITIME LOANS. eo CHAPTER LT. ABTIQUITT OF MARITIME LOANS TEXTS OF THE ROMAN LAW RELATING TO THE SUBJECT DEFINITION, LEGALITY AND NATURE OF A MARITIME LOAN — THE CONSTITUENTS OF A BOTTOMRY CONTRACT — DIFFERENCE BETWEEN BOTTOMRY, LOAN, PARTNERSHIP AND INSURANCE FORM OF A CONTRACT OF MARITIME LOAN. The subject of maritime loans is so nearly related to the other subjects considered in this work that it may be appropriately :' treated in the same volume. A few brief statements have already been made, in a previous chapter on usury, in respect to bottomry and respondentia {fimte, ch. 14) ; but a more extended notice of the general subject of maritime loans is necessary than that con- tained in the two or three pages there devoted to it. , There is a resemblance between contracts of maritime loan and insurance, and they are frequently governed by the same rules ; and, yet, each has a character peculiar to itself. Insurance has acquired an extensive empire, and it enjoys a dignity which sur- passes that of maritime loans; and, yet, maritime law possesses certain privileges of which insurance is deprived, and it is much more ancient in its origin. Insurance was little known to the ancient Homans, while the contract of maritime loans was in general use among them, under the name of pecunia trajeciitia. Money, lent at maritime interest and risk, was so called because it was lent to a person, to be employed by him in maritime com- merce, upon condition of returning it in case of a successful trade with maritime interest. And there was a stipulation in the con- tract that the money lent shoiild not be returned, nor should interest be paid for the loan of it, if the vessel should happen to be lost by the perils of the sea in the prosecution of a specified voyage {Cahmus). The texts of the Roman law relating to maritime loans, expressed in the briefest manner possible, were as follows : The money was given to the borrower, to be employed by him in commercial speculations upon and beyond seas ; or, in other words, it was 716 L-AW OF MARITIME LOANS. taken, to be transported beyond sea at the risk of tlie lender, and to be employed in merchandise for the advantage of the borrower. If the money lent was expended in the same place in which it was furnished, it was not said to be trajectiUa ; but if it was expended in the purchase of jaerchandise in the place where it was lent,, and the merchandise was afterward embarked at the risk of the lender, it was held to preserve its quality of being trajectitia. So that the essence of the maritime loan, by the Eoman law, con- sisted in the hazard of th« lender. The- money was not at the risk of the lender until the vessel had set sail ; but from that moment the lender incurred the hazard. Until the maritime peril was incurred by the lender, nothing could be claimed for the use of his mioney but common legal int;erest, and he was not permitted to retain the pledge or lien that had been given him to demand maritime interest, because that interest was not due to him. It was lawful to lend upon bottomry, or for an entire voyage, oi for a limited time ; but as soon as the lender had ceased to run the risk, the common and not the maritime interest was to be paid. The lender was not prohibited from demanding pledges and hypo- thecations as an additionall security, provided that it was not a pretext for exacting maritime interest after the sea risk shovdd be at an end. That which was received beyond the principal was a premium paid for the risk; or it was less an interest than an increase of the debt, in consideration of the peril to which the money was exposed. The lender was not prejudiced by a loss which happened at sea through the fault of the borrower. From the moment that the vessel left the port at which the money was borrowed, until she arrived at the port of her destination, the perils of navigation were at the risk of the lender, who had agreed to incur them. But if there was no stipulation to that effect, the borrower ran the risk. But, in that case, the lender was not per- mitted to stipulate for or receive any more than his principal with legal interest. In which case, the contract was a mere hypotheca- tion or pledge of the vessel or goods for the security of the money which had been lent ; but it was not, properly speaking, a mari- time loan. Such are, in a few words, the texts of the old Eoman law upon this subject of maritime loans, which are fully explained in the ancient and learned commentaries, Sbypma/wnus and Looenmi. According to the Guidon de la Mer, the contract of bottomry, NATURE OF tHE CONTRACT. 717 such as is now in customary use, has very little resemblance to ^ithat which was used by the ancient Eomans. But it will be observed, in the course of the examination of the subject, that this assertion is not strictly accurate, except as it regards the form which modern rules have given to the contract whose origin is lost in antiquity. According to M. Pothier, the contract of maritime loan " is an agreement,' borrower ; in the Eoman law the lender was termed the creditor. The condition of the contract is said to be fulfilled when the vessel arrives in safety at her destined port ; and it is not performed when the voyage is riot completed. The interest which the lender claims, in case of a successful voyage, is the price of hazard, j?eWc'M^*^7'e^TO, and the contract has nothing in it which resembles usury. And bottomry bonds may be given for the security of mercantile or other debts, either in places where the owners dwell or in foreign places by their order {Forbes v. The Brig Mannah, Bee^s Ad/in. Deo., 348). Bottomry is adopted in all commercial countries, and has been introduced into commerce for the advantage of society. It is not a sale, nor a partnership, nor a loan, properly speaking, nor an assurance, nor a contract composed of different kinds ; but it is a sp'ecific contract, known to the law, and has a character and quali- ties pjculiar to itself. 718 LAW OF MARITIME LOANS. To constitute the contract of bottomry, the money must be invested in something which is exposed to the dangers of the sea;, and, in case of loss, it is incumbent on the borrower to prove pro- perty to the amount of the loan. It is not less essential to the contract that the peril be borne by the lender {Pothier, iTo. 16, h. t.). It cannot properly be said to be a contract of bottomry until the day that the risk commences. Hence, if the borrower expend the money on shore, without exposing it to the dangers of the sea, it cannot be a contract of bottomry, although the instru- ment of writing between the parties may call it so {TumbuU v. The Ship Enterprise, Be^s Adm. Dec, 345). As soon as the risk ceases, either by the safe arrival of the vessel or by the expira- tion of the stipulated term, the contract ceases to bear a maritime interest. And if the contract was void in its commencement, the maritime interest is not chargeable, because no maritime dangers were borne by the lender. A bargain on a mere contingency, where the reward is given for the risk, not for forbearance, as has been shown in the comments upon usury, will not be within the statutes against usury {Button v. Downham, Cro. Eliz., 643). It follows, from this, that a hona fide contract of bottomry is not obnoxious to the statutes prohibiting usury ; for if a man give or lend money, not to be paid if the event should be one way, but double if the other, and it is uncertain which way it will happen, the transaction cannot be usurious, because the reward is given for the risk and not for the forbearance. This doctrine has been fiilly discussed in previous chapters on usury, and need not be dwelt upon in this place. It has been intimated that there is a manifest difference between contracts of bottomry and those of loan, partnership and insurance. Bottomry is different from the contract of loan, because : 1st. The peril of money, simply lent, concerns the borrower; whereas money lent at bottomry is at the risk of the lender. 2d. In a simple loan, interest is not due but by positive stipulation; whereas maritime interest is implied in the contract itself. 3d. In a simple loan, the interest, among merchants, cannot exceed the rate fixed by statute, or, at most, the custom of the country ; whereas bottomry may carry any interest which may be agreed upon by the parties. 4th. Legal interest is sometimes calculated annually, or at other fixed periods, in a successive manner, and separate from the principal ; whereas the whole maritime interest NATURE OF TBE CONTRACT. 719 is due jointly with the principal and at the same time, and the maritime interest is an augmentation of the principal. It is remarked in common parlance that the contract of bottomry is a kind of partnership which is foi-med between the lender and the borrower, and some of the early writers declared it to be so. But in order to constitute a partnership, the capital, the loss or the gain should be shared or -borne in common by both of the par- ties. .Here nothing is common between them. There is there- fore no partnership. In fact, partnership is an agreement between two or more persons, by which they hold all or a part of their goods in common ; or it rpay be for a particular voyage, a particu- lar work or other affair, in which they are to bear the loss or reap the profits in certain proportions. But money lent at gross adventure belongs properly to him who has received it. The profits of the voyage belong to him exclusively, with the excep- tion of the maritime interest which he is obliged to pay. The sea risks are borne by the lender. It is certain, then, that a contract of maritime loan is not a partnership, notwithstanding certain authors have supposed that they could perceive a species of part- nership in the contract. It may be remarked, however, that there is nothing to prevent the uniting the contract of maritime loan with that of partnership, if such may be the desire of the parties. The contract of maritime loan approaches more nearly to that of marine insurance. There is a strong analogy between these two transactions. In their effects they are construed on the same principles. In case of the maritime loan, the lender bears the sea risks; in that of marine insurance, the underwriter bears the risk. In the one contract, the maritime interest is the price of the peril; and this term corresponds with \he premium which is paid in the other. The rate of the premium or interest is greater or less, according to the duration and nature of the risk. In either ease it is incumbent upon the plaintiff to prove tliat the condition has been fulfilled. " In case of a suit, it lies upon the lender, in order to render the contract of maritime loan executory, to show that the ship has arrived at her port of destination in safety ; and in an action on a policy of insurance, it lies upon the assured to prove the loss, capture or shipwreck of the vessel" {Cleirac, on the Gwidon de la Mer., oh. 18, art. 2, p. 331). In each contract, it may be laid down as a general rule that the subject of the risk should be on board at the time when the accident happens. In 720 LAW OF MAHrriXM LOANS. general, the assurer and the lender are not responsible for the barratry of the captain, or for losses occasioned by the fault of the assured or the borrower. But assurance and maritime loan are different in many respects. In case of shipwreck, the lender has a lien upon all the effects saved, without admitting the borrower to any par- ticipation with him. On the contrary, if the whole of the pro- perty is not covered by the policy, the assured takes a part of the goods saved in common with the assurers. By the policy, the assurer may restrict himself to particular sea risks ; but against lenders^ such a limitation would be void. The formality of aban- donment, which is necessary in insurance, is unknown in the con- tract of maritime loan. In assurance the date of the policy must be attended to, in order to regulate the return premium ; but it is not regarded in contracts of maritime loan, effected for the same purpose and in the same place. The assured may stipulate that, in case of abandonment he shall not be obliged to pay freight; tlie same indulgence is not granted to the lender on the vessel. There are other distinctions between the two contracts, but it is unneces- sary to note them. In respect to the form of the contract of maritime loan, there is nothing of especial importance which needs to be stated. The contract may be drawn up in such a manner as the parties may find suitable. It is sufficient, if the language be clear and une- quivocal. It must contain proper clauses, and nothing must be stipulated which is contrary to the nature of the contract. It will be interpreted upon the same principles of other contracts ; and it will be sufficient if the intention of the parties can be ascertained. The contract may be made before a notary or under private signa- ture. M. Pothier says : " The instrument under private signature, where it is acknowledged or proved, is equally authentic with tliat which is executed before a notary public, as against the borrower and his heirs. But it is not so as to third persons, against whom the lender may wish to enforce the privileges attached to his con tract. The date of instruments under private signature is not i-egarded as against third persons, if it be not proved by some other means than the instrument itself" {Pothier, n. 29). This last rule, cited by the learned author, relates only to liens against piirchasers. It is otherwise where the question is of mere privity. Such is the view taken at the present day. MARITIME INTEREST. 721 The contract should contain the names of tlie borrower and tender, and those of the captain and the vessel. It should also mefltion the amount lent, the rate of interest, the times and places of the risk, and whether the money is lent on the bottom or the 681^0, jointly or separately, and all other lawful stipulations which felie parties may think proper to make. It has been sometimes said to be necessary to state, by a special clause in the contract, that tke lender undertakes to bear the maritime risks, but this agree- ment will be presumed. It is sufficient that it plainly appear that the (money is lent at maritime interest upon the vessel or cargo, or both, to put the risks of the sea upon the lender. A promissory note for 'oalue recewed in money lent at gross adventure, without further explanation, would not be called a bottomry bond, because it is wanting in the particulars before stated to be requisite in such an agreement. Other points respect- ing the internal form of these contracts will be referred to in the course of this discussion. Those already noted will suffice for the present. Certain specifications are peremptorily required in trans- actions of bottomry, on account of the privileges attached to this species of contract and to prevent abuses. But these particulars will be made apparent as the general rules, in relation to bottomry bonds, are more especially considered. CHAPTER LYI. MAErriME INTEREST — GENEKAL RULES US EESPEOT TO IT — RATE OF MARITIME INTEREST COMMON LEGAL INTEREST — THE FRENCH DECISIONS UPON THE SUBJECT. The greatness of maritime interest, says Montesquieu, is founded upon two considerations : The dangers of the sea, which render it proper that we should not incur such hazards without a prospect of uncommon advantages, and the facility by which the borrower affects exterior speculations in consequence of the loan. On the other hand, common legal interest, not being supported by such reasons, is either entirely prohibited by the legislature, or, whicli is more reasonable, it is restricted by proper limits {Montesq. Im. 22, oh. 20). We cannot call that a contract of gi'oss adventure, says'Pothier^ which does not contain a stipulation for the payment of maritime 91 722 LAW OF MARITIME LOANS. interest ; that is, the borrower must be bound to return not only the principal, but an additional sum, or some other compensation for the risk incurred. If a person lend a sum of money to a mas- ter of a vessel for a certain voyage, with an agreement that it is not to be returned in case of loss or the capture of the vessel by a vis magor, and does not stipulate for a .maritime profit, it cannot be called a contract of gross adventure. But it is merely a con- tract of loan, mingled with a donation of the money lent in case of the loss or capture of the vessel, which donation would become valid upon the delivery of the money, provided the parties were able to contract {Pothier, n. 19, A. t. Emerig. des. Assur., ch. 3). In general, maritime interest is payable in money ; but accord- ing to Pothier and the holding of the courts, in this country and in Europe, the parties may stipulate for any other thing in which the maritime interest shall be paid. And as the lender may stipulate for anything, by way of interest, that is for any advantage to him- self in case of the safe return of the vessel, it is obvious that this advantage, whatever it may be, should be such an interest as will give the legal character of gross adventure to the contract. For example, a captain in time of war being at Smyrna and in want of money to victual his ship, borrowed of a French merchant 1,000 piasters, Turkish money. Upon the safe arrival of his ship at Marseilles, he engages to return this money at the rate of a French crown for each piaster, the perils of the sea being at the risk of the lender. This is a real contract of gross adventure, as the French would call it, or contract of bottomry. The difierence between the two coins constitutes the maritime premium and the price of the risk. The captain, therefore, upon his safe arrival, should be obliged to pay the full sum of 3,000 livres, which would, in fact, be paying a premium of about twenty per cent on the sum bor- rowed. Maritime interest is not due to a lender who has run no risk, even if it should so happen in consequence of the act of the borrower, and, as the law now stands, the lender cannot demand the principal nor premium, nor maritime interest, if the thing upon which he lent his money be entirely lost by the accident of the sea. In respect to the rate of maritime interest, it may be remarked that it may be regulated by the degree to which the lender exposes or believes he exposes his money. Targa says that if the rate stipulated be excessive, it is in the power of the court to lessen il MARITIME INTEBMST. 723 {Ta/rga, ch. 53, n. 19, p. 149). Pothier observes that " altlioTigh maritime profit, at however exorbitant a rate it may have been fixed in the contract of gross adventure, is always considered in foro exteriori as nothing more than the price of the maritime perils, and is therefore lawful ; yet if the intention of the parties was to comprehend in that profit, -besides the price of the risk, or compensation for the loan and the credit given by the lender, this profit would be, as to the compensation, unlawful and usurious in foro eonscienUm" {Pothier, n. 2, h. t). But everything which belongs to the forum conscientiw may be taken notice of m foro exteriori, where a contract contains clauses which are repugnant to the nature of it or where fraud is proved, for equity is a part of tlie law, and law is a science as immutable as its Author, and the duty of judges consists in making it respected. Maritime interest or premium is generally stipulated at so much per cent for the entire voyage, or by the month, etc. The stipulated rate of interest is not aflected by the unexpected arrival of peace or war, unless the event was provided for in the contract. Such seems to be the general understanding of the law, notwithstanding Pothier seems to have expressed a contrary opinion. It is a general rule that the moment the risk commences the whole maritime premium becomes due, although the contemplated voyage is interrupted or the risk ceases before the expiration of the stipu- lated term.* Where the lender has begun to incur the risks, says Pothier, although he has not borne them all the time that he contracted to bear them, the voyage having been shortened, the entire maritime profit is not the less due to him, provided no accident of vis major *The French writers, when they speak of the consideration given for maritime loans, employ a variety of words in order to distinguish it according to the nature of the case.' Thus they call it interest where it is stipulated to be paid by the mouth or at other stated periods. It is a premium where a gross sum is to be paid at the end of a voyage ; and here the risk is the principal object which they have in view. Where that sum is a per centage on the money lent they denomi- . nate it exchwnge' considering it in the light of money lent in one place to be returned in another, with a difference in amount between the sum borrowed and that which is paid, arising from the difference of time and place. Where they intend to combine these various shades into one general denomination, they make use of the term ma/riiime profit to convey their meaning ( Ficfe Mmerigon^s Marir time Loans, 56, mofe). This explanation may be convenient to enable one to under-, stand the meaning of the text where these expressions may occur, 724 LAW OF MARITIME LOANS. has occurred to occasion the loss of the goods upon which the loan was made {Pothier, n. 40, h. t.). Where the money has been borrowed for th« voyage out and home and the vessel fails to return, it has been a matter of con- siderable discussion what premium the lender will be entitled to coUect. But it has been long settled by the French Admiralty Courts that if the property, upon which the loan was made, be safely landed, no deduction from the maritime interest is to be made, although the vessel do not return or be lost on her voyage. If the borrower squander the property or its proceeds, or dispose of it according to his own pleasure, instead of shipping the property in another vessel, he is bound to repay the sum borrowed with maritime interest ( Vide the cases gi/oen in Emerigon^s Essay on Maritime Loans, 55-60)., . Upon the termination of the maritime risks, if the borrower delay the fulfillment of his contract, the charge of common legal interest attaches i/pso jure, although it may not be judiciously demanded. M. Pothier, after remarking that the principal of money lent at gross adventure carries common legal interest only from the date of the judgment, adds that " the same rule does not extend to maritime interest, this profit being an accessary, which is given by way of interest on the sum lent, natotioa usv/ra, navr- Uownfom'as. You cannot demand interest upon it. It would be interest upon interest, a compound interest which the laws pro- hibit, accessio accessionis non est " {Pothier, n. 51, A. t!). Deoormis, after having said that " when the peril ceases and the vessel has returned, maritime interest ceases, ipso facto, and legal interest commences," adds, that "it is by relation only to that which is due upon the principal ; and you cannot, by adding it to and merging it in the profits, obtain interest upon the total sum " (2 Decorrms, 810). The French decisions add common legal interest to the mari- time interest, not only from the time of the demand, but from the time that the latter became due. This point was' not disputed when M. Emerigon wrote, about 100 years ago, and yet he seems to have been in doubt whether the point was not disputable. He observes : " In the first place, it is certain that the contract of maritime loan is not a partnership, as I have before proved ; and there is no law which provides that maritime interest shall, i/pso jwre, carry common legal interest. Upon what authority, then, do MARITIME INTBRBST^ 725 our decisions rest ? They say that maritime interest is the price of TpetiH, pericuU ^efium, ; that it is an increase of the obligation, according to the words of the law ; that it is an addition to the capital, according to the language of Dowmoulin; that this interest, being added to the principal, becomes identified with it, and the two sums make an entire whole which ought to carry interest. To such sophistry are they reduced ; and I cannot sup- press my emotion when I behold them in this manner overwhelm an unfortunate debtor, who returns to his country to be imprisoned by his fellow-citizens, after he has escaped from the hands of pirates and survived the perils of the sea. If, in contracts which flow from commerce, the law has paid more regard to public con- venience than to personal liberty, we ought at least not to be more rigorous than it is, and enlarge by a new addition that which is, in truth, but an addition itself. It would not be surprising if this, point in our jurisprudence should be one day overruled. It is supported by mere apices juris " {Essay on Maritime Loans, 62, 63). But the point has never been overruled, and there seems to be no good reason why it should be. The argument in favor of the rule is this : The maritime interest is a reward for the risk Tjrhich the lender has incurred. When the peril ceases he is entitled to his reward immediately. If it be withheld, the credi- tor is entitled to a compensation for the use of his property, f torn which he might have derived an advantage, by lending it again, if he had received it when it became due. If the common legal interest was not added to the maritime interest from the time the latter became due, the lender would calculate not only upon the perils of the sea, but upon the danger of delay upon land, and increase the maritime interest accordingly. The borrower might thus be injured by the very rule which was intended for his, benefit. If the risk is not commenced, the contract will become a simple loan, even though the borrower covenant to perform the voyage {Marshall on Insurance, 647). And Marshall thinks that if the lender has insured his principal, he should receive one-half per cent upon the maritime interest and all costs of insurance, together with his principal. Of the same opinion is Valin ; and Emerigon agrees with them, provided the non-performance of the voyage happen through the fault of the borrower. A little over a hundred years ago, a case, involving this que* 726 LAW OF MARITIME LOANS. tion, with others, came before the Admiralty Court at Marseilles, in France, and the rule was laid down in accordance with the principles here stated. It appeared that, in the year 1758, Jean Baptiste Margerel, mate of the Pink called la Vierge de la Garde, commanded by Captain Clastrier, borrowed of Armelin six dozen skins of morocco leather, for which he executed a respondentia bond, binding himself to pay 270 livres and 100 per cent free from average, on the safe return of the vessel to Marseilles. The vessel arrived in safety at Cayenne ; Margerel's adventure pro- cured 960 livres, which he received in paper money. The vessel was then declared not to be seaworthy. Margerel, not being able to find a vessel by which he could make a return shipment, was obliged to convert his money into a bill of exchange upon the royal treasury, which was never paid. Armelin filed a petition against him, claiming the 270 livres, together with maritime and legal interest. Margerel replied that his contract was conditional, and that he was only to be bound in case of the safe arrival of the vessel ; that the vessel never did return, having been declared unseaworthy ; that he had not been able to find a vessel by which he could ship goods in return for Marseilles; and that, consequently, according to the 17th article of the ordinance, hoc titulo, the contract was reduced to the value of the things saved, to wit, a draft on the royal treasury, which he offered to deliver up. On the 27th of June, 1760, a sentence was rendered in favor of Margerel, by which the plaintiff was nonsuited. From this decision Armelin appealed. He contended that the goods had been safely landed before the vessel was condemned as not seaworthy ; and that, as Margerel had disposed of them according to his own dis- cretion, at Cayenne, the contract was still in force. An arret passed in June, 1761, on the report of M. de Corriolis, deciding, Ist, that notwithstanding the loss of the ship in the course of the voyage, the contract of gross adventure was in full existence as to effects landed. 2d. That the borrower, who has not been able to send returns by another vessel, is obliged to give an account of the proceeds of the outward shipment. 3d. That if he do not render this account, he ought to pay the principal, together with maritime and common legal interest. The result of the French decision is that if the goods, upon which the loan was made, be safely landed, no deduction from the ' MARITIME INTERS ST. 727 maritime interest is to be made, although the vessel do not return or be lost on her voyage. If the borrower squander the goods or their proceeds, or dispose of them according to his own pleasure, instead of shipping them in another vessel, he is bound to return the sum borrowed with maritime interest entire. This would seem to be a quite reasonable doctrine ; and, yet, the question may depend very much upon the precise terms of the contract. It has been said that maritime interest must be provided in the bond or contract, or the loan cannot be considered one of bot- tomry ; and such is the doctrine of some of the American courts ( Vide Leland v. Medora, 2 Wbodh. and Mmofs B., 92, 107). This, however, has been thought to be inaccurate; and, indeed, the contrary has been expressly laid down in the English admi- ralty courts. Said Dr. Lushington, in a case of unquestioned authority : " I am aware that it is not absolutely necessary that a bottomry bond should carry maritime interest, and that a party may be content with ordinary interest ; but when the argument in support of the bond is that . the advance of the money was attended with risk, it is a material circumstance that only an ordi- nary rate of interest should be demanded. It is impossible to con- ceive that any merchant, carrying on his business with ordinary care and caution, would be content to divest himself of all. security for the loan of his money lent on bottomry bond, and ask no greater emolument than the ordinary rate of six pounds per centj if the repayment of such a loan was to depend upon the safe arri- val of the vessel at the port of her destination, after performing such a voyage " {Ths Emancipation, 1 Bobinson^s B., 124, 130)., Here it is conceded, at least, that a loan may be made on bottomry at common legal interest only, althpugh it is very properly suggested that lenders would not be likely to take the risk, which is always implied in a maritime loan on bottomry, without reserving " marine interest," or as much more than legal interest as will serve to cover the risk. It may be repeated that, if the ioterest in the case of a maritime loan be not expressed in the contract, it will, as a general rule, be presumed to be included in the principal {The Ma/ry, 1 Paine's C. C. B., 671). But this whole subject of maritime interest and common legal interest in bottomry and respondentia cases will be reverted to in another place. 728 LAW OF MARITIME LOANS. CHAPTEE LVII. WHO MAT BE PAETIES TO A MARITIME LOAN WHEK THE OWNEE 18 BOUlfD BY THE ACTS OF THE MA8TEE OF A VESSEL OF BOTTOMET BT THE MA8TEE — THE SAME BTTHE OWNBE OF A VESSEL — DIPFEEENOE BETWEEN BOTTOMET AND EESPONDENTIA. It may be affirmed, as a general rule, that every person who has an interest in a ship or cargo may borrow money at gross adven- ture as far as his interest is put at hazard, and every person who is capable of contracting may make a maritime loan. Masters of vessels may sometimes borrow upon maritime loan on account of their ownerSj whether it be in the port where the vessel is fitted out or in the course of the voyage. But the laws of commerce have established certain rules and regulations in those cases which it is indispensable to understand. It sometimes happens that a person is employed to act as the pilot of the vessel simply, to whom the direction of the voyage and the conducting of the ship safisly into port is intrusted, while the owners of the vessel or the cargo place a supercargo on board, with power to demand freight, make all commercial operations, and pay the necessary expenses. In that case the captain is, sav- ing the right of third persons, simply a pilot, and the supercargo is the master. But usually the functions of the pilot and supercargo are combined in the captain of the vessel, and then he is the mas- ter, and the owner is bound by his acts in all matters relating to the functions of his office. Pothier observes that " the owners are supposed to appoint a master to transact the business of the ship only in their absence, and to do those things which they could not conveniently do themselves" {Pothier, n. 55, A. ^.). According to this doctrine the captain can do nothing of consequence but with the approba- tion of the owners when he is in the port where they reside. Of course, a more general agency may be appointed to him, but sim- ply as captain of the vessel, this statement is strictly accurate, and his powers are thus limited when in the port where the owners reside. By the celebrated Ca/rsolito del Mare, it appears that, in the place of the owner's residence, it is necessary the captain should have his consent to purchase the necessary rigging of the vessel. And in POWERS OF THE CAPTAIN. ' 729 an ancient ordinance of the Hanse Towns, it was provided that, " in the place of the owner's residence, no person shall cause repairs to be made to a ship, purchase sails, cordage or any other thing for her, nor borrow money on bottomry, without the consent of the owner, under penalty of being answerable to it himself" And again, that " those who lend on bottomry to the master at the place where the owner resides, without his consent, shall not have any hen or privilege, except only on the portion of interest which the captain may have in the vessel and freiglit, even although the contract was made for the purpose of obtaining repairs or victuals for the vessel." It results from these statements that the contracts of bottomry, made by the captain in the place where the owner resides, with- out his consent, are not binding upon him, or rather that the lender is not entitled to hypothecation or privilege but upon the master's share, which alone is liable, when the loan is made by the master in the port where the owner resided. But where the vessel is away from the port where the owner resides, the master has power to loan money upon bottomry in case money is needed and cannot otherwise be obtained ; and in Europe contracts of bottomry are at present seldom made except by tlie master of the vessel in a foreign port. It has been often held by the courts of the United States that, to make a hypothecation given by the captain of the vessel valid, the necessity of raising the money in this way must be shown. So that if such an instrument he executed in a port where one of the owners resides, it follows that the same would be void ; and such is the express holding of the courts {The Lmmiia v. Barclay, 1 Wash. C. C. JR., 49). And the Supreme Court of the United States have held that a hypothecation of the ship, by the master, is invalid, unless it is shown by the creditor that the advances were necessary to effectuate the objects of the voyage or the safety of the ship, and that the supplies thus necessary cotdd not be procured upon the owner's credit or with his funds at the place. And it was declared to be incumbent upon the creditor who claims on a hypothecation to prove the actual existence of the necessity of those things which give rise to his demand ; and that if, from his own showing or otherwise, it appears that he had funds in his hands of the owners, which might have been applied to the demand, and he has neglected or refused so to do, he must fail in his claim. If various demands are mixed up 92. 730 I'-AW OF MARITIME LOANS. in his bond, some of which would sustain the hypothecation, and some not, the court declares it to be his duty so to exhibit them to the court that they may. be separately weighed and considered. The court further declared that the master of the ship is the confidential servant or agent of the owners, and they are bound to the performance of all lawful contracts made by him, relative to the usual employment of the ship and the repairs and other neces- saries furnished for her use. But that the authority of the master is limited to objects connected with the voyage ; and if he tran- scend the prescribed limits, his acts become, in legal contemplation, nullities. It was held, however, ihsA, a ionafide creditor who advances his money to relieve a ship from an actual arrest, on account of debts which are a lien upon him, may stipulate for a bottomry interest, and the necessity will justify the master, who has no other suffi- cient funds or credit, in giving it ; but that a mere threat to arrest the ship for a pre-existing debt would not be a sufficient necessity to justify the master in executing a hypothecation. Mr. Justice Story delivered the opinion of the court, and, among other things, said : " The law in respect to maritime hypothecations is, in general, well settled. The master of the ship is the confi- dential servant or agent of the owners, and they are bound to the performance of all lawful contracts made by him, relative to the usual employment of the ship and the repairs and other necessa- ries furnished for her use. The rule is established, as well upon the implied assent of the owners as with a view to the convenience «f the commercial world. As, therefore, the master may con- tract for. repairs and supplies, and, thereby, indirectly bind the owners to the value of the ship and freight, so it is held that he may, for the like purpose, expressly pledge and hypothecate the ship and freight, and thereby create a direct lien on the same for the security of the creditor. But the authority of the master is limited to objects connected with the voyage, and if he transcend the prescribed limits, his acts become, in legal contemplation, mere nullities. Hence, to make a bottomry bond executed by the master a valid hypothecation of the ship, it must be shown by the creditor that the master acted within the scope of his authority ; or, in other words, it must be shown that the advances were made for repairs and supplies necessary for efiectuating the objects of the voyage, or the safety and security of the ship ; and no presump- POWERS OF TSE CAPTAIN. 731. tion should arise that such repairs and supplies could be procured upon any reasonable terms with the credit of the owner, inde- pendent of such hypothecation. If, therefore, the master have sufficient funds of the owner within his control, or can procure them upon the general credit of the owner, he is not at liberty to subject the ship to the expensive and disadvantageous lien of an hypothecatory instrument " {The Aurora, 1 Wheat. JR., 96 ; am,d vide The Boston, ^latchford & Howlcmd^s Adm. JR., 309). A similar doctrine has been laid down by the Circuit Court of the United States, In an important case it was held that, where money has been advanced on the personal credit of the master or owner and the vessel had performed a subsequent voyage, a hypothecation by the master to secure the debt cannot be supported. And it was declared that the fact that th6 advances were necessary and were made on the security of the vessel, are not, in any instance, to be presumed. And it was further held that no officer of the vessel can legally make a hypothecation except the actual master ; and that it constitutes a conclusive ground of objection to the validity of such an instrument that the master, by whom it was given, had, before the advances were made and the bond given, resigned his command and another master had succeeded to it {Wal- den V. Chamberlain, 3 Wash. G. C. JS., 290 ; Surry v. The John and Alice, 1 ib., 293 ; Patton v. The Randolph, Gilfin^s R., 457). But it has been held by the District Court of the United States for the southern district of New Tork that a master, appointed by the American consul in a foreign port, has authority to execute a bottomry bond in a proper case {The Jacmel Packet, 2 Benedict s D. G. R., 101; vide Fox v. Holt, 36 Conn. R., 658). The Supreme Court of the United States have recently decided a case, in which the nature of the lien allowed by the maritime law upon a vessel for repairs and supplies ordered by the master while in a foreign port, upon the credit of the vessel, the circumstances upon which such lien arises, and the principles by which it is governed, were elaborately considered and stated, and the doctrine declared that, in the case of a lien asserted against a vessel sup- plied or repaired in a foreign port, necessity for credit must be presumed, where it appears that the repairs and supplies for which a lien is set up were ordered by the master, and that they were necessary for the ship when lying in port, or to fit her for an intended voyage ; unless it is shown that the master had funds, oi 732 LAW OF MARITIME LOANS. that the owners had sufficient credit, and that the repairer, fur nisher or lender knew those facts, or one of them, or that such facts and circumstances were known to them as were sniJicient to put them on inquiry, and to show that if they had used due dili- gence they would have ascertained that the master was not authorized to obtain any such relief on the credit of the vessel. Mr. Justice Clifford delivered the opinion of the court, and, among other things, observed : " Ports of Sta,tes, other than those of the State where the vessel belongs, are, for that purpose, con- sidered as foreign ports, and the authority of the master in con- tracting for repairs and supplies is not confined to such as are absolutely or indispensably necessary, but includes, also, all such as are reasonably fit and proper for the ship and the voyage. When such repairs and supplies are reasonably fit and proper, the master, if he has not funds, and cannot obtain such on the personal credit of the owners, may obtain the same on the credit of the ship, either with or without giving a bottomry bond, as necessity shall dictate. Reasonable diligence in either event must be exer- cised by the merchant or lender to ascertain that the repairs and supplies were necessary and proper, as the master is not authorized to hypothecate the vessel unless such was the fact, within the meaning of the maritime law " {The Lulu, 10 Wallaces R., 192, 200, 201). And in another case, decided by the same court and at the same term, the same doctrine was reaffirmed. Mr. Justice Clifford also delivered the opinion of the court in this case, and, in the course of his opinion, said : " Controversies respecting such liens usually arise in cases where the repairs and supplies were ordered by the master, without any express directions from the owner; and in such cases the repairer or furnisher must prove affirmatively that the ship needed such repairs and supplies, as the authority of the master in such a case is implied from the necessity for the repairs or supplies, the want of funds for that purpose, the inability to procure the same, and the absence of the owner. " Where it appears that the repairs and supplies were necessary to preserve the ship in port, or to enable her to proceed on her voyage, and that they were made and furnished in good faith, the presumption is that the ship, as well as the master and owner, is responsible to those who made the necessary advances ; and it is clear that the necessity for credit must be presumed where it POWERS OF TBE CAPTAIN. 733 appears that the repairs and supplies were ordered by the master, and that they were necessary for the ship, unless it is shown that the master had funds, or that the owner had sufficient credit, and that the repairers, furnishers and lenders of the money knew those facts, or one of them, or that such facts and circumstances were known to them as were sufficient to put them upon inquiry, and to show that if they had used diligence they would have ascer- tained that the master was not authorized to obtain any such relief on the credit of the vessel. " Subject to these conditions, the master, in the absence of the' owner, is^ rested with the authority to order necessary repairs and supplies ; but it is no objection to his authority that he acted on tie occasion under the eirpress ins,tructions of the owner; nor will the lien of those who made the repairs and furnished the supplies he defeated by the fact that his authority emanated from the owner instead of being implied by law. " When the owner is present, the implied authority of the mas- ter for that purpose ceases ; but if the owner gives directions to that effect, the master may still order necessary repairs and sup- plies ; and if the ship is at the time in a foreign port, or in the port of a State other than that of the State to which she belongs, those who make the advances will have a maritime lien, if they were made on the credit of the vessel " {The Kalorama, 10 Wal- lace's R., 204, 212, 213 ; and vide The Steamer Patapsco, 48 Em. Pr. P., 301). It may be affirmed, in general terms, that when the master has the authority to create a lien upon the vessel for repairs and sup- phes, he may exercise this authority by means of a bottomry bond. The Cfl'cuit Court of the United States for the third circuit, at an early day, held that, where . the original voyage is broken up abroad, the captain may borrow money upon bottomry to enable hun to return home. It seems that the authority to hypothecate extends to any voyage which the master is authorized to make. In general, a consignee cannot take a bottomry bond from the master to secure his advances ; but cases may exist where the con- signee is not bound, more than any other lender, to advance for repairs, without taking the ship as security for a loan on maritime interest (Crawford v. The William Perm, 3 Wash. G. C.R., 404; vide Reade v. The Commercial Insurance Co., 3 Johns. R., 352). Indeed, it seems to be decided that, in case of necessary repairs. 734 LAW OF MARITIME LOANS. the master may sell part ■ of the cargo, or hypothecate it. If he has money on board belonging to shippers, he is not bound tc apply it to the ship's necessities, before borrowing on bottomry, at least if not equal to the amount of repairs ; but the law invests the master in such cases with a large discretion upon the subject. But it seems that where the master has sufficient money of the owners of the vessel, he cannot borrow on bottomry ; nor can he legally do so if he has sufficient money of his own on board the vessel {The Packet, 3 Mason's S., 255 ; The Lammia v. Ba/rclay, 1 Wash. C. G. R., 49 ; Bueher v.. Gonynghami, 2 Pet. Adm. R., 295). But the master of a vessel in a foreign port acting in the character of agent is limited in his power, as before shown, and can only pledge the vessel in case of necessity {The Mary, 1 Paints C. C. JR., 671). And indeed, it has been held that a bottomry bond can be given by the master only under circum- stances of great distress, and when he is destitute of other means ; and only in a foreign port {Twrmo v. The Ma/ry, Be^s R., 120 ; ■ Sloam. V. The A. E. I., lb., 250). The authorities are uniform in holding that, to authorize a bottomry bond by a master, it must be given to enable the vessel to proceed on her voyage, and to leave a port where she is detained for i^ecessary repairs, or for claims upon her, and has no funds, credit or other means of getting money {Gibbs v. The Texas, Craihe's R., 236 ; Burke v. The M. P. Rich, 1 GUffarWs E., 308). The follovring propositions in respect to maritime hypotheca- tion by the master of a vessel have recently been laid down by the Supreme Court of the United States : 1st. Liens for repairs and supplies, whether implied (fr express, can be enforced in admiralty only upon proof made by the credi- tor that the repairs were necessary, or believed upon due inquiry and credible representation to be necessary. 2d. Where proof is made of necessity for the repairs and supplies, or for funds raised to pay for them by the master, and of credit given to the ship, a presumption arises, conclusive, in the absence of evidence to the contrary, of necessity for credit. 3d. Necessity for repairs and supplies is proved where such circumstances of exigency are shown as woi;ild induce a prudent owner, if .present, to order them, or to provide for the cost of them on the security of the ship. 4th. The ordering, by the master, of supplies or repairs xipon credit of the POWERS OF THE CAPTAIN. 735 ship, is sufficient proof of such necessity to support an implied -hypothecation in favor of the material-man, or of the ordinary lender of money, to meet the wants of the ship, who acts in good faith. 5th. To support hypothecation by bottomry, evidence of actual necessity for repairs and supplies is required ; or if the fact of necessity be left unproved, evidence is required of due inquiry and of reasonable grounds of belief that the necessity was real and exigent {The Grcvpeshot, 9 Wallaois B., 129). But it has been neld that, in order to constitute a sufficient fouadation for a bottomry bond, the necessity for the supplies furnished need not have beeii so urgent that the vessel must have been lost to the owner without them. It is sufficient if, as mat- ters then stood, they may, in th4 exercise of a discreet judgment, have appeared to be reasonable and proper for the interest of the owner {Thomas v. Gettmgs, Tcmey's G. 0. R., 4/12; vide The Jacmel Packet, 2 Benedicts D. G. B., 107 ; The Kathleen, lb., 458 ; The Yuia, 4 Blatohford's G. G. B., 352). As has been before suggested, the master can only hypothecate the vessel in a foreign port ; but for this purpose it has been held that the ports of the different American States are foreign to each other {Burke v. The M. P Bich, 1 Cliff. B., 308). And it has been held that where the necessity for the repairs have been shown in case of bottomry by the captain, it is for the claimant to show that the money could not have been obtained otherwise than by bottomry {The Kathleen, 2 Benedict's D. G. B., 458). A vessel having entered a port of distress, necessary repairs were made upon her on her credit ; and, afterward, it being impossible to procure funds in any other way, a loan was made on bottomry, and the money was applied to paying for the repairs. The court held that it was no objection to a recovery on the bottomry bond, that the repairs were made before the loan was effected. And it was fiirther held that the bill of a stevedore for services rendered in ascertaining the repairs needed by a vessel was a proper charge upon the vessel, upon a libel to recover on a bottomry bond ; and, also, with respect to a charge for commissions in pro- curing the loan, it being possible to raise the loan only through ah agent {TheTuba,^ Blatch. G. G. B., 352; and vide The Kath- leen, supra). The consignee of a steamship arriving in a foreign port toolj the agency for the vessel ; and she having been attached, and it 786 LAW OF MARITIME LOAMS. being neoessaiy to relieve her from that attadnnent, so that she might sail as advertised, the master executed a bottomry bond to the coasignee for the amount of the attaching claim, and also for advances. The Circuit Court of the United States for the eastern district of New York held that, inasmuch as the advances had been made without any agreement or reasonable expectation that they were to be secured by bottomry, the bond was invalid as to that item. That, although the design of the bond might suffice to sustain it, yet, as the master did not communicate with the owner, which he might have done by telegraph, he had no authority, and the bond was invalid {The Circassian, 3 Benedie^^ D. 0. R., 398). The Oonsolito del Mare says that " the owners of the ship ought to contribute to the fitting out of the ship, according to their respective shares. If some of them are unwilling or unable to fur- nish their proportions, the captain may compel them, judicially, to do what is right ; as he may also borrow money on their account, and pledge their proportions for the payment of the sum borrowed " {fionso. del Ma,re, oh. 46). And the ancient Teutonic Ordinance says that " where a merchant delays famishing his part, the cap- tain may borrow money on maritime loan and pledge the part of the recusant." And, again, it is said that " the captain may bor- row at bottomry for those who are unable or unwilling to contri- bute their proportions of the expense of fitting out the vessel " {Tent. Ord. Arts, 11, 59). This is laid down as the rule where the vessel belongs to two or more owners. The owner of the vessel as well as the master may pledge her by bottomry in a foreign port ; and in this country bottomry bonds are frequently made by the owner himself in the home port. In one case it was held that a bottomry bond, given by the owner to the. master to secure certain advances and wages due him was valid {Miller v The Heheooa, Be^s R., 151). There are cases m which an agent may take a bottomry bond, A ship, damaged on leaving New York, returned to that port. M., who had acted as agent for her owner, gave the owner notice of the accident, and of his intention to get the ship ready for sea again as soon as possible. The owner communicated with M. and with the ship's master, but provided no funds for the expenses. There was no evidence that the owner or master had credit at New York. When the ship was ready to sail, the master, not being able to pay for the expenses, advertised for a loan on bot- BOTTOMBT BT THE OWNER. 737 ;omry ; and M.'s offer being the lowest, the bond was given, and the court held that the bond was valid {The Oriental, 2 Eng. Law md Ef. R., 546). Ill a case which was decided by the Circuit Court of the United States for the second circuit, many years ago, and which has been before referred to, it was held that the owner in a foreign port, having an absolute control over his property, may pledge the ves- sel for money to purchase a cargo, and thereby create an admiralty lien. The facts of the .case were these : In N"ovember, 1822, the owner of a vessel in Connecticut gave a bill of sale of her in the nature of a mortgage, but was suffered to remain in possession and act as absolute owner, and her register and all her papers remained unaltered. In July, following, he gave a bottomry bond for money advanced to purchase a cai'gb for the vessel in the West Indies, without notice of the mortgage to the lender. The court held that, upon common-law principles, the claim of the lender was to be preferred to that of the niortgagee, and affirmed the right of the' owner to execute a valid bottomry bond for the purpose and under the circumstances appearing in the case {The Mary, 1 Paim's 0. C. R., 671). A similar doctrine was laid down by the Supreme Judicial Court of Massachusetts at an early day. A bond was given by the owner for money, to run on bottomry on a ship and her freight for three ^ears at twelve per cent interest yearly. The obligor was to pay the obligee, from tihie to time, half the ship's gross earnings, and to make other payments, if he chose, on the bond, and the interest was to cease on the amount of principal so paid ; the obligee Was to retain all payments so made, whether the ship should be lost or Qot, and the ship and freight were to stand hypothecated for the anpaid balance ; and at or before the end of three years, the obli- gor was to pay the remaining sum due, with the stipulated interest, ieducting such sums as the obligee would be held, by law, to pay for general average, etc., during the three years, as if he had been m underwriter ; and in case of a total loss by perils insured against in a form of policy referred to, the obligor was to- pay the obligee mch salvage as he would be entitled to, if he had been the under- writer in such policy ; and the obligor was to pay the obligee half ihe gross earnings not before paid over, deducting such sums as ;he obligee would be held to pay for general average, etc., as before mentioned. The obligor also gave a ©ortgage of real estate tc 738 LAW OF MARITIME LOANS. the obligee to secure fulfillment of the conditions of the bond. The court held that the bond was valid ; and the fact that the obligee had attached the ship before the three years elapsed on another debt of the obligor, whereby the latter was prevented from employing her, was held not to excuse him from performing the conditions of the bond, it being his own fault that the other debt was not paid. It may be of some importance to note this latter holding {Thorndike v. Stone, 11 Pick. E., 183). The master would have no right to pledge the vessel for advan- ces to piirchase a cargo. But there is no such limitation upon the authority of the owner ; he has the absolute control over his pro- perty, 'and has a right to pledge his vessel for money borrowed for any purpose, to be applied to repairs, outfits or other necesaries, or ^o the purchase of a cargo {The Prniama, OllcotCa G. O, P., 343). There seems to be no rule that, in order to constitute a bottomry bond as such, in the sense of the maritime law, it is necessary that the money should be advanced for the necessaries of the ship, or for the cargo or for the voyage. Where such bond is given by the master in that capacity, it must, in order to have validity, be for the ship's necessities, for the implied authority of the master extends no further. But where the bond is given by the owner, as such, he may employ the money as he pleases. It is sufiicient that the money is loaned upon the bottom of the ship at the risk of the lender for the voyage (The J)raco,-2 Smnner's P., 157 ; Eneas v. The Cha/rlotte Minerva, 39 SunSs Merchant^ Magazine, 73). A party who gives a bottomry bond upon a ship in the name and character of master, but was at the time or afterward became an owner, will not be permitted to restrict the rights of the bot- tomry holder, when he comes to enforce his bond, to those con- ferred by a bond made by the ship-master as such. Such party, it seems, takes all, the benefits under the bond which would have accrued had it been executed avowedly by the owner. The holder of the bond is, upon the othpr hand, entitled to every advantage derivable from the fact that it was made by one possessing not only the authority of agent, but that of principal also {The Pomama, Oloott's a C. P., 343). One part owner cannot take from the master a bottomry bond to bind another owner's share for repairs {Patton v. The Pandolph, Gilpin's P., 457). Either the owner or the master of a ship may bind her by a BOTTOjmr AND BE8P0NDMNTIA. 739 direct hypothecation for repairs or supplies made or furnished in a foreign port, although a note or other obligation is given for the demand {The Hilarity, Blatchford & Sowland's Ad/m. R., 90). And a bottomry bond given by the owner is not rendered invalid by the fact that part of the loan consists of a bill of exchange drawn by the bottomry lender on the home port of the ship {The Panarm, OlcoWs 0. C. R., 343). It may be stated that the terms bottomry and respondentia are often confounded as meaning the same security, but there is an essential difference between the two securities. There are three descriptions of the usura marina described in the books. 1st. Where the lender advances money on the ship, and this is called bottomry, and is to be repaid with certain interest in case the ship perform her voyage safely, in which case the ship itself is pledged to the lender as a security. In general, however, a bottomry bond binds not only the ship but her whole earnings. But a distinction is made between advances on freight and other advances. Sums advanced on account of freight must be deducted in preference to the bottomry {Freight Money of the Anastasi'a, 1 Benediofs D. G. S., 188). The true definition of a bottomry bond, in the sense of the general maritime law and independent of the peculiar regula- tions of the positive codes of different commercial nations, is, that it is a contract for a loan of money on the bottom of the ship at an extraordinary interest upon maritime risks, to be borne by the lender for the voyage or for a definite period {ITie Draco, 2 Sum- ner's G. G. R., 157). The contract of bottomry differs essentially from a loan with security, and is inconsistent with the existence of a lien such as is implied by the marine law to secure advances made to a master, in a foreign port, to enable him to make necessary repairs {The Ann C. Pratt, 1 Gurus' C. G. R., 340). The essential difference between a bottomry and a simple loan is, that in the latter the money is at the risk of the borrower, and must be paid at all events. In the, former, it is at the risk of the lender during the voyage, and the right to demand payment depends on the safe arrival of the vessel. The perils of the sea being at the risk of the lender, gives the right of reserving any rate of interest agreed upon, without incurring the penalties of usury {The Ma/ry, 1 Paine' s G. C. R., 671 ; The AtUmtio, 1 New- lury's Adm. R., 514; The William and Emelvne,, Rlatch. d Hov!. Adm. R., 66). 740 LAW OF MARITIME LOANS. 2d. Where money is advanced to be repaid in case the cargo arrives safe at the place of destination, and this is called respon- dentia, in which case, the cargo is pledged to the lender. And' 3d. Where money is advanced to be repaid on the event of a certain voyage terininating favorably, but where the money is not advanced on the security either of ship or goods, and where it is immaterial whether the borrower have or have not any interest in either. These are all maritime loans, but they depend upon diflferent securities. In case of bottomry, the lender's security is upon the ship, and in case of respondentia it is upon the cargo, but the risks are the same, and the terms of the obligation are alike. Bottomry securities are invariably entered into by the owner or the master of the vessel, while those of respondentia are usually made by the owner of the cargo. In case of necessity the master is authorized to hypothecate the cargo ; that is to say, when he is not able to procure the requisite advances in case of necessity, upon the security of the ship alone, he may sell a part of the cargo, or hypothecate the whole. And it has been held that, if the master has money on board of the ship belonging to shippers, he is not bound to apply it to the ship's necessities before borrowing on bottomry, at least if unequal to the amount necessary to be realized. The law invests the mas- ter with a large discretion on the subject. Said Mr. Justice Stoiy : " I am not prepared to say that there is any absolute rule which compels the master at all events, and under all ciream- stances, to make use of moneyed coin of third persons, which he happens to have on hand, in preference to any other mode of proceeding. The general principle is, that he is bound to act with a reasonable discretion. He is to get the necessary repairs done at as little sacrifice as is practicable. If he has money on board, and the use of that will be the least sacrifice, he ought to resort to it in the first instance. But there might be cases in which the use of such money would be the greatest sacrifice that could be made, and the whole object of the voyage might be thereby defeated. * * * In all these cases, therefore, much must be left to the master's discretion, and he must exercise it conscien- tiously for the general interest. If he acts iona Jide and with reasonable care, the rights of the parties are bound up by his acts, although it should afterward be found that he had committed an BOTTOMRY AND RESPONDElfTIA. 741 error in judgment, and might have acted more beneficially in another manner {The Ship' Packet, 3 Mason! s 0. 0. B., 255, 258, 259). But where the goods of a shipper are thus disposed of by the master, the owner has a lien, by the general maritime law, upon the ship and freigfit for reimbursement. The Consolito del Ma/re {oh. 106, 106) recognizes the principle ; and in general the money so lent upon a forced loan is deemed to be in the nature of bottomry {The GratiPudine, 3 Hoi. JR., 240, 264 ; Belgm v. The Shop Bawibow, Bee^s Adm. B., 11&). This doctrine is unquestioned. Doubtless a lender on bottomry is not bound to see to the appli- cation of the money he advances, but it is clear that he must make due inquiry to ascertain that an unprovided necessity exists, aiid that without money so advanced the ship cannot proceed on her voyage ; accordingly, where, without such previous inquiries, advances were made on bottomry to the master of a ship which had arrived with a considerable cargo in a foreign port, and remained there two months, the repairs, which were unimportant, having been completed, and her stores furnished before the advance, although there was no fraud on the part of the bond- holder, yet, as there was no real necessity for borrowing at mari- time interest, the bond was not supported {The Orciia, 3 Sagg. Adin. B., 75). But where repairs are necessary, it is not incumbent on the foreign merchant, before he advances thei money on bottomry, to calculate the expediency of incurring the eixpense of them {TheVibilia, 1 Bob. B., 1). The two securities of bottomry and respondentia, are in many of their essentials substantially alike, and they are, therefore, oftentimes considered as classed together. 742 LAW OF MARITIME LO4NS. CHAPTEK LYIII. WHAT MAY BB PLEDGED IN A MAEITIMB LOAN — WHAT MAT BE LENT AT MAEITIME RISK — LOAN, HOW TO BE EMPJ-OTED CONSEQUENCE IF THEEE HAPPENS TO BE NO EISK — THE CASE OP A FEATJDULENT BOE- EOWEE — PEOOF OF THE SHIPMENT LOAN, HOW EMPLOYED. As a general rule, everything which, can be insured may be the subject of a contract of a maritime loan, provided that the mari- time risk and the subject of it be real on both sides, and that there be nothing repugnant to the nature of the contract. The contract on marine loan on the cargo affects not only the goods on board, at the time of departure, but all which may be taken on board for account of the borrower during the voyage. If the contract be for the outward and inward voyage, it covers the returns for account of the borrower. 'But it has been held by the French admiralty courts, and such doubtless is the law, that the lien does not attach upon merchandise which the borrower voluntarily, and without being compelled by necessity, ships in another vessel. To the risk of this merchandise the lender is a stranger, even though it be the returns of the jSrst cargo, and hence no substantial reason exists why the lien should attach upon such merchandise thus circumstanced. It is enough, however, that the subject of the risk is on board the vessel at the time of the accident. If it is not, the borrower is not released from his per- sonal obligation by the loss. It seems by the ancient .usage that " money may be lent at bot- tomry on the body and keel, the rigging and apparel, arms and victuals, jointly or separately, and upon the whole or part of the cargo, for the entire voyage or for a limited term." It has been suggested, and very properly, too, that the words jointly or sepa- rately should be placed at the end of the article ; because nothing prevents a person from borrowing jointly on the ship and cargo, if he has an interest in them. When the captain or owners of the vessel ship goods and mer- chandise for their own account, they may take up money at mari- time risk on the vessel and goods jointly ; because they have the disposal of both, and the lender thereby has a more extensive lien. To borrow money at maritime risk on freight to be carried by the ship, is not sanctioned. M. Yalin observes that the lender WMAT MAT BE LOANED. 743 would be at the mercy of the borrower, who would make no exertions to save freight when it would yield no advantage to him. He adds that it is lawful to borrow money on freight al/ready reserved; that is to say, to borrow for the purpose of paying a stipulated freight, which is to be paid at all events, whether it be for the transportation of merchandise or for a mere passage. The Guidon de la Mer permitted the master " to take up as much money as the amount of the primage and that money which was promised to him in the charter-party, in consideration of the advances which he may make to the crew. The advances to sea- men is one of the expenses of equipment and outfit. It may, therefore, be the subject of insurance, and of a contract of mari- time loan for the benefit of those who fit out and equip the vessel " {Quid, de la Mer, ch. 19, art. T). It would seem that seamen are, at liberty to borrow money on merchandise laden for their own account, because they are con- sidered jwo hoc vice as owners. They require no permission from any person in that case. But as mariners are restricted from insur- ing their wages, so they may not borrow money at maritime risk on that fund {Emerig, des. Ass., ch. 8, § 10). The reasons for this law flow from the necessity of securing the attention of mariners to the safety of the ship, and these reasons would seem to apply with equal force to both contracts. ■ Money procures those things which persons desire to send out to sea, and without that necessary article a vessel could not leave her port. This is the reason why privileges so extensive are given to maritime loans. But when the vessel has put to sea, the public interest is subserved, and it is not necessary to grant particular privileges to an enterprise already executed. Still, after the departure of the vessel, nothing prevents the borrower from con- tracting to pay the money borrowed out of the interest which he has at stake; but this indication of a particular fund does not give the creditor any lien upon the fund thus pointed out. The money cannot truly be termed trajeetitia but when it has been employed in the actual purchase of the goods shipped or has enabled the borrower to purchase them. With respect to the article which may be lent at maritime risk, there seems to be no doubt that merchandise or other effects may be the subject of a maritime loan as well as money. The civilians require only that the effects lent should be designated by weight. 744 I'AW OF MAniTIMM LOANS. nuniber or measure ; and that that should be of such a nature, . according to the custom of the place, that they may be considered, or be intended, for sale by the borrower, who becomes the owner on condition of paying the price, and a maritime interest in case of the safe return of the vessel {Sty.pmannua, pwrt 4, ch. 2, n. 18). Pothier says : " In order to form a contract of maritime loan, there should be a sum of money borrowed by one from another on conditions specified in the contract. It is not meant that nothing but money may be the subject of this contract; for this contract includes that of mutuMm, to which is added an agreement, by which the lender takes upon himself the risks ; he may require all those obligations which are contained in the contract of mutuv/m ; that is, of all those qucB ponder e, nutnero eb mensura cohstomt, et quae usu oonsv/muntur. But it is not usual to lend anything except, money in a maritime loan " {Pothier, n. 8, A. t.). The contract of rmituum, or loan of things to be restored in kind, referred to by M. Pothier, is a covenant by which one gives to another a certain quantity of the kind of things that is ^ven by number, weight and measure, siich as money, corn, wine, etc., on condition that the borrower shall restore, not the same individual thing he borrowed, but as much of the same Mad and of the like quality. But it seems well settled by the authorities that everything may be lent in a maritime loan as well as money; and it would seem that this contract may be united with another, and that the con- tract is susceptible of any modifications which the parties may think proper to make ( Vide Emerigon on Marit. Looms, 139-141). And it seems, from the same authority, not only that any other article than money may be the subject of a maritime loan, but that it is even permitted to, stipulate that the lender shall continue to be the owner of the articles lent and at his risk ; in which case, two contracts would be embraced, which, being united, form a hi/ring at maritime risk. It has been shown, that maritime risk is the essence of the con- tract of maritime loan. It is necessary, therefore, that, the money should be actually applied to the purpose for which it was bor- rowed. If it be not so employed there is no risk, and, hence, the contract can have no existence as a maritime loan, and. may be rescinded. And, yetj it has been declared by judicial authority that the lender on bottomry is not bound to see to the application MUST BE A BISK. 745 of the money he advances, although he must make due inquiry to ascertain that an unprovided necessity exists for the advance, and that without it the ship cannot proceed oh her voyage ( Vide The Oralia, 3 Sagg. Adm. M., 75). The non-departure of the ship gives an eqaal right, according to circumstances, to the rescinding of the contract ; but after the risk is once commenced, the contract should have every effect which the circum&tamces will warrant. The maritime interest is the price of the risk ; and if there has been no risk it follows that no maritime interest can be due to the lender. Says M. Pothier : " Suppose there has beeii no risk in consequence of the voyage having been broken up ? In this ease, the boiroower would be obliged to return the money lent to him ; but he would not be obliged, also, to pay the sum which he had promised by way of maritime interest. For the maritime interest being the price of the risk which the lender ought to encounter, he would not be entitled to maritime interest for the effects upon which the loan was made, if they never had been at hazard ; and he cannot be entitled to the price of a risk, who never has incurred it. The condition, that there shall be risks to be encountered, is one that is necessarily included in a contract by which the borrower has agreed to pay the price of a risk " {Pothier, n. 3S, h. t.). And, again, the learned author remarks : " The maritime profit is not due to the lender, even in cases where the voyage has been broken up by the act of the borrower. For, let the case be what it may, it is enough that the voyage was broken up ; the lender has run no risk for which he would be entitled to a maritime interest ; he cannot dema,nd the price, of a risk which he never encountered" {Pothier, n. 39). And Valin says : " We do not make any difference between, the borrower in a maritime loan, who has had it in his power to load 'the ship, and him who could not do it. Let the lender have acted with ever so much good, faith, we must always recur to principles for the solution of any question on the subject ; for the nature of the contract is such, that, the lender could not be entitled to any maritime profit but as far as, he has incurred the risks to which the contract is subject. In the case of not lading the vessel, he has run no risTc; and, thereforej no maritime profit can have been earned. Whether the borrower was able to ship, is of no conse- quence" {Valm,art.l6i,h,t.,p.lS). 94 746 I>AW OF MARITIME LOANS. In those cases where the voyage is broken up before the com mencement of the risk, the borrower is bound simply to return the amount of the loan with legal interest, according to the custom of the place. It sometimes happens that the borrower fraudulently obtains more money than the security which he gives will adequately cover. Upon this subject,' the French ordinance forbade " persons to borrow by maritime loan upon the hull and keel of the ship, or upon the cargo, beyond their value, under pain of being obliged, in case of fraud, to pay the whole sum, notwithstanding the loss or capture of the vessel." According to this, he who has fraudu- lently borrowed money, by maritime loan, beyond the value of the thing at risk, must pay the whole sum borrowed, notwithstand- ing any accident. And it is well settled by competent anthority that, if the ship arrive in safety, the fraudulent borrower cannot avoid the payment of legal interest. His deceit imposes silence upon him, and he is not allowed to demand that the contract be rescinded [Emerig. Traite des Assuram,ces, ch. 16, § 5). In such case the owners would be obliged to pay the money with maritime interest for sums borrowed by the captain at maritime risk in the course of the voyage, because they are responsible for his acts, and they represent him at least until they abandon the ship and freight. From some rules which have been laid down in respect to the proof of the shipment of the goods on which the money was loaned, it has sometimes been contended that it is lawful to borrow when the thing is already at risk ; and that in case of accident it is suffi-. cient to prove that the subject of the risk was on board when the loss happened. This is the rule as to insurers, but not as to lenders at maritime risk, who cannot be considered in that char- acter, unless they have made a loan to effect the equipment, to purchase the cargo, or to supply the necessities of the ship during her voyage. The nature of the contract and good faith will not allow that the interests of third persons should be injured without a good and lawful cause ; such, for instance, as those of the lenders for the equipment of the ship and furnishing the cargo, which would be thus injured by a concurrent and not equally meritorious claim, and those of the insurers, who, in case of loss, would be deprived by an intruder of this proportion of the effects saved. The French Ordinance de la Marme declares that " the person who shall have borrowed money by maritime loan iO^JV, HOW, EMPLOYED. 747 on goods, shall not be released from his contract by the loss of the ship, .unless he prove that he had goods on board to the amount of the sum borrowed" {Ordmance, a/rt. 14, h. t.). M. Yalin remarks that, in such a case, the proof of pro- perty should be the same as in cases of insurance {Em&rig. Traite des Assit/rcmces, ch. 11). But it suiSces if the borrower prove property on board to the amount of the sum borrowed, as before stated, without being obliged to run the risk of any portion thereof ; for borrowers are frequently men of no fortunes and have nothing but their industry to depend upon. Targa, however, expresses the opinion that the borrower should run the risk of a third part of the thing borrowed {Ta/rga, ch. 33, n. 16, ^. 148). But this seems not to be correct. The Circuit Court of the United States for the first circuit, held by Mr. Justiae Story in 1826, made a decision involving this ques- tion to a certain extent. In a respondentia bond for $10,000 on goods, it was stipulated that the vessel should carry' goods to the value of the amount lent. The vessel was lost on the voyage, hav- ing goods on board to the value of $9,000 only. The lenders seized on the bond, and claimed payment of the amount loaned, because the full amount of goods were not on board. The court held that this act was not a condition precedent, the omission of which was sufficient to justify a recovery for the whole loan, but that the lenders were entitled to recover the difference in amount between the sum lent and the sum on board at the time of the loss {FranMim, Insy/r(mce Com^cmy v. Lord, 4 Mason's R., 248). This would seem to be a slight modification of the old French doctrine, as expressed in the ordinance and laid down by the elementary writers. It is not necessary that the borrower should expend the money which he has borrowed in merchandise at the place where the con- tract was made. He may carry it with him, in order to make a more advantageous use of it during the voyage. This was the common practice among the Romans, and the right is recognized by the French authors. It is sufficient that the money was exposed to the perils of the sea to make the maritime interest due, and on the other hand the borrower will be released from his bond by proving the property to have been on board at the time of the loss. Nor is it necessary to >show the particular manner in which the money was employed. It is enough to prove that at the time of 748 I/AW OF MARITIME- LOANS. the loss he had property on board to the value of the siim bor- rowied {Emerig. on Marit. Loans, 156, 157). The proof of the application of the money lent at maritime risk is never thrown upon the lender. It is sufficient for hiin to exhibit his contract to the person who has received his money or his agent {Gasa/regis, Disc. 1, n. 37; Pothier, n. 52). The Supreme Court of the United States have held that it is not necessary that a respondentia loan should be made before the departure of the ship on her voyage, nor that the money loaned should be employed in the outfit of the vessel, or invested in the goods on which the risk is run. And it was declared that, if the risk of the voyage be substantially and really taken, if the transac- tion be not a device to cover usury, gaming or fraud, if the advance be in good faith for a maritime premiunl, it is no objection to it that it was made after the voyage was commenced, nor that the money was appropriated to purposes wholly unconnected with the voyage. It was further suggested that the lender is not presumed to lend upon the faith of any particular appropriation of money ; and if he were, his security could not be avoided by any misapplication of the fund, when the risk was incurred in good faith upon other goods. Mr. Justice Story delivered th.e opinion of the court, and, among other things, said : " The form of the respondentia bond in the present case is, as far as we know, the common and usual form. The only deviation from the actual facts is, that it seems in some of its provisions to contemplate the voyage as not then commenced. This probably arose from using the common printed form, which- is adapted to that, as the ordinary case. But it misled no one, and was certainly perfectly understood by the parties. The risk was taken for the whole voyage, precisely as if the ship bad been then in port ; and if, before the bonds were given, the property had been actually lost by any of the perils enumerated in it, it is clear that the loss must have been borne by the lenders. They could not have recovered it back, since the event was one within the scope and contemplation of the contract. The safety, then, of the property at that particular period does not vary the rights of the parties, and from the very motive of the transaction it must have been entirely unknown to both whether the ship was at the time in safety or not. They entered into the contract upon the usual footing of policies of insurance- lost or not lost. So far as CONTRIBUTION BT THE LENDER. 749 this deviation from the fact bore upon the point of good faith and reahty of the contract as a genuine maritime loan, it was left to the jury to draw such inferences as upon the whole circumstances they were warranted to draw" {Conrad v. The AUantio Insvr rance Company, 1 Peters' B., 386, 437). CHAPTEE LIX. EI8KS AND LOSSES BOENE BT THE LENDEE8 IN OASES OE MARITIME LOAN — LOSSES AND AVEEA&E OCCASIONED BY THE PEEILS OF THE SEA — LBNDEES BEAR ONLY THE EISE8 OF THE SEA LOAN FOE THE VOYAGE OE A LIMITED TIME PLACES OF PEEIL AND CHANGE OF THE SHIP. Cleieac observes that the contract of maritime loan is subject to the same risks as the policy of insurance {JVbtes on le Guidon ' de la Mer, ch. 18, art.% p. 331). Valin and Pothier both adopt the same rule, but admit certain exceptions to which it is liable ( Yalvn,, art. 11, h. t., amd art. 6, tit. Des Assurances ; Pothier, n., 16, h. t.). The Guidon de la Mer decides that mari- time money does not contribute to any particular average {Ch. 19, art. 5). And by the law of England and of this country there would seem to be neither average nor salvage upon a bottomry bond. The lender at maritime risk is not bound to contribute to any simple average or particular damage which may happen to the merchandise unless there is a stipulation to the contrary. Thus, in order to charge the lender with particular average, there must be an express agreement to that effect, while the insurer is obliged to contribute, if he has not protected himself by a special clause to the contrary ( Vide Emerig., Traite des Assurances, ch. 12, §§39, 40). Pothier illustrates the reason of this difference. He says that " the insurers bind themselves to indemnify the insured against every loss and injury which their property may suffer from the perils of the sea ; but in a maritime loan the lender enters into no obligation to the borrower" {Pothisr, n., 42 and 47). Audit may be added that the safe arrival of the vessel is the essential and characteristic condition of the latter contract, and simple average has no influence on the accomplishment of this condition. 750 LAW OF MABITme LOANS. The lender, therefore, is a stranger to it, unless he has made him- self liable by a special agreement. The Guidon de la Mer says that " bottomry money must con- tribute to ransoms, compositions and jettison made for the safetji of the whole, and for the release or avoiding of damages" (CA. 19, art. 5). The reason of this difference between simple and gross average is this : Simple average, which is occasioned by acci- dent and without the fault of man, contributes nothing to the fulfillment of the contract and the safe arrival of the vessel ; on the contrary, without the aid of ransom or jettison the ship would never return. Says M. Prevot de la Jannes : '' The lenders ought to contribute to discharge the borrowers from gross averages, such as ransoms, compositions, jettisons for the common safety of the vessel and cargo ; for it is no more than a loss that they suffer for the preser- vation of their money, which, without this, might have perished with the vessel " {Prmeipes de la Jurisprvdence Francois, tit. 20, n. 556). Where repairs are ordered by the underwriters, for the payment of which a bottomry bond is given, and they refuse to pay it on the arrival of the vessel, in consequence of which she is sold, they are liable for all the damage which occurs to the owner in conse- quence of that refusal. Where a ship has been repaired, the underwriters are not entitled to the usual deduction of one-third, new for old, unless the ship has been put into the free possession of the owners again. Where a ship is obliged to put into port for the benefit of the whole concern, the charges of loading and unloading the cargo and taking care of it, and the wages and pro- visions of the workmen hired for the repairs, become general average (Da Costa v. Newnham, 2 Term R., 407). It would seem, from principle, that a lender upon bottomry ought not to be allowed to stipulate that he shall be exempt from gross average ; and this seems to be the opinion of both Valin and Pothier {Pothier, n., 46). Such an agreement would proba- bly be held to be absolutely void, and rejected, because it is con- trary to natural equity, and even to the interest of the lender, to whom everything would be lost if' the vessel perish {Pothier, n. 46). It has been before asserted that the safe arrival of the vessel is the essential condition and characteristic feature of the contract CONTRIBUTION BY THE LENDER. 751 of maritime loan. Consequently this condition should be scrupu- lously preserved. To make the contract lawful, the money must be at the risk of the creditor. If the ship perish before she arrives in port or previous to the expiration of the limited time, the condition has not been performed, and consequently the expec- tations of the lender vanish. This is the reason assigned why the French ordinance decided that " every contract of maritime _ loan shall become void by the entire loss of the thing pledged in the loan, provided that it happens within the time and place of the risk." It seems to be sufficient, then, that the entire loss shall happen within the time and place of the risk in order to render the con- tract void. It would really seem to be intolerable if the borrower, after having lost his property by an accident within the time and place agreed upon, should be obliged- to pay the whole princi- pal, with maritime interest, under pretense of an agreement which was radically void and usurious. And from a very early day the French Admiralty Courts have disregarded stipulations in contracts of bottomry that the lender shall be exempt from what is called gross average in case of damage to the merchandise or ship covered by the contract. The lender upon bottomry or respondentia bears no risks than those of the sea. He is not responsible for accidents which may happen from the internal defect of the thing — as if the commodi- ties rot, if the liquors leak out of the casks, if, from length of time, dry-goods get heated, or if the vessel become unseaworthy by age. And it has been held by the English courts, that where a ship's bottom is injured by worms in the course of the voyage, so tliat, in consequence thereof, she is incapable of completing the voyage and is condemned, the loss is not a loss " by perils of the seas " [Rohl V. Parr, 1 Es;^. N. P. €., 444). The lender is not responsible for any accidents which happen through the acts of the owners of the vessel, the master and mari- ners, or shippers. It is not a peril of the sea at the risk of the lender, if the voyage be changed by order of the owner, or a loss has happened by barratry or the fault of the merchant {Roocus, de Nwo. n. 51). If the effects be forfeited in consequence of their being contraband, in which the lender has not participated or of which he was ignorant, he does not suffer from this accident, because it is not a peril of the sea {StypmanmiJ'S, part 4, oh. 2, n. 752 LAW OF MABITIME LOANS. 105). But if tte design of smuggling or trading in contraband was evident from the contract, the loss would fall upon the lender {Kurioke, tit. 6, p. 362). And if any other shipper than the bor- rower be the occasion of an accident by his own act, without the borrower being able to prevent or repair it, this would be a via Timjor and an accident at the risk of the lender, provided it occurred at sea and was not the 'subject of- particular average. If the goods remain unsold at the place where they are exported, if they be sold under the limited price or to an insolvent person, or if they are pillaged, burnt or the like, the lender is not aflfected by such accidents, because they are perils of the land and not of the sea {Stypmcmnus, pa/rt 4, ch. 2, n. 204, p. 685). Among the Romans, money lent on maritime interest and risk was given either for the whole voyage, that is, out and home, or only out, or only on the return voyage, or for a limited time ; and this is in accordance with the doctrine of the American courts. It has often been held in this country that a bottomry bond is equally valid, whether made for a definite period of time or for a specified voyage ( Vide The Draco, 2 Sumner's R., 157 ; Eneas v. The Charlotte Minerva, 39 SunSs Merchants Magazine, 73). The old French ordinance upon this subject declared that if " the time of the risk be not stipulated in the contract, it shall commence, as to the vessel, when she hoists sail, and continue until she drops anchor in her port of destination ; and as to the cargo, as soon as it should be laden on board of the ship or of the lighters to be carried thither, and continue until it be delivered on shore" {Marshall on Insurance, 656). According to this, the voyage which the vessel makes, from her departure until her arrival at the port of destination, whether it be out or home, constitutes what is called the entire voyage, to distinguish it from the voyage for a limited time. It is very common to borrow money at gross adventure, or at maritime risk, for the voyage out and home, whether it be on the vessel or the goods. In this case, the risk commences at the place of equipment or lading, and does not end until the vessel has returned to the same place. Under the French ordinance, just referred to, if the time of the risk was not regulated by the con- tract, it appears that the presumption was that the money had been lent only for the outward voyage. M. Pothier was of the opinion that, in doubtful cases, the contrary presumption should MONEY, WHEN DUE. 758 ]De indulged, which seems to be, in effiect, analogous with the nature of a contract of retwn voyage, and in accordance with the daily practice. Perhaps, in a majority of the cases, the maritime money is to be repaid on the safe return of the vessel to the port of outfit. But it is all a matter of intent of the parties, to be gathered from the contract, which, in such cases, is ascertained without difficulty or doubt. The rule of the celebrated ordinance of Louis XIY, upon the subject, seems to have been copied into the Napoleon commercial code, although it was thought that the extensiop. of French commerce demanded a new marine ordinance, which, by investigating the nature of things and their various relations, might prevent litigatiop and give stability to the juris- prudence of the empire. But, as before suggested, Bonaparte's legislators adopted the old rule, which had been in force for over a century, without apaendment or improvement {Code du Gom- mei-ce, UTo^ Z2^). Of course, losses which happen during the existence of the risk are borne by the lender. But when the voyage has ended, or the time limited has elapsed, the risk ceases, as to the lender, and the maritime interest becomes due {Pothier, n. 36 ; Yalm, art. 11, jp. 13). Contracts of this nature are sometimes for a specified period, and pro rata, not exceeding, for exa-rnple, one year. In such, a case the term is limited to one year, at the expiration of ■yrhich the risk ceases, as to the lender, and his principal and inte- rest then become due. And it may be added that the terms of the clearance are of no consequence to the lender in estimating his risk. In some countries, for exainple in France and Holland, vessels are sometimes cleared out for one or two years, without designation of places which they are to visit. These voyages, in France are called en oara/van; and the vessels go from port to port in quest of freight or of profits until the time limited for their return. The practice has been expressly sanctioned by the English courts ( Vide Gienar v. Meyer, 2 E. Bladh. R., 603). In Italy they sometimes lend at gross adventure for an unliniiited time, without designating the voyage. In such a case it depends on either of the parties to terminate the contract when he thinks fit, provided it be done at a proper time and under proper circum- stances {Targa, ah. 33, n. 11, 12, 14, 15, p. 145). The same custom prevails in some other countries, and there does not seem to be any reasonable objection to the practice, 95 754 LAW OF MARITIME LOANS. The course of the time limited is not interrupted hy a demur- rage or delay in port during the route, because, whether the stay be voluntary or forced, it is possible that the ship may perish by the perils of the sea {Stypmcmrms, prni 4, ch. 2, n. SO, p. 383). In order that a delay may suspend the time, there should be an express agreement to that effect; but such stipulations are not common, except in charter-parties of affreightments or articles of associations for privateering. And it seems that a special agree- ment is equally necessary to justify a deduction, for the time during ■which a vessel is laid up for refitting or otherwise, from the term limited by the contract, unless, from the circumstances of the case, the laying up of the vessel be considered as a general average. The law would be the same as to demurrage occasioned by a fear of enemies or pirates (JEhnerig. on Mo/rit. Loans, 175). A ship which is not heard from is presumed to have perished within the time limited, at least, until the borrower proves the contrary ( Valin, art. 13, A. t.). As soon as the peril commences a lender has an undeniable right to the whole interest, although the peril should be abridged or lessened. The French ordinance of Louis XIY did not provide for the case of money lent for a limited time with a designation of ike voyage, but declared that then the voyage designated would be the principal object of the contract and the time merely accessory. And Targa adds that it would be just that the borrower should arrive at the place of his destination in order that he may be in a situation to pay the principal and interest {Ta/rga, ch. 33, n. 13, J?. 146). Doubtless the time was added, not as a period for the transaction of the risk against the lender before the voyage ended, but as a measure for the increase of interest in proportion to the length of time beyond the period stipulated. Contracts of mari- time loan are sometimes on a voyage out and home, at a certain per cent per month. In such a case the interest is not due until the end of the voyage. But if the ship perish, the lender has no claim. Yalin says that "usurious lenders have invented a way of indemnifying themselves in a case where the vessel does not return within the ordinary time, by stipulating that if she does not return by a certain period, they shall receive interest at the rate of one-half per cent per month both on the capital and the mari- t jpie interest " ( Valim^, aH. 2, h. t., p. 5). But- since they are GROSS ADVENTURE. 755 allowed to stipulate for any rate of interest that they think proper, it is not easy to see any good reason why they should be prevented from augmenting an interest already due in a case where the ves- sel does not return within the time limited. In respect to the places of peril and change of the ship, it may be affirmed that the lender is not responsible for any loss which occurs out of the places designated in the contract, except in cases of deviation occasioned by necessity or the perils of the sea {Pothier, n. 18). A voluntary deviation discharges the lender from the consequence of any ulterior peril, although the ship return to her legitimate track {fimerig. Traite des Assurances, ch, 15, § 16). The lender is not answerable for a change of the ship without necessity. Losses occurring in any other ship than that which is designated in the contract do not affect his rights.. But if the change of the ship be of necessity from the perils of the sea, the lender must bear the risk of the substituted vessel. For . instance, if the first vessel is taken for the service of the king or the government, or is declared unseaworthy, or is wrecked, the borrower, whose goods have been landed before the accident, may ship them or their returns in another vessel at the risk of the lender ; and it may be remarked that the additional freight which may have been paid to the substituted vessel is a gross average, which is chargeable to the lender. At least, such is the doctrine of the French ordinance, and the English law seems to be similar {Manhall on Insurance, 656). CHAPTEE LX. THE NATURE OF BOTTOMET BILLS — WHERE AMD IN WHAT MANNER MAErriME MONEYS ARE TO BE PAID — LIMrTATIONS OF ACTIONS FOE THE RECOVERY OF THE SAME — RULE IN EBSPECT TO SECU- EITY IN SUCH CASES EXTINCTION OF THE CONTRACT OF BOT- TOMRY — CASES ILLUSTRATUfa THE SUBJECT. t The term, hill of gross adventure, used by the French, is very comprehensive in its nature, and has found its way into the legal language of England and the United States. As the term is used by the French, it is sufiiciently comprehensive' to include every instrument of writing vhich poijtains g, coptract of bottpmry, 756 LAW Ot MARITIME LOANS. respondentia, and every other species of maritime loan; and there seems to he no other term of similar import in use in the English language. Bottomry hills are often referred to in the books and are weH understood. "With respect to these bills, they are considered to be negotiable where they are made payable to the owner or the bearer, as is often the case ; therefore, they may be indorsed and delivered from one to another. Against the bearer of such a bill a set-off will not be entertained of a debt due from the original creditor himself, because in such a case the indorsed biU must be considered as if it had been drawn in favor of the bearer himself. But if the bill had not been drawn payable to order, then the drawer would be entitled to the same exceptions or set-off against the bearer that he would have had against the original payee, because in that case 'the indorsement has no other effect than the assign- ment of a mere chose in action. It would be the same if the bill were not expressed to be for value received or in merchandise, because in such a case the indorsement is a naked authority to receive the amount. The holder of a bottomry biU, who has paid its value, beeotaes the owner of it. He incurs the maritime risks, and the maritime profits belong to him. On the return of the ship, if the borrower be insolvent, the bearer of the biU is entitled to an action of guar- anty against the indorsor, in the same manner as the bills of exchange or negotiable notes. This has been the doctrine since the days of Casaregis, and has not been questioned since {Casareg, disc. 55). But this guaranty, according to the same author, extends no further than the principal sum, although it also covers the cost of protest and common legal interest from the time of the protest ; but not the maritime interest, for the indorsement is not a guaranty of the contract. In short, the guaranty here spoken of would not take place if the indorsee should take the bill at. his own risk and without recourse. This depends on the agreettient of the parties ( Vide Mnerig. on Marit. Loans, 183, 185). When the risk is ended, the borrower must pay the principal and maritime interest in money. An offer of merchandise in pay- ment would not answer the contract {PoiMer, n., 242, 530). And payment should be made in money which is current at the place where it is made payable. The borrower having received money on the goods or the vessel, it has been thought to be just that a MONEY, BOW PAU). 757 little time should be allowed after the arrival of the vessel for the QoUection of the freight or to sell the merchandise, so that he may be able to fulfill ^is obligations. In some countries it is customary to allow a specified number of days ; and the legal interest does not commence until that time has elapsed. Emerigon thinks that if the contract do not provide for any days of grace,, a reasonable time should be allowed to the borrower to enable him to raise ftinds. Indeed, he expresses the opinion that time should be allowed, even if it be stipulated in the contract that the payment i^all be made immediately on the arrival of the vessel {Emerig. on Marit. Loans, 185). It would be well for the parties to make such stipulations in their contracts in this regard as to them may be thought convenient^ although it is doubtless in the power of the judge, in all these cases, according to equity and the circum- stances of the ease, to grant a certain delay, which, without injuring the creditor, will enable the debtor to pay the debt, saving the com- mon legal interest, which runs from the time when the debt became due, and not merely from the time the action was commenced. If the money was lent for the outward voyage or for a limited time, the principal and maritime interest ought to be paid at the place where the stipulated risk ended, although the voyage be not com- pleted, and the same should be paid to the creditor or his appointed jagent {Styp., part 4, ch. 2, n. 90, p. 384). But if, at the place where the stipulated risk ends, there be no person to whom the principal and interest can be paid, the borrower may make a judicial deposit of it or carry it with him. In the latter case, legal interest will not be chargeable until his arrival, but the money or efiects which he embarks will be at his own risk {LoGGeniu8,Ub. 2, ch, 6, n. 10, 11). And if, in order to fulfill his engagement, he voluntarily draws bills of exchange, they are on his own account, unless they are drawn by the order of the credi- tor ; and an agreement that the bills of exchange should be at the risk of the borrower would be inconsistent with the nature of the contract, and usurious ; for it is sufficient if the borrower pay the principal and interest at the place where the term expires, without permitting him to place himself in a worse situation. By the French Ordma/nce de la Marine, the borrower might apply to the judge of the place where the term expired for per- mission to make a deposit, and the other party was also at liberty to commence an action before the same judge for what was his 758 LA W OF UARITIME LOANS. due. In France, in most commercial cases, the court before which the suit is first brought may order, by its judgment, that the money shall be paid provisionally, any appeal notwithstanding ; the party to whom the money is paid giving security to refund, in case on an appeal the judgment shall be reversed ; although it would seem that such provisional orders cannot be made in cases of maritime loans, as they are not among the enumerated cases for which this remedy is provided ( Vide Emerig. Marit. Loans, 187, noU). By the old statute of Marseilles, adventures shipped on a joint concern and maritime loans, the acting partner could not be called upon to account after the expiration of four years from the return of the ship, but it was decided that this limitation did not apply to maritime loans under the Ordinance de la Marvne, because the latter ordinance established no such limitation. In this country, it has been held tliat there is no limitation of action against the original owner of property found derelict at sea, unless there be proof of an intention to abandon wholly {Wilkie v. Brig St. Peire, Be^s Adm. JR., 82). But by a late case, decided by the United States Circuit Court for the first circuit of Massachusetts, it is held that, if proceedings for enforcing a bpttomry bond are instituted witMn a reasonable time, the lien will not be affected merely by the departure of the vessel from the return port, ^ith or without the knowledge of the holder {Burhe v. The M. P. Rich, 1 CUff. C. G. R., 308). In respect to security given with a bottomry bond, the ordinary rule would require a degree of diligence in prosecuting the claim ; especially so in so far as the ■ same may affect third persons. It may be afiBrmed, however, that in general the security is bound by the same obligations to the lender as the borrower himself, unless there is a pai'ticular clause to the contrary in the contract {Pothier, des Ohlig.; n. 404, p. 198). This is the doctrine of Casaregis, as well as of Pothier {Casag., Pis. 63). The security is bound to pay the pi-incipal and interest, not only in case of the safe arrival of the ship, but, it would seem from the decisions, if the ship do not return ; that is to say, such would appear to be the rule, provided the goods on which the money was lent are sawed, or were secured on shore before the loss of the ship. And the security is bound, ipso jure, to pay legal interest from the time, of delay of payment. But " those who have been NULLITY OP THE CONTRACT. 759 security "for money lent at profit are discharged on the completion of the voyage, if the creditor leave the principal in the hands of the debtor for another voyage without their consent " {Guidon de la Mer., ch. 19, art. 2, p. 335). . And one author says : " The security is discharged, although the new contract be imperfect and insufiScient to cancel the first obligation of the debtor ; as in the ease of a renewal or tacit continuance of a lease after the expiration of the stipulated term, and other similar cases, where it is evident that the security is bound " {Boutwrie Inst., pp. 460, 482, 507). In respect to the question as to whether the security is respon- sible in case of the loss of the ship, where it appears that the bor- rower has fraudulently borrowed more at maritime risk than the value of his interest, there appear to be decisions both ways. In such cases the borrower is personally responsible to the lender, and the Guidon de la Mer allowed an action against the borrower and his pledges jointly in all cases where an action would lie against the borrower {Guidon de la Mer, ch. 19, art. 8). And the same doctrine was maintained by Casaregis {Casa/reg., dis., 62, n. 37). On this principle the security would be responsible in the cases supposed, and the latter opinion is certainly in favor of this doe- trine. If the ship perish, he who has borrowed beyond his inte- rest is presumed to have had nothing at risk. This was the pre- sumption established by the ordinance before referred .to, and it was regarded as juris el de jure. The contract is thus declared null, and hence it -would be just that the security should be answerable, and that he should pay the same with legal interest ; and the more so, because in general the security is the partner of the borrower. The important part of commerce which is carried on by means of the contract of maritime loan would languish extremely in consequence of the little confidence that is placed in seafaring persons, if the hand of the security were to be weakened by exceptions which are contrary to the spirit and nature of the contract. Thereupon, the decisions holding the security holden in such cases is never generally approved. In respect to the extinction and nullity of the contract of mari- time loan, it may be remarked that in such loans two kinds of nul- lity are rfecognized ; the first, where the contract contains some internal defect, which makes it illegal in its very commencement ; and the other, where it becomes void by the loss of the things upon 760 LAW OF MARITIME LOANS. which the loan was made. The latter does not affect the existence of the contract, considered in itself. It releases the borrower from his personal obligation by reducing the contract to the value of the portion which may have been saved. This is a condition which operates as a release of the borrower, who is only obliged to pay in case of the safety of his property. By the French ordinance it was declared that " all contracts of maritime loan shall become void upon the loss of the thing upon which the loan was made, provided it happened by accident, within the time and place of the risk ;" and it was added, in another article, that " in case of wreck the contract shall always be reduced to the value of the goods saved." There' is no doubt that the contract becomes void by the loss of the ship on the voyage. " Sueh is the nature of the con- tract of maritime loan, that if the thing upon vrhich the loan is made perish by accident, the contract is of no effect, and the lender can claim nothing. This is what is meant in the eleventh article, where it is declared that the contract shall be void in this case. It is also the common law of the nations of Europe " ( Valin, 12 ; and vide Olairac, sur le Ouidon, eh. 18, art. 2, p. 331). " The con- dition of the contract of maritime loan, and the obligation of the borrower which it contains, exist when the thing on which the loan is made remains on board during the whole term without being captured or lost, whatever damage they may suffer from mere accidents of vis major. And the borrower is obliged, in this case, to pay the whole sum lent, with maritime interest, without claim- ing any deduction on account of the deterioration which his goods may have suffered " {Pothier, n. 42). But in case of wreck or any other accident of vis major, the contract is void, and is reduced to the value of the things saved. If a capture, shipwreck, founder- ing, stranding, and the like, take place, it is a legal total loss. There remains nothing but the salvage. The personal obligation of the borrower is extinct. The lender has nothing but an action in rem on the salvage, and the contract is reduced to the value of the effects saved. M. Pothier observes : " We have seen that the arrival of the thing upon which the loan was made, whatever damages it may have suffered, by what accident soever of vis major, preserves the obligation of the borrower, who must pay the sum lent and the maritime interest. What if only a part of the thing return and the remainder has been lost or captured ; as, for example, if the ves- EFFECT OF LOSS OF TBE SHIP. 761 sel has been pillaged by pirates, wlio take away only a part of the cargo ? In such cases the condition applies only to what is saved, and the contract is void as to the remainder." But if the goods of the borrower had been entirely landed before the accident, the con- tract would not be affected, provided the goods or their proceeds could be laden on board of another vessel. The change of the ship would then be at the risk of the lender. This has been explained in a previous chapter. If the borrower cannot find another vessel in which to ship the goods or their returns, he becomes released from responsibility by rendering an account of the articles saved in the place where the goods are landed. This ha& also been explained in a previous chapter. If the effects which were on board at the time of the accident were worth less than the sum borrowed, the contract would still exist as to the surplus. This should be understood, however, sub- ject to the statement that there was originally on board goods to the value of the sum borrowed, and that a portion of them was landed at some time previous to the accident. The authorities will not support the position without this limitation. If the bor- rower had not shipped to the amount of the loan, the lender could demand only legal interest for that part which was not employed m the voyage and exposed to its perils. If the effects of the borrower are landed in consequence of the unnavigability of the ship, and he cannot provide another ship for them, they are to be considered as goods samed, to the value of which the contract must be reduced. If they are shipped in another vessel, the risk of the lender is transferred with them. But in such a case, if, after the accident, the goods decay or deteriorate in consequence of the delay, either on shore, in the new vessel or otherwise, so as to be less in value than the amount of the loan and interest, it is thought that the lender would be obliged to bear the loss, because the contract is broken by vis major. ' It follows, from what has been said, that the personal action against the borrower is barred by accidents arising from a vis trmjor. Nothing remains for the lender but an action in rem against the things saved, and an action Me^ofo'or?/.?w gestorum against him who has managed or taken care of it, and in whose possession it may be. The lender may pay himself from the effects saved, both his principal aind interest, if they are sufficient to enable him 762 ^AW OF MARITIME LOANS. to do so. But if they are not, he has no recourse against the person ; for all that may be due him, the lender can demand only the value of the effects saved and nothing more. And he can demand this value only from the person in whose hands the goods may be, who has preserved them for account of the parties con- cerned. From the moment of the accident the lender is seized, of right, of the effects saved; that is to say, he has a special lien upon them for payment of the debt, saving the freight and sal- vage. If the money was lent upon the hull, the lien of the lender embraces not merely the wreck of the ship, but also the freight on the merchandise saved {PotMer, n., 52). But the subject of lien will be discussed briefly hereafter. .In order to relieve himself from his engagement, it is not neces- sary that the borrower should abandon. The loss by vis major, ipso jure releases him from the personal action that flows from the contract {Valin, art. 13, h. t.). All that takes place after the accident principally concerns the lender, whose right of action against the borrower ceases, unless he- himself has recovered the goods or has been in fault. The borrower can claim nothing from the effects saved until- the lender is wholly satisfied. The debtor cannot divide with the creditor to his prejudice; but in some cases the creditor may demand an apportionment with the debtor. M. Pothier observes that if the loan " be made only .on a part of the cargo, as on two-thirds or three-fourths, the lien extends only to that proportion of the effects which are preserved from wreck ; the contract is reduced, not to the whole, but to that proportion, and the remaining third or fourth belongs to the borrower, free from any claim ; or if the surplus is insured, it should be abandoned to the underwriters " {Pothier, n. 49, h. t). This distinction is also referred to by M. Valin, and flows from true principles ( Vali/n, art. 11). In respect to the effect which the ill success of the voyage, by reason of something beyond the contract of the borrower, may have upon the contract of maritime loan, this does not seem to have been provided for by the French ordinance. But the omis- sion is easily supplied by the application of general principles^ The object of the contract is that the vessel shall reach some spe- cified place, where the borrower may sell his merchandise, pur- chase returns, and make such a voyage as will enable him to comply with his engagements. It is only on his successful rebu/rn MFFWCT OF LOaa OF THE SSIP. 763 that he has promised to pay the principal and interest. The accident renders this successful return impossible; therefore the object has not been accomplished ; the condition is not fulfilled ; the contract exists in its original state, and ought, necessarily, to be rescinded. If, by accident, the voyage be broken up before it is commenced, the better opinion is that the sum borrowed ought to be returned, without entering into any modifications, which are of no use, but occasion lawsuits. The maritime interest is not due, and common legal interest is due only from the time of ■demand and refusal ( Vide Pothier, n. 39). If money be lent upon the cargo, to go and return, and, in con- sequence of being rendered unfit to navigate, or other vis major, the ship do not return, and no other can be provided for the goods which have been landed, or their returns, the contract is void. The borrower then becomes the mandatory of the lender, and has full power to dispose of the eff'ects saved for fhe account of the lender, in order that he may be reimbursed. The question has been so decided by the French courts, and the same doctrine has been recognized by the American courts. An eariy case, decided in the State of Massachusetts, may be referred to. Money was lent on a bottomry' bond, conditioned that if the vessel should perform the voyage the money should be paid in twenty days after her arrival ; if she should be lost through the perils of the sea, or by fire, or by the enemies of the United States, the bond to be void. The vessel was captured by a British cruiser, and condemned as lawful prize. Upon appeal, the con- demnation was reversed, and full compensation received by the owner for vessel, cargo and freight, by virtue of an award of the commissioners under the treaty of November, 1794. Under these circumstances, the Supreme Judicial Court held that the obligee could not recover in an action of debt brought in the case. The case was very elaborately argued by the ablest counsel in the State, and an exhaustive opinion given by Parker, J., in the course of which he said : " Whether the terms, perils of the seas, comprehend every species of marine accident, where accidents of several sorts are mentioned in addition to perils of the seas, I shall not undertake to decide ; but I am satisfied that the taking, as alleged in the plea in bar, is, to all legal intents, a capture by the enemies of the United States ; and, if it had been so alleged by the defendant, the facts would have supported the plea. It is so 764 LAW OF MASITIMB' LOANS. understood in questions of insurance; and the doctrine is fully supported by the English writers on insurance, and by continental jurists of high authority. " I am, therefore, of opinion that the plea in bar is a sufficient answer to the plaintiff's action, unless it is avoided by the facts set forth in the replication ; and whether it is so avoided or not, is the second question which it is necessary to consider. " By the replication, it appears that the sentence of condemna-. tion was reversed, and that the value of the vessel, cargo and freight, in money, with interest, was awarded to the defendant, and has been received by him before the commencement of this action. It is contended by the plaintiff that, xmder these circum- stances, there was no loss of the vessel ; and that, therefore, as the money secured by the bond has not been paid, the bond is for- feited. * * * " The vfessel, in this case, was captured as prize, was condemned, and never returned to the owners, but, probably, was destroyed in consequence of her detention by the captors. Here was a total loss, which discharged the defendant from his bond. But it is said that the defendant has received her value ; so that, virtually, there was no loss. In equity, the plaintiff's case is undoubtedly very strong, and I can see no principle of mercantile honor upon which the recovery can be withheld by the defendent; but we must decide upon established legal principles, and are not at liberty to wander into the field of equity to do justice to the parties. The question with us is whether any event, within the condition of the bond, has happened, whereby the obligor is discharged from his contract. The facts relied upon by the plaintiff show that such event did happen, viz., the capture and condemnation of the vessel; and, further, they show that she never did return. And although the defendant has recovered her full value, yet I cannot say that there was a performance of the voyage within the meaning of the condition of the bond" {Apple- ton V. Crowninshield, 3 Mass. R., 443, 461, 462). Upon examining the treatises of Emerigon, Pothier and Valin, it appears that it is considered in France, as a principle of marine law, that the lender has a claim upon the vessel or effects saved, upon whichsoever the risk was taken. By these writers it will appear that" although a contract of bottomry is extinguished, by any of the niarine perils upon which the loan has been placed, yet EFFECT OF LOSS OF THE SHIP. 765 that the lender can pursue the effects saved, wherever they may- be, and may maintain an action against the borrower, provided they come into his hands. This has heen clearly shown in the preceding pages. But no authority can be found to justify the position that a bottomry contract, as such, can be enforced, where the vessel, which was the subject of it, did not reach her destined port of delivery. The lender is not entitled to the benefit of his contract of bottomry unless the voyage be performed as stipulated in the bond. There is no hardship in this rule of the law ; or if there is, it is mutual and equal on each side. The debt is to accrue on a contingency, by the express agreement of the parties ; if it does not happen, there is an end of the claim, and the con- tract is exlinguished. It should be stated, however, that under the circumstances of the case of Appleton v. CrowninsMeld (3 Mass. i?., 443), while the contract of bottomry will be void, the lender may have his action of assumpsit against the borrower for the sum lent and the interest. This was so decided in an action between the parties to the precise transaction, and the decision was put upon the ground that the borrower had received the full amount of the sum bor- rowed, under the award of the commissioners, by way of com- pensation for his vessel and freight. Parker, J"., . in his opinion, said : " Until I heard the very elaborate and learned argument by the defendant's counsel against ' the action, I did not entertain a doubt upon this question. It appeared so clear that a part of the money received by the defend- ant was a compensation for the $500, for which his vessel was pledged to the plaintiff, that I had no suspicion he would await a suit at law before he paid the money. * * * " Upon the whole, I cannot see any fair principle upon which a man, who has borrowed money upon the pledge of his vessel, the payment depending upon a contingency, the happening of which is prevented by a third party, who, having destroyed the pledge, afterward makes complete satisfaction for it in money, besides paying him damages for detention, can refuse to repay the money he so borrowed." Sewell and Sedgwick, JJ., also delivered opinions, arriving at the same conclusion of Parker, J.^ as above given {Appleton v. CrowninsMeld, 8 Mass. JR., 340, 357, 358-369). And it may be added that the English Court of King's Bench 766 TjJiW OF MARITIME LOANS. have decided that nothing short of a total destruction of the ship will constitute such a loss as to discharge the borrower of money upon bottomry {Thomson v. The Royal Insurance Company, 1 MoAile cfe SeVwyn^s H., 30). A bottomry bond was given on ship, freight and cargo; the money to be paid within twenty-one days of the ship's arrival in the port of London, and not to be demanded or recovered in case the ship and her cargo be lost, miscarry, or be cast away on the voyage. The ship never reached the port of London, but was abandoned, as for a total loss, at Algoa Bay, where part of the cargo was sold, and the proceeds brought to England, and part put into another ship, and also brought to England. The fact that the ship could not be repaired was not proved. The English Admiralty Court held that the bond must be pronounced for, and enforced against the proceeds of the cargo and the cargo shipped {The Mephania, 9 Mig. Lcm amd Eq. R., 553). CHAPTER LXI. , LIEN OF THE LENDER UPON THE EFFECTS AT EI8K — PEIOEITY OF LIENS ON THE SHIP PBIOEITT OP LIENS UPON THE CAEGO PEINCIPLES APPLICABLE TO MAEniME LIENS. In respect to the lien which the lender has upon the effects sub- ject to risk, there is a difference in the rule, as it has been applied in different countries. Among the Romans, he who lent money to purchase, build, repair or rig a ship, had a lien on the ship, as a security for his debt. But this was exclusively personal. It was only good by way of preference against simple contract creditors, and had no effect against those who were secured by express hypothecations. Kuricke, in his celebrated questions, conteiidi- that the Roman laws gave an absolute hypothecation to him who lent money to purchase, build, repair or rig a vessel {KuriclM, qu. 13, p. 866). But the design of this author was simply to afiapt the texts which he cites to modern customs. According to the Roman law, if one, among those who held hypothecations on the ship, furnished money for her repairs, or to purchase provisions during her voyage, he was preferred to the others, because he pre- served the common pledge. The same law prevailed in favor of LTENS ON TME SHIP. .767 one who had a hypothecation on the cargo or furnished money to pay average or freight. He was preferred to the others wIjo had Bimilar liens, because the common pledge would have been lost without his assistance. If the aid was furnished by a third per- son, who had no previous lien on the ship, he would have only a personal privilege and be excluded by the actual holders of hypo- thecations {Vide DorineUus, de pignor, p. 580). The personal privilege, mentioned in the Roman law, seems to be unknown in the French jurisprudence. Every privilege includes a i^acit and exclusive lien, at least against the thing which is the subject of it. In the language of Livoniere, " a common hypothe- cation is governed by the date of the contract, and a privilege is regulated by the degree of favor due to each particular claim, and is preferred to common hypothecation, though prior in time" {Liv. Regie du Droit, ch. 4, § 1, p. 439). For example, A. builds a ship and gives an actual mortgage to B. thereon to secure a debt due to him. Afterward the ship sails on a voyage, is dam- aged by storms, and puts into port to repair. 0. furnishes money for the repairs, which gives him a lien, by the French law, on the vessel, even without an express hypothecation. On the vessel arriving home, his lien will be preferred by privilege to the prior actual mortgage, by reason of ihe favor due to his claim. On the same principle, and for the same reason, mariners for their wages will be preferred to the same mortgage, though they have only a tacit and posterior lien. The ship, her tackle, apparel, furniture, provisions, and even her freight, are liable for the principal and interest of money lent on the body and keel for the necessities of the voyage. In order that the lender may be entitled to this lien, it is sufficient if the money have been furnished honafide on the hull for the necessities of the voyage, although the voyage should be broken up and the vessel seized before she put to sea. In this case there would be no mari- time interest, because there was no risk. But the lien would con- tinue on the vessel, within the meaning of the French ordinance, and as the rule is generally understood and enforced. If money be lent to the captain during the voyage for the necessities of the ship, the lien extends to the whole ship and freight. But if the money be lent to the captain in the place where the owners reside, without their consent, the lien extends no turtherthan to the interest which the captain may have in the ves- 768 LAW OF MARITIME LOANS. sel and freigkt. If it be furnished to a captain who was author- ized to provide tackle, apparel and furniture, the lender has a lien on the whole yessel. Money furnished to one joint-owner gives a lien only on his own interest in the vessel and freight. The lender on the ship and cargo has a lien in soUdum upon both. The ship and cargo form but one funil as to him. ^ The borrower, by a conjunction re et verbis, has made his interest in the two his capital. This capital is subject, without division, to the lien of the lender, who may pay himself from either or both. The lien of the lender comprehends his principal, iute-' rest and other cha^-ges. In fact, the obligation to pay the principal and interest arising from the same source, the same lien extends, to both. In order to have the advantage of his lien against a third person, it is not necessary that the lender should prove the useful employment of the money; it is sufficient if his title be clear. These are rules laid down by the French writers, and are thought to be of general application ( Vide Pothier, n. 48, 52, 57 ; Valin, art. 7, h. t., cmd a/rt. 16, tit. De la Sadsie, torn. 1, p. 344). In respect to priority of liens on a ship which has not com- menced her voyage, the Consolato del Mare contained this provi- sion : " If a vessel just built be «old at the instance of creditors before she is launched or before she has made her first voyage, the carpenters, caulkers and other workmen, as well as those who furnished the timber, pitch, nails and other articles which are neces- sary in the construction of a ship, are preferred to all other credi- tors, of what sort soever they be, even those who have lent money under a written declaration that it is to be employed in the build- ing of the ship " {^Ch. 32). And the French OrdonnaTice de la Ma/rine declared : " If the vessel sold have not made a voyage, the vendee, carpenter, ship-builders, caulkers and other workmen employed in her, together with the creditors for the timber, cord- age and other articles furnished to her, shall be preferred to other creditors and by a concurrence among themselves" {Art. 17). M. Yalin, remarking upon this subject, says : " It is an important observation, on the subject of liens of carpenters and other work- men employed in the building of a shipi, that they should worh hy the order of the owner, in order to be entitled to this privilege. If they were employed by an undertaker who has received the -stipulated price of the work from the owner, they have no lien LIENS ON THE SHIP. 769 upon the ship, and have no remedy but a personal action Against the undertaker, upon whose good faith they acted. This, however, is to be understood in cases where the worls'men and material-men knew that it was a job, and that they had no business with any one but the imdertaker " ( Valin, art. 17, Ut. De la Saisw, 349). The doctrine of this author, therefore, is quite similar to the law of the Consolato. There is nothing which is regarded with so much favor as debts for work and labor furnished to a vessel. Commerce and the country at large are interested in them. It is right that the work- men and material-men should enjoy the lien thus given them. They cannot be deprived of it, unless it is proved that they con- tracted on the faith of the person and not of the thing. By the Consolato del Mare it appears that " the wages of mari- ners, employed in the last voyage, shall be paid in preference to all other creditors " {Art. 16, tit. De la Saisie, Consolato del Mar^, ch. 33, 105, 135, 136). In respect to lenders at bottomry, writers upon maritime law generally agree that the common order of liens is reversed, and the last should be preferred to the first. Kuricke, however, in his celebrated questions, opposes this view. He contends that all the lenders should come in by concurrence, •because, by means of their money they enabled the voyage to be performed {Kmriche, Ques. 25, p. 880). Emerigon explains the rule in this way : " Before big departure from Marseilles a certain captain borrows money at bottomry. He arrives at Martinique, where he borrows a further sum for the necessities. He reaches Cape Francois, where he again borrows for the same purpose. The third lenders shall be preferred to the second, and those to the first. Sic erunt novissimi, prvmi ; etprwm, novissmd. But the credi- tors in each of these classes shall take by concurrence among them- selves, without regard to the dates of their respective ■ contracts " {Emerig. on Marit. Loans, 234). And it would seem that the same order of liens is recognized by the American courts. In an early case, decided by the Supreme Court of the United States, Mr. Justice Chase, who delivered the opinion, said : " A bottomry bond, made by the master, vests no absolute inde- feasible interest in the ship on which it is founded, but gives a claim upon her which may be refused with all the expedi- tion and efficiency of the admiralty process. This rule is expressly laid down in the boofes, and wiU be found consistent 97 770 LAW OF MABITIME LOANS. with the principle of the civil law, upon which the contract of bottomry is held to give a claim upon the ship. In the case of a bottomry bond, executed by an owner in his own place of resi- dence, the same reason does not exist for giving an implied admiralty claim upon the bottom ; for it is in his power to execute an express transfer or mortgage. There is strong reason to con- tend that this claim or privilege shall be preferred to every other for the voyage on which the bottomry is founded, except seamen's wages. But it certainly can extend no further." It was held, however, that if the obligee of a bottomry bond suffer the ship to make several voyages without asserting his lien, and executions are levied upon the ship by other creditors, the obligee loses his lien on the ship {Blaine v. The Ship Charles Garter, 4 OrancKs a., 328). And to the same effect is an early case, decided by the Circuit Court of the United States for the first circuit, in which it was held that a tradesman has a lien on a foreign ship, lying in a port of the United States, for repairs made by him on board ; and such lien will be preferred, in point of right, to a bottomry interest which is prior in point of time, if it appear that the repairs were indispensable. Story, J., in his opinion, said : " The lien for repairs must take precedence of the bottomry bond. The repairs were necessary to preserve the ship, even if she were to remain in the harbor till she could be sold. It must be presumed that the ship was actu- ally sold, in consequence of the repairs, for as much more as would pay for them. It has been holden that the lender on bot- tomry is liable to general average, and entitled to salvage {Ma/rs. on ins., 760, 764). " This may be considered a continuation of the original voyage " {The Jerusalem, 2 Gallisov^s C. G. E., 345, 346). But the same court held that where a wharfinger has made an express personal contract with the shipowner, the court will not ., give his claim a priority over a bottomry interest which had been previously attached to the ship {Expa/rte Lewis, 2 GaUison's M., 483). It has been held that if a bottomry creditor satisfies the claims of seamen for their wages, in good faith, for the protection of his demand, the court may recognize in his behalf a novation to those claims, as being equitably compounded with his lien. But he cannot coerce an assignment of their demands to himself {Tht JiIENS ON THE SBIP. 771 Cabot, 1 Abhott^s Admiralty R., 150). And in a case, decided by the Supreme Court of the United States in 1834, Mr. Justice Story observed : " It has been said that the seamen have a prior lien on the ship for their wages, and that the amount of the wages ought first to be deducted. Undoubtedly the seamen have such prior lien ; but the owners are also liable for such wages ; and if the bottomry holder is compelled to discharge that lien, he has a resulting right to compensation over against the owners, in the game manner as he would have if they had previously mortgaged the ship" {Tfhe 8hvp Virgm v. Vyfhius, 8 Peters' R., 538, 553). The general rule, in respect to bottomry bonds, is that they supersede all prior liens upon the ship, and are preferred to every other claim for the voyage, except that for seamen's wages. This is a peculiarity relating to those contracts which is always recog- nized by the courts {Vide The Madonna, 1 Dodson's M., 40; ■ Blaine v. TJie Ship Cha/rles Carter, 4 QrancKs R., 328). But, as it has been before shown, this lien upon the vessel, created by the bottomry bond, may be lost by the neglect to enforce it within a reasonable time. Said Lord Stowell, in pronouncing the opinion of the court, in an impoitant case before the English admiralty . "There is a principle of limitation in every system of jurispru- dence, to be derived out of the nature of things, which entitles the court to avail itself of the universal maxim, mgilantihus non dormientihus jura suhvenvwnt. And in questions of bottomry, more especially, the court is bound to expect particular vigilance, because, although bonds of this kind are to be supported vnth a high hand, when clear and simple, they are, in many respects, things to be narrowly watched. Bottomry is a transaction whicb atibrds great opportunities of collusion ; and, therefore, on the very account of the importance given to these bonds, they are to be pursued with very active diligence, in order that the court may have the opportunity of considering them in their recent origin, with a view to all the circumstances on which their honest validity depends" {The Rebecca, 5 Rob. Adm. R., 94; and vide The Ship Madora, 2 Woodb. and Minofs R., 92). Le Guidon de la Mer speaks of renewal ; that is, tbe renewing, from one voyage to another, of securities for money lent by mari- time. The language is : " These renewals have no special-lien on the profits of the voyage, but are to be considered as among the youngest privileged predito^s, If the roerchant reserve the profits 772 LAW OF UABITIME LOANS. of each voyage, and leave the principal in the hands of the master to be again employed, his right shall not be good against the tradesmen and victualers, nor those who have lent their money by bottomry for the particular voyage" {Quid, de laMer,ck. 19, a/rt. 2). And in the 10th article (A. ^.) of the French ordinance, it is also said that " money left by renewal or continuation of the con- tract shall not- come into concurrence with that which is actually furnished for the same voyage." The creditor in this case, doubt- less, would have a lien ; but it should be declared to be posterior to all others, and not prejudicial to the owners of the ship, unless they had authorized the renewal contracted by the captain. By the French law the seller of merchandise, and indeed of anything else may pursue the property in the hands of the pur^ chaser for the payment of the consideration money, as long as it can be identified. As to houses, lands and ships, he may pursue the objects sold, even in the hands of a third person. This is carrying the doctrine further than it is carried in this country or in England. Here the vendor of real estate has an equitable lien upon the property sold for the unpaid purchase-money, as against the vendee himself, but not as against a hona fide purchaser from the vendee. And the French doctrine appears rigorous to an American lawyer, who will immediately suppose the case of a honafide purchaser without notice. But the hardship will disap- pear when it is considered that, in France, a deed or biU of sale is not accompanied, as it is here, with a receipt in fall of the consid- eration money, but the credit given, and the terms of payment are always expressed on the face of the instrument of sale. There- fore the ease of a iona fide purchaser without notice can never occur. If the vendor should indorse a receipt in full on his bill of sale, he would undoubtedly lose his lien, and be driven to the new security which he had thought proper to take from the purchaser. The vendee of a ship which is not yet paid for may, then, under the French law, reclaim it by action, to pay himself, provided he yields the preference to those creditors who are privileged as before stated ; and the same rule would apply here, at least, as agTOst the vendee himseH, and purchasers from him, with' notice that the purchase-money remains unpaid. It is considered to be repugnant to the most common rules,' if the vendor of a ship on credit should be obliged to yield to simple creditors of the vendee, LIENS ON TSE CARGO. . 773 or if he were compelled to come into concurrence witli simple contract creditors, whose claims have no connection with com- merce. The privilege of the vendor is tisually recognized by other creditors, whose debts have no direct relation to the ship. But, however, those who have lent money for the necessities of the ship during the voyage, those who have made advances for the repairs, victuals and equipment before the departure, and shippers, are preferred to the vendor. The ship, by putting to sea under the name and at the risk of the new owner, ceases to be liable to the creditors of the vendor ; and, with more reason, the vendor ceases to have any lien, excepting that which results from general rules of law. In respect to priority of liens on the cargo, it may be remarked that the charges for unloading, porterage and storage, are usually placed in the first rank, and the captain's lien on the produce of the cargo for the freight and general average is placed in the second rank (Kwicke Quest., 11). If in the course of the voyage the shipper require money to save his goods or repair injuries which may have happened to them, the lendier will acquire a lien subsequent to the freight and general average. All those who lend money on the cargo or on small .adventures, before the departure, come into concurrence. If the merchant borrowed by way of maritime loan in an intermediate port, in order to increase his adventure, the second lenders are not preferred to the first. They come into concurrence, because money borrowed in the course of the voyage has not had for its object the preservation of the common stock {Kwricke Quest.^ 25, f. 880 ; ZoGoeovnius, lib. 2, ch. 6, n. 8, p. 993). The privilege of the lendel* by maritime loan is of public importance, and is, therefore, preferred to that of the vendee, who has not been paid for his merchandise. Wliere a person purchases merchandise on credit, and also borrows money by maritime loan on the same effects, from the moment of the loan the effects become pledged to the vendee, who furnished, money only on the faith of the goods. The French ordinance, in speaking of a vessel which has not yet put to sea, places the .vendor among the privileged creditors, and gives him a preference to the lenders on the hull, because the risk does not commence until, the ship has weighed anchor. But the risk on the lading commences the moment it is put on board. The right of the shippers to a lien, is consummated by landing the goods, and that 774 J^AW or MARITIME LOANS. of the lenders by the departure of the ship ; and since the vendor of a ship which has put to sea is exchided by the lenders on the hull, the vendor of merchandise on board should be excluded by the lenders on the cargo. He who buys merchandise on credit may dispose of it according to his own pleasure. If he ship it, it is because he supposes he will find a better market. If he borrow money by maritime loan on the goods, the lenders have a lien and special privilege on the effects embarked and their returns in pre- ference to a vendor, who cannot reclaim the thing sold, much less its returns, to the prejudice of the lender. Such has always been the understanding of the law on the continent of Europe, and the same is doubtless the rule here. A charterer who has hired the whole capacity of a vessel, and loaded her with goods of other parties, the freight of which exceeds the amount of the charter money, is entitled to be paid such excess out of the freight money in. preference to the holder of a bottomry bond upon ship, freight and cargo, executed after the charter party; so held by the United States District Court for the eastern district of Ifew York {Freight Money of the Anastasia, 1 Benedicfs D. C. B., 188). And it has been held by the Eng- lish Admiralty Courts that a bottomry bond cannot affect a previous contract in a charter-party, so as to take precedence of money advances made subsequently to the bond, under the authority of the charter-party {TJie Salada, 32 Z. J. Adm., 43). But the same court has recently held, in conformity to the doctrine understood to prevail in the United States, that a bottomry bond is entitled to priority over a mortgage during the voyage for which the bond was executed. The court declared, however, that when the bond becomes due it should be enforced within a reasonable time, and that a voluntary agreement on the part of the holder to postpone payment under it alters its character totally, and substitutes a con- tract over which the Admiralty Court, at least, has no jurisdiction (The Royal Arch, 1 Swabey's Adm. R., 269). A loan " upon the goods to the amount of the loan, laden or to be laden on board, or which may be laden on board at any time during the voyage," gives the lender only a lien on the homeward cargo, which will be postponed to a claim of the United States on the obligor. But delivery to the obligor of the homeward bill of lading, after the ship's arrival, converts his equitable into a legal LIUNS NOT TO BE IMPLIED. 775 interest {AtUmtio Insurance Company v. Con/rod, 4:Wash. C. C. J2., 662). "Where bottomry bonds are given as collateral security for debts due, that fact may be shown if the interests of third persons are thereby to be affected, notwithstanding the recital in the bond that they are given for money lent and advanced {Greeley y. Water- home^ 1 App. R., 9). Eeference has been heretofore made with respect to the time within which a party should prosecute his lien upon a vessel in order to enjoy the benefit of the same, and it was stated that the matter must be attended to within a reasonable time. So the courts hold ( Vide The JoJm Lowe, 2 Ben. C. G. R., 394). But it has been decided that there is no fixed time for liens to expire which exist at common law, except the time of parting with the possession, and none in maritime liens where possession does not exist with them exclusively, except the end of the next voyage, or the intervention, after it, of rights of third persons without notice {Packard v. The Louisa, 2 Wood^. c& Minot's G. C. R., 48 ; and mdeBwTce v. The M. P- Rich, 1 GUff. G. O. R., 308). It should be added here that it is a maxim of the common law " that a lien never takes place without an express law to authorize it." And another rule, not less general, is, " that liens of every sort are regarded with a jealous eye, because they are prejudicial to third persons." It is for this reason that they are never implied. It is always necessary that there should be a formal obligation exe- cuted which produces a conventional lien, or an express law which creates a legal lien ; otherwise there is no Hen, nor can there be by any construction or implication. Liens are stricti Juris. They cannot be extended from one case to another. Eespecting them there is no arguing by deduction or analogy. The lien must be created by the law itself. If the thing which is the subject of the lien be extinct, the lien is lost. These are general principles, which apply as well to maritime liens as to others. The maritime law gives no lien by implication ( Vande- water v. Yankee Blade, 1 Mo All. G. G. R., 9). Bottomry is a peculiar contract, differing essentially from a loan with security, and is inconsistent with the existence of the lien implied by the marine law to secure advances to a master in a foreign port to make necessary repairs. "Where the express con- tract of bottomry is void for fraud, no recovery can be had upon 776 LAW OW MARITIME LOANS. the footing by an implied contract and lien {The Brig Ann C Pratt, 1 Curds, C. 0. E., 340). And it has been decided by the Supreme Court of the United States that the fraudulent taking of a bottomry bond for a larger amount than the actual advance vitiates the bond and avoids the bottomry lien ; and that the party taking it, under such circumstances, has no lien upon the vessel for his actual advances under the general maritime law {CarringtonY. Pratt, 18 How. U. &. C. R., 63). CHAPTER LXII. THE BOTTOMET BOND FORM, INTEEPBBTATION AND EFFECT OF IT — REQUISITES OF THE CONTBACT OF BOTTOMKY OTHEK 8E0UEITY MAT BE TAKEN WITH THE BOTTOMEY CONTEACT — THE LENDEe's REMEDY IN CASE OF MAEITIME LOANS THE EOEM OF THE DECREE IN ADMIRALTY. It has been stated in a previous chapter that bottomry and respondenHa are, in their nature and effects, quite similar. The first gives a lien on the ship ; the latter gives a lien on the cargo of a ship. In all other respects, bottomry and respondentia are declared to be identical ; so that in giving the form, interpreter tion and effect of the one, the same is substantially given of the other. The elements of the contracts of bottomry and respondentia are all sanctioned by well-settled principles ; and in respect to their form, it is only necessary that they embrace, substantially, the terms upon which they are upheld. The contract involves an advance of money at a premium beyond the statutory rate of inte- rest for the purposes and objects recognized by law, dependent for its return on the result of a real risk — a risk in which the lender, in good faith, hazards his money. Where these features of the trans- action all appear in the contract, its form will be sustained. It is absolutely necessary that the liability of the lender to the sea risks should appear or be fairly collected from the instrument, otherwise the reservation of maritime interest will render the secu- rity void on the ground of usury, not only as a charge upon the ship, but also against the person of the borrower {Maitland v. The Atlantic, 1 N'ewlmry's Adm. P., 514). And it is essential to a valid bottomry bond, such as gives an Admiralty Court jurisdiction, RMQUISITES OF BOTTOMBT CONTRACT. 777 that the debt be risked on the bottom and loss of the vessel; and that the loan be at maritime interest. If these elements are want- ing, the contract will be deemed a mere mortgage, notwithstand- ing the instrument may be called a bottomry bond. To this effect are the authorities ( Vide Ldand v. The Medora, 2 Woodb. cfe Mmofs R., 92 ; Gredey v. Smith, 3 ii., 236, 248). If the lender of money on a bottomry or respondentia bond be willing to stake the money upon the safe arrival of tbe ship or cargo, and to take upon himself, like an "insurer, the risk of sea perils, it is lawful and reasonable that he shoiild be authorized to demand an extra- ordinary interest to be agreed on, and commensurate to the hazard. But all these elements are essential to appear in the bond, or its effects may be changed and the objects of the parties defeated {Maitland v. The Atlantic, 1 Newbwry's Adm,., R., 514). An instrument which was executed collateral to a bill of exchange drawn by the master of the vessel upon her owner, pro- vided as follows : " For the better securing of payment of the said bill of exchange, etc., in any port where the said brig may be, I do hereby bind myself, the owner of the said brig, and particu- larly the said brig, her tackle, etc." The United States Circuit Court for the southern district of New York held that the instru- ment was not a bottomry bond, within the sense of the maritime law. Neither marine risk nor marine interest was provided for, and the personal liability of the master and owner was secured. And dt was declared that all that was stipulated by way of hypothecation was a lien on the vessel until payment of the debt {The WilUam <& Emeline, 1 Blatoh. S Mow. Adm. R., 66). It may be affirmed, however, that a personal liability, in case the ves- sel is not lost, is harmless in the contract of bottomry. It is only a personal liability which continues, notwithstanding the loss of the vessel, which is regarded as inconsistent with the contract of bottomry {Greeley v. Smith, 3 Woodb. <& Minots R., 236). Judge Bouvier observes : " The form of the contract is either by bond, or bill of bottomry. The contract should state : 1st. The sura loaned, and at what interest or maritime profit; 2d. The subject upon which the loan is made. 3d. The name of the ves- Bel and of the captain, ith. Those of the lender and boiTower. 6th. The description of the voyage, its commencement and ter- mination " (1 BovAj. Inst., 507). Parties preparing the contract in cases of bottomry and respon- 98 778 , LAW OF maAitimm loans. d&ntia, by carefully observing these rules, may avoid uncertainty and mistake, and thereby save litigation, damage, cost and expense. The sum loaned and at what interest; the thing pledged; the names of the ship and the captain ; the names of the lender and borrower, and the description of the voyage, or the term for which the loan is made, are all indispensably necessary to be expressed in the contract, and the form should be cautiously observed. According to the form of respondentia bond used in Philadelphia, it seenis that payment of the debt and marine interest depends on the safe return of the goods, and not on that of the ship. The bor- rower, therefore, is obliged to pay if he receives his goods safely, though by another ship. The words "an utter loss of the ship," in such bond, means an actual, total loss, and not a constructive one {Permsylvania Insurance Gom/pcmy v. Dvmal,, 8 Serg. & RawWs JR., 138). And where the parties to such bond agree that the lender "shall be liable to average and 'entitled to the benefit of salvage, in the same manner as underwriters on a policy of insurance, according to the usages and practices of the city of Philadelphia," the court holds that the borrowier is not entitled to calculate an average loss on the whole amount of the money loaned on marine interest, but only on the cost and charges on board and the premium of insurance {G'ihson v. 'PhUadel^Ma Insurcmce Company, 1 Bvnney's R., 405). Another Philadelphia case was this : Money was loaned at Phila- delphia on respondentia by the ship J., at and from Liverpool to Canton, and thence to Philadelphia. N"o bond was executed at the time, as it was not then known whether the shipment at Liv- erpool would be in specie or goods, but the bond was to be given subsequently ; and in the meantime the parties agreed that bills of lading outward at Liverpool for $17,000 if specie should be shipped, or for $20,000 value of goods at par if specie should not be shipped, " in which case the lenders should only be liable for average and entitled to salvage, as if it had been a specie ship- ment." And also bills of lading of the returns at Canton should be assigned to the lenders as collateral security for the bond to be given. The vessel sailed from Liverpool with 700 pieces of goods, of the value of $20,000, but without specie, and was stranded and lost and forty-five pieces of goods were lost, and the remainder saved, but damaged. The court held that the lenders were not liable for the damage of the goods saved, but only for those which RBQUISITES OF BOTTOMRY CONTRACT. 779 were lost, the true construction of the contract being that they should be exempt from damage as they would haye been if specie had been shipped (Dela/wa/re Inswramce Go. v. Archer , 2 Mawle^a B., 216). • Abbott, in his work on Shipping, says: "There is no settled form of contract in use on these occasions. Sometimes an instru- ment in- the form of a bond, at others in the form of a bill of sale, at others of a different shape, is made use of. But, whatever the form, the occasion of borrowing, the sum, the premium, the ship, the voyage, the risks to be borne by the lender, and the sub- jection of the ship itself as security for the payment, all usually are, and properly ought to be, expressed. It is absolutely necessary that the liability of the lender to the sea risks should appear to be fairly collected from the instrument, otherwise the reservation of maritime interest will render the security void on the ground of usury, not only as a charge upon the ship, but also against the person of the borrower. And, where an instrument called a bot- tomry bond contained an express clause that the sum secured be paid within thirty days after intelligence of the loss. Lord Stowell doubted his jurisdiction to entertain the suit at all, and dismissed it on the ground that the very essence of bottomry, which alone could give jurisdiction to the admiralty, was wanting {The Atlas, 2 Hogg. Admh. R., 57). From this sentence an appeal was pre- sented to the delegates ; and that court, after directing a search for precedents, decided that, as maritime interest was reserved and maritime risk excluded from the bond, it was void " {Abbott on Shipping, 158). ■ An important case came before the English Court of King's Bench many years ago, wherein it appeared that, in a^responden- dia bond, the condition, after reciting that the money was lent 'wpon the goods laden and to he laden on board, a certain ship should proceed on her voyage and return within thirty-six months (the dangers of the sea excepted) ; and if the borrower, within thirty days after her arrival, should pay to the lender the sum agreed on, or if, in the voyage and within thirty-six months, the ship should be lost by fire, enemies or other casualties, the bor- rower should, within six months after such loss, pay to the lender a proportionable average on all the goods carried out and acquired during the voyage which should be saved, then the obligation to be void. The court held that this was no more than a personal 780 J^-AW OF MARITIME LOANS. obligation from the borrower to the lender, and did not give the latter any s^eci^c pledge or Uen on the home cargo or the proceeds thereof. Lord Ellenborough, 0. J., in his opinion, said : ' ' This appears to be a contract not of universal nature, but depien ding upon the particular form of the instrument, varying in difiEerent countries. In Spain it seems more like a direct hypothecation of the goods ; which would make all the difference in the construction. But nothing of that sort is to be found in this instrument. In the introductory part, instead of the condition, the money is stated to be lent on the goods ; but that is explained in the subsequent part, and shown to be only a pledge for the purpose of salvage. And no action could be maintained by the obligor to recover possession of those goods from the borrower, or any other having, also, a claim upon them ; for, admitting that the borrower and lender were even partners in them, the latter could not maintain trover against the other. We must construe the contract upon the words of this bond, such as these parties have made use of ; for it is this contract, and not one of a general nature, to be governed by gene- ral usage, that they have entered into. If, indeed, there were any ^ word used of doubtful signification, it might be construed by general usage. But here the terms of the bond are very plain and intelligible, and amount only to a personal obligation on the borrower " {Bush v. Fearon, 4 JEcisfa H., 319), Where a bottomry bond is given upon vessel and freight it binds them only, and not the cargo, although in a recital in the bond it is stated that the master was necessitated to take the sum loaned on the vessel, her cargo and freight. If the omission was by mistake, and is so stated in the libel, it is held that it might be reformed. Where the freight is pledged generally, it includes the whole freight for the voyage which the ship is in the course of earning ; and not merely freight to be subsequently earned, as upon a new contract. Upon any other construction, where the vessel is repaired at an intermediate port, without any change of her cargo, no freight at all would be hypothecated, for no distinct freight would grow due for the voyage from the port of repairs* The freight ultimately paid need not be divisible. Where the parties pledge freight, it must, in the absence of all other counter . proofs, be presumed that they mean the freight to be earned by the ship in the course of the voyage, which has been interrupted SMQUISITE8 OF BOTTOMRY CONTRACT. 781 by the disaster. Such was the construction put upon a bottomry bond which came before the Circuit Court of the United States for the first circuit in 1824, and it seems reasonable and proper [The Zephyr, 3 Ma/rme G. G. R., 341). A construction has lately been put upon a bottomry bond, in the English Court of Chancery, which is quite important as a reference. The master of a ship executed a bottomry bond upon the ship, the condition of which was, that if the ship should arrive at the end of her voyage, and, on such arrival, the amount of the bond should be paid to the. lenders, or, in case of the loss of the said ship, such an average as by custom should have become due on the salvage, or if, on the voyage, the ship should be utterly lost, cast away, or destroyed in consequence of the perils of the sea, then the bond should be void. The bottomry bondholder effected an insurance on the bottomry boncj against the perils of the sea, etc. The ship was, by the perils of the sea, so much damaged as to be not worth repairing, and was sold by the master for a sum much less than the amount of the bond. The court held that the condition of the bond only referred to an actual, total loss of the ship, and not to a constructive total loss ; and that there had, therefore, been no loss of the bond within the policy of insurance, and the bondholder was not entitled to maintain an action upon it against the insurers {Bloomfield v. The Southern Insurance Gompany, 22 L. T. R. Ex., 371 ; and vide 2 Albany Law Journal, 92). It has been held that a loan " upon the goods, to the amount of the loan, laden or to be laden on board, or which may be laden on board at any time during the voyage," gives the lender only a lien on the homeward cargo, which will be postponed to a claim of the United States on the i obligor. But delivery to the obligee of the homeward bill of lading, after the ship's arrival, converts his equitable into a legal interest. And it was declared that no fraud, practiced by the borrower or his agents, can affect the validity of ■ the bond, if the lender do not participate therein {Atlantic Insur- ance Gompamy v. Conrad, 4 Wash. G. C. R., 662). Bottomry bonds are not to be construed literally, but, liberally, 80 as to carry into effect the intention of the parties. Accordingly, it has been held that the holder of a bottomry bond will not lose his money where the non-performance of the voyage has not been occasioned by the enumerated perils, but has arisen from the fault 782 L.A.W OF MARITIME ZOANS. or misconduct of the master or owner. And it was held in the same case that, in cases of bottomry, a loss, not strictly total, can- not be turned into a technical total loss, by abandonment, so as to excuse the borrower from payment, even though the expenses of repairing the ship exceeds her value {Pope v. Niokerson, 3 Story^s R., 465). In respect to the remedy which the lender has upon a bottomry or respondentia bond, the question is ordinarily a very simple one. As a general rule, he has his remedy by action of covenant or debt at common law for a breach of the stipulations, or forfeiture of a condition of the bond. But when the lender desires a specific per- formance of his bond, his remedy is in a court of equity or of admiralty. The contract of bottomry is one over which the admi- ralty especially exercises an undisputed jurisdiction. Indeed, it has been held to be the only tribunal capable of enforcing a specific performance in rem by seizing into its custody the very subject of hypothecation {The Jerusalem, 2 Oill. R., 191, 196). And if seems that a proceeding m rem may be maintained in our courts against property within our jurisdiction, although the parties may be foreigners. It has been so held in our own admiralty courts {Davis V. Leslie, Abb. Ad/m. R., 123); and the same doctrine has been recognized and expressly approved by the Courts of Admiralty in England {The Qdbelchick,\Wm. Rob. R., 143). It has been held by the United States Circuit Court for the first circuit that the admiralty has jurisdiction over maritime con- tracts in personam and also in rem, where there is a maritime lien or express pledge as security ; and this embraces a bottomry bond given by the owner in the home port, where there is an express pledge as security {The Draco, 2 Sumner's R., 157; and vide Wilmer v. The iSmUax, 2 Pet. Adm. R., 295, note). This case of The Draco was disapproved as unsound in a much later case, but followed nevertheless as an authority {Greeley v. Smith, 3 Woodb. c& Minofs R., 236). A bottomry bond given in a foreign port by the owner himself, and without necessity for the ship, is held to be a maritime contract, cognizable in the admiralty, as well as a bond made by a master. It is held that there is no reason for any dis- tinction {The Mary, 1 Paine's C. C. R., 671). , And the general doctrine was declared at an ,early day by the Circuit Court of the United States. Story, J., said : " In my judgment, and I speak after having REMEDY ON BOTTOMRY CONTRACT. 783 given the subject a very grave consideration, the admiralty, has always rightfully possessed jurisdiction over all maritime con- tracts, and the decisions of the courts of common law prohibiting its exercise, are neither consistent in themselves nor reconcilable with principle. In the struggle between the courts of common law and the admiralty, which originated in the same spirit that attempted to break down the whole system of equity, it cannot be denied that the former have manifested a great degree of jealousy and hostility, fostered by strong prejudice and a very imperfect li^owledge of the subject. It is not, therefore, to be wondered at that in such an unequal contest, where the power was all on one side, the admiralty should have lost many of its inherent rights. In more modern times, when the jurisdiction of the admiralty has been better understood, a more liberal policy has been prescribed, and, where they have not been fettered by authority, judges have been more indulgent in allowing its exercise. The true doctrine was. always asserted by the learned judges of the admiralty, and has been recently recognized by Mr. Justice BuUer, that the juris- diction as to contracts depends not upon the locality, but upon the subject-matter of the contract {Menetone v. Giibons, 3 T. R., 267). And I have not the slightest hesitation in holding that the admi- ralty has perfect jurisdiction over all maritime contracts. The decisions at common law on the subject of its jurisdiction have nothing to recommend them, and certainly are not binding on us " {The Jerusalem, 2 GalUson's G. C. E., 345, 348). ' It has been stated in another place that in respect to contracts of bottomry and the application of rules of admiralty to them, depend- ing.upon the question of their being executed in foreign ports, the various States of the American union are to be regarded as foreign to each other. It seems pertinent to repeat the doctrine under the present head ( Vide The William a/nd Emmelvrte, 1 Blatch. & How. Adm. R., 66 ; The Hilarity, II., 90). It has been held by the Court of Errors and Appeals of Missis- sippi that the legislature has no authority to create maritime liens, or confer jurisdiction on State courts to enforce such liens by pro- ceedings m rem, ; and that such jurisdiction is exclusively in the Courts of Admiralty, of the United States. A suit was brought against a vessel by name, and. the vessel attached under the water- craft laws of Mississippi, for a debt due the plaintiff. The plain- tiff made an affidavit that the defendant was a steamer in the navi- 784 LAW OF WARITIME LOANS. gable waters of the State, and in his declaration set forth that he was a citizen of Mississippi, and that the " home port " of the ves- sel was in that State. But it was held that the court had no juris- diction, the case being one of admiralty. Shackelford, J., who delivered the opinion of the court, admitted that the statute gives the remedy, in the State courts, to the creditor, whether the vessel is engaged in trade exclusively between ports in the same State or ports in different States. But he held, upon authority, that the jurisdiction conferred by the act of congress of 1789, on the District Courts of the United States in civil cases of admiralty and maritime jurisdiction, is exclusive by express terms, and that this exclusion extends to State courts {Deever v. 2'he Steamer Sope, 9 Am. Law Beg., JV. S., 683). This doctrine seems to be in accordance with the decisions of the Supreme Court of the United States. In a late case, the owner of the vessel excepted to the jurisdiction of the Circuit Court of the State of Alabama, and alleged that the vessel, at the time the cargo was shipped, was duly enrolled and licensed under the laws of the United States ; that she was then and there engaged in commerce and navigation between the city of Colum' bus, in the State of Mississippi, and the city of Moljile, in the State of Alabama, and that the cargo described in the libel was lost on her trip from the former city to' the port of destination. In one of the shipments mentioned in the libel, the cargo was shipped from a port in the State of Alabama to the city of Mobile, but the cases were decided together. The counsel for the libelants contended that inasmuch as the cargo was shipped in one of the cases from ports in the same State, the State court had jurisdiction of that case, impliedly admitting the jurisdiction of the court would not attach, if the cargo had been shipped from a port in a different State to the city of Mobile. The court, after an elaborate review of most of the decisions of the Supreme Court of the United States, involving questions of jurisdiction in cases of admiralty, held that the State court in Alabama had no jurisdiction of those cases, including the one where the cargo was shipped in Alabama, and declared that the exclusive original cognizance of all civil causes of admiralty and maritime jurisdiction is, by the terms., of the ninth section of the judiciary act of 1T89, conferred upon the District Courts of the United States, saving to the suitors, in all cases, the right of a BEifMBY PN SOTTOJIfBr CONTSACT. 785 common-]aw remedy, where ]tfae common law is competent \o giye it. Mr. Justice Cliffpfd, in his opinion, reviewed the case of Allen T. Mewbury, previously decided by the court, and reported in 21 Howard's Bepprts, 244, and which was supposed to hold a contrary .doctrine, and observes : " Eemarks, it is conceded, are found in the opinion of the court in the case of Allen v. N^ew- Imy, inconsistent with these views, but they were not iiecessary to that decision^ as the contract in that case was for the transpor- tation of goods on pne of the western lakes, where the jurisdic- tion in adnjiral^ty is restricted, by an act of congress, to stpamboal^ ^nd other vessels employed in the business of commerce and navi- gation betwe^eji ports and ,pl?,ces in different States and territories" {^TheBdfast,n Wallace's R.,Iq'2,^. In JEnglj^ndj it seems that the admiralty jurisdiction extends to bottomry bonds when made abroad fpr the necessities of the vpy- age, whether made by the master or th,e owner {Duke of Bedford,, 2 Hogg. Adm. R., 294). But this rule does not extend to bot- tomry loans made. by the owner in the home port {The Barbara, 4 Rob. R; 1 ; Johnson v. Shippen, 2 Lord Raym. R., 983), In this latter .respect, the rule is different in the United States, as has been before shown. It may be added that, in makjiig a decree upon a bottomry bond, the principle is to consider the sum lent and tlie premium as a principal, and to allow common ,mterest on that suni for the delay of payment after it is due. This has been stated in another place, but should be repeated here ( Vide The Packet, 3 Mason' $ a a R., 255). CHAPTER LXIII. .SOME POINTS EESPECTING MAErTIME LOANS SETTLED BY AUTHOErTT, PKOMISOUOUSLT STATED. 'Though the form of bottomry bonds differs in different coun- tries in respect to the obligation of the owners, the established doctrine in England and America is, that the owners are not per- sonally bound, except to the extent of the fund pledged, which comes into their hands. The Supreme Court of the United States "have held, that to this extent tJiey may be gaid to be pergpually 99 786 LAW OF MABITIMM LOANS. bound, as thay cannot subtract the fund and refuse to apply it to discharge the debt. The court further declared that, where the ralue of the ship, being the only fund out of which payment can be made, falls short of the full amount due upon the bond, this is the misfortune of the lender and not the fault of the owners. The latter are not to be personally responsible because the fund turns out to be inadequate (The Virgin v. Vyfhms, 8 Peters^ R., 538 ; cmd vide The Nelson, 1 Hag. Adm. R., 176 ; The Ta/fta/r, lb., 1, 13). In some countries bottomry bonds bind the owners ; in others, not. And where they do not, even though the terms of the bond should affect to bind the owner, that part would be insig- nificant, but it would not at all touch upon the efficiency of those parts which have an acknowledged operation. A bottomry bond may be held good in part and bad in part. The rule of the common law, that the bond must be good in all or not at all, does not prevail in admiralty, which act* as courts of equity. So far as the money was properly advanced, the bond may be held to give a valid lien, and be dismissed as to the rest {The PaoM, 3 Mason's O. G. R., 255 ; The Bmder, Wa/re's JD. G. R., 249 ; Furnies v. The Magown, OlooU's B. C. R., 55V But the cases in which a bottomry bond has been held good in part and bad in part have been cases in which the items rejected, were not properly chargeable on the ship, or were embraced within the bond from inadvertence or mistake^ but not fraudulently. "Where the objectionable items are fictitious, and inserted in the bond with an intent to defraud third persons, the entire security becomes tainted, and a party to the fraud is not allowed to enforce it, even for the sum actually advanced. If, in such cases, the security were held valid to the extent of the loss, rejecting the excess, the guilty party would risk nothing, foi-, when detected in the fraud, he would still be able to maintain himself for the amount due. The rule of a court of equity or of admiralty is, therefore, in such cases, to leave the parties where it finds them. For this reason, where a bottomry bond was taken for a larger amount than was actually advanced, with a fraudulent purpose to enable the owner of the vessel to recover the amount of the bond from the underwriters, the Supreme Court of the United States held that the bond was void {Garrirngton v. Pratt, 18 ffow. R., 63 ; vide The Ann G. Pratt, 1 CiM. G. G. R., 340). Jf, after the risk on a bottomry bond has commencedj a sale oi BHilUDY ON BOTTOMBT CONTRACT. 787 transfer of the vessel takes place, or the voyage is in any manner broken up by the borrower, the maritime risk terminates as in the case of a policy of insurance, and the bond becomes presently payable. The vendee, in case of a sale, is not liable to the bottomry lender for either principal or interest. Nor can he, on the other hand, entitle himself, as vendee, to any benefit of the bottomry bond. The sale of the vessel terminates all interest in the borrower ; not only his interest in the voyage, but his power over the voyage. The bottomry bond is a contract for any voyage during the limited period carried on by the borrower, as owner, and not ultra. This was so held by the United States Circuit Court in a case where the bond contained a special clause restricting any sale of the vessel during the risk {The Draco, 2 Sumn. C. O. H., 157). It was held by the late Chief" Justice Taney, sitting in the United States Circuit Court of the fourth circuit, that if the owner of the cargo stands by and suffers the cargo to be sold under a bottomry bond, without requiring evidence of the necessity for the repairs, it will not avail him, in an action against the shipowners, to show that the necessity did not exist {Wayhr v. JBaltsell, Taney's 0. G. R., 55). And the same distinguished court decided some other quite interesting points in another bottomry case. O. haviiig made advances for repairs of a schooner, the title to which, according to her papers, was in D. (a relation of one of the firm of W. & Co.), sent the bottomry bond to W. & Co. for collection, supposing them to be her charterers,' whereon they indorsed an acquittance acknowledging themselves to' be the sole debtors to O. W. & Co. had previously written to O. that they were her owners. After maturity of the bottomry debt, 0., not knowing of the acquittance, sued "W. & Co., and obtained judgment on an account in which the amount of the bottomry bond was included. Afterward one H. purchased the schooner, knowing all these facts. On a libel filed by O. to enforce his bottomry lien, the court held, 1. That the acquittance was a fraud upon the libelant and a mere nullity, and did not in any degree impair the seeurityof the bottomry bond. 2. That O.'s suit against "W. & Co. did not amount to a waiver of the bond, but would have been a waiver if brought by O. with a knowledge of all the facts. 3. That H. could not hold the vessel discharged from the lien of the bond, inasmuch as he purchased her with notice of 0,'s claiin {Henoig y. OaUey, Twney's C. C. B., 389), 788 LAW OF MARITIME LOANS. The United States District Court of Ehode Island tas recently held that where a vessel is libeled and sold on a bottomry bond, the bond in court is not subject, as against the bondholder, to any claim for a general average loss subsequent to the dat6 of the bond {Odloga/rdt v. The Arma, 9 Am. Law Reg., If. S., 475). It has been held by the courts both of England and this country that, where bills of exchange are given as collateral security for a bond of bottomry, the bills do not destroy the validity of the bond {The Augusta, 1 i)od. B., 283 ; The Jams, II., 461). A bill of exchange, in such a case, is not an independent security payable at all events. It is collateral to the bond, and is subject to the same contingencies ; and a discharge of one security is a discharge of both {The Hvmter, Ware's D. C. B., 249). Even if the bottomry bond is indorsed. as collateral security for the bill of exchange, the bond will not be vitiated by the bill, provided the security by the bot- tomry was contemplated on the advance {The Taxta/r,\. Hagg. Adm. B., 1 ; TTie ifdson, H., 169, 1^9 ; The Emancipation, 1 Bob. B., 124; The Madora, 2 Woodb. <& Minofs O. G. B., 92). But it is requisite in all cases, however, that the bottomry should be the original security, although there is no objection to the lender taking security additional to the bottomry bond {The Ariadne, 2 Wm. Bob. B., 421), Some very important principles were enunciated, in a comparar tively recent case, before the English Court of Common Bench, involving questions of bottomry. The court held that the master of a vessel has no authority to hypothecate the ship for money bor- rowed at a foreign port for necessary repairs and disbursements, and l>y the saTneimstrument pledge the personal credit of his owner for such advances, whether maritime interest be stipulated or not. But it was declared that a bottomry bond may be given at the same tin^e with, and as collateral security for, bills drawn on the owners for moneys so borrowed. The master of the vessel finding it necessary to borrow money in a foreign port, under circumstances which would justify him in borrowing the saine in the usual way upon bottomry, borrowed a .certain sum of money and executed an instrument to the lendei-s, by which there was a distinct hypothecation of the ship, her cargo and freight, and then contained a separate and distinct reservation pf a right to the lenders to resort to all legal means to enforce repayment of the money, either against the ship or her owners. EFFECT OF BOTTOMBT CONTRACT. 789 Parkje, Barpn, delivered the judgment of the court, and said : "As to the principal question : The njaster of a vessel on a foreign y.oy?ge h^iS no authority to feind his employer to everything which h,e jmay deem to he, or which really may be, for the interest of his employer ; but the law, lojpjking to ,the ordinary perils inseparable j&;o,n;i navigation, gives him certain pow,erSj iji ,ord,er to provide for the completion of ,the voyage, and, amongst others, the power to ple,dge in a foreign country the personal credit of the owners for ^^cessary repairs ; and, if that should be ineffectual, a power to |)ledge the ship itself by an instrument of hypotl^ecation. But this power does not extend to more than hypothecation, well known in t;he civil law, and distinguished froD^ a mortgage, as well as a pledge or pawn a,t common law — the forn^er of which tranfers the property, the la,tter a lien on the chattel--and is void without .actual posse^sfion; but hypothecation gives only a right, to be enforced against the subject of it through the medium of process. If o authority has been cited, nor are we aware of any, authoriz- ing the .actual transfer of jthe properi^y by the master by way of pqrtgage in ,any case. The instrviment, therefore, in this case, could iiot be effectual to tra-nsfer any propcjrty to the assured. The ma^tea" having the po-yver of hypothecation, only \p be enforced against the ship by admiralty process, the first question is, whether the hppthecation in this form is valid. We agree with the .Coiirt of Common Pleas in their opinion that it is not ; and therefore my brother Alderson was right in directing the issue on the interest to be found for the defendant " i^Stavn^^omJc v. Shepar4, AfT.Scptfs R., 418, 442; S. G., T6 Eng. G.G. B., 417, 441, 442). Jn an important case before the English admiralty, Ijord Stowell says: "One objection is, that it (the, instrument under cpnsidera- tion) binds ,the owners persondUy as well as the ship ^rA freight, %Kich it cannot dp. Here we don't take this bond in toto, as is done in , other systems of law, and reject it as unsound in the whftle if vicious in any part. But we separate the parts, reject the vicious, and .respect the efB.ciency of those which are entitled to operate. The form of these bonds is different in different countries; so, is their authority. In some countries they bind the owner or, owners ; in other.s not ; and, where they do not, though the form of t|ae bond affects to bind the owners, that part is insig- nificant, bjjt does not at all touch upon the efficiency ,of those parts ■which have an acknowledged operation." The instrument with 790 LAW OF MARITIME LOANS. which the learned lord was dealing was, in form, a bottoniry bond, securing maritime interest {The Nelson, 1 Hogg. Adm. R., 176). A British ship, upon which a bottomry bond had been taken, payable on the ship's arrival in England, was sold by the master, as unseaworthy, at public auction, and, with the consent of the British consul at Babia, to a foreigner, who repaired her, changed her name, and sent her to England. There was no evidence of notice of the bond having been given at the sale. The court, not- withstanding, held that the ship was still subject to the bond {TTie Catharine, 1 Eng. Loajo and Eg. R., 679). But in another ease, it appeared that a British ship, being damaged, was repaired at Elsinore, where she arrived on the 18th of October. S. & Co. undertook the management of, and ordered the repairs, and cor- responded with the owner of the ship and part-owners of the cargo, but gave no intimation to them or the master of their intention to take a bottomry bond as a security, for many weeifs, and only just before the ship sailed. The bond was pronounced against by the court, with costs, on the ground that the repairs were ordered, in the first instance, on personal credit, and that S. & Co. should have given the master and owners immediate notice of their intention to take a bond {The Wave, 4 Eng, Loajo and Eq. R., 589). A bottomry bond by a master is not valid unless given to enable him to leave a port where she is detained either for necessary repairs or for claims upon her; she having there no funds, nor credit, nor means of getting money {Gibbs v. The Texas, Crdbb^s D. C. R., 236). And a libel cannot be sustained in the District Court, brought on a bottomry bond executed in a domestic port, for money neither loaned for, nor applied to, the purposes of the voyage {Knight y. The AlMa, Oralis D. G. R., 326). A bottomry bond on ship, freight and cargo was granted by the master at the port where A., the owner of the cargo and charterer of the ship, resided. Advertisements for the loan on bottomry were published, and A. was aware of those advertisements, of the unseaworthy condition of the ship, and of the fact that his cargo had been laden and unladen while the ship was in the port ; but no more direct communication was made to him, nor any applica- tion for advances. The English admiralty held that the adver.tise- ments were not suflScient notice ; and the bond was pronounced ^EFFECT OF BOTTOMRY CONTRACT. 791 against, so far as its interest was affected (The Nuova Loomese, 22 Eng. Lww - cipation on the authority of many cases. If necessaries can be provided on the personal credit of the owners or on a bill of exchange drawn by the master upon them, a bottomry bond cannot after- ward be given to secure the same debt, because the necessity of hypothecating the ship is the condition of the master's authority to do so {The Augusta, 1 Dods. Adm. R., 233). But bills of exchange inay be drawn on account of the supply, and a bottomry bond given at the same time as a collateral security in this sense, that if the bills of exchange are honored {The Ndsrni, 1 Hagg. Adm. R., 174), that is, accepted and paid, if they require accept- ance, or paid if they do not, as the case may be, the bottomry is discharged ; and though the ship arrives, the maritime interest is not payable. If dishonored, the amount is payable on arrival by SOME POINTS IN BOTTOMRY. 795 means of the remedy against the ship ; and in that case, with maritime interest {^The Catharine, 3 Hogg. Adm. R., 267 ; The Emancipation, 1 W. Rah., 129 ; The Atlas, lb., 421). So that, in that event, if the bills are accepted the creditor would have a. double remedy; one against the person of the debtor, and one against the ship. But the law forbids the creditor to have a direct remedy on tlie 'bond itself against the owner as well as the ship ; and it makes it essential to the remedy against the ship that it should be contingent on its safe arrival, and this whether maritime imterest is required or not " {Stavribank v. Shepa/rd, 4 J. Sootts Ji.i 443 ; 8. C, 13 Common Bench B., 443, 444 ; S. C, 76 J%. C. L. B., 443). Some very old cases, of more or less interest, are referred to in Bacon's Abridgment, illustrating certain principles in bottomry transactions. One case was this: The plaintiff entered into a penal bond of ■ bottomry to pay forty pounds per month for fifty pounds ; the ship was to go from Holland to the Spanish Islands, and so to return for England; but if she perished, the defendant was to lose his fifty pounds. The ship went accordingly to the Spanish Islands, took in Moors at Africk, and upon that occasion went to Barbadoes, and then perished at sea. The plaintiff being sued on the bond and penalty, sought relief in equity, pretending that the deviation was of necessity ; but his bill was dismissed, saving as to the penalty. Another case was the following : J. S. entered into a bottomry bond, whereby he bound himself, in consideration of £400, as able to perform the voyage within six months, or at the six months' end to pay the £400. and forty pounds premium, in case the vessel arrived safe, and was not lost in the voyage ; and it fell out that J. S. never went the voyage, whereby his bond became forfeited, and he preferred a bill to be relieved ; and in, regard to the ship, she lay all along in the port of London, so that the defendant ran no hazard of losing his principal. The Lord Keeper decreed that he should lose the premium of forty pounds, and be contented with his ordinary interest (3 BacorHsAh., tit. Merchant and Mer- ehamdise, 601). A reference to a few more modem English cases will conclude this chapter, and, essentially, the consideration of the subject of maritime loans. A vessel chartered by the appellants put into a port in Cuba, 796 J'AW OF MARITIME LOAN$, in distress ; the master attempted unsuccessfully to raise money ; and the agents of the appellants in Cuba then telegraphed to the appellants in Liverpool, who dinected that money should be obtained on bottomry. The telegram of the agents contained a direction to the appellants to see the owner, but they did not do so, though the owner was then living in the same town as the appellant. The owner was at the time insolvent. The British Privy Council held, affirming the j.Uidgment of the ^English Admi- ralty Court, that, under the eiroumsitances, notice to the owner was absolutely necessary to the validity of the bond- TJntil he ha? been jadicially declared' insolvent,, the owner is the person to receive notice of the intention to raise money on bottomry, in order to enable him to raise money for rescuing his vessel from her difficulties at a smaller amount of premium than the maritime 1 remiura would necessarily entail. In case the owner has been judicially declared insolvent, then the court hold that the owner- ship in the vessel is transferred to other persons, to whom notice must then be given {The Pomam^, 23 Z. T, B., M. S., 12 ; and vide 2 AHhany Law Jownal, .258). A master, being in want of funds and credit in a foreign port, executed an agreement with centain parties for advances to be mad^ to him. This agreement contained the follow;ing conditions; That the master should draw a bill of exchange to cover such advances upon the consignees of the ship at the port to which he was pro- ceeding ; that, within thirty-five days after ,his arrival at such port, he should discharge and pay such bill of exchange and all interest which might have become due uponit, together with the money paid by way of premium for i effecting an insurance of the vessel during the intended voyage, and until the vessel had taken her departure from the port to which she was proceeding on a further outward voyage, as also interest on all such money as last aforesaid at the rate of nine pounds per cent per annum from the time of payment up to the time of such repayment ; and, for securing the repayment of all such sums and interest, the master bound, pledged, mortgaged and hypothecated the ship, with her tackle and appurtenances. The English Court of Admiralty held that such an agreement was not an instrument which can be enforced in a court of admiralty; and, further, decided that the instrument was not a bottomry bond, for there was no maritime risk, an ingredient essential to its vitality {Thelrkdomitable, 5 Jw., JF. S., 632 ; S. C, SwaUy's E., 4M). sonE poofvs m BOtTOMRT. 797 "Wlie^e it appeared that at a foreign port, at which the mastei had taken in necessary supplies, the owner of the vessel had si jecognized agent within the possible and probable knowledge of the person making the advance, the Court of Admiralty of Eng- land held that the bottomry bond given for such advance was void (The Faithful, 31 L. J. Adm., 81). And the same court held in a subsequent case that the master, before giving a bottomry bond on ship, freight and Cargo, is bound, as against owners of cargo, to communicate both with the owners of the ship and the shippejs or ■eonsignees of the cargo, when such communication is, under all the circumstances, reasonably practicable; but not otherwise {The Olivia, Lush. E., ^84; S. C, 31 L. J. Adm., 137). And in still a later ease the same court held that it is as much the duty of a master to give or attempt to give notice to the owners of a cargo as to the owners of the ship before executing a bottomry bond {The Mwmak, 37 L. J. Adm,., 41 ; amd vide The Hamburg, 9 Jur., N. 8., 440; X?. a, 32 L. J. Adm., 161). In the last case referred to, it was held that the validity of a bot- tomry bond taken in a foreign port upon a foreign ship, freight and cargo, the owners of the cargo being English, and the ship and cargo being proceeded against in England, is to be governed by the general maritime law, and not by the lex loci contractus, or the law of the country to which the vessel belongs {The Hamburg, 2 Moore's P- C. C, W. S., 289 ; S. C, 33 Z. J. Adm., 116). It can hardly be necessary to pursue the subject further ; and with some extracts from the celebrated Digests and Code of Jus- tinian, and the equally celebrated French ordinance of Louis XIV, concerning the Marine, the whole discussion df the law relating to Maritime Loans will be concluded. 798 LAW OF MASITIME LOANS. CHAPTER LXIY. TRANSLATION OF THE SECOND TITLE OF THE TWENTY-SECOND BOOK OF THE DIGESTS, AND OF THE TWENTY-THIRD TITLE OF THE FOUETH BOOK OP THE CODE, EACH ENTITLED DE NA0TICO FOENOEB TRANS- LATION OF THE FIFTH TITLE OF THE THIRD BOOK OF THE FRENCH ORDINANCE CONCERNING THE MARINE. The provisions of the Digest entitled " Of Maritime Loan " are substantially as follows : Law I. What is called maritime money is money which is car- ried beyond the sea ; if it should be consumed in the same place it will not be mwritvme. But it is to be considered whether the merchandise purchased with that money has been purchased with that view. And it is material that it should be carried at the peril of the creditor. Then the money becomes maritime. Law II. Labeo says : If there is nobody on the part of the bor- rower on whom process can be served to compel him to pay the maritime money, the fact must be proved by testimony, and it will be equivalent to a legal demand. Law III. In a maritime loan, the lender undertakes the risk frqjn the day that the vessel is appointed to sail. Law IV. It matters not whether the maritime money may have been taken without being at the risk of the lender, or whether it ceased to be at the risk of the creditor after the expiration of the term or performance of the condition. In either of these cases no' more than the common legal interest shall be due ; and never in the first case, nor in the second, from the time that the risk ceases shall goods pledged or hypothecated be retained for a higher interest. § 1. The daily reward of a servant, sent for the purpose of recovering the maritime money, shall not exceed double the lawful interest of one per cent a month. If the stipiilation of interest to be paid after the risk expires does not amount to the whole legal interest, it may be supplied by another stipulation for the servant's labor. Law V. The price or compensation of risk is whatever is given over and above the money received on a penal condition not actu- ally existing, provided the contract is not of a gaming or wagering species, from which the condition is to arise, as, if you manumit, you do not do such a thing, if I shall not recover from, sichiess, PRINCIPLES OF THE ROMAN LAW. 799 etc. But there is no doubt, where money is lent to a fisherman to purchase fishing tackle, to be repaid mease he shall oatoh fish, or to a prize fighter to fit himself for the combat, to be repaid in case he shall come off conqvieror. § 1. But in all these cases a single contract, without a stipu- lation, is sufiicient to sanction the obligation. Law YI. A person haviilg lent money at maritime risk has taken in pledge some goods shipped on board of the vessel. And, further, in case there should not be sufficient to satisfy the whole debt, other goods, shipped on board of other vessels already pignorated to other lenders, are pledged to him, in case there should be any residue. It is now asked whether, if the ship out of which he was to have been paid the whole be lost, it is to the dam- age of the lender, or whether he has yet a recourse on the residue of-what was shipped on other vessels ? I answer : in general, the diminution of the pledge is to the damage of the debtor and not of the creditor. But where maritime money is thus given, the lender has no right to demand his money ; unless the vessel arrives in safety at the stipulated time, the obligation of the debt is extinguished by the non-existence of the condition, and, therefore, the lien on the pledge is also gone, even on those that are not lost. If the vessel is lost within the time fixed for the end of the risk, the condition of the stipulation is extinguished ; therefore, there is no ground for prosecuting a lien on the pledges that were shipped on board of other vessels. At what time, then, is the creditor to be admitted, to prosecute such liens ? Only when the condition of the obligation is actually in existence, and in case the pledge should be lost by another accident, or should sell for less than the amount of the money due, or if the vessel should be lost after the time when she ceases to be at the risk of the lender. Law VII. Maritime interest is due on certain contracts agree- ably to the stipulation. For, if I lend ten pieces on the condition that if the ship a/rrimes safely I shall receive the principal with a certain interest, then I may receive the principal with the interest stipulated. Law YIII. Servius says that the penalty of a marine loan can- not be demanded if the creditor had it in his power to receive his money within the limited time. Law IX. If the penalty of a maritime loan has been stipulated 800 LAW OF MARirnUE LOANS. for in the usual manner, although on the day of payment nobody sliouM be alive that might be said to owe the money, yet the pen- alty is forfeited in the same manner as if the debtor had left an heir. The provisions of the Code of Justinian upon the same subject are substantially as follows : Law I. It is clear that maritime money, lent at the risk of the -creditor, bears an interest diflFerent from that of the legal rate, only until the arrival of the vessel at the port of its destination. Law II. If you say that yon have lent money on condition that it should ie retv/rned to you in the Holy City, and if you do not -declare that you undertook the certain dangers of the seas, there is no doubt that you cannot recover any more -than common legal interest for money so lent. Law III. If you declare to have lent money at maritime interest on this condition, that you should he paid after the a/rrvoal at Salo of a vessel which the debtor represented to he hovmd to Africa, so that you only undertook the risk of the voyage to Africa ; and by the fault of the debtor the ship was seized for contraband goods on board of her, the reason of the law will not permit that the damage of the loss of 'the goods, which happened not by the stress of weather, but by the greedy avarice and insolent behavior of the debtor, should fall upon you. Law IV. But the loss of maritime money, lent at the peril of the debtor, before the vessel reaches the place of her destination, must not fall upon the debtor. Otherwise, without an agreement of this kind, the debtor should not be freed from his engagement, even by the misfortune of shipwreck. ExTEAOT. — ^Ex Julio Paulo. Maritime money, in consideration of the risk which the lender runs, may, while the vessel is at sea, have an indefinite interest. The provisions of the French ordinance concerning the marine, entitled Des Oonbrats a la grosse Adventwre ou a retour de voy- age, are as follows : Aeticle I. All contracts of ma/riti/me loan, otherwise called of gross adventure, or of return voyage, may be made either by a •public notary or under a private signature. Aeticle II. Money maybe given upon the body and keel of the ■ship, and upon her rigging, tackle, provisions and outfits, jointly PRINCIPLES OF TBE FRENCH LAW. 801 or separately, and upon all and any part of her lading, for one whole voyage or for a time limited. Aetiole III. "We forhid all persons to take up, at maritime risk, upon their ships or goods on board thereof, more than their real value, under pain of being obliged, in case of fraud, to pay the whole sums, notwithstanding the vessel should be lost or taken. Article IV. We also forbid them, under the like penalty, to take up any money upon the freight for the voyage tp be made, or upon the profit expected on the lading, or even upon the sea- men's wages, except it be in the presence and with the consent; of the master, and under one-half of tbe aforesaid wages. Abtiole V. We moreover forbid all persons to advance any mpney to seamen at maritime risk upon their wages and voyages, except it be in the presence and with the consent of the master, under pain of confiscation of the sums lent, and a fine of fifty livres. Aetiole VI. The masters shall be answerable, in their own names, for the whole amount of the sums taken up by the seamen with their consent, if they shall exceed one-half of their wages, and that notwithstanding the loss or capture of the ship. • Article VII. The ship, her rigging, tackle, apparel and pro visions, and even the freight, shall be, by privilege, affected for the payment of the principal and interest of money given upon the body and keel of the ship for the necessities of the voyage, and the lading shall be bound for the money borrowed to procure the same. Article VIII. Such as give money upon bottomry to a master without the consent of the owners, if they live in the place, shall have no security nor privilege upon the ship, any further than the part that the master may have in the ship and freight, though the money was borrowed for fitting out the ship or for buying provisions. Article IX. However, the parts of such of the owners as refuse to furnish their proportions for fitting out the vessel shall be affected for the money lent to the master for the equipment and provisions of the ship. Article X. Creditors for money formerly due on such things, and left outstanding by renewal or continuation of the contract, shall not come in competition with those that have actually lent for the last voyage. lOX 802 LAW OF MARITIME LOANS. Aeticle XI. All contracts of maritime loan shall be void after tlie entire loss of the effects upon which the money was lent, if that happened by accident, and within the times and places therein expressed. Aeticle XII. Ifothing shall be reported acoident that is occa- sioned by the internal defect of the things, themselves, or by the fault bf the owners, master or merchant, except it be otherwise provided by the contract. Aeticle XIII. If the time of the risk be not specified by the contract, it shah last, as to the ship, her rigging, tackle and provi- sions, from the day she sets sail until she arrives at her intended port and is moored at the wharf; and as to the goods, it shall last from the moment they are laden on board the ship, or lighter to be carried thither, until they are unladen or carried on shore. Aeticle XIY. A person lading goods, and taking up money upon them at maritime risk, shall not be acquitted by the loss of the ship and lading, unless he makes it appear that he had then on his own account effects to the value of the sum borrowed. Aeticle XY. However, if the person that has taken money at maritime risk make it appear that he could not ship goods to the value of the sum borrowed, the contract, in case of loss, shall be diminished in proportion to the value of the effects laden, and shall only subsist on the overplus ; upon which the owner shall pay the interest, according to the contract rate of the place where the con- tract is made, until the actual payment of the principal. And if the ship arrive in safety, there shall be due only the legal interest, and not the maritime profit of thie overplus of the effects put on board. Aeticle XYI. Those that give money at maritime risk shall con- tribute, in discharge of the borrower, to general average, such as ransoms, compositions, jettisons, masts and ropes cut away for the common safety of the ship and goods ; but not for simple average or particular damages that may happen, except there be some agreement to the contrary. Aeticle XYII. However, in case of shipwreck, the contract of, maritime loan shall be reduced to the value of the effects that are saved. AEaapLE XYIII. If there be a contract of maritime loan and an insuraric'e upon the same cargo, the lender shall be preferred to the IMPOBTANCE OF THE ANCIENT CODES. 803 insurers, upon tte effects preserved from shipwreck, for Ms capital, and no further. Such are substantially the provisions of the pertinent title of the Digest, the Code of Justinian, and the famous ordinance of Louis XIV of France, upon the subject of Maritime Loans, and they are regarded of sufBcient importance to be inserted in this place. The Code of Justinian is a digest of the usages and legislation of many centuries, and is really the great monument of the reign of the Byzantine Emperor. The work of compiling the Roman law, embodied in this Code, was entrusted to seventeen commissioners, of whom Tribonian was the head. The work was finished about A. D. 533. The compilation consisted of extracts from all the writers who were regarded as of any authority, and the entire Code was published in fifty books, and altogether formed the body of the Eoman law, and now known as the civil law. Although this Code, soon after its first publication, fell into neglect and even oblivion, about the year 1130 it suddenly grew into vogue and authority, and was introduced into several nations, since which it has occa- sioned a mighty inundation of voluminous comments, and is every- where consulted as a precedent for legislation, and considered by the courts as an authority of more or less weight. In some countries of Europe, the civil law is at present cultivated' with great success, and it is, in some cases, formally recognized as competent authority. In England and in this country this Code has never been adopted, as such, and it has been less inter- fused with the system of laws which has grown up in these countries than in most countries of Europe, and yet the princi- ples .of the Eoman law are often referred to by eminent English and American judges and writers, and the decisions of our courts are often influenced by reason of such recognition and reference ; and more especially are the Admiralty Courts of these countries governed by the principles of modern civil law, that is, by the usages of modern nations in the more extended relations growing out of commercial enterprise, but still having as a basis the rules of the Roman law, so far as applicable. Hence the convenience of having the provisions of the Justinian "Code, relating to mari- time loans, at hand when the subject is examined. And in respect to the marine ordinances of the French king, Louis XIV, it may be said that they are even more important tha:fi the Code of Justinian. The civilians and lawyers, of every 804 L-AW OF MARITIME WANS. period since their promulgation, have avowed the greatest admira- tion of their wisdom and justice. They form a part of the present Maritime Code of Europe, and are acknowledged as authority hy all ; at least, they have obtained the respect of every maritime State. In this country, it has been judicially declared that these ordinances and' the commentaries on them have been received with great respect in the courts of England and the United States ; not as conveying any authority in themselves, but as evidence of the general marine law. Where they are contradicted by judi- cial decisions in our own country, they, of course, are not to be regarded ; but, on points which have not been decided, they are worthy of great consideration, and are so regarded by our courts. No apology is, therefore, necessary for their insertion in this place ; and with them the discussion of the subject of maritime loans may be closed, and the consideration of the entire subjects of this treatise appropriately concluded. ALPHABETICAL DTDEX. A. ACTION, PAOB. in cases of usmy, when it accrues . . .65, 66, 69, 70, 73, 73, 75, 76, 393, 400 431-430, 433, 450-453 first process in 451 proper parties to 451 venue in 451 declaration or complaint in 453-458 plea or answer in 458-463 amendment of pleadings in 463, 464 compounding and settling of 465 evidence in 436, 433, 437, 466-473 trial of. 466 verdict in 473 ■judgment and execution in 478, 474 for property transferred on usurious consideration 433-434 in equity in cases of usury 485-449 accrues to pledgor, when 544, 550, 676 pledgee, when 561-567, 675, 680 pawnee may recover damages in, when 561 have on pledged paper, when 576-580 ADUIRALTY, jurisdiction of courts of, in bottomry cases 783-785 AGENT, bonus to, not usurious, when. . .^ 138, 156-173 usurious, when 338, 339 not liable for usury, when 471 may pledge property of principal, when 531, 533, 569 execute bottomry contracts, when 736, 737 • Vide Factob. AGREEMENT, to be usurious, must be corrupt . . . 103-110, 140, 175-181, 335, 338-333, 370 how construed, when usury alleged 107, 366 void for usury, when 66, 71, 73, 75, 85, 110, 875, et seq. not made usurious after inception Ill, 133, 136 held not usurious, for want of loan Ill, 114, 115, 194, 374, 363, 367 not usurious, per m, when 123, 124, 1,47 806 ALPSABETICAL INDEX. AGREEMENT— Continued. page. to pay commissions not usurious, when 130-141 old debt not usurious, wlien 141-143 exchange not usurious, when 143-155 not usurious unless loan to be returned 172-204 for loan of chattels 345-254 held to be usurious, when 366, 381, 386, 388, 391 inference of innocence in, when 366 Vide CONTKACT. ALABAMA, history of usury in 54 usury laws in force in 54, 73 decisions of the courts in respect to usuiy in . . . 98, 130, 147, 313, 360, 396 400, 406, 407, 409, 410, 425, 447, 448, 473 decisions of the courts in respect to pledges in 524, 535, 599, 607, 620 625, 631 AMENDMENTS, of proceedings in usury cases 463, 464 AMERICA, history of usury in 49-56, 59, 60 statutes against usury in 64r-78 history of pledges in 493, 493 ANNUITY, not usurious, when 98, 101, 188-204 cases of, held not to be usurious 188-204 definition of 303 life' insurance will not vitiate, when 304 cases of alleged, held to be usurious 394r-296 ANTEDATE, of instrument, when held not to be usurious 256, 362, 263, 266 to be usurious 298, 299 ARABS, the subject of pledges among 483,484 ARIZONA, statutes in respect to pawnbrokers in 699-701 ARKANSAS, history of usury in 54, 55 usury laws in force in 54, 55, 76 decisions of the courts in respect to usury in 447, 471 pledges in 575 ASSIGNEE, may not plead usury, when 418 Vide Negotiable Paper. what passes to, under banloiipt laws ' 560, 561 title and rights under bankrupt laws 560-565 ATHENS, ancient laws of, in respect to interest and usury , 38, 42, 43 ALPBABETICAL INDEX. 807 ATTORNEY, PASB. fees of, in security for loan, not usurious, when 141, 173, 271, 273 usurious, when 832 AUCTION, pledges to be sold at, when 583-601 AVERAGE, who must contribute to 749 general, lender in bottomiy cases must contribute to 750, 770, 788 B. BACON, LORD FRANCIS, ^ opinion of, in respect to interest and usury 35, 57 BAILMENT, pledge, a species of 494,496 BANK NOTES, sale of, at par, not usury, when 357, 258, 306 BANKRUPT LAWS, operation of, in cases of pledge 656, 668 rights of pledgee under 656-659, 663, 665, 667, 668 what passes to assignee under 560, 561 , are acts of bankruptcy under 661 contracts exempt from 661, 663 assignee's title under 662, 663 rights under 663,665 act in force in the United States 665 pledge in fraud of, not valid 667 BANKS, may charge for exchange, when 144-155 take discount, when 153, 155, 156 BENTHAM, JEREMY, opinion of, concerning usury laws 57, 58, 63 BILL OP EXCHANGE, acceptor's charge for prompt payment, not usurious, whe n 255, 356 BILL OP LADING, evidence of factor's right to pledge property, when 528, 529 BONUS, taken on loan not usurious, when 156-172 usurious,, when 328, 339 BORROWER, may interpose defense of usury, when 403-421 parties under, may plead usury, when 404, 410 who is regarded such under usury laws 438, 439 competent witness to prove usury, when 466-468 on bottomry, rules in respect to 746, 747 where and how to pay loan 756-758 when personally liable 759-761, 785, 786 808 ALPBABETIOAL INDEX. BOTTOMRY, woii. what are contracts of 178, 387 coirtracts of, not usurious, when 173-178,718 nature of contract of. . . . 176, 77, 279, 717, 718, 739, 746, 750, 751, 75S, 756 760, 796 cases of, held to be usurious 286-288 conditions of contracts of 717, 718, 753, 7,67, 776-779 contract of, must be subject to risk or hazard 718, 745 differs from partnership and insurance '. . 719, 730 form of contract of 730,721,748,776-779,785 promissory note held not to be contract of , 781 master may bind shipowner by, when 728-736, 788-790, 793, 796 ' whatis a foreign portin respect to 733, 733, 735, 783 owner of vessel may execute contract of, when. 736-740, 742 contract of, not affected by other security, when -. 739, 788 difference between contracts of, and respondentia 739, 740, 776 contract of, binds ship and earnings, when 739 cargo of ship may be pledged, when by 740, 741 what bound by contract of 742, 743 rules in respect to average under contract of 749 contract of, when void 751, 759,761-766,786 money on, where and how to be paid 756-758 limitation of su^t for 758 contract of, to be promptly enforced 771 may be renewed, when 771 requisites of 776-779 effect of personal liability clause in 777 construction of 778-782, 787, 789 remedy on 782-785, 787, 792 may be good in part and bad in part 786, 789 waived, when 787 effect of 789, 790 fraud does not vitiate, when 791, 792 BROKER, commissions by, not usury, when 157-173 usury, when 339-335 may pledge property of principal, when ; . . . 538, 539 BBOKERAGB, charge for, not usury, when 157-172 usury, when 329-335 BROUGHAM, LORD HBNRT, opinion of, concerning usury laws 58 c. CALIFORNIA, history of usury m 55 usury laws in force in 76 decisions of the courts in respect to pledges 'in, 508, 543,'S59, 580, 600, 630 633, 647, 674, 703 statute in respect to pawnbrokers in 7dl-703 A.LPHABETICAL INDEX. 809 CAPTAIN. VUe Master. CARE, i-A™- different degrees of, defined , 633, 634 CARGO, may be hypothecated by captain, when 734, 740-743, 791 by owner of vessel, when 787, 738 CERTIFICATE, of deposit and trust usurious, when 314-318 CHAMPERTY, . avoids a pledge, when 501-503 CHATTELS, loan of, not usurious, when 345-354,366,367 sale of, usurious, when 399-801, 303, 305, 307, 808 CHECKS, cannot be impeached for usury, when 400 CHINA, the subject cif pledges in 483 CHOSE IN ACTION, sale of, not usury, when 116-130, 258-360 'face of not paid, no proof of usury, when 260, 361, 366-368 sale of, held usurious, When 306,307,309-313 exchange of, usurious, when 319-833 void for usury, when .- 381, 886, 388, 389, 391 usurious, good in hands of horia fide holder, when 381, 38?, 893 who is' fete fide holder of 386, 387, 391 the subject of pledge, when 500-503 how pledged 508 CIVIL LAW, .importance of, to present legislation w 803 C0LLATBRA.L8, not usurious because accrued interest on, not allowed, when 362 to renew usurious contract, effect of 398-403 to Secure bottomry aIlowed,'when 779, 788 COMMISSIONS, not usurious, when Ill, 116-118, 128, 130-141, 270, 371 held to- be Usurious, when '..">'. — 338-385 COMPLAINT, form and sufficiency of, in usury cases . . 453-458 COMPOUNDING ACTION, in case ot qaitam, for usury 465 COMPOUND INTEREST, may be talien, when 74, 340-343 CONFLICT OF LAWS, in respect to usury, rules relating to 79-93, 373 what statute applies in usury cases 79-93, 372 rules to determine the matter of 79, ef aeq. laws of nations relating to - 79-83 102 810 ALFMABMTICAL INDEX. CONNECTICUT, pagb. history of usury 1q 51 laws in force, relating to interest in 68, 69 decisions of the courts in respect to usury in . . 109, 134-126, 141, 173, 311 333, 253, 305, 340, 891, 396, 398, 406, 410, 471 decisions of the courts in respect to pledges in 576, 630 CONSIDERATION, of usurious note, when valid as to indorsee 3S0 CONSTRUCTION, question for the court, when 106 of usury law, to he strict , 117 rules for, in usury cases 373, 380 CONTRACT, void for usury, when 66, 71, 73, 75, 85, 100, 375, et seq. to be usurious, must be corrupt . . 103-110, 140, 175-181, 325, 228-333, 370 not made usurious after inception Ill, 133, 126 not usurious for want of a loan, when 111, 114, 115, 194, 374, 363, 367 usurious per se, when 123, 124, 147 to pay commissions not usurious, when 130-141 old debt not usurious, when 141-143 a condition of loan not usurious, svhen 143 to pay exchange not usurious, when 143-155 not usurious, unless loan to be returned . . . , 173, 204 of maritime, favored in law 178 held to be usurious, when 366, 381, 386, 388,391 to do a forbidden act, void 394 Vide Contract of Pawn or Pledge, btC. CONTRACT OF PAWN OR PLEDGE, definition and nature of 493, 497 ■ requisites of '. 497,506-508,512,513 what may be the subject of 497-503 cannot be enforced, when 508 delivery the essence of 596,207,520 Vide Pawn ok PiiEDOB. CORPORATIONS, not permitted to plead usury, wnen 67, 69, 73, 413, 413, 417 COURTS, how to construe usury laws 373, 376, 380 CREDIT, sale of, not ustiry, when '. 114-130 exchange of, not usury, when 257, 358 CREDITORS, note made to defraud, usurious, when 359 assignee for benefit, cannot plead usury, when 413 CRIME, when usury is 474-478 of usury, when complete 477, 478 alpbabeticaij index. 811 CUSTOM, PAflB. will not protect usury, wlien 207, 377 D. DAMAGES, stipulated, not usury, when 214 recoverable in cases of pledge, when 643-647 DEATH OF PAETIBS, effect of, in cases of pledge 668-670 DECLARATION, form and suflBciency of, in usury cases 452-458 DECREE, import of, in bottomry cases 785 DEFENSE, of usury, when permitted 67-77 must be strictly proved 123 not permitted, when 401 to whom available '. 403-417 how to be set up 458-463 evidence to sustain 470-472 DEFINITIONS, of interest and usury 35, 208 of pawnor pledge 481,493-497,537 of loan 93,96, 99,100,111, 117,120,303,364,365 of lien 496, 497 of maintenance 501, et seg. of gross adventure 717, 719 DELAWARE, history of usury in 52 statute in force in respect to usury in 52, 69, 70 decisions of the courts in respect to usury in 467 DELIVERy, requisite in cases of pledge 496, 500, 506 may be actual or symbolical 496, 507-516 is the essence of the contract of pledge 506, 507, 520 may be actual or constructive 507-516 what is sufficient in case of pledge 509-514 when defective in case of pledge .^ 514r-516 need not be simultaneous with contract of pledge, when 516 DEPOSIT, loan on condition of, not usurious, when 154, 155 certificate of, usuripi^g, when 314^318 required as a condition of loan, when usurious 384, 335 DISCOUNTS, not usurious, when 153, 155, 156 usurious, when 332-334,338-345,855 812 ALPHABETICAL INDEX. DOCTRINE OF CASES, pam. summary of, in respect to usary 383-371 E. ENGLAND, history of usury in 37, 38, 45-49 late usury laws in 49, 59 history of pledges in 485-488 pawnbroking in 485-492 EQUITABLE BELIEP, in cases of usury, when proper 435-449 general rules in respect to 435-437, 439 complaint in. 458-464 EQUITY, jurisdiction of courts of, in usury cases . ■. 443-444, 446 proceedings in cases of pledge in courts of " 647-655 ESTOPPEL, when applied in cases of usury 413, 417-421 EVIDENCE, rules in respect to, in cases of usury 148, 360-363, 346, 336, 433, 437 466-472,478 EXCHANGE, contract for, not iisurious,,wlien 139, 130, 143-155, 221-329 reason why not usunofls , 145 held usurious, when 146 277, 335-338, 340, 358, 359 principles, applicable to 149, ISO EXECUTION, when may be levied on pledged property : 534-538 EXPENSES PAID, held not to be usurious, when 133, 133,136 usurious, when 327 EXTINGUISHMENT, of pledge, how eflfected 550-556 F. FACT, mistake of, saves contract from usury, when 239-339 FACTOR, cannot pledge property of principal at common law 521, 522-525 pledge by, valid by statute, when 525-530, 699 FLORIDA, history of usury in 53, 54 statute in force, in respect to usury in 76 decisions of the courts in respect to usury in 228, 338, 354 pledges in 60S ALPRASETIOAL INDEX. SIS FORBEARANCE, , page. applies only incases of loan of money 845 /^ of a diebt is usuric^s, Tvlieni, ^a 364 FOREIGN PORTS, what regarded such in bottomry cases| 733, 788, 785 FRANCE, hfttory of pledges in ; 48S FREIGHT, not the subject of pledge on bottomry, when 743, 743 what included in pledge of 780,781 may be pledged by master of vessel, when 792 FRENCH ORDINANCE, extracts from, in respect to maritime loans 800-803 importance of, in relation to present jurisprudence 803, 804 FUNGIBLES, how to be disposed of when pledged 587 G. GEORGIA, history of usury in 53 statute in force, in respect to uusury in 76 decisions of the courts in respect to usury in . . 380, 390, 396,437, 480, 483 pledges in 508,619 statute in respect to pledges in 704, 70S GIFT, no usury in case of . . . 289, 240, 470, 471 no evidence of usury, when 262, 263 GOODS, sale of, usurious, when 103, 111-123 taken as interest, when usurious , 299-301, 305, 307, 308 GRANTEE, of usurious mortgagor may plead usury, when 404r-409, 412, 414 not a borrower under usury laws 438 GROSS ADVENTURE, definition of the term 717, 719 nature and requisites of contract of 731, 722, 755, 756 QROTIUS, opinion of, relating to usury 59 GUARANTOR, of usurious security may plead usury, when 406 GUARANTY, recovery oa, limited, when 119, 130, 125, 129 ■ on assignment of chose in action not usury, when 258-260 814 ALPHABETICAL INDEX. H. HAZAED, PAOB. exempts contract from usury, when 96-101, 172-304, 219, 267' principal must be in, to exempt loan from usury 173, 181, 304, 219 in cases of bottomry 173-178 respondentia .' 174^177 post obit 178-184 annuity 184, 185 partnership , 185-188 interest in nature of penalty 204r-217 loan of chattels 346-354 usury in cases of 384r-297 essential in maritime loans 716 nature of, in bottomry contracts 717 HINDOOS, the contract of pledge aaiong 485 HYPOTHECATION, master of vessel may make, when 784, 735 rules in respect to ; 767 Vide Mastbr. I. ILLINOIb, history of usury in 55, 56 statute in force in respect to usury in 75 decisions by the courts in respect to usury in, 141, 804, 305, 380, 392, 40? 426, 529, 449, 461 pledges in, 511,519,583,597, 621,670 INCORPOEEAL THINGS, may be pledged, when 500, 501, 503 INDIANA, history of usury in , 56 statute in force in respect to usury in 76 decisions of the courts in respect to usury in. . . 114, 141, 391, 400, 408, 410 427, 469, 471, 478 pledges in, 580, 609, 610, 625, 646, 675 676, 680, 684 INDIANS, pledge by, not valid, when 491,492, 691-693 INDICTMENT, form and sufficiency of, in case of usury 478 INFANTS, cannot make a valid pledge, when 530, 531, 533 may act as agent, when 531 Vide MiNOKS. INSUEANCE', similarity of, to maritime loan 719, 720 effect of, in case of maritime loan 725 of mariners' wages, not competent, when 74S ALPHABETICAL INDEX. 815 INTENT, PAGE, essential element in case of. usury, 92, 96, 103-110, 135, 181, 225, 328, 276 370 must be corrupt to constitute usury. . 103,110,140,175-181,225, 238,232 370 usury always a question of 161 wanting in cases of mistake 329-239 must be corrupt in both parties to constitute usury 333, 234, 338 criminal, inferred, when 275 implied innocence of, when 366 INTEREST, definition of the word 35 opinions in respect to the morality of taking 36-40 statutes in relation to 65-78, 372 legal rates of, in the United States 70, 77 compound, may be taken, when 74, 240 rate of, fixed for national banks 77 none recoverable except provided by law 78 conflict of laws in respect to 79-93 rate of, must be illegal to be usurious 101-103, 194, 368 must be intended to be above legal rate, to be usurious 103-110 how to be computed 148, 376, 277, 351, 352 not usurious, when taken by way of penalty s 204-317 semi-annual and the like not usurious 353, 344 predicated only upon a loan of money, when 245 when above legal rates by mistake of law, usurious 375, 278, 381-384 held usurious in certain cases of alleged hazard 384^397 sea risk 381-388 partnership 388, 389 post obit 390 annuity 390-396 sale of salary 396, 397 penalty 397 held usurious in certain cases of payment in advance 307, 398 ante-dated instrument . . 398, 899, 307, 308 goods advanced instead of money, 399-301 ^ 303, 305 -transfer of stock 309-313 certificate of trust and deposit . . . 314r-318 sale of drafts and post notes 318, 323 exchange of obligations 319-333 extra, reserved in separate contract, usurious, when 355-359 usurious, may be recovered back, when 431-430 no action for, unless actually paid 450 maritime, what and when payable 718, 719 general rules in respect to 731-725 common, whgn payable in case of maritime loan 724r-726, 757, 788 Vide Mabitime Interest. 816 ALPHABETICAL INDEX. INTERPLEADER, paob. competent to determine right to a pledge, when 670-673 INTOXICATING LIQUORS, pledges given for, void, when 693, 093 IOWA, history of usury in 55 statute in force in respect to usury in 74, 75 decisions of the courts in respect to usury in . . 240, 314, 848, 854, 355, 392 416, 421, 429, 448, 462, 474 pledges in. . . . 516, 580,595, 612, 614 J. JEWS, laws of, in respect to interest and usury 36, 37 the subject of pledges among 482, 483 JUDGMENT, form and effect of, in usury cases ■. . 473, 474 JURY, question for, in cases of usury 93, 98, 100, 105, 116, 124, 135, 187, 146 235,228,229,235 K. KANSAS, history of usury in 55 statute in force in respect to usury in 74 pledges in 705 KENT, the late Chancellor, views of, concerning usury laws 41-43, 63-64 KENTUCKY, history of usury in 55 statute in force in respect to usury in. ... : 25, 76 decisions of the courts in respect to usury in 98, 297, 303, 335, 346, 355 891, 400-^2, 441 pledges in, 509, 545, 558, 610, 648, 674 I- LAND, cannot be usury in sale of, when 111-114, 309 usury declared on sale of, when 304, 305, 348, 361, 863, 471 LAW, ignorance of, no excuse for usury, 103, 104, 106, 108, 109, 275, 278, 381-384 against usury to be strictly construed 117 of a foreign State must.be proved, when 379 object of, defined 687 Vide Lbx Loci. LAW OF NATIONS, applies in cases of usury, when 79-82 ALPMABBTICAL INDEX. 817 LENDER, ^ PASB, in bottomry, must bear the sea risks '719, 739, 749, 751 presumptions in favor of 720-733 rules in respect to ; 739-785, 741 must inquire as to necessity of loan, when 741, 745 rights of, when vessel is lost 747 proof of, in matter of claim 748 contribution by 749, 750 bears no risks but of sea 751, 753 losses to be borne by 753, 755 remedy of 761, 763, 764-766, 783-785, 787, 793 lien of 766-776, 793, 797 may be subrogated as to other claims, when 771, 793 LEX LOCI, when governs in cases of alleged usury 79-9C Vide CoNPLicT OF Laws. LIEN, the word defined 496, 497 subject of a pledge, when 538 difference between, and pledge. 568 iu bottomry cases, nature and extent of 763, 766-776 priority of . . 768-774, 792 when lost 771, 775 not to be implied, when 775, 776' LIFE ANNUITY. Vide Anntjitt. LIFE ASSURANCE, does not vitiate annuity, when 304 LOAN, can be no usury without 92-96, 98, 114, 115, 136, 368, 367 definition of 93, 96, 99, 100, 111, 117, 130, 303, 364, 365 cases in which it was wanting to constitute usury 111^143, 194, 874 of stock, when not usurious ,...,, 317-331 of chattels, when not usurious , . 345-254 Vide Mabitimb Loan. LOCKE, JOHN, opinion of, concerning usury 57 LOCUS SOLUTIONIS, controls in usury cases, when 79-90 LOUISIANA, history of usury in 54 statute in force in respect to usury in 73, 74 decisions of the courts in respect to usury in 335, 384, 437 pledges in 580, 597, 610, 618, 676 statutes in respect to pledges in 705-710 LUNATICS, cannot make a valid pledge ,..,.,,,,,.,, , 530, 531 103 818 ALPBABETICAL INDEX. M. MAINE, , PABB. history of usury in 51 statute in force in respect to interest in 51 decisions of the courts in respect to usury in 343, 388, 391, 397 pledges in, 505, 519, 576, 599, 621, 681, 695 statutes in respect to pledges in 694, 695 MAINTENANCE, what is, and how it affects a pledge 501-503 MAEINERS, may not procure insurance of their wages, when 743 Hen of, for wages, rules in respect to 767 MARITIME CONTRACTS, favored by courts 178 Vide BoTTOMBT, Mabitimb Loajsts. MARITIME INTEREST, when and how payable 718, 719, 723, 724, 747, 754, 767 general rules in respect to 731-735, 745 not payable in-case of loss, when 733 rate of. 732, 733 ceases, when 734 whether, must be stipulated in contract 727 MARITIME LOANS, antiquity of ; 715 texts of the Roman law in respect to 715, 716 contract for, nature and requisites of, 717,' 718-731, 744, 746, 750, 751, 760 776, 796 interest on, when payable 718, 719, 754 differs from partnership, how. 719, 734 similarity of, to insurance j 719, 730 in case of, risks to be borne by lender 719, 739, 749, 751-753 form of contract 730, 731, 776-77,9, 785 maritime interest on, rules in respect to : 721-725, 745 common interest on, when payable 724r-726, 757, 758, 763 effect of insurance in case of 725 maritime interest presumed in case of, when 737 the proper parties to . . . -. 738 power of master of vessel to make 738-736, 739, 740, 789-791, 793, 796 no other ship's officer, but master, can make 731 by master, rules in respect to 733-735, 738 owner of vessel may make 736-740 payment of, when preferred 737 difference between bottomry and respondentia in respect to 739, 740 cargo of vessel bound for, when 740, 741 what may be pledged for 742 what bound by pledges for 742, 767 what may be risked on 743, 744 how to be appropriated 744, 747, 748, 790, 791 ALPMABETICAL INDEX. 819 MARITIME LOANS— CoNTnnjBD. , txbis. - where may be made 748 the voyage in respect to 752-755, 769 where and how to be paid 756-758, 787 contract for, when rendered void 759-766, 786 lien of lender in case of 766-776 contract for, when void for usury 776 construction of contracts for 778-783, 787, 789 remedy on contracts for 783-785, 787, 795 contract for, good in part and bad in part, when 786, 789 effect of contract for _ 789, 790 Vide BoTTOMKT. MARITIME MONEY, what is so regarded t 715, 743 . how to be appropriated 744 when due, and where and how paid 753, 754, 756-766 MARITIME RISK, essential in bottomry cases 716, 744, 745 nature of, in bottomry cases 717 must be borne by lender in bottomry cases 719, 739 when commences and ends in bottomry cases 753, 758 . MARRIED WOMEN, may not make a pledge, when 531 act as agent, when 521, 531, 583 MARYLAND, history of usury in ; 53 statute in force in respect to usury in , 68, 71 decisions of the courts in respect to usury in, 336, 338, 344, 339, 887, 890 897, 414, 460 pledges in . . 597, 599, 633, 667, 681 MASSACHUSETTS, history of usury in 50, 59, 60 statute in respect to interest in , 50, 68 decisions of the courts in respect to usury in, 97, 109, 156,311, 286,375, 340 843, 347, 349, 888, 404, 405, 436, 488-430, 461, 468, 469, 471 decisions of the courts in respect to pledges in, 505, 510-512, 517, 530, 534 581, 583, 541, 545, 554-555, 565, 574, 581, 596-599, 605 614, 635, 633, 646, 647, 653, 667, 670, 675, 680, 681 statutes in force in respect to pledges in 697-699 MASTER, may bind shipowner by bottomry, when, 738-786, 739, 740, 789, 790, 791 793, 796 powers of, when appointed by American consul 737 rules in respect to loans by 733, 734 may hypothecate vessel, when 734, 785, 798, 798 cannot pledge ship to buy cargo 738 may hypothecate cargo, when 740, 792 personally liable for loan, when. , 791 }l^^s lien on, vessel, -syhen ,,.,,,..,,,,,,..,, , , , , , , . 792 820 . ALPHABETICAL INDEX. MATERIAL MEN, pagb. have lien on vessel, when 769 MICHIGAN, history of usuiy in 52 statute in force in respect to usury in 70 decisions of the courts in respect to usury in 429, 471 pledges in 611, 680 statute in force in respect to pledges in 710 MINNESOTA, history of usury in .'. S5 statute in force in respect to usury in 76 decisions of the courts in respect to pledges in 580, 613 MINOR, validity of pledge by 520,521 may act as agent, when 521, 533 MISSISSIPPI, history of usury in 54 statute in force in respect to usury in 76 decisions of the courts in respect to usury in. . 305, 313, 314, 388, 396, 408 pledges in 547,613,631 MISSOURI, history of usury in 55 statute in force in respect to usury in 74 decisions of the courts in respect to usury in 349, 380, 388, 410, 480 MISTAKE, of fact excuse for usury, when 106-108, 225, 329-339 cases of, held to be within the rule as to usury 339-339 when presumed in cases of alleged usury 233 when held not an excuse for usury 375-384 of law, effect of, in respect to usury 275 MONTS DE PI^Ti, nature of, and when established 488, 489 MORTGAGE, foreclosure of usurious one, effect of 393-395 what is so regarded 481, 497 considered an executed contract, when 511 MORTGAGEE, may plead usury, when 404-409, 413, 414 MOSES, laws of, in respect to usury 36, 37 NATIONAL BANKS, law of Congress in respect to 77 subject to State law against usury 91, 93 decisions of the courts in respect to .' 91, 92 ALFHABETICAL INDEX. 821 NEBRASKA, PAeu. history of usury in 55 statute in force in respect to usury in 74 NEGOTIABLE PAPER, when, cannot be impeached for usury 70, 71, 77 sale of, not usurious, when 116, 119-130, 140, 231-329, 283, 383 ante-dated, not usurious, when , 131, 133,156 assignee of, limited in his recovery, when 119, 130, 135, 339 exchange of, not usurious, when 139, 130, 333-339 given to take up usurious note, valid, when 334 containing interest not due, not usm'ious, when 356 discounting of, not usurious, when -. . . . 365, 366, 368, 269 subject of sale, when 283, 388 sale of, held usurious, when 338-340, 343-345 discounting of, held usurious, when 338-345 sale of stolen one, usurious, when 353-354 exchange of, held usurious, when 358,359 when once free from usury, always good 370, 371, 389 free from usury in hands of bona fide holder of, when. . . 381, 386, 387, 388 391, 393 when pledged, how to be disposed of by pledgee 576-581, 586, 594 NEVADA, history of usury in 55 statute in force in respect to usury in 76 decision of the court in respect to pledge in 649 NEW HAMPSHIRE, history of usury in 51 statute in force in respect to interest in 69 decisions of the courts in respect to usiuy in. . . 336, 279, 408, 409, 437, 460 pledges in, 509, 519, 607, 610, 647, 696 697 statute in force in respect to pledges in 696 NEW JERSEY, history of usury in 53 statute in force in respect to usury in .' 69 decisions of the courts in respect to usury in, 171, 305, 336, 401, 448, 464, 469 pledges in 503, 531, 674 NEW YORK, history of usury in 51 statutes in force in respect to usury in 65-68 decisions of the courts in respect to usury in . . 43, 64, 81, 83, 85-90, 92, 94 95, 104, 107, 112, 114^133, 139-138, 143, 148-156, 159-170, 186, 187 331-237, 333-236, 238-240, 343, 344, 347-354, 256-274, 277-383,388,297 299, 302, 306, 307, 312, 317-333, 335-838, 333, 384r-338, 340-344,347-354 356-359, 363, 374, 384-389, 394-403, 404, 431-435, 431-434, 437-446 458-460, 463-464, 468-473, 476, 477 822 ALPHABETICAL INDEX. NEW YOEK— Continued. paoe. decisions of tlie courts in respect to pledges in 494, 50d-503, 508, 509 513-516, 520, 524, 529, 533-539, 545, 547, 551,554, 557-561,575, 577-579 583-594, 598-601, 603, 609, 613-615, 619, 620, 622, 625, 626, 628, 631-683 641, 643, 646, 648-650, 653, 654, 655, 668, 670, 671-673, 676, 678, 679, 684 statutes in force in respect to pledge by factor in 528, 529 lin 691-694 NORTH CAROLINA, history of usury in 58 statute in force in respect to usury in 72, 73 decisions of tlie courts in respect to usury in. . . . 98, 343, 303, 339, 354, 389 426,456,457,471,472 pledges in 508, 519, 607, 647, 648 0. OFFENSE, when usury is such 474r-480 when complete in case of usury 477, 478 OHIO, history of usury in 52 statute in force in respect to usury in 70 decisions of the courts in respect to usury in, 144, 145, 237, 318, 393, 438, 461 . pledges in 681 statute in force in respect to pledges in 711 OREGON, history of usury in 55 statute in force in respect to usury in 75, 76 OWNERS OF VESSELS, bound by acts of captain, when , . . . 738-786 may execute bottomry bonds, when 736-740 P. PARTNERS, transactions between, not usurious, ^hen 185-188 usurious, when 288, 289 may not pledge the firm property, when 527 PAWN. Vide Pledge. PAWNBROKER, regulations concerning, in China 483 England 486-488, 634, 684-691, 693 sign of, and its origin 489-493 regulations concerning, in the American States 492, 493, 691-711 who is regarded such 496 responsibilities of 686-641 statutes in force in respect to, in England 684-691 New York 691-694 Maine 694,695 ALPHABETICAL INDEX. 823 PAWNBROKER— CONTDTOBD. paob. statutes in force in respect to, in Massachusetts 697, 698 Arizona 699-701 California 701-703 Kansas 705 Ohio 710,711 PAWNEE. Vide Pledgee. PAWNOR. Vide Pledgor. PAYMENTS, must be actually made of extra interest to complete offense of usury, . when 96-101,173 when contract for prompt, avoids usuiy 204-317 held not to avoid usury 345, 346 bonus to extend time of, when usurious 354, 855, 860 PENAL STATUTES, what are, and how construed 873,380 PENALTY, interest in nature of, not usurious, when QQ, 101, 304^317 held to be usurious, when 397 in cases of usury, and the action therefor 435, 436, 438 PENNSYLVANIA, history of usury in 53 statute in force in respect to usury iu 70 decisions of the courts in respect to usury in. . . 371, 373, 389, 330, 361, 363 880, 403, 435, 478 pledges in 534, 541, 563, 575, 596 598, 613-614, 631, 639, 650, 679, 680 statutes in force in respect to pledges in 711 PENSIONS, rules in respect to pledging of 498-500 PLACE OP PAYMENT, controls, in usury cases, when 79-90 PLACE OF PERFORMANCE, controls in usury cases, when 79-90 PLEA, necessary averments of, in usury cases 458-463 PLEDGE, definition of. 481, 493^97,537 history of contract of 483-493 not valid without delivery 496, 500, 506, 519, 530, 678, 679-683, 696 requisites of the contract of 497, 506-508, 513, 513, 677, 678, 679, 695 what may be the subject of '. 497-503, 511, 676 what claim may be secured by 504, 506, 510 must be something in esse , 506, 510 possession of, must be continued 517-530 may be waived, and how , 519, 530, 554^556 the person of the pledgor 530-533 824 ALPHABETICAL INDEX. PLEDGE — CONTINUBD. PAOB. title of the pledgor in 533-539, 557, 681 pledgee in " 583, 557-561, 683 cannot be taken on execution at common law CB4 may be taken on execution by statute, when 584-538, 696 broker may contract, when 538, 697 stipulation that it shall be irredeemable, not valid 589, 540, 594 redemption of 539-541, 546-550 obligations of pledgor in respect to 541-544 rights of pledgor in 544^550 extinguishment of, how effected 550-556 ostensible sale may be such, when 560, 680, 681 rights of pledgee in, before redemption of 561-581 when fraudulently made, effect of 561 , pledgee may use it, when 56S-564 repledge it, when 567-S75, 588 hold increase of, when 575, 576 dispose of, when 576-601 collect negotiable paper and other securities, when, 576-581 586, 594, 674, 683, 684 sell it, when 578, 580, 582-601, 674, 683, 696 rights of pledgee in, after maturity of claim 581-607 sale of, how to be made 588-601 effect of, illegal consideration of 597, 598, 653, 653 rights of parties when it consists of several things 600, 604, 605 pledgee may not purchase it at sale of, when 601 rights of pledgee in, after sale of 601-607 disposition of proceeds of sale of. 603-605 surplus on sale of 605 pledgee must account for increase of, when 607, 608, 633 liability of pledgee in respect to 608-615, 618, 643-655 pledgee must account for face of negotiable paper, when . . . 609-612, 619 duties aijd obligations of pledgee in respect to 615-627 on terimimation of 627-641 remedies of pledgor in respect to 633-636, 643-655 operation of bankrupt laws in cases of 655-668 effect of death of parties to 668-670 means of determining right to 670-673 miscellaneous points in respect to > 678-684 where set-off against, not allowed 684 statutory provisions in respect to, in the American States-. 684-713 statutes in respect to, in New York 691-693 Maine 694r-696 New Hampshire 696 Vermont t, 697 Massachusetts 697-699 Arizona 699-701 California 701-703 Georgia 704, 705 ALPMABETICAL INDEX. 825 PLEDGE— CONTINUBD. PiOE. Statutes in respect to, in Kansas 705 Louisiana 705-710 Michigan 710 Ohio 710,711 Pennsylvania 711 Wisconsin 711, 712 what may be the subject of, in cases of maritime loans 742 extent of, in cases of maritime loan 743, 767 PLEDGEE, wlio competent for such 496 ■what claim may be secured by 504-506 may hold pledge for expenses, when 505 must take possession of pledge 506, 681, 683, 696 must continue his possession of the pledge 517-580 does not lose his lien by redelivery of the pledge, when 517-519 waives his lien to the pledge, when 519, 530, 554-556 has only a special property in the pledge 633, 557-561, 616, 683 may redeliver pledge to his own pledgor, when 539, 565, 629 loses his lien on pledge, when 555, 606, 675 rights of, in pledge before maturity of claim.- 561-581, 679 may use pledge, when 562-564 repledge the property, when 567'-575, 588, 597 hold increase of pledge, when 575, 576 dispose of pledge, when 576-601 collect paper securities, when 576-581, 674, 688, 684 sell the pledge, when , 578, 580, 382-601, 674, 683 sale of the pledge by, how conducted \... 562-601 may enforce the personal obligation, when 595, 599, 605-607 rights of, in pledge when claim illegal 597, 598, 652, 653 may employ pledgor to sell pledge, when 598, 599 enforce his claim in equity, when 599 rights of, where several things are pledged 600 is responsible for agent's acts, when 600 must not purchase pledge on sale of, when 601, 614 rights of, in pledge after sale of 601-607 how proceeds of pledge to be disposed of by 603-605 must account for profits of pledge, when 607, 608, 633 liability of, in respect to the pledge 608-615, 618, 642, 655 must account for face of negotiable paper, when 609-613, 618, 619 duties and obligations' of, in respect to the pledge 615-627 liability of, when pledge stolen 617, 632-627, 638, 639 duties of, after termination of pledge 637-641 presumptions and evidence in respect tp 638, 641 how he may be affected by bankrupt laws 655-668 effect of death of, in respect to the pledge 670 means for determining to whom to deliver pledge 670-673 may bring trover for the pledge, when 675 104 826 ALPBABBTICAL INDEX. PLEDGOR, who may be such 496, 520-533, 679 lunatics may not be, when 520 power of minors to be such 520, 521, 538 married women as such 521, 531, 533 factors cannot be, at common law 521-525, 532 may be, by statute, when 525-530 trustees may not be, when 530, 531 title of, to the property pledged 533-539, 557, 681 may redeem the pledge, when 539-541, 546-550 obligations of, in respect to the pledge 541-544, 605 warranty of title to pledge by, when 541, 542 estopped from setting up subsequently acquired title, when 542 must reimburse pledgee for expenses, when 542-544 ■ rights of, in the property pledged. . . . , 544r-550 may dispose of his interest in pledge, when 544, 545 has an action fbr conversion of pledge, when 545 right of, to redeem the pledge survives, when 548, 549, 647-670 personally liable on his contract of pledge, when, 595, 599, 605-607, 610 612 is entitled to surplus on sale of pledge, when 600 waives irregularity in sale of pledge, when 601 remedy of, against pledgee 612-614, 631, 633-636, 643-655 his action at law in respect to the pledge 643-647 proceedings in equity by, in respect to the pledge 647-655 may have the pledged article decreed to him, when 649 effect of the death of, in respect to the pledge 699, 670 POST OBITS, not usurious, when 101, 178-184 nature and description of 178 PEACTICE, rules of, in usury cases 318, 845, 450-47f: PRESUMPTION, what, in cases of usury 85-87, 260-268, 276, 468, 4ffi» PRIVIES, may set up usury, when 408, 406, 408, 413 PROMISSORY NOTE, insufficiency of, as a bottomry contract, when 721 does not invalidate bottomry contract, when 788 may be secured by bottomry bond, when 794, 795 Yide Negotiable Papbb. Q. QXn TAM ACTION, in cases of usury, when it accrues 451 declaration or complaint in 456-458 plea or answer in 458-463 compounding of 465 ALPHABETICAL INDEX. 827 QUI TAM ACTION— CONTIN0BD. rAsu. in cases of usury, evidence in 466-i73 verdict in '. , 472 ■when default in, will be opened 473, 473 judgment and execution in 473, 474 E. REDEMPTION, of pledge, rules in respect to 539-541, 546-550 REMEDIAL STATUTES, ■what are, and how to be construed 378 RENT CHARGE, held not to be usurious, when 189, 191, 203 nature and description of 203, 389 REPLEVIN, when the action of, will lie in usury cases 433, 434 RESPONDENTIA, contracts of, not usurious, when 174-177 nature of the contract of 175, 177 lenders on, not Uable for salvage on 175, 176 Vide BoTTOMKY. RHODE ISLAND, history of usury in 51 statutes in force in respect to interest in 51, 68 RISKS, rules in respect to, in usury cases . 286-388, 393, 296, 297 Vide Bottomry, Makitimb Loan, etc. ROMAN DIGEST, • extracts from, in respect to maritime loans 798-800 provisions of the Code Justinian in respect to maritime loans 800 importance of, in respect to present jurisprudence 803 ROMANS, history of pledges among 485 ROME, rules in respect to interest and usury in the ancient empire and repub- lic of 38,39,43, 63 S. SALARY, sale of, usurious, when 396, 397 nominally paid on loan usurious, when 334, 335 SALE, held not tainted with usury, when, 92-95, 111-130, 188-204, 258-260, 310, 364 held usurious, when ; 102, 301, 302, 304, 305, 307-313 of annuities held not usurious, when 188-304 of chose in action not usurious, when 218-260 of pledge, when upheld 578,580,582,601 828 ALPHABMTWAL INDEX. SALVAGE, PA9B. lenders on bottomry not liable for, when 175, 176, 749, 750 SEAMEN, may borrow money on freight of vessel, when 743 lien of, on^hip for wages', when 771 Vide Maeineks. SEA RISK, cases of, held to be usurious 386-388 SECURITIES, when sale of depreciated, not usurious ^ 331-339 taken for less than face of, no proof of usury, when 360-361 ante-dating of, no proof of usury, when 363, 363, 266, 398, 299 given for claims bought at a discount not usurious, when 270, 271 if they include expense of collecting of, not usurious, when 371, 272 exchange of, not usurious, when 373, 373 given for a loan to pay usurious debt not usurious, when 273, 274 exchange of, held usurious, when 306, 307, 309-313, 319-323, 340 renewal of usurious, still tainted 331, 338, 396, 400, 403 one of two given for the illegal interest, both usurious, when 368 if originally free from taint they always remain so, 370, 371, 389, 398, 401, 402 collateral, effect of usury upon 393, 403 though usurious, may be enforced, when 396, 402 SERVICES, charge for, in case of loaij, not usurious, when 130-141, 358-360 held to be usurious, when 328 SHIP, effect of loss of, in bottomry cases 761-766 lien on, in bottomry cases ' 762-766 Vide BoTTOMST, Maritimb Loaks, etc SOUTH CAROLINA, history of usury in 53 statute in force in respect to usury in 76 decisions of the courts in respect to usury in, 93, 94, 304, 313, 340, 345, 348, 411 pledges in 524, 545 STATUTES, in force in respect to interest and usury in the American States 65-78 conflict of, in respect to usury 79-93, 372 rules to determine which shaU apply 79-93, 372 against usury, how construed 3t3-93, 373 distinction between remedial and penal 373 when not retroactive in respect to usury 880 against usury held to be penal, when 409 when usury is held to be a crime under 475, 476 STOCKS, transfer of, held to be usurious, when 103, 301-303, 309-313, 314, 318 361,362,365 not usurious, when 102, 317-231 pledge of, how made 507-509, 513 ALPHABETICAL INDEX. 829 STOLEN PAPER, paoj,. sale of, held to be usurious, when- 353-354 STOPPAGE IN TRANSITU, of goods pledged, rules in respect to 566, 567 STRANGER TO USURIOUS SECURITY, cannot interpose defense of usury, when 403, 405, 407, 410, 417 SURETY, may set up defense of usury, when 404, 409 not allowed defense of usury, when 413, 417 T. TENNESSEE, history of usury in 54 statute in force in respect to usury in 76 decisions of the courts in respect to usury in 228, 430, 478 pledges in 520, 556, 621, 653 TEXAS, history of usury in 55 statute in force in respect to usury in 55, 76 decisions of the courts in respect to usury in 425, 463 pledges in 594 THEFT, sale of negotiable paper got by, when usurious 352-354 effect of, as against pledgee 617, 623-627, 638, 639 TITLE, nature of, of pledgor in property pledged 533-539, 557, 681 pledgee in property pledged . . . '. 533, 557-561, 616, 683 TORTS, caimotbe the subject of pledge 503 TRANSITU, right to stop property in, that is pledged 566, 567 TROVER, action of, in cases of usury 430-484 maintainable against pledgee, when. . . 612-614, 631, 633, 685, 636, 642-647 TRUST, certificates of, usurious, when 314-817 TRUSTEE, cannot pledge trust property, when 530, 531 TURKS, the subject of pledges among 484 TJ. UNCURRENT MONET, sale of, not usurious, when 257, 358, 264 held usurious, when 306, 314, 354 UNITED STATES, Vide Ambbica. USAGE, held no protection for usury, when 307, 277, 806 830 ALPHABETICAL INDEX. USURER, PAOI,. cannot plead usury himself, when 410, 411 USURY, definition or meaning of 35, 208 spirit of 35 opinions respecting the practice of. 36-40, 43, 65 general history of » 37, 38, 41-56 taking of, denounced 40, 41 policy of the laws against 56, 105 arguments and opinions in respect to laws against 57-64 statutes in force against, in the United States 64-78 not recognized by the common law 64, 65 action for, rules in respect to. ; 65, 66, 69, 70, 72, 73, 75, 76, 392, 400 held to be a crime, when ' 67, 68, 71 connot be pleaded by corporations, when 67, 69, 72 how pleaded as a defense. . ; '''1, 73, 458-43 rules in respect to, as applied to national banks 77, 91, 92 conflict of laws in respect to 79-92, 372 presumptions in cases of 85-87, 258, 260, 263, 276, 468, 469 none in case of bona fide sale, when 92, 95, 111-130, 209 constituents of. 92-110, 113, 194, 216 can be none without a loan 92-96, 98, 114, 115, 194, 374, 363, 367 contract to return loan 96-101, 367 can be none unless illegal interest taken or reserved 101-103, 194, 216 268 corrupt intent, 103-110,140,175-181,225,228,232 370 rules applicable to , 110, 111 transaptions held not to be tainted with 111-274 for want of loan 111-172 must be strictly proved , 123, 356, 357, 469 between original parties 129, 363 none on exchange of securities, when 129, 180, 272, 273 contracts for service, when 130-141 where expenses incurred, when 133, 133, 136-141 money paid to negotiate loan, when 138 old debt secured with loan, when 141-143 none where second contract the condition of the loan, when 143 charge for exchange is not, when 143-155 none in banks discounting notes, when 153, 155, 156 bonus to agent, when 156-173 where loan may not be returned, when 172-204 principal is put in hazard, when 172-204 none in bottomry and respondentia contracts, when 173-178 post obits 178-184 annuities 184, 185, 188-304 partnership transactions, when 185-188 none where interest is in nature of penalty, when, 204r-317 usage will not protect, when 307 ^ ALPBABETICAL INDEX. 831 USURY— CoNTrNUED. • - page none in transfers of stock, when 102, 217-321 securities, when -221-229 none in cases of mistake, when 229-239 gift, when 237, 240 compound interest, when 240-248 semi-annual interest and the like 243, 244 loan of chattels, when 245-254, 366 none where acceptor of bill takes commission for prompt payment, 255, 256 security is ante-dated, when 256, 262, 263, 266 uncurrent money is sold, when 257, 258, 264 not to be presumed, when 258 none on sale of chose in action, when 258-260 not proved, that full face of security not paid .'. . 260, 261, 266-268 collecting collaterals, and using money, not, when 262 not presumed by gift, when 262, 368, 368, 269 none on discount of note, when 265, 266 purchase of claim at discount, when . . ^ 370, 371 securing attorney's commissions, when g71, 273 security for loan to pay usurious debt, when 373, 274 transactions held to be tainted with 275-362. in cases of alleged mistake 276-384 hazard 284-397 sea risk 286-288 partnership 288, 289 post obit 390 annuity 290-296 sale of salary 396, 297 penalty 297 interest in advance 397, 298 ante-dating instrument : 298, 299 goods advanced 299-301, 308, 805, 307, 808, 382 exchange of stocks 301-303, 309-313, 327 sale of lauds 304, 305, 361, 362 hiring to service 305 sale of uncurrent money 306, 314, 354 certificate of trust and deposit 814-318 sale of drafts 318 exchange of obligations 319-328, 840, 358, 359 sale of post notes 328 payment of something beside money 324^328 charge for brokerage and commissions 329-335 payment of double discount , 832-334 charge for exchange 385-388 discounting paper 338-345 charge for prompt payment 345, 346 new security tainted with, when 346-349, 388 i(ma fide holder of security not affected by, when. . . 349, 850, 381, 388, 392 held to be, in case of wrong calculation of time, when 351, 352 renewal of security, wben 852 832 ALPHABETICAL INVEX. USURY— CONTIHTJBD. • ^*™- held to be in case of sale of stolen paper, when 352-354 contract to delay collection, When pay same interest as lender pays, when • 354,355 extend payment on note, when 354 355, 360 pay more than conventional interest, when 335 receive lender's note at discount 355 held to be, in respect to contracts to pay extra interest, when 355-359 note made to defraud creditors, when. ..^ 359 contract to purchase debt against lender, when 360 summary of the doctrine of the cases in respect to 363-371 laws against, how construed 872-380 when penal and when remedial ■ 374, 409 not retroactive, when 380 effect of, on security tainted with it 381-393 when security rendered void by 381, 386 new security not tainted with, when 388-393 security free from, always so • 389, 398-400 effect of, on security collateral to usurious debt 393-403 contract affected by, may be reformed, when 896-398 effect of judgment on instrument tainted with 399-403 the defense of, to an action 403-431 when parties are estopped from the allegation of 413, 417-431 the action for money paid in case of 431-430 property transferred in case of. 430-434 equitable relief in cases of.- 435-449 practice in actions in respect to 450-474 pleadings in actions for 453-464 compounding actions for , 465 competency of witnesses in actions for 466-468 verdict and judgments in cases of 473-474 in respect to, as a crime 474r-478 when maritime contract void for 776 USURY LAWS, how construed 373-380 apply only at time contract made '. . 437 V. VERDICT, form of, in usury cases 472 VERMONT, history of usury in 50, 51 statute in force in respect to usury in 51, 68 decisions of the courts in respect to usury in . . 170, 254, 325, 833, 392, 396 410, 437, 439 pledges in 500, 597, 607 statute in force in respect to pledges in „ 697 ALPHABETICAL INDEX. 833 VIRGINIA, PASB. history of usury in 52, 53 statute in force in respect to usury in 71, 78 decisions of tlie courts in respect to usury in. . . 109, 126, 127, 156, 172, 302 203, 212, 313, 236, 290, 312, 313, 336, 383, 344, 391, 400, 471 courts in respect to pledges in 504, 648 VOYAGE, • wliat constitutes, in bottomry cases 752^754, 770 effect of variation of 755 "W. WAGERS, held not to be usurious, when 185 WAIVER, of pledge, when 519, 530, 554r-556 WEST VIRGINIA, statute in force in respect to usury in 72 decisions of the courts in respect to usury in 90, 330 WISCONSIN, history of usury in ". 55 statute in force in respect to usury in 75 decisions of the courts in respect to usury in. . . 155, 237, 238, 389, 336, 380 402, 410, 436, 430, 447, 458, 465 pledges in, 579, 601, 611, 612, 649, 677 statute in force in respect to pledges in 711, 712 WITNESSES, competency of, in usury cases 466-468 105 DATE DUE ^-o5-^^ ( f p aAVLORD PRrNTED IN U.SA