Illegality of consideration, when it vitiates.

rity is taken, in lieu of another, void in respect of usury, &c. it will be equally invalid in the hands of the party to the first illegal transaction, but not if in the hands of a bonâ fide holder'. And a security given by the borrower to a person not privy to the usurious transaction, and to whom the lender is indebted in so much money, shall not be avoided by the usury; as where W. was indebted to A. in £100. for the forbearance of which he agreed to pay more than legal interest, and A. being indebted to E. in £100. W. and A. joined in a bond to E. in payment of his debt, and it was held not usury'. And though it has been held otherwise at Nisi Prius, it has recently been decided, that after usurious securities for a loan have been destroyed by mutual consent, and there is a fresh contract by the borrower to repay the principal and legal interest, such fresh contract is valid'. By suffering judgment by default, the defendant loses the opportunity of objecting to the sufficiency or illegality of the consideration. So a warrant of attorney given to the holder of a renewed bill, will not be set aside unless it be shewn that he was privy to the usurious transaction, though the person resisting the payment,

is considered usury in making the bill, see Young v. Wright, Campb. N. P. 141. see also 1 Holt, C. N. P. 270.—Parr v. Eliason, 1 East. 92. A bill was drawn in favour of the plaintiff, he indorsed it to Persent and Bodeker, upon an usurious consideration, and they indorsed it over, it was afterwards indorsed back to the assignees of P. and B. who had become bankrupts for a debt due to their estate, upon which the plaintiff brought trover to recover back. the bill. Lord Kenyon directed a nonsuit, and after a rule nisi, for a new trial, the court held, that as the bill was originally good, and as the indorsement by Persent and Bodeker was unimpeached, their indorsee had a good right to the bill, and that right was transferred to the defendant. (Rule discharged.) Vide also 1 Esp. Rep. 274. S. P.

Cuthbert v. Haley, 8 T. R. 390.-Pickering v. Banks, Forrest's, R. 72.-Harrison v. Hannel, 1 Marsh. 349.-5 Taunt. 780.-Parr v. Eliason, 3 Esp. R. 210.-1 East. 92. S. C.-Witham v. Lee, 4 Esp. R. 264.-See Barnes v. Headley, 1 Campb. Ni. Pri. 187. over-ruled in 2 Taunt. 184.-Holt C. N. P. 270.

2 Ellis v. Warnes, Cro. Jac. 32.-Yelv. 47.-Moore. 752.2 Anders. 121.

3 Barnes v. Headley, 1 Campb. 187.-Id. 2 Taunt. 184.

Shepherd v. Charter, 4 T. R. 275.-George v. Stanley, 4 Taunt. 6$3.-Ante, 101.

may be permitted to try in an issue whether the party Megality of con were implicated'.

The receiving of a bill or note upon an usurious contract, but given for a previous legal subsisting debt, will not extinguish such debt although the security itself will be void; but where there was usury in the making the bill, or where the holder has himself been a party to the usury, he cannot sue at law or prove under a commission of bankruptcy, even for the amount of principal and lawful interest, though it should seem that if deeds or property have been deposited as a collateral security, he may retain the same until he has been paid such principal and interest 3.

sideration, when it vitiates.

The taking of discount in advance on the loan of Interest. money secured by bond, even before the statute of Ann. was considered usurious, and we find it laid down that an agreement that the interest on the principal should be retained at the time of the loan, or paid before the expiration of the year, amounts to usury; because the borrower would not have the use of the sum, upon which the interest was taken for the whole year; but an exception to this general rule has been allowed in the discounting of bills of exchange negotiated in the ordinary course of trade, the usual mode of doing which is to take interest upon the whole amount of the bill, at the time the money is advanced, until the time when the bill will become due, and such transaction on a bill of exchange in the way of trade, for the accommoda tion of the party desirous of raising money is not usu◄ rious, though more than five per cent. be in effect taken upon the money actually advanced; for were it otherwise every banker in London, who takes at the rate of

'George v. Stanley, 4 Taunt. 683.

Phillips v. Cockayne, 3 Campb. 119.-1 Saund. 295, n. 1. 'Benfield v. Solomons, 9 Ves. jun. 84.-Fitzroy

1 T. R. 153.-Hindle v. O'Brien, 1 Taunt. 413.

. Gwillim,

* Barnes v. Worledge, Noy, 41.-Cro. Jac. 25.-Yelv. 31.-Moor. 644. S. C.-Grimes Ca. 1 Bulst. 20. and Per Popham, J. in Dalton's Case, Noy, 171.

sideration, when it vitiates.

Illegality of con- five pounds per cent. for discounting bills, would be guilty of usury; for, if upon discounting a £100 bill at five per cent, he should be construed to lend only £95, then at the end of the time he would receive five pounds interest for the loan of £95 principal, which is above the legal rate. In such cases it has been considered that the additional sum is in the nature of a compensation for the trouble to which the lender is exposed, and unless that indulgence were allowed it might not be worth while for any merchant to discount a bill. But if the bill or note be for a large sum, and made or drawn at a period of two or three years, it seems to have been considered that the length of the date of the bill will afford a presumption that the discount is intended as a cover for an usurious bargain; and in the case of a bill of exchange drawn for £5000, and payable three years after date, upon which £750 was retained for discount; such transaction was holden to be usurious, as the sum which was taken for interest was not then due, and the bill was given to secure a much larger sum than legal interest on the sum which would have been due at the end of three years, provided the bill had not been given3.

Commission.

Bankers who discount a bill or note payable at another place may, in addition to the legal interest or discount of five pounds per cent, lawfully take a customary and reasonable sum for remitting the bill or note for payment, and other necessary and incidental expences; for if they were allowed only five per cent. upon the whole transaction, they might, in consequence of the expences they incur in their establishment, obtain less remuneration on the discount than other indi

2

Per Eyre, C. J. and Blackstone, J. in Lloyd v. Williams, Bla. Rep. 792.-3 Wils. 256. S. C.

Per Lord Alvanley, C. J. in delivering judgment in Marsh v. Martindale, 3 Bos, & Pul. 158.-1 Holt C. N. P. 262, 3.

3 See Marsh v. Martindale, 3 Bos. & Pul. 154, and the judgment of Lord Alvanley, p. 160, 1.

viduals'. And the right to receive this additional remuneration, does not appear to be confined to cases where the bill is payable at a different place to that where the banker resides, but extends to bills payable in the same place; and though it has been considered that the case of bankers is dissimilar to that of other persons, on account of the nature of their business, and of the peculiar expence attending it', yet it seems that a merchant or other person may under circumstances legally receive a commission on discounting bills; as where he has considerable trouble in keeping accounts for the party so charged.

With respect to the amount of the commission which a banker may charge either for discounting, receiving, accepting, or paying bills, there appears to be no settled rule; but it is a question to be left to the jury upon the evidence, whether the charge is reasonable, and commensurate with the trouble and expences incidental to the transaction; if it exceed a fair remuneration, and be mixed with an advance of money, then the transaction will be usurious'. The usual commission on discounting bills sanctioned by the decisions, is five

'Winch, qui tam v. Fenn, cited by Buller, J. in Auriol v. Thomas, 2 T. R. 52.-Ex parte Jones, 17 Ves. 332.-1 Rose Rep. 29.-Benson v. Parry, cited in Baynes v. Fry, 15 Ves. jun. 120.-i Holt C, N. P.

263.

Winch, qui tam v. Fenn. This was an action for usury against the defendant, who was a country banker living at Sudbury. It appeared on the trial that the custom was to discount bills in London, for their correspondents at Sudbury, reserving five shillings per cent. on the gross sum (beyond the legal discount,) without any reference as to the time which the bill had to run. The jury found a verdict for the defendant under the direction of the judge; and Buller, J. in Auriol v. Thomas, 2 T. R. 52. referring to the above case, said "it is now clearly settled that the party is entitled to take not only five pounds per cent. for legal interest, but also a reasonable sum for remitting, and other necessary incidental expences. Vide also Ex parte Jones, in the matter of Allen, 1 Rose Rep. 29. S. P. and 17 Ves. jun. 332. S. C. 'Masterman v. Cowrie, 3 Campb. 492.

1 Per Eyre, C. J. Hammet v. Yea, 1 Bos. & Pul. 152.

Per Lord Alvanley, C. J. in Marsh v. Martindale, 3 Bos. & Pul. 158.

'Carstairs v. Stein, 4 M. & S. 195.-Palmer v. Baker, 1 M. & S. 56.-Harris v. Boston, 2 Campb. 348.-Masterman v. Cowrie, 3 Campb. 492.

legality of consideration, when

it vitiates.

sideration, when it vitiates.

Illegality of con- shillings per cent.'; but there is no rule of law, that it shall not exceed that rate; and in the case of a very large and complicated account, the commission of one half per cent. was allowed. But where a party charged seven and sixpence per cent. for commission on discounting a bill, without proving that he had been put to expence, or any considerable degree of trouble in the transaction, it was deemed usurious.

Compound In terest, &c.

Bankers cannot charge interest upon interest, without an express contract for that purpose; and it has even been supposed, that they cannot legally make rests in their accounts, so as to charge interest upon prior interest and commission, but this seems unreasonable; and unless the rests in the account be made too frequently, and out of the ordinary course of business, and for the mere purpose of obtaining compound interest, such rests seem perfectly legal". So also an agent who has advanced money for his principal in effecting insurances, and other mercantile business, is entitled to charge interest, and at the end of every year to make a rest, and add the interest then due to the principal; but

Winch v. Fenn, ante, 109. n. 1; but see the cases Ex parte Jones, 17 Ves. jun. 332.-1 Rose, 29. where one-eighth per cent. was allowed upon discounts.

Per Lord Ellenborough, Carstairs v. Stein, 4 M. & S. 199. 3 Id. ibid.

4 Brooke v. Middleton, 1 Campb. 448.

Caliot v. Walker, 2 Aust. Rep. 495. The defendants in this caseacted as bankers, and at the end of every quarter struck a balance, in which was included the principal money advanced by them, all interest then due upon it, and a commission of five shillings for every £100 advanced. This balance was at the end of every quarter converted into principal, and carried interest. This the plaintiff contended to be usury.

The court declared themselves strongly of opinion that this case was not usurious. The statute allows interest not merely of £5 per cent. for a year; but after the rate of £5 per cent. half yearly payments of interest, or the discounting bills at the beginning of the time when they have to run, have both been argued to be usurious, as being a greater profit than £5 per cent. for a year; but both these cases have been held to be legal, because they are after the rate of £5 per cent. So here the payment of interest quarterly is not illegal, and the custom of the place and practice of the parties being to strike a balance at those periods, brings it to the case of a fresh agreement, at the beginning of each quarter to lend the sum then due. So the commission claimed may be a fair value for the trouble of the defendants, and unless it appeared to be a mere colour for usury, we should be very unwilling to decide against the general custom of the place.

Bruce . Hunter, 3 Campb. 467.