Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924022465029 KD 1740?K29" """"""' """"^ * ^IDlTlSfY.,.?.' "'^ history and law of usur 3 1924 022 465 029 A S U M M 1 R -Y OF THE HISTORY AND LAW USURY, WITH AN EXAMINATION OF THE POLICY OF THE EXISTING SYSTEM, SUGGESTIONS FOR ITS AMENDMENT, TOGETHER "WITH A COLLECTION OF STATUTES. It is better to mitigate TTsory by declaration, than to suffer it to rage by connivance. LoBD Bacoit. BY JAMES BIRCH KELLY, OF THE mifEB TEMPIe'^'" PHILADELPHIA: T. & J. W. JOHNSON, LAW BOOKSELLERS, NO. 197 CHESTNUT STREET. 1853. ///m5 ■ ADVERTISEMENT. From the termination of the late war, and more especially from the passing of the Eeform Bill, public attention has been constantly drawn to the correction of whatever has, by lapse of time, become unsuited to our present circumstances. The subject of Usury has, in common with others, attracted its share of notice, without, however, producing any other result than a general and increasing conviction of the necessity of some material alteration in the existing law. That a change more extensive than any that has yet been made must soon take place seems generally to be admitted, but considerable diversity of opinion exists, as to its nature and extent. Those who recommend the total Repeal of the Laws relating to Usury, look more to the advantages of Trade and Commerce than to the interest of the Landed Proprietor, while others, who look alone to the dangers to be apprehended by the Aristocracy, forget the Trading part of the Com- munity. That the suggestions of the Author will reconcile those in- terests he cannot pretend to determine, but it will be to him a source of no small gratification, if they should, in any degree, contribute to so desirable an end. No evil consequences appear to have followed the alteration made in the Law during the last Session, by virtue of which Bills and Notes having no more than three months to run, may be discounted at any rate of interest, and the experiment may therefore be regarded as affording a safe and excellent ground-work for further change ; for which, indeed, repeated Parliamentary discussions have prepared the public mind. In 1832, a Bill for the alteration of these Laws was introduced into tthe House of Commons, by W. A Maekinnon, Esq., M. P. for Lyming- ton ; but, from the pressure of business, he was unable to proceed so far as to ascertain the feeling of the House. To this able and enlightened Member the Author is indebted for many useful hints ; and, while ac- knowledging them, with unfeigned pleasure, cannot but express his satis- faction that the cause has regained so temperate and efficient a supporter. IV ADVERTISEMENT. Since that period, several notices of a similar nature, whicli have been given by other Members, have been suffered to drop. A like notice was given for the ensuing Session, when it is hoped public expectation may not again be disappointed, nor so favourable a time for considering this important question be allowed to pass without the Legislature coming to a safe and satisfactory decision on its merits. PREFACE, In offering this work to the Public, it has been the object of the Au- thor to give a plain and concise Summary of the History of Usury in England ; and a statement of the Law, as defined by the decisions of the Courts at Westminster Hall. He is not aware of the existence of any very recent treatise on this subject. The last he has met with is by Mr. Comyn, in 1817; since which period, an Act of Parliament respecting Bills of Exchange, so far as they are affected, by Usury, in the hands of third parties, and two Acts explaining and amending the 14 George III., relative to Foreign Interest, as well as the recent Clause introduced into 3 & 4 William IV. c. 98, authorising the discounting of Bills and Notes not exceeding three months date, or which have not more than three months to run, at any rate of interest that may be agreed on, have materially altered the Lawj it is therefore, obvious, that many principles and decisions cited in for- mer publications as authority must now have ceased so to be. These observations are made by the Author ex necessitate rei, with no view to lessen the merits of any of the learned writers who had preceded him, much less to invite a comparison between their productions and his own, but only to show that room is made, by these alterations, for a new Treatise on the subject of Usury. In dividing the work into Contracts and Agreements, which have for the most part, been deemed within the Satute and Usurious, and those which have in general not been so considered, he is aware how difficult it is to class every case distinctly under the head to which it may be appli- cable; but notwithstanding these objections, he trusts they will be counter- balanced by the advantages of the arrangement. In the fifth Chapter will be found information as to the relief from Usurious Contracts and Engagements, which may be obtained on appli- VI P E E P A C E. cation to the Courts of Law and Equity, with the mode of proceeding in each. In the Sixth, the means to be used for enforcing the Penalties incurred under the Statutes, and the Evidence relative to Actions qui tam are exjilained. Endeavour has been made to ensure accuracy, by a careful examina- tion of the authorities referred to, and the language of Judges has, in all cases been made use of, where it has been found either establishing new, or confirming or refuting prior principles or decisions, in order that the reader might rather be left to draw his conclusion from the opinions expressed by the Courts than to trust to any explanation of them. CONTENTS. The pages referred to are those between brackets [ ]. PART I. Introduction. , . . . CHAPTER I. Summary of the History of Usury i. etc. CHAPTER II. Of Agreements and Transactions which have for the most part been deemed within the Statute, and Usurious. Sec. 1. Where the borrower has been furnished with Goods instead of Cash ....... 2. Discounting Bills, not of a Mer'caiitile Nature 3. Where an Extra-charge has been made for Brokerage, &c, 4. Compound Interest on Mortgages, &c. 5. Where the Risk of losing the Principal is slight. . 6. Where the Interest only is risked 7. Retiring Partners ..... 8. Stipulations made on the Transfer of Stock, by way of Loan 9. Where something besides Money has been given or con tracted for in consideration of the Loan . 34 41 43 47 49 50 51 53 55 CHAPTER m. Of Agreements and Transactions which for the most part have not been deemed Usurious. Sec. 1. Where Usury is incurred by mistake 2. Where the Principal is bona fide hazarded 3. Post Obit Bonds .... 4. Loans on Contingencies 5. Where the Transaction is by way of Annuity 6. Usage of Trade, Prompt Payment, &c. 7. Where there is a Penalty for Non-payment 8. Foreign Interest .... March, 1852.— 30 58 60 62 65 66 72 76 77 Vin CONTENTS. CHAPTER IV. Consequences of Usury. Sec, 1. Where Securities are void ..... 80 2. Renewed or substituted Securities .... 83 3. How third Parties not privy to the Usury, are affected by it 86 4. Sureties, and how affected by Usury ... 88 5. Consequences of Usury . . . . . 90 CHAPTER V. Relief in Cases of Usury. Seo. 1. Relief from Usury at Law ..... 93 2. Relief from Usury in Equity .... 95 3. Bankruptcy ...... 99 4. Evidence on Usurious Contracts .... 101 CHAPTER VI. On the Penalties of Usury. Sec. 1. Who are liable to Penalties . • . . 105 2. Proceedings for Penalties and Limitations of Actions qui tam 107 3. Where the Action must be brought . . . 109 4. Compounding Actions qui tam , . . .110 5. Evidence in Actions for Penalties . . . . Ill 6. Indictment . . . . . . .112 PART II. ■Observations on the Policy of the Usury Laws, with suggestion for their Amendment ...... 160 Index ......... A TABLE ow THE CASES CITED. The pages referred to are those between brackets [ ]. Page Abrahams v. Bunu 91, 111 Ackland v. Pearce 86 Ainsworth ex-parte 74, 100 Ancaster (Duke of) v. Picket 35 Anonymous Case 101 Anderson v. Maltby 52 Ashton V. Longes 103 Astley V. Reynolds 95 Auriol V. Thomas 44, 11 B. Baker v. Hellish 91 Ballard v. Oddey 59 Bangley, ex-parte 100 Barclay v. Walmsley 43 Barker v. Vansommer and another 39, 96, 91 Barjeau v. Walmsley 90 Barnes v. Hedley 84, 99 V. Worlich 41 Barnard v. Young 54 Barnett v. Tompkins 82 Bassett v. Prowe 89 Batty V. Lloyd 63 Baugh V. Oradocke 102 Becher's Case 16 Bediugfield v. Ashley 62, 65 Beete v. Bidgood 49 Bent V. Baker 111 Bernard v. Fitzhouse 93 Bernard, Lord v. Saul 93 Berny v. Pitt 63 Bevan ex-parte 49 Bladd V. Featherstone 110 Bodily V. Bellamy IS Body V. Tassel 80 Boldero v. Jackson 55 Borrodaile v. Middleton 106 Bosanquet v. Dashwood Bowyer v. Bampton Brand v Gumming Brard v. Ackerman Brooke v. Middleton Brown v. Barkham ■V. Fulsbye Bruce v. Hunter Buckler v. Millard Buckley v. Gilbank Burton's Case Bush V. Buckingham Button V. Downham (or Droman) 9T 86 97 102, 103 46, 106 47 80 49 59 59 50, 76 59 50, C. Caliot V. Walker Carstairs v. Stein Cecil V. Sutton and another Chambers «. Goldwin Ohauncey v. Tahourden Chapman v. Black Chesterfield v. Janssen 40, 61, Chippendale v. Thurston Clarke v. Shee Cleve V. PoweU Cole V. Gibbons Coombe v. Miles Cotterell a. Harrington Crook V. Jadis Cuthbert v. Haley D. Dagnall v. Wigley Dalbiac v. Dalbiao Daniel v. Cartony Davis V. Hardacre Davison v. Pitt 65, 89 44,49 44 39, 96 48 97 84, 85 64, 65, 71 54 94 102 40 38 71 88 84, 85 88 96 86 37 55 TABLE OF OASES. Dwar V. Span Dixie's (Sir Wolloston) Case Doe V. Barnard V. Chambers V. Goooh Duffen V. Smith E. Eaton V. Bell and others Eden's Bankrupt Law Edmonson v. Popkin Bkins V. Bast India Company F. . Farquharson v. Barstow Fereday v. Wightwick Fisher v. Beazley Fitzroy v. Gwillim Flight V. Chaplin Floyer v. Edwards V. Sherard Forrest v. Elwes Fountain v. Grymes Fussill V- Brookes G. Gardner v. Morefield Garret v. Foot Gilpin V. Enderby Glassfurd v. Laing GroaA's (Dr.) Case Goldsmith v. Bunn Gray v. Fowler Gwynne v. Heaton Gwyn ex-parte H. Hammet v. Yea Harris v. Boston Harrison v. Hannell Hart V. Draper Hattam v. Withers Harvey D.Archbold Heathcote v. Paignon Henson ex-parte Hindle v. O'Brien Hodges V. Lovatt Holland v. Pelham Hutchinson v. Piper Hylton V. Hylton I. Irnham v. Child Jennings ex-parte Jestons V. Brooke Joy V. Kent Kent V. Lowen T8 lOT 55, 81 56 11 102 49 99 82, 94 11 54 12 81, 106 95, lOT 66 42; IS 61 54 6t 80 109 62, 16 53 59 Tl 86 83, 91 40 46 45 44 ,:82 110 103 11 98 46 83 95 ■70 >44 98 83 51 62 46, 87, 103 King V. Clifton King V. Eraser King V. Hamlet Lamego v. Gould Lawley v. Hooper Le Blanc v. Harrison Lee V. Cass Lloyd V. Williams Long's Case Long V. Wharton jLowe V. Waller . Lowes «. Mazeredo :-.-, M. Machin v. Delaval Maddock v. Hammett V. Eumball Mallory v. Bird Manners v. Postan Merchant ». Dodgin and others Marsh v. Martindale Mason v. Abdy ■ V. Gardiner Massa v. Dauling Masterman v. Cowrie Matthew v. Lewis Matthews v. Griffiths : Maugham v. Walker , Meere's (Sir Thos.) Case ■ Moody V. King Moore v. Battle Morris v. Jones Morissett v. King Morse v. Wilson Murray v. Harding N. Naish ex-parte Nash V. Duncombe Neville v. Wilkinson Newall V. Jones Nicholls «. Lee 0. 110 109 40, 97 65 68, 69 56 46 41, 107 110 62, 65 36, 86 87 59, 82 106 55 106 57 85 59 50 96 41 44 64, 83 44 112 47 103 55 70 52 53 67, 68 70 -loa 94 49 84 Oliver v. Oliver 26, 27 Qssulston (Lord) v. Lord Yarmouth 47 Owen V. Barrow 112 P. Parr v. Bliason 45, 87 Patrick ex-parte in're Holthouse 45, 100 Peachy v. Osbaldestone 43 ■ Pearson v. M'Gouran 109 Ferryman v. Steggall and another 103 '; Phillips V. Cocagne 91 V. Weague 83 Pickering v. Banks 84 TABLE OF OASES. XI Pigou ex-parte in re Haa-vey 75, 100 Scrivener ex-parte 96, 99 Pike V. Ledwell 54 Scryme v. Rybot 39 Pitt V. Cholmondeley 98 Scurry v. Freeman 108, 109 Plumbe V. Carter 74 Sharpley v. Hurrell 60 Pollard V. Scholey 57 Shep Touch 55 Polwarth V. Cooke 39 ,96 Skip ex-parte 96, 99 Potkia's Case 89 Smedley v. Roberta 55 Pratt V. WUley. 36 Smith V. Bromley 94 PvP'^toTi 7) .Tflplrssmr 84 111 56 X XCobVill (/• Vl3l\jDk.O\JXt Solarte v. MelTille Q. Stanton v. Knight Symonds v. Cockerill 92, 98 71 Queen (The) v. Dye 113 T. E. Tanfield v. Pinch 71 Regina v. Dye 113 Tarleton v. Backhouse 48 V. Sewell, alias Beaug 84 ,94 Tate V. Wellings 55 Begnlae Generates &3, 110 Thompson ex-parte 99 Reynolds v. Clayton 76 Thompson v. Powles 46, 77 Rex V. Drury 71 Turner v. Hulme 85 V. Hendricks 108 Twisleton v. GrifBths 40 V. Rout 107 V. Upton 113 W. V. Walker 107 Rich V. Topping 36. 103 Wade V. Wilson 106 Richards v. Brown 50 , 66 Walker ex-parte in re Petrie 45 Roberts v. Trenayne 51, 81 ,83 Wharton v. May 64 Roberts v. Goff 83 ,94 White and another v. Wright 54, 81 Robinson v. Bland 90 Whitmore v. Francis 97 „, "n/Tn-n- 39 Wickes V. Gogerley 84 Rowe V. Bellasis 71 Williams v. Hedley Winch V. Fenn 94 44 S. Wood V. Greenwood Wright V. Laing 109 )2, 98, 108 Sauuder's Case 5.5 Wright V. Wheeler 56, 84, 99 Saunderson v. Warner 7 Wyatt V. Campbell 88, 104 Soome V. Glean 61 Scott V. Brest 56, 109 Y 91 V. Nesbitt 96 ,97 Young V. Wright 86 ON THE HISTORY OF USURY. CHAPTEK I. A SUMMARY OF THE HISTORY OP USURY IN ENGLAND. Usury is said by some to be derived from the Latin words ' Usu^ and '■Mris,' and by others, from 'Usu,^ and ' Rei,' and was originally defined to signify money given for the use of money, whereby a gain was made by contract above the principal by way of remuneration of the loan ; and this not only applied to money, but to goods, corn, merchandize, or any thing else : if of the latter it was commonly termed increase, and was uniformly prohibited in all Christian countries, and in England both by the common and statute law. (a) It may now, however, (since under restrictions it has been sanctioned by the legislature,) be defined as the taking of a rate of interest above what is permitted by law. *" Interest, therefore, is the gain allowed by law for the use of [ *2 J money." " And Usury, the extortion of any sum beyond what is legal." In its former sense. Usury was at an early period of our history in- variably stigmatised by ecclesiastical writers as contrary to the divine law, and by the canons of the church it was forbidden and punished, as sinful and against scripture. (S) Their objection to it seems to have arisen from the then current construction of the law of Moses, by which it is prohibited to the Jews, in their dealings with each other, in the following words : [a) Paley Mor. Phil. '■'■ if a woman should lend her neighbour two egges to have three againe, were it not damnable TIsurie ! !" — Fenton. [b) TJsurarius monitus non desistens si clericus, ab officio et beneficio suspenditur, si laicus, excommunicatur. Decret. 5 lib. tit. 19, de Usuris, Alexander In Concilio Toronem 1180 RomEe. Corp. Jur. Canonioi. It was ranked with heresy, schism, incest, and adultery,— sentence of excomnm- nication was to be denounced by a Bishop or Prebendary at least: Canones Synodi, London, Anno 1584, t. 4, and by Hugo Cardinalis said to be a Sadvmia Naturoe. 14 KELIiY ON USURY. " Thou shalt not lend upon Usury to thy brother, Usury of money, " Usury of victuals, Usury of any thing that is lent upon Usury. " Unto a stranger thou mayest lend upon Usury, but unto thy brother " thou shall not lend upon Usury. That the Lord thy God may bless " thee in all thou puttest thine hands to, in the land whither thou goest " to possess it."(f) According to a learned commentator on the sacred volume, the foun- dation otthis precept was to impress on the minds of the wealthier Jews „, the necessity of *kindness and benevolence to the poor of their L -■ own nation, who, being thus gratuitously assisted, might be en- abled, under divine Providence, to better their condition ;((^) and Sir Edward Coke conceives it was permitted to be taken of strangers only, as a mean to exterminate or depauperize them, so as they should not be enabled to invade or injure Grod's people. (e) It is clear that by " strangers," were meant the Canaanites and all those neighbouring tribes iJfith whom ■ the Jews might trade, and have any intercourse or transactions, for their mutual advantage. The Reverend Fathers alleged that as money was in its nature barren and unfruitful, and only instituted by mankind for the purpose of ex- change it would be monstrous to make it productive, which would in fact pervert it from the very purpose it was originally intended to serve, its becoming a source of profit having never been contemplated. One of these holy men, St. Basil, who flourished in the fourth century, expa- tiates with virtuous indignation on the unnatural and increasing fertility of money when placed out at Usury, <' brought and bringing forth (says "he, with pious horror,) on the same day, though not gifted by the god "of nature with genitive or procreative faculties."(/) Indeed in such general detestation was the practice of Usury held by the Church, that it was decided in the counsel of Lateran that it could not be allowed, although the profit were applied for the redemption of captives, r »4. T *The latter position of its natural sterility is said to have been ■- J derived from Aristotle, (g') though the passage relating to it has been suspected to be spurious. (^) Its fallacy has been ably exposed by a modern writer, (i) On the other hand there were not wanting those who contended (and their opinion has long since been generally adopted,) that the precept of Moses was to be understood in a political and not in a moral sense, as it did not entirely forbid the taking of Usury as a thing malum in se, but only restrained the Jews from receiving it of their brethren, while, by express words it gave them liberty to demand it from "strangers." " A distinction," observes an eminent writer with much force, " which could (a) Deut. 23, c. 20, 21 v. 25 Lev. 360. Psalms 15 ; 50. fd] Lewis. (e) 3 Inst. 151. (/) Vid. Appendix, A. 1. ■" re) Aristot. de Politica, lib. 2, o. 10, 8to. edit. ■ Ih) Black. Oomm. vol. 2, 450. (i) Bentham's Defence of Usury, 101. Calvin's Epist. 383. The ancient Fathers, Lactantius, Basil, Chrysostom, Augustin, &c., as well as hosts of Councils and Casuists, were unanimous in their condemnation of Usury. Gibb. Dec. and F. of Bom. Bmp. vol. 5, p. 376 note. USURY IN ENGIAND. 15 « hardly have been admitted into a law intended by the divine author to be of moral and of universal obligation." (^) _ As to money being naturally barren and unfruitful, the same might •with as much truth be affirmed of many other kinds of property into which it may be converted, as houses, carriages, and the like. These are equally unprolific, and yet it has never been said that it would be unlaw- ful for their owners, by lending them on hire, to derive a reasonable profit for their use; so if a man were to borrow a daric of another, though *it might be barren and not beget another daric, yet, if the bor- i-^i,-, rower were to buy with it two ewes and a ram, it is probable that L -J at the end of a year they would not prove barren, but that he might have two or three lambs in addition ; and if the three sheep were again sold to repay the sum borrowed, and he were to give a lamb for the use of the money, he would still be a gainer by two, or one lamb at least, by the bargain ; an idea, says the able and ingenious author of the Defence of Usury which does not seem to have occurred to Aristotle or his dis- ciples. (?) On these grounds it has been maintained that there is clearly nothing in the divine precept, (which was evidently intended for the Israelites alone,)(»i) to prohibit any Christian community from making such regu- lations for the convenience and benefit of society *as would allow r-^n-, of money becoming as profitable to its owner as any other species L -^ of his possessions; an opinion which is strengthened by the fact, that the practice is nowhere forbidden in the New Testament, which on the con- trary seems indirectly to sanction it,(n.) as in the Grospel of St. Luke we (k) Pal. Mor. and Polit. Phil, vol. 2, book 3, c. 10. Blac. Comm. vol. 2, p. 454. (I) Bentham's Def. of Us. 101. Sir Eob. Filmer on Us. Sir Rog. Twisden's Edit. p. 102. That money begetteth not money is a weake argument, for the gaine that is raised out of any thing is not always the fruit of that same thing, but rather of his skill and Industrie that doth employ it ; the Earth itself, without the labour of him that useth it, will yield in small gaine. Contractus ubi frater non Iceditur, charitate non repugnat. Ex. of Neshech. It may be remarked as singular, that while Aristotle's notable doctrine of the natural barrenness of money is adopted and quoted by most writers in this and other countries of Europe, down to the l7th century, it never had any influence in Greece. — For his opinion, vid. Appendix A. 2. (m) Michaelis observes, that the Mosaic Law contains three several Statutes on the subject of Interest, which are not, as is commonly imagined, precisely of the same import. In the first. Exodus xxii. 24, mention is made of poor Israelites only, and from them the taking of Interest is prohibited. In the second, Leviticus xxv. 35, Israelites that have waxen poor are still the only parties spoken of, and Michaelis infers, that hitherto it was allowable to take Interest of an opulent Israelite, but that in consequence of their laws being evaded by chicanery. Interest among Israelites was totally forbidden in the fortieth year after the Exodus : — he argues that the prohibition of Interest was more equitable and expedient among, the Jew- ish people than it would be among us, from the summary nature of Mosaic justice, from the greater certainty of the security, inasmuch as the Israelitish debtor was generally possessed of landed property, and if not, it was in the creditor's power to seize his person, his wife, and children, from the fact that the borrower was generally poor, which is not always the case in modern times, and that the lender bad not those means of profitably investing his money which exist in our days. On the whole, the German critic regards loans among the Jews as Alms-deeds, the subject of exhortation but not of legal constraint. See Commentaries on the Laws of Moses. (n) St. Luke, c. 19, v. 22. St. Matthew, c. 25, v. 21. 16 KELLYONUSUKY. find our Saviour, though in a parable, thus expressing himself: '' Where- " fore then gavest thou not my money into the bank, that at my coming "I might have required mine ovs^n with Usury." In St. Matthew it is still stronger; "Thou oughtest therefore to have "put my money to the exchangers, and then at my coming I should have " received mine own with Usury." We may rest satisfied, that this iti- junction would not have been given even parabolically if it were either immoral or contrary to the Mosaic law. In support of this view of the subject, there exists the testimony of two learned divines who differed widely in their religious tenets, St. Thomas Acquinas and Calvin, the ^^ -, latter of whom changed *his previous opinion, and candidly admit- L ' ted that he knew of no scriptural authority by which Usury was altogether condemned, (o) and many other learned and pious men were of opinion that Usury was only unlawful, even among the Jews, when con- taminated by oppression, cruelty or extortion. (jj) Lord Chief Justice Lea, in the time of James I. seemed to think that it was only biting Usury, such as was practised by the Jews, that was illegal at common law, but that Usury, such as 10 per cent., was not condemned but tolerated, if a man chose to endanger Ms conscience. He adds, that divines were not agreed on the subject, some of them holding that griping Usury alone was forbidden, (g') r *» n *The difference between the use and abuse of Usury has been L J well laid down by Grrotius, who thus expresses himself on this sub- ject : " if the compensation allowed by law does not exceed the hazard "run, or the want felt by the loan, its allowance is neither repugnant to " the. revealed nor the natural law ; but if it exceeds these bounds then. " it is oppressive Usury, and though the municipal laws may give it im- " punity they cannot render it just."(rt In the dark ages, however, when learning was confined to the monastery, and commerce almost unknown, the former reasoning prevailed, and accordingly the severest denuncia- tions were thundered by the church against this " horrible and damna- ble sinne," as it was termed. (s) And it will be seen hereafter, by the recital of some of the acts of parliament relating to it even of a more 'Ml C , St. Thos. Acq. Op. de TTsur. c. 4. — nulla iestimonio, says Calvin, " soripiurix I constat usuras omnino damnatas esse." Calv. Epist. de Usur. { p) This seems now to be clearly settled, for among the twelve questions sub- mitted to the Grand Sanhedrin of the Jews, summoned at Paris by Bilonaparte in 1806, were the two following: — XI. Is Usury to their brethren forbidden? XII. Is it permitted or forbidden to practice Usury with strangers ? To which it was answered — The Mosaic Institute forbids unlawful Interest, but this was the law of an agricultural people. The Talmud allows Interest to be taken from brethren and strangers., but for- bids Usury. Mill. Hist, of Jews, 3 vol. p. 407. {q) Saunderson «. Warner, Palm. 291. ihis distinction, however, between biting and toothless Usurie, which now be- gan to be more commonly made, is treated by Roger Fenton, B. D., in his elabo- rate work dedicated to Lord Chancellor Ellesmere, as a vaine device. He telU us the Hebrew word for Usury is ' Neshee', which signifies ^' cruel biting," the Greek, ' Pleonasmos/ '^painful travailing," a.Tii Va.e Latin, ' Fcenus,' " MnnaiMroZ brood;" and concludes that the nature of the thing itself is therefore greatly to be suspected, for certainly, he adds, it is ominous and very suspicious to have a bad name. {r) De jur. belli et pacis, I, 1. m, 12, s. 22. s) Horrible et damnable peche. Roll. Abr. tit. Usury. USURY IN ENGLAND. 17 recent date, that it was not until mankind became more enlightened, and more alive to the advantages of the use of capital at a moderate rate of interest, and foreign trade had increased, that more correct notions were entertained on the subject : and even then it was sometime before the practice was legally sanctioned, and the mists of prejudice wholly cleared away. At the period of the Crusades, when religious zeal blinded our ances- tors to every thing but military glory, and the restoration of the cross, the Jews who had come to England from Normandy, soon after the p <,q ■, conquest,(<) and who by their industry and frugality were possessed L J of the greater portion of the ready money of the kingdom, at a time when trade and merchandize were held in contempt, seem early to have availed themselves of the dispensations of the Mosaic law, as to transactions with " strangers." We find them in the twelfth century the chief if not the sole lenders of money for gain orUsury,(M) which then signified the same thing ; and being no less odious on account of their religion, than hated for their wealth and alleged extortions, were often heavily fined and im- prisoned, and at length were driven out of the kingdom for this ojffenoe,('y) It is but fair, however, to observe that they were subject at this time to such gross and open injustice, such cruel oppressions, and such morti- fying indignities, (ro) and their properties and their lives were held by so precarious a tenure, that it can hardly excite surprise that they should seek to indemnify themselves by turning their money to the best account, and by rapid and exorbiant gains secure some compensation *for p ^ifi /^ i the hazard they run in parting with it, as well as for the con- L J stant perils to which they were exposed, (x) Commerce, to which credit is of the first importance, and without which it cannot successfully be carried on, was at this period at a very low ebb, for as long as the Christians were forbidden to take interest for the use of their money, few would be inclined to lend it for the purpose of trade, and that of the Jews was more profitably employed in Usury. It seems to have been no uncommon thing for them to receive for its use at the rate of 50 per cent, per annum.(?/) Incredible as this appears, it is the less improbable, as we find they were restrained by an order of Henry III. A. D. 1272, on the petition of the poor scholars of Oxford, whose books they held in pawn, from taking more than 2d. in the week for every 20s. they lent th:m for the future, which is a little more than 43 per cent.(z) A late author,(a) however, thinks this license of Henry III. only applied to small sums, and was not meant to sanction large loans at 40 per cent. And this view of the subject, so far as the license is concerned, seems supported by the words " lesser sums than 20s." and (t) Anglia Judaica, p. 4, Hen. Brit. vol. 6, p. 278. But according to other his- torians they were settled here long previously. Vid. Spelman, and others. [u) It is said the Jews were allowed to take Interest or Usury at common law, Plow. 85. Stat, of Merton 1235. Fleta, lib. 2, c. 57. {v) Hume's Hist, of England, 2 vol. p. 225. They were also accused of clipping the coin. (w) Madox Hist, of the Excheq. p. 168. Anglia Judaica, vide Appendix A. 3. [x) Hen. Hist. Brit. vol. 6, p. 280. (y) Matt. Paris, 586. Hume's Eng. 2 vol. p. 223. (z) Ang. Jud. p. 122. (o) Plow. Treat, on Us. 18 KELLYONUSURY. by Stow and Holinshed's account of the massacre of the Jews in 1262, which was caused, says the former, " because one Jew bad wounded a r *i 1 1 " Christain man within *Colechurcb, in London, and would have L J " enforced him to haye paid more than 2d. for the Usury of 20s. " for one week," (6) from which it may be inferred that this was then the common rate of interest for such loans. The Jews do not appear, however,, to have carried on the lucrative business of Usury wholly without competitors, for " The Caursini,"{c) a company of Italians who were settled in London about this period as "Merchant Strangers," and who ^ere agents for the Pope in collecting his revenue in England, were grievously complained of for their extor- tionate conduct in exacting .60 per cent, for the money they lent. In order to evade the law they charged nothing for the first three months, but 5 per cent, for every month afterwards until the, money was repaid ;, and as they lived in security, and were not kept in perpetual dread of being plundered as the Jews were, being moreover themselves Christians, and employed by the head of the Christian church, their extortions were r- ^-,1) -i the more scandalous in the eyes of the people. *Indeed an old ^ > writer complains that the Pope, by means of the Caursini, was as bad as the Jews, and thus describes the subterfuge practised to evade the law : " If a person wanted a summ he could not pay under six " moneths, he would lend it at three without any interest at all, and then " covenant to receive fivety per cent, for every month afterwards that it " should remain unpaid ; now in this case, says he, I am no Usurer, for " I lent my money absolutely without interestj and what I was to receive " afterwards was a contingency that might be defeated." When, remarks Matthew Paris, the Jews came to understand this Christian mode of pre- venting Usury, they laughed very heartily.((Z) Though agents of the bead of the catholic church, by this conduct they drew down upon themselves the censures of the English clergy ; and Roger, the then bishop of London, having in vain admonished the Caur- sini to desist from such oppressions, excommunicated them, A. D. 1235. For this they cared but little, being conscious of the Pope's protection and their interest at Rome ; they shortly afterwards caused the bishop to be cited there to answer for his conduct,, which induced the historian shrewdly to suspect that the Pope was both their accomplipe and abettor, and shared with them in the plunder, (e) But however the sordid avarice (J) Stow. Chron. Hen. 3, 192. Holinshed Hen. 3, 800. Letters Patent of the French King John, bearing date 1360, are now extant, aiithorizing the Jews to lend in pledge at the rate of 4 deniers per week for every livre of 20 sous, which is more thun S6 per cent. Say. Polit. Econ. p. 301. .,, . (c) Mr. Millman in his History of the Jews calls them ' Caorsini,' from the town of Uahors in France. Matt. Paris, . Holinshed and. Stow 'Caursini.' Du Cange ' Caorcini,' who believes many of them belonged to an ancient and wealthy family of that name in It^ly, an,d says ' Usurier de chaorse' was a bye-word. Du Cange Gloss, voce Caorcini. Vid. Dante infer: c. 2. While Malynes, in his Lex Mercatoria, C3,lls theni Cwsini, and says they, were Italian bankers., . (d) Matt. Paris, 286. Ang. Jud. 123. For a translation of oneof their Bonds, vid. Appendix A. 4. (c) Vid. Matt. Paris, p. 4i8, who calls the Cmiaiairfpestis abominanda,' and tells us that the Bishop, who was old and infirm, in his. dilemma applied to his patron USURY IN ENGLAND. 19 of the Caursini might *bring upon them the sentences of the p j^-i o -i church, or the cupidity of the Hebrews excite the ire of monkish L -• historians and chroniclers, they sink into utter insignificance, according to Plowden, when compared with the mode adopted by a modern Chris- tian, the father of a peer, who, we are told, no later than the last cen- tury, contrived to amass a considerable fortune by supplying the retailers of fruit, fish, and vegetables, in the streets of London, with 20s. and a wheelbarrow every Monday morning, on condition of their returning the barrow with a guinea on Saturday nightj(/) by which his profit amounted to 260 per cent. ; nor was this industrious money-gainer considered a Jewish Usurer, but rather a benefactor to the poor, who were thus enabled to obtain a living. This expedient, however, has not novelty to recom- mend it, for according to Malynes taking the shilling penny by the week, of fish-wives and other retailers of small wares, was a common practice in his day, a. d. 1686. The imprudence of the law in thus throwing the business of Usury almost entirely into the hands of the Jews, without placing it under any statutable regulation, left their rapacity without restraint, and they are said to have taken every advantage of the necessities of those who ap- plied to them ; some idea may be formed of the inflexible rigour with which they enforced* their obligations, from the following letter r ^-i j -i of Peter of Blois, archdeacon of Bath, to the bishop of Ely,(^) ■- ^ if indeed the reverend writer, in his alarm, has not been led to give much too high a colouring to his facts : " I am dragged (says the archdeacon) " to Canterbury, by the perfidious Jews, to be crucified amongst their "other debtors whom they ruin and torment with Usury; the same suf- " ferings also await me in London if you do not mercifully interpose for " my deliverance : I beseech you therefore, most reverend father and " most loving friend, to become bound to Sampson the Jew for six pounds " which I owe him, and thereby deliver me from that cross." After this no one can be surprised at the universal execration in which they were held, and the popular clamour which was raised against them, and which led to their total expulsion from the kingdom, in the eighteenth year of the reign of Edward I. a. d. 1290, and for which the grateful Commons granted that monarch a fifteenth; but however the people might rejoice at thus getting rid of a greedy and irreclaimable race of unbelievers, the chroniclers seem to think the king himself would much rather have re- tained them as a source of revenue, to recruit his privy purse when in need, by plunder and exactions as heretofore, for which booty a portion of the exchequer had been set *apart, and called " The Excheqvsr r ^i c -i of the Jews," and that the fifteenth was but a poor compensation L J for the rich harvest he continually gathered from this oppressed people. Paul for advice, who not only approved of what he had done, but spiritedly added in his letter, '^ Ex si Angelus vobis his contraria prcedicaverit, anathema sit." (f) Plow, on Usury, p. 108, n.. (ff) Epist. Paul Blesens, 156, p. 242. This treatment may account for his bit- terness against Usurers, for in another letter he ohseives, " Fceneraior trisiissimus habet exitus hujus viice, cujus mors detestabilis, cwjus finis interritus, cujus damnatio sine fine." Ep. 131. and vid. Appendix A. 5. 20 KELLYONtrSURY. Indeed one of them scruples not to say that when Edward drove out the Jews, "he killed the Henne that layed the egges," On the banishment of the Jews, the English, as well as the Lombards and other foreigners who were settled here, began to follow their example by taking up the trade of Usury, " which proved it," says Tovey, " to he "a crime no-ways peculiar to those of the circumcision ;" [h\ and this they did in despite both of the censures of the church, and the prohibi- tion of the municipal and canon laws, which rendered them liable, when detected, not only to be excommunicated and branded with the opprobri- ous name of " habtised Jews,"{i\ but also to the forfeiture (even after death,) of the whole of their goods and chattels to the king ; so that it was much doubted whether the borrowers of money fared any better with these new Usurers, whose transactions were obliged to be carried on in secret, than with the Jews, as it became necessary to pay them not only for the use of their money, but also for the infamy and liability to pun- ishment which they incurred by lending it. According to Montesquieu, r *i c -1 tlie severity of the Usury laws amongst the *Mahommedans and L -' Romans, where Interest and Usury were confounded as the same, was attended with the like result, " il falut payer (says he) pour le pret " de V argent, et pour le danger des peines de la hi." Thus, he justly observes, laws excessively good are the source of excessive evil.(y) The church, at common law, held jurisdiction over Usurers, "for the "good of their soules"{k\ and was wont to punish them by excommuni- cation and censures until they made restitution, and to grant them pardon only on condition, or "dum tamen," that they forsook their evil courses.(Z) Most of the early acts of parliament contain a saving clause in favour of such jurisdiction. It seems, however, that it either had not exclusive authority over Usurers, or if so, that it was invaded at an early period by the temporal courts, for it appears that in the fifteenth year of the reign of Edward III. a. d. 1341, the clergy, through the archbishop of Canterbury and other bishops, complained that '•' the justices had pun- " ished Usurers," to which an answer was returned making a distinction between the living and the dead Usurers, " that the king and his heirs "shall have the cognizance of Usurers dead,(TO) and the ordinaries r *17 "1 " *°^ *'^® ^°^y church the cognizance of them in life, as to them l- -^ " appertaineth, to make compulsion by the censures of the holy " church for the sinne, to make restitution of the Usuries taken against " the laws of the holy church." (n.) And it was a charge to justices in eyre (h) Ang. Jud. Id. 252. (j) St. Bernard seemed to think them worse than Jews. " Taceo quod sicubi desunt Judcei, says he, pejus judaizare dolemus Ohristianos foeneratores, si tamen Ohristianos et non magis babtizatos Judceos convenit appellare." (j) L'esprit des Lois, c. 21 and 22. (k) Pro reformatione morum et pro salute animoe. 15 Ed. I. c. 6. Roll. Abr. tit. Usurers. {I) Canon 109. " The clergy, (says Bolton) who had a chief stroke in making " the common law, they were the more severe against Usury, because it was uu- " fruitful for them, as they had not tythes of Usurers profits." Ei. of Neshec, p. 31. (m) That his Majesty might take possession of their wealth. (n) 15 Ed. in. c. 6. Roll. Abr. tit. Usurers. USURY IN ENGLAND. 21 to inquire who had died Usurers, which being then a crime second only to murder,(o) was punishable by forfeiture of the Usurer's goods and chattels to the king, and the disherision of his heir;(p) but this was confined to those who were found by inquest, within a year and a day of their deaths, to have died " habitual Usurers," and not when before death they had discontinued the practice, and done penance for it.(2') But alas for human infirmity ! it was found that the anathemas of the church, though aided by the forfeitures of the law, were insufficient to put down this " damnable sinne," and statutable instead of spiritual punishment must now be had recourse to for its extirpation ; accordingly Parliament took up the *matter, and various statutes were passed r -tt-io ■, from time to time for its suppression, but it will be seen hereafter L J with how little effect; they all eventually proved inoperative, having tended, by the confession of their makers, to introduce much greater in- conveniences than those they were meant to remedy. An Act was passed in the third year of the reign of Henry VII. A. D. 1488, whereby the taking interest for money on any bargain, promise, by bill, or otherwise by the name of "dry exchange," was forbidden, (r) as contrary " to the law of natural justice, the common hurt of the land, " and the great displeasure of Grod." Such bargains, &c. were to be void, and the parties or their agents to forfeit £100. ; and lest they should escape by means of perjury at a trial, the chancellor was also empowered to examine and determine the same, with a reservation nevertheless to the church, " to proceed according to law for the preservation of their " soules." About the same time another Act was passed, levelled more particu- larly against brokers, which complains " that divers English and estran- " gers are inducers to Usury," and sentences all such, when found out, to lose their license, to forfeit for every *default £20. and to be j- jj.|„ -. imprisoned half a year; " and furthermore to be punished by the <- -^ ''pillorie or otherwise, to their open rebuhe and shame."[s\ Only eight years after these enactments, so far was Usury from being restrained by the pains and penalties they contained, that it became ne- (o) Among the Eomans, Gato, Seneca and Plutarch inveighed against Usury, Gibb. Cicero tells us in what abhorrence it was held at Rome in his day, " Im- probantur ii questus qui in odia hominum incurrunt, ut fceneratorum" De Off. lib. 1, c. 42. They considered it twice as bad as robbery. How criminal Cato thought it may be gathered from his opinion, " Cum ille, qui qucesierat, dixisset, Quid fenerari? turn Gato, Quid hominem inquit occidere?" Cic. de OS. lib. 2, t. 25. And by the French Law it was punished with death. Domat. Civ. Law, p. 128. (ji) Brae. lib. 2, c. 26, fo. 60. Glanv. Trac. de Leg. Ang. lib. 1, c. 16, and this whether he left awill ijr no. — A Mortgage was also considered a species of Usury, Ibid. lib. 10, c. 8, s. 3. It was also one of the articles inquirable of in a Court Leet. " De Christians Usurers et d'touts lour Mens." Vid. Miroir des Justices. 17 b. c. 1, s. IT. See also Dial, on the Excheq. 2 book, c. 10, p. 48. (q) 3 Hen. VII. c. 5. \r) Dry exchange was an evasion of the Usury Laws, by means of a Bill of Ex- change, which the borrower drew on a fictitious person at Amsterdam, or any foreign town, at the then current rate of exchange, which he delivered to the lender; at maturity, the Bill was returned protested from Amsterdam, and the borrower charged with re-exchange and incidental expenses; and in this way, 20 or 30 per cent, was made, the Bill having never been out of the country. Plow. p. 128. [s) 3 Hen. VII. o. 6. 22 KELLTONUSURT. cessary to provide againist certain subtleties and devices which began to be practised, by means of the fictitious sales of goods, and in various other ways, to evade the law j(<) to counteract which, another Act was passed shortly afterwards, A. d. 1496,(w) which repeals the former, and provides instead of the penalty of one moiety of the value of the goods, &c. at the rate at which they may have been sold or lent, where the Usury shall have been committed by the sale and re-sale of goods, &c., or by the rents of lands, or by means of any other form or mode by which the statute might be avoided, "reserving however to the spiritual " jurisdictions their lawful punishments in every case of Usury." The law thus remained until the year 1545, when it was doubtful whether the alteration allowing interestj which then took place, was not more to remedy the complaints tha.t were daily made of the extortion of Usurers, whose enormities it was found whoUy impossible to suppress, than with any positive view to benefit commerce, which was now, however, jifon -1 beginning *to be somewhat better understood. The existing L -I laws had long been found injurious to trade, and a bar to im- provement, for it became apparent that the necessity of credit increased in proportion to the extensiou of commerce, and that credit was not to be obtained without compensation. («) By an Act made in the thirty-seventh year of the reign of Henry VIII, c. 9. intituled "a Bill against Usury;" it is forbidden to take above the sum of ten pounds in the hundred for the forbearing or giving day of payment of one whole year, and so after that rate for a longer or shorter time j and thus, for the first time in England, interest was ne- gatively and indirectly sanctioned by law : the sense of mutual benefit having at length triumphed over both the decrees of the church, and the prejudices of mankind. It was restrained however to the then mo- derate rate of 10 per cent.(«;) (- ^„, , This statute proceeds to enact that every person *receiving L -" more shall forfeit for every offence treble the value of the wares, &c. so bargained &c., and suffer imprisonment, and make fine, and ran- som at the king's pleasure; it contains various clauses to prevent interest being taken at a greater rate, " by way or means of any corrupt bargain, loan, exchange, chevizance, shift, interest of any -wares, merchandize or [i) According to Tacitus, the Roman Laws forbidding Interest were in like man- ner continually eluded, " Totius represses (says he,) miras per artes rursum orie- buntur." Tacit. Annals, lib. 6. (u) 11 Hen. VII. c. 8. («) Hen. Hist, of Brit. 12 vol. p. SST. Hume's England. (w) It seems curious that the rate of Interest, when Interest was allowed, should, in remote antiquity, have been similar in various countries. Nehemlah, c. 5, v. 1, reproves the Jews in Syria, for takingthe 100th part, which Bishop Patrick informs us, meant that the 100th part of what was lent was paid by way of Interest every month, or 12 per cent, per annum. Solon allowed 12 on the 100, at Athens; and afterwards at Rome, it was fixed by Cicero's edict at 1 per cent, per month, and Interest upon Interest at the end of the year. Add. Att. lib. 6, ep. 1. While 12 per cent, per annum is the legal rate of Interest in India, at the present time ; in England we have seen it commenced at 10 per cent, per annum ; in the Low Coun- tries according to Malynes, in his Lex Meroatoria, it was lawful to take 12 in the 100 of merchants and traders ; and 12 per cent, is said to be the common rate in China, North Amer. Rev. July, 1834. USURY IN ENGLAND. 23 other things whatsoever, or by any other covin, engine, or deceitful way or conveyance." But this Act only lasted seven years, for the church, which then ma- terially influenced every thing, caused it to be repealed in the following reigu : the remains of ancient superstition being still too strong to allow of the existence of so salutary a law, though a striking proof of the in- utility of fixing the rate of interest too low by legal enactment was afforded by the fact, that while the law had tacitly allowed £10. per cent, to be taken, money could scarely ever be obtained under J14. per cent. j(a:) and in consequence of the legal rate being so considerably under the market rate, the law was constantly evaded ; and such, at all times, under siinilar circumstances, has been and ever will be the case. Nothing will better demonstrate the progressive change in the feelings and opinions of the nation respecting "Usury," than the language of the various succeeding Acts of the legislature relating to it, from which it will be seen how slowly our forefathers *became converts to r- ^^^ -i the doctrine, that Usury, under proper regulatians was not sin- L J ful ; and that great advantages to the commercial interests of the country would accrue from its being permitted by law. Accordingly we find that an Act in the reign of Edward VI.. A. D. 1552,(y) which restores things o their former footing, commences by stating that the former Act only permitted " Usury for avoiding more " evil and inconvenience that before that time was used and exercised, and " was not meant or intended for maintainance or the allowance of Usury, " as divers persons, blinded by an inordinate love of themselves, had mis- " taken, but rather was intended as against all kinds of Usury as a thing " unlawful." But for-as-much as if cannot he put down without temporal punishment, it declares all interest illegal, and attaches to the taking of it a* forfeiture of the value of what is so lent, and the Usury, impri- sonment, fine, and ransom at the king's pleasure, premising " that Usury " is, by the word of God, utterly prohibited, as a vice most odious-and de- " testable, as in divers places of the Holy Scriptures is evident to he seen." The intended rigour of this statute, defeated its purpose, for instead of diminishing. Usury increased, (z) In less than twenty years afteK wards, the impolicy of altogether prohibiting interest was acknowledged, and *it became once more the subject of legislative considera- r:(!23"| tion. By the 13th of Elizabeth, c. 8. A. d. 1571, the Act of L J Henry VIII. is revived, and interest again tolerated at 10 per cent, "it being found," says the statute, " that the Act of Edward had not done " so much good as was hoped for, but that rather the vice of Usury had " much more exceedingly abounded;" it next praises the Act of Henry Vlll.as one by which the vice of Usury was well suppressed : yet while permitting it to be taken, with singular inconsistency, it is still declared that all Usury is forbidden by the law of God as sin and detestible, and (x) Hume Hist, of Bng. 4 vol. p. 354. Haward, p. 218. (y) 5 & 6 Edw. 6, c. 20. (z) " Thus the forbidding of Usurie, is the very maintaining of damned TJsurie ; therefore, that which is lawful, in my conceit, should be approved, and the restric- tion and stints clearly sette down and nominated." Ex of Nashec. March, 1852.— 31 24 KELLYONTJSURY. that the Act thus revived shall be construed largely and strongly for re- pressing Usury, vrith the usual saving of the power of ecclesiastical courts to punish ofienders as heretofore. (2) This statute, as may be supposed, was not allowed to pass the House of Commons without a violent opposition j it encountered all the con- centrated virulence which the ignorance and superstition of its opponents could bring to bear on the question. (a) One of the principal speakers against the bill was Dr. Thomas Wilson, who, in 1569, only two years before the statute, had published his famous 'f Discourse upon " Usv/ry, hy way of Dialogue," {b\ a work which he dedicated to the Earl of Lei- cester ; and as his written sentiments may have more weight than his r *94. n sps^ches *in Parliament, a passage or two will be extracted to L -I shew that it was not the rate of interest, but the principle, to which he objected. The learned Author not only condemns those who availed themselves of the then moderate rate of £10. per cent., but con- siders him equally guilty who takes the slighest interest for the use of his money. " The Usurer, (says he,) who taketh less bicause he would " seem honeste, shall go the Divell, bicause he hath wittingly sinned " against God, as well as the other that taketh more :" for adds this un- compromising moralist, " there is no meane in this vice, more than there " is in murder, theft, or whoredom, and therefore I sale and maintaine it " constantlie, that all lending in respect of any gaine, be it ever so little, " is Usurie, and so wickednesse before God and man, and a damnable deed " in itself." ' Having thus consigned the Usurer to perdition for hia " wickednesse," he proceeds to examine how far the borrower is blamea- ble in the transaction, for some had considered the latter as a partieeps criminis, and sharer in "the " sinne," and as the reasons he assigns for acquitting the borrower are such as borrowers of the nineteenth century must approve, they shall be given in the words of the Author, more especially as they appear to be the result of his calm reflection, after his anger agfiinst the Usurer has had time to subside : " And now (says he,) " cometh to my mind a matter most needful to be spoken of after such " heats of speeche used against the Usurer, that whether he that payeth r ^O'S 1 *" Usurie be an offender or no, for some think because there can L J " be no Usury without borrowing, those therefore that borrow are " at fault as they which do give cause of this horrible offence ; I do " answer, that everie borrower doth not sinne, because it is an involun " tary action, and much against the borrower's will,(c) who would rather " with all his heart borrow freelie, and paie nothing for the loan than " otherwise." Dr. Wilson was far from enjoying the enviable distinction of being the only one who, about this period, raised his voice, and published his (z) Yea, with the Thunderbolt of excommumcation I to terrify such as do wilfully defend Usurie. Eogers on Usury, a. d. 1578. la) Tid. Pari. Deb. A. d. 15V1, 4 vol. p. 138. (6) The Romans, according to this author, never began to decay till Usury lorded among them. (c) " For the sinne of rape cannot be without the innocent party that is ravished." Dr. Downam, Lord Bishop of Derry, quoted in Blaxton's Eng. Usurer, 2nd ed. 1634. Que injuriampatitur non pecoat. Aristot. Bthec, lib. 5, c. 11. USURY IN ENGLAND. 25 sentiments, against tte restoration of the statute of Henry VIII. which was now again about to let loose the Usurer upon society. He was fol- lowed by a host of learned divines, who emulated each other in their efforts to stem the tide of demoralization which this enactment was likely to reproduce. Dr. Fenton, in his learned work, triumphantly states as a fact, which is no less true than surprising, " That Usury was never even " defended for fifteen hundred years after Christ." That it is beyond the pale of all law, both divine and human, he considers an incontesta- ble position, " The testimony of all authority, (says he) civil and hu- " mane, ecclesiastical and prophane, naturaU and morall ; of all ages* " old, new, middling; of all churches, primitive, superstitious, reformed ; " of all common weales, Jewish, Christian, heathenish ; *of all _ ^„„ _ " lawes, forraine and domesticall, are agsdinst Usurie." Other L J divines proceeded in the same strain, " God, nature, reason, (says Mosse,) " all scripture, all law, all authors, all doctors, yea, all councils beside, "are against Usurie." — "Philosophers, Greekes, Latins, Lawyers, Di- " vines. Catholics, Heretics, (adds Bishop Jewell,) all tongues, all nations, " have thought an Usurer as bad as a theefe." That the detestation of taking Interest for the use of money, or Usury, was not confined to the Church alone, is clear, for even fifty-three years after this statute had passed, it appears the prejudices of the learned judges were not a whit less strong. On the bench we find two of them not only expressing their own unqualified abhorrence of the practice, but quoting with great satisfaction the authority of a learned brother against it, in the classic language of the day. " Doddridge and Whitelock "agree, (says the reporter) que a oettejour, use de money, n'est hon con- " sideration quia encounter ley natural, car comme Herle dit, est mon- " Straus que argent producera argent et ad ettre defame par touts estatutes " comme horrible damnable !" (d^j It should seem therefore, that as the belief in the unlawfulness of taking Interest, or Usury, was still generally retained, it was policy which dictated its toleration, under legal restraint, in preference to any further attempts at suppression by enactments, which, in defiance of their severity, after a lapse of time, only drew from their framers the reluctant confession that *this "odious vice had more exceeding- ^ ^„„ -, ly abounded." Another proof how seldom laws are efi'ective L J when they are opposed to the constitution of society ; mankind, observes a learned writer, being governed not by extremes but by principles of moderation, (e) Even this Act was not passed without due caution, its. duration being limited to five years; it was, however, subsequently made perpetual ;(/) as foreign trade increased, and money became more abundant, the rate of interest thus fixed began to be considered as too high, Henry IV. of France having reduced it in that country to 6J per cent., an indication, (says the historian,) how much France had advanced above England in Id) Oliver v. OUver, 2 Boll. Eep, 469. (c) Montesquieu I'Esprit des Lois. (/) By 39th Elizabeth, c. 18, s. 31, 32. 26 KEIiI-T ON TTSUET. commerce, (gr) it was not long, therefore, before another change took place in our own. In the next reign the rate was reduced, by 21st of James I. A. D. 1624, to 8 per cent., the Act ending with this remarkable proviso, " That no words in this law contained shall he construed or ex- "pounded to allow the practice of Usury in religion and conscience." {h) We are told that this provision was introduced to please the bishops, who otherwise would not have consented to its passing, there being in fact no clause in this Act, as in the former statutes, disgracing Usury, (i) r *9o T Spiritual persons still entertained the same *objections to its pro- L -' priety as before, however it might be thought expedient by the legislature. Its operation like that of the preceding statute, was limited to seven years, but was rendered perpetual in the succeeding reign. (^) The clause disgracing Usury, is alluded to with great satisfaction by many of the divines who wrote about this period, as an admission by the legislature that Usury was against the law of God : " There are infinite " colours, mitigations, evasions, distinctions invented on earth, (says " Blaxton,) to cover heaven-exploded Usury ; nay, the tired earth he " adds, becomes barren, onely the Usurer's money the longer it breeds <"' the lustier, and an hundred pounds put out twenty years since is grand- " mother to two or three hundred children; pretty striplings, able to " begette their mother againe in a short time."(?) By such observations was the taking interest for money opposed as late as the beginning of the seventeenth century. It is to this reverend divine that we are also indebted for a description of the Usurer's person, from which our readers cannot fail to recognize him at a glance : " The Usurer is known (says he,) by his very lookes " often, by his speeches commonly, by his actions ever ; he hath a leane " cheeke, a meagre body, as if he were fed by the divill's allowance, his r* oq 1 " ^y®® *^'"® almost sunke to the backside of his head with admi- L -1 « ration of money, his eares are set to tell the clocke, his whole " carcass is a meere anatomy." From this time, we may consider that whatever religious scruples re- mained, they were, among the mass of the people, fast wearing away. The complaints made against the ' Sinne of Usury' hegan to decline, trade extended, agriculture improved, experience shewed how much the country had profited by allowing a moderate rate of interest for the use of capital employed in advancing industry, ingenuity and commerce ; and then gradually changing such rate to suit the state of the times, and place the kingdom on a level with other European nations. (m) Interest (ob- serves an historian,) being justly considered the barometer of the state. !! Hume's Hist, of England, 5 toI. p. 484. fh) Pal. Mor. Phil. 3d Book, p, 1, o. 10. ^ (j) Oliver v. Oliver. "Zes evesgues ne voile assente a ceo quia null clause come just Dodderidge dit que disgrace Usury come en la precedent Statutes." 2 Eolle's Rep. 469. (k) 3 Oar. 1, c. 4, s. 3. h) Eng. Usurer, by John Blaxton, 1634. "Siunum noris omnesnoris." Dr. Pie. (m) Montesquieu attributes the decline of commerce to the proscription of loans at Interest. Esprit des Lois, lib. 21, c. 20. USURY IN ENGLAND. 27 and the lowness of its rate an infallible sign of the flourishing condition of the people, and of the increase of industry.(m) The Commonwealth, a. d. 1650, further reduced the rate of Interest to 6 per cent. This was followed by 12th Charles II. (being the first year of the restoration,) which begins by reciting, " That the abatement " of interest from 10 to 8 per cent, had, from notable experience, been " found beneficial to trade and agriculture, with many more advantages " to the nation, *and reducing it to a nearer proportion with p „„ , " foregin states with which we traffique." L J The gradual change of public feeling on this subject is again remark- able, all the former statutes being styled either bills or acts against Usury, but this was intituled, " An act for the restraining of excessive Usury." Money, at this time, was commonly procured at 6 per cent., though the legal rate of interest had been till then 8 per cent., clearly shewing that however the law may limit the amount of profit to be derived from the use of money, it will, like any other commodity, fluctuate in the market, and the interest of it alternately rise and fall as the supply more or less approximates to the demand ; all legislation to reduce interest below the common market rate must become inoperative, from the tacit convention of the parties concerned. (o) The law remained without further alteration till the 12th'of the reign of Queen Anne, A. D. 1713, when legal interest was fixed at the present rate of 5 per cent., by an Act which is entitled " An Act to reduce the " rate of interest, without prejudice to parliamentary securities." As this statute now contains the law on the subject, and prescribes penalties for *its infringement, it will be proper briefly to allude to its leading r^ oi -i features ; it begins by reciting the great advantages which this L J country has derived from the successive reductions of the rate of interest from 10 to 8 per cent., and thence to 6 percent. ; and that, by reason of the late war, the owners of lands had become impoverished, and from the great interest and profit which had been made of money at home, foreign trade was neglected, for the redress of which mischiefs it became necessary to reduce the high rate of interest of 6 per cent, to a nearer proportion with the interest allowed by foreign states : it then enacts, that from and after the 29th of September, 1714, no person shall take for the loan of any money, wares, merchandize, or other commodities whatsoever, more than 5 per cent, for the forbearance of £100. for a year, and so on in propor- tion, and for a longer or shorter period ; and that all instruments secur- ing a greater rate shall be utterly void; and that all persons who shall contract for and actually receive more than the rate aforesaid, shall for- [n) Hume's Essay on Interest. Yet even in these comparatively enlightened times, we find the Judges differing in opinion as to the legality of taking Interest on the discount of a bill of exchange. Vid. Barnes v. Worlich, post. (o) In Eussia, in 1787, when Mr. Bentham wrote his Defence of Usury, he tells us the rate of Interest was fixed at 5 per cent. ; many borrowed but nobody lent money at that rate ; 8, 9 and 10 per cent, being the common rate, even on the best landed security. Def. of Us. let. 1. In France, in 1766, Interest was reduced, by edict, to 4 per cent., yet 5 per cent, was the common rate given. Vid. Smith's Wealth of Nations, book 2, c. 10, p. 45 28 KELIiTONUSTJRT. feit for each offence treble the value of the money, &c. so lent. This statute, like all the preceding ones, is founded on the statute of Henry VIII., and varies little from it beyond changing the rate of interest. Express Acts of Parliament have empowered two corporations to bor- row money on such terms as they think proper. By the 3rd George I. c. 8, A. d. 1716, the Governor and Company of rHcQon ^^^ Bank of England are enabled to *borrow money upon such L J rates and terms as they shall think fit, although it may exceed the interest allowed by law, and their contracts are exempt from stamp duties. And by 3rd George I. c. 9. s. 16, the South Sea Company is allowed the same privilege. Hitherto mention has been made only of the rate of interest applicable to contracts in Great Britain, it remains therefore to notice foreign inte- rest, which is regulated by express statutes, and to observe that our courts of justice diTect the payment of interest according to the law of the coun- try in which the contract is made j for this reason, Irish, American, Turkish, and Indian interest is recoverable in England ; and it is evident that were such contracts not to be etiforced, foreign trade would be de- stroyed. Neither is it unreasonable to charge the borrower with such interest, when it may fairly be presumed that he has received an equiva- lent advantage by the use of the money in the country where the contract was made. Thus 12 per cent; is fixed by the 13th George III. c. 63, s. 30, as the legal rate of interest in India ; and 6 per cent, by the 14th George III. c. 79, as the legal rate of interest in Ireland and the West Indies, which declares that all mortgages, made in Greait Britain, to any of his Majesty^s subjects, shall be as valid as if they had been made in the country where the property lies, provided that the interest does not exceed 6 per cent, and the lender does not advance more than he knows the property to be l-^oo -. worth, with a forfeiture, in *such latter case of treble the value L J of the money lent. And by 3 George IV. c. 47, repealing the 1 George IV. c. 7, all mortgages, bonds^ transfers, &c. for securing mo- ney in Ireland or the West Indies, as well as collateral securities given by third parties, may be executed in this country, whether entered into at the same time or subsequently. By 3 & 4 William IV. c. 98, s. 7, bills of exchange and promissory notes, not exceeding three months datey or having more than that time to run, may now be discounted at any rate of interest that may be agreed on, without the parties incurring the penalties of Usury. for the Statutes relating to this subject, see Appendix A. 6. - WHAT DEEMED USURIOUS. 29 *CHAPTBR. II. [*34] OF AGREEMENTS AND TRANSACTIONS WHICH HAVE FOR THE MOST PART BEEN DEEMED USURIOUS. 1. — Where the borrower has been fur- nished with goods instead of cash. 2. — Discounting bills, not of mercantile nature. 3. — ^Where an extra charge is made for . brokerage. 4. — Compound interest. 5. — Where the risk of losing the princi- pal is slight. 6. — Where the interest only is risked. 7. — Retiring partners. 8. — Where stock is transferred. 9. — Where something besides money is given or charged for. Section 1. Where the Borrower has heen furnished with Goods instead of Cash. As early as the time of Henry VII. A. d. 1496, it became necessary to provide against the law's being evaded by the pretended sale of goods and merchandize, in order to obtain a profit for the use of money, when no interest was allowed ; and ever since interest has been permitted, and the rate fixed by different statutes, it has been the most usual mode *re- sorted to for eluding the penalties they contained, and obtaining r j^ok n by such means a higher rate than is legal. L J The lender, instead of money, furnishes the borrower with goods, at a price which is generally much above their real value ; these the borrower must of necessity sell as soon as possible, which he usually does at a considerable sacrifice, receiving perhaps one half of the amount for which he has given security, while the lender not unfrequently, though an agent, becomes the purchaser of his own goods at a reduced price, and has them again in readiness for a similar dealing : thus charging the bor- rower with interest on the sum at which they were sold, when the amount advanced is only what is necessary to re-purchase them. In all cases of this description, the only question to be determined is whether the transaction be a sale or a loan; if a bona fide sale, the seller is of course entitled to the price agreed on, although the purchaser may have lost by a re-sale ;(a) but if it be only a shift, and merely colourable to obtain more than legal interest, and in reality a loan, the party fur- nishing the goods must be contented with what they actually produced to the borrower on a re-sale, while any security he may have taken for them becomes absolutely void, as tainted with Usury. For, as the statutes are to be construed largely and strongly for repressing Usury, the Courts inva- riably look to the substance of the transaction, and not to the form or *colour it has been made to assume ; and wherever it can be j- ^„ „ -. shewn that a loan of money was intended, under the disguise of •- ' a colourable sale of goods, there is an end of the action. (a) Ancaster t. Picket, cited 1 Bro. Oh. Ca. 151. 30 KELLTONUSURT. Lord Kenyon held that it was usurious to substitute goods for money, at an excessive value, in the discount of a bill of exchange, secus, if the goods were taken at an ascertained value. (6) The rule, however, has been laid down at law more strictly by later authority. One Waller, being in want of cash, applied to a money broker to raise him £200. ; Harris and Stratton hearing of this, offered through the broker £100. in goods at warehouse price, and ^GIOO. in cash, but after protracting the business by repeated delays, under pretence of not being prepared with money, they ultimately agreed with Waller himself to let him have goods for the whole amount ; these were sorted out and de- livered to Waller, who in return gave to Harris and Stratton a bill of ex- change for £220. : the goods were then, by Waller's directions, taken to an auctioneer, who sold them for £117 : 2 : 2. the question left to the jury was, whether this was a bona fide sale of goods, or a loan under the pretence of a sale, and the jury finding the latter, and that it was usu- rious, the Court of King's Bench afterwards, on a motion for a new trial, refused to disturb their verdict.(c) r *^7 T *^^ ^ later case, Hardacre applied to Davis to discount him a bill L -I of exchange for £700. ; this Davis refused to do, unless Hard- acre would take for it £250. by cheque, a promissory note at two months for £286 : 12., and a landscape in imitation of Poussin, to be valued by agreement between them at £150., to this Hardacre consented. Davis afterwards brought an action on the bill so discounted against Hardacre, and was non-suited by Lord Ellenborough, Chief Justice, before whom the cause was tried, who thus lays down the rule : " Where the party is '< compelled to take goods in discounting a bill of exchange, I think the " presumption arises that the transaction is usurious; to rebut this pre- " sumption, evidence should be given of the value of the goods by the " person who sues on the bill ;(c? ) in the present case I must require " such evidence to be adduced, and I wish it may be understood that in " similar cases this is the rule by which I shall be governed for the " future : when a man goes to get a bill discounted, his object is to pro- " cure cash, and not to encumber himself with goods ; therefore if goods " are forced on him, I must have proof that they were estimated at a sum " for which he could render them available upon a re-sale, not at what " might possibly be a fair price to charge to a purchaser who stood in " need of them."(e) r *S8 1 *^^' ^°'^^'^^^> *^® party applying for the discount readily takes L -I or wishes to have goods in part payment, with a view to gain by speculating in them, it will be different, for in a case which was tried shortly after the preceding, the same learned Judge made this distinction between them : " Upon this evidence (said his Lordship,) we must rather presume the " goods were charged beneath their true value, and it lies upon the person b) Pratt T. Willey, 1 Esp. N. P. 0. 40. Rich v. Topping, Idem. 116. c) Lowe V. Waller, Doug. 13S. d) Vid. chap. 4, s. 3, as to innocent holders of bills, &c., tainted with Usury. e) Davis v. Hardacre, 2 Camp. N. P. C. 375. WHAT DEEMED USURIOUS. 31 " applying to prove the contrary, if he would impeach the discounter's " title on the score of Usury ;"(/) and plaintiff had a verdict. In like manner, in equity, where goods had been delivered to a young man who wished to raise money, and had given a promissory note for the goods so delivered, the Court of Chancery restrained proceedings at law until the value of the goods had been ascertained by a sale, on payment of which, the promissory note was ordered to be restored. The facts were these : Barker, (the plaintiff,) who was then a student in the University of Oxford, and who had recently come of age, applied to a Jew to raise him a sum of money, who recommended him to another, who introduced him to to the defendants, who were silk mercers, and they finding, on inquiry, the youth was entitled to some reversionary property, let him have silks, to the amount of ^2224., for which he gave them a promis- sory note, payable twelve months after date ; the Jew then (as Barker's, the plaintiff's agent) *took possession of the silks, and sold them ^ ^„q -, on his account for £799. In the mean time the promissory L J note was endorsed by the payees to a third person, who was no party to the sale, nor had in any way interfered in the business. Afterwards Barker filed a bill in Chancery against the tradesmen who had furnished the silk, to re-deliver him his promissory note on payment of what the silks actually produced at the sale ; this they refused to do, contending that it was a fair transaction : but Lord Chancellor Thurlow, who heard the cause, thought and decreed otherwise. " I am to inquire, (he ob- " served,) whether, under the mask of trading, this is not a method of " lending money at an extraordinary rate of interest ? There is no doubt " that if they had talked of this as a loan of money, there would have " been an end of the case. The question then is only, whether there is any " method of shewing the Court that they meant so, short of their treat- " ing of it as such in plain language ? There is not a doubt that in this " case the transaction was merely for the purpose of raising money to " supply the necessities of this young man. Do they deny knowing " the goods were to be sold ? I take it, therefore, as an advancement of " goods, instead of money, to supply his necessities."(^) And in a case, (decided in June 1831,) where the defendant had appealed from an order of the Vice-Chancellor, *who had granted - ^ . „ -. an injunction to restrain him from proceeding at law, on securi- ^ -■ ties given for the price of goods by an expectant heir, on the ground that the onus lay on the defendant to prove that the transaction was not a loan : the Lord Chancellor Brougham aflSrmed the decision of the Vice-Chan- cellor with costs.(/t) However, on this case subsequently coming before the Court, on a bill filed by the plaintiff to vacate the securities, on pay- ing the amount the goods fetched on a sale by auction, it appearing that the expectant heir had dealt with the reversion with the privity and sanc- (/) Ooombe v. Miles, 2 Camp. N. P. 0. 553. (g) Barker v. Vansommer and another, 1 Br. 0. C. 149, and Polwarth v. Cooke. Cecil v. Sutton. Scrynre v. Rybot, cited therein, Eq. Ca. Abr. 91. (h) King T. Hamlet, Trin. Term 1831, and Hil. Term 1834. Cole v. Gibbons and another, 3 P. Wms. 289. Twistleton v. Griffiths, 1 P. "Wms. 310. Chesterfield v. Janssen, 2 Ves. 125. Gwynne t. Heaton, 1 Br. Oh. Eep. 1. 32 KELLY ON USUET. tion of his father, the tenant for life; the Chancellor considered this a totally new case, and different from Barker v. Vansommer and another, which had been cited, that being a loan (said his Lordship) at usurious interest, to cover which the sale of goods was resorted to ; and stated that in all cases where relief had been given, it had been done on the ground that the plaintiff had been in a position to place the defendant in the same situation he was in before the contract; and as this could not be done here, and as the father of the plaintiff had been aware of, and sanctioned the transaction, he decreed that the bill should be dismissed. It is clear, therefore, that goods cannot (unless under peculiar circumstances,) become the medium of raising or borrowing money at an extra rate of interest, P .^ 1 nor will the ^borrower be liable to one shilling more than they '- -1 realise him on a re-sale, when fairly converted into cash, as he is liable, it appears, not for the value, but for the sum really made of them. And, according to Lord Mansfield, as this is the easiest way of evading the statute, so it is the one most frequently adopted, (i) Section 2. As to Discount of Bills, not of a Mercantile character. It appears at one time to have been doubted whether it was not usuri- ous to take interest before the time expired for payment of the principal ; as it was contended that a person who discounted a bill for £100., at the rate of 5 per cent, per annum, and retained at the time £5. for the in- terest, in fact, lent only the balance, or £95., and therefore had received more than the legal rate ; the Judges differing ip their opinions on the snbject.(A;) The right, however, (in favour of trade, )has long been clearly establish- ed ; and it is now as lawful to take interest at the time of forebearing, as afterwards, for having forebone.(Z) This, however, must be understood as applying solely to bills of ex- change, in reference to their merchantile character, and the established r *if) 1 '"^^*'°™ *respecting them, which forms an exception to the gene- L J ral rule of law ; as to which Lord Mansfield observed, in one case, " Usage certainly will not protect Usury, but it goes a great way to ex- " plain a transaction. Upon a nice calculation, it will be found that the " practice of the bank in discounting bills exceeds 5 per cent., for they " take interest upon the whole sum, for the whole time the bills run, and " pay only part of the money, viz. by deducting the interest first ; yet " this is not Usury."(m) But where a bill of exchange, not of a commercial character, for £5,000., which was negociated to redeem annuities drawn by the grantor, and payable to the grantee's order three years after date, and for the discount % Doug. TSS. (/c) Barnes v. 'Worlicli, Cro. Jac. 25. Noy. 41. Massa v. Dauling, 2 Str. 1243. Lloyd t. Williams, Blac. Rep. 793. m) Ployer t. "Edwards, Oowp. 112. WHAT DEEMED TTSTTEIOUS. 83 of which £750. was charged, the balance being made up of the re-purchase money of the annuities, arrears and costs, and a bond given for the whole amount ; although a verdict was found for the plaintiff, who sued on the bond, yet Lord Alvanley and the Court of Common Pleas, on a case reserved, decided it was void, being given for a bill of exchange which secured a much larger amount than legal interest on the sum which would be due at the end of three years, as it was for the forbearance of £4,250., for which the party was to receive interest for £5,000. ; that it was not a discount in the regular way of trade, but merely a shift to obtain more than legal interest : the plaintiff was non-suited. A case was put in argu- ment by defendant's counsel, *(then Serjeant, and subsequently ^ j^ ,„ -, Mr. Baron Bay ley,) in which it was supposed that a bill for L J £10,000., payable in twenty years, was to be discounted, as the interest amounted to the whole sum, the lender would have nothing to advance, though at the end of the time he would be entitled to receive the £10,000. It is not usurious, however, for an acceptor to discount his own accept- ance for more than 5 per cent, on the time the bill has to run, for here there is no loan or forbearance, (n) As this exception from the general rule is made in favour of trade, and peculiar to bills of exchange and promissory notes, we may conclude, that to discount a bond or mortgage, at the rate of 5 per cent., would be usurious. Section 3. Where an extra charge has been made for Brolcerage, &c. When interest was first taken by way of discount, any further charge for commission, trouble, &o. was not allowed,' being considered an excess of interest, and usurious, (o) However the rule has been relaxed in favour of trade, and it is now decided that bankers and others whose business it is, may legally take, not only 5 per cent, interest, but also a commission for their trouble ^■nd expense of correspondence, for discounting, accepting, pay- [*44] ing, or protesting bills, provided such commission be reasonable, warranted by custom, and not used as a cover for Usury, (p) Brokers and factors in like manner are entitled, above the legal interest of their money, to a fair remuneration for their services, according to the custom of the particular business to which the broker or factor is attached ; the extent of which, in case of dispute, is a question of fact for the deter- mination of the jury. (2) But where a broker or factor advanced money for the purchase of goods, (n) Barclay v. Walmsley, 4 East, 55. (0) Peachey v. Osbaldestone, 'I Mod. 353. Ip) Auriol v. Thomas, 2 T. R. 52. Winch, q. t. y. Fenn) id. note Masterman v. Cowrie, 3 Camp. 488. Caliot t. Walker, 2 Austr. 495. (?) Carstairs v. Stein, 4 M. & S. 192. 34 KELLTONUSTJRT. and received a higher commission on the purchase than he would have been contented to take had he not advanced the money, it was held usu- rious. (r) Part payment of a discount by bills, which have some time to run, without first deducting the interest of them, though acquiesced in by par- ties, for their mutual conveniences, is clearly usurious, (s) Unless it be done by a banker, who has charged no commission, postage, or stamps, ; and where the amount gained by the interest of the second bills does not exceed what might have been fairly charged by him for commission, and P ju^r -| the jury are of opinion it was not a *device to exceed a reasona- L J ble remuneration. (<) Nor is it illegal for a banker who lends his customer a sum of money, after the loan, to stipulate that the custo- mer shall leave a certain balance in the banker's hands by way of remu- neration for managing the banking account. Messrs. Ladbroke and Co. lent Holthouse (who became bankrupt) £4,000, and it was agreed subsequently that the bankrupt (whose account was a large and troublesome one) should not keep a less balance in their hands than ;fil,000, or if he did, interest was to be paid on deficiency ; the balance was reduced below J1,000, and interest on the difference paid by the bankrupt, whose assignee afterwards petitioned to expunge Messrs. Ladbroke and Co.'s- proof, on the ground of Usury : but the Court of Review was unanimously of opinion, that the balance being bona fide left by way of compensation for the trouble of managing the banking account, and not as a cover to evade the statute, it was not a usurious transaction, and dismissed the petition. The Chief Judge afterwards observed, "I wish it to be understood, that if the keeping a balance of " £1,000 Jiad formed part of the contract ior lending the £4,000, that it " would have been usurious ; but my opinion was, and is, that it was a " term of arrangement as to the banking account subsequently introduced, " and for the benefit of the parties."(w) r *46 1 *'^^^^> however, must be confined to bankers, brokers, factors, and L J others, who are at the expense of keeping up establishments for the purpose, and cannot be charged by any one who does not come pro- perly under any of those denominations, and can show no good ground for it, on the score of extraordinary trouble or expense, (w) A charge of 7s. Qd. per cent, commission, by a person (who was not a banker,) and who was put to little trouble and no expense, was held to be usurious by Lord Ellenborough, and confirmed by the Court of King's Bench ; they refused however to grant a new trial, which was applied for it being a qui tam action for penalties, and the jury having found for the defendant. («o) (r) Harris v. Boston, 2 Camp. 348. Hutchinson v. Piper and another, 4 Taunt. 810. («) Matthews, q. t. v. Griffiths, 1 Bos. & P. 153, n. Peake's N. P. 0. 200. 1 East, 92. [t) Sir Benj. Hammett v. SirWm. Yea, 1 Bos. &Pnll. 144, Par. v.Bliason, 2 East Rep. 92. . ; I (u) Eiparte Patrick in re Holthouse, 1 Mont. & Ayr. 385. And see Exparte Walker in re Petrie, idem, note. M 4 Taunt. 810. Kent v. Lowen, 1 Camp. 178. (w) Brooke q. t. v. Middleton, 1 Camp. 445. Exparte, Gwyn, 2 Dea. & Chitt. 12. WHAT DEEMED TTSTJRIOUS. 35 But a charge by a bill-broker in the country of 10s. per cent, as com- mission in dicounting a bill payable in London, was not deemed usuri- ous, (x) Where a discounter of a bill took an extra sum beyond legal interest, to guarantee the payment by the acceptor, there being no doubt of his solvency, the jury, in a qui tarn action for the penalties, found it usuri- ous, (y) As to bills and notes not exceeding three months date, or to run, vide Stat. 3 & 4 William IV. c, 98, s. 7. The reason assigned for further relaxing the rule *in favour of ^ trade is, that as the ordinary rate of interest is merely a sufficient L *' J consideration for the sum lent, when the lender is put to any extra trouble or expense on account of the loan, it is but fair he should be remunerated by the borrower. Section 4. Gompound Interest. To make interest principal and carry interest, on a mortgage security, it is necessary that it should first have grown due, and then an express agreement in writing, signed by the parties, is requisite to convert it into principal. A covenant in a mortgage deed, with a proviso declared that if the interest was unpaid six months it should be accounted principal and carry interest, was held to be insufficient, Lord Chancellor Cowper stating "that no precedent had ever carried the advance of interest so far."(«) And in another case Lord Thurlow said : " My opinion is in favour of " interest, because I do not see any reason, if a man does not pay interest " when he ought, why he should not pay interest for that also : but I " have found the Court in the constant habit of ^thinking the ^ . „ , "contrary, and I must overturn all the proceedings of the Court L J "if I give it." (a) Lord Eldon also observed in one case — " There is nothing unfair, or " perhaps illegal, in taking a covenant originally, that if interest is not <'paid at the end of a year.it shall be converted into principal, but the "Court will not permit that, as tending to Usury, though not Usury." (&) These dicta, however, must be understood as applying to mortgages of real property only, as there is a difference between mortgages and agreements for sale. Where bonds for the amount of purchase money were given payable by instalments, which instalments were composed of principal and interest, (x) Exparte Henson, 1 Madd. Rep. 112. Thompson v. Powles, 2 Sim. 195. (y) See q. t. v. Cass, 1 Taunt. 511. \z) Meere's case, cited in Bosanquet and Dashwood Ca. temp. Talbot, 40. Brown V. Barkham, 1 Pr. Wms. 653. Lord Ossulston v. Lord Yarmouth, 2 Salk. 449. (a) 1 Ves. J. 99. (i) Chambers v. Goldwin, 9 Ves. 271. 36 KEliLYONUSURT. it was contended, as the bonds themselves carried interest, this was in- terest upon interest and Usury. But Lord Eldon held, that as the obligee, on each instalment becoming due, might have had judgment for the principal and interest due on the bonds, there was no Usury. (c) And in a more recent case, where a contract was made for the sale of an estate, situate in the colony of Demerara, where 6 per cent, was the legal interest, at a certain price, and it was agreed that this should be paid at certain future days, with interest calculated at 6 per cent., and pro- r *4.q n ''lisso'^y notes were *given for these sums, compounded of the in- L J stalments and that which was called interest, it was decided by Lord Tenterden and the Court, that the whole must be considered as the purchase-money of the estate, and that the bargain was not usurious. " The " agreement being founded partly, said his Lordship, on what was, con- " sidered the present price of the estate, and partly of what was considered " the price of the estate if paid at some future day.'VrfJ As to personal contracts, it may be matter of agreement, or settled by mercantile usage. Where bankers struck a balance quarterly, having charged interest and commission on it, and afterwards carried it forward as principal, and charged interest, the court was not inclined to consider this usurious, presuming that as the balance was adjusted every quarter, it becomes a freih agreement to lend the amount then due.(e) But in the absence of any such understanding or agreement compound interest would not be allowed. Section 5. Wliere the Rish of losing the Principal is slight. Where the principal is really put, in hazard, it is not usurious to [•50] receive moje than 5 per cent.; but it *is necessary the risk should not be slight or the contingency colourable only. An agreement made by by the lender of sBlOO to receive from the hor-- rower £2Q at the end of a year, for the forbearance of the ^6100, if the lender's son were alive, was held insufficient, and a mere subtlety to avoid the act, for if it should be out of the statute for the uncertainty of the life, the statute would be of little effect.(/) So the contingency of a young and healthy person dying within three months has been deemed usurious, for being so slight, it appears an eva- sion of the statute, (gr) (cjTarlton v. Backhouse, Coo. 0. C. 231. Id) Beete v. Bidgood, 4 B. & Cress. 453. (c) Caliot V. Walker, 2 Anst. 495. Bxparte Bevan, 9 Ves. J. 223. 2 Ves. J. 20. Bruce v. Hunter, 3 Camp. 46Y. Eaton & others v. Bell & others, 5 Barn. & Aid. 40. Newall V. Jones, 1 M. & M. 469. 4 C. & P. 124 s. c. (/) Per Popham, C. J. in Burton's case, 5 Co. Rep. 70. Mason v. Abdy, 3 Salk. 390. Button v. Downham, Crp. Eliz. 642. [g] Richards q. t. v. Brown, Cowp. 770. WHAT DEEMED USURIOUS. 37 So the chance of one collier out of twenty reaching London in the summer season, would be deemed a mere diguise to obtain more than legal interest, (/t) And no risk merely of the borrower's insolvency, however great, is such a hazard as will justify the lender's taking more than legal interest on the sum lent. See more on this subject, title Hazard. Section 6. Where the Interest only is risked. The rule has been thus laid down where the interest only is put in jeopardy. If £100 be lent, to receive 'J120 at the end of a year, *upon ^r-t -, a casualty, if the casualty goes to the interest and not to the L J principal, it is Usury ; for the party is to have the principal come what will ; but if the principal and interest are both hazarded, it is then not Usury, (iy Section 7. Retiring Partners, As long as a partner remains in the concern, or retires leaving his capital therein, if he is still liable to the losses, and to be personally sued for the debts of the firm, he may make what stipulation he pleases, for interest upon any sum he leaves in the trade although it may exceed 5 per cent. But if he wholly withdraws himself, and he is no longer subject to a proportion of the losses, or liable to be sued as a partner, he cannot receivfe more than 5 per cent, for his money, without being guilty of Usury ; for, although his principal in the latter case would be liable to partnership creditors, yet it is not such a hazard as will justify the extra interest ; this has been clearly established, both at law and in equity. Where money was lent in consideration that the lender should have part of the profits of a trade, in lieu of interest, bearing a proportion of the losses, *though his share of the profits exceeded the amount ^ ^^^ -, of legal interest, it was not usurious : because, as Lord Mans- L -■ field observed, " The lender might be drawn into bankruptcy, by means " of this agreement, which would have been more severe perhaps than " the loss of the capital or the penalties of the statute of Usury ."(_;) . But where a person was possessed of two shares in a brewery, estimated A) 2 Vernon, Eep. VlQ. («)Eoberts v. Trenayne, Oro. Jac. 50'7. [j) Morrisset v. King, Burr. 891. Anderson v. Malthy, 2 Ves. J. 248. \). 88 KELLYONUSURY. at dSljOOO each, the business of which he carried on in conjunction with two partners, and which was considered a flourishing concern, borrowed i62,000 of another, and agreed to pay him for the loan, not only 5 per cent, interest, but also the surplus profits of the two sliares, which were expected to leave a balance, after paying the interest on the £2,000, and that he would assign the two shares to the lender, as his own property, it was held usurious. And in answer to the argument of the lender's coun- sel, that the principal was put in hazard, as it was liable to the partner- ship creditors. Lord Kenyon observed, '< It was no further hazarded than "in the case of every other loan, viz., by the risk of the borrower's insol- "vency; for, as between the plaintiff and the partners in the business, " he was not liable to contribute to to the losses in the trade." Buller, Justice, added that " the lender was only liable to make good the losses " of the trade, in the event of an insolvency of the other partners ; but " as between these parties, if there were any losses, they must be borne r *fiS 1 " ^^ *^^^ borrower and the other partners, whilst, if there was L -1 " any profit, the lender would receive his proportion of it."(^) In another case in error, from the Court of Common Pleas, Lord Ten- terden said, " If there is a partnership there is no loan of money. And " where the jury have found a bona fide partnership, and no contrivance " to cover Usury, the Court will not disturb the verdict. (Z) Section. 8. Where Stock is trans/erred. Stock in the public funds is occasionally used as a means of avoiding the statute. And wherever the lender, who transfers the stock, has made such a stipulation with the borrower, to whose use it is transferred, so as to receive in lieu of it a greater amount of stock or interest at some future period, without the chance of receiving less, it is usurious; but if his receiving more depends on a contingency, such as the rise or fall of stock at the time at which it is to be retransferred or paid for, this will alter the case, as risk in the transaction is incompatible with the idea of Usury, in which the principal must be always certain. r #54 1 *Two cases will sufiioe to shew this : L J Where one agreed with another, to whom he owed a sum of money, that he would either repay it at a certain day, or transfer so much stock as the debt would have produced at that time, whichever was preferred by the creditor; this was held to be usurious by Sir William Grant : " For the creditor," said that eminent judge, " might elect " to take stock when it had risen, whilst his principal and interest being " secure he could sustain no loss."(»i) But, on the other hand, where the agreement was in consideration of (k) Morse v. Wilson, 4 T. R. 353. (I) Gilpin v. Enderby, 5 B. & A. 954. (m) Barnard v. Young IT Ves. J. 44. Forrest v. Elwes, 4 Ves. J. 492. Cbip- pendale t. Thurston, 1 Moo. & Malk. 411. White v. Wright, 3 B. & C. 2T3 WHAT DEEMED USURIOUS. 39 £160, to transfer 400. 3 per cent, consols in nine months or pay the then market price, though, at the time it was made the £400. was worth £240, whereby it was alleged the plaintiff both made £80, and the di- vidends by the bargain. Lord Ellenborough decided that, though this was a catching^»g,ain, yet, as there was some contingency, and a possi- bility of the stTOk declining to that extent, though he admitted it was very remote, that contract was not usurious, (n) This decision is considered as carrying the principle of contingency to a great length, the fall of 20 or 30 per cent., in so short a period, being very improbable. If, on the negociation for a loan, the lender insists *on the bor- ^^ rr-, rower's taking stock at a rate exceeding the market-price, it is L J usurious, (o) Contracts, called continuation and backadation, known chiefly on the Stock Exchange, and which are the same in principle, are where a pre- mium is given to postpone the actual payment or delivery of stock till a future day, have been held usurious.(p) An arrangement, therefore, to replace stock lent, even if more than the principal and interest be obtained, is not usurious, on account of the contingency ; but if that be removed before-hand, the value defined, and the gain certain, or may be rendered so, it is usurious. Section 9. Where something besides Money is given or charged /or. It matters not how the compensation above the legal interest arises, if the object be to avoid the statute. For where a sum of money was lent, and only legal interest charged, but the borrower was obliged to take a house on lease, at double its yearly value, it was held to be Usury. (5) *Again, an agreement that, upon the advance of a sum of p ^f.„ -. money by Ohambre to Tristram, the latter shall assign to Cham- L J bre the lease of premises of a greater value, with a power of redemp- tion on repayment of the money, and that in the meantime Chambre shall grant Tristram an under-lease of the premises at a greater rent than the legal interest of the money, Tristram incurring the expenses, and paying the ground rent and taxes, it was held usurious, and the assign- ment executed on such agreement void.(»') Likewise, where a bankrupt had borrowed ^61000. of another, at legal interest, for a quarter of a year, but deposited some silk with the lender (re) Pike v. Ledwell, 5 Esp. N. P. C. 164. Parquarson v. Barstow, 4 Bli. 560. (0) Doe V. Barnard, 1 Bsp.Jf. P. 0. 11. (p) Smedley q. t. v. Roberts, 2 Camp. 607. Vid. also on this subject, Moore v. Battie, Amb. 371. Tate t. Wellings, 3 T. R. 531. Haddock v. Rumball, 8 East, 304. Boldero v. Jackson, 11 Bast, 612. Davison v. Pitt, Esp. N. P. C. 1. (q) Shep. Touch, 62, Saunders's Case. (r) Doe ex dem. Telford t. Chambers, 4'Camp. 1. March, 1852.— 32 40 K E L L T N TJ S TJ R Y. as collateral security, and agreed to give him £1. for every £100. bor- rowed for that quarter, as warehouse room ; this the Judge thought was usurious, though the jury, under the peculiar circumstances of that case, found a verdict for the defendant.(s) So where the borrower appointed the lender receiver of his rents, with a salary for his trouble far heyond what was customary or reason- able ; and where another allowed the lender a salary as clerk in his brewery, for services which were neither performed nor intended to he, it was held in each case to be a mere contrivance, and usurious. (<) For, l- ju-^ -, according to *Lord Mansfield, " where the real truth is a loan of L J « money, the wit of man cannot find a shift to take it out of the " statute." Nor is it absolutely necessary there should be a loan, for where a surety for a debt gave a sum of money for the forbearance of the debt, the transaction was ruled equivalent to a loan.(M) Neither is it necessary the compensation for the forbearance should be in money, as the statutes have prohibited the taking above the value : for where one bought two oxen, to be paid for at a certain time and not being able to pay for them at that time, agreed with the seller that if he would forbear, and give him till a future day, he would give him three quarters of wheat, which being above the value of the legal interest, was held usuriou3.(v) [*58] *CHAPTER III. OF AGREEMENTS AND TRANSACTIONS WHICH FOR THE MOST PART HAVE NOT BEEN DEEMED tJSTJRIOtJS. 1. — Where Usury is incurred by mis- take. 2. — Where the principal ia bona-fide hazarded. 3. — Post obit bonds. 4. — ^Loans on contingencies. 5. — Where the transaction is by way of annuity. 6. — Prompt payment and usage of trade. 1- — ^Where there is a penalty for non- payment. 8. — ^Foreign interest. Section 1. Where Usury is incurred by mistake. As the intention of the parties is essential to the offence, it necessarily follows Usury cannot be incurred by the mistake of a third person. («) Le Blanc v. Harrison, Holt's Rep. 706. Solarte v. MeMlle, 1 Barn. & Cress. 431. (t) Wright V. Whpeler, 1 Camp. 165, note. Scott q. t. t. Brest, 2 T. R. 238. (u) Manners q. t. v. Postau, 3 B. & P. 343. Jestons t. Brooke, Cowper, T93. 3 Barn. & Aid. 664. . ' (v) Pollard v. Scholey, Cro. Bliz. 20. WHAT NOT DEEMED TJSTTRIOTJS. 41 Therefore, in cases where the attorney or agent of the contracting par- ties has by mistake inserted a *larger rate of interest than is ^ ^^q -. legal, or made the time of payment of it fall due sooner than L J was intended, the Courts have invariably held, that as there was no cor- rupt agreement, the parties shall not be prejudiced, and that the sum really due may be recovered, (a) Nor is it material that the lender, after he has advanced his money, has taken the security, knowing of the mistake, as his acceptance of it does not make him a party to the corrupt agreement, the security being necessary for the recovery of the money : neither does it signify whether the scrivener's mistake be an error in fact, from ignorance of the law, as the want of a corrupt motive will protect the lender. (6) However, if the agreement be clearly usurious, it is void, though the parties did not intend it to be so, and were ignorant that such was the result of their contract, (c) Though it is more than probable, under such circumstances, they would not be held liable for the penalties ; for it is an universal rule that a cor- rupt agreement is the ground and foundation of usurious contracts, and that if the intent of the contracting parties be righteous, the contract cannot be within the statutes of Usury. ♦Section 2. [ *60 ] Where the Principal is bona-Jide hazarded. We have before observed that where the risk of the principal is so slight as to afford grounds of belief that it is merely colourable, or where the interest only is in danger, it is not sufficient to warrant the taking of more than 5 per cent. But where the principal may be entirely lost, as in the case of loans on contingency, hottomry, post obit bonds, annuities, &c., it there cannot be said that the consideration is paid for the forbearance of money, when the day of payment itself may never come. For where a man advanced money to victual a Newfoundland ship, on condition of receiving so many Jish, far exceeding the legal rate of inte- rest, (in value,) with the principal, in case the ship returned to Dart- mouth, and the principal only in case she arrived elsewhere, but nothing in case she did not come at all, the Court held it not to be Usury, for the lender ran a hazard of having less than the interest in one case, and of losing both principal and interest in the other. (cZ) So where a bond was given, with a condition if the ship went to sea, or the goods on board or the borrower should return safe, the lender (ffi) Ballard v. Qddey, 2 Mod. 307. Buckler v. Millerd, 2 Vent. 108. 1 Free. 264. Murray v. Harding, 3 Wils. 390. Glassfurd v. Laing, 1 Camp. 149. (b) Bush V. Buckingham, 2 Vent. 83. Buckley v. Guilbank, Cro. Jac. &n. ic) Marsh v. Martindale, 3 B. & P. 154. \d) Sharpley v. Hurrcll, Cro. Jac. 208. 42 KELIiTONUStJRT. should receive not only his principal and interest, but also a premium r »R1 1 ^°' ^^^ ^°^^ > ^^ ^^^ contended that this was an *usurious con- L -I tract, for as the payment depended on so many contingencies, one of them must probably take place ; but the Court held it good, as it was according to the usage of merchants, and allowable by reason of the dangers of the sea.(e) It was however, stated in the leading case on the subject, by Justice Burnet, " that the true reason why the Court held bottomry bonds good, " is because they are not against the statute, as by the hazard a person "runs, he (may be entitled to neither principal nor interest ;" and Lord Chief Justice Lee said, in the same case, "bottomry bonds are held " good, not because they are for the benefit of trade, but because the " whole is at hazard."(/) They may, however, be made an evasion of the statute, as where the premium is large and unusual, in proportion to the risk, which is trifling and improbable, as if a contract were made on a ship's return from Dover to Calais, at a season of the year when there is little or no danger; this would be looked upon as colourable, and a pretence to avoid the statute. The chance of five doAtghters being alive at the distance of ten years, was held sufficient risk; for where one agreed with another, in considera- tion of £100. paid down, that he would pay ^£80. a piece to each of the five daughters that should be living at the end of ten years : the Court held it not usurious, and said, " if it had been that he should pay at the r *fi9 T "^^^ °^ *one or two years £300. if any of the said children were L -I " alive, that had been Usury, for in probability one of them " would continue alive for so short a time, but in ten years are many " alterations.' V ^) A post obit bond is a hazardous bargain, and not within the statute, Vid. Post obit Bonds. It is clear, therefore, that a fair hazard will keep the ease out of the statute, but a colourable or slight risk will not. Section 3. ' Post obit Bonds. Post obit bonds are given in consideration of a certain sum paid down, to receive a much greater sum at the death of some particular person or persons, and are not usurious, however hard the terms on which they may be given, as there ia only a chianee of survivorship, and the risk of losing both principal and interest. A person who had the reversion of an estate on the death of two old women, being in want of ready money, borrowed £850. of another, and (e) Soome v. Gleane, 1 Sid. 27. (/) In Chesterfield v. Janssen, 2 Ves. 125. .1 Atk. 301 & 1 Wils. 286. (g) Bedingfield v. Ashley, Cro. Bliz. '741. Long^ ». Wharton, 3 Keb. 304. Joy V. Kent, Hardr. 418. Garret v. Foot, Comb. 133. WHAT NOT DEEMED USURIOUS. 43 agreed, in consideration of it, to give the lender £700. on the death of the two old women, and to secure it by mortgage of the reversionary estate. It happened that the *two old women died within two p ^„„ years of the agreement, whereupon the borrower was anxious to L -' be off the bargain, on the ground that advantage had been taken of her necessitous situation, and she filed a bill in Chancery for the purpose, which was dismissed. Lord Keeper North, (whose opinion is applicable to all fair eases of this description,) thought it was a fair bargain, and, as to the plaintiff's necessities, he observed, "it-is the same in all other " cases, one that is necessitous must sell cheaper than those who are not ; " if I had a mind to buy of a rich man a piece of ground that lay near " mine, for my convenience, he would ask me almost twice the value, so " where people are constrained to sell, they must not look to have the fullest "price. As in some cases that I have known, where a young lady that " had £10,000. portion, payable at the death of an old man, or the like, "and she in the mean time becomes marriageable, this portion has been " sold for £6,000. present money, and thought a good ba:rgain too. It is "the common case, pay me double the interest during my life, and you " shall have the principal after my decease."(A) The principal case upon loans on contingencies and hazardous bargains, where the subject met with the greatest consideration from the most emi- nent lawyers of the day, and in which all the former decisions were can- vassed and the law clearly settled, and which now forms the standard case on these subjects, was the following : , *Sir Abraham Janssen lent Mr. Spencer £5,00©. on his post ^ ^„. -. obit bond, on condition that he was to receive for it i610,000. if L -' Mr. Spencer survived the Duchess ,of Marlborough, but nothing if he died before her ; Mr. Spencer was thirty years of age at the time, and the Duchess seventy-eight ; his health was impaired and infirm from in- temperance ; her's good, considering her age ; about six years after this bargain, the Duchess died, and Mr. Spencer, being unable to pay off the £10,000., gave Sir Abraham a new bond for that sum, and before he died, paid £2,000. on account of it. He bequeathed the residue of his personalty to his son ; the bill was filed by the executors and guardians of the son to be relieved against this, as an usurious and unconscionable bargain. It was however dismissed, with costs ; the Court having de- livered an elaborate opinion that the contract was not usurious, and that the case was free from fraud, (i) But though not usurious, the Court would have relieved against it, as an unconscionable bargain, had not Mr. Spencer confirmed it, in his life-time, by payment of the £2,000. in part, on the death of the Duchess. Post obit bonds do not thei-efore come within the statutes of Usury, but where undue advantage has been taken of the necessities, or gross imposition has been practised on a reversioner, or expectant heir, a Court of Equity will, on a strong case being made out, afford the same relief as it does in all other unconscionable bargains.ije) (h) Batty v. Lloyd, 1 Vern. 141. Berny v. Pitt, 2 Vern. 14. 2 Vem. 21. \i) Chesterfield v. Janssen, 2 Ves. 125. 1 Atk. 301. 1 "Wils. 286. \k) Matthews v. Lewis, 1 Anstr. 1. Wharton v. May, 5 Ves. J. 27. 44 kelltonustjrt. [ *65 ] ^Section 4. Loans on Contingencies. Loans on contingencies are not usurions, on account of the risk in- curred. Where a person, in consideration of £30., became bound to another to pay £100. to him on the marriage of his daughter, but, if either of them should die before the marriage, nothing ; this was held good, the Court stating, "it was plain bottomree." (T) And a wager between other two, to have £40. for £20. if one be alive on a future day agreed on, was not usurious, (m) So in a case, lately decided, where the defendant had applied to the plaintiff, in May 1829, to lend him £200. ; he consented, and the de- fendant gave him a warrant of attorney for the payment of £300. by in- stalments, viz. =eiOO. at Christmas 1829, — ^£100. at Midsummer 1830, — and £100. at Christmas 1830, — if hoik should be living on those days respectively. There being a risk of the principal, the Court refused, on application, to interfere. Lord Tenterden observing, " We do not think " this a case in which the Court can interfere, there certainly was a risk " of the principal; the contingency was, if either of the parties happened r *RR n " *" die." In this case, the plaintiff swore, that his *life was <- -■ bad and uninsurable, that two insurance offices had refused to insure it, and that the defendant was an officer in the army, and liable to be called into active service ; and that he believed such transactions were very common in the city of London, (m) It is on the ground of risk, or contingency, that partners on retiring are allowed to make what arrangements they please as to interest for the capital they either invest, or leave, in the business, during the time they are liable to the engagements of the concern, though it may exceed 5 per cent. Therefore we see, that although a very slight or colourable contingency will not take a case out of the statute,(o) yet a bona fide hazard will have that effect. Section 5. Where the Transaction is hy way of Annuity. It is clearly settled that the grant of an annuity for life or lives, if (l) Long T. Wharton, 3 Keb. 304. Chesterfield v. Janssen, Atk. 301. (m) Button v. Downham, Oro. Bliz. 643. Bedingfield v. Ashley, Ore. Eliz. '741. Lamego v. Gould, 2 Burr. ^15. (n) Flight T. Chaplin, 3 B. & Adolph. 112. (o) Richards q. t. v. Brown, Cowp. ^70. WHAT NOT DEEMED USURIOUS. 45 made bona fide, is not in its nature usurious, though it may be rendered so by concomitant circumstances. Mr. Justice Blackstone observed, that every case of Usury must de- pend on its own circumstances ; and added, " That he did not know an " instance where the principal was bona fide hazarded, that the contract " *had been held usurious. If the price be inadequate to the ^ ^„y ^ " hazard, it may be imposition, and, under some circumstances, •- J "relievable in equity, but it cannot be legal Usury ."(p) The reason assigned for grants of annuity not being deemed within the statute, is the hazard run by the purchaser of not receiving an adequate return for his principal; this hazard, however, in the present day, is much diminished by means of life insuranca. It was, at one time, con- sidered that if the deed granting the annuity were to contain a clause of redemption or repurchase, it would infect the whole transaction with Usury, as it was thought the principal was not then in reality put in hazard ; and while it was so understood, it was customary to provide for such repurchase, either by a separate deed or agreement, or to leave it entirely to the honour of the parties. The Court having observed, in one case, where the question arose how far an annuity granted for three lives was valid, — " That as there was no loan, but a bona fide sale, it " was good ; but if there had been a provision made for repayment of " the principal, although not expressed in the bond, it had been an usuri- " ous agreement and lending within the statute."(g') And in accordance with this view of the case. Lord Hardwicke at one time decided, that the grant of an annuity by a person for his life, with a proviso for repur- chasing or redeeming *it, upon giving six months notice to the grantor, was a mere loan, and usurious, (r) Subsequent cases, [*68] however, have altered the law in this respect, it being now considered that a redemption, at the option of the grantor, was clearly for his bene- fit, and therefore the Court ought not to consider the transaction within the statute ; for where an annuity was sold for the life of the grantor, then aged thirty-two years, with a clause of redemption, at the option of the grantor, after the expiration of five years, for five and a half years purchase, it was, after much consideration, not deemed usurious. De Grey, Chief Justice, observed, " That it was essential to the nature of an " usurious contract, that there must be 1st, a loan ; 2ndly, that illegal " interest is to be paid for such loan ; and it is essential to the nature " of a loan, that the thing borrowed should, at all events, be restored ; "if that be bona fide put in hazard, it is no loan, but a contract of an- " other kind ; so if illegal interest is to be certainly paid, or upon a rea- "sonable possibility, the contract is usurious. "(s) In another case, where an annuity was sold, and it was agreed and understood at the time, that the grantor was to be allowed to redeem it, but no proviso was introduced into the deed to that effect, under the im- pression that its introduction would render the deed void, as usurious ; (p) Murray v. Harding, 3 Wils. 390. 2 Blacks. Rep. 859. (g) Fountain v. Grimes, Oro. Jac. 252. Floyer v. Sherard, Amb. 19. (r) Lawley v. Hooper, 3 Atk. 280. (s) Murray v. Harding, Blacks. Rep. 859. 3 Wils. 390. 46 KELLY ON TTSTBT. r *CQ -I *lie grantor filed his bill in Chanceryj to compel the execution of I- J *this parol agreement, which Lord Chancellor Thurlow dismissed, on the ground that where there is no fraud, parol evidence shall not be permitted to contradict a deed ; and with reference to the omission of the proviso, his Lordship observed, " To sell anannuity, and make it redeem- " able, is not Usury, because it is not a loan, and this doctrine prevails " at the present day."(rt Neither does an assurance effected on the life of the grantor of the an- nuity render it invalid. Lord Hardwicke, in reference to this mode of insuring the risk, saidj " It has been objected that a man must be out of " his senses to lend his money upon annuities for life, which may drop " the next day, and speaking abstractedly, and merely on the nature of " annuities for life, there seems to be weight in this objection, but every " person knows that this casualty of losing the principal, is secured by " insuring the life upon which the annuity depends; but it is said every " life cannot be insured, indeed the insurance office will require different "tprms, according to the life, but still they mai/ be insured." («*) Therefore, a ready mode of evading the penalties of the Usury Laws, in raising money at more than 5 jier cent, presents itself to the borrower, on granting the lender an annuity, proportioned to the rate of interest agreed on, and retaining the power by proviso to repurchase it, at his r *7ft 1 convenience, while the *lender guards himself against ultimate L J loss, by insuring the borrower's life, or taking an assignment of a policy already effected ; all which is perfectly legal, ag it has been de- cided by a recent case, that a covenant by a grantor of an annuity to in- sure his life, is the same as if an increased rate of atiiKial payment had been stipulated for by the grantee, in order that he might effect the same insurance ; nor would the grantor be personally liable if, after having effected the insurance, the company were not to pay.(w) Neither where the annuity is granted for lives is it deemed usurious, though it be granted for and during the lives of four persons, and the life of the longest liver of them, though they be all nominated by the grantee, and the deed contains a covenant to insure the last life, within thirty days after the lapse of the third life.(«)) It was formerly held that an annuity for a term of years certain was not usurious. The Courts, however, of late incline to a contrary opin- ion. ^ / Where £566. was given for an annuity of j6120. for twenty-three years, it was said by the Court, " This is clearly no Usury, where there " was no communication before between them for a loan ; the annuity " was purchased bona fide, and had it been ^640. per annum for forty r *71 1 " y^^^^) ^°' .£100., it had been *no Usury, no more than if for '■ J " £100. one purchase lands worth £40 per annum."(a3) So where one agreed with another to lend him £100., and that for the (t) Irnham v. Child, 1 Brown, C. C. 92. (u) Lawley v. Hooper, 3 Atk. 280. (v) Morris v. Jones, 2 B. & C. 232. Holland T. Pelham, 1 Tyr. 438. 1 C. & J. 575. (w) Exparte Naish, 7 Bing. 150. (x) Tanfield v. Finch, Cro. Eliz. 27. WHAT NOT DEEMED USURIOUS. 47 forbearance thereof he should receive £20.. half yearly, till ^120. had been paid ; Twisden, Justice, said, " The contract was not usurious, but " a purchase of an annuity for three years.'Vy) Doubts have, however, in more modern times, been entertained, whether an annuity for a term of years, if it be so granted as to repay the principal and more than legal interest, would, not now be deemed usurious. In a recent case of ejectment, on Sir James Scarlett observing argu- endo, " If a person have an annuity secured on a freehold estate,- it may " clearly be his interest to redeem it, but such a power will not make " the bargain usurious." But per Bay ley. Justice, "In that case, the " principal is in hazard, from the uncertain duration of human life. Here " it is the nature of an annuity for years, and there is no case in " which such an annuity has been held not to be usurious, where, on " calculation, it appeared that more than principal, together with legal in- " terest, is to be received."(») In this dictum the learned Judge must be understood to mean p^ ,..„ -, that there is no modern case in which it has been so decided, as L ^ we have already cited several old authorities to the contrary ; and this observation has been made, in a later case, before his Honor the Master of the Rolls, who does not appear to have disapproved of it. Where an annuity had been granted /or a term of years, to be paid half-yearly, and at the time promissory notes were given by the grantor for the payment of each half-year's annuity when it became due, and it appeared that the several half yearly payments would repay the purchase-money, with inte- rest exceeding the rate of 5 percent.. His Honor observed, " With respect " to the question of Usury, I shall not refer to the old cases, which have " been cited. This is in effect an agreement to repay the principal sum of " £4000. with interest, by twenty-three instalments, and as it appears " that the interest thus paid will exceed legal interest, the transaction is " plainly usurious."(a) Section 6. Prompt Payment and Usage of Trade. The deducting of more than 5 per cent, for prompt payment is not considered usurious at law, when *done bona fide and according -^ _„ -. to the usage of trade, as it is considered the debtor has the op- '■ tion at all times of defeating the interest, by payment at the time agreed on. Where the plaintiff, who was a gold refiner, brought an action for goods sold and delivered to a customer, to be paid for at three months {y) Rowe v. Bellasis, 1, Sid. 182, and Dr. Goad's case, Trin. 19th Eliz. Symonds V. Cockerill, Noy. 151. CJotterell v. Harrington, Brownl. 180. Rex v. Drury, 2 Leon. *l, per Burnett, Just, in Chesterfield v. Janssen, 2 Ves. 1*2. (z) Doe V. Gdoeh, 3 Barn. & Aid. 660. \a) Fereday v. Wightwick, 1 E. & M. p. 45. 48 KELLTONtJSrKT. credit, with an agreement that if they were not paid for at the expiration of that time, the customer was to paylc?. an oz. a month, /or every month afterwards that the account should remain unsettled, and this mode of dealing was proved on the trial to be customary in that trade, though, on calculation, it exceeded 5 per cent., which the customer alleged in his de- fence was usurious. Lord Mansfield decided, "That as it was proved " to be the custom of that particular trade, and as it was optional with " the defendant to have avoided the increased sum, by payment at the " end of three months, it was not usurious."(6) In another case, where the defendant, in an action for money had and received, had paid into Court the principal, and 5 per cent., from the time of the bargain, and it appeared the excess was only to be taken in case of delay of payment at the end of three months, the same learned Judge was of opinion, that though it ought not to be considered Usury within the statute, yet that the demand of the surplus was an exorbitant demand, and therefore ought not to be recovered in an action for money |-ji5 - . , had and received, which was an equitable action, and *founded in L -1 conscience, under the particular circumstances of the case. The defendant had a verdict, (c) There are, however, cases in bankruptcy at variance with what has been stated, as well as the former eases, which has thrown some doubt on t e subject. A firm of cotton manufacturers had agreed with bleachers, who were in the habit of bleaching for them, upon the terms of receiving their running account quarterly ; and, if paid immediately, they were to be allowed 30? per cent, discount. This went on for some- time, the quar- terly accounts were paid, and the discount allowed ; when, at length, the cotton manufacturers failed : the bleachers then wished to prove, under the commission, their full account, but the commissioners refused to al- low them more than 5 per cent, discount ; on this they petitioned to be allowed to prove the surplus discount, according to agreement, and sup- ported their application by an affidavit, setting forth the custom, among bleachers, to allow such large discounts, varying from 20 to 30 per cent. ; but Lord Chancellor Kosslyn dismissed the petition, thinking the com- missioners had done right, (c?) This decision has been followed, in a more recent case, by the Vice- Chancellor, in which no discount, not even 5 per cent., was allowed ; and r* 7'i 1 ^* ^^ ^^^^ *that the reporter was mistaken in representing that L J 5 per cent, was allowed in the bleacher's case. The facts were these — some parcels of gunpowder were sold, to be paid for at the end of the year in which they were purchased, but if paid for before the end of the year, 20 per cent, discount was to be allowed ; they were not paid for within the year; yet, on the bankruptcy of the debtor, the creditors were not allowed to prove the whole debt without the deduction of the dis- (b) Floyer v. Edwards, 3 Cowp. 112. (cj Plumbe v. Carter, Oowp. 116 \d) Bxparte Ainsworth, 4 Ves. J. 6T8. But see Eden's Bankrupt Law, p. 135, where it is said, Mr. Vesey was mistaken in representing that 5 per cent, discount was allowed, and Co. Bankrupt Law, 220, where no notice is taken of the 5 per cent. WHAT NOX DEEMED USURIOUS. 49 count. The Vice-Chancellor, Sir John Leach, observing, "That it might " be difficult, on legal reasoning, to arrive at the conclusion of Lord " Rosslyn, in the former case, as he seemed to have come to that deci- " sion, as a rule of expediency, to avoid the frauds which might other- " wise be practised; and as that case had ever since been acted upon, he " would not depart from it."(e) From these latter authorities, therefore, one of two consequences must be inferred, viz., either that the prior cases on the subject are overruled by them, or that there is a distinction made between actions at law and commissions of bankruptcy; for it is clear the seller of goods, notwith- standing any agreement he may have made with the buyer as to discount for payment within a stipulated period, cannot, in the event of the latter's bankruptcy, prove for more than the real price, minus the discount. As to proceedings in Bankruptcy, vid. post, tit. Bankruptcy. *Section 7. [*76] Where there is a Penalty for Non-Payment. These nearly resemble the cases of prompt payment, for where the sum reserved is in the nature of a penalty, and the redemption optional, on the part of the borrower, it should seem it is not usurious ; but as this would open a wide door to avoid the statute, such contracts are narrowly watched, and i£ it can be shewn that the penalty was a mere contrivance, and the forfeiture certain, it will be deemed usurious. Where one had delivered goods of the value of £100., and took a bond for their re-delivery in a month, or to pay ^6123., it was held Usury, be- ing considered a mere cloak to avoid the statute. (/) Holt, Chief Justice, said in one case, " If I covenant to pay £100. a " year hence, and if I do not pay it, to pay £20. more, it is not Uusnry, " but only in the nature of a penalty." (^) So if I lend one £100. for two years, at the end of which time he is to pay me £30. for the loan, but if he repays me the principal at the year's end, he shall pay nothing for interest ; this is not Usury, for he had his election, and might have discharged himself by repayment before the two years expired. (^) *This, at first sight, appears to be at variance with the rule, ^ ^^7 -1 that where the interest only is risked it is not sufficient to avoid L J the statute; but we must remember that these cases of penalties are mere executory agreements, and the additional sums may never become a debt, as the borrower may entirely defeat it, by payment before the for- feiture is incurred. (e) Eiparte Pigou in re Harvey, 3 Madd. 136. (/) Beecher's Case, cited in Keynolds v. Clayton, Moore, 397. \g) Garret v. Foote, Comb. 133. Burton's Case, 5 Co. Bep. 69. (A) Cro. Jac. 509, per Doddridge, Just. 50 kelly on usury. Section 8. Foreign Interest. Foreign interest is regulated by different statutes, and it is not usu- rious to receive, upon a contract made in a foreign country, the .rate of interest allowed by such country, though it may exceed 5 per cent. Therefore, a bill payable in India, and returned to England^ protested for non-payment, may lawfully bear 12 per cent., the interest allowed in India.(i) But if an action were brought upon such bill in England, and the plaintiff should have judgment in his favour, he would be -allowed Indian interest to the signing of the judgment, and afterwards being con- r *78 1 si'^^'^'i principal, he would only be entitled to the *English rate, ■- J or 5 per cent, from the liquidation of the debt by the judgment.(/l!) It was formerly necessary, in order to secure foreign interest on bonds or mortgages in Ireland, and the West Indies, that the bond or mortgage should have been actually executed in the country where the interest was to be calculated. This has, however, been remedied by an express statute, the 14th Q-eorge III., c. 79, which allows of Irish or West Indian interest being taken on securities of land there, though the deeds or securities may have been executed in Great Britai'n. This, however, is confined to mortgages and other real securities, and does not' extend to personal contracts. Therefore, where a bond was given for the purehase-tnoney of land in the West Jidies, which was afterwards exchanged in England for another boDrdi. West Indian interest, or 6 per o,ent., was not allowed on the sub- stituted bond.(?) In consequence of doubts being entertained; of the correctness of con- struing the 14th George HI., e. 79, not to extend to personal contracts entered into, by way of collateral security for the payment 6f colonial in- terest, an explanatory Act was passed in. the 1st arid' 2nd George IV., c. 51, to give to bonds and covenants of third parties, which may have been given as collateral security, in Great Britain,' for money lent and secured r *7Q "1 ™ *^® manner *mentioned in the former Act, the same validity, L -' and put them on the same footing, as the deeds or mortgages they accompanied ; this last Act was itself repealed in the next Session, 1822, (except only so far as regarded any mortgages or securities exe- cuted before the passing it.) By the 3rd 'George IV., e, 47, which de- clares that all mortgages and other securities executed in Great Britain, respecting lahds, &c., in Ireland or the West Indies, and all assurances, &c., entered into by way of collateral security for the payment of such interest, or securing interest on the money bona fide advanced, though at a higher or additional rate than the rate which such mortgages, &c., carry ; whether in any of the cases aforesaid they may have been entered (i) Ekins T. E. I. Company, 1 Peer Wms. 395. Auriol v. Thomas, 2 T. R. 52. Harvey v. Archbold, 5 D. & B. 600. 3 B. & 0. 26. Thompson v.- Powles, 2 Sim. 194. (4) Bodily v. BeUamy, 2 Burr. 1094. {I) Dewar v. Span, 3 T. R. 425. OONSEQTJENOESOi" USURY. 51 into or executed at the time of executing such mortgages, &c., or subse- quent thereto ; and whether they shall have been made with the original parties, or their representatives, trustees or assignees, and though the in- terest be payable in Great Britain, shall be as good, valid, and effectual as if the same had been entered into and executed, and the interest made payable in the place where the subject-matter of the security lies j and British suljjects are not to be liable to the penalties in the statute of Anne for receiving such interest for the money bona fide advanced, as it does not exceed the rate of interest allowed in such place, &c.(»i), It does not appear that any cases have been reported on this Act since its passing. CHAPTER IV. [*80] CONSEQUENCES OF USURY. 1. — Of Agreements and Securities which are void. 2. — In what cases renewed or substituted Securities are void. 3. — How Third Parties not priyy to the Usury are affected by it. 4.-^Sureties. 5. — Consequences of Usury. Section 1. Of Agreements and Securities which are void. Usury (with few exceptions) so far taints every security of which it forms the consideration, as to render it absolutely void, and no payment or subsequent act of the parties can render it available ; so if it be good in its inception, no subsequent arrangement will render it usurious, (a) And this holds equally where the consideration for a bond or bill is of a mixed character, as partly good and partly usurious, the latter so far taints the whole as to prevent the holder recovering even the sound part ♦upon that instrument, although he were minded to abandon r- ^g ^ -, that part which he knew to be usurious, so all writings whatever ■- for the strengthening an usurious contract are void.(6) An exception has been made in favour of indorsees of bills of exchange, or promissory notes, founded on Usury, in the hands of third parties, where valuable consideration has been given, without notice of the cir- cumstance. Vid. post. p. 87. Where a lease was granted to secure a sum really lent, and merely to secure the principal, and another agreement was made at the time, between ' Vni)See these Statutes more at length, Appendix A. post. (a) Brown v. Fulsbye, 4 Leon. 43. Body v. Tassel, 3 Leon. 205. Fussil t. Brookes, 2 0. & P. 318. (6) White and another v. Wright, 3 B. & C. 273. 52 KELLYONtJSURY. the same parties, as to usurious interest being received by the lender, the lease was held void, though only taken for the prinoipal.(c) Here it must be observed, the two contracts were contemporaneous. Where a mortgage deed was given on an usurious consideration, the mortgagor agreeing to take stock at 75, when, at the time of the trans- action, the real value was only 73, it was held usurious, and the mortgagee nonsuited in an action of ejectment. (cZ) So, if there be an agreement to pay legal interest on a bond, and a premium was paid down, over and above the interest, the bond is void.(e) Where three bills of exchange were given to secure, partly an usurious r *82 1 ^^^^> ^'^'^ partly money lent at legal *interest, though two of the L -■ bills exactly covered the legal debt, yet it was held that they were all void, as tainted with Usury.(/) A judgment entered up, on a warrant of attorney, where the considera- tion was infected with Usury, was, on application to the Court, ordered to be set aside ; the warrant of attorney, and bond accompanying it, were ordered to be delivered up, and the plaintiff saddled with the costs of the application. (5') But in another case, upon motion (in the same Court,) to set aside a warrant of attorney, and a judgment entered up thereon, given on an usurious consideration, and why a bill of exchange, given by defendant to procure his release from prison, should not be ordered to be delivered up, and the last case was cited in favour of the motion ; the Court thought the rule should be confined to the warrant of attorney and judgment, as they were not to decide the question of Usury in a summary way.(A.) And where an application was made to the Court of Exchequer, to shew cause why a certain judgment entered up by the plaintiffs should not be set aside on the ground of Usury, that Court refused to interfere, considering it the peculiar office of a Court of Equity, and that although the Court of King's Bench had granted such motions, it did not alter their r*8^ 1 determination. (t) *But this was the case of a post obit trans- L -I action, and which was held not to be usurious. If usurious interest is not contracted for, the security is not invalidated by subsequently taking such interest. (/<;) So where a contract for the principal is good, and a subsequent one for the interest usurious, the latter, though void, does not affect the former ; the holder of the first being in the same situation as if the second had never been made.(A From the observations of Sir John Strange, in the celebrated case of Chesterfield v. Janssen, it seems there are two ways of determining (c) Roberts v. Trenayne, Cro. Jac. 507. U) Doe T. Barnard, 1 Bsp. N. P. C. 11. (e) Fisher v. Beazley, Doug. 235. (/) Harrison v. Hannell, 1 Marsh. Rep. 349. Barnett v. Tomkins, Skinner's Rep. 348. (g) Machinv. Delaval, Barnes, 22. 3rd edit. idem. 211. (A) Edmonson v. Popkin, 1 B. & P. Rep. 210. (i) Matthews t. Lewis, 1 Anstr. 1. Roberts v. GofF, 4 B. & A. 92. Hindis v. O'Brien, 1 Taunt. 413. (k) Exparte Jennings, 1 Mad. 331. {1} Phillips V. Weague, 3 Camp. 119. Gray «. Fowler, 1 H. Black, 462. CONSEQUENCES OP USURT. 53 whether or not an agreement be usurious ; 1st, on a verdict of a jury on a plea of the corrupt agreement; 2nd, the Court exercising its own judg- ment on the particular circumstances of the case.(5?i) Section 2. In what cases renewed or substituted Securities are void. If a security be free from the stain of Usury when it is made, it will continue so, although the lender afterwards take, or contract to take, usurious interest ; *yet if this formed no part of the original ^ ^„ , , agreement, and was not in contemplation at the time, the security L J will be good, though the party may have rendered himself liable to the penalties of the aet.(ra) Where a bond founded on Usury was destroyed by mutual agreement, and another given on the same terms, the mere substitution of the one for the other was of no avail. (o) So a fresh security given for the balance of a debt originally usurious, is so likewise. (j>) But where a new security is given in lieu of a former one, which was usurious and void, yet if, in the second security, a deduction be made of all sums paid under the first security, the second is good, and not affected by the Usury of the first. (3J After an usurious security, given for a loan, has been destroyed by mutual consent, a promise by the borrower to repay the principal and legal interest is binding.(»-) Where a party borrowed money on an usurious agreement, and gave a bond, and afterwards, at the request of the lender, it was arranged that such bond should be destroyed, and a new one given by the^ borrower to a third person, to whom the lender owed the same amount, and in satis- faction of the lender's debt, this new bond was held good.(s) *So where a promissory note, founded on Usury, was given to p j^Qp. , another, who transferred it for a valuable consideration to a third L J party, who knew nothing of the circumstances, and the maker of the note afterwards gave the third party a bond for it ; this was held avail- able, and the usurious consideration of the note no defence to an action on the bond ;(<) but if the bond had been given to the original lender, it would have been otherwise. But if a bill, affected by Usury, in the hands of an innocent holder, (m) 1 Atk. 345. Koberts v. Trenayne, Cro. Jac. &0l. (n) NichoUs v. Lee, 3 Anstr. 940. 2 Taunt. 184. (o) Per Gross, Just, in Cuthbert v. Haley, 3 Esp. 22. 8 T. R. 390. (p) Pickering v. Banks, Forr. 1, 72. Preston v. Jackson, 2 Stark. 237. [q) Wickes v. Gogerley, 2 0. & P. 397. 1 M. & R. 123. Chapman v. Black, 2 B. & A. 5S8. Wright v. "Wheeler, 1 Camp. 165, u. Ir) Barnes v. Hedley, 1 Camp. 157. {«) Regina v. Sewell, alias Beans, 7 Mod. 118. (i!) Cuthbert v. Haley, 8 T. R. 390. 54 KELLTONUSTJRY. who, upon being informed of the Usury, takes a fresh bill in lieu of it, drawn by one of the parties to the original Usury, and accepted by a third person, for the accommodation of the other party, he cannot main- tain an action against the acceptor of this substituted bill.(M) And where a third party, to procure the liberation of another, who had been arrested on a promissory note which had been given on an usurious consideration, joined in another note for the amount of the debt, Lord Kenyon decided, that unless it could be shewn it was a colourable shift to evade the statute when the money was originally lent, and the first note given, it could not be questioned in the action on the second note.(«;^ iProm which we may infer, that where a stranger has become a party r «8fi -1 *o ^ security iounded originally *on an usurious consideration of L J which he was ignorant at the time, he is looked upon more favour- ably, and will not now be prevented recovering on it in an action, nor will he, on the other hand, be allowed to avail himself of any after-ac- quired knowledge in his defence. (w) Section 3. How Third Parties, not privy to the Usury, are affected hy it. Agreements and other securities founded on Usury have been held void in the hands of third parties, though ignorant of the fact at the time they took them. Bills of exchange and promissory notes were formerly in like manner considered void.(x) In two cases, where bills originally good had been endorsed on usuri- ous terms, and at length came into the hands of persons unacquainted with the circumstances, and who had given full value for them, Lord Kenyon held, that if they had been originally given on an usurious transaction, or for an usurious consideration, they would have been void in the hands of even a bona fide holder; but that Usury in an interme- P j^„„ , diate transaction respecting them, could never make them *void L -1 in the hands of a bona fide indorsee, where there was no Usury in the original transaction. (y) But in a later case. Lord Ellenborough, and the Court of King's Bench, on deliberate argument, decided that Usury on the part of the payee of a note, who had endorsed it on usurious terms, was a bar to the plaintiff's claim, because they could not bring themselves in connection with the defendant but through the medium of an indorsement tainted with Usury, (a) («) Chapman v. Black, 2 B. & A. 588. Marchant v. Dodgin & others, 2 M. & Sc. 632. (v) Turner v. Hulme, 4 Eap. N. P. 0. 11. {w) Daniel v. Cartony, Esp. 274. (a;) Lowe v. Waller, Doug. T35. Bowyer v. Bampton, Str. 1155. Goldsmith v. Bonn, 10 Mod. 448. Bayley, on Bills, 411. Ackland v. Pearce, 2 Camp. 599. Young V. Wright, 1 Camp. 141. (y\ Parr v. Eliason, 1 East, 92. (zf Lowes and another v. Mazaredo, 1 Stark. 385. Kent v. Lowen, 1 Camp. 111. Bayley on Bills, p. 413. OONSEQUENOES OP 'USURY. 55 The hardship of these decisions, in making innocent holders of bills of exchange, or notes, liable for the Usury of preceding parties, induced the legislature to interfere ; for it was said, with much truth, in arguing the last case, that if third parties were thus to suffer, even a bank-post bin might be void in the hands of a stranger, merely because the payee had discounted it on usurious terms. To remedy this for the future, the 58th G-eorge III. c. 93, was passed, which provides, "That no bill or note made after the 10th day of June, " 1818, shall be void in the hands of an indorsee for valuable considera- " tion, although such bill or note may have been given for an usurious " consideration, or upon an usurious contract, unless such indorsee had " at the time of discounting or paying such consideration for the same, " actual notice that such bill or note had been originally given for an " usurious consideration, or upon an usurious contract." *The following case was decided) under this statute, by Lord [ *88 ] Tenterden, in 1827 : Campbell, (the defendant,) who was sued on a bill of exchange, proved an usurious bargain respecting the- bill between Ford and Sampson, at the time one of them was the holder : — per Lord Tenterden, " As this " statute declares that the bill shall not be void in the hands of a bona " fide holder for valuable consideration, it was incumbent on the plaintiff " to shew, and not the defendant to prove, that the plaintiff was such " holder for valuable consideration : and unless the plaintiff adduced " such evidence, the prior statute applied, and the plaintiff could not re- " cover ;" and in this case, the plaintiff had no notice that the considera- tion would be disputed.(a) ' Section 4. Sv/reties, aiid how affected by Usury, It seems to be settled that wtere one joins another in a bond which is usurious, on condition that the other will indemnify him by a counter- bond, that such counterbond will be good, and may be recovered on. There does not appear to be any very recent decisions on the subject j those cited are all in the time of Queen Elizabeth. *In one case, Manwood, Chief Baron, held a plea of Usury to j- ^on -i be a good bar. (5) L J But, in an action brought on a bond of this description, where the plaintiff had been sued upon the original bond, and obliged to, pay the amount, had brought his action on the counterbond against the defendant who pleaded the statute of Usury ; Wray, Chief Justice, held that this was no plea, for the statute is that all bonds, &c. made for the payment (a) Wyatt v. Campbell, N. P. 13th July 182^. 4 M. 4r M. 80. Crook v. Jadis, 6 C. k P. 191. Dagnall v. Wigley, 11 East, 43. 2 Camp. 33, (i) Potkln's Case, 2 Leon. 63, pi. 93. March, 1852.— 33 56 KELLY ON USUET. of money lent upon Usury, shall be void, but here the bond was not for the payment of money, but for the indemnity of the surety, (c) The reason assigned (by the reporter,) in a similar case, for the decision was, that the surety might be ignorant of the corrupt agreement, and so could not plead it in bar to the action. (c2) And in another case the Court held the plea of no avail, for though the first bond was void, yet the second was forfeited, because the defendant had not saved his surety harmless ; the Judges, however, in this case do not appear to have been unanimous, for Glanville, Justice, said it would be a dangerous precedent, as the surety might be a friend of the Usurer's and so the statute would be of little avail. Judgment, however, was given for the plaintiff, upon which G-lanville said, "that that judgment would be quickly carried to Cheapside."(e) r *qfi 1 *-^^* ^^ ^^^ surety knew the first bond to be usurious, and ne- L J glected to plead it, it is probable he would not be allowed to re- cover, as the case seemed to have presumed he was ignorant of the fact. Section 5. Oonsequences of Usury. The words of the statute of Usury are " bonds, contracts and assur- " ances," so that if no security has been given, but merely a verbal con- tract entered into, it is void. In this respect it varies from the 9th Anne, relative to gaming, for in that act the words are, " all notes, bills, bonds, " judgments, mortgages, or other securities, or conveyances whatsoever/' and under this last Act it has been held, that where money has been lent at play, the securities taken for it, but not the contract itself, is void.(/) Mortgages and leases are rendered void by Usury, and no estate passes either to the mortgagee orlessee.(g') Bills of exchange, and promissory notes, are assurances within the sta- tute ; (as to them, vid. ante, p. 87,) so are fines and recoveries.(^) Though the statutes avoid the securities, they do not destroy a bona r *Qi 1 ^^^ ^^^^ '• therefore, where one *was indebted to another in the •- -I sum of £\\2b., and having requested the indulgence of further time to pay it, the lender refused, unless he would add ^150. to the debt instead of interest, to which the borrower acceded, and gave five accept- ances for these two sums, payable within fourteen months ; it was held the bona fide debt remained unimpeached by the Usury.(i) Lord Mansfield observed in one case, that if the contract were legal, ie) Bassett v. Prowe, 2 Leon. 166, pi. 200. d) Bobinson v. May, Oro. Eliz. 588. (c) Button t. Downham, Cro. Eliz. 642. /) Barjean v. Walmsley, 2 Str. 1249. Robinson v. Bland, 2 Burr, 1077. g) 1 Leon. 307. (A) 3 Rep. 30. (») Gray t. Fowler, 1 H. Blac. Rep. 462. RELIEF IN OASES OP USURY. 57 and the lender afterwards took more than 5 per cent., though the party is liable to the penalties of the statute, yet the contract is not void.(y) So where a bill of exchange was given for a debt, and afterwards ano- ther bill was given for the former, with a premium added in lieu of the first, which was not paid, Lord Bllenborough decided, that though the second bill was void, yet the debt was noLdestroyed, but that the holder of the bill was in the same situation as if no bill had been given, (yk) But if the contract is itself usurious, it follows nothing can be recover- ed on it ; for where one lent another ;S60., and at the time took a note at three months for £65 : 5s., and afterwards brought an action for money lent : it was held he could not recover back the £60. per Lord Mansfield, " This is too plain to be argued."(?) *But the Courts will not presume Usury, for in one case Lord ^ ^f,„ -\ Tenterden observed, " where a person has two demands, one re- L -^ " cognized by law, the other arising on a matter forbidden by law, and " an unappropriated payment is made to him, the law will afterwards ap- " propriate it to the demand which it recognizes, and not to the demand i" which it prohibits."(m) *CHAPTER V. [*93 ] RELIEF IN CASES OF USURY. 1. — ^Relief from Usury at Law. I 3. — Banfauptoy. 2. — ^Relief from Usury in Equity. | 4. — Evidence on Usurious Contracts. Section 1. Relief from Usury at Law. As Usury, (with the exceptions already noticed,) avoids every security into which it enters, it necessarily follows that none such can be enforced at law; and advantage may be taken of such securities, by pleading the statute in bar to actions brought on them to recover the sum secured, (w) or to an action of assumpsit brought on an usurious contract, the general issue may be pleaded, and the Usury given in evidence :(o) but a defend- ant cannot do both.(j9) But now by Reg. Gren. Hilary Term, 4th William rV. 1834, it must be pleaded specially. A party to an usurious security, who has paid the full amount ^ ^g. , due on it, may recover back all excess above 5 per cent, in an ^ J Abrahams v. Bunn, Burr. 2251. Phillips T. Cocagne, 3 Camp. 119. {I) Scott v. Nichol, 4 Doug. 314. n) Wright and another v. Laing, 3 B. & C. iTl. Stanton v. Knight, 1 Sim. Rep. 483. (re) 12 Mod. Rep. 493. (o) Bernard v. Saul, Str. 498. (;;) Bernard T. Fitzhouse, 9 Mod. 359. 58 KELLY ON USURY. ^ action for money had and received ; as it seems dearly settled, though once doubted, that a party so situated is not to be considered as a partioeps criminis but according to Lord Chief Justices Mansfield and Holt, rather as one under duress ;( q) and even money paid to compromise a qui tarn action, brought by an informer for penalties, may be recovered back in an action for money had and received.(r) In one case the Court of Common Pleas refused to set aside a judgment and execution, founded on an usurious consideration, until the defendant had paid the legal principal and interest.(s) But in a latter case, the Court of King's Bench expressed their disap- probation of this decision, and set aside a judgment founded on an usurious consideration, without compelling the defendant to pay the principal and interest. («) But though the securities are void, the real debt we havfe seen is not destroyed, if it were originally good and lawfuL ^If the borrower or his surety voluntarily pay the money really lent, with legal interest, he can- r* QS 1 ^°^ recover them back again, or if he *pay more, he can only rC' L J cover the excess : for it is said, where a man only pays what in conscience he ought to pay, though not compelled so to do, the Court will not assist him to retract such payment, (w) And where a person brought an action at law against a pawnbroker, to compel him to re-deliver a, pledge, or security for the money which had been advanced on an usurious agreement, and afterwards accidentally burnt, she was not allowed to recover on the action, which is of an equi- table nature, not having tendered or paid the sum actually received.^ Section 2. Relief in Equity. Belief from Usury in Courts of Equity, differs from that afforded by G) King T. Hamlet, June, 1831. "^ (?) Scott T. Nesbitt, 2 Br. Ch. Rep. 641. (r) Barker T. Vansommer and another, 1 Br. Oh. Ca. 149. Bosanquet v. Dash- wood, Ca. Temp. Talb. 38. (s) Brand v. Gumming, Vin. Abr. tit. Us., 315. h) Whitmore v. Francis, 8 Price, 616. Baker v. Mellish, 11 Ves. 68. \u) Chauncey t. Tahourden, 2 Atk. 393. (v) Pitt T. Cholmondely, 2 Ves. 567. [*98] 60 KELLYONUSUET. Leases from mortgagor to mortgagee of mortgaged premises at a fixed rent, are transactions at which a Court of equity will look with great jealousy. But this Court will not presume Usury any more than a Court of Law; for where a testator directed that one of his residuary legatees should be answerable for all debts due to him from the father of the legatee, the Vioe-Chanoellor held that the debt, though usurious, must be deducted from the legatee's share. (lo) A Court of Equity will also afford protection and relief to cases which, though not exactly usurious, may be considered hard and unconscionable, and where the distresses of the borrower have been taken advantage of to an extreme degree by the cupidity of the lender; this most commonly occurs where expectant heirs are concerned, and post obit bonds given, or reversioners or tenants for life are obliged to raise money to meiet their necessities on disadvantageous terms. There must, however, in'any of these cases, have been either fraud or gross oppression practised to induce Courts of Equity to interfere, which is not done as a matter of course. (aj) [ *99 ] *Seotion 3. Ba/nhrwptcy. \ The proceedings in bankruptcy, where Usury has been alleged, have been considered very oppressive, and repeatedly contrasted by Lord Eldon with analagous proceedings at law and in equity, as going much further than either of the latter. For in bankruptcy, where a party who has taken usurious interest, attempts to establish his claim under a commis- sion, it is sufficient to suggest Usury in a petition, supported by affidavits, merely upon information and belief, putting the party charged to prove against himself, for the purpose not of giving him his real debt, but of cutting him off' from all relief : and unless he can escape through this ordeal, he cannot stand as a creditor, and participate in the dividend.(y) But if a borrower, on usurious interest, afterwards give a secuity for the sum really advanced and legal interest, such security has been de- termined to be valid. (zj It has been held that no part of a dividend, arising upon an usurious contract, is proveable.(a) And even where a lender, who had taken out r *1 00 1 ^^^oution, delivered *up the proceeds received from the Sheriff L J under an agreement with the assignees (who gave him a release,) fw) Stanton t. Knight, 1 Sim. Rep. 483. Wright v. Laing, 3 B. & C. Itl. \x) Hyltou T. Hylton, 2 Ves. Sit. 1 Ponb. 25, 140. Heathcote t. Paignon, 2 Br. Ch. Ga. 16t. (j/) Exparte Scrivener, 3 Vea. & Beames, 14. 1 Eose, 52. Eden's Bankrupt Law, 119. (z) Barnes v. Hedley, 1 Camp. 157. 2 Taunt. 184. Wright v. Wheeler, 1 Camp. 16Y, n. (ffi) Exparte Thompson, 1 Atk. 125. Exparte Skip, 2 Ves. 489. But as to Bills, &c. Vid. 58 Geo. III. c. 93. REtlEF IN OASES OF USURY. 61 that he should come in with the other creditors for the balance due to him, it was holden that such agreement meant a proveable balance and did not let in a debt affected by Usury. (J) And it was determined in the last case, that a warrant of attorney to secure the repayment of £600 with interest, from a day agreed on, was usurious, unless the whole of the money was actually advanced on that day J but, if it was part of the agreement, that the lender should retain the amount, or any part of it, as a banker for the borrower, who was to be at liberty to draw it out, from time to time, as he wanted it, this would not be usurious, even though the money was not forthcoming when ap- plied for, although it might be a breach of contract, (c) It has been before observed, that whatever discount a trader may have agreed to give his debtor for prompt payment, within the time limited for the expiration of the credit, he is not allowed in bankruptcy to prove for more than the original sum, and cannot add the discount to it.(^ Yid. p. 74. — Where proceedings at law and in bankruptcy, relative to prompt payment, are contrasted, a debt void by statute, as an usurious contract, ought not to be permitted to be proved. And although the *rule of the Court of Chancery is, upon a bill to be relieved r jit-irvi -i against usurious interest, not to make void the whole debt, but L J to make the party pay what is realy due, in a commission of bankruptcy the assignees have a right to insist that the whole is void, as an usurious contract; and unless the assignees and creditors submit to pay what is really due, the Lord Chancellor has not power to order it, and applications of this nature have been frequently refused, (e) Section 4. Evidence on Usurious Contracts. The defendant, who has pleaded Usury, must be prepared to prove it for as he has admitted the debt the onus lies on him.(/) In one case. Lord Holt refused to permit a person who had been pri- vately intrusted to make an illegal bargain to be examined as a witness. (5") But in a more recent case. Lord Kenyon decided otherwise. It was an action of debt, on a bond, conditioned for the payment of £400 and interest, plea that the bond was given on an usurious contract. Defendant called plaintiff's attorney as a witness to prove the conside- ration on which the bond and *the mortgage which accompanied it, were given, was usurious. It was objected by plaintiff's coun- [*102] sel, that this was a case of confidence, and that he could not be examined. But per Lord Kenyon, " The privilege does not extend as far as this ij) Exparte Bangley, 1 Rose, 168. c) And see, Bxparte Patrick, in re Holthouse, 1 Mont. & Ayr. 385. idem note. d) Bxparte Ainsworth, 4 Ves. J. 678. Exparte Pigou, 3 Madd. 136. e) Co. Bankrupt Law, p. 214. /) Per Holt, C. J. 12 Mod. Eep. 547. {g) Anon., Baymond, 733. 62 KELLY ON USUKT. " case ; where there is anything eommunicated to an attorney by his " elieat for the purpose of the defence, he ought not to divulge it; but i' where he himself, is, as it were, a party to the original transaction, that " does- not come to his knowledge in the character of an attorney, and « he is. as liable to be, examined as any other person."(A) To debt on bond, plea of Usury. The plaintiff offered a judgment in an action brought by the defendant against him, for the penalties on the same ibond in which defendant was defeated ; the record in that action was held admissible as evidence by Denman, Chief Justice. (i) Where the defence to an action on a note for money, lent was that the note was usurious, it was held by Lord Tenterden that a memorandum of agreement, as to the terms, imight be given in .evidepce, without a stampjfot the purpose of proving Usury. (A) In an action bythe indorsee. against the acceptor, the drawer, being P^-j^q-.; released by the -defendant, is a good *witness to prove that he in- ^ .. J dorsad the bill upon an usurious contract with the.plaintiff.(^) •A bankrupt, howescer, is not a competent witness, though released by a defendant, as such release only operates as a release of his person and future assets, but not of the assets in the hands of his assignees; he is, therefore, an interested-party, and cannot be examined, as his testimony, by defeating the. claim, would addito the surpluR=fund, which would come to him after payment of his creditors, (m) Where Usury is stated- to have been, committed, in discounting the bill on which the action is. -brought, and another bill in one vuidivided, trans- action, no parol evidence is admissible, as to the contents of the latter, unless notice has been given to produce i\ ; nor unless both bills be given in evidence can the charge of taking one sum for the discount of two bills be supported, or it can be distinguished how much was paid for the discount of each particular bill.:(ji) In an action by the indorsee of a note against the maker, letters written to the latter by the payee negociating an usurious bargain, are admissible, if shewn by the post-mark, or otherwise, to have been con- temporaneous with the note.(o) r 1041 *-^iid in an action by the indorsee against the indorser of a bill^ L J where the defendant proves Usury, in the concoction or negocia- tion of. the bill, the plaintiff must prove himself a honcL fide holder, although he may have received no notice to prove the consideration. (j?) (A) Duffen V, Smith, N. P.- 0. 108. And see Baugh t. Oradocke, 1 Moo. & Rob. .182. Brard v. Ackerman, 5 Esp. 119. (i) Cleve v. Powell, 1 M. & Bob. N. P. 228. Yft) Nash v. Duncomb, 2 Moo. & Malk.TiT. P. 104. [t] Rich T. Topping, Peake, 224. 1 Esp. N. P. 0. ItT. Brard v. Ackerman, 5 Esp. 119. (m) Perryman v. Steggall and another, 0. P. in Banco, 1 May, 1832. Ashton v. Longes, M. & M. 127.: Moody v. King, 4 D. & R. 30, 2 B. & C. 558. {n\ Hattam t. Withers, 1 Esp. 289. \o) Kent t. Lowen, 1 Camp. 117. (p) Wyat V. Campbell, Moo. & Malk. 80, cit. ante, p. 88. PENALTIES OF USURT. 63 *CHAPTER VI. ON THE PENALTIES OP USURY. [*105] 1. — Who are liable to Penalties under the Statute: how and by whom recoTered. 2. — Proceedings for Penalties, and,liim-i itatiou of Actions qui tarn. 3. — ^Where the action must be brought. 4. — Compounding Actions qui tam. 5. — Evidence in Actions for Penalties. 6.> — Indictment. Section 1. . :. Who are. liable to Penalties under the Statute; how and hi/' whom recovered. If a person contracts to take more than the statute allows, but in reality takes nothdngj' hedsnot liable to the penalties, though the security, as we have before observed, is void. : But if he takes- any sum, however small (above the *legal r;^i aoi interest), it is an affirmance of the contract, and renders him lia- L .. J ble to treble forfeiture, (a)' But such forfeiture is not incurred till the actual receipt of the interest, for where theidefendantihad received a premium. of £2. 2s. for the loan of £100. for six. months, on a, bond, at the time when he advanced the moneys and at the end of, six months the principal was repaid with £2. 10s. interest for the half-year, it was held the forfeiture was not incurred till the half-year's interest was received. (6) . To constitute:Uanry, and complete the offence, there must be an actual taking of money or money's, worth ; therefore the repayment of the sum lent, with usurious interest, either by bill of .exchange, promissory note, or .banker's cheque, is not complete until it has been paid, the lender having, in fact) as yet received .nothingj for payment may be refused. (c) It would seem that it is usurious to receive any amount beyond inter- est, even without a contract, for where £20. was given for the loan of £100., without any agreement as to interest, at the end of the year, it was deemed within the statute, for the acceptance completes the offence without any previous^ bargain, *as the statute has been held to r^iny-i refer as well to the past as the future .forbearance of money, (c^) L J All the forfeitures under the Act are to be recovered 6y action of debt, bill, plaint, or information ; an action qui tam, for penalties under the statute, may be brought by a stranger,^^ and the borrower produced as a witness to prove the Usury.(e) (a) Malloiy v. Bird, cited in Cro. Eliz. 20. Per Aston, Just, in Fisher q. t. v. Beasley, Doug. 236. 4 Leon. 43. 2 Leon, 38. (b) Wade q. t. t. Wilson, 1 East, 195. (c) Haddock q.t. v. Hammett, 1 T. R. 184. ; Brooke q. t. v. Middleton, 1 Camp. 445. Borrodaile q. t. v. Middleton, 2 Camp. 53. (d) Sir WoUaston Dixies case, 1 Leon. 96.-. Rex v. Walker, 1 Sid. 42 L Rex. v. Rout, Trin. T. 16 Car. B. R. cited in Tin. Abr. tit. Us. (e) Vid. Evidencie, p. 101. 64 KELLY ON USUKT. But if a borrower himself sue for penalties, he must, it seems, either repay, or at least tender the sum borrowed before he brings the action, (gr) And in all such actions the plaintiff may sue out the writ in his own name, and declare qui tam.(A) Section 2. Proceedings for Penalties, and within what time a/nd where hrought. All informations and qui tarn actions upon the statute must be brought within twelve calendar months from the commitment of the act of Usury, and indeed this applies to all other penal actions brought by common in- formers. r*1 081 *^^^ ^^ Crown may sue within two years after the end of L J the first year.(i) Nor will the Court assist an informer if he does not bring his action in time.(y) But a party to a usurious contract is not limited to any time to take advantage of it in his defence, or in his application to the Courts to avail himself of the nullity of the securities he may have given. In general, when bills are discounted, the usurious interest is not to be considered as received till the bill is paid, but there may be excep- tions ;(A) upon a loan of £500. the borrower agreed to give something mere than legal interest as a compensatioti, but no particular sum was agreed on j after the execution of the securities and payment of the mo- ney, the parties went to another place, where £50. was given as a com- pensation, and interest at 5 per cent, on the £500. was paid for five years ; at the end of which time, an action for the penalties was com- menced, such payment of interest was judged usurious, inasmuch as the loan could only be deemed a loan for £450., and as interest was received on the full sum of £500. for the previous year, the action was not too late.(?) But where an agreement was njade for the loan of =65,000, on mort- gage, at 5 per cent, interest, to be paid half-yearly, and the lender sub- sequently refused to complete the agreement, unless, by way of bonus, r*1 OQI *'^® borrower would purchase certain goods of him, at a rate L J much heyond the market price, to which he consented, the goods were paid for on the 10th of January, and the half-yearly payment of interest was made on the 25th of April following, held that the offence of Usury was complete on the first payment ; that the subsequent pay- ments of interest were not usurious, and that the action consequently ought to have been brought within one year after such first payment, (to) (g) Fitzroy v. Gwilliem, 1 T. R. 153. (A) Lloyd q. t. T. Williama, 2 Blac. Rep. T22. (i) 31 Bliz. c. 5. Xi) Rex V. Hendricks, Str. Rep. 1234. \k) Wright T. Laing, 3 B. & C. 165. {I) Scurry q. t. v. Freeman, 2 Bos. & Pull. 381. (ot) Wood T. Greenwood, 10 B. k 0. 689. 1 L. & W. 229. 1 East, 195. penaitiesopusuey. 65 Section 3. Where the Action must he brought. A qui tarn action for treble forfeiture can only be prosecuted in the superior courts at Westminster, and where one was brought in another Court, a writ of error was allowed. («) The words of the statute of Anne have rendered this action a local one, and therefore it must be brought in the county where the offence was completed, that is where the usurious consideration is received, or the account relating to it is settled.(o) If the cause of action arises in two different counties, the venue may be laid in either of them. (^) *Section 4. [* 110 ] Compounding Actions qui tarn. An action brought to recover penalties for Usury may be compounded, by leave of the Court in which the proceedings are, which, in general, will give this permission, but if compounded without such leave, it is penal ; and the party paying the composition, we have seen, may recover it back in an action for money had and received, (g^ If the defendant, on application to the Court, has obtained a rule to stay the proceedings, on payment of the penalties, the Court will grant an attachment against him, if he does not pay them.(r) But by the new rule of Court, No. 90, signed by the fifteen Judges, and which is applicable to all the Courts, — " Leave to compound a penal " action shall not be given in cases where part of the penalty goes to the " Crown, unless notice shall have been given to the proper officer, but in " other cases it may."(s) The Attorney-General may enter a nolle prosequi on behalf of tha King, but only for the moiety of the penalty due to the Crown. (<) *Section 5. [*111] Evidence in Actions Qui Tarn for Forfeitures under the Statute. In a qui tarn action, brought by a common informer, the borrower may (n) Gardner T. Morefield, 1 Keb. 554. Hardr. 420, anon. (o) Scott q. t. v. Brest, 2 T. R. 238. Pearson v. McGowran, 5 D. & R. 616. 3 B. & C. 300. Scurry, q. t. T. Freeman, 2 B. & P. 381. King v. Fraser, 6 East, 348. (jp) Scott q. t. V. Brest, cit. sup. (q) 18 Eliz. c. 5. Bland t. Featherstone, Barnes, 118, 3rd edit. (r) Hart q. t. v. Draper, 2 Marsh, 358. King v. Clifton, 5 T. R. 25'r. is) Regulee Generales, Hil. Term, 2 Wm. IV. [t) Long's case, 1 Ventris, 191. 66 KELLYONUSURT. prove the whole transaction, whether the principal be paid or notj this, though once doubted, seems now to be settled, (m) The objection going to the credit, and not to the competency of the witness ;(■!)) for as to the credit due to his testimony, the Jury alone are to judge. The ground of these decisions appears to be, that the witness is not interested in the event of the suit, nor could he give the judgment against him in evidence on any future occasion for his benefit, as in an action against him for money lent. Lord Kenyon observed in one case, " That " a clear and certain! rule had been laid downy that no objection could be '< made to the competency- of a witness, upon the ground of interest, un- " less he were directly interested in the event of the suit, or could avail " himself of the verdict in the cause, so as to give it in evidence on any " future occasion for his benefit." («)) r*l 1 91 *^^ ^""'^ ^^ action an admission by the borrower is not evi- L J dence for the defendant, the lender, (a;) Where an attorney had brought an action on an usurious security on the part of the holder, and received the- debt and costs, and gave a re- ceipt for the same, it was held sufficient to charge the defendant, that the attorney acted as his agent, and that the defendant had received more than legal interest, (y) Section 6, Indwiment. The better opinion seems to be, since the statute of Anne, that an in- dictment for Usury will not lie ; and that if an indictment be brought, it must be quashed, as the method which the" Acts prescribe must be followed. The authorities, however, are by no means unanimous on the subject ; Lord Coke affirming that all Usury was prohibited at common law, and Lord Chief Justice Hale, on the contrary, maintaining that Jewish Usury, or 40 per cent, was alone forbidden ; whilst among modern writers, Mr. Plowden strenuously contends that Usury is still ail offence at common r*l 1 m ^^' ^^^ ^^^^ ** ^^^ ™^y ^^ iiidicted as a common usurer, Mr. L J Comyn, on the other hand, inclines to the contrary opinion, and shews the absurdity of the former. And as there appears to have been no indictment prosecuted since the («) Abrahams v. Bunn, 4 Burr. 2255. Smith q. t. v. Prager, 2 Esp. 486. T T. R. 60. {«) Bent V. Baker, 3 T. R. 2T. ho) Lord Kenyon iq Smith v. Prager, cited sup. Phil, on Er. 1 Vi p. 115. Ix) Maugham q. t. v. Walker, Peake, 163. (y) Owen q. t. v. Barrow, 1 N. Rep. 101 ; and see Evidence on Usurious Con- tracts, ante, p. 101. STATUTES. 67 statute of Queen Anne, while one five years previously to that act was quashed as bad, it seems unnecessary to investigate the subject.(2) (z) Vid. Plow, on Usury, 220. Comyn on Usury, 220. The Queen v. Dye, 11 Mod. lU. Res. T. Upton, 2 Str. 816. Mr. Ord seems to think, that the Indictments for Usury, of which frequent men- tion is made in the books, were grounded on the Stat, of Hen. 8, which makes the Usurer liable to fine and imprisonment at the king's will. On Usury, p. 15^ *A. 6. [*125] STATUTES CONCERNING USURY. 3 Henet VII. c. 5, A. D. 1488. An Act against Olievizance and Usur^. Item, for as much as importable damage loss and impoverishing'-of this realm is had by damnable bargains grounded in Usury coloured by the name of New Chevisance contrary to the law of natural justice to the com- mon hurt of this land, and to the great displeasure of Grod, our Sovereigne Lord the King, for the reformation thereof and of all corrupt and unlaw- ful bargains by the assent of the Lords spiritual and temporal and the commons in his said parliament assembled, and by authority of the same hath ordained and enacted.. That if hereafter any bargaine covenant by buying of any obligation bill or any pledges put into suretie, or by bill or otherwise by the name of dry exchange or otherwise whereby any' cer- tain sum shall be lost by any covenant or promise between any person or persons by themselves or any other to their knowledge within thi^ i-ealme or if any bargaine or loan whereby any of the party should lose or pay for any sum certain : that is to say for having an £100, in money or merchandize or otherwise and therefore to pay six score pounds or more or less, in and for any more or lesssumme, after any manner or rate, that all such bargains covenants, promise and sureties therefore made, and all things thereof depending be utterly voyde *and of none effect. J.^^ „»-, And over this it is ordained by the same authority that if any''- -* merchandize obligations, bills, or plate, be promised to be delivered upon such corrupt bargain, and delivered, or delivered and had agaiti to that ought such merchandizes, obligation, bills, or plate, or know- «th by any other man, by assent or agreement, or knowledge, in any bo KELLTONUSURT. manner forme of him, or his factor, or broker, that such merchandizes ought, orprivieto such bargaines, that all such bargaines, covenants pro- mises and all sureties therefore made, be utterly voyde. And the sel- ler, owner, bargainer, or promisor of such corrupt bargains or goods, shall lose, for any such bargaine made by him or his factor, £100. And whosoever ■will sue, therefore, to have an action of debt : in which the party shall not wage his lawe, the King to have the one halfe, and he that will sue the other halfe. And forasmuch as these corrupt bargains be most usually had within cities and burroughs having authority to try all matters and causes growen and had within the said cities and bo- roughes : and if at any such defaults, should there be tryed, perjury by likelinesse thereby should growe and little of the premises to be founde, therefore it is ordained by the said authoritie, that as well the Chancel- lour of England, for the time being, have authority and power to exam- ine all manner corrupt bargains, promises, loans, or sales, growen and had of any of the premises, and thereupon by examination to heare and determine the same, and to give like judgment, and make like execution thereof, as the matter were tried and found at the parties suit, in any such , action of debt, by the course of the common law, as the justices of the peace of any shire, next adjoining to any citie or burrough, where such defaults be of any of the premises. And they to make like process against any man thereof, endyted afore them of any of the premises, as they should or ought to doe against any man that were endyted afore them, of any riot or trespasse, and to determine it. And if any man be found guilty afore them of any of the premises to forfeit the aforesaid peine' of £100. reserving to the church (this punishment notwithstanding) the correction of their souUs according to the laws of the same. ■ [*127] *3 Henry VII. c. 6, a. d. 1488. An Act concerning Exchange and Rechange, Chivizance Usury and Broken. Item, forasmuch as there hath growen and daily groweth great dis- pleasure of God, and great hurt of the King our Sovereigne Lord, and to this his realme by and for the inordinate changes and rechanges that have been of long time used and yet continued in this saide realme with-' out authortie given of the King to such changing and rechanging. For remedie whereof many noble statutes against the same made whereof one special statute was in the xv. yere of King Edward the third made for the same remedie and in Henry the fourth Henrie the fifth and in Henry the sixth days ; — wherefore the King our Soveraigne Lord will, that all such statutes be put in due execution from henceforth. And that no man make any exchange without the King's license, ne shall make any exchange or re-change of money, to be paid within this land, but only such as the King shall depute thereunto to keep make and answer such exchanges and rechanges, upon the peines in the same statute of King STATUTES. 69 Edward eonteined. And over that it is ordeined by the King our Sove- raigne Lord by the assent of the Lords spiritual and temporall and Com- mons in his said parliament assembled and by authoritie of the same that all unlawful chevisances and usury be dampned and none to be used, upon peine of forfeiture of the value of the money or goods so chevised- or lent the same forfeiture to run on the seller and lender thereof. Al- so forasmuch as divers English and estrangers brokers, ■which he named and assigned to occupy lawful brokages be inducers and bargainemakers of unlawful ehevisance and usury and in some part of unlawful exchang- es to the the hurt of our said soveraigne Lord and this his said realme : therefore it is enacted and established by the said authoritie, that all such brokers dealing unlawfully of any of the premises be put apart and never to occupie as brokers within *this his realme as they may j-^, „„_ be espied and found in cities boroughs and townes, by maiors L J bayliffs or any of them or their ministers where such bargaine is used. And that every broker that is found defective in making of unlawful brok- age, shall forfeite for every defaulte £20. and have imprisonment of half a yere. And futhermore to be punished by the pillorie or otherwise to their open rebuke and shame, the King to have the one halfe of every of the said forfeitures, and the parties that will sue the other half of the same, by action of debt by the common lawe and the defendant in the same action bee not admitted to his lawe nor essoine nor protection be for the same defendant allowed. 11 Henry VII. o. 8, a. d. 1496. An Act for repealing the Zd of Henry VII. and mahing more effectual Provision against Usury. Praien the commons in this present parliament assembled, that wherein the parliament holden at Westminster the third yeere of youre most noble reigne, it was enacted ordained and established that of for and upon bargains grounded in usury coloured by the meanes of new chevesaunce or exchange contrary to the law of natural justice to the great displea- sure of Grod and our said Soveraigne Lord and the common hurt of this his land, that certaine punishments and penalties should runne upon the offenders in that behalf, as in the said act more at large, is contained, which act was and is so obscured dark and defuse, that the true intent of the makers thereof cannot persitely be understood ; wherefore and for the plaine explanation and declaration of usury and penalties to be here- after executed upon the offenders in the same : the King our Soveraigne Lord by the assent and advice of the Lord spirituall and temporall and the commons in *this present parliament assembled and by r^iogi authoritie of the same ordaineth enaeteth and establisheth, that L J all manner of person or persons lending money to and for a time taking for the same lone anything more besides or above the money lent by way of contract of covenant at the time of the same lone, saving lawful 70 KELLTONUSURT. penalties for non-paiment of the same: money lent, and that all manner of person and persons which heereafter sell any goods catties or merch- andizes to any person or persons being in necessitie, and the seller him- self or by his broker or factor in that behalfe againe buy' the same goods catties or merchandizes of the same person to whome they were sold being in necessity of his broker or factor in that behalf within three months after they be sold for a less sum of money than they were sold for, knowing the same goods so bought again afore by the same buyer or buyers to be sold after the form aforesaid : and that every person and persons lending or taking any money to any person or persons to a cer- tain time, and taketh lands tenements or any hereditaments or other bonds for perfite suretie and sure payment of his or their money lent at the time assigned, without condition or adventure : and also at the time of the same loan or taking of the said money covenanteth appointeth or contracteth, convenanten appointen or contracten, that he or they that lend or take money, shall have the revenues and profits of the lands, tenements or hereditaments of him that so borroweth or taketh money by a certain time : that then every person heerafter upon any of the premisses convicted, forfiete the moiety of the value in money of the said money goods catties merchandizes, as is above said, so soH or lent after such value as they have been sold or lent for after any forme afore- said, whereof the King shall have the one moiety of the same forfeiture and the party that will sue the other moiety ; and if no man will sue then the King to have the whole. And this suit for the said penalty and forfeiture to be as well at the King's suit as any other, that will sue by information in any of the King's Courts of Record, and such prooesse to be had in the same as is used in other ;actions of debt at the common law in the same courts. Provided alwais that in the Court of Chaunce- r*l^m *"'^ ^^^ Exchequer *they shall make such processe as hath been *- -' used afore time in informations afore them commenced, wherein the defendant shall not wage his law nor protection ne essoine de sevice le Roy in the same allowable. And that the same act and ordiiAance made the third yere and all things therein contained be from henoefortb utterly void and of none effect, reserving alway to' the spiritual jurisdiction their lawful punishments in every cause of Usury. n ■■■. ^- 87 Henry VIII. o. 9. a. d. 1545. A Bill against Usury. Where before this time divers and sundry acts statutes and laws have been ordained had and made within this realm, for- the avoiding and punishment of Usury, being a thing unlawful, and of other corrupt bar-- gains shifts and chevizances which acta statutes and laws been so obscure and dark in sentences words and terms and upon the same so many doubts ambiguities and questions have arisen: and grown and the same acts statutes and laws been of so little force or effect, that by reason thereof STATUTES. 71 little or no punishment hath ensued to the offenders of the same but rather hath encouraged them to use the same, for reformation whereof be it enacted by the King our Soverainge Lord by the assent of the lords spiritual and temporal and of the commons of this present parlia- ment assembled and by authority of the same, that all and every the said acts statutes and laws heretofore made of for or concerning usury shifts corrupt bargains and chevisances and every of them, and all pains forfeitures and penalties concerning the same and every part thereof shall from henceforth be utterly void and of none effect to all intents constructions and purposes. *II. And be it further enacted by the authority aforesaid, That ^-, oi -, no person or persons of what estate degree, or condition soever L J he or they be, from and after the last day of January next coming shall by himself factor attorney servant or deputy sell his merchandizes or wares to any person or persons and within three months next after by his factor attorney deputy or by any other person or persons to his use and behoof buy the same merchandizes or wares or any part or parcel thereof upon a lower price, knowing them to be the same wares or mer- chandizes, that he before did so bargain and sell upon the pains and for- feitures hereafter limited in this estatute. III. And be it also enacted by the same authority. That no person or persons of what estate degree quality or condition soever he or they be at any time after the said last day of January next coming by way or mean of any corrupt bargain loan exchange chevisance shift interest of any wares merchandizes or other thing or things whatsoever, or by any other corrupt or deceitful way or mean or by any covin engine or deceit- ful way or conveyance shall have receive accept or take in lucre or gains for the forbearing or giving day of payment of one whole year of and for his or their money or other things, that shall be due for the same wares merchandizes or other thing or things above the sum of ten pound in the hundred, and so after that rate and not above of and for a more or less sum or for a longer or shorter time, and no more or greater gain or sum thereupon to be had upon the pains and forfeitures hereafter in this act mentioned and contained. IV. And be it further enacted by the authority aforesaid, That if any person or persons at any time after the said last day of January do bar- gain and sell, or lay to mortgage by any way or mean any manors lands tenements or hereditaments to any person or persons upon condition of payment or non-payment of any sum or sums of money to be had paid or made at any day certain, or before any such day by him, that shall so bargain sell or lay to mortgage the same manors lands tenements or here- ditaments, that the same person or persons, to whom any sueh*ma- j-^, „„-. nors lands tenements or hereditaments shall be so bargained sold L J or laid to mortgage, shall not by reason thereof have ne take in lucre or gains of the issues revenues and profits of the same manors lands tene- ments or hereditaments above the sum of ten pound in the hundred for one whole year, and so after the rate of abovesaid for a more or lesser sum or for a longer or shorter time and no more nor otherwise, upon the March, 1852.— 34 72 KELLYONTJSTJRY. pains forfeitures and penalties hereafter in this present estatute limited and expressed. V. And be it further enacted by the authority aforesaid, That if any person or persons, of what estate degree quality or condition soever he or they be, at any time after the said last day of January next coming shall do any act or acts thing or things contrary to the tenor form and effect of this estatute, or of any clause article or sentence contained in the same, that then all and every offender and offenders therein or in any part thereof shall forfeit and lose for every such offence the treble value of the wares merchandizes and other thing or things so bargained sold exchanged or shifted, and the treble value of the issues and profits of the said manors lauds tenements and hereditaments so had taken or re- ceived by reason of any such bargain sale or mortgage, and also shall have and suffer imprisonment of Ms body and make fine and ransom, at the King's will and pleasure ; the moiety of which forfeiture of the said trelle value shall be to the King and the other moiety to him or them, that will sue for the same in any of the King's Courts by action of debt bill plaint or information, in which action bill plaint or information no ■wager of law essoin or protection shall be admitted or allowed. VI. Provided alway and be it enacted by the authority aforesaid, That this act nor any thing therein contained shall not in any wise extend to any lawful obligation indorsed with a condition, nor to any statute or recognisance made and to be made for the payment of a lesser sum, so that the same obligation statute or recognisance be made for a true just and perfect debt, or for the performance of any other true covenants made or to be made upon a just and true intent had between the parties, other than in cases of usury interest corrupt bargains shifts or chevis- r*1^m ^^^^J ^^ *y®* shall extend to any recovery fine feoffment release L J confirmation or grant made or to be made upon condition with a true intent, other than to such recoveries fines feoffments releases confir- mations and grants as shall be made upon condition with a true intent, other than to such recoveries fines feoffments releases confirmations and grants, as shall be made upon condition extending to usury interest cor- rupt bargains shifts or chevisance, any thing in this statute contained, or any law statute or ordinance heretofore had used or made to the contrary notwithstanding. 5 & 6 Edward VI. ch. 20, a. d. 1552. An Act against Usury. Wherein the seven and thirtieth year of the reigne of the late King of famous memorie King Henry the Eight father to our Sovereign Lord the King that now is, amongst other acts and statutes then made it was enacted by the authority of parliament, that no person or persons at any time after the last day of January in the said seven and thirtieth year, should have, receive, accept or take in lucre or gains from the loan, for- STATUTES, 73 bearing or giving day of payment of any sum of monie for one whole year above the sum of ten pound in the hundred, and so after that rate and not above, of and for a more or less sum or fbr a larger or shorter time, upon the paines and forfeitures in the said act mentioned and con- tained. The which act was not ment or intended for the maintenance and allowance of usury as divers persons blinded with inordinate love of themselves have and yet do mistake the same, but rather was made and intended against all sorts and kinds of usurie as a thing unlawful, as by the title and preamble of the said act it doth plainly appear, and yet nevertheless the same was by the said act permitted for the avoiding of a more evil and inconvenience, that before that time was used and exer- cised. But for as much as usurie is by the word of Grod utterly prohib- ited as a vice most odious and detestable, as in divers places of the Holy Scriptures *it is evident to be seen, which thing by no godly ^ i qj n teaching, and persuasions can sink into the hearts of divers L J greedie, uncharitable and covetous persons of this realme, nor yet by any terrible threatenings of God's wrath and vengeance that justly hangeth over this realme for the great and open usurie therein dayly used and practised, they will forsake such filthy gain and lucre, unless some tem- poral punishment be provided and ordained in that behalf. For refor- mation whereof be it enacted by the authoritie of this present parliament, that from the first day of May, which shall be in the yeere of our Lord God 1552, the said act and statute concerning only usury lucre or gains of or for the lone, forbearing, or giving days of any sum or sums of money be utterly abrogated, void, and repealed. — And furthermore be it enacted by the authoritie aforesaid, that from and after the said first day of May next coming no person or persons of what estate, degree, quality or con- dition soever he or they be by any corrupt colourable or deceitful con- veyance slight or engine, or by any way or mean shall lend give set out deliver or forbear any sum or summes of monie to any person or persons or to any corporation or body politicke to or for any manner of usurie increase lucre gaine or interest to be had received or hoped for over and above the sum or summes so lent, given set out delivered or forborne upon pain of forfeiture of the value, as well of the sum or sums so lent given set out delivered or forborne, as also of the usury, increase, lucre, gain, or interest thereof. And also upon pain of imprisonment of the body or bodies of every such offender or ofienders, and also to make fine and ransom at the King's will and pleasure. The moieties of which for- feiture of the said value shall be to the King, and the other moiety to the party, that will sue for the same in any of the King's Courts of Kecord by action of debt, bill, plaint, or information, wherein no wager of law, essoins or protection shall be allowed or admitted. *13 Elizabeth, Cap. 8, a. d. 1571. [ *135 ] An Act against Vsurt/. Whereas in the parliament holden the seven-and-thirtieth year of the 74 KELLYONUSURT. reign of our late sovereign Lord King Henry the eighth of famous me- mory, there was then made and established one good act for the reforma- tion of usury, by which act the vice of usury was well repressed, and specially the corrupt chevisance and bargaining by way of sale of wares, and shifts of interest : And where since that time by one other act made in the fifth and sixth years of the reign of our late soTeriegn Lord Ed- ward the sixth, the said former act wa,s repealed, and new provisoes for repressing of usury dbvised and enacted; which said latter act hath not done so much good as was hoped it should, but rather the said vice of usury, and especially by way of sale of wares and shifts of interest, hath much more exceedingly abounded, to the utter undoing of many gentle- men, merchants, occupiers, and others, and to the importable hurt of the commonwealth, as well for that in the said latter act there is no provision against such corrupt shifts and sales of wares, as also for that there is no difference of pain, forfeiture or punishment, upon the greater or lesser exactions and oppressions by reason of lones upon usury. Be it therefore enacted. That the said later statute made in the fifth and sixth years of the reign of King Edward the sixth, and every branch and article of the same, from and after the five-and-twentieth day of June next coming, shall be utterly abrogated, repealed and made void; and that the said late act made in the said seven-and-thirtieth year of King Henry the eighth, from and after the said five-and-twentieth day of June next coming shall be revived, and stand in full force strength and effect. And be it further enacted, That all bonds, contracts, and assurances collateral or other to be made for payment of any principal or money to be lent, or covenant to be performed upon or for any usury in lending or r *i!?ft 1 doing of any thing against the said *act now revived, upon or L -'by which lone or doing there shall be reserved or taken above the rate of xl. for the hundred for one year, shall be utterly void. And be it further enacted, That all brokers, solicitors and drivers of bargains for contracts or other doings against the said statute now revived, whereupon shall be reserved or taken more than after the rate of ten pound for the lone of one hundred pound for a year, shall be to all intents and purposes judged, punished and used as councellors, attornies or ad- vocates, in any case of praemunire. And forasmuch as all usury, being forbidden by the law of God, is sin and detestable: Be it- enacted, that all usury, loan, and forbearing of money, or giving days for forbearing of money by way of loan, chevi- sance, shifts, sale of wares, contracts or other doings whatsoever, for gain mentioned in the said statute, which is now revived, whereupon is not reserved or taken, or covenanted to be reserved) payed, or given to the lender, contracter, shifter, forbearer or deliverer, above the sum of ten pound for the lone or forbearing of a hundred pound for one year, or after that rate for a niore ^^ *Grreat Britain, to or with any of his Majesty's subjects, L J either by the persons borrowing, such money, or by any other persons residing in Great Britain or elsewhere, whether such conveyan- ces, demises, or other assurances, bonds, and covenants, shall be executed, or entered into by way of collateral security for the payment of such in- terest, Or for securing the payment of interest on the money bona fide advanced, at any higher rate than the rate of interest which such mort- gages or other securities bear or carry, or for securing any additional in- terest over and above the interest which such mortgages or other securi- ties bear or carry ; and whether such collateral or other securities for such interest, or higher rate of interest, or additional interest, in any of the cases aforesaid, have been or shall be respectively executed, or entered into, at the time of executing such mortgages and other securities, for the money bona fide advanced, or at any time subsequent thereto j and whether the same have been or shall be executed, or entered into, to or with the persons to whom such mortgages and securities have been or shall be originally made, or their representatives or trustees, or to any persons to whom any transfers or assignments of any such mortgages or other securities have been or shall be made, or their representatives or trustees; and all the transfers and assignments which have been, or which after the passing of this act shall be executed in Great Britain, of such mortgages, securities, conveyances, demises, or other assurances, bonds, or covenants as aforesaid, to any of his Majesty's subjects, shall be as good, valid, and effectual, to all intents and purposes whatsoever, as such mortgages, securities, conveyances, demises, or other assurances, bonds, covenants, transfers, or assignments, respectively would have been, if the same had been respectively executed, or entered into, and the interest se- cured thereby had been made payable, and the persons executing, or en- tering into such conveyances, demises, or other assurances, bonds, or cove- nants, had resided in the country, island, plantation, or place where the things comprised in any such mortgage, security, conveyance, demise, or other assurance, transfer, or assignment lie ; and that none of his Ma- |-^1 rr-j jesty's subjects *in Great Britain shall be subject to any of the L -I penalties or forfeitures in the act of 12 Anne, by receiving or having received interest for the money bona fide advanced, on any such mortgage, security, conveyance, demise, or other assurance, bond, cove- nant, transfer, or assignment as aforesaid ; so as the total amount of the interest so to be received do not exceed the rate of interest allowed by the law of the country, island, plantation, or place. § 2. STATUTES. 87 *BANK CHARTER ACT. [ # 156] 3 & 4 William IV. o. 98, s. 7, a. d. 1833. Bills and Notes not having more than Three Months to run, not subject to Usury Laws. No bill of exchange or promissory note payable at or within three months after date, or not having more than three months to run, shall by reason of any interest taken or secured, or any agreement to receive or allow interest, be void, nor shall the liability of any party to any bill be affected by reason of any statute of usury, nor shall any person taking more than the present rate of legal interest on any such bill or note, be subject to any penalty or forfeiture; anything in any law or statute relating to usury to the contrary notwithstanding. * Since the Work was printed, the following Case on the construe- j-^, r--. tion o/th^eB &4: WiLLlAM IV. c. 98, s. 7, has been decided. L J The defendant being indebted to the plaintiff for goods sold, accepted plaintiff's drafts at three months date for the price of the goods, together with interest at a rate considerably exceeding that of 5 per cent, per an- num. The bills not having been paid when due, the plaintiff arrested the defendant for the amount ; whilst in prison under the arrest defend- ant gave a warrant of attorney, to confess judgment, for the full amount of the bills with interest at five per cent. Judgment having been entered up, Piatt, Counsel for Defendant, obtained a rule Nisi to set aside the warrant of attorney and judgment, on the ground that the Act was con- fined to bills and notes, and did not extend to substituted securities. By the Court; Lord Denman, C. J. "If this case were not within the ' Act the section would be nearly nugatory ; the section provides that the liability of any party to a bill of exchange or promissory note paya- ble within three months shall not be affected by reason of any statute ' or law in force for the prevention of usury. This is the liability of a ' party to bills of exchange within the protection of that act ; if we were ' to say that a warrant of attorney given to secure the amount of these ' bills was not within the clause, we should be deciding that the liability ' of the party is affected by reason of the interest taken upon those bills ' exceeding the ordinary rate of interest." Connop V. Yeates, 4 Nev. & M. 802. Semhle the warrant of attorney could not have legally secured more than five per cent, for the future interest. Maech, 1852.— 35 PART II. 01 THE POLICY OF THE USURY LA¥8. PAET II. AN EXAMINATION OP THE POLICY OF THE PRESENT USURY LAWS, WITH Suggestions for their Amendment. Having completed a brief Summary of the History and Law of Usury, we next proceed with the Second part of our subject, — to ex- amine the reasons and authorities on which the present system is found- ed and supported both on the grounds of policy and morality, as well as the arguments advanced by those who object to its continuance, and recommend a change. It cannot but surprise every one who has attentively considered the subject, that Britain, so long the *emporium of commercial en- r *if>n -i terprise, and the seat of enlightened government, should still L J pursue the track of antiquated prejudice and precedent, and with blind deference to authority, continue the restrictions on the merchantable commodity, called money, which have long since been removed from every article of traffic. By the 12th Anne, c. 16, A. D. 1713, now nearly a century and a quarter ago, the rate of interest in England was fixed at 5 per cent, per annum, for^the use and forbearance of money, uniformly, and without reference to the nature of the security on which it might be lent, whether it was of the most unimpeachable description of landed property, the yearly rental which equalled the sum advanced, or of the mere personal security of the borrower, guarantied perhaps, in some cases, by a distant reversionary interest, or terminable life estate ; while in most other coun- tries of Europe, where any limitation exists, one rate of interest is allowed upon mortgage on land, and another upon commercial or personal securi- ty : this is the case in France and Spain, and various other parts of the continent. Even the ancient Romans, when they allowed interest, had 92 KELLYONTJSURY. different rates, and permitted a higher rate to be taken from merchants and traders, than from landed proprietors, (a) ^, „-. ^ *The alteration, therefore, which is now suggested, is not an L J untried innovation, it is recommended by the examples both of ancient and modern times. It appears from the preambles of the various statutes concerning Usury, (which generally speak the sentiments of the legislature, on the occasion of of their enactment,) that the various reductions of the rate of interest which were effected at different periods, from the reign of James I. to that of Queen Anne, were made partly for the purpose of relieving the landed proprietors, and partly with a view of improving the trade of the country, by withdrawing some portion of the capital they invested on mortgages at a high rate of interest, and causing it to be thrown n to commerce and agriculture, which, it was alleged, were much neglected in consequence of the great and certain advantages enjoyed by mortgagees. In later times. Dr. Adam Smith, in his " Wealth of Nations," gave it as his opinion (an opinion which he afterwards changed) that if the legal rate of interest was fixed at 8 or 10 per cent, the greater protion of the money of the country would be lent to prodigals and projectors, who alone would give so much, and thus, instead of being employed to profit and advantage, as it might be in better hands, it would be most likely wasted and destroyed ; and that such an alteration would lessen the value of land. Dr. Paley thinks that the policy of these regulations is to check the power of accumulating wealth without industry, to give encouragement r #1 fi9 T *° trade, by *enabling adventurers in it to borrow money at a L J moderate price, and of late years, to enable the State to borrow the subjects' money on better terms. According to some eminent and learned Judges, these statutes also are designed to prevent the needy and distressed from becoming the victims of the avaricious and the unconscionable, and to protect the thoughtless and the prodigal, or, to use the words of Lord Mansfield, " to protect men " who act with their eyes open against themselves." Dr. Johnson maintained that these laws were intended for the protec- tion of lenders no less than of borrowers, that the former were benefitted by the removal of the temptation afforded by the prospect of extravagant interest to lend on insuflScient security ; and some speakers in Parliament have alleged, that money being an article distinguishable from merchant- able commodities generally, is not subject to the same rules which govern them, and that as these laws are hallowed by the wisdom and experience of our ancestors, they ought not to be abolished. That no other reasons can be assigned for the maintenance of the pre- sent system, may be concluded from the enumeration made by Lord Chief Justice Best (now Lord Wynford) as late as the year 1825, in de- livering the opinion of the twelve Judges, in the House of Lords, on a question relating to foreign interest. (a) It is a glorioiis monument of the enlightened and commercial character of Oreeee, (says Boek,) that she had no laws on the sulject, that her trade in money, like the trade in every thing else, was left wholly without legal restriction. Econ. of Athens. PRESENT USUET LAWS. 93 " The supposed policy of the Usury laws in modern times," said that learned Judge, " is to protect »neeessity against avarice; to fix ^^ " such a rate of interest as will enable industry to employ with t ^ " advantage a borrowed capital, and thereby to promote, labour and in- " crease the national wealth; andio enable the state to borrow on better " terms than would be made, if speculators could meet the minister in " the money market on equal terms." In what degree these various objects have been or can be attained by the means used for the purpose, it will be our business to inquire, pre- mising that it is not intended to recommend the entire abolition of the Usury laws at once, but only the following modification of them. That while the law should he allowed to remain as at present, with re- gard to money advanced as a charge on landed or real proper^, which affords ample security as well for the return of principal as the due pay ment of the interest, the market should he thrown, open to those who are disposed to lend their money on contingent, personal, or terminable secu- rities, leaving such market, like every other, to accommodate itself to the relative nature of the supply and the demand. That there should be but one rate of interest permitted by law for every kind of security and at every period (observes an acute and ingenious writer,) (6) is as absurd as if the law were to fix the same price for all horses, as the value of horses difi'ers not more than, the value of money on difiierent occasions. *How far the successiye statutes have, by the reduction of r- #1 en interest, succeeded in withdrawing much of the capital formerly L -' invested on mortgages, and employing it in commerce, or in the purchase and culture of lands, it would probably,, at this time be difficult to deter- mine ; but it is conceived money ever has been, and ever will be, dis- posed of by its owner, so as to afibrd him either the greatest return com- patible with good security, or the highest remuneration he can obtain, if there be any risk, according to the object he may have in view, without reference to the wishes of Government on the subject. But as every merchant, manufacturer, mine proprietor, patentee, or agriculturist, is a projector within the meaning of the word (not a yery definite one) as used by Dr. Smith, the state of the existing laws must surely be con- sidered as tending to impede enterprise . when it is to be conducted with borrowed capital ; a,nd if this really be so, what becomes of the benefits which it was the avowed object of these very laws to confer upon trade and commerce ? It being stated in the. preamble of the statute of Anne as a reason for the further reduction of interest to 5; per cent., that 6 per cent, still operated as an inducement to many to prefer mortgages and other securities on land to mercantile speculations, the discouragement of projectors would indeed be a strange object of legislation in a commercial country. Let it be remembered too, that without the assistance afforded by capi- tal to the mechanic, and manufacturer, *and the merchant, to p jk-i cc -1 enable each of them to develope his ingenuity and skill, Crreat L -^ (i) Bentham. 94 KEI.LT ON USTTRT. Britain never would have held the distinguished rank she now sustains among the nations of Europe. As to the danger of capital being lent to prodigals, little fear need be entertained on that head, for it is just as improbable that the moniedman (who is not necessarily a simpleton) will lend his cash, without security for its repayment, at an extravagant rate of interest, as that the landowner will his farms' merely "at the highest bidding he can obtain, without regard to the responsibility of his tenant ; nor that the facilities thus given to trade and commerce will re-act on them, by producing a spirit of gamb- ling in commercial transactions, speculations not bottomed on real capital, over-trading, and a host of other excesses, creating the ruinous consequen- ces which emanated from the unrestrained issue of paper, which was lately permitted, by the want of a metallic standard. With respect to the efficacy of enacting laws for the purpose of protect- ing men against themselves, however desirable if it could be accomplished, it must now, it is conceived, be given up as useless and impracticable, since centuries of experience convinces us that such laws tend in a great degree to accelerate the ruin of those very persons for whose special pro- tection they were designed. For the habitual drunkard, the extravagant and reckless prodigal, there is no preservation short of the adoption of a plan similar to the Roman r*1 Rfi"l i'^*^'*'^!'^'') *which is said to be in operation in some of the North L ^ American States, where such characters are classed with the in- sane, and their persons and property consigned to the guardianship and administration of their friends. But even if the " protection of men against " themselves" were the object of the legislature, it is manifestly incon- sistent in allowing a man in want to borrow, by way of an annuity, at 30 or 40 per cent.,(c) or, in short, at any rate at which he can get money ; or if the borrower belong to the humbler classes, he may pledge the very tools of his trade, and raise money at the rate of from 15 to 20 per cent.((^) With reference to this legalised Usury, it may fairly be asked, do the needy and distressed, the vicious and the extravagant of mankind, in this country, belong solely to the upper and middle classes of society ? or are those classes, from some hitherto inexplicable cause, less gifted with prudence and foresight than their poorer brethren ? Unless this be taken to be so, how are we to account for the confidence which the law has placed in the latter, and the preference shown to them by permitting Usury (it must be presumed for their benefit) in the legal sanction given to pawnbroking ? And as there is no risk in this business beyond what the pawnbroker chooses to incur, there is the less reason for allowing a rate r*1 fi7i °^ interest greatly exceeding the ordinary one, on *chattels easily L -■ converted into money at the end of a year or fifteen months, the time limited by law for their redemption. If it is to be understood that the excess above 5 per cent, is allowed in lieu of warehouse room and other expenses, it must be conceded that this class of persons have been most (c) For a confirmation of this, see the Memorials enrolled in Chancery. (d) Pawnbrokers are allowed, by 36 Geo. III. c. 8'r, to charge at the rate of 20 per cent, on sums under £2. 2s. and 15 per cent, on all sums exceeding that amount and under £10. PRESENT USURY LAWS. 95 liberally dealt with, and if it have any reference to the heavy annual tax imposed on them,(e) it savours of the olden times, when the Jews alone enjoyed the exclusive privilege of pillaging the Christians, by lending money at 40 per cent., in order that they in turn might be plundered by the Government ; and as every obstacle placed in the way of the free cir- culation of money must be prejudicial to the borrower, and every charge imposed upon it must eventually fall upon him, this tax is the more un- justifiable, seeing it falls exclusively upon the poor. Pawnbroking must be either beneficial or injurious, if beneficial, why are the merchant, the manufatcurer, and the tradesman, virtually exclu- ded from its operation ?(/) If injurious, why is it tolerated at all ? If the Usury laws be founded on morality, and to prevent the evils of which Lord Mansfield complained, there is no reason why they should not be extended to aU classes alike, for the immediate want of twenty pounds may be as keenly felt by one needy man as the want of twenty shilling by another; the *importance of the sum must be altogether governed p^, „„-, by the relative circumstances of the parties ; it may be sought for L -■ the purpose of gratifying extravagance in one station of life, as well as in another, and equally soon squandered ; gaming-houses, notwithstanding legal interference, still exist for the one, and between the pawnbroker's and the gin-shop, alas ! U n'y a qu'un pas. And it may well be doubted whether, in other respects, they do not lead to greater immoralities than any they repress, by producing perjury, in the temptation held out to unprincipled persons to share in the enormous penalties which these laws inflict, as well as in attempts, by such means, to avoid the payment of debts, honestly incurred. Indeed, so forcibly is this ill-judged preference felt by the upper and middling classes, that a few years since they united for the purpose of establishing for themselves, by the aid of parliament, a monte dipieta, or joint-stock pawnbroking establishment, which it was intended, however, to designate by the more modern and refined appellation of " An Equitable " Loan-Banking Company." (5-) It was projected with a view of meeting the wants and wishes of the inhabitants of the largest and most commercial city in the world, and per- haps, of participating in the profits of a very lucrative branch of busi- ness ;* be thatas it may, the active jealousy and combined opposi- ^^-. „q-| tion of they who bear the arms of the Medici, added, either to L the want of union amongst the projectors, or some other outward event, frustrated the attempt, and caused the scheme to be abandoned ; enough, however, was done to shew the inclination of the times, and the want felt by the manufacturer, the merchant, and the tradesman, of some increased facility of meeting an occasional emergency. Nor does their inconsistency end here, in Bottomry and Kespondentia (e) £15. per annum in London and Westminster, elsewhere £7. lOs. (/) Pawnbrokers can only lend to the amount of £10. on one article. (ff) See an account of a somewhat similar scheme, called " The universal and perpetual princely Contract of Commerce," in Malynes' Lex Mercatoria, p. 244. " The perpetual Contract," however, like its more humble imitation of the 19th century, did not long survive its origin. 96 KELLY ON PSUR¥. Bonds, a distinction is made between risks by land, as if any good reason could be given for the diflferenoe thus created, by the law j in both oases, the lender can indemnify himself by insurance and collateral security, . which is usually taken into consideration at the time of the contract, and forms an item in the calculation on which it is made. Does any one com- plain of the injurious tendency or evil consequences which spring from this maritime Usury? on the contrary, is it not universally admitted to be proper and beneficial ? Here the captain and the merchant are just- ly considered the best judges of their own several interests. Why not, we ask, the manufacturer and the tradesman ? By the 7th Section- of the 3rd & 4th William IV. c. 98,{h) they are r*1701 "^"^ enabled to raise money on bills, *which have not more, than L -> three months to run, on the best terms they can make, without being liable to the pains and penalties of the statute of Anne ; which change having been found, as far as can yet be ascertained, to be, on the whole, very beneficial, and we believe, in practice it is not complained of, has formed a very safe basis for further proceedings to relieve pecuniary transactions from the restraints with which they are still encumbered. Before this beneficial alteration, the want of some such institution as has been alluded to, of borrowing on chattel security, to an amount ex-; ceeding £10. seemed rather to have increased than diminished, and it is always more sensibly experienced on the occasion of those suddpn fluctu- ations in the value of money, which have too often ocourredj, to the detri- ment of commerce. Posterity will scarcely credit the fact announced in a leading journal, (i) that a merchant of the first eminence, was unable to raise a loan to the extent wanted, on the deposit of silver bullion at the Bank of England, that corporate body having, it is said, refused the advance from^ a disin- clination to encrease its issues at that particular period ; and as, transao- j... -., -, tions of such magnitude are generally above the means of *private L J individuals, or of banking hpuses; of a limited number of partners, when there is a panic and consequent scarcity of cash, the- evil arising from it is aggravated by the amount which ought tO; have been SP obtained being kept out of circulation. \ The hardships and mischiefs of the restrictive system are obvious, for as no one will lend money for less than it is worth, and at such periods it is worth more than legal interest, the borrower, if he obtained it at all, must do so by an evasion of the law ; and as the lender runs the risk of forfeiting trebk the value of his loan, by accepting more than what the law has deemed the proper compensation for the use of money, the unhappy borrower, if his bill exceed three months, is still obliged, in addition to the remuneration for the loan, to insure his creditor against (A) This Act, as might have been anticipated, is daily evaded by the discounters of bills, by the simple device (■where the term exceeds three months,) of always dis- counting two bills at least (o^e of a short date,) at the same time, and charging 5 per cent, only on the bill exceeding three months, and taking the extra rate agreed for, on the short bill. This, of course, would be held to be usurious, if proved to have been done in fraud of the statute, but evidence of the intention will not be easily obtained. (i) The 'Times,' 11 Feb. 1832. PRESENT USURY lAWS. 97 the penalties of Usury ; thus the borrower's difficulties are increased, and his situation rendered worse, by the inexpedincy of the very laws made for his protection. The limited period of three months is in many cases of little avail to a merchant, who relies on the means of repays ment on the arrival of a cargo from a distant shore j and since the China trade is thrown open, the number of those who depend on the forbear- ance of money for a much longer period must be considerably increased. If a manufacturer or a tradesman, must have money for a longer period than three months, (for the renewal of bills cannot, from the contingency of death, and the ever-varying circumstances of the be relied on,) he must either borrow it at an unnecessarily n^^iwo-i ♦increased rate of interest, or as Lord Bacon observes, " be L 'J " forced to sell his means (be it land or goods,) far under their value ; " and as Usury doth but knaw upon him, bad markets would swallow «' him quite up." Now it is conceived the merchant, or manufacturer, with his eyes open, provided he be neither a minor (which rarely happens) of weak mind, under duress, or circumvented by fraud (and for all such cases be it remembered, the Courts of Westminster afford ample relief,) if free from these disqualifications, he is quite as competent as the legislature to judge whether or not it will be to his advantage to borrow at the rate of 10 or 12 per cent, j for if he be deemed incompetent in perfect free- dom to borrow on fair terms, and liable to be imposed upon, owing to the pressure and urgency of his necessities, how can he be deemed more com- petent (the same causes operating) to sell either his goods, his life-estate, his leasehold his reversion, to bargain for the giving a post obit bond, or granting annuity ? If borrowing at 10 per cent, would^at the time be the means of making 20 per cent., or three times that sum, by turning his capital frequently in the course of the year, or prevent the loss of 20 or 30 per cent, by a forced sale, to preserve his credit, which may be invaluable and beyond the power of computation, it is difficult to con- ceive why he should be debarred from doing so ; no good reason has yet been assigned, nor is it possible to imagine one. Yet the law, in its kindness, precludes him from borrowing, on what it deems, *dis- p^^ _q-i advantageous terms, but cannot prevent his selling on any terms, L J however ruinous, though every one knows that the loss he would sustain in borrowing a* an increased rate of interest, may bear but a small pro- portion to what he might suffer by a forced sale. (A;) As to Dr. Paley's belief that the system is retained for embracing the manifold advantages to which he alludes, it may be observed that the law can never effectually check the power of accumulating wealth without industry, while it leaves the disposition of property unfetteredj nor can money be obtained by the adventurer in trade at 5 per cent., whose only security depends upon the success of his undertaking ; it is manifestly injurious to such borrowers, for when the natural rate is above the'legal rate of interest it diminishes competition, by driving the capitalist, who (k) See the evidence of Mr. Holland, Mr. Kaye and Mr. Kemble, on this head. Appendix 0. 98 KELLTONUSURT. either respects the law or dreads the penalties, from the market ; and whatever discourages the lending of money, must injure commerce, and be a loss to the kingdom, by stopping pro tanto the current of money, which turns the wheels of trade, and thereby limits the productive pow- er or the capital and industry of the country.(Z) Neither are these laws beneficial to trade; traders, who must surely be the best judges, do not r*l "41 ^° regard them j the Chambers of *Commerce, of Dublin, Man- L J Chester, Birmingham, and Glasgow, as well as the Merchants of London have petitioned parliament for their repeal. As far as Government is concerned, it seems to entertain no fear of be- ing less able to borrow the subjects' money, on fair terms, for the future, since it has never objected to the repeal or alteration of the Usury laws, or made it a Cabinet question, while its members, whether Whigs or To- ries, have individnlly supported a change. If the supposed benefit to Government were a good reason for limiting the rate of interest by law to 5 per cent., it would be equally good for reducing it still lower. Go- vernment, in its recent transactions, has borrowed the subjects money at much under 5 per cent., and can always do so, when there is little trade and advantageous employment for capital, and money is consequently abundant, while at other times, when commerce is flourishing and money scarce. Government have been obliged to pay as high as 6, 7, and even 8 per cent, for it, the rate of interest being wholly dependent on the rate of profit to be made by the employment of capital in trade and manu- factures. It would be but just, if the limitation to 5 per cent, be deemed necessary to protect the owner of money from the loss which he sustains in the variation of its value, for as he is forbidden to take more „^„„ than after the rate of 5 per cent per annum,(m) for the use of L J *money, when the market rate is 7 or 8 per cent., he ought never to receive less than 5 per cent, even when it is only worth 3 or 4. That money is not as much a merchantable commodity as an arti- cle of which it represents the value is an argument now generally abandoned, even by those who contend for the retention of the present system ; nor have we ever been told in what the difference between them consists ; and the alleged antiquity of these laws is no more a reason for their being immutable than it is for re-enacting the laws against Witch- craft and Sorcery, and other equally venerable monuments of the wisdom and experience of our forefathers. It is an error to suppose that opinions adverse to the policy of these laws have been entertained only recently ; the immortal Locke long since combatted their expediency — " Money," he observes, " is an universal " commodity, and is as necessary to trade as food is to life ; and every- " body must have it at what rate they can get it, and invariably pay dear " when it is scarce ; you may as naturally hope to set a fixed price upon " the use of houses or of ships as of money. Those who will consider "things (he continues,) beyond their names, will find that money, " as well as all other commodities, is liable to the same change and (I) "Shew me," said Sir Edward Faynes, (afterward Baron Clinton,) in the House of Lords, " a State without usury, cmd I will shew you a State without trade." (m) Save on bills and notes which have not more than three months to run. PKESKNT USURY LAWS. 99 " inequality, and the rate of money is no more capable of being regula- " ted than the price of land ; because, in addition to the quick changes "that happen in trade, this too must be added, that money may be car- " ried in and out of the kingdom, *which land cannot." Even p^, „„ long before the time of Locke, the mighty mind of Bacon, which L J towered far above the prejudices of the times in which he lived, discerned the inconveniences of this system ; and after balancing, as he says, the commodities against the discommodities of Usury, he comes to the con- clusion, " that it is vanity to suppose there can be borrowing without "profit, and as great inconveniences would arise, if borrowing were " cramped, in order to retain the advantages, and avoid the disadvan- " tages of Usury, two rates of interest, a less and a greater, should be " adopted, the one to suit the borrower who has good security, and the " other to suit the merchant, whose profits being higher will bear a "greater rate."(?i) As most lenders, including trustees and executors, would still prefer ample security at the lesser rate, to hazard at the greater, there would be no want of loans upon mortgages or government security ; it must be remembered too that when Lord Bacon wrote the legal rate of interest was 8 per cent. It seems surprising that in the repeated discussions which this subject has undergone in parliament, and when every writer of note has been quoted, from Aristotle to Adam Smith, the opinion of this "Great " Oracle of Reason" should have been entirely overlooked. *The adoption of this plan, or what seems preferable, removing j-^, ^-.-, all restrictions upon pecuniary bargains (excepting mortgages and L -' other securities on land), would be attended with the happiest results to the trading part of the community, and avert the hostility of the land- owners, who have hitherto strenuously and successfully opposed in par- liament the abolition of the Usury laws,(o) on the grounds that they would unhinge existing mortgages and other contracts, and throw the landed interest, already heavily burthened, into confusion, induce the Bank of England to increase its rate of interest upon mortgages, and, finally, by sacrificing the welfare of the many to the few, would place the country gentleman at the mercy of the capitalist, and give the monied men the preponderance in parliament. Much of the money, they con- tend, now lent on mortgages (if these laws were abolished) would be called in when cash was scarce, to be employed at a greater interest else- where, or if left, would only be so on condition of their paying a higher rate of interest for it, as the competition would then be with the borrow- ers, and not, as now, with the lenders of money. These objections, we are bound to confess, are not without weight, as (re) " The greatest characters of the age (said Mr., now Lord, Brougham,) have disproved of these laws ; Sir Francis Baring, more than thirty years ago, strongly denounced them, as injurious to those for whose benefit they were intended." House of Commons, Feb. \st, 1816. (o) Those who have large landed estates have always been envious of the sud- den fortunes raised by commerce, and the improvements and increase of personal estates. Treatise on Treatise may be written, to prove that these two interests mutually supp ort and strengthen each other ; the prejudice may indeed be some- what lessened, but cannot be eradicated. Barr. Obs. on the Stat, of Merton, 100 KELLY ON TJSURT. r«l YSI '^® ^^^^ ^^ ^^ present subject to *many exclusive burthens, which L J press heavily upon it j the money raised for the maintenance of the poor (hitherto an increasing weight) is paid entirely by the land, for persons in trade contribute only as far as they are the owners or occupi- ers of real property ; while, on the one hand, the farmer is subject to bad seasons, and the landlord to reduction, or loss of rent, the former is pre- vented, by the operation of the corn-laws, from enjoying the full advan- tage of a series of abundant harvests, the latter, from the same cause, from raising his rents ; and when to these are added the expense and ex- posure incidental to the renewal of mortgages (for assignments of them without reinvestigation of title are very rare in practice) it will be readily seen how much more the land-owner is at the mercy of his creditor than the merchant or tradesman, who has borrowed on a bill of lading or a dock-warrant, which is capable of being transferred by indorsement, with privacy, and at little or no expense. These reasons may satisfy us that there exists in this country, at present, good grounds for a bonus or protection to the landed interest, if indeed these restrictions can be considered either a bonus or protection to that interest. In stating these objections, however, and giving them their due importance, it must not be overlooked that they apply more to ordinary than to extraordinary times, for when money becomes, as in time of war, worth more than 5 per cent., and Government is obliged to borrow at 6, r*1 7QT °^ *even 8 per cent,, the situation of the land-owner is rendered L -J worse by the operation of these restrictions now considered so beneficial ; for as Groveriiment securities will, at that time, be preferred to mortgages- at 5 per .cent., it will follow, as was the case during the war with Napoleon, that the landholder will be unable to raise money in any other way than by means of an annuity transaction. "We have the autho- rity of Mr. now Lord Brougham, (late Lord High Chancellor) for stating, that in 1816 "money could not be borrowed at 5 per cent., and that In- " suranoe Companies, in the employment of their surplus capital, never " lent at that rate ; some charging 8 per cent, and insurance (and that " only to those who effected insurances with them, and, in fact, were " customers), and others charging 12, 13, and even 15 per cent., and the " annuity well secured." Thus the landed interest was reduced (in a great degree by the operation of the Usury laws) to the state Swift de- scribes it was in his day, " when power, which, according to the old max- im, used to follow land, had gone over to money, and the country gentle- man was in the condition of a young heir, out of whose estate a scrivener received half the rents for interest, and had a mortgage on the whole, and was therefore always ready to feed his vices and extravagances while there was anything left, so that, if the war had continued some years longer, the land-owner would have been little better than the farmer of a rack rent." r*18m *'^^^ objections we have stated, we deem well worthy of con- L -i sideration, but are more applicable to the question of the total abolition of the Usury laws, than to the modified change in them which has been suggested, and which, it is thought, would be found in practice to benefit the trading, the manufacturing, (including farmers), and the PRESENT USURY LAWS. 101 oommeroial interest generally, without injuring the landed proprietor. Five per cent, is not inducement suflScient to lend to one who has nothing better than a mere personal or terminable. aeourity to offer, for it must be borne in mind that interest is of a mixed character, and' partakes of the nature of insurance as well as of rent, and that all interest charged to a borrower above the market rate is not, justly speaking, profit; part of it is indemnity,— indemnity for the loss of security, which must always vary in amount in proportion to the risk, like every other insurance. To meet such cases, an extension of pawnbroking, establishing two rates of interest, what we have- here proposed, or something similar in effect, has long been earnestly desired by the trading part of the commu- nity. Care should undoubtly be taken, lest in altering the law, and thereby assisting one class of persons,: the difficulties of another class be not in- creased, of which some apprehension might fairly be entertained, more especially if the existing .restrictions were at once removed, without the country being thoroughly prepared for the change. *When the legislature reduced the rate of interest on landed p^-ioi t security, Such as mortages, &c., it seems to have committed an ' J error in iiot stopping there, or at least in not increasing it afterwards on mercantile or inferior securities, such as now generally form the conside- ration for annuities ; in order to keep pace with the increasing wants of commerce, which has been wonderfully extended since the last of the statutes relating- to Usury. And this error has, it is conceived, been directly admitted^ by endeavouring to supply the defect, by the legalised sanction given to pawnbroking, by Grovernment deviating from its own principal in loans, and by the statutable protection given to bor- rowing by way of redeemable annuity. It may be said that life annuities must be considered as purchases, and not loans, as the buyer is debarred from calling in his money, a circum- stance essential to the nature of a loan; to this it is answered that, let them be called by what name you will, or be allowed to assume what shape you please, every practical man well knows that the great majority of such jmrchases are, in fact, mere loans, meant to be repaid or repur- chased at the convenience of the selkr or borrower; that the deed grant- ing the annuity usually contains a clause for that purpose ; and that, in order to save the expense of insurance) itis now very common to grant the annuity for the lives of three or four, perstas, and the life of the sur- vivor, the lives being usually nominated by the grantee of the *an- r- j^i oo -i nuity, who is allowed to insure the last life, when the others L ' have dropped at the expense of the grantee or seller ; and that such trans- actions, though sanctioned by the courts of law, are, most of them, mere legalized evasions of th^ statutes against Usury, as the reason of their being allowed, viz. the presumed ground of risk, is never contemplated by the buyer or lender, being generally well provided against, by insu- rance and other collateral security. And although the grantee or lender cannot recall his principal, yet the higher the rate of interest paid by the grantor the greater is the certainty that it is only a loan, and will so"" be redeemed. 102 KELLY ON USUET. It has been quaintly observed that the land-owners, who were both the borrowers and makers of those laws, had, in enacting them, an eye to the future wants of their children ; this, however, cannot be allowed as a reason for continuing these restrictions wholly unmodified in the nine- teenth eentury. Efforts, however, have not been wanting to procure an alteration in them, for they have long been deemed ill-suited to the genius of the pre- sent age. Philosophy having already so far triumphed over ancient super- stition asto break down the barriers which so long enthralled the human understanding, and prepared the way for further and more beneficial im- ment. If the authority of great men in ancient times and in foreign lands has received its due meed of deference and respect, we see no reason why r *1 8m *^^* °^ great men *of modern times, and in our own country, L J should not be entitled to the like consideration, seeing they have had the additional advantages of history and experience for their proveguides. The names of Bacon, Locke, Bentham, and Brougham, may well grace the same page with Aristotle, Plutarch, Cato the Censor, and Cicero. The opinions -of the three first of our illustrious contrymen have been already stated, the latter (Mr. now Lord Brougham) observed in the course of a luminous speech in a committee of supply.(/>) That " the repeal or modification of the Usury laws was a measure, in " the present age, all mankind agreed was perfectly safe) calculated to « afford the greatest measure of relief, and innoccuous to the borrower, " to the lender, and to the state." The attention of Parliament was (since the statute of Anne) first specifieally called to the subject by Mr. Serjeant Onslow, on the 22d of May 1816, who moved for leave to bring in a bill to repeal the laws re- lating to Usury ; and as the opinions then and subsequently expressed by able, enlightened, and practical men, must be interesting to those who have thought the repeal or modification of those laws expedient, we have introduced, in an Appendix, a brief analysis of the Debates which have taken place on this question in Parliament, as well as of the opin- ions given to a Select Committee of the House of Commons, by experi- enced men, in various pursuits of life. r*1 84.1 *Holland having been frequently alluded to in the Debates of L J which we are about to give a brief abstract, as illustrative of the advantages derived from the interest of money being wholly unrestricted, it will not be inappropriate to introduce some observations, in connexion with that country, by an English writer, as far back as the middle of the seventeenth century. " Plenty of money and few borrowers," sai/s he, " will make the rate of interest better than any statute for the purpose will do. A famous instance whereof we have in the 'United Provinces, where it is lawful for a man to take twenty in the hundred, if he can get it; and yet money is commonly to be had there at 6 or 7 per cent., by reason of plenty of money ; and now, in 1668, from the like plenty, and (p) In the House of Commons, in 1816. PRESENT UStlRT LAWS. 103 not by reason of any law as is unjustly alleged, it is to be borrowed at once asking, at 3 or 4 per cent. ; and how Tast the difference between the kindly working of nature and the violent acting of a law, when the matter is not prepared for it, I leave every man to judge. I dare avow, (Ae adds^ interest without a law will be every jot as cheap with us as with them." With regard also to the alleged fact, that the increase of the rate of interest creates a fall in the value of land, experience does not show that there is any certain proportion between the interest of money and the value of land ; the latter seems to depend principally on peculiar and local causes, which operate far more powerfully than a high or r *iok t *low rate of interest ; much must result from the quantity of L J land in the market, compared with the number of purchasers ; for, as in other things, it is only the overplus compared to the demand, that con- stitutes the value ; and there can be no doubt but that the difficulty of borrowing money on landed security under the present system (during times of scarcity) must tend, at such periods, considerably to depreciate the value of the land itself, and be a bar to improvements. An effect is always in proportion to it cause ; when the rate of interest was 10 per cent, the value of land did not exceed sixteen years purchase ; when 8 per cent., eighteen years purchase ; and it did not rise higher when the rate was further reduced to 6 per cent., little more than half the original sum. To support the theory which connects the rate of interest with the price of land, it ought to have risen to twenty-four or twenty-five years purchase, which it has only done since the reduction of interest to 5 per cent. The operation of the corn, tithe and poor laws materially affect the value of land in the present day, by burdening the farmer, causing a reduction of rent, and consequently a less profit to the purchaser on the capital invested in land. In conclusion, it may be observed, that if the Usury laws cannot be altogether abolished, from the dread of inconvenience to the landed in- terest, already heavily taxed, they might, at least, be modified in the way proposed, for the benefit of the trading part of *the community, j- j^^gg ., an alteration which concurs with the suggestions of those who L -I supported their entire abolition in parliament, viz. : " That mortgages might be exempted from the operation of the bill, seeing those most in- terested in them objected to the change." The adoption of this plan, it is conceived, would tend, in a great de- gree, to remedy the mischief and inefficaoy of the present system, and operate as an inducement to the capitalist (whose interest the law deigns not to notice, conceiving that he, at least, is capable of taking care of himself,) to part more readily with his money when he receives a com- pensation more in proportion to the risk, or weakness, of the security on which he lends it. While it would also enable the borrower, whose dis- tresses are often of a temporary nature, to escape the pressure of the mo- ment, and retrieve his situation, by raising the sum he may want on se- curities of an inferior nature, on much better terms than at present, and thereby save him from much occasional oppression. March, 1852.— 36 104 KELLY ON USURY. The rate of interest on mortgage security might remain the same, leav- ing inferior securities to find their own level in the money market, and it would by no means follow that this rate would be invariably maintained, or mortgagees be always obliged to pay so high an amount, for were the money market thrown open to fair competition, and the odium of infring- ing the law removed, it would be supplied on lower terms. Mortgagors might provide against the sudden increase in the value of money, by r «187 T stipulating that the mortgage* should not be redeemed (unless L ■' by consent,) before a future period agreed on, and then only on receiving six months' notice, a mode now far from uncommon in prac- tice. All experience teaches us how impossible it is for the law to fix a max- imum of interest applicable to every period, for when there is little de- mand for money, it can be borrowed (as at the present time,) for less than legal interest, on good security ; when the contrary is the case, the law is evaded, and more than the legal interest given ; for whatever may be the municipal regulation, there is no axiom better established, than that money, like water, will always find its own level ; that it is governed by the same rules, as to production and distribution, which affect all other merchantable commodities ; and that the rate of interest for its use is no more capable of being regulated by law than the rate of insurance, or the price of labour; and that "free trade in money is the only way of rend- ering it abundant," to say nothing of the advantages that must accrue to the public from having this necessary and confidential branch of business transacted by respectable members of the legal profession, amenable to the Courts for their conduct, instead of the anonymous and irrespon- sible individuals, who now, for the most part, monopolise it, to their ex- clusion. A plan somewhat similar to that which has been proposed, has been r *1 SS 1 already hinted at by a practical *and most eminent legal writer L -I of the present day,(t;') who wisely considers, that as money may now be borrowed at any rate, however exorbitant, by way of annuity, it would be better to raise the rate of interest on inferior securities, and abolish redeemable annuities, with certain exceptions, altogether. The law ought not to permit that to be done circuitously and indirect- ly, which it will not allow to be done openly and at once ; if borrowing at more than 5 per cent, be pernicious, it ought to be practicable by no means whatever ; if beneficial, it should be subjected to no impediment. Every unprejudiced mind must feel satisfied, that the more the subject is discussed the more certain will be the repeal, or modification, of these laws; for as to their efficacy, it has been well observed, they must pro- duce one or other of two consequences ; if wholly successful, they must prevent all loans at a greater rate of interest than 5 per cent., if partially successful, they must raise the terms of the bargain to the borrower ; in either case, they do nothing but counteract the intention of the legislature which enacts them. If it should be objected, that this would authorise Usury where it [ff) Sir Edward Sugden. PRESENT USURY LAWS. 105 was before prohibited, we reply, with Lord Bacon, that "it is better to mitigate Usury hy declaration, than to suffer it to rage hy connivance." As to the time of effecting this alteration, it seems *clearly to have arrived; periodical parliamentary discussion, for the L 1 last eighteen years, has prepared the public mind for a change, and as the questions relative to the currency of the United Kingdom have now been disposed of, that ground is wanting for postponing the measure any longer, while a time like the present, when the market rate of interest is under the legal rate, has been admitted, on all hands, the fittest for the adoption of an alteration. The new law itself might be made to come into operation at a period of twelve or eighteen months from its enactment, so that borrowers, as well as lenders, might have time to arrange their affairs, and prepare for the change; and it might be confined to future contracts, so as not to in- terfere with those already existing. To distinguish what securities may, or may not, be taken at more than 5 per cent., the act might be general, with a clause similar to the last section of the Annuity Act, 53 George III. c. 141, s. 10, in favour of mortgages and other charges on land.(r) And it might also enact, with a view to check frauds and perjuries, that an agreement, in writing, signed by the parties, or their agents pro- perly qualified, *should in all cases be necessary where a greater y^-. „„-, rate than 5 per cent, is contracted for; and that bills of exchange L J and promissory notes, not expressing a greater rate on the face of them, should remain as at present ; and that, in the absence of a written agree- ment or stipulation appearing on the face of a written instrument, the present legal rate only should be recoverable ; thus -the Courts would, in such cases, still retain a rule, and measure of damages. With a view to guard against underhand and dishonourable transactions being carried on, by the means of agents and others, the act might require that the real name of the bona-fide lender should, in all cases, appear upon the face of the security, or in default thereof, that every such security, collateral security, &c., &o., should be absolutely null and void, and that the sum so lent should be recoverable by no means whatever. To restrain oppression, protect infants, and relieve against hard and and unconscionable bargains, the Courts of Common Law might be in- vested with summary jurisdiction and powers of redress, similar to those they now exercise, with so much advantage to the public, under the An- nuity Act just stated,(s) (which in other respects, especially as regards infants, might afford an useful model for imitation,) without obliging the complainant to seek relief by the more tedious and expensive application to the Court of Chancery; *while the contemplated measure for |_j|j„^_ the abolition of imprisonment for debt will, by materially dimi- <- -' (r) See such a provision introduced into an Act, passed by the Common-wealth of Massachusetts, in the United States of America, A. n. 1834, entitled "An Act concerning Usury," (similar in its provisions to the Tth Section of the 3 & 4 William IV. c. 98, ante, p. 155.) '^That the provisions of this Act shall not be construed to ex- " tend to any note of hand, the payment of which is secured by mortgage of real estate, or " to notes of hand payable on demand, or to bills of exchange payable at sight." 106 KELLY ON USTJRT. nishing the lender's power over the borrower, free the latter from the op- pression to which he may be occasionally liable. After a sufficient trial, and if found to work well in practice, and when due changes shall have been made in the laws more immediately affecting real property, the transfer of it facilitated and rendered cheaper, and the landed interest conciliated to the principle of freedom, it may be further extended, and in the mean time, a cautious and safe experiment will be made of its effects. This would probably be found better than a total abrogation of the present system, which might give too great a shock to existing contracts, " leing an untrodden path, (as Sir Thomas Culpepper, jun., has observed,) it must he hewn out hy dint of reason." An alteration in the law never being so well received, as when it has due consideration, accords with the various interests of the community, and is adapted to the times, and con- curring circumstances, when the change is effected. It has been truly said, that the Usury laws are vestiges of the times when the principles of commercial polity were wholly unknown, when the legislature extended its interference with the rights of individuals to almost every act of private life, when the price of bread, cloth, leather, wine, &c., &c., were fixed by statutes ; but these were days of political dark- r«i Qo-i "^^^h **t^ wisdom of the people has ever since been increasing, L -' and one after another of these legal abuses have been expunged from our statute book, by succeeding and more intelligent Parliaments, until scarce a relic remains of the old regime of error, save the Usury laws alone. A still further reform must follow that increase of know- ledge, which is now fast enlightening the community ; and we trust, the time is not far distant when these also will disappear. («) The public is indebted for this useful Statute, (among others,) to Sir Edward Sugden. OBEX. The pages referred to are those between brackets [ ], ACTION AT LAW— Actions for penalties may be brought by a stranger, and the borrower produced as a witness, 111. May be brought to recover money paid to an Informer to compro- mise a qui tarn action, 110. Limitations of actions on the sta- tutes of Usury, 107. Compounding actions qui tam, 110, Evidence in, 111. Can only be prosecuted in the su- perior Courts, 109. Where it must be tried, 109. ACTS OP PARLIAMENT.— (See Statutes.) - AGREEMENT.— (See Contract.) An agreement to pay more than legal interest avoids the securi- ty, 80. ANNUITY— Grant of Annuity for life or lives not Usurious, if bona fide, 66. Considered a purchase, 67. Clause of redemption does not vitiate, 68. Nor Insurance, 69. Nor if granted for four lives and the life of the longest liver, 70. Annuities for years may be Usu- rious, 72. Annuities considered evasions of the Usury Laws, 69, 181. ATTORNEY— May be examined as a witness, where he has prepared an Usu- rious Security, 102. His receipt for more than legal interest for his client on an Usurious Security, binds the latter, who may be sued for Penalties, 112. AUDITA QUERELA— Not allowed where the party ne- glects to plead Usury, 89. BACON, LORD— His objections to the Usury Laws, 172. In favour of two rates of interest, 176. BACADATION— A Stock Exchange Contract, held illegal, 55. BANK OF ENGLAND— May borrow money at a higher rate of interest than 5 per cent. 31. BANISHMENT— The Jews banished for being ex- tortionate Usurers, 14. BANKER— May take a reasonable conpensa- tion above 5 per cent, for his trouble, 43. Confined, however, to Bankers, Brokers, Factors, &c. 46. BANKRUPTCY— Proceedings in Bankruptcy, where Usury has been alleged, consid- ered oppresive by Lord Eldon, 99. A debt affected by Usury cannot be proved, 100. Where there is a discount agreed on for prompt payment, a credi- tor only allowed to prove for the original sum, 75. BASIL, St. His horror of usury, 3. 108 KELLY ON USUKT. BENTHAM, Mr. JEREMY— Writes in defence of Usury 5, 163. BEST, LORD CHIEF JUSTICE— (now Lord Wynford.) Delivers the opinion of the Twelve Judges in the House of Lords, 162. BILLS OF EXCHANGE— Once doubted how far legal to discount a Bill of Exchange, 29. Now clearly established in favour of Trade, 41. Discount, however, confined to Bills of exchange and Promis- sory Notes, 41. Acceptor may discount his own acceptance, 43. As to Bills of Exchange in the hands of third parties, not privy to the Usury, 87. BISHOPS— Complain that the Justices had punished Usurers, 16. How answered, 16. Distinction made between living and dead Usurers, 17. A clauses introduced into an Act of Parliament to satisfy them, 27. BLESENS, PAUL— His Epistles againt Usury, 14. BLOIS, PETER OF— His letter to the Bishop of Ely, 14. BOND, — (See Contract, Agreement.) 90. BOTTOMRY— Not Usurious on account of the Hazard, 65. Otherwise, if the risk be trivial, 66. No distinction between Loans on Bottomry and other Loans, 169. BROKERS— May take a commission above 5 per cent, for trouble, &c. above legal interest, 44. Of an Usurious Contract liable to a premunire, 144. Liable to fine and imprisonment for taking more than 5s. per cent, procuration money, 143. BROUGHAM, Mr. (now Lord Broug- ham, late Lord High Chancellor of Great Britain.') His statement in Parliament, as to the difficulty during the war of borrowing money at the legal rate, even upon good security, 179. Recommends a change in the Usury Laws as safe and benefi- cial, 183. CANON LAW— Usury forbidden by, 2, CAURSINI— Some account of, 11, Rival the Jews in Usury, 11. Their methodof evading the law, 12. Excommunicated by theBishopof London, 12. CHANCELLORS OF THE EXCHE- QUER. — (See Goalhurn, Robinson Vansittart, and Lord Althorp) — All in favour of an alteration in the Usury Laws. CHRISTIAN USURERS— Their ingenuity, 19. Take up the trad e of Usury on the banishment of the Jews, 15. How punished, 17. CHURCH— Had jurisdiction over Usurers, 18. Its infiuence, 21. CIVIL law- How Usury was punished by, 17. CLERGY— Reasons for their being severe up- on Usurers, 16. Their influence, 21. COKE, SIR EDWARD— His reasons for the Jews being permitted to take Usury from strangers, 3. COMMERCE, CHAMBERS OF— Of Dublin, Glasgow, and Manches- ter, petition Parliament for the repeal of the Usury Laws, 174. COMMON LAW— Usury prohibited at common law, 1. How punished by, 17. Altered by statute, 130. COMMISSION— Allowed to Bankers, Brokers, Fac- tors, and others, 44. COMPOUND INTEREST— May be taken at law by express agreement after the simple in- terest has accrued, 47. Not allowed in Equity, 48. COMPOUNDING PENAL AC- TIONS— Mfry be compounded by leave of the Court, 110. If compounded, without leave, it is penal, and composition may be recovered bads', 110. If Defendant obtain a rule to stay INDEX. 109 COMPOUNDING— conimucd. proceedings, on- payment of Penalty, and neglect to do so. Court will grant attachment against him, 110. By a late rule, leave to compound shall not be given without no- tice to the proper officer, 110. CONSTRUCTION— The Statutes of Usury are to be construed strictly, 136. CONTINGENCY— (See Hazard.) A contingency merely colourable — Usurious, 66. Otherwise, if the risk be bona fide, 65. (And see Hazard.) CONTINUATION CONTRACT— What, 5.5. Usurious, 55. CONTRACT— Foreign Contract carries interest according to the laws of the country where made, 32. For more than legal interest avoids the security, 81. A contract good for the principal, and a subsequent Usurious one for the interest, the latter only affected, 83. How to determine whether a con- tract be Usurious, 83. Perpetual Princely Contract of Commerce — what, 168. COURTS— Will not presume Usury, 98. In what Courts Penalties for Usury may be recovered, 109. DEVICES— To evade the law, 125. Prohibited by Statutes, which are to be construed strictly for re- pressing Usury, 136. DISCOUNT.— (See Bills of Ex- change.) DIVINES— Allude with satisfaction to the Clause disgracing Usury, 28. DRY EXCHANGE— Explanation of, 18. An Evasion of the Usury Laws, 18. This and other devises prohibited by ancient Statutes, 19. EAST INDIES— 12 per cent, interestallowed in,32. ECCLESIASTICAL COURT— Had jurisdiction over U.surers, 18. Their jurisdiction saved by Sta- | tute 11 Henry VIL, and by Statute 13 Elizabeth, 130, 137. EQUITABLE LOAN BANK— proposed to be established in Lon- don, 168. EQUITY, COURTS OF— Relief in Equity differs from relief at Law, 95. A Borrower may file a Bill in Equity oefore proceedings have been taken by the lender, 96. Bill must offer to pay what is really due, otherwise demura- ble, 97. Courts will grant an injunction in certain cases, 96. Defendant not obliged to discover any Usurious Contract, unless Plaintiff agrees to waive the penalties, 97, Court of Equity will afford relief and protection in cases not strictly Usurious, where there has been fraud, oppression, &c. 98. EVIDENCE— Defendant, who pleads Usury, must prove it, 101. An Attorney may be examined to prove an Usurious consideration for a Bond which he has pre- pared, 102. Where Defendant proves Usury in the negociation or concoction of a Bill, Plaintiff must prove himself a bona fide holder, without notice, 104. A Bankrupt, in certain cases, not competent witness, though re- leased by Defendant, 103. The borrower may prove the whole transaction, though the princi- pal be unpaid, HI. EXCHANGE.— (See Dry Exchange.) EXECUTOR— Paying an Usurious Bond of his Testator is a devastavit, but Usury will not be presumed, 98 FATHERS— St. Basil, Lactantius, St. Chrysos- tom, Augustin, and most of the holy Fathers inveighed agaipst Usury, 4. FENTON, Dr. Writes against Usury, 25, His opinion of the distinction be- tween biting and toothless Usury, 7. FITZ WILLIAM, EARL.— (See Mil- ton.) 110 KELLT ON USURY. FOREIGN INTEREST— Statutes relating to, 32, 145 In what cases it may be taken, 32, 78. Plaintiff in an action allowed foreign interest to the signing of thejudgment, but not after,77. FORFEITURE— Usurers forfeit treble the value of the principal, 143. Usurious interest must be receiv- ed before treble forfeiture is in- curred, 106. How forfeitures are recoverable, 107. Pecuniary forfeitures go to the King and the Informer, 144. GOODS— Fictitious sales of, to evade the Usury Laws, 19. Where the Borrower is furnished with goods instead of cash, 34 Where the Borrower wishes to have Goods, with a view to gain by them, 36. HAZARD— Where the Interest only is haz- arded, 50. Where both Principal and Interest are risked, 51. Hazard must be real and not col- ourable, 50, 60, 61. HOLLAND— Often referred to by speakers in Parliament, 184. INDICTMENT— Generally considered an indict- ment for Usury will not lie, 112. INFORMER— Receives half the Penalties in- flicted by the Usury Laws, 144. INTEREST (EAST INDIAN)— 12 per cent. Interest allowed in the East Indies, 32. INTEREST (WEST INDIAN)— 6 per cent. Interest allowed in the West Indies, 32. INTEREST (Irish). 6 per cent. Interest allowed in Ireland, 32. INTEREST— Definition of, 2. Comparison of the rate allowed in various countries in ancient times, 20. Rate of Interest reduced in France by Henry the Fourth, 27. Considered by Hume to be the ba- rometer of the State, 29. Gradual reduction of the rate of Interest in England, 27, 29. Fixed by Statute of 12 Anne, at 5 per cent. 30. INTEREST— (See Landed.) INSURANCE— Insuring the life of the granter of an annuity does not render it usurious, 69. ISSUE— An action qui tam must be tried in the county where the Usury was completed, 109. JEWELL (BISHOP)— Writes against Usury, 26. JEWS— Prohibited by the Mosaic Law from lending on Usury to their brethern, 2. Permitted to practice Usury with strangers, 2. Opinion of Michaelis on the Mo- saic law, 5. The Talmud and Mosaic Law- compared, 7. First practice Usury in England, 9. Banished for being extortionate Usurers, 14. Sometimes receive at the rate of 50 per cent, per annnm inter- est on their loans, 10. Rivalled by the Caursini, 11. Extortionate conduct of the lat- ter, 12. JOHNSON, Dr— His Opinion of the Usury Laws, 162. JUDGES— Express their abhorrence of Usu- ry, 26. Differ in their opinion as to allow- ing discount, 29, 41. Their opinions of the policy of the Usury Laws, 62 KING (THE)— Entitled to a moiety of the Pen- alties in actions upon the Sta- tutes of Usury, 144. May sue two years after the com- pletion of the offence, 108. LANDED INTEREST— Opposed to the abrogation of the Usury Laws, 177. Where both borrowers and ma- kers of the Usury Laws, 182. INDEX. Ill LANDED, INTEREST— coniwwrf. Swift's description of the distress of tlie, 179. LEASE— Lease of a House, by the lender to the borrower, at an exces- sive rent, sometimes a device to evade the Statute, 56. LliMITATION— Qui tam actions upon the Statutes of Usury, and information, must be brought within twelve calen- der months, 107. But the King may sue within two years, lOd. Defendant not limited to time in his defence. LOAN— Actual receipt of, necessary to render a contract Usurious, 106. LOCKE— Consider the Usury Laws to be inexpedient, 175. LOMBARDS—^ Practice Usury on the banishment of the Jews, 15. MANSFIELD, EARL OF {Chief Justice of the Court of King's Bench) — His opinion of the Usury Laws, 162. MICHAELIS— His commentaries on the Laws of Moses, 6. MISTAKE— Usury cannot be incurred by mis- take of a third person, 58. Scrivener's mistake immaterial, 58. MONTE DE PIETA— A proposal for, on a large scale, in London, 168. MORTGAGE— Illegal to charge compound inter- est on Mortgage, 47. MOSES— The law of, 2. Different opinions on the construc- tion of, 4, 7. How explained by Michaelis, 5. MOSSE— Writes against Usury, 26. NATURE, LAW OF— Usury said fo be agiinst the Law of Nature by Aristotle and St. Basil, 3, 5. NOLLE PROSEQUI— The Attorney-General may enter a nolle prosequi on behalf of the King, but only for the moi- ety of the penalties due to the Crown, 110. NOTICE— Leave given to compound a penal action, now none given without notice to the proper officer, 110. OBSERVATIONS— On the policy of the Usury Laws, 160. ONSLOW, MR. SERJEANT, M. P.— Brings in a bill to abolish the Usury Laws, 183. ORDINARY— Was empowered to compel the Usurer to make restitution, 17. PALEY, DR.— His opinion on the policy of the Usury Laws, 161. PARIS, MATTHEW— His hatred to the Caursini, 12. PARTICEPS CRIMINIS.— Borrower not considered a parti- ceps criminis by Dr. Wilson, and other writers, 24. PARTNERSHIP— A retiring partner, who is liable to losses, may stipulate for what interest he pleases on his capi- tal, 51. Otherwise if merely a pretence, 52. PAWNBROKERS- Allowed to take more than 5 per cent., 166. Heavily taxed, 167. PETER OF BLOIS (Archdeacon of Bath)— His Letter to the Bishop of Ely, 14. PENALTY— Common Informers may sue for Penalties under the Statute, 107. Difference between Interest and Penalty, 77. Penalties for Non-payment, 76. When bona fide, not IJsurious, 76. Penalties under the Statute may be recovered by action of debt, 107. Penalties not incurred until Usu- rious Interest be actually taken, 106. Limitation of actions for Penalties, 107. 112 KELLY ON USURY. P ENALTY—continued. Conipountling- actions for Penal- ties, 110. POST OBIT— Post obit Bonds, not Usurious, 62. Relievable against in Equity, 64. PRRAMBLES OP STATUTES.— (See Statutes.) PRESIDENTS OF THE BOARD OP TRADE, — (See Huskisson, Thom- son and Baring.) All in favour of repealing the Usury Laws. PROCURATION MONEY— IVJust not exceed 5s. per cent, on Loans, 144. PROMMISSORY NOTES.— (See Bills of Exchange.) PROMPT PAYMENT— Discount for prompt payment not Usurious, 73. Not allowed in bankrupty, seller being obliged to prove for the real price, minus the discount, 75. PROOF— Who may prove a contract to be Usurious, 102, 111. PUNISHMENT— Usurers, how punished formerly, 17. Pardon only granted them condi- tionally, 16. By the Statute of Anne, 143, PURCHASE— An annuity considered a purchase, 67. REDEMPTION— Clause of redemption does o t render an annuity Usurious, 68. RELIEF, AGAINST USURY— At law, 93. In equity, 95. In bankruptcy, 99. RENT— Excessive rent may be made a cover for Usury, .56. RESPONDENTIA.— (See Bottom- ry-) ROMAN LAW.— Its severity against Usurers, 17. Rate of interest allowed by, 20. ST. BASIL— His norror of Usury, 2. SALE— (See Goods.) SCRIVENER— Mistake by, does not vitiate a se- curity, 58. SECURITY.— (See Contract Pounded on Usury, in the hands of third parties, 86. A substituted security for one usurious is void, 84. Otherwise, if what is Usurious be deducted, 84. SMITH, DR. ADAM.— Opposed to the Repeal of the Usury Laws, 161. Subsequently changes his opinion, 161. SOLICITOR-GENERAL.— (See We- SOUTH SEA COMPANY— May borrow at a higher rate than 5 per cent., 33. SPENCER, EARL.— (See Althorp.) STATUTES.— 3 Hen. 7, c. 5 {Usury,) 125. 3Hen. 7,0,6, (t;««ry,) 127 11 Hen. 7. c. S, {Vsury,) \2S. 37 Hen. 8, c. 9, (10 per cent.) 130. 5 & 6 Edw. 6,-c. 20, (Usury,) 133. 13 Eliz. c. 8, (10 per cent.) 135. 39 Eliz. c. s. 18, s. 31 &32, (con- tinues 13 Eliz. c. 8,) 137. 21 Jac. 1, c. 17, (8per cent.) 138. 12 Car. 2, c. 13, (6 per cent.) 140. 12 Ann. c. 16, (5 per cent.) 142. 3 Geo. 1, c. 8, s. 39, (Bank) 144. 3 Geo. 1 c. 9, {South Sea Com- pany,) 32. 13 Geo. 3, c. 63, (East India Company,) 145. 14 Geo. 3, c. 97, (West India and Irish Interest) 147. 58 Geo. 3, c. 90, (Indorsees,) 87 1 & 2 Geo. 4, c. 51, (Colonial In- terest,) 151. 3 Geo. 4, c. 47, (Colonial Interest,) 1,53. 3 & 4 Wm. 4, c. 98, s. 7, (Dis- counts,) 155. How evaded, 169. STOCK— Occasionally used as an evasion of the Usury Laws, 53. Where the lender may lose, not usurious on account of the con- tingency, 54. Otherwise, if the lender is sure to gain, .55. SUGDEN, Mr. (now Sir Edward, M. P. and Lord Chancellor of Ire- land,) Author of the Annuity Act, and other useful Statutes, 190. INDEX. 113 SURETY— 1 A Security for indemnifying a Surety for joining in another Security is good, thougli the original Security is usurious, 88. j Otherwise, if the Surety knows the first Security to be usurious and neglects to plead it, 90. , SWIFT— Complains of the distress of the Landed Interest, 179. I TRADE (See Partnership.) \ Increase of Trade diminishes the | complaint of Usury, 27. | Reducing the rate of interest found beneficial to Trade, 27. Discounting Bills of Exchange, &c., allowed in favour of Trade, 41. Present Laws injurious to the Trading Interest, 173. Usage of— (See Prompt Pay- ment.) TREBLE VALUE— (See Forfeiture.) USURER,— Description of his person by Blax- ton, 28. USURY— Derivation of, 1. Definition of, 2. Stigmatized by ecclesiastical writers, as contrary to the divine law, 2. Punished by the canon law, as sin- ful, 2. The Jews prohibiting taking Usury of their brethren, 2. But permitted to take it of stran- gers, 2. Reasons for the distinction, 3. Objection, on account of the natu- rul barrenness of money, 3. How answered, 4. Said to be contrary to the Mosaic Law, 5. New Testament seems not to for- bid it, 6. Divines differ on the subject, 7. Opinion of Grotius, 8. Considered by the Romans a crime second only to murder, 17. Judges express their abhorrence of the practice, 26. Forbidden by Statute Law, 18, 22. Subsequently tolerated by Sta- tutes, 20. Prejudices against it gradually wear away, 29. Usury Laws always evaded, 19. Consequences of Usury, 90. Observations upon, and sugges- tions for their amendment, 160. VENUE— The Venue, in Actions on the Statutes of Usury, is local, and must be laid in the county where the oflfence was comple- ted, 109. IPcause of Action arise in two dif- ferent counties, the Venue may be laid in either, 109. VOID— All securities founded on an usurious consideration or agree • ment are void, 90. WEST INDIES— 6 per cent. Interest allowed in the West Indies on Mortgages, &c. 32. Securities relating to, may now be executed in this country, 1.54. WILSON, Dr. Opposed to the repeal of the Sta- tute of Edward 6th, 23,35, 217 WITNESS— Who may be a Witness for De- fendant in a plea of Usury, when Action brought to recover pen- alties, 102, 112. WYNFORD, LORD,— (See Best.) When Lord Chief Justice of the Common Pleas, delivers the opinion of the Judges, as to the supposed policy of the Usury Laws, 162. ERRATA. Page 2, note 2,/or 20 & 21 v. read 19 & 20 T. , for LeVi 360, read Lev. 36 & ST. • for Psalms 15 ; 50, read 15, 5. Page 5, note 2, /or Exodus, v. 24, read v. 25. Page 6, note 1,/or St. Luke, c. 19, v. 22, ready. 23. Page 21, note, for Hayward, p. 218, read 318.