a debtor in trust to pay a certain usurious debt cannot be avoided by a creditor of the assignor upon the ground that the debt thereby secured was usurious, though it is otherwise with a judgment creditor who has acquired a legal lien upon the property encumbered by the usurious security. And we need hardly add that a lender cannot avoid his own usurious contract on the ground of his own usury.1

Privies in law of the debtor, as the assignee in bankruptcy or the sheriff in execution, may usually, it would appear, set up the plea of usury against his unpaid debts; though not so as to recover illegal interest which the debtor has already paid.2

3

A surety of the borrower in the usurious contract, who has not been repaid, and whose conduct has been honest, is entitled to the defence of usury; also bail of the borrower; also a joint obligor. But where B. borrows from A., and gives him two bonds, on one of which C. is surety, and afterwards pays the other bond on which usurious interest was reserved, C. cannot avail himself of the payment of such usurious interest in defence of an action on the bond in which he is surety. And if a surety to a usurious contract pays usurious interest, knowing it to be such, he cannot recover it again from his principal. A usurious contract giving the principal debtor indulgence in payment will not discharge his surety, though carried out afterwards, if the law makes such contracts illegal and void."

Where an executor or administrator loans the money of his intestate at a usurious rate of interest, the debtor may make the same defence as if the money had belonged to the administrator as an individual. Fiduciary officers of this character are responsible, as such, for usury received by the deceased in his lifetime; but it seems certain that they can

1 Riley v. Gregg, 16 Wis. 666; Car- Palmer, 13 Ind. 457; Kirkpatrick v. ter v. Dennison, 7 Gill, 157. Wherritt, 7 B. Monr. 388; Safford v. Vail, 22 Ill. 327.

2 See Morse v. Crofoot, 4 Comst. 114; Lee v. Fellowes, 10 B. Monr. 117. But see Low v. Prichard, 36 Vt. 183.

8 See 12 Mod. 193; Goodhue v.

4 Cantey v. Blair, 2 Rich. Eq. 46. 5 Jones v. Joyner, 8 Geo. 562. Gilder v. Jeter, 11 Ala. 256.

7 Norcum v. Lum, 33 Miss. 299.

not, if innocent, be made to suffer personally the penal consequences.1

§ 279. The Same Subject. Usury is a defence to a suit to foreclose a mortgage, just as it is upon the usurious note which secures it; and any one claiming under a mortgagor and in privity with him may raise the defence of usury in the mortgage. But a subsequent mortgagee cannot take advantage of usury in a prior mortgage, since he is a stranger and not a privy to it, and cannot be injuriously affected by enforcement of the contract. And the same holds true in general of the subsequent grantee of premises subject to a usurious mortgage, or at least of one who purchases the equity of redemption, or who agrees to assume the mortgage as part of his consideration; since, as to the right of a general grantee, under such circumstances, there appears some uncertainty. Such rules are often controlled by legis lation; and it must be considered that a court of equity proceeds upon its own equitable theory, where its jurisdiction is invoked.5 But in New York the bona fide purchaser, under a statute foreclosure of a mortgage which was tainted with usury, acquires a good title."

The statutes of some States expressly prohibit corporations, and especially banks, from interposing the defence of usury.7 And in a controversy as to the validity of a levy of execution upon a corporation, a stockholder cannot object on the ground of usury.8

1 See Proctor v. Terrill, 8 B. Monr. 451; Heath v. Cook, 7 Allen, 59.

2 Wright v. Bundy, 11 Ind. 398; Ramsay v. Warner, 97 Mass. 8; Brolasky v. Miller, 1 Stockt. 807.

8 Churchill v. Cole, 32 Vt. 93; Rexford v. Widger, 3 Barb. Ch. 640; Pritchett v. Mitchell, 17 Kan. 355.

4 Post v. Bank of Utica, 7 Hill, 391; Sands v. Church, 6 N. Y. 347; Cramer v. Lepper, 26 Ohio St. 59; Hough v. Horsey, 36 Md. 181; Burlington Loan Association v. Heider, 55 Iowa, 424. The maker of a note secured by mortgage should not, after such conveyance, set up usury in a

suit which seeks no personal judgment against him. 52 Iowa, 354. But see Newman v. Kershaw, 10 Wis. 333. And see Dolman v. Cook, 1 McCart. 56; Gunnison v. Gregg, 20 N. H. 100.

5 See § 282, post.

6 Jackson v. Henry, 10 Johns. 185. 7 See Schermerhorn v. Talman, 14 N. Y. 93; Rosa v. Butterfield, 33 N. Y. 665; Hartford, &c. Ins. Co. v. Hadden, 28 Ill. 260. And see Bach v. Lanman, 24 Penn. St. 435.

8 Chaffin v. Cummings, 37 Me. 76. As to plea by the surety of a corporation, see 35 N. J. 285.

[PART II. The accommodation indorser of a note may, like any surety, take advantage of the plea of usury, as well as the borrower; and so may any indorser when charged upon the note, if not chargeable with bad faith.2 And the indorsee who takes a note with notice that it is tainted with usury takes it subject to that defect; so that where accommodation paper in any form is discounted by a party knowing its true character, the defence of usury may be set up between the parties to the paper and the party by whom it is originally discounted. As to whether the plea of usury may be set up against bona fide holders for value, the rule is not uniform; and it may depend somewhat upon local statutes, which are frequently explicit in this respect. Thus usury makes "void" according to some State codes; while in others the penalty is far less severe.* In some States usury is deemed a good defence for the maker of business paper pro tanto, though the note be in the hands of an innocent holder for value, who has received it in the ordinary course of business; but the better opinion is that the plea is not available under such circumstances, in the absence of a positive statutory provision to that effect.5

But where a debtor gives a new security for a usurious debt, to the bona fide assignee of the debt, who took the original debt and takes the substituted security without any knowledge of the usury, such debtor cannot afterwards set up usury as a defence to the substituted paper. And if the maker of a usurious note gets a third person, who had no

1 See Gray v. Brown, 22 Ala. 262. 2 And this, even though, ignorant of the usury, he has given his own note. First Nat. Bank v. Plankington, 27 Wis. 177.

Simpson v. Fullenwider, 12 Ired. Eq. 334; Veazie Bank v. Paulk, 40 Me. 109; Clark v. Sisson, 22 N. Y. 312.

4 See Claflin v. Boorum, 122 N. Y. 385, which turned upon the statute expression "void."

5 See William v. Wilder, 37 Vt. 613; Tucker v. Wilamouicz, 3 Eng.

157; Kendall v. Robertson, 12 Cush. 156; Bacon v. Lee, 4 Iowa, 490; Cutchen v. Coleman, 13 Ind. 568. The bonâ fide holder of a note given for usurious interest who purchases for less than its face value may recover only the actual consideration paid, together with legal interest. Cheney v. Campbell, 28 Neb. 376.

6 See Cuthbert v. Haley, 8 T. R. 390; Dix v. Van Wyck, 2 Hill, 522; Houghton v. Payne, 26 Conn. 396. And see Wendlebone v. Parks, 18 Iowa, 546.

connection with it, to give his note which is free from usury for the amount in payment of the usurious note, this third party cannot afterwards defend on the plea of usury between the former parties; though it would probably be otherwise if this note had been given not in payment, but as a mere renewal or substitution for the original usurious note.1

§ 280. The Same Subject. — Upon the whole, then, as to parties entitled to plead usury, while the question is often dependent upon the legislation and public policy of each State, and it is impossible to lay down a rule which may completely reconcile all the cases, it may be stated that the right to set up such a defence depends mainly upon the character of the party as the original borrower or his legal representative and substitute, or else upon the party's liability to prejudice or injury through the enforcement of the usurious contract. And even where usury may be pleaded, the defence must be seasonably made; for lapse of time, especially when actual benefits have been taken by the party under the contract alleged to be usurious, or he has otherwise by his conduct manifested an intent on his part to waive the defence of usury, proves a fatal barrier.2

§ 281. Usury, how to be pleaded and proved. Usury, too, is a defence which, as a general rule, must be strictly proved; and the court will not presume a state of facts to sustain that defence where the instrument is consistent with correct dealing. Hence, it is held that a note dated on one day for a sum payable with interest from a day previous, will be deemed prima facie a note given subsequently for a loan. which was actually made on the former date. Nor will it avail the party to prove usury if the case of usury proved is not that set up in defence; nor to make out a case which leaves to conjecture and does not prove usury. Usury must

1 Hanley v. Kempton, 30 Me. 118, and cases cited. And see Macungie Bank v. Hottenstein, 89 Penn. St. 328.

2 See Davis v. Converse, 35 Vt. 503; Smith v. Marvin, 27 N. Y. 137; Lucas v. Spencer, 27 Ill. 15; Fur

long v. Pearce, 51 Me. 299. But see Kendig v. Marble, 55 Iowa, 386.

See Marvin v. Feeter, 8 Wend. 533; Ewing v. Howard, 7 Wall. 499; Andrews v. Hart, 17 Wis. 307; Wet ter v. Hardesty, 16 Md. 11.

in general be specially pleaded; and the corrupt agreement must be distinctly set out and must be proved as alleged.1 This doctrine prevails both in law and in equity; though in the action of assumpsit at law every defence which shows. that the plaintiff never had any cause of action may be given in evidence under the general issue.2 But the manner in which usury must be pleaded and proved is to be determined by the statute in force at the time of suit; and the practice of the different States is not altogether uniform in this respect. In many cases the party pleading usury must first tender to the usurer the amount admitted to be due; and yet the formality of tender is now frequently dispensed with; and it seems to have always been rather a requirement of equity than the law courts.3

§ 282. Usury as a Defence in Chancery. -As a general rule relief cannot be obtained in equity against usury where the party has omitted to plead it at law and shows no excuse for the failure; nor will a bill of discovery be entertained in chancery after judgment at law, where the facts sought to be elicited are matters of legal defence, and no excuse is offered for not having shown it earlier. And usury paid, under a decree in chancery, cannot be recovered again by a suit in chancery.5

§ 283. Legal Consequences of Usury. The legal consequences of usury were under the old statutes very disastrous.

1 New Jersey, &c. Co. v. Turner, 1 McCart. 326; Vroom v. Ditmas, 4 Paige, 526; Manning v. Tyler, 21 N. Y. 567; Frank v. Morris, 57 Ill. 138; Omaha Hotel Co. v. Wade, 97 U. S. 13; 98 U. S. 50.

2 Ib.; Comyn Usury, 201-203; Holland v. Chambers, 22 Geo. 193; Stockham v. Munson, 28 Ill. 51; Bond v. Worley, 26 Mo. 253.

3 Kuhner v. Butler, 11 Iowa, 419; Newman v. Kershaw, 10 Wis. 333. And see Heath v. Page, 48 Penn. St. 130. An agreement not to plead usury or to withdraw the plea is against public policy and void. 22 Hun, 264. But our later courts disincline to per

mit such plea to be waived or withdrawn, and then reasserted. Clark v. Spencer, 14 Kan. 398; St. Albans Bank v. Wood, 53 Vt. 491. A sealed release of all claims for usury, executed at the time of the usurious transaction, is a mere subterfuge, and does not bar a subsequent plea of usury. Herrick v. Dean, 54 Vt. 568.

4 Jones v. Kirksey, 10 Ala. 579; Smith v. Walker, 8 S. & M. 131; Brown v. Swann, 10 Pet. 497; Blyd. 117. See Busby v. Finn, 1 Ohio St. 409.

5 Thompson v. Ware, 8 B. Monr. 26. See § 285, post.