This same principle is applied to some land contracts; as if one buys an annuity, or rent charge, even on exorbitant terms, it is still no usury. From the authorities on this subject it may be inferred, that the grant of an annuity, at any price, for an uncertain period, either upon a purchase or a loan, is not usuri. ous, because the lender or purchaser incurs the risk that he may never be entitled to receive the amount loaned or paid. If the transaction be, in fact and in good faith, a purchase, any actual contingency, although slight, will prevent the contract from being usurious; and even if the annuity granted by the seller be so large that a court of equity will set it aside as unconscionable, yet it is not thereby usurious. But if it appears that a loan was in fact intended between the parties, and the form of an annuity was resorted to merely as the shape or method of the loan, the contingency must now be real and substantial, and of sufficient magnitude; for if it appears to be so slight as to be merely colorable, or such that the probability of its occurrence could not have been for any material purpose within the contemplation of the parties, this shape of an annuity will not protect the transaction from the penalties of usury. (m) the three years. It appeared also, that the defendant mortgaged certain real estate to the plaintiff, to secure the performance of the condition of the bond; that the plaintiff procured $10,000 insurance on the vessel for one year, at five and a half per cent., and that the defendant also insured the vessel for a certain voyage. It was contended, for the defendant, that this was not a bottomry bond, but a contract at common law, and usurious. Putnam, J., delivered the opinion of the court: "We are all clearly of opinion, that the objections which the defendant's counsel have made to the plaintiff's recovery, cannot prevail. It is said that this is not a bottomry bond, but a usurious contract; and the court are to determine whether it be one or the other, upon the facts which are agreed by the parties. It is argued, that payment of the money borrowed, is secured in such a manner as to make it a certainty that the plaintiff would receive his money with twelve per cent.; that it is secured by a mortgage of real estate, as well as by a mortgage of the ship, and an assignment of half the freight and earnings for the term of the loan; and it is further objected, that the loan is upon time, and not for a voyage, as it is usually made. But the answer to these objections is, that if the ship should be lost within the time of three years, for which the money was lent, the plaintiff was to lose all the money which should be then due upon the bond. It is the essence of the contract of bottomry and respondentia, that the lender runs the marine risk, to be entitled to the marine interest. The rate of interest, and the manner of securing the payment of what may become due upon such contracts, are to be regulated by the parties. Those considerations are not to be regarded by the court, excepting only to ascertain whether they were colorably put forth to evade the statute against usury. We do not perceive any thing in the facts which would warrant that conclusion. If the ship had been lost immediately after she sailed, it is perfectly clear that the plaintiff would have lost all his money." (m) Roberts v. Tremoille, 2 Rolle, 47; Fountain v. Grymes, Cro. Jac. 252 1 Bulst. 36; Flower v. Sherard, Ambler 18; Lloyd v. Scott, 4 Pet. 205; Scott It has been held that loans, of which the repayment is made to depend on the life of the parties, come within the same principle. (n) So also with regard to loans to be repaid on the Lloyd, 9 Pe.. 418. In Richards v. Brown, Cowp 770, Lord Mansfield treats an annuity upon the borrower's life, with a right, on his part, to redeem at the end of three months, as involving only the contingency of the borrower's dying within that three months; and after showing that the transaction between the parties was essentially a loan says: "It is true, there was a contingency during the three months. It was that which occasioned the doubt, whether a contingency for three months is sufficient to take it out of the statute. As to that the cases have been looked into, and from them it appears, that if the contingency is so slight, as to be merely an evasion, it is deemed colorable only, and consequently not sufficient to take it out of the statute. Here the borrower was a hale young man, and therefore we are of opinion that there was no substantial risk, so as to take this case out of the statute." But it seems that where the right to redeem is optional with the seller, the purchase is not usurious, because the purchaser or lender cannot compel a repayment of his principal, and it is therefore a risk. King v. Drury, 2 Lev. 7; Murray v. Harding, 2 W. Bl. 859. See also, Bayley, J., White v. Wright, 3 B. & C. 273; Chippindale v. Thurston, 1 Moody & M. 411; Earl of Mansfield v. Ogle, 24 Law J. N. s. Ch. 450, 31 Eng. L. & Eq. 357. Since the introduction of life insurance, the purchase of an annuity may be made the means of effecting a loan at more than legal interest, and that certainly secured, as the purchaser may guard against the contingency of the grantor's death by effecting insurance on his life. Hardwicke, L. C., Lawley v. Hooper, 3 Atk. 278; Blackstone, J., Murray v. Harding, 2 W. Bl. 865. And where an annuity was granted for four lives, with a covenant that the grantor, within thirty days after the expiration of the third life, should insure the principal sum upon the life of the survivor, the covenant was held not to make the transaction usurious. In re Naish, 7 Bing. 150. See also, Morris v. Jones, 2 B. & C. 232; Holland v. Pelham, 1 Cromp. & J. 575, 1 Tyrw. 438. It was anciently decided, that annuities for terms of years, by which it was evident that eventually more than the principal sum and legal Here interest would be paid, were not usurious, being merely purchases. Fuller's case, 4 Leon. 208; Symonds v. Cockerill, Noy, 151; Cotterel v. Harrington, Brownl. & G. 180; King v. Drury, 2 Lev. 7; Twisden, J., in Rowe v. Bellaseys, 1 Sid. 182. But in Doe v. Gooch, 3 B. & Ald. 666, upon Sir James Scarlett's saying, that if a person have an annuity secured on a freehold estate, with a power of redemption, such power will not make the bargain usurious, Bayley, J., remarked: "In that case the principal is in hazard, from the uncertain duration of life. it is in 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 the principal, together with legal interest, is to be received." And, where an annuity was granted for 11 years, payable half yearly, the seller giving twenty-three promissory notes for the halfyearly payments; and it appeared in evidence, that these payments would pay the purchase-money of the annuity, and interest, at nearly 121. per cent. per annum;" the Master of the Rolls said: "With respect to this question of usury, I shall not refer to the old cases which have been cited. This, in effect, is an agreement to repay the principal sum of 4,000l., with interest, by twenty-three instalments, and as it appears that the interest thus paid will exceed legal interest, the transaction is plainly usurious." (n) In Burton's case, 5 Rep. 69, Popham, C. J., said: "If A comes to B to borrow £100, B lends it to him if he will give him for the loan of it for a year £20, if the son of A be then alive. This is usury within the statute; for if it should be out of the statute, for the uncertainty of the life of D, the statute would be of little effect; and by the same reason that he may add one life, he may add many, and so like a mathematical line, which is divisibilis in semper divisibilia." In accord ance with this principle, Clayton's case, 5 Rep. 70, in which Reighnolds lent Clayton £30 for six months, to be paid at that time £33 if Reighnold's son should be then alive, if not, to be paid £27, was decided to be usurious. Button v. Down. ham, Cro. Eliz. 643, was similarly decided; death of a party, or post-obit contracts, which, even if excessive and oppressive, and on that ground avoided in equity are, nevertheless, not usurious. (o) but in Bedingfield v. Ashley, Cro. Eliz. 741, in which Ashley, for £100, covenanted with Gower to pay to every one of Gower's five daughters, who should be alive in ten years, £80, this transaction was resolved by all the judges not to be usury; "for it is a mere casual bargain, and a great hazard, but that in ten years, all the daughters, or some of them will be dead; and if any of them be not alive, he shall thereby save £80. But if it were that he should pay £400 at the end of ten years, if any of them were alive, it were a greater doubt. Or if it had been that he should pay at the end of one or two years, £300, if any of the said children were 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." And in Long & Wharton's case, 3 Keble, 304, which was Error of judgment, in debt, on obligation to pay £100, on marriage of the daughter, and if either plaintiff or defendant die before, nothing. The defendant pleads the statute of usury, and that this was for the loan of £30 before delivered, to which the plaintiff demurred, and per turiam, this is plain bottomry, and judgment affirmed." (0) The great case on the validity of post-obit bonds, is that of Chesterfield v. Jansson, I Atk. 301, 2 Ves. Sr. 125, 1 Wilson, 286. The defendant paid Mr. Spencer, testator of the plaintiffs, £5,000, and took from him a bond for £20,000 conditioned for the payment of £10,000 to the defendant, at or within some short time after the death of the Duchess of Marlborough, in case Mr. Spencer survived her, but not otherwise. In six years the Duchess died, and shortly after her death Mr. Spencer renewed the bond of £20,000, to the defendant, with a condition for the payment of the £10,000 on the next April, -gave the defendant a warrant of attorney to confess judgment against him, and about a year after this paid £2,000 on the new bond. Two years after the Duchess of Marlborough's death, Mr. Spencer died, and his exccutors brought this bill to be relieved against the bond to the defendant, as unreasonable and usurious, being independent of any other contingency than that of a grandson of thirty years of age surviving a grandmother of eighty, so that by reason of the great age and infirmity of the Duchess, and her consequent approaching death, the requiring £10,000 for the forbearance of £5,000, was more than legal interest. The cases upon the subject of loans, upon contingencies, post-obits, &c., down to the time of this case, were collected and cited by the able counsel employed; and Lord Chancellor Hardwicke, Sir John Strange, M. R., and Mr. Justice Burnett, decided, that the loan to Mr. Spencer being upon a contingency, whereby the principal was bona fide hazarded, was not usurious; and although they would have relieved against the bargain as unconscionable, had it not been confirmed, they held that the execution of the new bond, by Mr. Spencer, and a part payment upon it, confirmed and ratified the agreement, so that they could not relieve. It will be noticed, that in this case there was a possibility, in case Mr. Spencer should die before the Duchess, that no part of the money lent would be repaid; and therefore this case does not go the extent of deciding that where there is a contract to pay money, at all events, upon the death of a party, such contract is good by reason of the uncertainty of the amount that will eventually be received. But in Batty v. Lloyd, 1 Vern. 141, the defendant had agreed with the plaintiff, who had an estate fall to her, after the death of two old women, to give her £359, in consideration of receiving £700 at the death of the two women, which money the plaintiff was to secure by a mortgage of her reversionary estate. Both the women died within two years afterwards; and the plaintiff being sorry for her bargain, brought this bill to be relieved. Lord Keeper North said: "I do not see any thing ill in this bargain. I think the price was of full value, though it happened to prove well. Suppose these women had lived twenty years afterwards, could Lloyd have been relieved by any bill here? I do not believe you can show me any such precedent. What is mentioned of the plaintiff's necessities, is, as 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 . SECTION XI. CONTRACTS IN WHICH A LENDER BECOMES PARTNER. It is often attempted to apply the same principle to the law of partnership, and to protect contracts in which money has been loaned from the imputation of usury, by the defence, that the person advancing the money becomes a partner with the person receiving it, and liable as such for the debts of the partnership, and that, therefore, there is a substantial risk, which protects the transaction from being usurious, although, by the terms of the agreement, the party is to receive more than legal interest for his money. In reference to this question, it seems in general clear, that where a contract of partnership is expressly entered into by the parties, or where money is advanced, and the party advancing it reserves, instead of interest, a certain proportion of the profits of a certain business, so that, in the construction of law, a partnership may fairly be presumed to be intended, and the contract is in neither case intended as a device to cover a usurious loan, then the contract lacks that essential element of the crime of and therefore no usury is comadvancing the money may and usury, a loan of money, mitted; although the partner 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 look not to have the fullest price; as in some cases that I have known, when a young lady that has had £10,000 portion, payable after 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 bargain too. It is the common case; pay me double interest during my life, and you shall have the principal after my decease." In Lamego v. Gould, 2 Burr. 715, defendant gave plaintiff this writing, receiving therefor two guineas; "Memorandum. In consideration of two guineas, received of Aaron Lamego, Esq., &c., I promise to pay him twenty guineas, upon the decease of my present wife, Anne Gould." The question was, whether it was usurious, the woman being at the time seventy years of age. The court held it no usurious loan, but only a wager. Matthews ". Lewis, 1 Anstr. 7, was a case in which Lewis, upon a loan of £1,600, gave post-obits for £3,200, payable on the death of either Lewis's mother or grandmother, from whom he was entitled to large property, and his grandmother being eighty-seven years of age. The court said: This is nothing like usury. It is a catching bargain, an extortioning post-obit, but no usury." probably will receive more than would amount to legal interest upon it. (p) And if it be clear that a partnership was bona fide intended, and that there was no contrivance to cover a loan, there is no usury, although one of the partners covenants that he will bear all the losses, and pay the other, as his share of the profits, a certain sum, which amounts to more than legal interest on that other share in the capital; for here is still no loan of money. (a) But where the contract is for a loan of money, in the form or under the disguise of a partnership, and for its use the borrower contracts to pay legal interest, and also a certain proportion of the profits of a trade or business, this is usurious, although the lender may be made liable, as a partner, for the debts incurred by the borrower in the course of the trade or business; because, if he is so compelled to pay, he still has his remedy over against the borrower, and therefore runs no ultimate risk, except that of the borrower's insolvency, which, as we have seen, is not enough. (r) SECTION XII. OF SALES OF NOTES AND OTHER CHOSES IN ACTION. It is quite settled that negotiable paper may be sold for less than its face, and the purchaser can recover its whole amount from the maker when it falls due, although he thereby gets much more than legal interest for the use of his money; and this principle is extended to bonds and other securities for money loaned. The reason on which this rule rests is obvious. For such paper is property; and there is no more reason why one may not sell notes which he holds, at a price made low either by doubts of the solvency of the maker, or by a stringency in the (p) Fereday v. Hordern, 1 Jacob, 144; Morrisset v. King, 2 Burr. 891. (q) Enderby v. Gilpin, 5 J. B. Moore, 572, 1 Dowl. & R. 570, 5 B. & Ald. 954; Fereday v. Hordern, 1 Jacob, 144. (r) Morse v. Wilson, 4 T. R 353; Huston v. Moorhead, 7 Barr, 45. |