by way of interest, the dividends which would be paid on it, whatever they may be, provided he agrees at the time of the loan to take them; (j) for they may be more or less than the interest; but he cannot contract that he shall have them, if more than the interest, and, if less, so much more as shall make the whole amount received equal to legal interest.

If a contract be in part for usurious interest, and it is made by two instruments, one promising to pay the principal, with or without lawful interest, and the other promising to pay 113 the usurious interest as a principal, with or without interest, it would seem that it is not this last promise alone which is void, but both, because both together form one contract, which is tainted with usury. (k) So, if there be a note, and a separate

oral promise to pay usurious interest, the note is void. () The authorities differ on this point; but the prevailing rule is, that if the design of the whole transaction, and the inducement to it, are to lend money on usurious interest, the taint of usury affects the whole and every part of the contract, and no one portion thereof, although in form an independent contract, is made valid by the fact that taken by itself it is free from objection. The very fraud consists in disguising usury, by separating the contract into these parts. (m) The common way in which, in our mercantile cities, the usury laws are now evaded, we suppose to be this. A valid bargain is made for the payment of money with interest; the additional bonus or premium is left entirely at the pleasure of the

borrower, with the understanding that the worth of money *114 at that time is a certain per cent. *Then there is no con

tract which is not legal; if, when the money is due, nothing but simple interest is paid, nothing more can be demanded by any contract, and the lender trusts to the fact that a borrower, who thus executes only his contract, would not be able to borrow again. But if this understanding assumes distinctness enough to become a contract for the repayment of additional interest, we are satisfied that the penalties of the usury law would attach to it. The difficulty of distinguishing between a mere understanding and a promise might often be great. If money was actually paid for the use of the sum loaned over and above the lawful interest, a similar question would arise, whether it was paid in pursuance of a contract to pay, so that the penalty would be incurred; or whether it was a mere gratuity. The rule of law must be, that if A lends to B a sum for a given time, on simple interest, and B, on paying this money, manifests his gratitude for the accommodation by a free gift to A, either of money or a chattel, there is no usury in this; but if the money is paid, or a chattel given, in performance of a previous promise to pay, then the penalty of usury must attach; and in each case it must be a question of fact whether the payment is in the nature of a gift, or of the execution of a promise.

It should be remarked, that if a foreign contract provides for interest which is lawful where the contract is made, it will not be

lawful in itself, was held, upon the authority of Roberts v. Trenayne, to be vitiated by the other bond for the payment of illegal interest. To the same effect are Motte v. Dorrell, 1 McCord, 350; Clark v. Badgley, 3 Halst. 233; Postlethwait v. Garrett, 3 T. B. Mon. 345; Fitch v. Hamlin, 1 Root, 110; Swartwout v. Payne, 19 Johns. 294; Gray v. Brown, 22 Ala. 273.

() Merrills v. Law, 9 Cowen, 65; Macomber v. Dunham, 8 Wend. 550; Hammond v. Hopping, 13 Wend. 505; Willard v. Reeder, 2 McCord, 369; Lear v. Yarnel, 3 A. K. Marsh. 419; Atwood v. Whittlesey, 2 Root, 37; contra, Butterfield v. Kidder, 8 Pick. 512.

(m) Ibid.; Warren v. Crabtree, 1 Greenl. 171.

declared void for usury in a State in which only a less interest is allowed by law. (n) 1 And a foreign corporation may receive upon a contract to be performed in a State the interest there legal, although it is higher than its charter and the laws of its own State allow. (nn) If a contract made in one place is to be executed in another, the parties may agree that the interest to be paid shall be that of either place. (no) But if a usurious contract is made in a State in which it is wholly void, because of such usury, it cannot be recognized in another State in which the penalty is a forfeiture of a part only, and enforced there for all but this part. (0) See chapter on the Law of Place, as to effect of different rules as to interest in the States where the contract is made and that where it is to be performed.

It would seem that there must be an intent to take usury, to constitute the offence. (oo)2 Hence the usual discount of

*

a bank, although it takes in fact something more than *115 lawful interest, is not usury. (p) And there must be

(n) Harvey v. Archbold, 3 B. & C. 626; Thompson v. Powles, 2 Simons, 211; De Wolf v. Johnson, 10 Wheat. 367; Chapman v. Robertson, 6 Paige, 627; Pratt v. Adams, 7 Paige, 615. See on this subject, ante, vol. ii. p. 584, n. (h); Nichols v. Cosset, 1 Root, 294; McQueen v. Burns, 1 Hawks, 476; M'Guire v. Warder, 1 Wash. (Va.) 368; Robb v. Halsey, 11 Smedes & M. 140. See also Gale v. Eastman, 7 Met. 14; Jacks v. Nichols, 1 Seld. 178; Davis v. Garr, 2 id. 134; Turpin v. Povall, 8 Leigh, 93.

(nn) Bank of Louisville v. Young, 37 Mo. 398.

(no) Bolton v. Street, 3 Cold. 31. ante, vol. ii. p. 584.

*

(0) Houghton v. Paige, 2 N. H. 42.

See

(00) Doak v. Snapp, 1 Cold. 180; Fay v. Lovejoy, 20 Wis. 407.

(p) This point is abundantly settled, both by usage and decision. Savage, C. J., in Bank of Utica v. Wager, 2 Cowen, 712, 769, expressed the opinion that the privilege of discounting in this way was confined to banks and bankers, and said that this was the rule in England. But it has been held that there was no distinction on this point between banks or bankers and other persons, in New York Firemen's Insurance Co. v. Ely, 2 Cowen, 678; and same plaintiffs v. Sturges, id. 664; Parker v. Cousins, 2 Gratt. 372; McGill. Ware, 4 Scam. 21; Cole v. Lockhart, 2 Cart. (Ind.) 631; Maine Bank v. Butts, 9 Mass. 54.

1 Interest, lawful where the contract is made and is to be enforced, is allowable, though exceeding that allowed at the place fixed for payment. Pancoast v. Travelers Ins. Co. 79 Ind. 172. The usurious quality of a note made in one State and transmitted for discount to another must be determined by the usury laws of the latter State. Providence Bank v. Frost, 14 Blatchford, 233. A., who resided in Illinois, having collected certain money of B., a resident of New York, sent to him as agreed, instead of the money, his notes, one of which was payable in New York, but all dated at his residence in Illinois, and at a rate of interest lawful there, but unlawful in New York; and it was held, in an action on the notes in the latter State, that their validity was to be determined by the law of Illinois. Sheldon v. Haxtun, 91 N. Y. 124. — K. 2 Siewert v. Hamel, 91 N. Y. 199. Where a lender requires, and a borrower assents to, the payment of a sum falsely represented by the former as a part of the expense of getting the money, the transaction does not constitute usury, as it fails to show a mutual agreement for that purpose. Morton v. Thurber, 85 N. Y. 550; Guggenheimer v. Geiszler, 81 N. Y. 293. —K.

3 And a note on which interest is payable quarterly at the legal rate is not usurious. Mowry v. Shumway, 44 Conn. 493. The custom of stock-brokers to debit and credit interest monthly, computing interest on balances, does not necessarily involve usury, as the balances may be paid. Hatch v. Douglas, 48 Conn. 116.

- K.

intent, so there must be act, as intent alone is not enough: an usurious lender not being subject to the penalties of usury, if in fact he takes only lawful interest. (pp)

Bills or notes promising to pay legal interest from a period anterior to their date, will not be presumed to be usurious, as they may be given subsequently to the transaction on which they are given. (pq)

It has been held in New York that the usury laws of that State do not apply to loans by national banks organized under the act of June 3, 1864. (pr) 1

SECTION IV.

THE CONTRACT ITSELF MUST BE TAINTED WITH THE USURY.

In order that a contract or debt should be avoided as usurious, it is necessary that it should itself be tainted with this offence; for if any subsequent contract in payment of the first be usurious, this second contract will be void, and will therefore leave the origi

nal contract or debt wholly unpaid, and it may be enforced *116 as if the second had not been made. (q) 2 Thus, if * one,

499.

(pp) Smith v. Robinson, 10 Allen, 130. (pq) Ewing v. Howard, 7 Wallace,

(pr) First Nat. Bank of Whitehall v. Lamb, 57 Barb. 429.

(9) Radley v. Manning, 3 Keble, 142, pl. 13. "In debt upon an obligation, upon oyer, the condition was to pay by a certain day. The defendant pleaded the statute, 12 Car. II., and said that the

1 Interest received by a national bank on a note greater than that allowable in the State where it is made, in violation of the statute, cannot be set off, in an action thereon by the bank against the amount due thereon; but the bank is entitled to recover only the face of the note without interest. Peterborough Bank v. Childs, 133 Mass. 248; Barnet v. National Bank, 98 U. S. 555; Auburn Bank v. Lewis, 81 N. Y. 15; Clarion Bank v. Gruber, 91 Pa. 377. Usurious interest paid to a national bank on renewing a series of notes cannot, in an action by the bank on the last note, be applied in satisfaction of the principal of the debt. Driesbach v. National Bank, 104 Ü. S. 52; Barnet v. National Bank, 98 U. S. 555. Where a national bank receives interest on a note greater than is allowable by the laws of the State where made, the forfeiture provided may be availed of in defence of an action thereon by the bank in a State court, and other than in the State where the note was discounted; and such defence is not limited to two years thereafter. Peterborough Bank v. Childs, 130 Mass. 519. That a national bank, having discounted a note, reserving a usurions rate of interest, for which the borrower gives a new note in renewal at legal interest, may recover the amount of the renewal note with interest, less the usury on the original discount, credited as of that date, see Madison Bank v. Davis, 8 Bissell, 100. A national bank's demand and receipt of usurious interest on notes discounted by it will not avoid a written guaranty for the payment of the notes. Lazear v. Union Bank, 52 Md. 78. — K.

2 Thus an obligation valid in its inception is not invalidated by a usurious agreement for the extension of the time of payment; but the sum paid on the agreement for forbearance will in equity be applied as payment. Real Estate Co. v. Keech, 69 N. Y. 248. A note given after the abolition of usury laws for money actually lent, at a rate of interest usurious at the time it was borrowed, is valid. Houser. Planters' Bank, 57 Ga. 95. — K.

who, as joint surety, has paid the whole of a debt, and so acquired a claim for contribution for one-half, settles this claim by receiving a note with usurious interest, this note cannot be collected, but the original claim for contribution revives, and may be enforced. (7) So an agreement to pay more than interest, by way of penalty for not paying the debt, is not usurious, because the debtor may relieve himself by paying the debt with lawful interest; and, even if he incurs the penalty, this may be reduced to the actual debt. (s) And if money be* due, and the *117