§ 721. In the next place, usurious contracts are void. Usury is denned by Sir Edward Coke to be "a contract upon a loan of money, or giving days for forbearing of money, debt, or duty, by way of loan, chevisance, shifts, sales of wares, or any other doings whatsoever."1 In the usual acceptance of the term it signifies the illegal rent of money.
§ 722. Usury was held in abhorrence in England at as early a date as the reign of Alfred, and. the severest powers of the king and the church were exerted against the usurer.2 The Jews, who chiefly pursued the trade in money, were on this account not only branded with infamy and disgrace, but were fined, imprisoned, and banished the realm, while the Christians were forbidden, under the severest penalties, from pursuing it. It seems to be doubtful, however, whether all loans of money for rent were prohibited by common law, or whether only Jewish usury, which was forty per cent, was prohibited. Sir Edward Coke says, that "it appeareth that, by the ancient laws of the realm, usury was unlawful and punishable."3 consequently a contract made to favor and protect this commerce is peculiarly unlawful, and can raise no obligation.' If our law be justifiable in protecting these transgressions, it can be only on the plea of necessity. But where is the necessity ? Shall we be told that it is impossible to ascertain in the English courts the complex provisions of another country's revenue law ? Surely this argument can avail but little, when it is recollected that in all cases where the argument is not convenient, the law of another country, however complex, is the rule by which contracts negotiated in that country are tried and construed. It may be true that the rule of our law was adopted by way of retaliation for the illiberal conduct of other states, and is continued from a cautious policy. But a cautious policy in a great state is but too often a narrow policy; and, after all, the best policy for a state, as well as for an individual, will perhaps be found to consist in honesty and honorable conduct. Indeed, the system is so directly opposite to the clear principles of right feeling between man and man, that nothing could have withheld the states of Europe from concurring for its total abrogation, except the smallness of the gain or loss that attends upon it." See also La Jeune Eugenie, 2 Mason, 459, 461.
1 3 Inst. 151, c. 70.
2 Comyn on Usury, 2; 2 Roll. Abr. 800; Saunderson v. Warner, 2 Roll. 240. 3 3 Inst. 152.
And the authority he cites seems to establish his assertion. But Chief Justice Hale thought that all usury was not against common law, but only Jewish usury.1 At all events, by the statutes of 3 Henry VII. and 11 Henry VII., all usury is, in the words of Sir Edward Coke, "damned and prohibited." After the enactment of these statutes, however, public opinion began gradually to change upon this subject, and in the thirty-seventh year of the reign of Henry VIII. an act was passed sanctioning the taking of interest on loans of money, and limiting it to the amount of ten per cent per annum, but providing that any person taking more than such sum should forfeit for every offence the treble value of the money, etc, be forborne, and suffer imprisonment. But the effects of this statute not being found to be beneficial, or to serve to prevent excessive usury, it was repealed by the statute 5 & 6 Edward VI. ch. 20, and usury was entirely forbidden, under penalty of a forfeiture of the. sum lent, and of the usury. The statute of 13 Elizabeth, ch. 8, re-established, however, the statute of Henry VIII., and fixed the legal rate of interest at ten per cent. This percentage was afterwards reduced by the statute of 21 James I. ch. 17, to eight per cent; by the 12th of Charles II. ch. 13, to six per cent; and by the 12 Anne, ch. 16, to five per cent, which at present regulates the law of interest in England. The rate of interest permitted by statute in the United States ranges, where usury laws prevail, at from six to ten per cent.
§ 723. In order to constitute the offence of usury, there must be, 1st. A loan; 2d. It must be for more than legal interest; 3d. The principal must be to be returned at all events.
§ 724. In the first place, there must be a loan. And it is not a loan of money for A. to purchase of B. a demand he has against C, though at C.'s request, and it is not usury for C. to secure the debt to A., although the latter purchases the claim at a discount.2 A contract, not for the loan of money or goods, nor for the forbearance of an existing debt, cannot be usurious.3 It is not, however, necessary that the transaction should be a formal loan; for if it be, to all intents and purposes, the same thing as a loan, it is of no consequence that it is effected under cover of a fictitious sale, or of any other mere formality of proceeding.1 Thus, where B., through an agent, applied to C. to borrow a sum of money at an interest of fifteen per cent per annum, to be secured in a mortgage and lot; and 0. replied that he was willing to advance the money, but would have nothing to do with a mortgage, but that he would purchase the property for the sum required, and would rent it to B. for a rent equivalent to fifteen per cent on the sum advanced, with a privilege to B. to redeem the property for the sum advanced on paying up the rent; and this proposition was acceded to; it was held to be a usurious contract, the form in which it was put being merely a device for the evasion of usury.2 So, also, wherever money and goods are advanced together, or goods are advanced alone, to be taken at a specified price; and at the end of a certain time, a sum equal to the price at which the goods are valued is to be returned, together with the money, the contract will be usurious, if it be manifestly intended as a loan, and if the value affixed to the goods be nominal or excessive, so as to have the effect of usury. Thus, where the plaintiff, being desirous to raise a sum of money, applied to B., who advanced him a certain number of silks to sell and raise money upon, for which the plaintiff gave a note for £2224, and the goods were sold under the direction of the defendants for £799; it was held, that this contract was in substance an usurious loan, and was void.3 Again, the mere forbearance