Farmers' Loan & Trust Co. v. Smith

The Vice Chancellor.

This case presents another question under the head of usury, which legal vice seems to possess a fruitful facility in being attached to, or interwoven with, much of the litigation which has been presented for adjudication by this court. It has been found connected, in some one of its many subtle and shifting devices, with many transactions, tainting their legality ancl destroying their validity. Professional ingenuity has been astute to endeavor to attach the taint of usury to transactions which are not fairly infected with this legal leprosy; and, in some shape, it has been brought in question in a large number of cases which have been submitted to the jurisdiction of this court. The elements of usury are a loan or forbearance at a greater rate of interest than the law tolerates, in pursuance of a corrupt agreement and with a corrupt intent. It implies a lending and borrowing upon terms which the law will not allow. A debt due, or about to grow due, is perhaps as much a subject of lending and borrowing, as money, goods, or choses in action; and in such case, the creditor may be the lender, and the debtor the borrower.

In the case now before us, Hawkins and Smith, when they became the purchasers of the Stoddard and McOmber contracts, did not, by such purchase, incur any debt or personal liability to Walbridge and Hunt. The personal obligation to pay, was on the part of Stoddard and McOmber. Hawkins and Smith, if they had paid Walbridge and Hunt according to the terms of the contracts, might have enfor*548ced a conveyance of the lands embraced in the contracts so assigned to them. But there was no reciprocal obligation on their part to pay. They never could have been prosecuted upon such contracts by Walbridge and Hunt, for the contract price of the janc¡s—the only remedy of the latter was against the lands and upon the covenants of Stoddard and Me Omber. In fact, it was a mere executory contract on the part of Walbridge and Hunt, which they were bound to fulfil by making conveyances, upon condition that it was performed upon the other side by making payment. This was the right which Hawkins and Smith acquired by the purchase of the contracts, viz. to compel a conveyance after they had made the stipulated payments. We will suppose they had just this rightand after the assignment thus made to them, and some payments made thereon to the vendors, they had ascertained that the payments required to be made by the contracts, fell due too rapidly to suit their convenience or perhaps their means, and if exacted as they became due, they must lose all the advantages which they had acquired by the purchase, and all the.payments they had made, for want of funds to meet the accruing’ payments. Finding this to be the fact, they surrender the contracts to the vendor, and at the same time agree to purchase the same lands at an advanced price, but upon more favorable terms of payment. Does a bond given in pursuance of such an agreement, come within the statute of usury, so that it shall be rendered void ?

That is this case so far as lots Nos. 36 and 42 (the last the mortgaged premises in this case) are concerned, It appears to me that there is no material con*549fiict in the testimony as to the facts. The testimony of both witnesses substantially sustains the facts set up in the answer, bridge and Hunt to the defendant—there was no debt due from the defendant to them, to be foreborne t. i it txt i Here was no loan made by W al—there was no agreement for lending and borrowing : it seems to me to be a sale of lands, and a sale of lands alone. When the contracts were cancelled, Walbridge and Hunt held the lands freed from their covenant to convey. I admit that the agreement to cancel the contracts and the agreement to sell and re-purchase, were parts of one and the same agreement, and must be so deemed under the answer and the testimony ; but I do not think this alters the case. Walbridge and Hunt, before the cancellation of these contracts, could with perfect propriety have sold these lands to a third person, for. an amount greater than that due him upon the contract, with the condition that such third person should fulfil the contract made them, in case its terms were complied with by the other parties. Such third person might believe, from the probable inability of the purchaser to pay, that he could profitably make such a purchase of Walbridge and Hunt. He certainly could not defeat it for usury. Such an interest is precisely the one which they sell to the defendant; and why cannot he purchase such an interest as well as another ? It is not a debt which is sold, but an interest in land. Neither do I apprehend that it makes any difference that the contract made personally with Hawkins and Smith, and upon which they were personally bound, was made a part of the same agreement. The same principles must apply to that, as the other. It is in both cases an abandoning of rights or interests in *550land held upon certain terms, and purchasing new 01 ™ter€sts *n ^ie same lands upon other terms—a bargain which I deem it competent for tkem to make.

If, however, I could see in the papers sufficient evidence to show that this was resorted to as a mere contrivance to cover a loan, or a device to evade the statute, I should come to another conclusion. The defendant contends that his answer responsive to the bill, shows this intent. I apprehend that the answer of the defendant, so far as it sets up the facts and circumstances connected with the transaction, is responsive to the bill. Those facts must be taken as true. The witnesses, in addition, prove that they are true; but when the defendant undertakes to draw inferences from those facts and circumstances, and to give them a name and character, and' swears to the intent with which these transactions were performed, he goes beyond the legitimate bounds of the answer in asking it to have weight as testimony, with relation to the inferences as well as the facts. The facts and circumstances are detailed. It is for the court to draw from them the proper legal infer- ' enees; and in this case it is, that the bond and mortgage are not infected with usury. The case of Crippin vs. Heermance, formerly before this court, (ante, p. 133,) is something similar to this.

There must be the ordinary reference to a master to compute the amount due, (fee.