Scholfield applied to Moore to raise or borrow $5,000, securing
him on an annuity or ground rent on sufficient real estate for one
year. Moore proposed to let him have the money for ten years on the
same security. After much discussion, the parties agreed to divide
the difference, and that S. should keep the money for five years. A
deed for sufficient real property in Alexandria, in the District of
Columbia, securing the annuity was executed by S., and the annuity
or ground rent was paid for some years. Scholfield, after the
execution of the deed securing the annuity to Moore sold and
conveyed the estate, subject to the annuity or rent charge, to
Lloyd, and subsequent to the conveyance he gave notice to Lloyd not
to pay the rents to Moore on the allegation that there were fraud
and usury in the transaction, and that the grant of the annuity was
therefore void. At the time this notice was given, Scholfield
agreed in writing to indemnify and save Lloyd from loss if a
distress should he made for the rent, and he would resist the same
by a writ of replevin. This was done by Lloyd. Lloyd and others, as
creditors of Scholfield, became afterwards possessed in absolute
property by releases from and agreements with Scholfield of all
his, Scholfield's, interest in the reversion of the estate on which
the rent was secured or any benefit or advantage from the suit, and
was discharged by the insolvent law of Virginia, but no release of
Scholfield by Lloyd from his responsibility to save him harmless
for the resistance of the distress and the action of replevin was
executed. On the trial of the action of replevin in the circuit
court, Scholfield was examined as a witness in favor of Lloyd to
show that the original contract between him and Moore was usurious.
Held that he was an interested and incompetent
witness.
The statute against usury not only forbids the direct taking
more than six percentum per annum for the loan or forbearance of
any sum of money, but it forbids any shift or device by which this
prohibition may be evaded and a greater interest be in fact
secured. If a larger sum than six percent be not expressly
reserved, the instrument will not of itself expose the usury, but
the real corruptness of the contract must be shown by extrinsic
circumstances which prove its character.
The court was requested to say to the jury that the facts given
in evidence in the trial of the case did not import such a lending
as would support the defense of usury. By the court:
"The court was asked to usurp the province of the jury and to
decide on the sufficiency of the testimony, in violation of the
well established principle that the law is referred to the court,
the fact to the jury."
The statute declares
"that no person shall on any contract take, directly or
indirectly, for loan of any money . . . above the value of six, for
the forbearance of one hundred for a year."
It has been settled that to constitute the offense, there must
be a loan, upon which more than six percent interest is to be
received, and it has been also settled that where the
Page 34 U. S. 419
contract is in truth for the borrowing and lending of money, no
form which can be given to it will free it from the taint of usury
if more than legal interest be secured.
The ingenuity of lenders has devised many contrivances by which,
under forms sanctioned by law, the statute may be evaded. Among the
earliest and most common of these is the purchase of annuities
secured upon real estate or otherwise. The statute does not reach
these, not only because the principal may be put in hazard, but
because it was not the intention of the legislature to interfere
with individuals in their ordinary transactions of buying and
selling or other arrangements made with a view to convenience or
profit. The purchase of an annuity or rent charge, if a
bona
fide sale, has never been considered as usurious though more
than six percent profit be secured. Yet it is apparent that if
giving this form to the contract will afford a cover which conceals
it from judicial investigation, the statute would become a dead
letter. Courts therefore perceived the necessity of disregarding
the form and examining into the real nature of the transaction. If
that be in fact a loan, no shift or device will protect it.
Though this principle may be extracted from all the cases, yet
as each depends on its own circumstances and those circumstances
are almost infinitely varied, it ought not to surprise if there
should be some seeming conflict in the application of the rule by
different judges. Different minds allow a different degree of
weight to the same circumstances.
The covenants in the deed from Scholfield granting the annuity
to Moore secure the payment of ten percent forever on the sum
advanced. There is no hazard whatever in the contract. Moore must,
in something more than twenty years, receive the money he has
advanced with the legal interest on it, unless the principal sum
should be returned after five years, in which event he would
receive the principal with ten percent interest. The deed is
equivalent to a bond for five thousand pounds, amply secured by a
mortgage on real estate, with interest at ten percent thereon, with
liberty to repay the same in
five years. If the real contract was for a loan of money without
any view to a purchase, it is plainly within the statute.
An instruction to the jury which would separate the
circumstances of the case from each other, and the object of which
is to induce the court, after directing the jury that they ought to
be considered together, to instruct them that, separately, no one
in itself amounted to usury, ought not to have been given.
In the course of the trial of the cause in the circuit court,
the counsel for the plaintiff objected to a question put by the
defendant's counsel to a witness as being a leading question. By
the court:
"Although the plaintiff's counsel objected to this question and
said that he excepted to the opinion of the court, no exception is
actually prayed by the"
party and signed by the judge. This Court cannot consider the
exception as actually taken, and must suppose it was abandoned.
An action of replevin was instituted in March, 1825, by John
Lloyd in the Circuit Court of the United States for the County
Page 34 U. S. 420
of Alexandria, against Charles Scott, bailiff of William S.
Moore, and a declaration was filed in the common form at September
rules of the same year. In November, 1827, the defendant filed the
following avowry.
"Charles Scott, bailiff, &c., at suit, John Lloyd, and the
said Charles Scott, by Robert J. Taylor, his attorney, comes and
defends the force and injury, when, &c., and as bailiff of
William S. Moore well acknowledges the taking of the said goods and
chattels, in the said place, when, &c., and justly, &c.;
because he says that before the said time when the said, the taking
of the said goods and chattels, is supposed to have been made, one
Jonathan Scholfield was seized in his demesne in fee of four brick
tenements, and a lot of ground, whereon they stood, on the east
side of Washington Street and north side of Duke Street in the Town
of Alexandria and county aforesaid, whereof the said place, when,
&c., is, and at the said time, when, &c., was parcel, and
being so seized, as aforesaid, of the said tenements, and lot of
ground, he the said Jonathan and Eleanor his wife, afterwards, and
before the said time, when, &c., to-wit, on 11 June, 1814, at
the county aforesaid, by their certain indenture dated on the said
11 June, 1814, and here now to the court shown, in consideration of
the sum of $5,000 by the said William paid to the said Jonathan
granted, bargained, and sold to the said William one certain
annuity or yearly rent of $500, to be enuring out of, and charged
upon, the said four brick tenements and lot of ground, whereof the
said place, when, &c., is parcel, to be paid to the said
William, his heirs and assigns, by equal half-yearly payments of
$250 each, on 10 December and on 10 June in every year forever
thereafter. To hold the said annuity or rent, so as aforesaid
charged and payable, to the said William S. Moore his heirs and
assigns, to his and their only proper use forever, and the said
Jonathan Scholfield, for himself, his heirs and assigns, did by the
said indenture, among other things, covenant with the said William
S. Moore his heirs and assigns, that he, the said Jonathan
Scholfield, his heirs and assigns, would well and truly satisfy and
pay to the said William S. Moore his heirs and assigns, the said
annual rent of $500, by equal half-yearly payments,
Page 34 U. S. 421
as aforesaid forever, and that if the said rent should not be
punctually paid as it became due, then that on every such default
it should be lawful for the said William S. Moore his heirs and
assigns, from time to time, to enter on the said four tenements and
lot of ground, so as aforesaid charged, of which the said place,
when, &c., is parcel, and to levy by distress and sale of the
goods and chattels there found, the rent in arrear, and the costs
of distress and sale, of which said rent, so as aforesaid granted,
the said William became and was seized under the said deed, and by
the perception thereof -- that is to say, on 11 December in the
year 1814 at the county aforesaid, and has since remained and yet
is seized thereof."
"And afterwards, that is to say on 29 October in the year 1816,
at the county aforesaid, the said Jonathan Scholfield and Eleanor,
his wife, by their certain deed of bargain and sale, under their
seals, dated on the day and year last mentioned, bargained, sold,
and conveyed to the said John Lloyd, his heirs and assigns forever
certain tenements and lots of ground in the said Town of
Alexandria, whereof the said four brick tenements and lot of ground
before mentioned, including the said place where, &c., is and
was parcel, subject by the terms of the said deed to the payment of
the said annuity or rent of $500 to the said William S. Moore his
heirs and assigns, under and in virtue of which said bargain, sale,
and conveyance to him the said John entered upon the said tenements
and lots of ground so to him bargained, sold, and conveyed, of
which the said place where, &c., is, and was parcel, and became
thereof seized and possessed, that is to say on the said 29 October
in the year 1816, at the county aforesaid, and ever since has
continued, and yet is so seized and possessed, and became, after
the said bargain, sale, and conveyance to the said plaintiff as
aforesaid and after his entry, seizin, and possession of the
premises, including the said place where, &c., and whilst he so
continued seized and possessed as aforesaid, the sum of $250 of the
annuity or rent aforesaid, for the half-year ending on 10 June in
the year 1824, and the further sum of $250 of the said annuity or
rent for the half-year ending on 10 December in the year 1824,
became and remained in
Page 34 U. S. 422
arrear and unpaid to the said William S. Moore, he, the said
Charles Scott, as bailiff of the said William and by his command
and authority at the said time when, &c., entered on the said
place where, &c., being parcel of the said four brick tenements
and lot of ground, so as aforesaid charged, with the said annuity
or rent, and liable to the distress of the said William, and took
and carried away the said goods and chattels in the declaration
mentioned, then and there being found in the said place where,
&c., parcel of the said four tenements and lot of ground, as a
distress for the said rent so in arrear as aforesaid, to the said
William, as he lawfully might, and this he is ready to verify,
&c.; wherefore the said Charles prays judgment for the sum of
$1,000, being double the value of the said rent so in arrear and
distrained for as aforesaid, with full costs of suit, &c.,
according to the statute in that case provided."
"The plaintiff's attorney thereupon filed four several pleas,
the first of which was: "
"And the said John, by Thomas Swann, his attorney, prays oyer of
the said indenture from the said Jonathan Scholfield and Eleanor,
his wife, to the said William S. Moore in the said cognizance
mentioned, and the same is read to him in these words, to-wit;
which being read and heard, the said John saith that the said
Charles, as bailiff of the said William S. Moore for the reasons
before alleged, ought not justly to acknowledge the taking of the
goods and chattels aforesaid, in the said place, in which, &c.,
because he saith that before the making of the said indenture, that
is to say, on 11 June in the year 1814, at the county aforesaid, it
was corruptly agreed between the said Jonathan Scholfield and the
said William S. Moore that the said William S. Moore should advance
to him the said Jonathan, the sum of $5,000, and in consideration
thereof that he the said Jonathan and the said Eleanor, his wife,
should grant, by a deed of indenture, duly executed and delivered
to him, the said William, his heirs and assigns forever, a certain
annuity or rent of $500, to be issuing out of, and charged upon a
lot of ground and four brick tenements, and appurtenances thereon
erected, on the east side of Washington Street, and on the north
side of Duke Street, in the Town of Alexandria, bounded as
follows:
Page 34 U. S. 423
beginning at the intersection of said Streets; thence north, on
Washington Street, eighty-seven feet, more or less, to the
partition wall between the fourth and fifth tenements from Duke
Street; thence, east parallel to Duke Street and with said
partition wall one hundred and twelve feet to an alley; thence with
the line of the said alley eighty-seven feet to Duke Street; thence
on Duke Street, west, to the beginning; to be paid to the said
William, his heirs and assigns, by equal half-yearly payments of
$250, on 10 December and on 10 June forever thereafter."
"And it was further corruptly agreed that he, the said Jonathan,
in and by the said deed of indenture, should, for himself, his
heirs, executors, administrators, and assigns, covenant with the
said William, his heirs and assigns, that he would well and truly
pay to him, the said William, his heirs and assigns, the said
annuity or rent of $500 by equal half-yearly payments, on 10 June
and 10 December in each year forever thereafter, as the same should
become due, and that if the same should not be punctually paid,
that then it should be lawful for the said William, his heirs and
assigns, from time to time, on every such default, to enter on the
premises charged, and to levy by distress and sale of the goods and
chattels there found, the rent in arrear, and the costs of distress
and sale, and if the same should remain in arrear and unpaid for
the space of thirty days after any day of payment as aforesaid, and
no distress sufficient to satisfy the same could be found on the
premises, that then it should be lawful for the said William, his
heirs and assigns, to enter upon the premises charged, and from
thence to remove and expel the said Jonathan, his heirs and
assigns, and to hold and enjoy the same as his and their absolute
estate forever thereafter; and it was further corruptly agreed
between the said Jonathan and him, the said William, that he the
said Jonathan should enter into these further covenants in the said
indenture, that is to say, a covenant that he the said Jonathan, at
the time of the execution of the said indenture, was then, in his
own right, seized in fee simple in the premises charged, free from
any condition or encumbrance, other than such as were specified in
a deed from the said Jonathan to Robert J. Taylor, dated the ___
day of _____; and that he, the said Jonathan, his heirs and
assigns, would forever
Page 34 U. S. 424
thereafter, keep the buildings which then were or thereafter
might be erected on the premises charged, fully insured against
fire in some incorporated insurance office, and would assign the
policies of insurance to such trustee as the said William, his
heirs or assigns, might appoint, to the intent that if any damage
or destruction from fire should happen, that the money received on
such policies might be applied to rebuilding or repairing the
buildings destroyed or damaged, and that he, the said Jonathan, his
heirs and assigns, would execute and deliver any further conveyance
which might be necessary, more completely to charge the premises
before mentioned with the annuity aforesaid, and to carry into full
effect the intention of the said parties; and lastly that he and
his heirs would forever warrant and defend the annuity or rent, so
agreed to be granted to the said William, his heirs and assigns,
against any defalcations and deductions for, or on account of, any
act of him, his heirs or assigns; and the said William did further
corruptly agree that he would, in the said indenture, covenant for
himself, his heirs and assigns, with the said Jonathan, his heirs
and assigns, that if the said Jonathan, his heirs or assigns,
should at any time thereafter, at the expiration of five years from
the date of the said indenture, pay to the said William, his heirs
or assigns, the sum of $5,000, together with all arrears of rent,
and ratable dividend of the rent for the time which should have
elapsed between the half-year's day then next preceding, and the
day on which such payment should be made, he, the said William, his
heirs and assigns, would execute and deliver any deeds or
instruments which might be necessary for releasing and
extinguishing the rent or annuity thereby agreed to be created,
which, on such payments being made, should forever after cease to
be payable."
"And the said John saith that afterwards, to-wit, on the same
day and year aforesaid, at the county aforesaid, the said William,
in pursuance and in prosecution of the said corrupt agreement, did
advance to the said Jonathan the said sum of $5,000, and the said
Jonathan and Eleanor his wife, and the said William, did then and
there make, seal, and duly deliver to each other, respectively, the
said deed of indenture, as their several acts and deeds, which said
deed was duly acknowledged by the said Eleanor, and admitted to
record. And
Page 34 U. S. 425
so the said John saith that the said deed of indenture, in the
said cognizance mentioned, was made in consideration of money
advanced upon and for usury, and that by the said indenture there
has been reserved and taken above the rate of six in the hundred,
for the forbearance of the said sum of $5,000 so advanced as
aforesaid, for the term of one year, and that the said John is
ready to verify; whereupon he prays judgment; if he ought to be
charged with the rent aforesaid, by virtue of the indenture
aforesaid; and for as much as the said Charles hath acknowledged
the taking of the said goods and chattels, he, the said John, prays
judgment and his damages, on occasion of the taking and unjust
detaining of the said goods and chattels, to be adjudged to him,
&c."
The second plea is in all respects like the first, except it
states that the agreement was that Moore should "lend" to
Scholfield $5,000. It then states that the parties agreed a deed
should be made containing all the covenants set forth in the first
plea. It then avers that in pursuance and in prosecution of this
corrupt agreement, Moore did advance to Scholfield the sum of
$5,000, and that Scholfield and wife, and Moore made and executed
the deed aforesaid in pursuance of this corrupt agreement, which
was duly acknowledged and admitted to record. And that the deed was
made in consideration of "money lent upon and for usury," and that
by it there has been reserved and taken above the rate of six in
the hundred, for the forbearance of the sum of $5,000 so lent as
aforesaid, for the term of one year. This plea concludes as the
first does.
The third plea is more general than the first and second. It
states that before the making of the indenture -- that is to say on
11 June, 1814 -- it was corruptly agreed between Scholfield and
Moore that he, Moore should "advance" to him, Scholfield, the sum
of $5,000 upon the terms and conditions, and in consideration of
the covenants and agreements in the indenture mentioned and
contained, and that in pursuance of this corrupt agreement and in
the prosecution and fulfillment of the same, Moore did advance to
Scholfield the sum of $5,000, and they, Scholfield and Moore did
make, seal, and duly deliver the deed to each party respectively as
their act and deed. And that the deed was in consideration
Page 34 U. S. 426
of money advanced upon and for usury, and that by the indenture
there has been taken and reserved above the rate of six in one
hundred for the forbearance of the sum of $5,000, so advanced as
aforesaid for the term of one year. This plea concludes as the
first does.
The fourth plea is like the third, except it is stated that the
agreement was to "lend" $5,000 upon the same terms stated in the
third plea. It then avers that in pursuance and in execution of the
corrupt agreement in the indenture mentioned, Moore did "lend" to
Scholfield the sum of $5,000; that the deed was duly executed by
the parties and recorded; that it was made in consideration of
money lent upon and for usury, and that by the said deed there has
been reserved and taken above the rate of six in the hundred for
the forbearance of the sum of $5,000, so lent as aforesaid, for the
term of one year. This plea concludes as the others do.
To each of these pleas there was a special demurrer, and
particular causes of demurrer assigned.
The circuit court, in November, 1828, gave judgment for the
defendant, and the plaintiff prosecuted a writ of error to this
Court.
29 U. S. 4 Pet.
205.
At the January term, 1830 of the Supreme Court, the judgment of
the circuit court was reversed and the case was remanded to the
circuit court with instructions to overrule the demurrers to the
second and fourth pleas and to permit the defendant to plead, and
for further proceedings, &c.,
29 U. S. 4 Pet.
231.
On the coming of the mandate into the circuit court in November,
1830, the demurrers were withdrawn and there was a general
replication to the pleas filed in November, 1827. The case was
then, on the application of the defendant, removed to Washington,
and a transcript of the record of proceedings, with the original
papers, was transmitted to the Clerk of the Circuit Court for the
County of Washington.
At November term, 1832, of the circuit court, the cause came on
for trial, and a verdict and judgment were entered in favor of the
plaintiff.
The defendant sued out this writ of error.
On the trial, the counsel of the defendant filed four bills of
exception.
Page 34 U. S. 427
These exceptions are set forth at large in the opinion of the
Court, and the evidence given on the trial of the cause is
particularly stated in the first exception.
The material parts of the deed from Jonathan Scholfield and
wife, to William S. Moore referred to in the pleas of the plaintiff
in the circuit court, were:
"The indenture is dated 11 June, 1814, and is from Scholfield
and wife, of Alexandria, in the District of Columbia. It recites
that in consideration of $5,000 in hand paid by William S. Moore of
the same town, he grants, bargains and sells to the said William S.
Moore his heirs and assigns forever, one certain annuity, or rent,
of $500, to be issuing out of and charged upon a lot of ground
[describing the premises], to be paid to the said William S. Moore
his heirs and assigns, by equal half-yearly payments of $250 on 10
December and on the 10 June forever hereafter, to hold the said
annuity or rent to the said William S. Moore his heirs and assigns,
to his and their own proper use, forever. And the said Jonathan
Scholfield, for himself, his heirs, executors, administrators and
assigns, does hereby covenant with the said William S. Moore his
heirs and assigns, as follows -- that is to say that he the said
Jonathan Scholfield, his heirs and assigns, will well and truly pay
to the said William S. Moore his heirs and assigns the said annuity
or rent of $500 by equal half-yearly payments on 10 June and 10
December in each year forever hereafter, as the same shall become
due, and that if the same be not punctually paid, then it shall be
lawful for the said William S. Moore his heirs and assigns, from
time to time, on every such default, to enter on the premises
charged and to levy by distress and sale of the goods and chattels
there found the rent in arrear and the costs of distress and sale,
and if the same shall remain in arrear and unpaid for the space of
thirty days after any day of payment as aforesaid, and no distress
sufficient to satisfy the same can be found on the premises
charged, then it shall be lawful for the said William S. Moore his
heirs and assigns, to enter on the premises charged and from thence
to remove and expel the said Jonathan Scholfield, his heirs and
assigns, and to hold
Page 34 U. S. 428
and enjoy the same as his and their absolute estate forever
thereafter. And further that he, the said Jonathan Scholfield, is
now in his own right seized in fee simple in the premises charged
aforesaid, free from any condition or encumbrance other than such
as are specified and provided for in a deed from the said Jonathan
Scholfield to Robert I. Taylor dated the day before the date
hereof, and that he the said Jonathan Scholfield, his heirs and
assigns, will forever hereafter keep the buildings and improvements
which now are or hereafter may be erected on the premises charged
fully insured against fire in some incorporated insurance office,
and will assign the policies of insurance to such trustees as the
said William S. Moore his heirs or assigns may appoint, to the
intent that if any damage or destruction from fire shall happen,
the money received on such policies may be applied to rebuilding or
repairing the buildings destroyed or damaged. And that he, the said
Jonathan Scholfield, his heirs and assigns, will execute and
deliver any further conveyance which may be necessary more
completely to charge the premises before described with the annuity
aforesaid, and to carry into full effect the intention of the
parties hereto."
"And lastly, that he and his heirs will forever warrant and
defend the annuity or rent hereby granted to the said William S.
Moore his heirs and assigns against any defalcation or deduction
for or on account of any act of him, his heirs or assigns."
"And the said William S. Moore, for himself and his heirs and
assigns, does hereby covenant with the said Jonathan Scholfield,
his heirs and assigns, that if the said Jonathan Scholfield, his
heirs or assigns, shall at any time after the expiration of five
years from the date hereof pay to the said William S. Moore his
heirs or assigns, the sum of $5,000, together with all arrears of
rent, and a ratable dividend of the rent for the time which shall
have elapsed between the half-year's day then next preceding and
the day on which such payment shall be made, he the said William S.
Moore, his heirs or assigns, will execute and deliver any deed or
instrument which may be necessary for releasing and extinguishing
the rent or annuity hereby created, which, on such payments' being
made, shall forever after cease to be payable. "
Page 34 U. S. 438
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the
Court.
The plaintiff in error, the original defendant, avowed as
bailiff of William S. Moore that the goods replevied were
distrained for rent in arrear. The plaintiff in replevin, after
craving oyer of the deed by which the rent alleged to be in arrear
was reserved, pleaded the statute of usury in bar of the claim. The
plea alleged that the contract between the parties was a corrupt
and usurious lending of the sum of $5,000, upon an interest of ten
percentum per annum.
Other issues were joined in the cause, but they are not noticed
because they are of no importance.
On the trial, the plaintiff in replevin offered Jonathan
Scholfield as a witness, who was objected to by the avowant, but
admitted by the court, and to this admission the avowant
excepted.
In support of his objection to the competency of the witness,
the counsel for the avowant exhibited a deed executed on 11 June,
1814, by Scholfield and wife to William S. Moore,
Page 34 U. S. 439
by whose authority the distress was made, by which the said
Scholfield and wife, in consideration of $5,000 paid by the said
Moore to the said Scholfield, granted to the said William S. Moore
his heirs and assigns forever, one certain annuity or rent of $500,
to be issuing out of and charged upon a lot of ground, and four
brick tenements and appurtenances thereon erected, lying in the
Town of Alexandria, and particularly described in the deed.
Also a deed between the said Scholfield and wife of the first
part, John Lloyd the plaintiff in replevin of the second part, and
Andrew Scholfield of the third part; conveying to the said John
Lloyd the lot out of which the annuity or rent charge of $500, had
been granted to William S. Moore. This deed contains several
covenants, and, among others, a stipulation that the lot shall
remain subject to the annuity to William S. Moore.
Also the following letter from Scholfield to Lloyd.
"Alexandria, June 9 1824"
"Sir -- As you hold under me the property on which I granted a
rent charge of $500 a year to William S. Moore, I now give you
notice, the contract by which that rent charge was created I
consider to be usurious, and that I shall take measures to set
aside the same, and I hereby require you to withhold from William
S. Moore the payment of any further money on account of this rent
charge, and in case distress should be made upon you for the rent,
I promise to save you harmless if you will resist the payment by
writ of replevy. I wish you to understand that if you make any
further payments after receiving this notice, that you make them at
your own risk."
"I am with great respect, yours,"
"JONATHAN SCHOLFIELD"
"To Mr. JOHN LLOYD."
This letter was delivered to Mr. Lloyd on the day of its
date.
Also a deed of 18 November, 1826, from said Scholfield, making a
conditional assignment of one-fifth of said annuity of $500 to
Thomas K. Beale in which he recites and
Page 34 U. S. 440
acknowledges his responsibility to Lloyd, on account of the
distress for rent made by William S. Moore.
Also an exemplification of the record of the proceedings in the
County Court of Fairfax, in the Commonwealth of Virginia, upon the
insolvency and discharge of the said Scholfield as an insolvent
debtor in May, 1822.
Whereupon the plaintiff in replevin, to support the competency
of the said Scholfield, laid before the court the following
documents.
A release from said Scholfield to the plaintiff in replevin,
dated 13 June, 1831, whereby said Scholfield, in consideration of
$5,000 released to him by the said Lloyd, out of a debt due by him
to Lloyd, grants to said Lloyd all the right, title, and interest
which he has or may have from the decision of the suit depending
for the annuity or rent charge granted to Moore or which he has or
may have thereafter to the brick buildings upon which the said
annuity or rent charge is secured. He also releases the said Lloyd
from all covenants or obligations, expressed or implied, arising
out of the deed of assignment from him to said Lloyd, and also from
all claims, &c., which now exist or may hereafter arise out of
the said deed, &c. Also a release from the same to the same,
dated 25 April, 1828, in which Scholfield releases to Lloyd all his
right, &c., to the said suit, &c., and to all sums of money
which may accrue, and from all actions, &c., on account of the
said suit, &c.
Also a release of the same date from Thomas K. Beale and James
M. McCrea releasing the said Jonathan Scholfield from $950, part of
a debt of $2,000 due from him to them.
Also a release from Joseph Smith, of same date, releasing
$1,150, part of a debt of $3,000 due to him from said
Scholfield.
Also a release of William Veitch and Benoni Wheat discharging
the said Scholfield from $250, part of a debt of $800 due to them
from him.
Also an engagement of John Lloyd dated 25 April, 1828, binding
himself to the several persons who executed the foregoing releases
for the several sums released by them in the
Page 34 U. S. 441
event of his succeeding in the suit then depending between
himself and Charles Scott, bailiff of William S. Moore.
Also a release from John Lloyd, stating, that whereas Jonathan
Scholfield stood indebted to him in a large sum of money, he had
agreed to release, and did thereby release the said Scholfield from
$5,000, part of the said debt.
In discussing the competency of the witness, some diversity of
opinion prevailed on the question whether he could be received to
invalidate a paper executed by himself, but without deciding this
question, a majority of the Court is of opinion that he is
interested in the event of the suit. His letter of 9 June to John
Lloyd, the tenant in possession, requiring him to withhold from
William S. Moore the payment of any further sum of money on account
of this rent charge, contains this declaration:
"And in case distress should be made upon you for the rent, I
promise to save you harmless if you will resist the payment by writ
of replevy. I wish you to understand that if you make any further
payments after receiving this notice, that you make them at your
own risk."
This is an explicit and absolute undertaking to assume all the
liabilities which Mr. Lloyd might incur by suing out a writ of
replevin, if an attempt should be made to levy the rent by
distress. Mr. Scholfield then is responsible to Mr. Lloyd for the
costs of this suit. This is a plain and substantial interest in the
event of the suit, from which Mr. Lloyd alone can release him. This
liability was incurred before the sale and release from Scholfield
to Lloyd of 13 June, 1831, and Mr. Scholfield's responsibility
depended on the decision of the suit in which he was called as a
witness, unless his release to and contract with Lloyd of 13 June,
1831, could discharge him from it. That contract transferred to
Lloyd all the interest of Scholfield in the ground charged with the
rent to Moore, but did not transfer with it his obligation to save
Lloyd harmless for resisting the claim of Moore to the rent in
arrear. It produced a state of things which removed all motives, on
the part of Scholfield, for incurring fresh liabilities, but did
not discharge him from liabilities already incurred. It placed in
his hands the entire management of the suit, but did not enable him
to undo what was done or to relieve himself from the claim of Moore
to costs should the suit terminate in his favor.
Page 34 U. S. 442
The responsibility of Lloyd to Moore continued, and the
correlative responsibility of Scholfield to Lloyd still continued
also, unless Lloyd had released him from it. Now there is no
expression in the contracts between the parties which purports to
be such a release. It has been inferred as the result of the change
in the situation of the parties, but we do not think the inference
justified by the fact. The obligation is unequivocal; is expressed
in plain and positive terms; is dependent on the event of a suit,
and independent of the ownership of the property. The parties enter
into a contract by which the property is transferred, without
making any allusion to this obligation. It remains, we think, in
full force, and consequently Jonathan Scholfield was an interested
and incompetent witness.
In the progress of the examination, the plaintiff's counsel put
to the witness the following question:
"Did you, in the course of your discussions as to the time you
were to keep the money, state your object in the application to be
to have the use of the $5,000 for a limited time?"
To which the defendant's counsel objected as being a leading
interrogatory. The plaintiff's counsel then varied the question as
follows: "Did you or did you not, in the course of your
discussions," &c.
To which the defendant's counsel made the same objection, but
the court overruled the objection and permitted the question to be
put, and the defendant excepts to that decision.
Although the plaintiff's counsel objected to this question and
said that he excepted to the opinion of the court, no exception is
actually prayed by the party, or signed by the judge. This Court
therefore cannot consider the exception as actually taken, and must
suppose it was abandoned.
Evidence was given by the plaintiff in replevin conducing to
prove that the contract between Scholfield and Moore under which
the sum of $5,000 was advanced by the latter to the former
originated in an application for a loan of money, not for the
purchase and sale of a rent charge or annuity. Scholfield applied
to Moore to raise or borrow $5,000, securing him on an annuity or
ground rent for one year; Moore proposed to let him have the money
for ten years on the same security. After much discussion, the
parties agreed to split the
Page 34 U. S. 443
difference, and that Scholfield should keep the money five
years. Scholfield says his first proposition was to allow ten
percent and to secure it by an annuity or ground rent on the houses
mentioned in the deed. No other interest but ten percent was
mentioned; Scholfield had no intention of selling the property. It
was also in evidence that Moore was a money lender, and was in the
habit of advancing money, secured on ground rents or annuities, and
that Scholfield was a money borrower, and that the property was an
ample security for the money lent and for the annuity.
On the part of the avowant it was proved that the usual value of
those ground rents or annuities charged on lots in Alexandria was
such as to afford an interest of ten percent per annum on the
principal sum advanced, and it was admitted by Scholfield that he
gave Moore no promise, stipulation, or security for the return of
the $5,000, other than is contained in the deed itself.
Many witnesses were examined, and a great deal of testimony,
bearing more or less directly on the contract, was adduced.
The deed from Scholfield and wife to W. S. Moore, by which, in
consideration of $5,000, the annuity or rent charge of $500 per
annum was created, contains a covenant
"That the said J. Scholfield, his heirs and assigns, will well
and truly pay to the said W. S. Moore his heirs and assigns, the
said annuity or rent charge of $500 by equal half-yearly payments
on 10 June and on 10 December in each year forever hereafter, as
the same shall become due, and that if the same be not punctually
paid, then it shall be lawful for the said W. S. Moore his heirs
and assigns, from time to time, on every such default, to enter on
the premises charged and to levy, by distress and sale of the goods
and chattels there found, the rent in arrear and the costs of
distress and sale, and if the same shall remain in arrear and
unpaid for the space of thirty days after any day of payment as
aforesaid, and no distress sufficient to satisfy the same can be
found on the premises charged, then it shall be lawful for the said
W. S. Moore, his heirs and assigns, to enter on the premises
charged and from thence to remove and expel the said J. Scholfield,
his heirs and assigns, and to hold and enjoy
Page 34 U. S. 444
the same as his, and their, absolute estate forever thereafter.
. . . And that the said J. Scholfield, his heirs and assigns, will
forever hereafter keep the buildings and improvements which now are
or hereafter may be erected on the premises charged fully insured
against fire in some incorporated insurance office, and will assign
the policies of insurance to such trustees as the said W. S. Moore
his heirs or assigns, may appoint, to the intent that if any damage
or destruction from fire shall happen, the money received on such
policies may be applied to rebuilding or repairing the buildings
destroyed or damaged."
"And lastly that he and his heirs will forever warrant and
defend the annuity or rent charge hereby granted to the said W. S.
Moore his heirs and assigns, against any defalcation or deduction
for or on account of any act of him, his heirs or assigns."
The deed contained a further covenant that if at any time after
five years the said J. Scholfield should pay to the said W. S.
Moore the sum of $5,000, with all arrears of rent, &c., the
said W. S. Moore will execute any deed releasing or extinguishing
the said rent or annuity.
When the testimony was closed, the counsel for the defendant and
avowant prayed the court to instruct the jury
"That the contract between said Jonathan Scholfield and William
S. Moore such as it is evidenced by the deed from said Scholfield
and wife to said Moore set out in the proceedings, and given in
evidence by the plaintiff as aforesaid, was lawful and free of the
taint of usury, and in order to impeach it of usury, and support
the issues of fact joined in this cause on the part of the
plaintiff, it is necessary for the plaintiff to prove that besides
the contract imported by the terms of said deed, there was an
actual contract between said Scholfield and Moore for the loan of
$5,000 as usurious interest, to-wit, at the rate of ten percent per
annum, to be disguised under the form and name of an annuity or
rent charge, and that such sum was actually lent by said Moore to
said Scholfield, and said deed given in pursuance and execution of
such contract and loan, securing the said usurious interest under
the form and name of such annuity or rent charge; that the facts
given in evidence to the jury as aforesaid to support the issues
above joined on the part
Page 34 U. S. 445
of the plaintiff, did not import such a lending of money by
Moore to Scholfield at usurious interest, as was sufficient to
support the issues joined on the part of the plaintiff in replevin,
upon the second and fourth pleas by the plaintiff in replevin,
pleaded to the cognizance in this case."
Which instruction the court refused to give, to which refusal
the defendant and avowant by his counsel prayed an exception, which
was signed.
The substantial merits of the case are involved in the
subsequent instructions which the court actually gave, and it will
be apparent when we proceed to the consideration of those
instructions that if they ought to have been given, this ought to
have been refused. There are, however, objections to the manner in
which these instructions are framed which ought not to have been
overlooked by the court. The statute against usury not only forbids
the direct taking of more than six percentum per annum for the loan
or forbearance of any sum of money, but it forbids any shift or
device by which this prohibition may be evaded and a greater
interest be in fact secured. If a larger sum than six percent be
not expressly reserved, the instrument will not of itself expose
the usury, but the real corruptness of the contract must be shown
by extrinsic circumstances which prove its character. Those
circumstances must, of course, be viewed in connection with the
contract. The counsel for the avowant asks the court to separate
the instrument from its circumstances and to inform the jury that
the instrument itself was lawful and free from the taint of usury,
and that to fix this taint upon it, the plaintiff in replevin must
prove, besides the contract in the deed, an actual contract
stipulating interest at the rate of ten percentum per annum for the
loan of $5,000. Had this instruction been given, circumstances
which demonstrated the intention of the parties and explained
completely the contract actually made, if such existed, must have
been disregarded by the jury. The court is next requested to say to
the jury that the facts given in evidence did not import such a
lending as would support the issue.
The court is thus asked to usurp the province of the jury and to
decide on the sufficiency of the testimony, in violation of the
well established principle that the law is referred to the
court,
Page 34 U. S. 446
the fact to the jury. The court did not err in refusing to give
this instruction.
"The plaintiff then prayed the court further to instruct the
jury that the matters shown in evidence to the jury as aforesaid
are proper for the consideration of the jury to determine, from the
whole evidence, under the instruction of the court, as already
given to them in this cause, whether the said contract so made
between the said Moore and Scholfield was in substance and effect a
loan at usurious interest or a
bona fide contract for the
bargain and sale of a rent charge, and if the jury, from the said
whole evidence under the instructions as aforesaid, shall believe
it to have been such a loan, they should find for the plaintiff; if
otherwise, for the defendant."
The court gave this instruction, and the defendants excepted to
it. Its correctness is now to be examined.
The statute declares "that no person shall, upon any contract,
take, directly or indirectly, for loan of any money," &c.,
"above the value of six, for the forbearance of one hundred for a
year," &c.
It has been settled that to constitute the offense, there must
be a loan upon which more than six percent interest is to be
received, and it is also settled that where the contract is in
truth for the borrowing and lending of money, no form which can be
given to it will free it from the taint of usury if more than legal
interest be secured.
The ingenuity of lenders has devised many contrivances by which,
under forms sanctioned by law, the statute may be evaded. Among the
earliest and most common of these is the purchase of annuities
secured upon real estate or otherwise. The statute does not reach
these, not only because the principal may be put in hazard, but
because it was not the intention of the legislature to interfere
with individuals in their ordinary transactions of buying and
selling or other arrangements made with a view to convenience or
profit. The purchase of an annuity, therefore, or rent charge, if a
bona fide sale, has never been considered as usurious,
though more than six percent profit be secured. Yet it is apparent
that if giving this form to the contract will afford a cover which
conceals it from judicial investigation, the statute would become a
dead letter. courts therefore perceived the necessity of
disregarding the
Page 34 U. S. 447
form and examining into the real nature of the transaction. If
that be in fact a loan, no shift or device will protect it.
Though this principle may be extracted from all the cases, yet
as each depends on its own circumstances, and those circumstances
are almost infinitely varied, it ought not to surprise us if there
should be some seeming conflict in the application of the rule by
different judges. Different minds allow a different degree of
weight to the same circumstances.
King v. Drury, 2 Lev. 7, is a very strong case in favor
of the avowant, and has been much pressed on the court by his
counsel.
Brown agreed to assign to Drue a lease of a house for forty
years for the sum of �300. Drue not having the money, Drury,
by agreement with Drue, paid the �300, took the assignment
to himself, and then let the house to Drue for thirty-nine and
three quarter years at a rent, of which �30 was payable to
himself. Drury covenanted that if at the end of four years, Drue
paid the �300, he would convey the residue of the term to
Drue. Per Hale, C.J.:
"This is not usury within the statute, for Drue was not bound to
pay the �300 to Drury. . . . It is no more in effect than a
bargain for an annuity of �30 pounds yearly, for thirty-nine
and three quarter years, for �300 to be secured in this
manner, determinable sooner if the grantor pleases, but the grantee
hath no remedy for his �300. . . . And so the acceptance of
the �7 10 shillings is not usury. But if Drury had taken
security for the repayment of the �300, or it had been by
any collateral agreement to be repaid, and all this method of
bargaining a contrivance to avoid the statute; this had been
usury."
This case has been cited to prove that, without an express
stipulation for the repayment of the money advanced, a contract
cannot be usurious, whatever profit may be derived from it. It must
be admitted that although Lord Hale does not say so in terms, the
case, as reported, countenances this construction. But the accuracy
of the report must be questioned, and it is believed that such a
principle would not now be acknowledged in the courts of
England.
Chief Justice Hale considers the transaction simply as a bargain
for an annuity, not as a loan of money. Whether
Page 34 U. S. 448
the circumstances of the case warranted this conclusion or not,
it is the conclusion he drew from them. The negotiation between
Drue and Drury by which the latter advanced the money became the
assignee of the term, and then loaned it to the former, accompanied
with a power of redemption, are totally overlooked by the judges.
It had no influence on the case. It was not considered as affording
any evidence that the transaction was in reality a loan of money.
The principle of law announced by the judge is simply that a
bargain for an annuity is not usury. He adds that if the repayment
of the �300 had been secured and all this method of
bargaining a contrivance to avoid the statute, this had been
usury.
He connects the bargaining, being a contrivance to avoid the
statute, with a security for the repayment of the sum advanced, as
if he thought this security indispensable to the effect of the
bargaining, without which the contract could not be usurious.
It is obvious that if this inference of law from the fact be
admitted without qualification, it will entirely defeat the
statute. If an express stipulation for the repayment of the sum
advanced be indispensable to the existence of usury, he must be a
bungler indeed who frames his contract on such terms as to expose
himself to the penalties of the law. If a man purchases for $500 an
annuity for 200 per annum redeemable at the will of the grantor in
ten years, without any express stipulation for the repayment of the
$500, this, according to
Drury's Case, as reported, would
be no more than a bargain for an annuity; and yet the grantor would
receive excessive usury, and the grantee would be compelled, by the
very terms of the contract, to repay the $500 as certainly as if he
had entered into a specific covenant for repayment, on which an
action could be maintained. Lord Hale cannot have intended this. He
has not said so in terms, and we must believe that he did not mean
to require more than that the contract should not be such as, in
effect, to secure the principal sum advanced with usurious
interest. It would be a very unusual stipulation in the grant of an
annuity that the money should be returned otherwise than by the
annuity itself.
So in
Finch's Case, reported in Comyn on Usury 43,
Canfield secured to Finch more than the legal interest on the
money
Page 34 U. S. 449
advanced by a rent issuing out of land, and the court determined
that it was not usury, though Canfield had applied for a loan of
money which Finch refused, offering at the same time to let him
have the sum by way of annuity or rent. This was held not to be
usurious. "This," said the court, "is not a contract commenced upon
a corrupt cause, but an agreement for a rent which it is lawful for
everyone to make." But it was said that if twelve pounds in the
hundred had been offered to be paid (the legal interest was then
ten percent) and the other had said that he would accept it, but
that this would be in danger of the law, and therefore he did not
like to contract upon these terms, but that if the other party
would assure him an annual rent for his money then he would lend
it, and upon this an agreement for the rent had been made; this
would have been within the statute. The same principle is decided
in Cro.James 252. These cases turn on the evidence which shall be
sufficient to prove a loan to be the foundation of the contract,
but do not withdraw the case from the statute, if a loan be its
foundation. They decide that a mere application for a loan does not
convert a subsequent annuity, which yields a profit beyond legal
interest, into a usurious contract; but that an actual contract for
the loan, if converted into an annuity in order to avoid the law,
is within the statute.
In these cases, the court decides upon the fact and determines
that a variation in it, the importance of which is not distinctly
perceived, would bring the contract within the law. In all of them,
we think it probable that a court of the present day would leave it
to the jury to say whether the contract was a fair purchase or a
loan, and would direct the jury to find for the plaintiff or
defendant as their opinion on that fact might be.
In
Fuller's Case, 4 Leon. 208, and in
Symonds v.
Cockrell, Noy 151 and Brownlow 180, a distinction is taken
between the purchase of an annuity without any communication
respecting a loan and a purchase where the negotiation commences
with an application to borrow money, though no contract of loan
followed such application.
In a case between Murray and Harding reported in Comyns on Usury
51, Markham, an attorney, at the request of Robert Harding, rector
of Grafton Regis, applied to Mrs. Mary Murray to lay out
�120 in the purchase of an annuity
Page 34 U. S. 450
of �20 a year for the defendant's life, charged on his
rectory of Grafton, redeemable by him at the end of the first five
years upon the payment of �109 10 shillings. There was no
communication with her about a loan, but merely about the purchase
of such redeemable annuity, although Harding had mentioned to his
attorney Markham, a wish to borrow �100 or upwards.
This case was brought before the court. In giving his opinion on
it, Chief Justice De Grey said,
"Communication concerning a loan has sometimes infected the case
and turned the contract into usury, but then the communication must
be mutual. . . . I know no case where even a meditated loan has
been
bona fide converted into a purchase and afterwards
held to be usurious. To be sure, it is a strong and suspicious
circumstance, but if the purchase comes out to be clearly a
bona fide purchase, it will notwithstanding be good."
"If a power of redemption be given, though only to one side, it
is a strong circumstance to show it a loan, as in
Lawley v.
Hooper. But that alone will not be conclusive."
The Chief Justice added, "in the present case, the principal is
precarious and secured only by the life of a clergyman, and his
continuing to be beneficed."
In
Lawley v. Hooper, 2 Atk. 278, Thomas Lawley, being
entitled to an annuity of �200 a year for life; sold
�150, part thereof, to Rowland Davenant for �1,050,
with power to repurchase, on giving six months notice. After the
death of Davenant, Lowry brought this bill against his executors
for an account, and that upon payment of what should be due, the
defendants might reassign the annuity to the plaintiff.
In giving his opinion, the Chancellor said,
"There has been a long struggle between the equity of this court
and persons who have made it their endeavor to find out schemes to
get exorbitant interest and to evade the statutes of usury. The
court very wisely hath never laid down any general rule beyond
which it will not go."
"In this case, there are two questions to be considered. 1.
Whether this assignment is to be considered as an absolute sale, or
a security for a loan."
"As to the first, I think, though there is no occasion to
Page 34 U. S. 451
determine it; there is a strong foundation for considering it a
loan of money, and I really believe in my conscience that
ninety-nine in a hundred of these bargains are nothing but loans,
turned into this shape to avoid the statutes of usury."
The Chancellor then proceeds to state the circumstances under
which the contract was made and the character of the contract
itself, and although there was no treaty about a loan, he considers
it as one. After enumerating the circumstances, he concludes with
saying,
"Therefore, upon all the circumstances, I think it was and is to
be taken as a loan of money turned into this shape only to avoid
the statute of usury, but I do not think I am under any absolute
necessity to determine this point, for I am of opinion that this is
such an agreement as this court ought not to suffer to stand,
taking it as an absolute sale."
The relief asked by the plaintiff in his bill was granted.
In the noted case of
Chesterfield, Executor of Spencer v.
Janssen, reported in 1 Atk. and 1 Wils., �5,000 was
advanced by Janssen on the bond of Mr. Spencer, to pay
�10,000 should be survive the Duchess of Marlborough. After
the death of Mr. Spencer, this bond was contested by his executor,
and one of the points made was that it was usurious. The cause was
argued with great ability, and determined not to be within the
statutes because the principal was in hazard. In giving this
opinion, the judges define usury in terms applicable to the present
case. "To make this contract usurious," said Mr. Justice
Burnet,
"it must be either because it is within the express words or an
evasion or shift to keep out of the statutes. . . . Whatever shift
is used for the forbearance or giving day of payment will make an
agreement usurious, and is by a court and jury esteemed a color
only. Suppose a man purchase an annuity at ever such an under
price; if the bargain was really for an annuity, it is not usury.
If on the foot of borrowing and lending money, it is otherwise, for
if the court is of opinion the annuity is not the real contract,
but a method of paying more money for the reward or interest than
the law allows, it is a contrivance that shall not avoid the
statute."
The Lord Chancellor said,
"If there has been a loan of money and an insertion of a
contingency which gives a higher rate of interest than the statutes
allow, and the contingency goes to
Page 34 U. S. 452
the interest only, though real and not colorable, and
notwithstanding it be a hazard, yet it has been held usurious.
Where the contingency has related to both principal and interest,
and a higher interest taken than allowed by the statute, the courts
have then inquired whether it was colorable or not."
Wilson reports the chancellor to have said,
"Courts regard the substance and not the mere words of
contracts. Loans, on a fair contingency to risk the whole money,
are not within the statute; a man may purchase an annuity as low as
possible, but if the treaty be about borrowing and lending, and the
annuity only colorable, the contract may be usurious, however
disguised."
Richards qui tam v. Brown, Cowper 770, was an action on
the statute of usury. Richard Heighway applied to Brown for a loan
of money, to which Brown assented, and advanced part of the money,
promising to advance the residue, being �400, in a
fortnight. After some delays, Brown said he could not raise the
money himself, but would try to get it of a friend in the city, who
was a hard man. Heighway said he would give twenty or thirty
guineas rather than not have the money. Brown said, "that his
friend never lent money but on an annuity at six years purchase.
However," he added, "if you will take the money on those terms, I
will engage to furnish you with money to redeem in three months'
time." Heighway executed a bond and warrant of attorney, for
conveying the annuity to one Waters. The money was really advanced
by Brown, and the name of Waters was used by him. Heighway deposed
that Brown first proposed the annuity. He himself would not have
granted one. Heighway pressed for the money to redeem, but Brown
refused it.
Lord Mansfield told the jury that if they were satisfied,
"That, in the true contemplation of the parties, this
transaction was a purchase by the one, and a sale by the other, of
a real annuity, how much soever they might disapprove of, or
condemn the defendant's conduct, they must find a verdict for him.
But on the contrary, if it appeared to them to have been in reality
and truth, the intention of both parties, the one to borrow and the
other to lend, and that the form of an annuity was only a mode
forced on the necessity of the borrower by the lender, under color
of which he might take an usurious and exorbitant
Page 34 U. S. 453
advantage, then they might find for the plaintiff,
notwithstanding the contingency of the annuitant dying within three
months."
The jury found for the plaintiff.
On a motion for a new trial, Lord Mansfield said,
"The question is what was the substance of the transaction and
the true intent and meaning of the parties, for they alone are to
govern, and not the words used. The substance here was plainly a
borrowing and lending. Heighway had no idea of selling an annuity,
but his declared object was to borrow money. . . . It is true there
was a contingency during three months. It was that which occasioned
the doubt whether a contingency for three months is sufficient to
take it out of the statute."
The new trial was granted.
In the case of
Irnham v. Child, 1 Br.Ch. 93, Lord
Thurlow is reported to have said (referring to previous
dicta),
"all therefore that seems to be meant is this that the annuity
shall be absolutely sold without any stipulation for the return of
the principal, and that it shall not be intended as a means of
paying interest until such principal is returned. But where there
is a sale it is not usurious to make it redeemable."
In
Drew v. Power, 1 Schoales & Lefroy 182, the
plaintiff being much embarrassed in his circumstances, communicated
to the defendant his desire to raise money to extricate himself
from his debts. After approving his purpose and increasing
sufficiently his anxiety for its accomplishment, the defendant
informed him that two of his estates, Poulagower and Knockavin,
would shortly be out of lease, and that if he would make the
defendant a lease of them for three lives, at the rent of
�200 per annum, he would, from friendship, advance him money
sufficient to pay all his debts. The plaintiff assented to this
proposition. The bill then proceeds to charge much unfairness and
oppression on the part of the defendant in making advances towards
paying the debts of the plaintiff, and states that he claimed a
balance of �1,015 and 15 shillings, for which he demanded
the plaintiff's bond. This was given. The defendant then required a
lease for Poulagower and Knockavin, which was executed for three
young lives, at the rent of �200 per annum, which was
greatly below their value. The defendant also obtained other leases
from the plaintiff.
Page 34 U. S. 454
The bill details a great variety of other transactions between
the parties, which are omitted as being inapplicable to the case
now before this Court. The bill was brought for a full settlement
of accounts, and that on payment of the balance fairly due to the
defendant, the leases he had obtained from the plaintiff might be
set aside.
The defendant, in his answer, denied the charges of oppressive
and iniquitous conduct set up in the bill, and insisted that the
lands called Poulagower and Knockavin, having been advertised to be
let, he agreed to take them at a valuation, and insisted that he
paid a fair rent for them.
The cause came on to be heard before the Master of the Rolls,
who directed several issues to try whether the full and fair value
of the lands were reserved on the leases granted by the plaintiff
to the defendant, and whether either, and which of them were
executed, in consideration of any and what loan of money, and from
whom.
The case was carried before the Lord Chancellor, who disapproved
the issues, and gave his opinion at large on the case. After
commenting on the testimony respecting the leases, he says,
"Hastings has distinctly proved, that the loan of money was the
inducement to this lease, and if it was, it vitiates the whole
transaction. I do not mean advancing money by way of fine or the
like, but where it is a distinct loan of money to a distressed man,
for which security is to be taken, and he is still to continue a
debtor for it. If I were to permit this to be considered as a
transaction which ought to stand, I should permit a complete
evasion of the statute of usury."
The chancellor concluded a strong view of the testimony, showing
a loan of money to be the consideration on which the leases were
granted, with saying, "there is no reason to send this case to a
jury. . . . There is sufficient to satisfy the conscience of the
court, that these leases ought not to stand."
The case of
Marsh v. Martindale, 1 Bos. & Pul. 153,
was a judgment on a bond for �5,000. The consideration on
which the bond was given, was a bill drawn by Robert Wood on
Martindale, Filet & Co., for �5,000, payable three years
after date. The bill was accepted, the interest discounted by Sir
Charles Marsh, and the residue of the money paid to
Page 34 U. S. 455
Martindale, for the purpose of enabling him to discharge certain
annuities for which he was liable.
On a motion for a new trial, Lord Alvanley, Chief Justice,
said,
"It was contended that the transaction was to all intents a
purchase of an annuity, and this certainly was the strongest ground
which the plaintiff could take, for it has been determined in all
the cases on the subject, that a purchase of an annuity, however
exorbitant the terms may be, can never amount to usury. But if the
transaction respecting the annuity be under cover for the
advancement of money by way of loan, it will not exempt the lender
from the penalty of the statute, or prevent the securities from
being void. Then is this transaction the purchase of an annuity or
is it not?"
After restating the transaction, the judge asked "what is this
but forbearing for three years to take the sum of �4,250,
for which forbearance, he was to receive interest on
�5,000."
The judge referred to the case in Noy 151 as applicable to this.
"There," he said,
"a question having arisen, whether a deed securing a rent charge
were void for usury, the court agreed that if the original contract
were to have a rent charge, that is not usury, but a good bargain;,
but if the party had come to borrow the money, and then such a
bargain had ensued by security, then that is usury."
Doe, on the demise of Grimes, assignees of Hammond (a
bankrupt) v. Gooch was an ejectment. Hammond had taken ground
on a building lease at the rent of �108 per annum. He
assigned the premises to Roberts for 2�,300, a sum
considerably above their then value, and at the same time took a
lease from Roberts at the increased rent of �395, containing
the same covenants for building as were in the original lease,
together with a stipulation that he should be at liberty, on giving
six months' notice, to repurchase the premises at the same price
for which he had sold them to Roberts. Hammond completed the
houses, and, having become a bankrupt, his assignees brought this
action against the tenant of Roberts. The judge left it to the jury
to say whether the transaction between Hammond and Roberts was
substantially a purchase or a loan, and told them "that if they
thought it was a loan, the deeds were void, the transaction being
usurious." The jury found a verdict for the
Page 34 U. S. 456
plaintiff. On a motion for a new trial, counsel contended that
the deeds imported a purchase. That the principal money was
altogether gone, unless Hammond chose to redeem, and, though it may
be his interest so to do, this will not make it an usurious
transaction. If a person have an annuity secured on a freehold
estate, it may be clearly his interest to redeem it, but such a
power will not make the bargain usurious. Here Bailey, Justice,
observed,
"in that case, the principal is in hazard from the uncertain
duration of life. Here it is in the nature of an annuity for years,
and there is no case in which an annuity for years has been held
not to be usurious where, on calculation, it appeared that more
than the principal, together with legal interest, is to be
received."
The new trial was refused.
In the case of
Low v. Waller, Doug. 735, Lord Mansfield
told the jury,
"that the statute of usury was made to protect men who act with
their eyes open; to protect them against themselves. . . . They
were to consider whether the transaction was not in truth a loan of
money, and the sale of goods a mere contrivance and evasion."
The jury found the contract to be usurious. On a motion for a
new trial, Lord Mansfield said, "the only question in all cases
like the present is what is the real substance of the transaction,
not what is the color and form."
Gibson v. Fristoe, 1 Call 62, was an action of debt
brought by Gibson against Fristoe, in the District Court of
Dumfries. Issue was joined on the plea of the statute of usury.
Verdict and judgment for the defendant, and appeal to the Court of
Appeals.
The case was shortly this, John Fristoe being indebted to John
Gibson, by bond, for �445, 11 shillings, and 2 pence
sterling, on 17 December, 1787, assigned him bonds of perfectly
solvent obligors for �780 currency, at the agreed value of
�382, 8 shillings, and 2 pence sterling, and gave a new bond
with two sureties for a balance of �106, 17 shillings, and 2
pence sterling, payable in March following.
Mr. Washington, for the appellant, said,
"in all these cases the first inquiry is if there be a loan. I
admit that if a real loan is endeavored to be covered under any
disguise whatever, it is still usury."
He contended that here was no loan, "but a purchase of property,
for bonds are property."
Page 34 U. S. 457
In giving his opinion, Mr. Pendleton, the president of the Court
of Appeals, said,
"An agreement by which a man secures to himself, directly or
indirectly, a higher premium than six percent for the loan of
money, or the forbearance of a debt is usury. If the principal or
any considerable part be put in risk, it is not usury, because the
excess in the premium is the consideration of that risk. . . . But
if the bargain proceeds from and is connected with a treaty for the
loan or forbearance of money, it is usury, because the vendor is
supposed to have submitted to a disadvantageous price under the
influence of that necessity which the statute meant to protect him
against."
The judgment of the circuit court was affirmed.
Clarkson's Administrator v. Garland, and another
reported in 1 Leigh was a bill in chancery, brought by the
plaintiff to be relieved against several contracts, bonds and deeds
of trust, alleged to be usurious. The bill states numerous usurious
and oppressive transactions, which are generally and particularly
denied in the answers. Testimony was taken, and the case, so far as
it is applicable in principle to that under consideration, is thus
stated.
Clarkson, wanting to raise $2,235, applied to Jacobs, and
offered him as many slaves as would command that sum. Jacobs
advanced him, on 23 March, 1815, $2,335, and took an absolute bill
of sale for sixteen slaves. It was at the same time agreed that the
slaves should remain in Clarkson's possession on hire for one year,
and if at the end of the year, Clarkson shall pay Jacobs $2,935,
Jacobs shall, in consideration thereof, resell the slaves to him.
The plaintiff charged that his application to Jacobs was to borrow
money, and that the substance of the transaction was a loan,
reserving a higher interest than is allowed by law.
On 22 May, Clarkson again applied to Jacobs, and obtained from
him the further sum of $2,666.26 cents. For this sum he also gave
Jacobs a bill of sale for fourteen slaves, redeemable by the
payment of $3,394 on or before 23 March, 1816.
The plaintiff avers that this also was a loan, and that the
pretended sale of slaves was a device to cover the taking of
usurious interest.
Page 34 U. S. 458
Jacobs, in his answer, avers that both contracts were in truth
what they purport to be,
bona fide agreements to purchase
and resell the slaves therein mentioned.
The slaves not being redeemed, Garland, with full knowledge of
the usury, as the bill charges, became jointly interested with
Jacobs in both contracts. In August, 1816, they procured Clarkson's
bond for $7,000, being the aggregate of both debts, with further
usury for forbearance.
The court declared both contracts to be usurious.
Douglass v. McChesney, 2 Randolph 109, was a bill, to
be relieved from two bonds and a deed of trust, given by the
plaintiff to the defendant. The bill states that Douglass applied
to McChesney to borrow $500; McChesney replied that it was his
practice, whenever he lent money, to sell a horse, which Douglass
professed his willingness to purchase. Sometime afterwards the
complainant went by appointment to the house of McChesney, who
showed him a horse for which he asked $400. The plaintiff avers
that the horse was not worth more than $80 or $100, but urged by
his necessities, and knowing that he could not get the $500 from
McChesney, without giving his price for the horse, he assented to
the proposal, and executed two bonds for the money, which were
secured by a deed of trust. When the bonds became due, McChesney
advertised the property for sale, and this bill was brought to
enjoin further proceedings, and to be relieved.
The testimony proved that the horse was not worth more than
$100, and that it was reported to be McChesney's practice when he
lent money, to sell a horse at an exorbitant price to cover an
usurious gain.
The chancellor dissolved the injunction, and the plaintiff
appealed.
The Court of Appeals was of opinion that a tacit understanding
between the parties, founded on a known practice of the appellee to
lend money at legal interest, if the borrower purchased of him a
horse at an unreasonable price, would be a shift to evade the
statute of usury.
The decree was reversed, but the court being of opinion that the
questions of fact would be decided more understandingly by a jury
on
viva voce testimony, remanded the cause
Page 34 U. S. 459
to the court of chancery, with directions to have issues tried
to ascertain the value of the horse, and whether Douglass was
induced to purchase him at the price of $400 by the expectation of
a loan.
The covenants in the deed of 11 June, 1814, granting the
annuity, have been stated. They secure the payment of ten percent
forever on the sum advanced. There is no hazard whatever in the
contract. Moore must, in something more than twenty years, receive
the money which he advanced to Scholfield, with the legal interest
on it, unless the principal sum should be returned after five
years, in which event he would receive the principal with ten
percent interest till repaid. The deed is equivalent to a bond for
$5,000, amply secured by a mortgage on real property, with interest
thereon at ten percentum per annum, with liberty to repay the
principal in five years. If the real contract was for a loan of
money, without any view to a purchase, it is plainly within the
statute of usury; and this fact was very properly left to the jury.
There is no error in this instruction.
The counsel for the defendant then prayed the court to instruct
the jury, that if they shall believe from the evidence aforesaid,
that the land out of which the said rent charge mentioned in said
been from Scholfield to Moore was to issue, was in itself, and
independently of the buildings upon the same, wholly inadequate and
insufficient security for said rent; that then the jury cannot
legally infer, from the clause in said deed, containing a covenant
on the part of said Scholfield to keep the said houses insured,
anything affecting said contract with usury or illegality, which
instruction the court refused, whereupon the defendant prayed the
court to instruct the jury as follows, to-wit, that if the jury
shall believe from the evidence, that the fair and customary price
of annuities and rent charges, at the date of the said deed from
Scholfield, was in the market of Alexandria ten years' purchase,
and so continued for a period of years; then, from the
circumstances of the rent being ten percentum on the amount
advanced, the jury cannot legally infer from such circumstance,
anything usurious or illegal in the contract.
But the court refused to grant the said instructions, or either
of them, as prayed by the counsel for the defendant, whereupon,
Page 34 U. S. 460
the said counsel excepted to the said opinion of the court, and
its refusal to give either of the said instructions as prayed.
It is obvious that the instructions given by the court, at the
prayer of the plaintiff's counsel, cover the whole matter contained
in this prayer of the defendant. It is, in truth, an effort to
separate the circumstances of the case from each other, and to
induce the court, after directing the jury that they ought to be
considered together, to instruct them that, separately, no one of
them amounted in itself to usury. The court ought not to have given
this instruction. It was proper to submit the case, with all its
circumstances, to the consideration of the jury, and to leave the
question whether the contract was, in truth, a loan, or the
bona fide purchase of an annuity, to them.
There is no error in the opinion of the court refusing the
second and fourth instructions prayed by the defendant and avowant
in the court below, nor in giving the instructions prayed by the
plaintiff in replevin, but this Court is of opinion, that the
circuit court erred in deciding that Jonathan Scholfield was a
competent witness for the plaintiff in that court. This Court doth
therefore determine that the judgment of the circuit court be
Reversed and annulled, and that the cause be remanded to
that court with directions to set aside the verdict, and award a
venire facias do novo.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Columbia, holden in and for the County of Washington, and was
argued by counsel, on consideration whereof it is ordered and
adjudged by this Court, that the judgment of the said circuit court
in this cause be, and the same is hereby reversed and annulled, and
that this cause be and the same is hereby remanded to the said
circuit court with directions to set aside the verdict and award a
venire facias de novo.
