2 Tate v. Wellings, 3 T. R. 531; Smedley v. Roberts, 2 Camp. 607;, Stribbling v. Bank of the Valley, 5 Rand. 132; Barker v. Vansommer, 1 Bro. C. C. 149.
3 Bank of U. S. v. Owens, 2 Peters, 535; Bank of the Valley v. Stribling, 7 Leigh, 36.
4 Williams v. Williams, 3 Green (N. J.), 255. 5 Wright v. Wheeler, 1 Camp. 165, n.
6 Saunder's Case, Shep. Touch. 62; Douglass v. McChesney, 2 Rand. 109.
§ 727. Again, where the lender discounts the bill or note of the borrower, deducting more than legal interest, the contract will be void, if it be a mere cloak to cover a loan.4 But although the discounter is in such case generally restricted to taking merely legal interest, he may, nevertheless, charge a reasonable sum in addition as a remuneration for any trouble, expense, or inconvenience, to which he may be put.5 It should, however, clearly appear that the additional compensation was reasonable, and was not a mere device to evade the statute, or it will not be allowed.6 Thus, a banker, bill-broker, or other person, discounting a bill, may charge a reasonable commission for his trouble; but if the commission be unreasonable, or a mere pretence to obtain more than legal interest, the contract will be usurious. Where, therefore, the holder of a note for $1000 payable to himself, requested another person to get it discounted, who by indorsing it procured it to be done, and paid over the avails, except thirty dollars, which he retained for his indorsement and services, it was held that the transaction was usurious, and that the usury might be alleged in bar of a recovery of a subsequently substituted note.1 The mere fact, however, that interest on a bill of exchange is taken in advance, will not of itself make a loan usurious, if it be done bond fide and in the ordinary course of business,2 but the circumstances of the case may render it usurious. So, the advantage which the lender obtains by the difference of exchange between the place of loan and the place of payment, is not usury.3 But whether the transaction be a bond fide discount in the way of trade, or a loan of money made with an intent to exact usurious interest, is a question for a jury.4 It is not usury for the lender to exact as a condition of his loan, that the borrower shall also guaranty the payment of a debt due from some third party to the lender.5 Nor is it usury for the maker of a note to pay a consideration to a third person to indorse it and get it discounted at the bank; and the latter can recover on it.6 § 728. A bona fide sale of negotiable securities is, however, valid, for the mere inequality of price is not sufficient to vitiate a sale.7 So, also, the bond fide sale of one's credit by way of guaranty, or by making a note for another's accommodation, though for a compensation exceeding the legal rate, has been held not to be usurious, if the transaction be unconnected with a loan between the parties.1
1 East River Bank v. Hoyt, 32 N. Y. 119 (1865).
2 Whitney v. Tyler, 12 Met. 193.
3 Tyson v. Rickard, 3 Har. & J. 109; Comyn on Usury, sect. 15, p. 160.
4 Massa v. Dauling, 2 Str. 1243; Bank of U. S. v. Owens, 2 Peters, 537; Powell v. Waters, 8 Cow. 669; Matthews v. Griffiths, PeakC, 200.
5 Auriol v. Thomas, 2 T. R. 52; Hutchinson v. Piper, 4 Taunt. 810; Baynes v. Fry, 15 Ves. 120; Comyn on Usury, sect. 12; Lyman v. Morse, 1 Pick. 295, note; Thurston v. Cornell, 38 N. Y. 281 (1868).
6 Masterman v. Cowrie, 3 Camp. 488; Lee v. Cass, 1 Taunt. 511; Ham-mett v. Yea, 1 Bos. & Pul. 144; Scott v. Lloyd, 9 Peters, 440; Kent v. Lowen, 1 Camp. 178; Comyn on Usury, sect. 12; Stevens v. Davis, 3 Met. 211; Beadle v. Munson, 30 Conn. 175 (1861), explaining Jacks v. Nichols, 1 Seld. 178. And see Hutchinson v. Hosmer, 2 Conn. 341.
1 Steele v. Whipple, 21 Wend. 103. See also Seymour v. Strong, 4 Hill, 255; Seneca County Bank v. Schermerhorn, 1 Denio, 133.
2 New York Firemen Ins. Co. v. Ely, 2 Cow. 678; N. Y. Firemen Ins. Co. v. Sturges, 2 Cow. 661; Marsh v. Martindale, 3 Bos. & Pul. 154; Agricultural Bank v. Bissell, 12 Pick. 586; Utica Ins. Co. v. Bloodgood, 4 Wend. 652; Bank of Utica v. Phillips, 3 Wend. 408; Thornton v. Bank of Washington, 3 Peters, 40.
3 Eagle Bank v. Rigney, 33 N. Y. 613 (1865); Oliver Lee's Bank v. Walbridge, 19 N. Y. 134.
4 Supra, note 2; Marsh v. Martindale, 3 Bos. & Pul. 154; Masterman v. Cowrie, 3 Camp. 488; Lyman v. Morse, 1 Pick. 295, note.
5 Valentine v. Conner, 40 N. Y. 248 (1869). And see Thomas v. Murray, 32 N. Y. 605.
6 Chatham Bank v. Betts, 37 N. Y. 356 (1867); Van Duzer v. Howe, 21 N. Y. 531.
7 Powell v. Waters, 8 Cow. 669; Nichols v. Fearson, 7 Peters, 103; Cram v. Hendricks, 7 Wend. 569; Churchill v. Suter, 4 Mass. 156; Bridge v. Hubbard, 15 Mass. 96; French v. Grindle, 15 Me. 163; Braman v. Hess, 13 Johns. 52; Munn v. Commission Co., 15 Johns. 44; Lane v. Steward, 20 Me. 98; Holford v. Blatchford, 2 Sandf. Ch. 149.
§ 729. Contracts by which pompound interest is secured, are not, in themselves, necessarily usurious. And parties may agree to settle accounts at stated times, and to turn any balance of interest due at such times into principal.2 So, also, an agreement to pay interest annually or semiannually, making rests at such times, and to add the interest then due to the principal, and treat this whole sum as principal, is valid.3 So, also, where there is no antecedent agreement, and after interest becomes due, a promise is made to pay interest thereon, in consideration of forbearance, it is good.4 But if no antecedent agreement be made to settle accounts at stated times, or to make .rests, and then to turn the interest into principal, if the person to whom the interest is due lets the time when it is payable pass without exacting payment, he cannot, in an action on the contract, recover compound interest.1
1 More v. Rowland, 4 Denio, 264 (Beardsley, J., dissenting); Mazuzan v. Mead, 21 Wend. 285; Ketchum v. Barber, 4 Hill, 224.