It is not usury to advance money which is to be repayable only on a contingency, even though the sum that will be repaid if the contingency happens exceeds the amount loaned with legal interest,54 if the transaction is genuine and not used as a mere cover to carry out a usurious intent.55 It was~stated in an early case that if the interest only was put at hazard, the transaction would be usurious; 56 and it is obvious that where the interest only is subjected to a contingency, there is a greater opportunity for colorable transactions; but if the transaction is a genuine business venture it is not usurious according to the better view to provide for the payment on a contingency of interest exceeding the legal rate, though the principal of the loan is absolutely repayable.57
47 United States Bank v. Waggener, 9 Pet. 378, 9 L. Ed. 163; Hayward v. LeBaron, 4 Fla. 404; Stark v. Coffin, 106 Mass. 328. Cf. Gates v Hackethal, 57 111. 534, 11 Am. Rep. 45.
47a Stockwell v. Holmes, 33 N. Y. 53. See also Jarrett v. Nickell, 9 W. Va.345.
48 Wright v. McAlexander, 11 Ala. 236; Gillette v. Ballard, 25 N. J. Eq. 491, 27 N. J. Eq. 489.
49 Sapp v. Cobb, 60 Ark. 367, 30 S. W.349.
51 Galveston, etc., Ins. Co. v. Grymes (Tex. Civ. App.), 50 S. W. 467, 94 Tex. 609, 63 S. W. 860, 64 S. W. 778.
52 Morrison v, McKinnon, 12 Fla. 652, 559. See also Barnard v. Young, 17 Yes. 44; Steptoe's Adm. v. Harvey, 7 Leigh, 501.
53 Moore's Exec. v. Vance, 3 Dana, 361; Maury v. Ingraham, 28 Miss. 171; Turney v. State Bank, 6 Humph. Tenn.) 407.
54 Gilpin v. Enderbey, 5 B. & Aid. 954; Fereday v. Hordern, Jacob, 144; Clemens v. Crane, 234 111. 215, 84 N. E. 884 (aff'g. 135 111. App. 68); Thorn-dike v. Stone, 11 Pick. 183; Gilbert v. Warren, 171 N. Y. 665, 64 N. E. 1121; Cunningham v. Green, 23 Oh. St. 296; Curtze v. Iron Dyke Min. Co., 46 Or. 601, 81 Pac. 815; Truby v. Mosgrove, 118 Pa. 89, 11 Atl. 806, 4 Am. St. 575; Duffy v. Gilmore, 202 Pa. 444, 51 Atl. 1026; Case v. Fish, 58 Wis. 56, 15 N. W. 808.
55 Missouri, etc., Trust Co. v. Krumseig, 172 U. S. 351, 19 S. Ct. 179, 43 L. Ed. 474.
56 Roberts v. Trenayne, Cro. Jac. 507, 508, and see Morse v, Wilson, 4 T. R. 353; Cooper v. Tappan, 9 Wis. 361.
57 Rapier v. Gulf City Paper Co., 77 Ala. 126; Potter v. Yale College, 8 Conn. 52; Goodrich v. Rogers, 101 111. 523; Scripps v. Crawford, 123 Mich. 173, 81 N. W. 1098; Duval v. Neal, 70 Miss. 288, 12 So. 145; Iilliendahl v. Stegmair, 45 N. J. Eq. 648, 18 AtL 216; Payne v. Freer, 91 N. Y. 43, 43 Am. Rep. 640; Clift v. Barrow, 108 N. Y. 187,15 N. E. 327; Lay v. Bouton, 73 Wash. 372, 131 Pac. 1153.
In Hartley v. Eagle Ins. Co., 222 N. Y. 178, 118 N. E. 622, 623, the court said: "The rule, as stated in the leading case of Roberts v. Trenayne (Cro. Jac. 507), was that, 'if the casualty goes to the interest only, and not to the principal, it is usury, for the party is sure to have the principal again.' It is difficult to see any logical reason for this rule, and in this country, while Roberts v. Trenayne, mpra, has frequently been cited, the rule has quite generally been modified to the extent of holding that if the casualty goes to the entire interest an agreement to pay interest in excess of the legal rate, depending upon a reasonable contingency which may result in no interest at all being paid, is not necessarily usurious, even though there be an absolute agreement to repay the entire principal. 29 Am. & Eng. Ency. of Law (2d Ed.) 486; 39 Cyc. 952; Potter v. Yale College, 8 Conn. 52; Clift v. Barrow, 108 N. Y. 187, 15 N. E. 327.
"Such arrangements, however, will not be upheld in any case where the purposes is to evade the statutes against usury, no matter what form the transaction may take. Meaker v. Fiero, 145 N. Y. 165, 39 N. E. 714; Quackenbos v. Sayer, 62 N. Y. 344; Birdsall v. Patterson, 51 N. Y. 43. The question in each case is, and necessarily must be whether the agreement be fair and reasonable, or a mere device to evade the usury statutes,"
If the contingency is wholly within the control of the lender, there is obviously no risk involved, and if in such an event the lender is to receive more than legal interest the transaction is usurious.58 On the other hand, if the contingency is within the control of the borrower, as he is bound to make no excessive payment unless he so chooses, the transaction is unobjectionable on the ground of usury,59 though it may be objectionable as imposing a penalty. If the security of a loan only is put at hazard, a transaction providing for more than legal interest is usurious.60 Obviously also, if the principal and full legal interest is absolutely payable, a stipulation for even a chance of advantage beyond that, is usurious.61
Cf. Blaisdell v. Steinfeld, 15 Ariz. 155, 186, 137 Pac. 555, where the court said: "In Weaver v. Burnett, 110 Iowa, 567, 81 N. W. 771, the court quotes Chancellor Walworth, in Col-ton v. Dunham, 2 Paige (N. Y.), 267, as follows: 'Whenever, by the agreement of the parties, a premium or profit beyond the legal rate of interest, for a loan or advance of money, is, either directly or indirectly, secured to the lender, it is a violation of the statute, unless the loan or advance is attended with some contingent circumstances by which the principal is put in evident hazard. A contingency merely nominal, with little or no hazard to the principal or the money loaned or advanced, cannot alter the legal effect of the transaction. . . . Where there is negotiation for a loan or advance of money, and the borrower agrees to return the amount advanced at all events, it is a contract of lending; . . . and whatever shape or disguise the transaction may assume, if a profit beyond the legal rate of interest is intended to be made out of the necessities or improvidence of the borrower, or otherwise, the contract is usurious.' See also the following cases: Scott v. Fabacher, 176 Fed. 229, 100 C. C. A. 147; Scott v. Lloyd, 9 Pet. 418, 460, 9 L. Ed. 178; Buttrick v. Harris, 1 Biss. 442, Fed. Cas. No. 2256; Inland Trading Co. v. Edgecombe, 57 Wash. 257, 106 Pac. 768."
58 Hungerford Brass, etc., Co. v. Brigham, 47 N. Y. Misc. 240, 95 N. Y. S. 867; Smith v. Nicholas, 8 Leigh (Va.), 330.
59 Spain v. Hamilton's Adm'r, 1 Wall. 604, 17 L. Ed. 619; Walton Guano Co. v. Copelan, 112 Ga. 319, 37 S. E. 411, 52 L. R. A. 268; Mutual Ben. Ins. Co. v. Davis, 115 Ky. 404, 73 S. W. 1020, 24 Ky. L. Rep. 2291; Taylor v. Buzard, 114 Mo. App. 622, 90 S. W. 126; Kilpatrick v. Germania L. Ins. Co., 95 N. Y. App. Div. 287, 88 N. Y. S. 628; Diehl v. Becker, 178 N. Y. App. Div. 12, 164 N. Y. S. 920; Hughes Bros. Mfg. Co. v. Conyers, 97 Tenn. 274, 36 S. W. 1093. Cf. Ford v. Washington etc. In v. Co., 10 Idaho, 30, 76 Pac. 1010, 109 Am. St. 92.
60 Chapman v. Clark, 5 Mackey, 527; Craig v. McMullin, 9 Dana, 311; Bang v. Phelps etc. Co., 96 Tenn. 361, 34 S. W. 516; Raynolds v. Carter, 12 Leigh (Va.), 166, 37 Am. Dec. 642; Knight v. American Ac, Co., 73 Wash. 380,132 Pac. 219. Cf. Blohm v. Han-nan, 82 N. J. Eq. 192, 88 Atl. 622.
61 Cleveland v. Loder, 7 Paige, 557; Leavitt v. DeLauny, 4 N. Y. 364, 369.
In Barnard v. Young, 17 Ves. 44, the plaintiff having borrowed a sum will not be made usurious, though the bonus and the reserved interest together exceed the permissible rate of interest.66 But if the bonus, though paid by a third party, is paid with the connivance of the borrower, the transaction is usurious.66