Usury

The excess over the legal rate charged to a borrower for the use of money. Taking an illegal profit for the use of money.

Mae Kaekan v. Bank, 164 N. C. 24, 80 S. E. 184, 49 L. R. A. (N. S.) 1043.

Originally, the word was applied to all interest reserved for the use of money; and in the early ages taking such interest was not allowed. In the later Roman law, usury was sanctioned; and it is said that taking usury was not an offence at common law; Tyler, Usury 64; but see Ord. Usury 17. Unless there is a law limiting the rate of interest that can be charged for money, there can be no usury; Newton v. Wilson, 31 Ark. 484; Reynolds v. Neal, 91 Ga. 609, 18 S. E. 530; Lamprey v. Mason, 148 Mass. 231, 19 N. E. 350. The enactment of a usury law canndt affect prior contracts; Swint v. Carr, 76 Ga. 322, 2 Am. St. Rep. 44; Richardson v. Camptom can legalize it; Harmon v. Lehman, Durr & Co., 85 Ala. 379, 5 South. 197, 2 L. R. A. 589. A note void for usury in its inception cannot be enforced by an innocent purchaser for value; Littauer v. Rodecker, 59 Fed. 857, 8 C. C. A. 320, 19 U. S. App. 455. “The shifts and devices of usurers to evade the statutes against usury have taken every shape and form that the wit of man could devise, but none have been allowed to prevail. Courts have been astute in getting at the true intent of the parties and giving effect to the statute.”

Quackenbos v. Sayer, 62 N. Y. 346.

There must be a loan in contemplation of the parties; Nichols v. Fearson, 7 Pet. (U. S.) 109, 8 L. Ed. 623; Schermerhorn v. Talman, 14 N. Y. 93; and if there be a loan, however disguised, the contract will be usurious, if it be so in other respects. Where a loan was made of depreciated bank-notes, to be repaid in sound funds, to enable the borrower to pay a debt he owed, dollar for dollar, it was considered as not being usurious; Burton v. School Com’rs, 1 Meigs (Tenn.) 585. The bona fide sale of a note, bond, or other security at a greater discount than would amount to legal interest is not per se a loan, although the note may be indorsed by the seller and he remains responsible; Corcoran v. Powers, 6 Ohio St. 19; Newman v. Williams, 29 Miss. 212. But if a note, bond, or other security be made with a view to evade the laws of usury, and afterwards sold for a less amount than the interest, the transaction will be considered a loan; Munn v. Commission Co., 15 Johns. (N. Y.) 44, 8 Am. Dec. 219; Turner v. Calvert, 12 S. & R. (Pa.) 46; Corcoran v. Powers, 6 Ohio St. 19; and a sale of a man’s own note indorsed by himself will be considered a loan. Usury cannot arise from the purchase from brokers of a note at a discount; Chase Nat. Bank v. Faurot, 72 Hun 373, 25 N. Y. Supp. 447. Nor is there usury in a transaction for the sale and repurchase of securities, where there is no loan; Struthers v. Drexel, 122 U. S. 487, 7 Sup. Ct. 1293, 30 L. Ed. 1216. It is a general rule that a contract which in its inception is unaffected by usury can never be invalidated by any subsequent usurious transaction; Nichols v. Fearson, 7 Pet. (U. S.) 109, 8 L. Ed. 623; Williams v. Reynolds, 10 Md. 57. On the other hand, when the contract was originally usurious, and there is a substitution by a new contract, the latter will generally be considered usurious; Bridge v. Hubbard, 15 Mass. 96, 8 Am. Dec. 86; but a note or other contract for the payment of money is not usurious and void for providing for the payment of more than the statutory interest after maturity; Green v. Brown, 22 Misc. 279, 49 N. Y. Supp. 163. There must be a contract for the return of pal only, depend upon a contingency, there can be no usury; Spain v. Brent, 1 Wall. (U. S.) 604, 17 L. Ed. 619; but if the contingency extend only to interest, and the principal be beyond the reach of hazard, the lender will be guilty of usury if he receive interest beyond the amount allowed by law. Where the principal is put to hazard in insurances, annuities, and bottomry, the parties may charge and receive greater interest than is allowed by law in common cases, and the transaction will not be usurious; U. S. Bank v. Owens, 2 Pet. (U. S.) 537, 7 L. Ed. 508.

See Tiffany v. Boatman’s Institution, 18 Wall. (U. S.) 375, 21 L. Ed. 868.

To constitute usury, the borrower must not only be obliged to return the principal at all events, but more than lawful interest; this part of the agreement must be made with full consent and knowledge of the contracting parties; 3 B. & P. 154. The fact that the usurious interest is paid in notes of another party, instead of money, is immaterial; Pritchard v. Meekins, 98 N. C. 244, 3 S. E. 4S4; Savannah Sav. Bank v. Logan, 99 Ga. 291, 25 S. E. 692. When the contract is made in a foreign country, the rate of interest allowed by the laws of that country may be charged, and it will not be usurious, although greater than the amount fixed by law in this; Story, Confl. of Laws § 292. Parties may contract for interest according to the place of the contract or the place of performance; Miller v. Tiffany, 1 Wall. (U. S.) 298, 17 L. Ed. 540; Houston v. Potts, 64 N. C. 33. Where there is no agreement made, the law of the place of the contract governs, in the absence of any intent to evade the usury laws; Merchants’ Bank v. Griswold, 72 N. Y. 472, 28 Am. Rep. 159. A note made, dated, and payable in New York, without intent of maker that it should be elsewhere discounted, if negotiated in another state at a rate of interest lawful there, but excessive in New York, is usurious; Rorer, Int. St. Law 112; Dickinson v. Edwards, 77 N. Y. 573, 33 Am. Rep. 671. See Conflict of LAW'S. To constitute usury both parties must be cognizant of the facts which make the transaction usurious; Powell v. Jones, 44 Barb. (N. Y.) 521; but a mistake in law will not protect the parties; Maine Bank v. Butts, 9 Mass. 49; though a miscalculation will, it seems; Bank of Utica v. Smalley, 2 Cow. (N.- Y.) 770, 14 Am. Dec. 526. If a contract be usurious in itself it must be taken to have been so intended; Burwell v. Burgwyn, 100 N. C. 389, 6 S. E. 409. An agreement by a mortgagor to pay taxes on the mortgage debt is not necessarily usurious; Banks v. Mc Clellan, 24 Md. 62, 87 Am. Dec. 594; nor is a clause in a bill of exchange, providing attorney fees for Dorsey v. Wolff, 142 111.

589, 32 N. E. 495, 18