Same - Loan Of Money

In the first place, there must be a lending and borrowing of money. If it is so understood by the parties, no shifting or contrivance for the purpose of disguising the real nature of the transaction can avail to evade the statute; and, on the other hand, if it was not a borrowing and lending, it cannot be brought within the statute.73 The parties to a contract, for instance, may agree on a sum as stipulated damages in case of breach, and it may be recovered, though it exceeds the legal interest on the value of property which should have been paid.7* So, also, on a loan of chattels, the agreed comas a sale rather than a loan.80 If the note was originally made for accommodation, and the first person giving value for it takes it at a rate of discount greater than the legal rate and with knowledge that it is accommodation paper, this constitutes usury, for it is a mere loan, and not the sale of a subsisting instrument; 81 and some courts have held such transactions usurious, even when the transferee of the note takes it without knowledge of its accommodation charac-ter;82 but by the better opinion this is not usury, for there is no intention to lend, but only an intention to buy an instrument believed to be already valid and subsisting.83

72 Lloyd v. Scott, 4 Pet. 205, 7 L. Ed. 833; Balfour v. Davis, 14 Or. 47, 12 Pac. 89. See "Usury," Dec. Dig. (Key-No.) §§ 1, 11-15; Cent. Dig. §§ 1, 28-29.

73 Tyson v. Rickard, 3 Har. & J. (Md.) 109, 5 Am. Dec. 424; Price v. Campbell, 2 Call (Va.) 110, 1 Am. Dec. 535; Ferguson v. Sutphen, 3 Gilman (I11.) 547; Osborn v. McCowen, 25 I11. 218; Struthers v. Drexel, 122 U. S. 487, 7 Sup. Ct 1293, 30 L. Ed. 121G; Gaither v. Clarke, 67 Md. 18, 8 Atl. 740; Hartranft v. Uhlinger, 115 Pa. 270, 8 Atl. 244; Lukens v. Hazlett, 37 Minn. 441, 35 N. W. 265; Pope v. Marshall, 78 Ga. 635, 4 S. E. 116; Drury v. Wolfe, 34 I11. App. 23; Id.. 134 I11. 294, 25 N. E. 626. Money paid above the legal rate for the forbearance of an existing debt is usury. Hathaway v. Hagan, 59 Vt. 75, 8 Atl. 678. Charging "banker's commission." Bowdoin v. Hammond, 79 Md. 173, 28 Atl. 769. An agreement by which a party lends bonds and the borrower agrees to pay to the owner the interest paid by the government, and 6 per cent. in addition, is not a contract for the loan of money. Marshall v. Rice, 85 Tenn. 502, 3 S. W. 177. Loans by building and loan association. Jackson v. Cassidy, 68 Tex. 282, 4 S. W. 541; Tilley v. Association (C. C.) 52 Fed. 618; Succession of Latchford, 42 La. Ann. 529, 7 South. 628; Hensel v. Association, 85 Tex. 215, 20 S. W. 116; International Bldg. & Loan Ass'n v. Abbott, 85 Tex. 220, 20 S. W. 118; Sullivan v. Association, 70 Miss. 94, 12 South. 590; Reeve v. Association, 56 Ark. 335, 19 S. W. 917, 18 L. R. A. 129; Iowa Savings & Loan Ass'n v. Heidt, 107 Iowa, 297, 77 N. W. 1050, 43 L. R. A. 6S9, 70 Am. St Rep. 197; Washington Nat. Building, Loan & Investment Ass'n v. Stanley, 38 Or. 319, 63 Pac. 489, 58 L. R. A. 816, 84 Am. St. Rep. 793. See "Usury," Dec. Dig. (Key-No.) § 18; Cent. Dig. § 25.

74Tardeveau v. Smith's Ex'r, Hardin (Ivy.) 175, 3 Am. Dec. 727; Blackpensation may be recovered, though it exceeds what would be the legal rate of interest on the value of the chattel.75 In neither of these cases is there a loan or forbearance of money.76 As already said, however, the contract must be made bona fide, and not as a cover for a loan.77

A negotiable note which has been executed and delivered is treated as a chattel, and it is not usury for a third person to buy it from the holder at a discount greater than the legal rate of interest.78 An exception is made to this rule in some jurisdictions if the transferror indorses the note and thus makes himself conditionally liable for its payment;79 but on principle and by the weight of authority such indorsement is regarded as a warranty of title and the transaction bum v. Hayes, 59 Ark. 366, 27 S. W. 240. See "Usury," Dec. Dig. (Key-No.) § 13; Cent. Dig. § 25.

75 Hall v. Haggart, 17 Wend. (N. Y.) 2S0; Bull v. Rice, 5 N. Y. 315. See "Usury," Dec. Dig. (Key-No.) § 13; Cent. Dig. § 25.

76 See, also, Truby v. Mosgrove, 118 Pa. 89, 11 Atl. 806, 4 Am. St Rep. 575; Appeal of Trine (Pa.) 13 Atl. 765; Union Cent. Life Ins. Co. v. Hil-liard, 63 Ohio St. 478, 59 N. E. 231, 53 L. R. A. 4G2, 81 Am. St. Rep. 644. If a person sells chattels or land on credit, the fact that he charged a larger sum than he would have charged if he had sold for cash does not render the transaction usurious. Bull v. Rice, 5 N. Y. 315; Brooks v. Avery, 4 N. Y. 225; Gilmore v. Ferguson, 28 Iowa, 220; Swayne v. Riddle, 37 W. Va. 291, 16 S. E. 512; Brown v. Gardner, 4 Lea (Tenn.) 145; Graeme v. Adams, 23 Grat. (Va.) 225, 14 Am. Rep. 130; Wheeler v. Marchbanks, 32 S. C. 594, 10 S. E. 1011; Bass v. Patterson, 68 Miss. 310, 8 South. 849, 24 Am. St. Rep. 279. Contra, Fisher v. Hoover, 3 Tex. Civ. App. 81, 21 S. W. 930. Where on a purchase of land the vendee agrees to pay, as part of the price, on deferred payments in excess of the legal rate, the contract is not usurious. Askin v. Lebus (Ky.) 4 S. W. 305; Reger v. O'Neal, 33 W. Va. 159, 10 S. E. 375, 6 L. R. A. 427; Dykes v. Bottoms, 101 Ala. 390, 13 South. 582. For other cases in which It has been held that the relation of borrower and lender did not exist, see Appeal of Donehoo (Pa.) 15 Atl. 924; Niebukr v. Schreyer (Com. Pl.) 13 N. Y. Supp. 809; McComb v. Association, 134 N. Y. 598, 31 N. E. 613; Duval v. Neal, 70 Miss. 288, 12 South. 145; Eddy's Ex'r v. North-up (Ky.) 23 S. W. 353. Sale or loan. Ellenbogen v. Griffey, 55 Ark. 268, 18 S. W. 126. See "Usury;' Dec. Dig. (Key-No.) § 13; Cent. Dig. § 25.

77 Lloyd v. Scott, 4 Pet. 205, 7 L. Ed. 833. See "Usury," Dec. Dig. (Key-No.) § 13; Cent. Dig. § 25.

78 Lloyd v. Keach, 2 Conn. 175, 7 Am. Dec. 256; Nichols v. Fearson, 7 Pet. 103, 8 L. Ed. 623; Munn v. Commission Co., 15 Johns. (N. Y.) 44, 8 Am. Dec. 219; Cram v. Hendricks, 7 Wend. (N. Y.) 569; Jackson v. Travis, 42 Minn. 438, 44 N. W. 316; Holmes v. Bank, 53 Minn. 350, 55 N. W. 555; Claflin v. Boorum, 122 N. Y. 385, 25 N. E. 360; Chase Nat Bank v. Faurot, 72 Hun, 373, 25 N. Y. Supp. 447; Rodecker v. Littauer, 59 Fed. 857, 8 C. C. A. 320. See "Usury," Dec. Dig. (Key-No.) § 26; Cent. Dig. §§ 57, 58, 62.

79 Bank of Radford v. Kirby, 100 Va. 498, 42 S. E. 303; Sedbury v. Duffy, 158 N. C. 432, 74 S. E. 355. See "Usury," Dec. Dig. (Key-No.) § 26; Cent. Dig. §§ 57, 58, 62.

The sale below par of the bonds of a corporation bearing the highest legal rate of interest is in reality a borrowing of money by the corporation at a higher rate than that prescribed by law, and in the absence of a special statute relating to corporations such transactions have usually been held usurious.84 By statutes in some states, however, corporations are given the power to borrow money by the sale of bonds at a rate of interest higher than the legal rate prescribed for private persons; 85 and in other jurisdictions it is held that such sales are not usurious because by common commercial custom corporate bonds are regarded as chattels and their issue to a purchaser is treated as a sale of a subsisting security rather than a borrowing of money.86