proper; and so, too, a party may lend stock as stock to be replaced, or he may lend the produce of it as money, or he may give the borrower the option to repay either in one way or the other. But he cannot legally reserve to himself the right to determine which it shall be. A loan of stock to be replaced at a future day with its dividends is a transaction where the lender takes the risk of depreciation in the meantime, and this is lawful; but to lend the produce of stock with an agreement that it shall be returned as so much money, while reserving the dividends by way of interest, this is usurious, if the dividends amount to more than the legal rate on the produce of the stock. The collateral advantage which the lender here seeks to enjoy is usurious; for it is a cover for getting a usurious rate of interest on a loan of money.1 Where animals are sold or loaned, as is sometimes the case, with a reservation of increase, like considerations of usury sometimes arise; and such transactions are sustainable, where it does not appear that a loan of money is disguised under the name of a loan or sale by way of mutuum of live stock.2 A loan of corn to be returned in kind may be good, regardless of the per cent in amount which is to be added; for this is a mutuum.3 § 274. Various Usurious Devices. - Another trick sometimes attempted is that of forcing goods upon the borrower, in connection with the loan, at an estimate far above their true worth, instead of making a cash loan for the full amount. To distinguish between the legal and illegal here is not easy; and each case must depend somewhat upon the willingness or reluctance of the borrower to take the goods, the hardness of the bargain, and other facts which serve to manifest what the law deems an usurious intent. Thus, the issue being 1 See Blyd. Usury, 45-47; Tate v. Wellings, 3 T. R. 531; Cleveland v. Loder, 7 Paige, 557. 2 See Gilmore v. Ferguson, 28 Iowa, 220; Bull v. Rice, 1 Seld. 315. If the lender to an adventure receives a share of the profits, usury cannot be alleged, provided he were responsible under the terms of the contract for losses. Goodrich v. Rogers, 101 Ill. 523. 8 Easterlin v. Rylander, 59 Ga. 292. And see 4 Baxter, 86. 4 Blyd. Usury, 42-45, and cases infra. mainly one of fact in each case, where a certain sum is loaned, and as part of the same transaction the borrower purchases a mill, giving much more than it is worth, both parties knowing the facts at the time, the transaction may be pronounced usurious, even though nothing special was said as to the real value of the mill. And a contract for labor or for commodities at an unfair price, when made as the condition of the loan, may render the loan usurious. So, too, where the lender makes the borrower give him, before receiving all the money, his wagon at a depreciated value. A fair criterion by which to detect usury in all such cases is to compare the market value of the goods with the gain to the lender in charging and obtaining more than the market value. We here suppose that the apparently external harsh arrangement is part of the loan transaction itself, and not entirely distinct, so as to stand or fall on its own merits. To make a loan in depreciated bank-notes, expecting to receive payment in money at par, would not generally constitute usury; certainly not where the parties acted in good faith. Nor necessarily would the transfer of a debt at par coupled with a loan of money, though the debt afterwards prove uncollectible. Yet even here the facts might be such as to taint the whole transaction. And the same may be said of a transfer of our modern securities, which might amount to a fair sale of them on credit or an usurious loan, according to circumstances.6 An exchange of negotiable obligations to raise money, and 1 Low v. Prichard, 36 Vt. 183. And see Miller v. Bates, 35 Ala. 580; Tarleton v. Emmons, 17 N. H. 43; Heath v. Page, 48 Penn. St. 130; 88 Ill. 566. 2 See Root v. Pinney, 11 Wis. 84; Parker v. Maxwell, 51 Minn. 523; 49 Minn. 111; Roger v. O'Neal, 33 W. Va. 159. 8 Cummins v. Wire, 2 Halst. Ch. 73. 4 See Mumford v. American, &c. Insurance Co., 4 Comst. 463; Collier v. Barr, 64 Ala. 543. an agreement to pay insurance premiums, see 1 McCrary, 234; Braynard v. Hoppock, 32 N. Y. 571. As to an agreement concerning stock of the corporation which lent the money, see 48 Md. 455. 5 See Hayward v. Le Baron, 4 Fla. 404; Gregory v. Bewley, 4 Eng. 22. 6 Brown v. Nevitt, 27 Miss. 801; Thomas v. Murray, 32 N. Y. 605; Bank of Washington v. Arthur, 3 Gratt. 173; Dean v. Herrick, 54 Vt. For application of this rule to 573; § 275. so made, is a loan within the usury laws; and if by such exchange the amount ultimately to be paid by the borrower is greater than that to be paid by the lender, and it is one loan transaction, there is generally usury. But we presume that premiums, commissions, and the like may be stipulated for, as in other cases. Making out the borrower's note for a larger sum than the lender advanced or antedating it, is a palpable device for usury.2 § 275. Distinctions as to the Purchase and Sale of Commodities. And this brings us to an inquiry which the courts. and legislatures have not as yet fully answered; namely, where shall the line be drawn between a usurious loan and a bona fide sale or exchange of commodities at a profit exceeding the interest rates, the one transaction being illegal and the other perfectly legal. In our later cases this subject is discussed frequently, and as to most of the wealthier States the courts seem disposed to shield parties from the harsh consequences of usury as far as possible. It has been well said that in every instance where the contract is in form one of sale or exchange, if the court, in looking at the whole transaction, can see that the value secured to the vendor was in good faith, only the price of the thing sold or exchanged by him, there can be no usury, whatever the price may be or the mode in which it may be reserved. And it is certainly a familiar rule that the seller of goods may ask one price in cash and a higher price on credit. But in order to render a transfer valid, on any such ground, the sale must be fair and honest and above board; and the substance of the transaction, not the form of words, is to be regarded by the court.4 1 See Hyde v. Finley, 26 Miss. 468; Nickerson v. Babcock, 23 Ill. 561; Schermerhorn v. Talman, 14 N. Y. 93. Whether a loan payable either in gold coin or in currency with the premium on gold, is, in times of legal tender currency, usurious, see Gates v. Hackenthal, 57 Ill. 534. But where A. owes B., and B. owes C., an agreement between A. and C. that C. should give B. further time upon a payment of extra interest by A. is not usurious. Gleason v. Childs, 52 Vt. 421. 2 See 44 Minn. 121; Vail v. Van Doren, Neb. (1895). See Gardiner, J., in Dry Dock Bank v. American, &c. Co. 3 Comst. 344, 359. And see supra, § 269; 94 Tenn. 17. * See Beete v. Bidgood, 7 B. & Cr. 453; Leavitt v. De Launy, 4 Comst. Inquiries of this sort are usually raised on the transfer of bills and notes; and a distinction may here be made between business and accommodation paper. Where a note is made without consideration, and merely to enable the payee to raise money upon it, the maker is not bound by it until it has been negotiated; and if the payee gets it discounted at a greater rate than the lawful interest, the transaction is regarded as a loan by the indorsee and prima facie usurious.1 But a sale of bills and notes at a discount exceeding the legal rates would not be usurious if the transaction proved not to be a cover for a loan.2 And it appears to be now well settled that a bill or note valid in its inception and binding between the original parties, and in fact all negotiable paper in the hands of those who have taken it by way of business and not accommodation, may be purchased in good faith as a marketable commodity at any rate of discount, though practically exceeding legal interest. So a debtor may purchase debts due from his creditor to others at a greater discount than legal interest, and demand a set-off to the full amount with legal interest. It is not a usurious transaction to purchase below par, railroad, municipal, or other negotiable bonds, bearing interest periodically due; even though bought directly from the government or corporation in question at such a discount from their face.5 § 276. Usury with Reference to a Former and Latter Loan. A party in making a further loan may insist upon 364; Newman v. Williams, 29 Miss. 212; Vail v. Heustis, 14 Ind. 607. Where goods were bought on a stated credit, and at the expiration of that period the buyer gave his note for the aggregate amount, with interest as from the date of purchase, the transaction was held usurious. White v. Friedlander, 35 Ark. 52. Cf. Ford v. Hancock, 36 Ark. 248. 1 Tufts v. Shepherd, 49 Me. 312; Richardson v. Scobee, 10 B. Monr. 12; Whitten v. Hayden, 7 Allen, 407; Belden v. Lamb, 17 Conn. 441. The sale of accommodation paper at a discount greater than legal interest is usurious and void under New York statutes. Claflin v. Boorum, 122 N. Y. 385. 2 Durant v. Banta, 3 Dutch. 624; Otto v. Durege, 14 Wis. 571. See Atwell v. Gowell, 54 Me. 358; Bayliss v. Cockroft, 81 N. Y. 363. 8 Newman v. Williams, 29 Miss. 212; Corcoran v. Powers, 6 Ohio St. 19; Williams v. Reynolds, 10 Md. 57. And see Kitchel v. Schenck, 29 N. Y. 515; Dickerman v. Day, 31 Iowa, 444. 4 Young v. Miller, 7 B. Monr. 540. 5 See City of Memphis v. Bethel, Tenn. (1892). security for a former loan, and may even make the giving of such security a condition of the new loan, and yet the loan is not necessarily usurious in consequence. The question in such a case is, whether the object was in reality to get security for the old debt, or only to make a loan with such security as a usurious premium.1 § 277. Usury consists in Actual Taking. - In absence of controlling words in local statutes to the contrary, the offence of usury may be said to consist not in the attempt to take, but in the actual taking of more than the legal rate of interest. And, as a general rule, the offence of usury is not consummated until a lender has received more than principal and interest, bonus included, for the sum actually advanced.2 But this is not an invariable rule, for the language of legislation varies in different States. § 278. Usury, who may plead, etc. It is a general rule that usury is a personal defence, and cannot be set up by a stranger; in other words, that no person, unless legally implicated in the usurious transaction, or having a legal interest in the property subject thereto, can interpose such a plea. For it is a general principle that a mere stranger has no right to intermeddle with the concerns of others. And one very good reason why the rule should be thus applied is that, notwithstanding the general policy of the usury laws, the courts leave the borrower free to waive such a defence, and stand by his contract if he chooses to do so.3 The borrower, then, and his heirs and personal representatives, may set up the defence of usury. But the borrower cannot transfer to another the right to plead usury which is in himself. Nor can he set up usury paid by a third person in connection with the transaction. And an assignment by 1 See Jarvis' Appeal, 27 Conn. 432; Saunders v. Lambert, 7 Gray, 484. 2 See Brestle v. Mehaffie, 19 Penn. St. 117; Mitchell v. Doggett, 1 Branch, 356. See Blyd. Usury, 106, 107; Livingston v. Harris, 11 Wend. 329; People's Savings Bank v. Collins, 27 6 Conn. 142; Pritchett v. Mitchell, 17 4 Ib. 5 Bullard v. Raynor, 30 N. Y. 197; Cain v. Gimon, 36 Ala. 168; 15 Hun, 564. 6 McArthur v. Schenck, 31 Wis. 673. |