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for the payment of legal interest, but there is an oral agreement that an illegal rate shall be paid, the whole contract will be considered usurious. One L wished to buy a piece of valuable timber land and applied to S for a loan. S agreed to let him have the money wherewith to enter the land, but S took title in his own name as security for the money advanced, and then gave L a land contract for two-thirds of the land entered, agreeing to convey such two-thirds to him upon payment of the whole sum advanced to L within one year at eight per cent. interest and also agreed to convey to L the other third of the land upon payment to him, S, of the value of the timber on the one-third. The parties considered the transaction as a loan from S to L. It was held that in effect the transaction was a loan, and that the deed in the name of S was a mortgage, and that as the value of what S had reserved was more than the legal rate of interest, the transaction was usurious. A applied to B for a loan and B received from A $60 for procuring a loan of $300 for one month. At the end of every month B charged A $10 for procuring an extension of the loan and also charged him the highest rate of interest. B claimed that he acted as a broker and that the money loaned belonged to his father-inlaw, but the evidence in the case tended to show that B was really the owner of the money, and that the claim of ownership in the father-in-law was a subterfuge. It was held that the transaction was usurious. There is nothing in the law to prevent one who obtains a loan through a broker acting in good faith, from paying such broker a commission for his services, although he also pays the lender the highest legal rate. The substance of the transaction is what the courts look at in such cases.

What is not usury.-The taking of compound interest is not usury, but where interest is payable at the highest legal rate and compounded at very short intervals, and the transaction does not appear to be one in good faith on the part of the lender, it will be held usurious. It is not usury to make interest payable semi-annually at the highest rate, or to add a charge for exchange.

The firm of F Bros. was largely indebted to one C on a chattel mortgage on their entire business plant, and were unable to pay their debts. Thereupon C foreclosed his chattel mortgage and took possession of all the prop

erty, and made an agreement with F Bros. whereby they were to carry on the business as his agents and that he was to put in such additional capital, and loan his credit to such an extent that it would be feasible to run the business. C was to be paid ten per cent. interest on the money actually invested and a certain amount for his services and the risk he was running. It was also agreed that whenever the business would fully repay C, that F Bros. were to be given possession of their former property by C. In a suit for an accounting between the parties, F Bros. contended that the transaction was usurious. The court says: "It seems to us the usury laws have really no application to the transaction under review. The plaintiff made advances under the agreement to carry on the business, and became liable for every debt that was contracted. This is an incontestable fact. The defendants do not deny his personal responsibility to every creditor of the concern, and the evidence shows that he did give the business more or less personal attention; that his own clerk attended to it; that in some years he actually incurred liabilities about the business amounting to a half million of dollars. It is obvious that this was not a simple loan by the lender to the borrower. That is the transaction which the statute condemns. Nor is there any ground for saying that the transaction took the form it did as a shift or device to cover usury. The parties had the undoubted right to agree as to what compensation the plaintiff should receive out of the business for his personal services and the services of his clerk. Such an agreement having been fairly made, what principle of law or morals will be violated if effect is given to it? Neither in form nor in substance did the transaction amount to a loan and borrowing or a forbearance of money. . . . . . Where it appears that the parties have adjusted their accounts, have agreed that interest due shall be turned into principal and draw interest, this court has adhered to the doctrine that such a transaction was not illegal or wrong."

If a new note is given for the principal of an old one, which was tainted with usury, but the old note is cancelled and the usurious interest paid up so that the new note represents only the principal, the new note will not be affected by the transaction, but will be good. If, however,

some of the usurious interest on the first note is made a part of the principal of the second, the second note will be usurious.

The sale of an instrument for the payment of money at a discount, in good faith, is not usurious. Parties have a right to sell property for any consideration they see fit, and if a seller does not deem a note worth its face value he may sell it for whatever he thinks it is worth. The fact that the buyer subsequently recovers the face value does not make the transaction usurious. "If the seller of a note acquired it by purchase, or if it is his for money advanced or lent by him to its full amount, he may sell it for what he can get; but if he be the maker of the note, or the agent of the maker, and receives for the note less than would be paid him if only a lawful discount were made, it is a usurious loan. In other words, the first holder of a note (and the maker of a note is not and cannot be its first holder) must pay to the maker the face of the note, or its full amount. And after paying this, he may sell it, and any subsequent purchaser may sell it as merchandise. The same rule must apply to persons who issue their notes or bonds on interest. If sold by brokers for them, for less than the full amount, it is usurious.." If the transaction is made for the purpose of covering up a usurious loan, as where one who borrows money at a exhorbitant rate transfers a note to the lender at a discount and indorses it, thus making himself liable for the full amount of it at maturity, the real transaction being a loan, the contract will be usurious. A note tainted with usury, which does not appear on the face of it, is good in the hands of a bona fide holder. As to who is a bona fide holder of negotiable paper, see the chapter on Negotiable Instruments.

Relief against usury. It is provided by statute in Wisconsin that "every person who, for any. . loan or forbearance, shall have paid or delivered any greater sum or value than is... ... allowed to be received, may, by himself or his personal representative, recover in an action against the person who shall have taken or received the same, or his personal representative, treble the amount of the money so paid or value delivered above the rate aforesaid if such action shall be brought within one year after such payment or delivery. And any person who

shall ask, demand, receive, take, accept or charge more than ten per centum per annum upon the sum of money actually loaned for the forbearance, use or loan thereof, when the repayment of the money loaned shall be secured by chattel mortgage, bill of sale, receipt or other evidence of debt upon chattel goods or property, or ask, demand, receive take, accept or charge more than an amount equal to fourteen per centum per annum of the sum so actually loaned and secured in full for all examinations, views, fees, appraisals, commissions, renewals and charges of any kind or description whatsoever in the procuring, making and transacting of the business connected with such loan shall be punished by a fine of not less than five dollars nor more than fifty dollars."

Usury is an affirmative defense, and must be pleaded by the borrower if he wished to take advantage of it. When the borrower is sued by the lender for the principal and interest, he may set up usury as a counter-claim and deduct the amount to which he is entitled under this statute from the amount claimed as principal. The defense of usury is personal to the debtor, his privies in blood or estate, or privies to the contract. A stranger to the contract cannot take advantage of the fact that it is usurious. Thus, one who buys a piece of property which is subject to a usurious mortgage cannot set up the usury in a suit to foreclose the mortgage, as he is not privy in any way to the maker of the mortgage. Nor can the holder of a second mortgage set up usury in a suit to foreclose the first mortgage. The creditors of the debtor, according to the weight of authority in this country, cannot set up usury in his behalf, although a trustee in bankruptcy or receiver, being privy in estate to the debtor, may set it up.

Condition of relief.-The statute provides that "whenever any person shall apply to any court in this state to be relieved in case of a usurious contract or security, or when any person shall set up the plea of usury in any action instituted against him, such person to be entitled to such relief or the benefit of such plea shall prove a tender of the principal sum of money or thing loaned to the party entitled to receive the same.

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This section does not apply to usurious contracts made under the laws of another state. It was held that where a

note and mortgage governed by the laws of Illinois were sued on in this state, the Illinois laws against usury would apply, and as such laws do not require a tender, none was necessary to defeat interest on the note. Neither does this statute apply where one seeks to restrain a sale of mortgaged premises for a greater sum than is actually due. If the one setting up usury as a defense does not prove the tender, the plaintiff in the case recovers the principal and the legal, but not the contract rate, of interest.

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