interest, and more than interest is discounted, it is a usurious transaction. Supposing these two rules to be settled, the question in each case is, Under which of them does that case come, or to which of them does it draw nearest ?

We are not aware of any general principle so likely to be of use in determining these questions as this: if the seller of a note acquired it by purchase, or if it is his for money advanced or lent by him to its full amount, he may sell it for what he can get; but if he be the maker of the note, or the agent of the maker, and receives for the note less than would be paid him if a lawful discount were made, it is a usurious loan. In other words, the first holder of a note (and the maker of a note is not and cannot be its first holder) must pay to the maker the face of the note, or its full amount. And after paying this, he may sell it, and any subsequent purchaser may sell it, as merchandise. The same rule must apply to corporations, and all other bodies or persons who issue their notes or bonds on interest. If sold by brokers for them, for less than the full amount, it is usurious. Nor can such notes come into the market free from the taint and the defence of usury, unless the first party who holds them pays for them their full value.

But then comes another question. If a note be offered for sale, and be sold for less than its face, and the purchaser supposes himself to buy it from an actual holder and not from the maker, can the maker interpose the defence that it was actually usurious, on the ground that the seller was only his agent? I should say that he could not; that there can be no usury unless this is intended; and that the guilty intention of one party cannot affect another party who was innocent.

I should say, also, that one who, having no interest in a note, indorses or guarantees it for a certain premium, will be liable for the amount it promises; he does not now add his credit to the value of his property and sell both together, as where he indorses a note which he holds himself, but sells his credit alone. This transaction I should not think usurious. And if it was open to no other defence, as fraud, for example, and was in fact what it purported to be, and not a mere cover for a usurious loan, we know no good reason why such indorser or guarantor should not be held liable to the full amount of his promise.

SECTION IV.

COMPOUND INTEREST.

Compound interest is sometimes said to be usurious; but it is not so; and even those cases which speak of it as "savoring of usury" may be thought to go too far, unless every hard bargain for money is usurious. As the authorities now stand, however, a contract or promise to pay money with compound interest cannot, generally, be enforced. On the other hand, it is neither wholly void, nor attended with any penalty, as it would be if usurious; but is valid for the principal and simple interest only.

Nevertheless, compound interest is sometimes recognized as due by courts of law, as well as of equity; and sometimes, too, by its own name. Thus, if a trustee be proved to have had the money of the party for whom he is trustee (who is called in law his cestui que trust) for a long time without accounting for it, he may be charged with the whole amount, reckoned at. compound interest, so as to cover his unlawful profits. If compound interest has accrued under a bargain for it, and been actually paid, it cannot be recovered back, as money usuriously paid may be. And if accounts are agreed to be settled by annual rests, which is in fact compound interest, or are actually settled so in good faith, the law sanctions this. Sometimes, in cases of disputed accounts, the courts direct this method

of settlement.

Where money due on interest has been paid by sundry instalments, the mode of adjusting the amount which has the best authority, and the prevailing usage in its favor, seems to be this: Compute the interest due on the principal sum at the time when a payment, either alone or in conjunction with preceding payments, shall equal or exceed the interest due on the principal. Deduct this sum, and upon the balance cast interest as before, until a payment or payments equal the interest due; then deduct again, and

+

so on.

ABSTRACTS OF THE USURY LAWS OF THE STATES.

These laws are stated from the latest information; but are constantly undergoing change, and are likely to be so, until restrictions upon interest are abolished, as they now are in some States.

ALABAMA.-Legal interest, eight per cent. Usurious interest cannot be recovered, and, if paid, is to be deducted from the principal. ARKANSAS. —Legal interest, six per cent. Parties may agree, by contract, written or verbal, for whatever amount they will.

CALIFORNIA. - Legal interest, seven per cent. money overdue on any written instrument.

Ten per cent on

CONNECTICUT. - Legal interest, seven per cent. Any person or corporation taking more than seven per cent forfeits the value so taken to any person who sues therefor within one year thereafter, and prosecutes his suit to effect. Contracts to pay taxes on the sum loaned, or insurance upon estate mortgaged to secure the same, not usurious. - Legal interest, six per cent.

DISTRICT OF COLUMBIA. Ten per cent may be paid on agreement. Any excess forfeits the whole interest. DELAWARE. - Legal interest, six per cent. Penalty for taking more, — forfeiture of the money lent; half to the prosecutor, half to the State. FLORIDA. Legal interest, six per cent. But the usury laws are expressly abolished.

More than legal interest

GEORGIA. Legal interest, seven per cent. cannot be recovered. All titles to property made as part of a usurious contract are void.

ILLINOIS. Legal interest, six per cent. Parties may agree upon ten per cent orally or in writing. If more is agreed on or is taken, only the principal can be recovered.

INDIANA. Legal interest, six per cent. Ten per cent may be agreed upon in writing. It may be taken in advance. Excess cannot be recovered, and, if paid, shall be considered as paid on account of the principal.

IOWA.-Legal interest, six per cent. Parties may agree in writing for ten per cent. If contract be for more, the creditor recovers only the principal, and interest at ten per cent is forfeited to the State.

KANSAS. Legal interest, seven per cent. Parties may stipulate for any rate not exceeding twelve per cent. Contract for more forfeits all interest. Usurious payments held to be made on account of principal. KENTUCKY. - Legal interest, six per cent. Extra interest forfeited; if paid, may be recovered back.

LOUISIANA.

· Legal interest, five per cent.

Conventional interest

shall in no case exceed eight per cent, under penalty of forfeiture of entire interest. Owner of negotiable paper discounted for more than eight per cent may recover eight per cent. Usurious interest may be recovered back, but must be sued for within twelve months.

MAINE. - Legal interest, six per cent; but not to apply to letting cattle, or other similar contracts in practice among farmers; nor to maritime contracts, as bottomy or insurance; and not to course of exchange in practice among merchants. Excessive interest not recoverable, and, if paid, may be recovered back, if sued for within a year.

Legal interest, six per cent. Excess forfeited.

MASSACHUSETTS.

-

- Legal interest, six per cent. Any rate of interest or discount may be made by agreement; but if greater than six per cent, it must be in writing.

MICHIGAN. Legal interest, seven per cent.

Parties may agree in

writing upon any rate not exceeding ten per cent. If more interest is agreed for, only legal interest recoverable.

MINNESOTA. Legal interest, seven per cent.

Parties may agree in

writing for more, but agreement not valid for any excess over twelve per cent. Interest on judgments, six per cent.

MISSISSIPPI. Legal interest, six per cent. Parties may agree in writing for ten per cent. If more be taken or agreed for, the excess is forfeited.

MISSOURI. Legal interest, six per cent; but parties may agree in writing for any rate not to exceed ten per cent. If more be taken or agreed for, the creditor recovers only the principal, and interest at ten per cent is forfeited to the State. Parties may contract in writing for the payment of interest upon interest; but the interest shall not be compounded oftener than once a year.

NEBRASKA.

Legal interest, ten per cent. Parties may agree on any rate not exceeding fifteen per cent. On proof of illegal interest, plaintiff shall recover only principal.

NEVADA. Legal interest, ten per cent. But parties may agree in writing for any rate.

NEW HAMPSHIRE. - Legal interest, six per cent. A person receiving more forfeits threefold the excess; but contracts are not invalidated by securing or taking more. Exceptions as to contracts of farmers and merchants, as in Maine.

NEW JERSEY.-Legal interest, seven per cent.; on usurious contract, principal only can be recovered.

NEW YORK. Legal interest, seven per cent. A contract for more than legal interest is wholly void. If more than legal interest is paid, it may be recovered back within a year by payer, or within the next three years by the overseers of the poor. No corporation can interpose the defence of usury; nor can a joint-stock company, having the powers of a corporation.

NORTH CAROLINA. - Legal interest, six per cent. Eight per cent. may be recovered for loan of money by written agreement. On usurious contracts no interest is recoverable.

OHIO. Legal interest, six per cent. Any rate not exceeding ten per cent may be agreed upon in writing; excess cannot be recovered. Banks can charge or take by discount only six per cent. Railroad companies may borrow money at seven per cent.

OREGON. Legal interest, ten per cent. Parties may agree for one per cent a month. Usurious interest works a forfeiture of the principal and interest.

PENNSYLVANIA. Legal interest, six per cent. Excess cannot be recovered. If paid, may be recovered back if sued for within six months. RHODE ISLAND. - Legal interest, six per cent. Any higher rate may be agreed upon.

SOUTH CAROLINA. Legal interest, seven per cent. interest may be agreed upon by the parties.

TENNESSEE.

More than legal

- Legal interest, six per cent. Parties may agree in writing for ten per cent. If more be charged, the whole interest is forfeited, and if paid, may be recovered back; and the creditor is liable to a fine equal in amount to the excessive interest.

Legal interest, eight per cent. Parties may agree in writing

for twelve per cent. If more than this is agreed for, no interest can be recovered.

VERMONT. More than six per cent prohibited; and a person paying more may recover excess; but this is not to extend to usage of farmers or merchants, as in Maine and New Hampshire.

VIRGINIA.

Legal interest, six per cent. All contracts for a greater
The receiver is liable

rate void. Excess, if paid, may be recovered back.
to a fine of double the amount of the principal.

WEST VIRGINIA. Same as Virginia; but a new code is under consideration, which may make a change in the law of usury.

WISCONSIN. Legal interest, seven per cent; but parties may agree upon a rate not exceeding ten per cent. Usurious contracts are void, and if excessive interest be paid, treble the amount thereof may be recovered back.

CHAPTER XXVIII.

THE LAW OF PLACE.

SECTION I.

WHAT IS MEANT BY THE LAW OF PLACE.

If either of the parties to a contract is not at home, or if both are not at the same home, when they enter into the contract, or if it is to be executed abroad, or if it comes into litigation before a foreign tribunal, then the rights and the obligations of the parties may be affected either by the law of the place of the contract, or by the law of the domicile or home of a party, or by the law of the place where the thing is situated to which the contract refers, or by the law of the tribunal before which the case is litigated. All of these are commonly included in the Latin phrase lex loci, or, as the phrase is translated, the law of place.

It is obvious that this law must be of great importance whereever citizens of distinct nations have much commercial intercourse with each other. In this country it has an especial and very great importance, from the circumstance that, while the citizens of the whole country have at least as much business connection with each other as those of any other nation, our country is composed of thirty-seven separate and independent sovereignties, which are, for most commercial purposes, regarded by the law as foreign to each other.