In a contract for the loan of money, the law of the place where
the contract is made is to govern, and it is immaterial that the
loan was to be secured by a mortgage on lands in another state.
In such a case, the statutes of usury of the state where the
contract was made, and not those of the state where it is secured
by mortgage, are to govern it unless there be some other
circumstance to show that the parties had in view the laws of the
latter state.
Although a contract be usurious in its inception, a subsequent
agreement to free it from the taint of usury will render it
valid.
The purchaser of an equity of redemption cannot set up usury as
a defense to a bill brought by the mortgagee for a foreclosure,
especially if the mortgagor has himself waived the defense.
Under a usury law which does not avoid the securities, but only
forbids the taking a greater interest than six percentum per annum,
a court of equity will not refuse its aid to recover the
principal.
A certificated bankrupt or insolvent, against whom no relief can
be had, is not a necessary party to a suit in equity, but if he be
made a defendant, he cannot be examined as a witness in the cause
until an order has been obtained upon motion for that purpose.
This was a bill filed by the appellant, De Wolf, in the court
below, on 4 September, 1818, for a foreclosure of a mortgage given
by Prentiss, one of the respondents, on 7 July, 1817, to secure the
repayment of the sum of $62,000. The bill alleged that the
mortgagor had conveyed his equity of redemption to W. T. Barry by a
deed of trust dated 16 March, 1818, describing the lands as
"all those tracts or parcels of land described and contained in
a deed of mortgage from the said J. Prentiss to the said J. De
Wolf, dated 7 of July, 1817, . . . it being the intention and
meaning hereof that after the satisfaction of the debts set forth
in said deeds, the remainder of the property described in said
deeds . . . shall be hereby conveyed."
According to the provisions of the deed, Barry exposed the
premises for sale at public auction on 27 May, 1818,
"subject to the encumbrances of any previous mortgage or deed of
trust, particularly a mortgage deed to J. De Wolf, from J.
Prentiss, dated 7 July, 1817, . . . recorded in the clerk's office
of the Fayette County Court, and to which all persons wishing to
purchase are referred for more particular information."
At this sale, the property was purchased by J. Johnson and R. M.
Johnson. Prentiss filed no answer to the bill, and it was taken
pro confesso against him. J. Johnson answered, claiming as
a
bona fide purchaser for a valuable consideration and
setting up the defense of
Page 23 U. S. 369
usury in the contract between Prentiss and the appellant De Wolf
and also denying notice of the mortgage except by vague report,
which report was accompanied with the suggestion that the mortgage
was void as being affected with usury. Barry also answered,
admitting the conveyance to himself by Prentiss in trust to sell,
which sale he had effected publicly and in good faith before the
bill filed, and in pursuance of the sale had conveyed to the
defendants, J. and R. M. Johnson, and alleged that he was ignorant
of the claim of the plaintiff De Wolf except so far as that claim
was recognized in the deed of trust, and also set up the defense of
usury between the mortgagor and mortgagee. The other defendant, R.
M. Johnson, answered, recognizing and adopting the answer of J.
Johnson and denying for himself all knowledge of the mortgage at
the date of the conveyance to Barry. He also averred that he was a
creditor of Prentiss to the amount of nearly $500,000, for which he
had no other security than the assignment to Barry, through which
he derived title to the mortgaged premises. The cause went to
hearing on the pleadings and proofs, and Prentiss was admitted as a
witness on the part of the other defendants, subject to legal
exceptions, but it did not appear by the transcript of the record
whether the decree of the court below was grounded upon his
testimony. It appeared by the other evidence in the cause that the
transaction originated in a loan made by De Wolf to Prentiss in the
State of Rhode Island
Page 23 U. S. 370
in the year 1815, the repayment of which was secured by a
mortgage upon the lands in Kentucky, which contract was afterwards
waived by the parties and a new contract entered into by them in
the State of Kentucky in the year 1817. The principal question of
fact was whether either or both of those contracts was void under
the usury laws of either of those states, and as this question is
fully considered in the opinion of this Court, it has not been
thought necessary to extract from the voluminous mass of testimony
in the court below the general result of the evidence as bearing
upon it.
On the part of the appellants, it was contended:
1. That the original contract of 1815, if usurious, was not void
according to the laws by which it ought to be governed, the laws of
Rhode Island not avoiding the contract or the securities given for
it, but only forfeiting one-third of the principal and all the
interest of the loan as a penalty to be recovered by information or
action of debt.
2. That the contract of 1817 was free from the taint of
usury.
3. That if either or both those contracts were usurious, the
defendants, J. & R. M. Johnson, could not take advantage of the
usury, not only because they were not parties to the contract, but
because, by the very terms of the deed of trust to Barry under
which they claim, they
Page 23 U. S. 371
took the estate in controversy subject to the prior conveyance
to the appellant.
On the part of the respondents it was insisted:
1. That the loan of 1815 was usurious and void.
2. That the transaction of 1817 was a device to secure the
repayment of money advanced on an usurious agreement.
3. That money advanced on an usurious agreement cannot be
secured and the payment enforced in a court of equity at the
instance of the lender by force of any after agreement of the
lender to relinquish the usury and of the borrower to repay the
money lent.
Page 23 U. S. 377
MR. JUSTICE JOHNSON delivered the opinion of the Court.
This cause has been discussed very much at large, and with a
degree of talent, candor, and research very satisfactory to the
Court. In proceeding to consider it, however, we think it advisable
to deviate from the order in which the points were examined at the
bar and to pursue them as they arise in the progress of the
suit.
In the year 1818, the complainant filed his bill in
Page 23 U. S. 378
the Circuit Court of the United States for Kentucky to obtain a
foreclosure of a mortgage given to secure the sum of $62,000 and
bearing date July 7, 1817. The debt secured was payable by
installments, only one of which was due when the bill was filed,
but in the progress of the cause all the installments falling due,
they were all, by consent, admitted into the pleadings, as if
introduced by supplemental bill.
The bill first sets out the mortgage and the breach, and then
proceeds to allege that Prentiss, the mortgagor, had conveyed his
equity of redemption to W. J. Barry, who had sold to James Johnson
and R. M. Johnson the two latter of whom were then in
possession.
Prentiss files no answer, and in due course the bill as to him
is ordered to be taken
pro confesso. James Johnson files
an answer, claiming as
bona fide purchaser for a valuable
consideration and setting up the defense of usury in the contract
between Prentiss and the complainant and putting the complainant
generally upon his proof. He also denies notice of De Wolf's
mortgage otherwise than by vague report, which report, he alleges,
was accompanied with the suggestion that the mortgage to De Wolf
was affected with usury and void.
At a subsequent day, Barry also answers, admitting the
conveyance to himself by Prentiss in trust to sell, which sale, he
alleges, he had effected publicly and in good faith before the bill
was filed, and in pursuance of such sale had conveyed
Page 23 U. S. 379
to the Johnsons. He further alleges that at the time of the
execution of the deed of trust to him, "he was ignorant of the
complainant's claim except so far as that claim is recognized in
the deed of trust," and also sets up the usury between the
mortgagor and mortgagee in avoidance of the mortgage.
R. M. Johnson also files an answer in which he recognizes and
adopts the answer of James Johnson and further denies altogether
knowledge of the mortgage to De Wolf at the date of the transfer to
Barry. He then sets out that he is a creditor of Prentiss to the
amount of near $500,000, for which he has no other security than
the assignment to Barry, through which he derives title to the
mortgaged premises.
Upon this state of the pleadings, with a few formal and
immaterial additions, the parties went into their proofs. And as
the complainant exhibited his mortgage in legal form and with all
the evidence of authenticity required by law, it followed that the
defendants were put upon their proof to maintain the grounds on
which they sought to avoid it.
It was not contended that in the immediate contract on which the
bill was founded there was any usurious taint belonging to that
transaction itself. The ground taken was usury in a transaction
anterior by two years, out of which the mortgage in question drew
its origin and from which the usurious taint was supposed to be
transmitted either directly or incidentally. The case proposed to
be established in proof
Page 23 U. S. 380
was that in the year 1815 there was a negotiation for a loan
between these parties, the scene of which was in Bristol, Rhode
Island. That the sum to be loaned was $83,000, but which sum in
fact was reduced below $80,000, by means which they contended were
resorted to for the purpose of disguising the usurious interest, to
be retained by way of premium, or bonus or imposition. That the
interest actually stipulated for was twelve percent, of which six
percent was reserved in a bond executed at the time for $111,000,
comprising compound interest, there being no annual interest
reserved. The other six percent was secured under the aspect of a
rent payable out of lands in Kentucky, for which Prentiss executed
absolute conveyances, and De Wolf stipulated to reconvey on the
payment of the amount for which Prentiss gave his bond, and a sum
annually, by way of rent, equal to six percent upon the $83,000,
that is, the sum of $4,980.
This rent, it seems, was paid the first year, together with an
additional sum of $498 added as interest and damages.
And a bill for the sum of $4,980 was drawn the second year by De
Wolf upon Prentiss payable in Philadelphia, but this was returned
under protest, and subsequently taken up by a bill for $5,154,
endorsed by J. T. Meder, Jr.
The evasion of the statute against usury supposed to have been
practiced upon Prentiss in making up the sum of $83,000 had
relation to three items. The first a sum of about
Page 23 U. S. 381
$32,000, admitted into the computation as the price set upon
fifteen shares of the Lexington Manufacturing Establishment,
transferred by De Wolf to Prentiss. The second, Treasury notes to
the amount of $20,211.94, received at par, and the third
$30,802.73, bills drawn upon Philadelphia also taken at par. Upon
these three items there was an estimated loss sustained of about
$3,400.
The contract of 1815 was unquestionably entered into in the
State of Rhode Island, and was there reduced to writing, but had a
view to Kentucky for its consummation. As it entered into the
contract that Prentiss should secure De Wolf by a conveyance of
Kentucky land to a large amount, two agents were employed and
entrusted by De Wolf, with the securities to be passed to Prentiss,
and a power to draw upon him for the money, to be paid in
Philadelphia, which Prentiss was to have the benefit of upon
complying with the articles of his contract purporting an absolute
conveyance of the land. The place where the contract of repayment
of the principal on the part of Prentiss was to be fulfilled
appears no further than this that the bond is given to pay
generally, without regard to place, and the money to be paid by way
of rent, appears by the subsequent acts of the parties respecting
the bills drawn for the rent to have been payable in
Philadelphia.
The contract of 1817, in which this mortgage originated, was
executed in Kentucky, and had its inception in an intimation from
Prentiss of a
Page 23 U. S. 382
design to avail himself of the plea of usury. Upon this, De Wolf
repaired to Kentucky, and there instituted a new negotiation with
Prentiss personally, having for its object to clear the contract
from all usurious incidents and to take security for the sum loaned
at the legal interest of Kentucky, which, as well as that of Rhode
Island, is six percent. Accordingly, all the instruments of writing
which appertained to the old contract were surrendered mutually,
and a new mortgage given to secure the balance now sued for, the
original sum having been reduced by large actual payments to the
sum for which this mortgage was given, and which includes the same
premises conveyed under the prior contract.
The defense set up rests upon the assumption that the new
contract was not purged of the usury, or rather that the whole
contract of 1815 was void, and could therefore form no basis or
consideration for the contract of 1817. Or if not wholly void, it
comprised several items of an usurious character which ought to be
included in the new contract. And here two preliminary questions
arose, the first of which was whether the
lex loci of the
contract of 1815 was Rhode Island or Kentucky. By the usury laws of
the latter, the contract and all the securities given for it are
void both for principal and interest. By the laws of the former,
although it is prohibited to take more than six percent interest,
and a penalty imposed for the offense, the act does not render the
contract void -- certainly not for the principal sum. By the laws
of Kentucky,
Page 23 U. S. 383
it is supposed that, the principal debt being abolished, there
could be no consideration to sustain the new contract, by the laws
of Rhode Island, that the reverse would be the effect unless, as
was contended in argument, that the simple prohibition of such a
contract, which is express in the Rhode Island act, would affect it
with the character of an illegal contract, and as such one which a
court of equity would not lend its aid to carry into effect.
With regard to the locality of the contract of 1815, we have no
doubt, that it must be governed by the law of Rhode Island. The
proof is positive that it was entered into there, and there is
nothing that can raise a question but the circumstance of its
making a part of the contract that it should be secured by
conveyances of Kentucky land. But the point is established that the
mere taking of foreign security does not alter the locality of the
contract with regard to the legal interest. Taking foreign security
does not necessarily draw after it the consequence that the
contract is to be fulfilled where the security is taken. The legal
fulfillment of a contract of loan on the part of the borrower is
repayment of the money, and the security given is but the means of
securing what he has contracted for, which, in the eye of the law
is to pay where he borrows, unless another place of payment be
expressly designated by the contract. No tender would have been
effectual to discharge the mortgagee unless made in Rhode Island.
On a bill to redeem, a court of equity would not have listened to
the idea of
Page 23 U. S. 384
calling the mortgagee to Kentucky in order to receive a
tender.
In the effort to sustain his defense under the laws of Rhode
Island, the defendants have introduced into the cause the
examination of their co-defendant, Prentiss, taken at the instance
of themselves, and received in the court below subject to legal
exceptions. We are not informed whether the court below actually
recognized it as competent evidence, since the grounds on which
that court dismissed the bill are not spread upon the record. It is
enough that it does not appear to be rejected; we are now called
upon to pass an opinion upon it.
The only grounds upon which an argument has been made in support
of the admissibility of Prentiss' deposition have been that the
complainant avers him to be insolvent, which fact the testimony in
the cause goes also far to establish, and that his deposition was
taken before he was in reality made a party by the service of a
subpoena. But on no principle can his evidence be adjudged
competent. It is true that cases occur in which certificated
bankrupts are struck out of a record and made witnesses, but if
this was a case in which a motion to strike out could have been
sustained, the motion should have been made and the party's name
expunged from the record. On no principle could he be made a
witness while he was himself a party. He may have had little or no
interest in the event of the suit except as to the costs, but
still, while a party to the record, he could not be examined.
We
Page 23 U. S. 385
know of no exception to this rule, whatever be the court in
which the question occurs, except it be in the administration of
certain branches of the admiralty jurisdiction. From the views that
we take of the case, however, we do not find it necessary to
inquire whether there is sufficient evidence in the cause, after
rejecting the evidence of Prentiss, to sustain the facts on which
the defense rests. If, with the aid of that testimony, the defense
cannot be sustained,
a fortiori it cannot be without it.
And here it may be proper to premise, as was very correctly
remarked in the argument, that there has not been in fact any
contrariety of opinion expressed by the counsel on the law of
usury. Usury is a mortal taint wherever it exists, and no
subterfuge shall be permitted to conceal it from the eye of the
law; this is the substance of all the cases, and they only vary as
they follow the detours through which they have had to pursue the
money lender. But one difficulty presents itself here of no
ordinary kind. It is not very easy to discover how the taint of
Rhode Island usury can infuse itself into the veins of a Kentucky
contract. The defense would not admit of a moment's reflection if
it rested on the direct effects which laws against usury have upon
contracts. Whatever sums may have been derived through the usurious
contract of 1815 to the contract of 1817, they would not affect the
latter with usury, unless introduced in violation or evasion of the
laws of Kentucky, for the two contracts are governed by laws that
have no connection. But it makes very little difference
Page 23 U. S. 386
in this case, since if the contract of 1817 is, either in whole
or in part, unconscionable, this Court would not lend its aid to
execute it as far as it was unconscionable, and the argument goes
to show that it partakes of that character, because, admitting that
the law of Rhode Island did not render the contract of 1815 null
and void for the principal sum loaned, yet the sum exhibited in
that contract as principal and so transmitted to the latter
contract contained sundry items which it is contended were passed
upon Prentiss at a great loss and under circumstances calculated to
serve as a disguise to usury.
And first, as to the shares in the Lexington Manufacturing
Company. These were fifteen in number, and appear to have been
taken by Prentiss on account of the $83,000, about $2,000 a share,
the whole of which, there is reason to think, was sunk in his hands
in the general wreck of the adventure.
It cannot be denied that this is a suspicious item, it does not
in general comport with a negotiation for a loan of money that
anything should enter into the views of the parties but money or
those substitutes which, from their approximation to money,
circulate with corresponding, if not equal facility. Still,
however, like every other case, it is open to explanation, and the
question always is whether it was or was not a subterfuge to evade
the laws against usury. And here it is to be observed that it is
not every sale which, in a negotiation for a loan, will taint the
transaction with usury, for it may
Page 23 U. S. 387
comport perfectly with the general views of the borrower to make
such a purchase, or to take the article even in preference to
money. I would illustrate this by the case of a merchant who
proposes to borrow a capital to adventure in trade, and who,
instead of money, receives an assortment, at a fair price, adapted
to that trade. There would be no ground for attributing to such a
transaction a design to evade the statute. But in what does the
present case vary from that? Prentiss had embarked in a
manufactory, of the prospects of which he entertained the highest
hopes. He either believed or endeavored to persuade others that it
would yield fifty percent. The De Wolfs had embarked, on his
representations, $30,000 in the enterprise. No experiments had been
yet made from which any doubts could be excited, nor is there any
proof that the stock was falling. Under these circumstances, he
proposes to take back the shares if he could procure money to
complete the establishment. The connection between the actual loan
and taking the shares as part of the loan was easy and natural, and
the interest of twelve percent, with other incidental advantages
held out for the loan, may well be estimated as the actual
inducement, without supposing that De Wolf was conscious of passing
this item upon Prentiss at an inflated price. Prentiss had himself
put a value upon these shares but a short time before, in the sale
to De Wolf, at nearly the same price, and De Wolf was either his
dupe or the shares were resold at their value. Prentiss'
continuing
Page 23 U. S. 388
confidence in their value is positively deduced from the efforts
he made to complete, at every hazard and sacrifice, the
establishment to which those shares appertained. He still thought
it a profitable investment, and so had De Wolf thought it or he
would not have made so large an investment without an atom of
security but what was to be found in his anticipations from the
establishment itself. It is conclusive that this was no
heterogeneous disconnected article forced into the negotiation, but
intimately connected with, if not the primary object of, the loan;
that the price, however inflated, was that which both parties had
by previous unequivocal acts set upon it; and if it could be said
to have a market value, there is no evidence that it was above its
market value; and finally that it was an actual transfer of
interest with a view to acquire the article, and not merely to
throw it upon the market in order to raise money. It was a real
transaction, and not a subterfuge.
On the subject of the Treasury notes and bills drawn on
Philadelphia, we can perceive nothing usurious, or even
unconscionable, in this part of the transaction. As to Treasury
notes, they were thrown into circulation as money, and it is an
historical fact that they were worth all they purported to be
worth, notwithstanding the casual depreciation which the
embarrassments of the country and the scarcity of gold and silver
may have produced, and as to the bills on Philadelphia, we are
induced to believe that payment in that form was a benefit
conferred on the borrower.
Page 23 U. S. 389
From the well known course of trade between Kentucky and
Philadelphia, it would scarcely have been possible, at that time or
perhaps at any time, to have suited them better in making a payment
of money intended to be transported to, and used in, Kentucky. With
regard to the bills, it is in evidence that there was no loss
incurred, and, on the Treasury notes, not as much as the
transportation of gold and silver would have cost, calculating all
the incidents to actual transportation. But what if these payments
had been made in Rhode Island bank bills? Would there have been a
pretext of lurking usury in such a payment? Yet who can doubt that
the payment would have been less convenient than that actually
made? In all probability, with reference to gold and silver, and
the exchange or depreciation in Kentucky, the paper of Rhode Island
would have been equally if not more disadvantageous. It is not on
such vague and equivocal grounds that courts infer the presence of
usury. But there is one consideration with reference to this part
of the cause which is conclusive. There is no evidence in the
record that these payments were in any way forced upon Prentiss. On
the contrary, for anything that appears in the evidence, it may
have been in both instances the payment of his own choice. In a
letter not long before the loan, he actually quotes bills on
Philadelphia from four to six percent advance. Nothing of that
chaffering appears in the cause which distinguishes all the cases
in which attempts are made to evade usury laws
Page 23 U. S. 390
at the moment of extorting extravagant profits on the advance of
money.
With regard to the two payments made by way of rent, we have to
remark, that there never was any payment of interest for two years
on the $83,000 besides what was made in that form, and had the
payments been direct and absolute and confined to the sum of $4,890
each, there could no question have been raised respecting those
payments. They would have amounted only to the legal compensation
for the use of the money. With regard to the second year, it is
obvious that as yet nothing has been actually paid; but as it may
be said to be secured or acknowledged by another bill, we will
consider both sums as paid. And then the only exceptionable parts
of the payment will be the sum of $498, added to that actually paid
for the first year, and $174.30 added to the bill drawn for the
rent of the second year. As to the cash, it is a simple allowance
of interest upon a bill drawn for the $4,980, upon its being
returned and taken up by another, and cannot be excepted to. And as
to the first, we perceive in the transaction about the second
payment a sufficient explanation of the origin of the addition made
in that instance. As Prentiss acquiesced in having a bill drawn for
the second year, payable in Philadelphia, we may reasonably
conclude that the agreement was to pay the rent or interest,
whichever it may be called, by drawing such a bill. If, then, such
a bill was drawn and returned for nonpayment, it may
Page 23 U. S. 391
afford an easy solution of the question upon what principle the
addition was made.
But why for so inconsiderable a sum should we perplex ourselves
with difficulties in so large a transaction? It could, at most, in
common with all the items we have been examining, have furnished
only a ground for a deduction -- certainly not for dismissing the
bill. Nor should we have proceeded to examine these items in detail
were it not that the court below will have to make a decree upon
which it will be necessary to allow or disallow these items. Nor,
when it is considered under what circumstances this second contract
was entered into, would this Court upon slight grounds be induced
to open it.
The parties had previously entered into a contract avowedly
usurious with relation to the interest reserved. The defendant
intimates his intention to avail himself of the defense of usury,
and the parties sit down together for the sole and express purpose
of purging it of all usurious taint and to arrange a new contract
respecting the same loan which should be legally obligatory.
Is it then probable that any deduction would have been withheld
which, by being retained, could affect the new contract with usury
or with any of the incidents of usury? Would De Wolf have trusted
himself again in the hands of Prentiss by mixing anything with this
contract on which a legal exception could be sustained? We think
not.
But one of the counsel for the appellees has placed the
objection to the complainant's right to
Page 23 U. S. 392
relief on a more general ground than the receipt of usury or the
avoidance of the contract under statute. He insists that it is
enough for this Court to refuse its aid that the contract of 1815
was prohibited by law, although not avoided by law.
That a court of equity will not lend its aid to an illegal or
unconscionable bargain is true. But the argument carries this
principle rather too far as applied to this case. The law of Rhode
Island certainly forbids the contract of loan for a greater
interest than six percent, and so far no court would lend its aid
to recover such interest. But the law goes no further; it does not
forbid the contract of loan nor preclude the recovery of the
principal under any circumstances. The sanctions of that law are
the loss of the interest, and a penalty to the amount of the whole
interest and one-third of the principal if sued for within a year.
On what principle could this Court add another to the penalties
declared by the law itself?
But the case does not rest here. The subsequent legal contract
of 1817 rescued the case from the frowns of the law. Courts of
justice will not shut the door in the face of the penitent, and
hence it has been decided in a case very analogous to the present
that although a contract be in its inception usurious, a subsequent
agreement to free it from the illegal incident shall make it good.
1 Campb. 165, note; 2 Taunt. 184.
According to the views, then, which we have
Page 23 U. S. 393
exhibited of the case, the principal sum of the loan of 1815 was
a subsisting debt at the date of the contract of 1817, and
unaffected by any of the deductions contended for in the several
items which we have considered. There was, then, a good
consideration for the contract of 1817, and it is legally valid to
the amount which it purports on the face of it.
But if it were otherwise, there are two views of this subject
upon which the court below ought to have sustained the bill.
It is very clear that the Kentucky contract must be considered
as a new and substantive contract. It is governed by a distinct
code of laws from the Rhode Island contract, and cannot be affected
by the taint of usury which might have been transmitted to it under
some circumstances had it taken place in Rhode Island. It was,
then, equivalent to a payment and reloan, and no one can doubt that
money paid on an usurious contract is not recoverable back beyond
the amount of the usury paid.
Again, it is perfectly established that the plea of usury, at
least as far as to landed security, is personal and peculiar, and
however a third person having an interest in the land may be
affected incidentally by a usurious contract, he cannot take
advantage of the usury. Some exceptions may exist to this rule
under bankrupt systems, but they are statutory and peculiar.
Here, then, the case presents a third person, the assignee of an
equity of redemption, setting up a defense which, in one aspect,
Prentiss himself
Page 23 U. S. 394
cannot set up, and which in another aspect he has not set up,
but, on the contrary, under the state of the pleadings, must be
supposed to have refused to set up or have abandoned. These views
are independent of the effect of notice, of the peculiar
circumstances of the notice in this case.
It is true the Johnsons deny the notice prior to the deed of
trust. But previous notice is immaterial, since the notice with
which the law affects them, is that which the deed to Barry, under
which they claim, communicates to him as assignee. In the actual
case, the notice is peculiarly strong and pointed, since the only
description of the lands in question in the deed to Barry is
contained in a reference for description to the mortgage to De
Wolf, and the purpose is explicitly declared to give priority to
that mortgage. Technically and morally, therefore, they required no
more than what should remain after satisfying De Wolf. But had they
purchased from Prentiss in the most absolute and general manner and
altogether without notice actual or constructive, they still could
have acquired no more than the equity of redemption, and that would
not have transferred to them the right of availing themselves of
the plea of usury. We have examined the cases quoted to this point,
and are satisfied with their application and correctness. It would
indeed be astonishing were it otherwise, for the contrary rule
would hold out no relief to the borrower; it would be only
transferring his money from the pocket of the
Page 23 U. S. 395
lender to the pocket of the holder of the equity of
redemption.
Upon the whole we are of opinion that the decree must be
Reversed and the cause sent back to have a decree of
foreclosure entered and carried into effect according to the
exigencies of the case.