Note F, Concerning Usury

INTEREST is the compensation which a borrower pays to the lender, for the profit which he has an opportunity of making by the use of the lender’s money.¹ Part of that profit naturally belongs to the borrower, who runs the risk and takes the trouble of employing it; and part to the lender who affords him the opportunity of making this profit. The proportion which the usual market rate of interest ought to bear to the ordinary clear profit necessarily varies as profit rises or falls.² Double interest, is in Great Britain reckoned what the merchants call a good moderate reasonable profit, by which is probably meant no more than a common, usual profit. In a country where the ordinary rate of profit is eight or ten per cent, it may be reasonable that one half of it should go to interest, wherever business is carried on with borrowed money. The stock is at the risk of the borrower, who as it were insures it to the lender; and four or five per cent may in the greater part of trades be both a sufficient profit upon the risk of this insurance and a sufficient recompense for the trouble of employing the stock. But the proportion between interest and clear profit might not be the same where the ordinary rate of profit was either a good deal lower, or a good deal higher; if it were a good deal lower, one half of it perhaps could not be afforded for interest; and more might be afforded, if it be a good deal higher. For wherever a great deal can be made by use of money, a great deal will commonly be given for the use of it; and wherever little can be made by it, less will commonly be given for it.³ The interest which the borrower can afford to pay, is in proportion to the clear profit only.⁴ In countries where interest is permitted, the law, in order to prevent the extortion of usury, generally fixes the highest rate which can be taken without incurring a penalty. This rate ought always to be somewhat above the lowest price commonly paid for the use of money upon undoubted security. If it be fixed lower, the creditor will not lend his money for less than the use
of it, and the debtor must pay him for the risk he runs in accepting the full value. Neither ought it to be much above the lowest market rate.⁵ If the legal interest of Great Britain, where money is lent to government at three per cent, and to private people upon good security at four, and four and a half, were fixed so high as eight or ten per cent, the greater part of the money, which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people would give for the use of money no more than a part of what they are likely to make by the use of it, and consequently would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which are most likely to make an advantageous use of it. Where the legal interest on the contrary is fixed a very little above the lowest market rate, sober people are universally preferred as borrowers, to prodigals and projectors.

The ordinary market price of land depends every where upon the ordinary market rate of interest. The superior security, and some other advantages of land, will generally dispose a person to be content with a smaller revenue from land, than from lending out money at interest. But these advantages will compensate for a certain difference only; and if the rent of land, should fall short of the interest of money by a greater difference, nobody would buy land, which would soon reduce its ordinary price.⁶

New colonies must for some time be more under-stocked in proportion to the extent of territory, and more under-peopled in proportion to the extent of stock, than the greater part of other countries. They have more land, than they have stock to cultivate. Such land too is frequently purchased at a price below die value even of its natural produce. Stock employed in the purchase and improvement of such lands must yield a very large profit, and consequently afford to pay a very large interest. As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded.⁷

Such are the principles by which the rate of interest ought to be governed, according to the opinion of the author of the treatise on the wealth of nations. Let us see how far they have been regarded in Virginia.

To those who proposed to themselves the acquisition of large estates in lands, the use of money must have appeared extremely valuable at the first settlement of the colony: but the immense quantity of land, which might be procured, at a very trifling expense, would keep down the’ value of all uncultivated lands, whatever advantages of soil or situation they might possess. It, therefore, became another object of importance to cultivate those, which were most likely to yield an immediate profit. For this, laborers were required; but laborers who receive daily, or annual wages, could not be had. Instead of the farmers’ paying a recompense at the end of the week, or year, for work already performed, and the product of which he had, perhaps, also already received, it was necessary to advance the wages of seven years, before a single day’s work was performed by the laborer; and this, even at the risk of losing the whole sum advanced…. As this was the only alternative between losing what had been already expended in the purchase of lands, the planters found themselves obliged upon these hard terms, to cultivate their lands, by purchasing slaves. The only means by which this could be effected was borrowing of money, which, from the necessity of having it under these circumstances, would, therefore, command a high rate of interest. Adequate returns were not made from the annual profit of the lands, to repay the principal; but the borrower conceived that the increasing value of his lands, and the increasing number of his slaves (where he purchased females as well as males) more than compensated the deficiency of his annual returns from the land, by a kind of compound interest…. Money could not be borrowed for these purposes, but from the merchants in the mother country, or their agents here, and bills of exchange were substituted for the actual specie. As the African ships were owned in England these bills answered all the purposes of specie to the purchasers of slaves. They were accordingly accounted as ready money, and the damages in case of protest being very high, those damages became, in time, the measure of interest for money lent in that manner. As the re-payment was usually expected to be made in the same manner as the loan itself, when the
debtor was called upon to pay one creditor, he often applied to another person, who gave him a bill for the amount of the loan, and took the borrower’s own bill, with a responsible endorser, as a security for the sum thus lent. The borrower having no funds in the hands of the person on whom he drew, his bill was sure to return, protested, and consequently the lender became entitled to receive a higher interest thereon, under the name of damages. For the security of the lender, the law gave an action of debt, jointly, or separately, against the drawer, and every endorser, of which, in proportion to the lender’s caution, there were often several. The bill, if protested, had the force of a judgment against the executors and administrators of all the parties thereto. There was supposed to be no limitation to the time, in which a suit thereon might be brought. A bill, in the hands of an importunate creditor was frequently renewed, and the interest and damages were every time added to the principal…. These damages in the year 1666, were fixed at fifteen per cent, on the amount of the bill … before that period they were thirty per cent. In 1750, they were fixed at ten per cent, per annum. The rate of interest on bonds was fixed at six per cent, in 1730. In 1748, it was reduced to five per cent, and all contracts for a higher rate of interest were declared void. Thus at one, and the same time, there were different rates of interest fixed by law. Actual loans of money seem to have been generally earned on by bills of exchange…. Where a bond was taken for a debt before contracted, or upon a sale of lands on credit, the interest was not to exceed five per cent. But if an adventurous planter wanted to make a purchase of slaves for ready money, or was pushed for the payment of a debt to a creditor in England, he drew a bill of exchange. Tobacco being substituted in many instances as a circulating medium of colonial trade, the want of specie was not felt in these transactions, and when paper money was issued for very small sums, it was felt still less, except when the debtor was obliged to pay ready money. Hence the rate of interest, in ordinary transactions, rarely exceeded the legal limits of five per cent, but where a projector proposed to himself an extraordinary advantage by the command of
specie, or sterling money, or was pushed to support his credit, he hesitated not to give double that interest, and the law in favor of bills of exchange sanctioned the transaction.

Paper money can only serve as a substitute for specie to a certain extent, and can never be said to represent it, but when the government exchange it for specie without reserve, whenever it is required. The paper money emitted in this country before the war, was for internal commerce considered equal to specie; but for foreign commerce it was altogether useless. The capacity of holding lands in Virginia enjoyed by the merchants of Great Britain, in some degree supplied the want of specie to make good the balance of trade that continually accumulated against the colony. This kept down the rate of interest in some measure, by substituting land for money in payment of debts. But when the separation between Great Britain and the colonies took place, and trade was diverted into other channels, the paper money which had been greatly augmented in quantity, and which was not only unfit for foreign commerce, but for want of adequate funds to redeem it, had become a mere ideal currency, soon fell into such discredit that no man would keep it by him a day, if he could meet with any thing to purchase. The rapidity of circulation which it acquired from this circumstance so long as the laws made it a legal tender, though the effect of distrust, in some degree supplied the absence of a valuable circulating medium: it daily depreciated; but the man who received it in the morning, hoped to get rid of it before night: the total absence of specie at the same time, supported it as a medium of exchange in this daily traffic, much longer than its own credit. On the other hand those who foresaw an advantage from a purchase to be made on credit, did not hesitate to allow for that credit, a rate of interest equal to five, ten, or twenty per cent, per month, in the expectation of selling what they purchased, at a still greater advance before the day of payment arrived. But when this advantage was generally understood the vendor to guard against the effects of a rapid depreciation, fixed the value of his debt in tobacco, which was supposed to bear a more stable relation to the value of specie. These tobacco contracts, contrived at first to evade the penalties denounced against those who demanded more for their commodities in paper than in specie, and afterwards recurred to, merely to
prevent the seller’s being injured by the depreciation of paper, became after the abolition of paper money, and the consequent introduction of specie, a most violent engine of extortion; the creditor availing himself of the rise or fall of that article, to demand a new bond from his debtor, for money, when the price of tobacco had risen, and again for tobacco, when the price was low, and expected to rise. Although by these means a debt was in two or three years doubled, trebled, and even quadrupled, yet these shifts appear not to have been deemed usurious: at least I have not heard of any decision to that effect. The enormity of the evil begun to work its own cure, when new sources of speculation successively presented to avaricious minds the means of gratification. The liquidated debts of the state, and of the United States, were thrown into circulation as a vendible commodity, which the necessity of the possessors induced them to part with, and the hopes of speculators prompted them to purchase at a vast discount. The land offices in the various states, where principalities in extent might be acquired for a few dollars in specie; the prospect, now rendered certain by the adoption of the constitution of the United States, that the debts of the Union would appreciate as fast as they had depreciated: the golden hopes inspired by the establishment of banks; the impulse given to trade by an European war, which had not begun to exercise its spoliations on our commerce; the advanced price of our produce arising from the additional demand for provisions created by that war; for a time seemed to inundate the United States with wealth, which among a certain class of men increased with such rapidity, as to give to the use of money an almost unlimited advantage; hence the laws which restrain immoderate interest have been universally disregarded, and the most enormous usury has been openly practiced without the smallest apprehension of the consequences. Five per cent a month it is said has been frequently given. Half that rate for a week, and even one per cent a day, has on some occasions been offered and accepted. It is easy to perceive that no honest commerce could long support such a defalcation from its profits. Accordingly numerous bankruptcies have taken place,
particularly in those parts of the United States where there was the greatest quantity of money in circulation…. Our foreign commerce having no longer the same immunity as some years ago, the United States have ceased to be the Entrepot of the produce of the colonies of the belligerent powers, and a general deficit may be expected, among the commercial part of the nation, unless some favorable change should happen very shortly in our external relations and connections. The produce of our lands will fall accordingly, and the lands themselves will sink still lower in value.

Were it possible for the laws to restrain this evil, nothing would be more worthy of the attention of a wise legislature than to purge a state from the corruption which the projects, the rapacity, and the frauds of avaricious speculators, swindlers, land-jobbers, and usurers infallibly produce. Money as the means of assisting honest industry can not be procured on any terms which would not consume the borrowers gains, though fourfold as great as any honest occupation ever produced. The farmer, the mechanic, the retail shop-keeper, can neither of them procure the credit necessary for their subsistence. The use of money is confined only to the hands of those who are sure to abuse it…. A moderate interest is the life of commercial credit. The manufacturer gives a credit to the merchant, the merchant to the shopkeeper, the shopkeeper to the farmer, and the mechanic of small capital; the farmer in his turn can give credit for his crops to the merchant; who can thus enlarge his capital, and afford to lessen his profits. The rate of interest in these cases is supposed to be such, as to make a moderate compensation for the use of money, without lessening the gains of the. profit. But where the rate of interest bears no proportion either to the profits of land, or of manufactures, or of merchandise, but merely to the hopes and expectations of projectors and speculators, and the avarice of usurers, the culture of land attention to manufactures, and the pursuit of an honest commerce will be equally neglected, and the state must suffer a pecuniary palsy until the cause of the disease be removed.

In the country below the mountains in Virginia, very little of the best land remains to be cleared, and the far greater part of them have been cultivated, without improvement, till they are not more productive than fresh lands of far inferior quality. This circumstance, together with the great abundance and low price of lands in other parts of this and the neighboring states, occasions there being very few purchasers of land in the middle and lower country. The tracts are generally large, and the proportion that is cultivated small. It would probably be a very high estimate should we suppose the generality of farmers to make ten per cent, per annum upon the whole value of their lands and slaves. I incline to believe that very few exceed eight per cent, and out of this, the clothing and provisions of their slaves and horses employed in making the crop, ought to be deducted. A nett profit of five per cent, is probably more than remains to one in twenty, for the support of himself and his family. If he wants money to increase his stock, even the legal interest is probably equal to his additional profit; but the interest usurers demand, and speculators pay, without scruple, will amount to fourfold, perhaps, tenfold his profits. Agriculture then can hope for no aid while interest remains unchecked; on the contrary every man who can find a purchaser will sell his lands, and turn money lender, until the total neglect of agriculture shall in its turn make the money lenders bankrupts. Nor is it in this view alone that exorbitant interest must injure agriculture. A farmer ought to be able to get credit with the merchant, at least, for his tools, his farming utensils, and the clothing of his servants, upon the faith of payment from his ensuing crop.. If the use of money will command five per cent, per month, what storekeeper can afford to lie out of his money six or eight months, without a proportionate advance on his goods, and what farmer can purchase at such an advance? If the ordinary profits of trade be twenty per cent, per annum, when credit can be got at five per cent, what must those profits be when sixty per cent is counted upon as the product of money. Who could deal with a shopkeeper who should advance his gains ten or twelvefold? Trade then must suffer equally with agriculture. Is
the mechanic better off? He must be supported both by the farmer and merchant. Labor and industry of every kind, must, therefore, be brought to a stand, or these ruinous practices must fail} and since labor is the only true source of wealth, it must accordingly eschew that fate…. It will, however, be sometime before this happens. The speculators in lands will be buoyed up for a time’ by the prospect of their lands rising in value. But vast tracts of unsettled lands are of little more value than the parchment which conveys them…. Population first creates a value in land; “without that, it is of less value than the waters of the Ocean; these at least serve for an high way. Uncultivated deserts whatever they may promise, yield, only to population and industry…. Very few land-jobbers have had any other object in view than selling their lands in the gross, to some dupe, or other speculator. The settling and cultivating the lands form no part of their plan. It is not till they are ruined, or till projectors of a different character shall become purchasers, that these lands will ever acquire more than a nominal value, or yield any real profit. Hence it is easy to foresee that this source of exorbitant usury must have an end. Bank-paper, and every other species of paper credit have aided in blowing up the bubble, and when it bursts will fall with it. The artificial demand for this circulating paper occasioned by these immense speculations, being lopped off with them, the quantity of this kind of currency will again be regulated by the demands of productive commerce, instead of unproductive speculation.

Nor is excessive usury more inimical to every species of honest industry, than it is to the moral conduct of men. The heart that is once corroded by avarice, becomes callous to generosity and friendship, obdurate against the cries of distress, regardless of justice, and insensible of every impulse, or passion, except only the insatiable thirst of amassing.

We have said, that in 1730, the rate of interest was limited in Virginia to six per cent … in 1748, it was reduced to five; the act of 1786, confirmed this standard. In 1796, it was again raised to six per cent, the obvious, or at least, ostensible reason for which, was, that the public pay interest at that rate. These acts are nearly a transcript of the British statutes.

VERY few cases have hitherto been decided in our courts on the subject of the acts for restraining usury. I shall notice some of those which have been reported, and one, which I believe has not. It was as follows:

In June, 1789, the chancellor referred the following case for the opinion of the judges of the general court, upon it.

A bond for 1000 pounds of tobacco was executed when that commodity was worth eighteen shillings per 100 pounds. Another executed for the payment of 18£, when tobacco was worth thirty-six shillings, and given in discharge of the former. And whether this latter bond was usurious was the question referred to the court, for their opinion.

One of the judges who was prevented by indisposition from attending at the term, when it was expected that the judges would have delivered their opinions, had prepared to deliver his own to the following effect.

The act concerning usury declares,” That no person shall upon any contract, take directly or indirectly, for loan of any money, wares or merchandise, or other commodity above the value of five pounds for the forbearance of one hundred pounds per year, and after that rate for a greater or lesser sum, or for a longer or shorter time; and all bonds, contracts, covenants, conveyances or assurances, to be made for payment, or delivery of any money or goods, so to be lent, on which a higher interest is reserved, or taken, shall be utterly void.”

Although the question referred to the court falls immediately under this clause of the act, yet as the succeeding clause may serve further to elucidate the intention of the legislature, it will be proper to consider it likewise…. It is as follows:

“If any person shall by any ways, or means of any corrupt bargain, loan, exchange, shift, covin, device, or deceit, take, accept, or receive for the loan of, or giving day of payment for money, wares, merchandise, or other commodity, above the rate of five pounds for one hundred pounds for one year, every person so offending shall forfeit double the value of the money, wares, merchandise, or commodity so lent, exchanged, or shifted; one moiety to the use of the commonwealth, and the other to the informer… And,

“Any borrower of money, or goods, may exhibit a bill in chancery against the lender, and compel him to discover upon oath, the money or thing really lent, and all bargains, contracts, or shifts, which shall have passed between them, relative to such loan, or the repayment thereof, and the interest, or consideration for the same; and if thereupon it shall appear that more than lawful interest was reserved, the lender shall be obliged to accept his principal money without interest, or other consideration, and pay costs, but shall be discharged of all other penalties of the act.”

In order to answer the question propounded by the chancellor for the opinion of this court; viz. whether the bond given for 18£ was usurious, it may be proper to inquire; first; whether this bond be taken, contrary to the express words of the statute, and, secondly whether it be an evasion out of it.

As to the first point, whether this bond was taken contrary to the express words of the statute; I am inclined to think that the case stated by the chancellor is too naked, for us satisfactorily to give an opinion upon that point. Tobacco being in this country both a vendible commodity, and very frequently a medium of exchange, also, contracts respecting it may be fair, or usurious, according to the relation they bear to these several and distinct properties. If, for example, a planter should engage to sell his crop to a merchant at eighteen shillings by the hundred, and give his bond to the merchant for the delivery thereof accordingly, in consideration of having received the purchase money, or part thereof, and fail in his contract; and then in order to avoid a suit, and indemnify the merchant for his failure, he were to give the merchant his bond for as much money as the tobacco was fairly worth at the time, this transaction, simply, and unconnected with any other circumstances, would not, I conceive, be usurious. Whether the transactions between the parties in the case referred to this court by the chancellor originated in this way, or in any other that might be considered as standing upon as fair ground does not appear, at least not sufficiently, for me to give an opinion upon the first point. I shall, therefore, proceed to the second.

2. Then is this bond given for the sum of eighteen pounds, when tobacco was worth thirty-six shillings per 100 pounds, in discharge of a former bond, given for 1000 pounds of tobacco, when that commodity was worth only 18£ per 100 wt. or 91 in the whole, a shift or evasion to avoid the statute? In which case it will fall under the statute, though not expressly within the words of the enacting clause.

As our statute is nearly a transcript from the English statutes the decisions in England will aid us in the true construction of it.

To make a contract usurious within the statute, there must be a reward for forbearance, or giving day of payment; and whatever shift may be used, it will be usury. 2 Vezey, 142.

And, in England, where annuities are frequently granted in consideration of a present sum paid, if the bargain be really for the purchase of annuity, though at ever such an under price, it seems agreed not to be usury. But if upon inquiry it shall appear that the annuity is a mere device to pay the principal with usurious interest, in order to evade the statute, this will bring it within the statute…. 2 Vezey, ibid.

A bargain on a mere contingency where the reward is for the risk, and not for forbearance, has been solemnly adjudged not to be within the statute. Spencers Exors. vs. Janson. 2 Vez.. 125. 1. Wilson286. 1 Atk. 501.

So a bottomry bond, being a contract founded on a risk really run, has been adjudged not within the statute. 2 Vez. 142, 143.

In like manner a contract to receive double in the event of the borrower’s outliving another person, and nothing, in case it should happen otherwise, has been determined not to be within the statute* 1 Atk. 301.

But in these cases it depends upon the risk really run, and not merely upon a colorable risk, to evade the statute; as, in the case of a bond given if one ship out of twenty, bound from one place to another in time of peace, and in a fair season of the year, should arrive safe. 2 Vez. 143.

In like manner, where the chance was that a young man in perfect health did not live six months, the hazard was merely colorable, and the loan was adjudged to be usurious. Mason vs. Abby, Carthew’s Rep. 67. Comb. 125. 3 Salk. 390. 2 Blacks. Rep. 863.. and Cowper, 777,

A power of redemption to the borrower, without interest, within n certain time has also been held to be not within the statute, though more than legal interest be reserved after that time is past; as if one lend 100£ to another for two years, and the borrower agree to pay 30£ for the loan of it: but if he pay the principal at a year’s end, he shall pay nothing for interest; this has been held not to be usury;’

for the party has his election, and may discharge himself by the payment of the principal only, if he pleases, 3 Wils. 395. Yet in this case, if it were privately agreed between the parties that the borrower, notwithstanding this stipulation should not repay the money until the first year was past, this case would also fall within the intent to evade the statute.

In these cases, respectively, if there be a fair and bona fide sale of the annuity, and not a colorable one in consequence of a negotiation for a loan; or, a fair and bona fide risk of the principal, upon a probable (or rather not improbable) contingency; or a fair and bona fide election given to the borrower, whereby he may discharge himself of the debt, within a reasonable time, without paying any interest; or in any other case, where either the principal or interest may be fairly and bona fide put in hazard, the contract, although more than legal interest may be eventually reserved thereon is not deemed usurious, or within the statutes: but if the sale, or the risk be merely colorable, in order to evade the statute, the bare intention to evade it seems to bring the case expressly within it’s meaning.

. And the subsequent acts of the parties may be evidence of such intention, and turn that into an usurious transaction, which was not such upon the face of the original contract.

For if a man sets out with borrowing money, and afterwards turns the loan into the shape of an annuity, this is a shift and evasion to avoid the statute; and yet any man may purchase an annuity on as low terms as he can. 1 Atk. 851.

And the same point was resolved in a qui tam action, where the original communication was for a loan, but the contract was for an annuity. Cowp. Rep. 770. Richards vs. Brown.

It is likewise lawful for a man to sell his goods at as high a price as he can get for them; yet if the sale of goods be merely a colorable mode of obtaining more than the real value of the goods, and legal interest thereon, such a bargain has been adjudged to be usurious. Douglas’s Rep. 708. Howe, et al. vs. Waller. 5 Ba. Abr. 408. s. 9.

If one delivers wares of the value of 100£ and no more, and takes a bond with condition for the re-delivery of them within a month, or to pay 120£ for them, at the end of the year; this obligation has been adjudged to be void. 5 Ba. Abr. 408. s. 8.

And, it seems to be agreed, that the reducing a former debt to a speciality, and giving day of payment thereafter, converts the former debt into a loan. For it is not so much the form of a transaction as the essence of it, which must determine it’s nature. Now the essence of a loan, is the giving a day of payment, in consideration of interest, to be paid for the forbearance. 12 Mod. 385.

We have the concurrent authority of judge Burnett, lord Hardwicke, and lord Mansfield in favor of the utility of these statutes, and that they ought to be so construed, that where a door is left open by the parties, to evade them, the court should if possible get at it. 2 Vez. 142. Douglas, 710. Hardwicke’s cases, 235.

It therefore becomes this court maturely to weigh the case referred to them; for as the decision may open a wide door to those who study shifts, evasions, and cunning devices in order to elude the effects of these statutes, on the other hand, the decision in this case may perhaps affect the interest of many innocent creditors.

Whatever may have been the foundation of the debt originally due from the obligors to the obligee, the original value of it as stated in the case referred to us, appears not to have exceeded 91. current money: at least, this was the actual value at the time the first bond was given. That bond being given as a security for the debt, and interest accruing thereon of course, it is to be regarded, upon the principles of the case in 12 Mod. 385, as the evidence of a loan, the real value of which was 91. only, at that time, and for the forbearance of which interest was stipulated to be paid.

At law the obligee could recover nothing more than the specific thing lent, whether money or tobacco, with interest thereon. In conscience, he was entitled to nothing else, but that or the value at the time of the lending.

For the value of a loan is not to be estimated by the rise or fall in the price of any fluctuating commodity, but according to that standard which the laws of the land have established for the regulation of transactions of that nature; and that standard is the value of the precious metals, as fixed by law.

At a subsequent day, the lender in consideration that the borrower would give another bond for double the value of the original loan, and interest upon the value so doubled, agrees to give a further day of forbearance. What other consideration appears to have moved the lender to grant this further day? I am at a loss to divine it.

Upon comparing this case with the authorities before cited I am therefore unavoidably led to conclude that this last transaction must be deemed a shift, or device, to elude the statute, and consequently an unconscionable, and usurious bargain within the meaning of it, unless it can be shown to be a fair bargain for the actual purchase of one thousand pounds of tobacco, the consideration for which the bond is supposed to be given.

To constitute a sale of any commodity, there must be a possession in the vendor, or his agents. Had the obligee possession of the tobacco? No, it was merely a chose in action. Did the obligor want to purchase tobacco? No, he had not wherewithal to pay what he already owed the obligee. Is there a single feature of a purchaser, in this case? None that I can discover. The debtor being called upon to pay, and unable to make payment, in order to obtain further time, enters into a new, and essentially different contract from the former, by which he actually doubles the value of his original debt.

If a man sets out with borrowing, says lord Hardwicke, though he afterwards actually purchase an annuity, it is an evasion to avoid the statute. 1 Atk. 351. Cowper 770, S. P.

In the present case the parties set out with a loan; it is scarcely possible, as was said by lord Mansfield, to wink so hard as not to see that the latter bond was not a contract for the purchase of tobacco: consequently, to my understanding it appears to be a shift with a view to the obtaining a greater interest for the forbearance of a loan than the statute allows, and as such usurious. And that we ought to certify our opinion to the chancellor, accordingly.⁸

In the case of McIntire vs. Warder, it was said by the president of the court of appeals, that the court will never presume a contract to be usurious unless it be proved; especially where such presumption would be at variance with the degree of a court, which it is not to be supposed would sanction such a contract: and that as the residence of the creditor usually fixes the place of the contract, they would presume a contract with a person residing in Pennsylvania to be made there, especially where the debt is stipulated to be paid in Pennsylvania money, rather than interpret a contract to be usurious upon which more than legal interest in Virginia was reserved, although not more than the laws of Pennsylvania allow. But if the interest were increased merely to procure a further indulgence, it would be usurious in the case of Gibson vs. Friscor, where the defendant being indebted to the plaintiff, in 445£ sterling, and about to remove to Kentucky, assigned to the plaintiff bonds, which were afterwards paid, to a greater amount than the value of the original debt, and interest, at a value agreed on between the parties, and moreover gave a new bond, for the balance, which according to a statement then made between the parties, appeared to be still due to the plaintiff, the district court of Dumfries decided that this last bond was usurious; and the court of appeals, dissentiente, Lyons, Judge, affirmed the judgment. 1 Call’s Rep. 62.

And in that case the court held, that it is sufficient if the verdict finds facts, amounting to usury; although the jury does not find the corrupt agreement in technical words. Ibid.

And in this case it seems to have been agreed by the majority of the judges, that a corrupt forbearance of money, then due, is as much within the statute as an original loan.

In order to constitute usury, there must be a borrowing, and a lending with intent to exact an exorbitant interest; that is to say, both parties must consent to the usurious agreement. And therefore a bill of exchange drawn upon an obscure person in Scotland, if there be no agreement that it shall be protested, although the payee may expect it, will not render the transaction usurious. And this, although the drawee was known to the payee, (whose brother he was) and not to the drawer, who had no former correspondence with him. Price vs. Campbell, 2 Call 110. In this case the court seem to have regarded the original transaction between the parties as a purchase, and not as a loan. But if the negotiation had been for a loan, I humbly conceive that the circumstances above mentioned must have been deemed sufficient evidence of a corrupt agreement between the parties, to secure a greater interest to the lender than the law allows, by the bill’s being returned protested.

An agreement to set the profits of the thing mortgaged, against the interest of the money lent, or due by the mortgage, where it greatly exceeded the legal interest, was held to be so far usurious and void. Robertson vs. Campbell, 2 Call 430. The same point seems also to have been before decided in like manner, in the high court of chancery, between Woodson and Woodson. Wythe’s Rep. fol. 55.