terest out of the loan in advance.' Although, as we have seen, compound interest is disallowed by some courts as contrary to public policy,2 yet the compounding of interest is held not to be usurious. Charging interest on monthly balances, according to the custom of stockbrokers, does not constitute usury."

3

§ 2460. Forbearance, or Extension of Time. - An agreement to forbear to enforce a demand, or to extend the time of payment in consideration of the payment of interest at more than the legal rate, is usurious. Where a note is given on a usurious contract, and partly paid, a new note given for the balance is likewise usurious."

ILLUSTRATIONS.- -A note for five hundred dollars became due, the holder took a new note for that sum and a note for fifty dollars for forbearance for sixty days. Held, usurious, and both notes void under the statute: Motte v. Dorrell, 1 McCord, 350; 10 Am. Dec. 675. 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.

1 English v. Smock, 34 Ind. 115; 7 Am. Rep. 215; Bank v. Smoot, 2 McAr. 371; Parker v. Cousins, 2 Gratt. 372; 44 Am. Dec. 372; Meyer v. Muscatine, 1 Wall. 384; Newall v. Bank, 12 Bush, 57; Goodrich v. Reynolds, 31 Ill. 490; 83 Am. Dec. 240; Hawks v. Weaver, 46 Barb. 164; Brown v. Vandyke, 8 N. J. Eq. 795; 55 Am. Dec. 250; Magruder v. Bank, 18 Ark. 9.

2 See ante, § 2443.

Culver v. Bigelow, 43 Vt. 249; Miner v. Bank, 53 Tex. 559; Woods v. Rankin, 2 Heisk. 46; Com'rs v. King, 13 Fla. 461; Austin v. Bacon, 28 Wis. 416; Jones v. Vandyke, 8 N. J. Eq. 795; 55 Am. Dec. 250; Stewart v. Petree, 55 N. Y. 621; 14 Am. Rep. 353; Hale v. Hale, 1 Cold. 233; 78 Am. Dec. 491; Fitzhugh v. McPherson, 3 Gill, 408; Quimby v. Cook, 10 Allen, 32; Tylee v. Yates, 3 Barb. 222; Fobes v. Cantfield, 3 Ohio, 18; Sinclair v. Peebles, 3 Cold. 584. Contra, Kimbrough v. Lukins, 70 Ind. 373; Cox v. Brookshire, 76 N. C. 314; Mason v. Callender, 2

Minn. 350; 72 Am. Dec. 102; Leonard v. Patton, 106 Ill. 91.

Hatch v. Douglas, 48 Conn. 116; 40 Am. Rep. 154.

Cobb v. Morgan, 83 N. C. 211; Paulling v. Creagh, 54 Ala. 646; Rosa v. Doggett, 8 Neb. 48; Rosebrough v. Ansley, 35 Ohio St. 37; Glisson v. Newton, 1 Hayw. (N. C.) 336; 1 Am. Dec. 559; Gibson v. Fristoe, 1 Call, 62; 1 Am. Dec. 502; Motte v. Dorrell, 1 McCord, 350; 10 Am. Dec. 675; Swartwout v. Payne, 19 Johns. 294; 10 Am. Dec. 228; Erwin v. Lowry, 2 La. Ann. 314; 46 Am. Dec. 545; Gates v. Hockenthal, 57 Ill. 534; 11 Am. Rep. 45; Galesburg Bank v. Davis, 108 II. 633.

6 Warren v. Crabtree, 1 Me. 167; 10 Am. Dec. 51; Flemming v. Mulligan, 2 McCord, 173; 13 Am. Dec. 707; Reynolds v. Carter, 12 Leigh, 166; 37 Am. Dec. 642. Contra, State Bank v. Ayers, 7 N. J. L. 130; 11 Am. Dec. 535; Chadbourn v. Watts, 10 Mass. 121; 6 Am. Dec. 100,

Substituted or New Securities.

Where a

§ 2461. security is tainted with usury, a new security, or a security substituted for it, is still affected with the original usury. A new security including a sum for unlawful unpaid interest is so far without consideration, and liable to abatement to that extent. All consecutive securities growing out of a usurious contract are tainted therewith, and none of them, however remote, can be free from it, if the descent can be traced. A mere renewal of a usurious note between the original parties does not remove its usurious character. A usurious loan is none the less usurious because it was made to enable the borrower to take up securities which were not tainted with usury, and such securities were assigned to the usurious lender as collateral. But where a bona fide holder receives the new security without any knowledge of the usury, it is valid in his hands." "If the immediate parties to the transaction repent, and by mutual consent the usurious security be surrendered, a new promise to pay the sum loaned with legal interest may then be enforced"; even though the lender knows that the original loan was usurious, and is aware of the borrower's object in obtaining the new loan. Where the promisor in a usurious contract makes it the

1 Bridge v. Hubbard, 15 Mass. 96; 8 Am. Dec. 86; Powell v. Waters, 8 Cow. 669; Tuthill v. Davis, 20 Johns. 285; Fulton Bank v. Benedict, 1 Hall, 481; Walker v. Bank, 3 How. 62; Reynolds v. Carter, 12 Leigh, 166; 37 Am. Dec. 642; King v. Ins. Co., 57 Ala. 118; Campbell v. Sloan, 62 Pa. St. 481; Miller v. Erwin, 85 Pa. St. 376; Judy v. Gerard, 4 McLean, 360; Rudd v. Planters' Bank, 78 Ky. 513; Wilday v. Morrison, 66 Ill. 532; Stanton v. Demeritt, 122 Mass. 495; Price v. Lyons Bank, 33 N. Y. 55; 88 Am. Dec. 368; Campbell v. McHarg, 9 Iowa, 354; Sugart v. Mays, 54 Ga. 554; Seneca Co. Bank v. Schermerhorn, 1 Denio, 133.

81 Am. Dec. 778; Fitzpatrick v. Apperson, 79 Ky. 272.

3 Schutt v. Evans, 109 Pa. St. 625. Masterson v. Grubbs, 70 Ala. 406. King v. Cushman, 41 Ill. 31; 89 Am. Dec. 366.

6 Kent v. Walton, 7 Wend. 256; Aldrich v. Reynolds, 1 Barb. Ch. 43; Flemming v. Mulligan, 2 McCord, 173; 13 Am. Dec. 707; Palmer v. Call, 2 McCrary, 522; Mitchell v. McCullough, 59 Ala. 179; Jackson v. Henry, 10 Johns. 185; 6 Am. Dec. 328.

Taylor v. Morris, 22 N. J. Eq. 606; De Wolf v. Johnson, 10 Wheat. 367; Miller v. Hull, 4 Denio, 104; Barber v. Ketchum, 7 Hill, 444.

8 Vaught v. Rider, 83 Va. 669; 5

Smith v. Stoddard, 10 Mich. 148; Am. St. Rep. 305.

consideration of a new contract with a third person, not a party to the original contract, or to the usury paid or reserved on it, and the new contract is not a contrivance to evade the statutes against usury, the new contract is not usurious;' as where a bond executed by three persons for a loan of money at usurious interest is subsequently superseded by a new bond for the amount of the former bond, principal and interest, which new bond is signed by two persons, strangers to the former bond, as principals, and by one of the former obligors as surety.2 An obligation, valid in its inception, is not invalidated by a usurious agreement for the extension of the time of payment. A contract legal when made will not be avoided by a subsequent agreement to pay usurious interest. Thus a security made on a good and bona fide consideration is not made invalid by a subsequent usurious assignment.5

ILLUSTRATIONS. A advanced money to pay a mortgage, taking a second mortgage to secure the advance. The latter was declared void for usury. Held, that it did not affect the first, which could be enforced by A: Patterson v. Birdsall, 64 N. Y. 294; 21 Am. Rep. 609. A borrowed of B three thousand six hundred dollars on his note and mortgage, and on his asking to borrow some more, which she did not have, she sold the . three-thousand-six-hundred-dollar note, to a purchaser whom he furnished, for three thousand four hundred dollars; and A then borrowed the three thousand four hundred dollars, and secured the same by his note and mortgage for three thousand six hundred dollars, allowing her the two hundred dollars in compensation for the discount, and for expenses in examining the title to the property mortgaged to secure the second loan. Held, that there was no usury: Comstock v. Wilder, 61 Iowa, 274.

1 Call v. Palmer, 116 U. S. 98.

2 Drake's Executor v. Chandler, 18 Gratt. 909; 98 Am. Dec. 762.

3 Swartwout v. Payne, 19 Johns. 294; 10 Am. Dec. 228; Real Estate Co. v. Keech, 69 N. Y. 248; 25 Am. Rep. 181; Terhune v. Taylor, 27 N. J. Eq. 80; Winsted Bank v. Webb, 39 N. Y. 325; 100 Am. Dec. 435.

Chastain v. Johnson, 2 Bail. 574; York Bank v. Asbury, 1 Biss. 230; Emmons v. Barnes, 4 Daly, 148; Swartwout v. Payne, 19 Johns. 294; 10 Am. Dec. 228; Farmers' Bank v. Joslyn, 37 N. Y. 355.

Bush v. Livingston, 2 Caines Cas. 66; 2 Am. Dec. 316.

§ 2462. Usurious Interest may be Recovered backSet-off. In most states usurious interest may be recovered back,' while in some such an action is not permitted. But the payment must have been voluntary, to estop the borrower. Thus in Illinois, where the usurious interest had been paid to a bona fide indorsee of the note, it was held that the maker might recover it from the payee, this being an involuntary payment, as the maker could not set up the defense of usury against a bona fide indorsee before maturity. In some states such relief is given by statute; but it is also held that these statutes are cumulative, and that the right to recover back usurious interest is a common-law right. A sealed release of all claims for usurious interest, executed at the time the loan was made, is no bar to a suit to recover the amount usuriously paid. So a party sued on the debt may set off the excessive interest paid by him. Where usurious interest is paid on a note after its execution, it amounts to a payment of so much on the principal; and if the amount thus paid exceeds the principal, it may be recovered back."

Albany v. Abbott, 61 N. H. 313; Wheaton v. Hibbard, 20 Johns. 290; 11 Am. Dec. 284; Philanthropic Bldg. Ass'n v. McKnight, 35 Pa. St. 470; Nat. Bank v. Lewis, 81 N. Y. 15; Grow v. Albee, 19 Vt. 540; Ware v. Bennett, 18 Tex. 794; Hodge v. Owings, 5 T. B. Mon. 94; Webb v. Wilshire, 20 Me. 406; West v. Meddock, 16 Ohio St. 417; Coughman v. Drafts, 1 Rich. Eq. 414; Zeigler v. Scott, 10 Ga. 389; 54 Am. Dec. 395; Wood v. Kenny, 19 Ind. 68; Willie v. Green, 2 N. H. 333; Bond v. Jones, 8 Smedes & M. 368; Fay v. Lovejoy, 20 Wis. 403.

Latham v. Building Ass'n, 77 N. C. 125; Woolfolk v. Bird, 22 Minn. 341; Quinn v. Boynton, 40 Iowa, 304; Hadden v. Inness, 24 Ill. 381; Perkins v. Conant, 29 Ill. 184; 81 Am. Dec. 305; Rutherford v. Williams, 42 Mo. 18; Manny v. Stockton, 34 Ill. 306; Carter v. Moses, 39 Ill. 539; Nichols

v. Skeel, 12 Iowa, 300; Spurlin v. Milliken, 16 La. Ann. 217; Dickerson v. Raleigh Building Ass'n, 89 N. C. 37. Where one has recovered in the United States courts the statutory penalty against a national bank for taking usury, he cannot maintain assumpsit in the state courts for the excess above legal interest: Hill v. Barre Bank, 56 Vt. 582.

3 Woodworth v. Huntoon, 40 Ill. 131; 89 Am. Dec. 340.

Palmer r. Lord, 6 Johns. Ch. 65; Porter v. Mount, 41 Barb. 561.

Herrick v. Dean, 54 Vt. 568.

Hass v. Flint, 8 Blackf. 67; Bartlow v. Bond, 3 Dana, 591; Clark v. Hunter, 2 Spear, 83; Farwell v. Myer, 35 Ill. 41; Threadgill v. Timberlake, 2 Head, 395; Herring v. Woodhull, 29 Ill. 92; 81 Am. Dec. 297.

7 Musselman v. McElhenny, 23 Ind. 4; 85 Am. Dec. 445.

Where judgment is obtained for principal and usurious interest, the latter cannot be recovered back in an action at law. The judgment operates as an estoppel, and the party should have interposed the defense in the first action.' Equity, however, has in some instances granted relief in such cases. The reservation of an illegal rate of interest does not prevent recovery of the principal and legal interest thereon.'

ILLUSTRATIONS.—A paid usurious interest on four notes. He was sued upon a fifth note. Held, that he could not set up by way of defense the usurious interest paid on the other notes: Riddle v. Rosenfeld, 103 Ill. 600. At the request of S., and for his benefit, A. borrowed money of L. on a usurious contract to loan to S. Held, that A. could not recover of S. the usury paid by him to L.: Swift v. Adkins, 2 Lea, 137. A person wrongfully converted a promissory note, and collected the amount due on the note, together with the usurious interest, which was contracted for on the note. Held, that he was liable to account for the full amount collected, including the sum for the usurious interest: Allison v. King, 25 Iowa, 56.

-

§ 2463. Penalties also Recoverable. In some states, also, certain penalties for taking unlawful interest are by statute recoverable."

§ 2464. Relief in Equity. - Equity will also relieve against a usurious contract. But "the right to this relief only exists where from the form of the security the defense cannot be made available at law, or where the instrument sought to be avoided is a cloud upon the title to land, or some other necessity for the interposition of a court of Lewis, 33 Pa. St. 33; 75 Am. Dec. 574.

1 Hopkins v. West, 83 Pa. St. 109; Lawless v. Blakely, 4 T. B. Mon. 488; McDonald v. Smith, 53 Vt. 33; Dooley v. Stipp, 26 Ill. 86; Moseley v. Smith, 21 Tex. 441; Bank v. Stevens, 1 Ohio St. 233; 59 Am. Dec. 619; Bartholomew v. Yaw, 9 Paige, 165.

Lawless v. Blakely, 4 T. B. Mon. 488; Dooley v. Stipp, 26 Ill. 86; Doub v. Barnes, 1 Md. Ch. 137; Thompson v. Ware, 8 B. Mon. 26.

3 Philadelphia etc. R. R. Co. v.

Nat. Bank of Gloversville v. Johnson, 104 U. S. 271; Gruber v. Bank, 87 Pa. St. 465. To create a forfeiture under United States Revised Statutes, sections 5197, 5198, it is only necessary that the usurious interest has been "taken, received, or charged"; the note need not bear interest on its face: Auburn Bank v. Lewis, 75 N. Y. 516. 2 Pomeroy's Eq. Jur., sec. 937.