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should be clearly seen that no usurious transaction is concealed beneath such as are thus favoured by the law. For then no form will protect the contract; the substance must be taken into consideration, and any usurious intention will vitiate an insurance, or an annuity, as much as if there had been no such disguise assumed by the contract.

III. There must not only be a contract that the money shall be returned at all events, but also that it shall be returned with more than lawful interest.

And this part of the agreement must be with the full consent and knowledge of the contracting parties; though if a transaction be 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. Marsh v. Martindale, 3 Bos. and Pul. 154. And it does not matter whether the illegal interest is to be paid in money or goods; or whether the transaction is a transfer of stock or a sale of goods, so long as the lender gains more than five per cent. for his forbearance. Yet where trouble, or expense, or inconvenience is sustained by the party advancing the money, the law allows of a reasonable compensation for this, in addition to the interest becoming due; as in the case of brokerage, or in the negotiating of bills of exchange. And though it will be usury, if the interest be received before the expiration of the time for which the principal is forborne, yet the mercantile custom of discounting bills of exchange will be sanctioned by the courts, unless, by being carried into the extreme, it enables the parties. to advance and receive a large sum of money without any adequate forbearance; especially where the character of the parties is other than mercantile. And where interest has once become due, it may, if a balance be agreed on, be added to the principal in arrear, and carry future interest upon the gross sum.

An exception to the restriction to £5 per cent. must be made in favour of contracts which have arisen in foreign countries, and which are allowed to carry the established interest of such country. And even where the security is executed in this country by the parties here resident, upon lands lying in Ireland or the West Indies, the interest of those particular places shall be allowed: an indulgence which is created by statute, and which extends only to real, and not to personal, securities.

CHAPTER III.

OF THE CONSEQUENCE OF THE USURIOUS CONTRACT OR SECURITY.

THE second provision of the statute naturally brings us to the consideration of the contracts and assurances which are void upon the ground of usury, and the consequence of such contracts and securities.

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SECTION I.

As affecting the parties to the usury.

Every contract, assurance, or security, which is founded in usury, is ipso facto void, and can never be rendered valid by the subsequent act of the parties, (1 Bulstrode, 17,) 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 very inception. 4 Leon. 43. 3 Leon. 205. 1 Mod. 69. Moore, 397. And, according to one authority, this is not theeffect of the statute alone, but even at common law, usury avoided the contract: Oliver v. Oliver, 2 Rals. Rep., 468. To this rule there is, however, as we have already seen, one exception. Where a mortgage is given on lands in a foreign state, according to the law of that state, such mortgage will be sustained in rem, notwithstanding the contract of loan will be invalid in every place where it is sought to be enforced. See the case of Chapman v. Robertson, 6 Paige, 627.

Therefore, if a man take a bond from another for the payment of a certain sum, with excessive interest, although in fact he only take the principal with legal interest, still the bond will be void. 4 Leon.

43.

And where money had been lent, for securing which a lease was made, conditioned for the repayment of the principal; and, by a further agreement, the lender was to receive ușurious interest; it was

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holden that the lease was void, although it was only taken for the payment of the principal money, and not for the payment of the interest. Croke Jac. 507.

So a judgment given upon an usurious agreement, where part of the agreement is to have a judgment, may be avoided by auditâ querela, by scire facias, or by the interference of the courts. Earl of Oxford's case, in 1 Chan. Rep. 9.

Therefore, where it had been found by verdict, on the trial of a feigned issue directed by the court, (Barnes, 277,) that the warrant of attorney to enter judgment was given in consequence of a usurious contract, the Court of Common Pleas ordered the judgment to be set aside, and the warrant of attorney and the bond whereon the judgment was entered to be delivered up, and the plaintiff to pay the costs of the application. Barnes, 52, 3d edit.

And in a subsequent case, the Court of Common Pleas set aside a warrant of attorney and judgment, given to secure a loan which was sworn to be usurious, in order to bring the question of usury before a jury; but they refused to order a bill of exchange to be delivered up, which had been given to procure the defendant's release out of execution on the judgment. 1 Bos. & Pul. 270.

In debt on bond, the defendant, after Oyer, pleaded that it was an usurious contract, &c., and upon evidence it appeared that the wife of the plaintiff used to lend money to be paid by the week, and that she lent to the defendant £20, to be paid by 20s. per week, and 1s. 6d. per week for interest. Lord Chief Justice Holt ruled that it was an usurious contract; and that though it was not sufficient to charge the husband criminaliter, yet it was sufficient to discharge the bond civiliter; and accordingly it was found for the defendant. Barnet v. Tompkyns, Skinn. R. 348.:

The general rule is, that if parties enter into an usurious agreement, any remote security for any part of the illegal contract, with a distinct and valid debt, cannot be enforced; there being no express agreement to expunge the original bad part of the debt, or forego the excess of interest; although such new security be founded on a new settlement of accounts. Preston v. Jackson, 2 Starkie's R. 237. Chapman v. Black, 2 B. & Al. 588; 7 Pick. 40; 12 Pick. 126. Crabtree, 1 Greenleaf, 167; 7 Vermont, 457; 5 Conn. 154; 2 Conn. 284; 14 Pick. 436; 13 Peters, 345; 1 Clarke, 252.

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And a new promise to pay the principal originally lent on an usurious agreement, is not binding, unless all payments beyond legal interest are repaid or deducted. Wickes v. Gogerly, Ry. & M. 123; 1 Carr. & Payne, 396. Jackson v Packard, 6 Wend. 415.

A, being indebted to the plaintiff in £90, and £20 upon legal consideration, and in a larger sum on usurious loans, in consideration of the plaintiff's advancing him £150 more on legal interest, procured him the defendant's acceptances for £100, £100, and £50 for securing the whole balance due from A to the plaintiff. It was held, that these bills were tainted by the usurious transactions, and could not be enforced against the defendant, the acceptor, even to the extent of the debts untainted by usury. Harrison v. Hannel, 5. Taunt.

780.

So where a bankrupt, after he had obtained his certificate, promised to pay a creditor the balance of a usurious debt, on condition that he would advance him another sum, and then gave the creditor security for the gross amount of the former balance and the new loan, the security would seem to be infected by the usurious taint of the first transaction. Exparte De Grouchy in re Butler, 2 Deacon, 79; 3 Mont. & Ayr. 22.

Where a note could not be available till discounted, and is discounted at a sum greater than the legal interest, it is usurious and void; and this whether the person discounting knew it to be a note before unavailable or not. A note made and endorsed for the purpose of fair discount at a bank, if discounted by another at an usurious rate, is void; so if it be made and endorsed for lawful discount anywhere, though it be discounted by the person intended at an usurious rate, it is void. A note void as between the parties for usury, is void, even in the hands of a bona fide holder. 8 Cowen, 669. Knowledge of one party discounting a note for a firm, is constructive knowledge to the whole firm and, therefore, if negotiated to other members of the firm without actual notice, a new substituted security taken by them is void. Idem.

But where a bona fide holder of a usurious note, without notice of the usury, takes a new substituted security, this cannot be avoided for usury. A renewed security, including the usury of the first, to one who was party to the original usury, is equally void with the first; and so to one who has notice of the usury. Idem.

SECTION II.

As affecting strangers.

Not only are usurious securities 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 usurious transaction.

In Ellis v. Warnes, where the plaintiff declared upon a bond for £200, and the plea was usury, it appeared that the defendant, being indebted to one Alder in £100, agreed with him for the forbearance of that sum for a year, that he would give him £30, and make a bond to Alder of £60, for the payment of the said £30. Accordingly, he and Alder entered into a bond to the plaintiff for the payment of the £100; and therefore the bond, it was argued, was void. Three Judges, Gawdy, Yelverton, and Williams, held it good; for they said, "that 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, when he shall take security by bond, with sureties for his money, if it should be examined whether there were any corrupt agreement betwixt his creditor and his sureties, whereof he cannot by intendment have any conusance; and it would be a means to draw in question every debt, and to punish one who is not privy to any corrupt agreement." Fenner, Justice, doubted; because it being grounded upon corruption, is altogether ill; and every one is to take heed to his assurance at his peril. Popham, Chief Justice, was absent, wherefore, the other three adjudged it for the plaintiff. Croke Jac. 32.

Whatever this case may have decided, the law seems now to be settled that a stranger must take heed to his assurance at his peril,' and cannot set up his ignorance of the corrupt contract in support of his claim to recover upon a security which originated in usury.

Thus, in the case of Lowe v. Waller, Douglass, 735, where the plaintiff was the endorsee of a bill, originally made upon an usurious contract; though he had received it for a valuable consideration, and was entirely ignorant of its vice, the Court of King's Bench, after great consideration, determined, that the words of the statute were too strong, and that after what had been held in the case on the statute against gaming, the plaintiff could not recover.

So, if a bill of exchange is drawn, in consequence of an usurious agreement for discounting it, although the drawer, to whose order it was payable, was not privy to this agreement, still it is void in the hands of a bona fide endorsee. Ackland v. Pearce, 2 Camp. 599.

Lord Ellenborough, Chief Justice, observed, that a bill, having been stained by the payee with usury, could never be effective until it were cleansed. Had it been called in by the payee and republished, it might have received an effect de novo; but, tainted as it was, every one must take it subject to its vice. It was impossible to reject one part of an

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