per cent. on the sum advanced, and to be brought into the business, shall be paid to him (y). But if a partnership be not contemplated, and the borrower give a bond for the principal and interest, at 51. per cent., and also covenant to pay to the lender .a certain portion of the profits of a trade carried on by him in partnership with another person, this is a usurious contract, and the obligee cannot recover on the bond (z). And whenever the legal operation of the contract is such that the principal is secured thereby, and payable in any event, and yet more than 57. per cent. may be gained by the terms of the contract, it is usurious (a); and the contingency of the solvency of the borrower is not a sufficient risk to take a case out of the statute (b).

Though more than legal interest be reserved upon a contract for the loan of money, yet if it be part of the agreement that the borrower may discharge himself from payment of any interest at all, by the repayment of the principal on a certain day, the case it appears does not fall within the statute (c).

If A. be indebted to B. in 807., and give a promissory note for 871. 3s., payable by four quarterly instalments (being the amount of principal and interest to the time of the last instalment), and it be provided, that in case default be made in payment of any one instalment, the whole sum shall immediately become payable; A. is entitled to recover the whole of such sum, on default being made in the payment of the first instalment, as it was a stipulation between the parties in the nature of a penalty, and not a contract for usury (d).

Loan of stock.--Although it seems not to be sufficient that the interest only is hazarded (e), yet the loan of money produced by the sale of stock, on an agreement that the borrower shall replace that stock on a certain day, or repay the money on a subsequent day, with such interest in the meantime as the stock itself would have produced, is not usurious, though the interest thus obtained

(y) Morisset v. King, Burr. 891; Hoare v. Dawes, 1 Doug. 372; Enderby v. Gilpin, 5 Moore, 571; Gilpin v. Enderby, 5 B. & Al. 954.

(z) Morse v. Wilson, 4 T. R. 353. Observed upon in Enderby v. Gilpin, 5 Moore, 571; ante, 233.

(a) Morse v. Wilson, 4 T. R. 356. (b) Id.; Doe v. Chumbers, 4 Camp. 4; Ferguson v. Sprang or Spring, 3 Nev. & Man, 665; 1 Ad. & E. 576,

S. C.

(c) 2 Hawk. bk. 1, c. 82, s. 3; Rʊberts v. Trenayne, Cro. Jac. 509; Floyer v. Edwards, Cowp. 113, 115; Morisset v. King, 2 Burr. 891.

(d) Wells v. Girling, 4 Moore, R. 78; 1 B. & Bing. 447, S. C.

(e) Roberts v. Tremayne, Cro. Jac. 508; 2 Hawk. c. 82, s. 29; The Earl of Chesterfield v. Jansen, 1 Atk. 350,

happen to exceed 51. per cent.; unless the transaction be colourable, and a mere device to obtain more than legal interest (ƒ). But a contract that stock shall be taken on loan, at a stipulated sum, being more than the market price, at 5l. per cent. interest, is usurious (g). A party may lawfully lend stock, as stock, to be replaced, or he may lend the produce of it as money, or he may give the borrower the option to repay it, either in the one way or the other; but he cannot legally reserve to himself a right to determine in future which it shall be. It is not illegal to reserve the dividends, by way of interest for stock lent, although this may amount to more than 57. per cent. on the produce of it: for the price of stock may fall, and then the borrower would be a gainer; but the option must be made at the time of the loan. Therefore the lender of stock cannot reserve to himself the dividends by way of interest, and the option of deciding, at a future day, whether he would have the stock replaced, or the sum produced by the sale of it repaid to him in money, with 5l. per cent. interest (h).

The usurious interest must be reserved at the time of the agreement.—It is also a clear principle that to defeat a debt or agreement on the ground of usury, the contract must have been usurious at the time the debt or demand was created thereby; for if a demand do not originate in, or accrue from, an usurious bargain, no subsequent reservation of illegal interest, or posterior arrangement for a usurious security, will taint or invalidate the original claim (i); although the penalty will be incurred by taking usurious interest on such agreement. And it has been held, that if a bond be given for principal and legal interest, the mere proof that usurious interest was subsequently taken, will not establish an original agreement for usury (k). But if at the time of a loan a note be taken as a security for principal and usurious interest, it will be inferred that the money was lent on usurious terms (1).

Of a new substituted agreement or security.-On the other

(ƒ) Tate v. Wellings, 3 T. R. 531; Maddock v. Rumball, 8 East, 304; Boldero v. Jackson, 11 id. 612.

(g) Id.; Parker v. Ramsbottom, 3 B. & C. 257; 5 D. & Ryl. 138, S. C. (h) White v. Wright, 3 B. & C. 273; 5 Dow. & Ryl. 110, S. C.

(i) Tate v. Wellings, 3 T. R. 539;

1 Saund. 295, n. 1; Parr v. Eliason, 1 East, 92; Phillips v. Cockayne, 3 Camp. 119; Parker v. Ramsbottom, 3 B. & C. 257, 270; 5 D. & R. 138, 151, S. C.

(k) Fussil v. Brookes, 2 C. & P.

318.

(1) Scott v. Nicholl, 4 Doug. 318.

hand, after usurious securities given for a loan have been destroyed by mutual consent, a promise by the borrower to repay the principal, and legal interest, is founded on a sufficient consideration, and is binding (m). And the substitution of a bond, securing principal and legal interest for a bond agreed to be cancelled, and whereby illegal interest was made payable, is valid (n). And it was held, even before the 58 Geo. III. c. 98, that if A., for an usurious consideration, give his promissory note to B., who transfers it to C. for a valuable consideration, without notice of the usury, and afterwards A. give a bond to C. for the amount, the bond is good (o).

The general rule, however, is, that if parties enter into an usurious agreement, any remote security for any part of the illegal interest, or to enforce the tainted contract, with a distinct and valid debt, cannot be enforced; there being no express agreement to expunge the original bad part of the debt, or forego the excess of interest; although such new security be founded on a new settlement of accounts (p). And a new promise to pay the principal originally lent on an usurious agreement, is not binding, unless all payments, beyond legal interest, are repaid or deducted (q).

A. being indebted to the plaintiff in 901. and 201. upon legal consideration, and in a larger sum on usurious loans, in consideration of the plaintiff advancing him 150l. more on legal interest, procured him the defendant's acceptances for 100, 1007., and 507., for securing the whole balance due from A. to the plaintiff. It was held, that these bills were tainted by the usurious transactions, and could not be enforced against the defendant, the acceptor, even to the extent of the debts untainted by usury (r).

So where a bankrupt, after he obtained his certificate, promised to pay a creditor the balance of an usurious debt, on con

(m) Barnes v. Hedley, 2 Taunt. 184; ante, 48.

(n) Wright v. Wheeler, Peak. Add. C. 175; 1 Camp. 165, note, S. C.

(0) Cuthbert v. Haley, 8 T. R. 390; George v. Stanley, 4 Taunt. 683. See Chapman v. Black, 2 B. & Al. 588.

(p) Tate v. Wellings, 3 T. R. 531; Preston v. Jackson, 2 Stark. R. 237; Chapman v. Bluck, 2 B. & Al. 588.

(4) Wickes v. Gogerley, Ry. & M. 123; 1 C. & P. 396, S. Č. A colour

able contract for the sale and re-purchase of goods, to hide an usurious transaction, conveys no property in the goods, and the seller may recover them in trover without deducting the money he really received; Hargreaves v. Hutchinson, 2 Ad. & E. 12. Semble, overruling Fitzroy v. Gwillim, 1 Term R. 153, contra.

(r) Harrison v. Hannel, 5 Taunt.

780.

dition that he would advance him another sum, and then gave the creditor security for the gross amount of the former balance and the new loan, the security would seem to be infected by the usurious taint of the first transaction (s).

Bona fide holder of usurious bill.-Under the stat. 12 Anne, stat. 2, c. 16, bills or notes founded on an usurious consideration were void, even in the hands of a bonâ fide holder (t). But by the statute 58 Geo. III. c. 93 (u), reciting that to be the law, and that in the course of mercantile transactions negociable securities often passed into the hands of persons who had discounted the same without any knowledge of the original consideration, for which the same were given, and that the avoidance of such securities in the hands of such bona fide indorsees, without notice, was attended with great hardship and injustice, it was enacted, that "no bill of exchange or promissory note shall, though it may have been given for an usurious consideration, or upon a usurious contract, be void in the hands of an indorsee for valuable consideration, unless such indorsee had, at the time of discounting or paying such consideration for the same, actual notice that such bill or note had been originally tainted with usury."

The operation of this latter statute was, that if in an action on a bill or note, the defendant succeeded in establishing that it was founded on an usurious contract or consideration, the plaintiff was bound to prove that he gave value for it, and then the defendant must have shown that the plaintiff nevertheless had notice of the usury at the time he took the security (x). The act, however, though evidently intended to repeal so much of the 12 Anne, c. 16 as rendered bills and notes given for an usurious consideration void in the hands of a bonâ fide indorsee for valuable consideration, who had no notice of the usury, but not having in fact repealed any of the provisions of that statute, was held to be confined to parties who had discounted or paid a valuable consideration for the bill or note, and not to extend to a party who had taken it in payment of an antecedent debt (y). But by the 5 & 6 Will. IV. c. 41, which has a prospective and

not a retrospective operation (z), bills and notes given for an usurious consideration are not to be void, but to be deemed to have been given for an illegal consideration (a).

Separate instruments constitute one agreement, when.-If a contract for the loan of money be void on the ground of usury, a separate security for the principal or interest only cannot be enforced (b). It is not material that the usurious contract is to be executed, and is evidenced by means of two separate instruments, instead of being comprised in one (c).

Charge for bona fide expenses beyond 51. per cent.-There are instances in which, though more than 5l. per cent. be taken on the loan of money, the statute does not apply, the excess being bona fide contracted for to cover reasonable expenses incident to the transaction (d).

Thus, a banker, bill broker, or other person, discounting a bill (e), or an agent procuring the acceptance and payment of bills (f), may lawfully charge and take a reasonable commission or remuneration, besides legal interest, for his bond fide and necessary expenses and trouble; and a conveyance to bankers of timber growing, in trust to sell the same, and to pay themselves. a debt due to them, with interest, and to pay over the residue, after all expenses, &c., and to retain 2007. for their trouble, is not, on the face of it, usurious (g). But if a loan be mixed up with the transaction, and the compensation demanded be unreasonable, it is a question for the jury, whether the commission be a shift, to obtain more than legal interest for the forbearance (h).

Goods taken on discount of bill.-When goods are taken in part of money agreed to be advanced as a loan, the presumption of law appears to be, that no usury was contemplated; and, consequently, the lender is not to be called upon to show the real

(z) Hitchcock v. Way, 2 N. & P. 72; 6 Ad. & E. 943, S. C.

(a) It seems to have been doubted whether this statute really has the effect of rendering such securities available in the hands of a bona fide holder for value. See per Lord Abinger in Edmunds v. Groves, 2 M. & W. 642, 644; 5 Dowl. 775, 777, S. C.

(b) 2 Hawk. bk. 1, c. 82, s. 40; Fountain v. Grymes, Cro. Jac. 252, 508; Roberts v. Tremoile, 2 Roll. R. 48; 2 Lev. 7, 8.

(c) White v. Wright, 3 B. & C. 273;

(e) Hammet v. Yea, 1 B. & P. 144; Er parte Jones, 17 Ves. 332; Marsh v. Martindale, 3 B. & P. 158; Jones v. Davison, Holt, N. P. R. 263; Musterman v. Cowrie, 3 Camp. 492; Solarte v. Melville, 7 B. & C. 430.

(f) Baynes v. Fry, 15 Ves. 120. (g) Palmer v. Baker, 1 M. & Sel. 56. (h) Masterman v. Cowrie, 3 Camp. 488; Lee v. Cass, 1 Taunt. 511.