1. To constitute usury, there must either be a loan upon
usurious interest or the taking of more than legal interest for the
forbearance of a debt or sum of money due. This is the common law
definition of the term, and the statute of Indiana does not enlarge
it.
2. Where a sum of money is due on a contract for the sale of
land, and the vendor takes more than legal interest for the
forbearance of the debt, it is usury.
3. But where the owner of land proposes to sell it for one price
in cash, and for another price, double as large, on a long credit,
and a purchaser prefers to pay the larger price for the sake of the
longer time, the contract cannot be called usurious.
Nathaniel B. Hogg brought his bill in the circuit court against
Benjamin Ruffner and several other defendants, who were
collaterally interested. The bill avers that Ruffner made
Page 66 U. S. 116
his nineteen promissory notes, for two thousand dollars each,
amounting in all to thirty-eight thousand dollars, payable to the
order of John W. Brice and James L. Birkey, with interest from
their date, and that these notes were delivered to Brice and
Birkey; that in order to secure the payment of the notes, Ruffner
executed three mortgages to Brice and Birkey, and that some of the
notes and so much of the mortgages as secured them were assigned to
the plaintiff. The bill prays for a decree against the defendant
that he pay the sum due upon the notes, and in default thereof that
the mortgaged premises be sold. The notes were to become due as
follows: two on January 1, 1856, and two on the 1st of April in
each of the years 1857-1865.
The answer of Ruffner is that the notes and mortgages were given
on a contract usurious and corrupt. He was in debt as he asserts in
the sum of twenty thousand dollars to Brice and Birkey, who took
these nineteen notes for two thousand dollars each, with interest,
payable as stated in the bill; that he, the defendant, gave the
notes and mortgages solely for the debt of twenty thousand dollars,
and being much embarrassed and pressed for money, and seeing no
other means to prevent the sacrifice of his property by an
oppressive and inexorable creditor, agreed to the corrupt and
usurious contract, and gave his notes for the extra sum of eighteen
thousand dollars for the forbearance of the twenty thousand which
were due.
The true character of the contract as proved in the circuit
court will be found stated in the opinion of MR. JUSTICE GRIER.
The circuit court held the notes which were due and to become
due in the years 1861, 1862, 1863, 1864, and 1865, and which were
given for the eighteen thousand dollars, to be usurious and void,
and the remainder of the notes valid, as covering only the debt
justly owing to the parties by whom they were taken. The court
accordingly decreed payment of the notes which were already due,
with interest and costs. From this decree both parties
appealed.
Page 66 U. S. 118
MR. JUSTICE GRIER.
If the exception taken to the decree of the court below by the
complainant be sustained, it will be unnecessary to notice those
taken by the respondents.
Was the contract of Brice and Birkey with Ruffner, which shows
the consideration of the mortgage and notes assigned to the
complainants, usurious?
The statute of Indiana declares that "the rate of interest upon
the loan or for the forbearance of any money &c., shall be at
the rate of six" percent, but "if a greater rate of interest shall
be contracted for, received, or reserved, the contract shall not,
therefore, be void;" "the plaintiff shall recover only his
principal, without interest," and the "defendant shall recover
costs."
To constitute usury, there must either be a loan and a taking of
usurious interest, or the taking of more than legal interest for
the forbearance of a debt or sum of money due. This statute does
not profess to enlarge the common law definition of the term, while
it aims to include the common devices resorted to by usurers to
evade its penalties.
The original contract by which a debt is created may be for the
purchase and sale of land, and it will be, nevertheless, contrary
to the statute for the vendor to demand or receive more than legal
interest for the forbearance of such debt, as in the case of
Crawford v. Johnson, 11 Ind. 258, where separate notes
were taken for two percent interest, in addition to the legal
interest, on the sum due for the purchase money of land.
But it is manifest that if A propose to sell to B a tract of
land for $10,000 in cash, or for $20,000 payable in ten annual
Page 66 U. S. 119
installments, and if B prefers to pay the larger sum to gain
time, the contract cannot be called usurious. A vendor may prefer
$100 in hand to double the sum in expectancy, and a purchaser may
prefer the greater price with the longer credit, and one who will
not distinguish between things that differ, may say, with apparent
truth, that B pays a hundred percent for forbearance, and may
assert that such a contract is usurious, but whatever truth there
may be in the premises, the conclusion is manifestly erroneous.
Such a contract has none of the characteristics of usury; it is not
for the loan of money, or forbearance of a debt.
Does this case come within this category? We are of opinion that
it does.
The mortgage and notes in question were given in execution of a
contract between the parties, dated the 20th of April, 1855. This
contract is in writing, and signed by the parties. It would be
tedious and unprofitable to enumerate its various covenants; but
the chief subject of it is a sale of land by Brice and Birkey to
Ruffner for the sum of $38,000, in ten annual installments, the
sale to include, also, certain personal property. There is no proof
that the recitals of this contract are untrue, or that the
consideration of the notes and mortgage in question was other than
is there stated. These parties had formed a partnership in
February, 1854, "for dealing in land, farming," &c. Brice and
Birkey advanced money, and had each an interest of one-third in the
lands whose title was in the name of Ruffner. In October of the
same year this partnership was dissolved, and Ruffner afterwards
agreed to pay certain sums of money to the other parties for a
release of their interest in the land, and gave them his
obligations. Afterwards, in February, 1855, in order to extinguish
these obligations, which he was unable to meet, he agreed to
reconvey to Brice and Birkey certain tracts of the land. In the
spring of 1855, they made arrangements to take possession of these
lands, with their tenants, stock, farming utensils &c. Ruffner
then refused to let them have possession. Finding they could not
obtain possession without great and ruinous delay,
Page 66 U. S. 120
a proposition was made to sell or release all their interest in
the lands of the firm, if Ruffner would pay in cash the amount of
money advanced by them. After some negotiations and calculations,
this amount was ascertained to be about twenty thousand dollars.
They professed a willingness to receive this amount, if paid in
cash, or security given that it should be actually paid in six
months. A conditional deed was proposed, by which the title was to
become absolute in case payment was not made on the day. But
counsel advised that this would be construed a mortgage, in
whatever form of words it might be drawn. Ruffner being unable to
furnish such security as was required, this agreement was not
signed or executed. Proposals were then made to purchase for a
larger consideration, to include the farming stock &c., owned
by Brice and Birkey, on a credit running ten years. On these terms
they demanded forty thousand dollars, and Ruffner offered
thirty-six thousand, and finally the amount of thirty-eight
thousand was agreed upon, as set forth in the contract referred
to.
Now the hearsay testimony of witnesses, who relate what they
"understood" from conversations with the parties, or may
have misunderstood to be the contract between them, and their
inference, because the parties had a "settlement," that therefore
the first terms proposed, but not accepted, amounted to the
ascertainment of a debt due, cannot be received to contradict the
written contract of the parties and the testimony of witnesses
cognizant of the whole antecedent history of the transaction. Nor
is there any irreconcilable discrepancy between their impressions
or "understandings," and the written agreements and other
testimony. They construed the "settlement" of the difficulties,
which had long existed between the parties, to mean a balance of
accounts of money due from one party to the other, and consequently
inferred that the increased amount of the securities was for
usurious interest for the forbearance of its payment. This was but
the usual error of arriving at a false conclusion by the use of
equivocal or ambiguous terms.
Page 66 U. S. 121
The decree of the court below is, therefore, erroneous, insofar
as it is affected by the assumption that the contract was
usurious.
Decree of the circuit court reversed, and record remitted,
with directions to proceed in conformity to the opinion of this
Court.
