Steptoe's Adm'rs v. Harvey's Ex'ors, 7 Leigh 501

*BRPCKENBROUGH, J. By the statute it is declared that the taking on any contract, directly or indirectly, for loan of money, wares or merchandizes, or other commodities, above the value of six dollars for the forbearance of one hundred dollars for a year, shall be unlawful, and all contracts on which a higher interest is reserved are declared to be void.

It has been long ago decided that where, on a loan of money, there is a hazard that the principal sum lent may be lost, it is not usury to contract for a higher than the legal rate of interest, because, whilst on the one hand the lender may by some contingency receive greater interest than the law allows, yet on the other some event may happen that may altogether deprive him of his money. Comyn on Usury p. 21; 1 Atk. 340. In MastIn v.

Abdee, 1 Show. 8, the court say — '"When there is a hazard that the plaintiff may have less than his principal, it is no usury.” And in Gibson v. fristoe, 1 Call 81, judge Pendleton says —"‘If the principal or any considerable part be put in risque, it is not usury.” The restriction on the rule is, that where there is only a slight contingency, or the hazard is merely colourable, then the case is taken out of the rule. Comyn, p. 31. The same rules prevail as to the loan of any other commodity, as well as money.

If any chattel be loaned, for the forbearance of which a greater sum or greater value be taken or reserved than the legal rate of interest, it is unlawful. But if the principal be hazarded, or if the commodity stipulated to be returned may be less in value than that loaned, although it is more in quantity and amount, such contract is not unlawful.

The researches of the counsel for the ap-pellees have brought before us several cases from a sister state, in which it has been decided that upon the loan of a certain number of animals, such as cows or sheep, and a promise to return double the number in three or four years, the loan is not obnoxious to the charge of usury, *on the ground that it is uncertain, at the time of the loan, what will be the value of the animals to be returned several years afterwards; and that although the lender might probably have made a profitable bargain, yet he might have lost some part of the capital itself. Spencer v.

Tilden, 5 Cow. 144; Holmes v. Wetmore, Id. 149, note; Cummings v. Williams, 4 Wend. 679. And in Hamlin v. Fitch, Kirby’s Conn.

Rep. 260, the court, in illustrating the matter then before them, sasr— “A loan of one hundred bushels of salt in 1783, when it was at twelve shillings, to repay double the quantity at the end of a year, when it may be worth but four shillings, would not be within the statute, be the price what it might at the end of the year.” And the reason given for this opinion is a sound one. “To bring a contract within the statute and the mischief it was made to prevent, it must be clearly for the repayment of a greater value than the amount of the loan with an advance of six per cent, per annum.

That it be of a greater quantity, though of the same kind of article, is not sufficient. If the

article be of a fluctuating value, it may not be at the time of repayment worth more or so much. ” With respect to contracts for replacing stock at a future day according to the then state of the market, it seems to be now settled, that if the lender be not certain whether by the stock’s being replaced at the given day he shall be a loser or a gainer, any gain which he may obtain by the replacing will not taint the agreement with usury. Comyn, p. 114; Tate v. Wellings, 3 T. R. 531; Pike v. Ledwell, 5 Esp. N. P. C. 164; Maddock v. Rumball, 8 East 304. To which may be added the above case from Kirby’s Conn.

Rep. 260. But on the other hand, if the lender has so made the agreement that he is secure from loss and has a chance of gain, this, by taking away the contingency deprives the transaction of its legality. Barnard v. Young, 17 Ves. 44. ^Tested by these principles, I think there can be no doubt that the third plea tendered by the defendants was properly rejected by the court. It does not aver that the contract to replace 142 shares then lent, by 172 at the expiration of a twelve month, was intended as a shift to evade the statute, nor that by the contract the lender was secured from any loss.

The chief reliance of the pleader seems to have been that the 142 shares lent, and the additional 30 shares to be returned, were each of them of the value of 100 dollars at the date of the loan ; whereas it is the uncertainty of the value of the stock at the time of its replacement, arising from the fluctuation in the price of the article, that is the turning point-on which the question depends whether the loan be usurious or not.

On the same principle, I am of opinion that in the instruction which was refused, and in that given, as set forth in the bill of exceptions, no error whatever was committed by the court. The appellants contend that the court erred in rejecting the fifth and sixth pleas.

Those pleas aver that Steptoe was only surety for Mitchell, (thereby departing from the terms of the covenant, which on its face shews that the covenantors were all principals) ; and then aver that Mitchell the principal, at the time when the shares became due, made a new contract with the covenantee, by which he extended the time for replacing the said shares. This brings up for adjudication one of the questions decided in Ward v. Johnson, 6 Munf. 16.

In that cáse, it appeared on the face of the obligation that Ward was surety for Long the principal obligor, and yet it was decided that the defence, that the obligee had given time to the principal by taking a confession of judgment with a stay of execution, by which the -surety was alleged to be discharged, was not one that could be made at law, however it might be in equity, and a plea setting forth such defence was overruled on demurrer. That decision is supported by the case of *Davey v. Prendergrass, 5 Barn. & Ald. 187. I think we should not disturb the decision of Ward v. Johnson.

The last exception taken to the opinion of the court relates to the order of proceeding in the trial of causes before a jury. It is undoubtedly the ' practice in England, that he who holds the affirmative shall open the case, and close the argument to the jury. 3 Blacks. Com. 366. In this state, the practice has varied. In some of the circuits the english rule prevails; but in the greater number the plaintiff in all cases (except in writs of right) is allowed to begin, and the general court has recommended that to be the rule in all- the circuits.

I have thought that the english rule was the best: but however that may be, I do not think that the adoption of the other rule is any ground for reversing a judgment which is otherwise correct. I am for affirming the judgment. CARR, J. Our act declares ‘ ‘that no person shall, upon any contract, take directly or indirectly, for loan of any money, wares or merchandize, or other commodity, above the value of six dollars for the forbearance of 100 dollars for a year” &c. This statute being copied, in its definition of usury, «from

an act of parliament, we are in the constant habit of referring to english decisions, upon any question as to its meaning and construction.

Prom these decisions we learn, that there are a good many cases in which more that the value of six per cent, is reserved on the money or other thing lent, which yet are not considered as within the mischief or the meaning of the statute; cases, for instance, of bottomy or respond-, entia, and post obit securities; all cases indeed, where the principal advanced is not to be repaid at all events, but is on a hazard or contingency, provided such hazard and contingency be real, and not col-ourable merely.

Ord, in his treatise on usury, p. 46', has this remark: “As the price of stock is in continual "^fluctuation, the contingency respecting it has been held to exempt from the statutes of usury, agreements to transfer a specific amount at a specific future day, which, without such contingency, would be usurious.” In support of this position he cites several cases: and many others may be adduced. In Maddock v.

Rumball, 8 East 304, Rumball was indebted to Maddock a certain sum, for which he was sued; but being unable to pay, and Maddock wishing to invest the money" in three per cent, stock, it was agreed between them, in consideration of Maddock’s forbearing his action and demand one year, that Rumball should transfer to him, at the end of the year, so much of that kind of stock as the sum due at the time of the agreement would purchase, and in the mean time should pay Maddock the interest and dividends accruing on such stock; which it appeared upon calculation, produced more to Maddock than his debt and five per cent, interest.

But all the court agreed that this was not usury, as the amount of the sum to be paid by Rumball depended upon a contingency; and if the stocks had fallen within the year, Maddock might have received less than his principal and legal interest would have amounted to. They considered this transaction as resting on the same footing with an agreement to replace stock lent; which, though once contended to be usury, if more than the principal and legal interest were thereby obtained, had been long settled to be legal. In Pike v. Ledwell &c., 5 Esp. N. P.

C. 164, M. wishing to advance his son, agreed, on the 5th May 1801, to dispose of ^"400. stock to P. for ^160. to be transferred to him when his son should arrive at the age of 21 years, which would be on the 11th February 1804. The value of the stock when the agreement was made was proved to be /240. It was contended on the part of M. that this agreement was usurious. P. had paid ^160. only, for stock worth ;£240. He got ^80. by his bargain, and the dividends in the mean time.

But lord *Ellenborough said — “Whatever remedy M. may have in equity on the ground of this being a catching bargain, he has none at law; contingency in the thing purchased is incompatible with the idea of usury, in which the principal must always be certain. It is admitted, that if the stock when transferred to P. would be worth but ^160. it would not be usury ; that the stock would suffer that most extraordinary depreciation was very improbable, but still it was within the reach of possibilitj’".

I cannot say that there was not some contingency in the transaction; and therefore the contract was not usurious.” I consider this case peculiarly strong and apt to the point before us. It shews first, that it is the uncertainty of the value of the stock at the time of delivery, rather than the value at the time of sale, which is to be considered ; and moreover, that where there is any real contingency, the contract is not usurious. The case of Forrest v.

Elwes, 4 Ves. 492, was thus — Forrest applying to Elwes for a loan, he transferred to him stock, upon bond to return the stock six months after date, and in the mean time to pay interest at live per cent. The stock not being replaced, and being depreciated, the court decreed that the obligee was entitled to the value of the stock at the time of the transfer, with interest to the date of the report. I notice, this case, simply to explain the reference to it by the master of the rolls in Barnard v. Young, 17 Ves. 44.

This last was a contract for repayment of a debt with legal interest, or, at the option of the creditor, to transfer so much stock as it would have produced at the day it was payable. Sir William Grant observed —.“I am of opinion that the contract is usurious; as it reserves the capital with legal interest upon it, and likewise a contingent advantage, without putting either capital or interest in any kind of risk. The case of Forrest v. Elwes differs from this in the very point in which I conceive the usury to consist.

In that case, the objection” (of usury) “though at first made, *was properly given up; as, though it is true, if the stock had risen, the lender might have had more than principal and legal interest, 3ret on the other hand, if it had fallen, he would have had less; as he had no option to have stock or money, but the borrower could have discharged himself by merely replacing the stock. Here the lender is at his election to have his principal and interest, or to have a given quantity of stock transferred to him.

His principal never was at any hazard, as he was at all events sure of having that, with legal interest, and had the chance of an advantage if stock rose. It was usurious to stipulate for that chance.” Here we find this eminent judge declaring, that in contracts of this kind there is no usury where each party takes the hazard arising from fluctuation in price; and that the very point in which usury consists, is a provision by the lender against that fluctuation.

In the case before us, there was no such provision ; and surely every one must say, that from the very nature of the subject it was liable to the fluctuations of the market. The case of White v. Wright, 3 Barn. & Cres. 272; 10 Eng. C. L. Rep. 75, decides the same principle, on the same ground of the option reserved by the lender of the stock. In the matter of Naish ex’x of Stewart, 7 Bingh. 150; 20 Eng. C. L.

Rep. 81; Stewart and Pelham, in consideration of ,£1000. paid to Stewart, granted to Holland an annuity of £'120. for four lives, and covenanted that in 30 days after the expiration of the third life, they would insure the £1000. to Holland ; and the grantors executed a power of attornejr to enter up judgment for £2000. but none was entered. A rule nisi was obtained to set aside the power of attorney, on the ground that it was void for usury.

It was contended that this was not usury, because the principal was in hazard, as the last two lives might drop at once; or the last life might drop within the thirty days, and before the insurance was effected, and in such case the covenant would be of no *avail. And the court decided that it was not usury, because of the hazard. Tindal, C. J., said — “The question is whether an advance of money, under the circumstances now laid before the court, comes within the statute of Anne, as a loan of money on which a larger rate of interest than five per cent, has been reserved?

The general rule is, that there is no loan where the principal is placed in hazard, because a loan contemplates repayment of the money lent: and where there is no loan, it.is matter of agreement between the parties, on what terms the money shall be advanced.” The court also lay some stress on the fact that there was no affidavit imputing to the parties the intention of a loan, or shewing that the principal had never been put in hazard. I will cite but one more case on this point. In the case of Gilpin v. Enderby, 5 Barn. & Ald. 954; 7 Eng. C. L.

Rep. 314, a deed was executed between the parties, by which they covenanted to become partners in the business of army clothiers, for ten years, and that Enderby should advance £20,000. as part of the capital for carrying on the business, and Gilpin should find a like sum; that Enderby should during the continuance of the partnership, have out of the profits, if sufficient, or if not, out of the capital, £2000. yearly for his share of the profits.

Gilpin then covenanted, that on the determination of the partnership by effluxion of time, the sum of £20,000. should be returned to Enderby, and that Gilpin should guaranty all debts and pay all losses. At the end of the ten years Enderby sued on this deed for the £20,000. and Gil-pin pleaded the statute of usury, — that the £20,000. was a loan for ten years, at the premium of £2000. a year, and the deed a shift and device to evade the statute. Replication, that the deed was executed for good and lawful consideration, and not by way of shift &c.

Upon this replication issue was taken, and the jury found a verdict for the plaintiff, thus negativing the corrupt agreement. A judgment *was rendered on this verdict in the common pleas, and a writ of error taken to the king’s bench, upon the ground that the deed manifestly exhibits a case of usury within the statute, and ought consequently to be pronounced void in law. Abbott, C. J., delivered the opinion of the court. He said — ■* ‘By the execution of this deed, Enderby undoubtedly made himself answerable as a partner to all strangers, though he might not be answerable as between himself and Gilpin.

And if the deed discloses the real facts and the intention of the parties to it, this is not a case of a loan by Enderby to Gilpin, but a contract of partnership between them of a peculiar kind. If the deed does not disclose the real facts and the intention of the parties, but was executed only as a contrivance to cover a loan of £20,000. for ten years, at ten per cent, the deed was undoubtedly void; but this is a fact that ought to have been found affirmatively by a jury, to enable the court thereupon to declare the deed void.

No such fact has been found, and in the absence of such finding-, we must consider the deed as speaking the language of truth.

And so considering it, we cannot pronounce it void.” Now, if we compare the case presented by this third plea, with the cases cited shewing that the fluctuation in price, and hazard or contingency of other kinds, will take contracts and loans out of the statute, we must surely agree with the court that that plea presented no bar to the action: for it is a simple case of the loan of 142 shares of stock for twelve months, to have 172 returned for the forbearance; with no provision securing the lender against the fall of stock, and no averment that it was meant as a shift or device to evade the statute, the real intention being an usurious loan.

The plea then was properly rejected.

On the trial, the defendants moved the court to instruct the jury, that if they believed the consideration of the covenant was the 142 shares of stock lent by Harvey *to Mitchell for twelve months, of the value of 100 dollars each at the date of the loan, and that the 30 shares additional, agreed to be paid, were reserved in consideration of the loan and forbearance of the 142 shares, and that the value of the said 30 shares was, at the date of said loan, greatly above six per cent, on the value of the 142 shares, to wit, of the value of SO dollars per share, though deliverable twelve months after, and that both parties so understood it, and intended to secure to the lender a compensation of the value aforesaid, — then, upon the third plea on which issue was joined, the defendants were entitled to a verdict; and this without any reference to the question whether the said Harvey might gain or lose, by the rise or fall of the stock.

The court refused to give this instruction; and very properly, I think. Nor if the cases I have cited prove any thing, it is that the question of hazard, the consideration of the rise and fall of the stock, is the very point which takes the contract out of the statute. The court, I think, was, upon the same ground of reason and authority, equally correct in the instruction which it did give the jury. I will turn now to another point in this complicated cause.

A fifth and sixth pleas were tendered by the administrators of Steptoe, stating that their intestate executed the covenant as a surety merely, and that afterwards, without his knowledge or consent, a new contract was entered into between Harvey and Mitchell the principal debtor, by which, for a new consideration, further day of payment was given, and by which also the sureties were discharged. These pleas were objected to by the plaintiffs, as presenting no legal bar to their claim; and the court being of that opinion rejected them: to which the defendants excepted.

It will be recollected that in the covenant declared on, no distinction of principal and surety is made: all are on its face principal obligors. In Ward v. Johnson, 1 Munf. 45; 6 Munf. 6, this very point was made; in the first place, by motion *to the court below. This, court decided, that if the facts could avail the defendant at all at law, it must be by way of plea: and the cause was sent back. It came up again, with the plea regularly pleaded and demurred to, so as to present the naked point to the court. The cause was elaborately argued by Mr. Wickham and Mr.

Wirt, than whom we had no abler counsel: the cases of the discharge of sureties by such new contracts were cited: and the court decided unanimously, that this was no discharge at law, though it might be, and the majority seemed to think it would be, a discharge in equity. This decision was in 1817, and has never been questioned since, that I know of; and I am for standing by it. There is a later case upon this point — an english case — Davey v. Prendergrass, 5 Barn. & Ald. 187, 7 Eng. C. L. Rep. 62.

There, upon debt on a surety bond executed by the defendants, conditioned to pay, within one month after 'demand, such balance not exceeding ^500. as upon settlement of accounts S. P. and J. P. should appear to owe the plaintiff, the defendants pleaded a parol agreement made without their privity, giving time to the principal debtors 1o pay by instalments &c.

To this plea there was a demurrer, which was sustained, upon the general rule of the common law, which requires that the obligation created by an instrument under seal shall be discharged by an instrument of equal validity. ‘‘The operation of that rule” (says Abbott, C. J.), “is indeed sometimes such as to make it imperative upon a court of equity to interpose and grant relief; but it by no means follows that the rule of law is to be broken down, because a court, having jurisdiction of another kind, will interpose where there is a particular case in which the rule of law may be found to operate harshly.

There is great objection to a court of law taking upon itself to act as a court of equity; because they have not the means of doing that full and ample justice which the particular case may *require.” In another part of his opinion he shews the distinction between the case before him, and others in which the courts of law have taken notice of this defence of the surety. “Bills of exchange” (he says) “stand upon a different footing: there the law merchant operates, and the courts of law decide upon them with reference to that law.

Guaranties for the payment of debts are not, in general, instruments under seal, and there is no strict technical rule which, as to them, prevents a court of law from looking at the real justice of the case. The cases of bail and replevin bonds are provided for by acts of parliament, giving to the courts an authority over them.

A recognizance of bail stands upon a different ground from bail bonds, as to the jurisdiction of the court. • There the jurisdiction is not founded upon statute, but upon a general authority in the court to see that an improper use is not made-of its own records.” The court were right, then, in rejecting these pleas also.

With respect to the last exception, taken to the decision of the court refusing to the counsel of the defendant the opening and conclusion of the argument to the jury: it is a question which can have no influence on the opinion of this court, in passing upon the final judgment of the court below. Suppose the defendant’s counsel ought to have had the opening and conclusion: how can we ascertain the effect of the refusal?

The verdict was either contrary to the evidence, or it was not: if it was, that would be a sufficient reason for a new trial: if it was not, ought a new trial to be granted because the defendant’s counsel had not the opening and conclusion? In the case before us, no new trial was asked, no objection taken to the verdict as being against evidence. It is not necessary then, in this cause, to give an opinion on this point; and I question whether it might not be better to leave the courts below and the general court to settle the practice as to it. I am for affirming the judgment.