CHAPTER IV.

OF THE AVOIDANCE OF, AND RELIEF AGAINST, USURIOUS CONTRACTS AND

SECURITIES.

SECTION I.

Who may set up the defence of usury.

ALTHOUGH the statute declares utterly void all usurious contracts and securities whatever that may be tainted with it, the borrower may nevertheless, where others are not implicated with him, elect to waive the defence and confirm the contract, or expressly charge the property subject to the usurious lien, by selling it subject to the payment of the usurious incumbrance, and set up the defence in personam as to himself. Hence no person, unless legally implicated in the usurious contract, or having a legal interest in the property subject to such charge, can interfere with the contract by interposing the defence. But if the borrower make an unqualified sale of the property incumbered by the usurious security, he has parted with the power to confirm the security, as to such property, though he may waive the defence as to himself, and the purchaser in such case may plead the statute as to the property. 9 Paige, 139.

This exception to the invalidity of the usurious contract arises not from the statute against usury itself, but upon general principles which prohibit a mere stranger from interfering with the contracts of others.

To determine, therefore, who may set up the defence of usury, it will be necessary to ascertain whether any lawful right in or lien upon the subject matter of the contract exist in the party claiming to set up the defence, independent of the usurious contract or security tainted with it; or whether such party would be legally liable to prejudice or injury by the enforcement of such contract if it were not usurious, and if not, he will not be permitted to plead the statute; for the usurer or his representatives in such case have equal equity, and by the election of the borrower to confirm the contract, a paramount right.

A surety of the borrower in the usurious contract is entitled to the defence. 11 Wendell, 329.

Bail of the borrower to the action may plead the usury. 12 Mod. 493.

And also a joint obligor. 5 Coke, 119.

A judgment creditor having acquired a legal lien upon the property incumbered by the usurious security, may plead the statute, whether the borrower join in the defence or not. 8 Paige, 639. Privies in blood, as the heirs of the borrower.

Privies in representation, as executor or administrator of the borrower. 16 Mass. 118.

Privies in law, as the assignee in bankruptcy or sheriff in execution, and privies in estate may avail themselves of the defence of usury. 2 Hill, 525; 14 Johnson, 435.

A party who is the direct assignee in trust of a mortgagor, may impeach the mortgage for usury; such assignee stands in the place of the mortgagor and has his rights. Pearsall v. Kingsland, 3 Edw. 195.

The owner of the premises against which a usurious mortgage is attempted to be enforced in a court of chancery, must himself set up the defence of usury in his answer. He cannot avail himself of a defence set up in the answer of the co-defendant from whom he purchased, who has no interest in or lien upon the mortgaged premises, and who is not a necessary party to the suit. 4 Paige, 526.

One Scofield granted to William S. Moore an annuity to issue from four houses and lots in Alexandria, and covenanted that the same should be paid to M. forever thereafter. In the deed granting the rent charge, M. the grantee covenanted, that at any time after five years on the payment of $5000 with all arrears of rent, he would release the rent charge and the same should cease. S. covenanted to keep the buildings in repair, and have them insured against fire, and assign the policy to M., the money from the insurance to be applied to rebuilding or repairing the houses if destroyed or injured by fire.

Afterwards S. by deed of bargain and sale conveyed to Lloyd the houses and lots of ground, subject to the payment of the rent to M. The rent being unpaid, M. levied a distress for the same, and Lloyd brought a replevin. Moore avowed the taking, stating the rent charge and arrears of rent, to which Lloyd pleaded usury and defendant demurred to pleas, and per curiam. The principle seems to be settled that usurious securities are not only void as between the original parties, but the illegality of their inception affects them even in the hands of third persons, who are entire strangers to the transac

tions. A stranger must take heed to his assurance at his peril, and cannot insist on his ignorance of the corrupt contract in support of his claim, to recover upon a security which originated in usury. In the case of De Wolf v. Johnson, 10 Wheaton, 367, the first mortgage being executed in Rhode Island in 1815, was not usurious by the laws of that state, and the second mortgage executed in Kentucky in 1817, being a new contract, was not tainted with usury. The question whether the purchaser of an equity of redemption can show usury in the mortgage to defeat a foreclosure was not involved in that case. The law of Virginia having declared that a contract infected with usury is void, and by the deed from S. to M. a right to enter on the premises and distrain for rent is claimed under a deed, which upon the admissions in the pleadings is usurious; the premises upon which the distress was made being held by L. under a conveyance from S., L. may set up the defence of usury in the deed against the summary remedy asserted by M. under the deed. 4 Peters, 205.

Where the plaintiff was sued at law upon notes alleged by him to be usurious, and suffered a verdict and judgment to be taken against him without making any defence, or applying to chancery for a bill of discovery: Held, that he was concluded, and not entitled to relief in that court.

An assignment of a debt, usurious in its inception, to a third person, who has knowledge of the original transaction, will not cover it from the scrutiny of the court. And sufficient ground appearing to support the charge of usury, a reference to a master to take an account, &c., was ordered. 17 Johnson R. 436.

In Green v. Kemp, (13 Mass. R. 515,) the demandant claimed under a mortgage to himself from Isaac Woods in 1808. Two years afterwards, Woods conveyed the " equity of redeeming" the land to the defendant. The court would not permit the defendant to set up usury in the mortgage, for the reason that he had no title to the land, having only purchased the right to redeem, of which he had not thought proper to avail himself. It was admitted that if he had purchased the land, though with notice of the mortgage, he might have set up the usury.

See also, case of Trumboo, Exec. of Niff v. Blizzard & Jacobs. -6 Gill & Johnson, 18.

A mortgages lands to B, upon a usurious contract for £100, and before the day of payment, B is ousted by C, against whom B brings an action. C cannot to such action plead the statute of ușury, for he has no title. Per Periam, Justice, in Carter and Claypole's case, 1 Leon. 307.

SECTION II.

How usury must be pleaded at law.

In assumpsit usury may be given in evidence under the general

Issue.

And if it appear upon the face of the plaintiff's declaration, that the contract is void for usury, he shall not be permitted to recover. Comyn, 202.

But this can seldom be the case, as every ingredient of the offence would not be set up by the plaintiff. And it would seem that, in an action purely legal, where the plaintiff must substantiate his claim through an instrument, agreement, or deposit, infected with usury, any defendant other than the original and primary debtor may defeat the claim by evidence of usury under the general issue. And it seems that a defendant sheriff in replevin may, under a plea of non cepit, or non detinet, give evidence of usury in the bond and mortgage under which the plaintiff claims, and thus defeat the action. Dix v. Van Wyck, 2 Hill, 522.

A subsequent grantee, lessee, or other legal possessor of land, may defend an action of ejectment, or writ of entry, brought upon a prior usurious instrument, without being put to his special plea, as he may be unacquainted with all the necessary facts for that purpose, but he may give the usury in evidence under an issue of nul disseisin or non ouster in ejectment. Hills v. Elliott, 12 Mass. 26.

The principle of this would seem to be, that any person holding under a lawful title of the oppressed borrower prior to action brought, is entitled to his day in court; and the fact of his not being fully acquainted with the necessary facts to constitute a plea of usury, shall not be permitted to deprive him of a lawful defence, where the land is not expressly charged with the payment of the usurious loan.

In actions of debt on specialty against the obligor, the usury must be specially pleaded, he being cognizant of all the material facts constituting the offence, each of which must be distinctly and positively alleged, in order to give the plaintiff an opportunity to reply and explain, and upon issue joined every allegation of the pleader must be positively proved precisely as laid, or it will not be the usury set up as a defence, and any material variance will be fatal. Every presumption is against the pleader, and a mispleading cannot be

amended, or a default opened, but upon terms of waiving the forfeiture.

As to what facts are material to be averred in a plea of usury. First. The parties to the contract-or the plaintiff might reply he was innocent of the usury. Second. The time when and where it was entered into or the plaintiff might reply, the contract was made previous to the operation of the act, or made in a foreign state not subject to the act. Third. Where the loan was actually made, or the debt became due that was contracted to be forborne, and to whom owingelse the plaintiff might reply, that the advance was made, or debt forborne, became due in a country different from the place of contract and subject to the law of the place of performance. Fourth. For what length of time the debt was to be forborne-or the plaintiff might reply, that interest was included from a date previous to the date of the bond. Fifth. The true amount of the debt, the legal rate of interest, and the excess over legal interest, agreed to be paid in violation of the statute, and that the usurious premium was upon the consideration of forbearance, and giving day of payment; for if the plaintiff can show a good consideration, the law will sustain him. The statute violated must be referred to, but need not be recited, unless it be a foreign statute, when it must be recited with the enacting clause and when it went into operation, and that it has not been repealed, for the court cannot judicially know a foreign law, and the plea must state the contract was made with reference to such foreign law, or that the advance was made within the operation of such law.

The plea must allege, that the defendant was indebted to the plaintiff at the time the bond was given, or that there was an agreement to lend money or other thing upon the usurious contract. And it must be alleged, that the bond was given for the payment of the

usurious interest.

Where there is a direct negotiation for a loan of money, or other thing, and more than the legal rate of interest is contracted to be given and taken, the intention of the parties is of no consequence; in such case, whether they intend to violate the law or not, the contract is invalid, if they do violate it. But if it was agreed to disguise the transaction under cover of any device, whatever it may be, the technical allegation of "quod corrupte agreatum fuit," is material and necessary; and all the circumstances constituting the disguise must be set out, in order that the court may judge whether such alleged