§ 737. But where a contract is valid, and not usurious in its inception, any subsequent taking of more than legal interest will not render the original contract void, but only subject the party paying it to the penalty prescribed in the statute; that is, the usury attaches in such cases to the person, and not to the contract.1 So, also, if a new usurious contract be made to pay illegal interest on a contract or bond which was valid in its inception, the latter contract does not vitiate the former.2 And if a renewal note is avoided for usury, not affecting the original note, the latter may be recovered.3 If, therefore, one man, being already legally indebted to another, promise to forbear exacting such debt, on condition that the latter shall pay usurious interest on it, such subsequent contract is void, but it does not prevent the party from recovering the original valid debt.4 And if a note or security of any kind be originally given for a legal consideration, it cannot afterwards be rendered usurious in itself by any usurious sale or discount thereof, but the usury only attaches to the new contract or promise.5 So, if a valid claim is embraced in a subsequent security, which is invalid as being made upon usurious considerations, the valid claim is not made void, or in any way discharged.6
1 Ackland v. Pearce, 2 Camp. 599; Lowe v. Waller, 2 Doug. 736; Young v. Wright, 1 Camp. 141; Sauerwein v. Brunner, 1 Harr. & Gill, 477; Powell v. Waters, 8 Cow. 669; Bank of U. S. v. Waggener, 9 Peters, 399.
2 Clark v. Badgley, 3 Halst. 233; Brown v. Fulsbye, 4 Leon. 43; Shep. Touch. 63; Body v. Tassell, 3 Leon. 205; s. c. 1 Mod. 69; Roberts v. Trenayne, Cro. Jac. 507; Hammond v. Hopping, 13 Wend. 505.
3 Bridge v. Hubbard, 15 Mass. 96; Cuthbert v. Haley, 3 Esp. 22; 8 T. R. 390; Bank of U. S. v. Waggener, 9 Peters, 399; Reed v. Smith, 9 Cow. 647 J Powell v. Waters, 8 Cow. 669; Wickes v. Gogerly, 1 C. & P. 396; Hargreaves v. Hutchinson, 2 Ad. & El. 12; Brigham v. Marean, 7 Pick. 40; Moncure v. Dermott, 13 Peters, 345; Chapman v. Black, 2 B. & Al. 588; Walker v. Bank of Washington, 3 How. 62.
4 Moncure v. Dermott, 13 Peters, 345; Kent v. Walton, 7 Wend. 256; Cuthbert v. Haley, 8 T. R. 390.
5 Barnes v. Hedley, 2 Taunt. 184; Wright v. Wheeler, Peake, Ad. Cas. 175; s. c. 1 Camp. 165, note; Kilbourn v. Bradley, 3 Day, 356; Botsford v. Sanford, 2 Conn. 276.
§ 738. But although the mere fact that a contract contemplates the taking of more than legal interest originally, makes it void, yet it does not subject the party contracting for it to the penalty of the statute, unless it be actually taken.7 The penalty is incurred only by the actual reception of interest, and if it be actually taken, it matters not whether the contract were or were not usurious in its origin,8 the legality or illegality
1 Bank of U. S. v. Waggener, 9 Peters, 399; Floyer v. Edwards, 1 Cowp. 112; Cram v. Hendricks, 7 Wend. 569; Braman v. Hess, 13 Johns. 52; French v. Grindle, 15 Me. 163; Gardner v. Flagg, 8 Mass. 101; Thompson v. Woodbridge, 8 Mass. 256; Chadbourn v. Watts, 10 Mass. 121; Pollard v. Scholy, Cro. Eliz. 20; Gray v. Fowler, 1 H. Bl. 462.
2 Ibid.; Chitty on Cont. p. 612 a, note. • of the original contract affording no criterion of the liability of the parties to the penalty, and the only question being, whether an illegal rate of interest has actually been recovered. § 739. In the next place, as to the effect of an usurious contract upon the remedies of the parties. The general rule is, that where parties have made an illegal contract, knowing it to be so, no relief will usually be granted to them, either in law or in equity;l but they will be left in whatever condition the contract places them, the maxim being, In pari delicto potior est conditio defendentis. There are, however, some exceptions to this rule, and among them contracts for usury are admitted as an exception, on the ground of public policy.2 Although, therefore, an usurious contract for the payment of illegal interest is void, so that the lender not only cannot enforce it either at law or in equity against the borrower, but is subject to the penalty prescribed in the statute if he take illegal interest; yet the borrower cannot avail himself of the defence of usury, nor can he reclaim the illegal interest already paid, unless he actually pay, or offer to pay to the lender all that is bond fide due to him; that is, the principal actually lent, with the legal interest thereon.3 For although the borrower will be protected against usury, he will not be allowed to avail himself thereof for the purpose of taking advantage of the lender, and defrauding him of money actually advanced; the maxim being, that he who seeks equity must do equity.1
3 Farmers' and Mechanics' Bank v. Joslyn, 37 N. Y. 353 (1867); Crane v. Hubbel, 7 Paige, 413; Brown v. Dewey, 1 Sandf. Ch. 57; Billington v. Wagoner, 33 N. Y. 31.
4 Kamsdell v. Soule, 12 Pick. 126; Pollard v. Scholy, Cro. Eliz. 20; Bank of U. S. v. Waggener, 9 Peters, 400.
6 Cook v. Barnes, 36 N. Y. 520 (1867).
7 Fisher v. Beasley, 1 Doug. 237; Loyd v. Williams, 3 Wils. 261; Commonwealth v. Frost, 5 Mass. 53; Simpson v. Warren, 15 Mass. 460; Maddock v. Hammett, 7 T. R. 184; Pearson v. M'Gowran, 3 B. & C. 700.
8 Ibid.; Doe v. Brown, Holt, N". P. 295; Bank of U. S. v. Waggener, 9 Peters, 400.
1 1 Story, Eq. Jur. § 298; Tomkins v. Bernet, 1 Salk. 22; Smith v. Bromley, 2 Doug. 697; Collins v. Blantern, 2 Wils. 347; Worcester v. Eaton, 11 Mass. 368; M'Cullum v. Gourlay, 8 Johns. 147; Neville v. Wilkinson, 1 Bro. C. C. 543; Watts v. Brooks, 3 Ves. 612; Osborne v. Williams, 18 Ves. 379; St. John v. St. John, 11 Ves. 535; Howson v. Hancock, 8 T. R. 575.
2 Smith v. Bromley, 2 Doug. 695, note. In this case, Lord Mansfield said: "If the act is in itself immoral, or a violation of the general laws of public policy, there, the party paying shall not have this action; for, where both parties are equally criminal against such general laws, the rule is, potior est conditio defendentis. But there are other laws which are calculated for the protection of the subject against oppression, extortion, deceit, etc. If such laws are violated, and the defendant takes advantage of the plaintiff's condition or situation, there the plaintiff shall recover; and it is astonishing that the reports do not distinguish between the violation of the one sort and the other." Astley v. Reynolds, 2 Str. 915; Browning v. Morris, 2 Cowp. 790; Clarke v. Shee, 1 Cowp. 200.
3 Fanning v. Dunham, 5 Johns. Ch. 142; Fitzroy v. Gwillim, 1 T. R. 153; Hindle v. O'Brien, 1 Taunt. 413; Astley v. Reynolds, 2 Str. 915; Clarke v. Shee, 1 Cowp. 200; Mason v. Gardiner, 4 Bro. C. C. 436; Rogers v. Rathbun, 1 Johns. Ch. 367.
§ 740. If, however, the borrower offer to repay the principal borrowed, together with legal interest thereon, he may avail himself of usury as a defence to an action on a contract to pay more than legal interest.2 So, also, if he have already paid the money on such an usurious contract, he may reclaim the excess paid above the principal and legal interest, and no more;3 the necessity of his wants, and the duress of circumstances affording the reason for not applying to him the general rule applicable to a particeps criminis, namely, that the law will leave him where it finds him. The exceptional rule in these respects is the same, both in law and in equity, usury being permitted to him with the same limitation in both forums, as either a defence or a ground of relief. Where goods have been advanced for the borrower to raise money upon, he would only be bound to offer to pay to the lender the actual price received thereon, and interest, and not the value of the goods; for as money and not goods is the object of such a contract, the borrower is only bound to repay the money actually produced by the goods.4
§ 741. The right to avoid a contract for usury adheres only to the parties, and a stranger cannot avail himself of usury as a defence.6 Thus, a subsequent mortgagee cannot take advantage of usury in a prior mortgagee.6 But where a person is indirectly connected with the contract, as if he be a guarantor thereon, he is so far a party as to entitle him to the defence of usury.1
1 Ibid.; Scott v. Nesbit, 2 Bro. C. C. 649; 1 Story, Eq. Jur. § 301; Ex parte Skip, 2 Ves. 489; Benfield v. Solomons, 9 Ves. 84. 2 See cases cited supra.
3 1 Story, Eq. Jur. § 302; Smith v. Bromley, 2 Doug. 696, note; Browning v. Morris, 2 Cowp. 792; Bond v. Hays, 12 Mass. 34; Bosanquett v. Dashwood, Cas. t. Talb. 41; Pit v. Cholmondeley, 2 Ves. 567.
4 Barker v. Vansommer, 1 Bro. C. C. 151.
5 Ohio & Miss. Railroad Co. v. Kasson, 37 N. Y. 218 (1867); Williams v. Tilt, 36 N. Y. 319 (1867). And see Dix v. Van Wyck, 2 Hill, 522; Post u. Dart, 8 Paige, 640; Billington v. Wagoner, 33 N. Y. 31 (1865).
6 Mechanics' Bank v. Edwards, 1 Barb. 271; Stoney v. American Life Ins. Co., 11 Paige, 635.
§ 742. If a principal deliver money to his agent to loan on lawful interest, and the agent, without his knowledge, exacts also a bonus for himself, the principal is not affected thereby, and the loan as to him is not void for usury.2