Swanson v. White

Where goods or choses in action are furnished to the buyer at a price greatly above their value, to enable him, by selling them at their real value, to raise money, such transaction is held to be usurious.

Bodenhamer was embarrassed, and applied to White for a loan of money. White told him he would get some bonds of the State of Tennessee, if he would take them. White procured two bonds calling for a thousand dollars each, which, at the market price, were worth about six hundred each. They were sold to Bodenhamer at $2100, for which sum Bodenhamer executed his note to White. Bodenhamer sold them to Goff & Balentine at $1200. Bodenhamer gave a deed of trust to White for his land and slaves, to secure to him the payment of the said sum of $2100. Swanson had recovered a judgment in the Circuit Court of Giles county against Bodenhamer for the sum of $559; execution was issued, and returned without satisfaction; and thereupon this bill was filed against Bodenhamer, White and the trustee, charging that the sale of the State bonds was a contiivance to loan money and evade the statute against usury, and praying that the deed of trustbe executed by a sale of the land and slaves, and that the sum really due said White, to wit, $1200, with interest thereupon, be paid to him, and the balance of proceeds be applied to the satisfaction of complainant’s judgment. The case was tried by Chancellor Cahal, on bill, answers, replications and proof. The Chancellor being satisfied that the transaction between White and Bodenhamer was usuiious, decreed a sale of the estate conveyed and a satisfaction of the claims, according to the prayer of the bill. The defendant White appealed. 1st. The transaction in relation to the State bonds between Bodenhamer and White is usurious and the latter only entitled to receive of the former what the bonds were re-sold for and six per cent, interest. Vide Comyn on the Law of Usury, 5 Law Library, top pages 36, 37, 43 and 44; Barker vs. Vansommer, 1 Br. Ch. Cases, 149; Lowe vs. Waller, Douglas’ Rep. 236; Potheir’s Treatises on Contracts, sec. 88, page 22. Vide also, Usury Acts 1741, (1 Scott’s Rev. 53,) 1819, (2 Scott’s Rev. 485,) 1835, (Nich. & Car. Rev. 407.) The words “directly or indirectly,” in the statute, cover the case. The British acts and those of Tennessee are alike. (Vide those in the Appendix to Comyn on Usury, top page from 96 to 107.) This is not like the cases of a loan or transfer of stock, &c. to be found in Comyn on Usury, 40, 41 and 42; the cases of Taic vs. Willings, Pike vs. Ledwell and others. Here is no risk or contingency of any kind to White. His money is certain. Comyn, 43 and 44. 2nd. The creditor has a right to recover the usury from the usurer, if it is paid over; for it is a chose in action and debt, between the debtor and usurer, and under our act of 1832, (Nich. & Car. Rev, 222,) enlarging the chancery jurisdiction, the creditor may recover it. In N. Carolina it has been decided, that a conveyance infected with usury is no bar to the widow’s dower. Norwood vs. Morrow et al. 4 Dev. & Batt. Law Rep. 442; and in Moffat et al. vs. McDowell et al. 1 Me Chord’s Ch. Rep. 434, it seemed to be conceded that cases might exist, where creditors would be let in to show usury and enlarge the fund to pay their debts. If the usury has not been paid (as is the case here) of course the creditor has a right to cut down the dealings to the real debt; for the contract is really void for the excess and the deed only a security for the sum actually due and interest, in this case the value of the State bonds. But the act of 1843-4 (p. 204) covers this case. By it creditors may recover the usury, if paid. Here it is not paid, but only secured to be paid; and when paid, may be recovered, because the act says so. The payment, if ever made, will be after the act. Now why may not the creditor prevent its payment? Here is a fund for real hona fide creditors. In its distribution, is it not material to enquire who have debts and their real amounts? It is insisted, as one of the principal grounds, in the bill, that the sale of the State bonds by defendant A. C. White, to Bodeij-hamer, was usurious, and to that extent the consideration in - the deed of trust inadequate. 1. This allegation in the bill is denied in,the answer of White, and there is no proof which shows that the object was to evade the statute. On the part of White, the transaction was a sale with the ordinary accompaniments, and made in good faith. The seller was endeavoring to get as high a price as he could for his property, and the purchaser to get it at the lowest rate. The deposition of Bo'denhamer himself proves the fairness of the transaction. How then is the transaction to be impeached? “The court will never presume a contract to be usurious, without proof.” See McGuire vs. Warder, 1 Wash. 368.' “Usury is the taking of more than the law allows upon a loan or forbearance of a debt. To make a contract usurious, it must be apparent upon the face'of it, or by, evidence, that the intent of the parties in the creation of it, was by means of shift or device to take more than legal interest for the loan or. forbearance of money.” See Moore vs. McKay, 1 Beatty, 2S7. Again: To constitute usury there must be a borrowing and a lending, with an intent to exact exorbitant interest, &c. See 4 East, 55; 1 Taunton, 449; 7 John. C. R. 77; 4 Hen. & Mun. 490; 2 Call, 92, 121. And there must be a corrupt agreement. 2 Call, 111. Again: There are three requisites to constitute usury. 1st, a loan, either expressed or implied: 2nd, ah understanding that the money lent shall or may be returned: 3rd, that a greater rate of interest than is allowed by statute shall be paid. See Peters’ U. S. Reports, 205, 224; 2 Cowen, 712; 7 Peters, 109. There is some proof to show that White was in the habit of shaving notes. But the general character and habit of a usurer is not a foundation for presuming usury in a particular loan. See.Ja-cJcson vs. Smith, 7 Cowen, 712. That a sale of State bonds, upon tlie terms of the present, might be made, without usury, I suppose will not be questioned. For “a bona fiie sale of bank stock, at however high a price, is not usury; to constitute which, there must be a treaty for the loan or forbearance of money.” See SJcipwith vs. Gibson, 4 Hen. & Munford, 490, and Greenhow vs. Harris, 6 Munford, 472. “Depreciated bank paper may be the subject of sale, without the imputation of usury. And if an individual executes his note for specie at a future day, in consideration of the present delivery of depreciated bank paper, whether for a greater or less amount, it' is not evidence per sc of usury.” See Boswell vs. Clarkson, 1 J. J. Marshall, 49. “Borrowing and lending, or any device to avoid the statute, must be established before there can be usury. The Chancellor will not, from the solitary fact that, a note for specie payable in twelve months was executed for the same amount of depreciated bank paper, conclude ■ that there was usury.”,See Talbot vs. Wmfield, 3 J. J. Marshall, 84: see also 2 Munford, 36. 2. The proof shows, that the cash value of the note executed for the State bonds, exceeded very little, if any, the cash value of the bonds themselves, at the time of the transaction; and at the time of the maturity of the notes, the balance was still nearly equal; for as the discount upon such paper diminished, so did that upon State bonds. Usury, therefore, cannot be imputed on the ground of inadequacy in the consideration. The proof also shows, that at the time of the trade, White was of opinion that State bonds were advancing, and was reluctant therefore to consummate it. There is no proof to show that he knew at what rate Bodenhamer sold the bonds, or would be compelled to sell them, or whether it was his purpose to sell them or not. And suppose he did know the precise object of Bodenhamer, that he intended to convert the bonds, and at a discount of 33£ per cent, does this prove a usurious intent on the part of White? a shift or device to evade the statute? For his motives must concur, in order to implicate him. There must be a corrupt agreement. See 2 Call, 111.