
    Ruffin v. Armstrong.
    From Wayne.
    A. being embarrassed, and having a promissory note payable to, himself, indorsed and delivered the note to H, his clerk, with instruc-tionsTto raise money on it by a sale of it to the Plaintiff and at the same time directed the clerk to conceal from the Plaintiff that the note was his (A’s) property. The clerk sold it to the Plaintiff at a discount of 33 1-3 per cent, and represented it as his own property, and indorsed the paper to the Plaintiff^ without recourse to himself, in the event of the failure of.ojhers who were liable On it. In á suit by the Plaintiff against A, it was held that the transaction was usurious.
    In this case the Plaintiff declared as indorsee of a pro;-missory note, against the Defendant as indorser. The note and indorsements were as follows:
    “ On demand the 13th of September next, with interest from the 10th of December next, we or either of us promise to pay to Joseph Armstrong, or order, nine hundred and eleven dollars and twenty-eight cents, for value received. Witness our hands and seals, this' 13th of September, 1319. ' ,
    “ JOEL ALTMAN, (x. s.)
    “ JOHN DUNN, (x, s.)
    “BEN. SAULS, (x. s.)”
    « I indorse the within note to Bennett J. Hallcome, for value re-' calved, this 2d of October, 1819.
    «JOS. ARMSTRONG.”
    «I assign the within obligation and the above transfer to Henry S. G. Ruffin, or his order, but am not myself bound in case of failure.
    “B. J. HALLCOME.
    « October 2d, 1819.”
    The Defendant relied on two grounds of defence — 1st. the want of due diligence in the demand of the makers, and notice to tiie indorser ; and 2dly, that the indorsement of the Defendant was part of an usurious transaction, and therefore void. The facts were, as to the in-dorsement, that, the Defendant, being the holder of the note, was desirous of raising money, and being informed bis clerk, Tlaílcusnc, that the Plaintiff was in the habit buying notes, si was indorsed by the ííeíom’ant to Hállenme, with a-, request that he, llallonme. should sell ^ iiurgn as i.:,, property. Hallcoiue accordingly did soli the. note to Ib ¡tin for six hundred dollar.;, and at the timo ««aw-'-nied <!>.■' fact of his agency, and • , pye;;: oted the noie sis f«i■ ■ c"* e. In the wiiolc transaction,‘‘Háll-enme (as be H:>: h) was hut the agent of the DeiV.-daní, ¡m(5 paid over to him immediately tiie money which he received from Rabin.
    On this part cf the case, .RonnelL Judge, who presided, charged the Jury, that if they should believe the indorsement by Armstrong, the Defendant, was msdo v.-ith a view of raising money by a sale of the note to Reír» at a discount gfoaiir than the legal rate of interest,; and that, in the who*** transaction.liallcome wac merely the agent of the licfeudant, Armstrong, having no interest in it himself, and that the Plaintiff took this note of jj&fiil r.8. with the-genera] indorsement of the Defendant. and paviiif thereior only the sum of £,600, then the indorsement of the Defendant might ho considered as made immediate!;.' to the Plaintiff, Ruffin, and the trans-adlo» ivas usurious, although Ruiiin was ignorant'of the agency of lialiceme, and believed him to ho the real owner of the note.
    The Jury retai ned a verdict for the Defendant, on the ground of usury. A hew trial was refused the Plaintiff, and judgment rendered, from which there was an appeal.
    
      Gaston and Mordecai for appellant. Scawell, "Ruffin and Hawks for appellee.
    For the appellant. If, by the terms of the contract, die principal is put in hazard, the contract is not usurious — (Jllorse v. I Vi Uon, 4 T. R. 353 — Cro. Jac. 508.)
    In this case, the contract was between Ruiiin and ilali-coiauj and it is agreed expressly between them, that .A¡oleóme is not to be responsible for the payment of the money. As between them, therefore, Ruffin’s principal was put in hazard. The case would have been different, liad Nallcome been responsible : for then a greater in-teresl would have been reserved, than is allowed by sta-fute, and the principa! not jeopardized snore than it must be by every loan.
    Bat it is said, that the contract was really between Armstrong and Ruffin ; that Hal Iconic was only the agent of the former; and that the same consequences will result, as if the contract had beoe made by Armstrong in person.
    As between Armstrong- and Hallcome, the characters of principal and agent may be permitted to exist so far as to entitle the former to all rights, and to impose on the latter all the obligations incident thereto. But as to third persons, they are to be considered in the characters they have assumed, and shall not avoid responsibility, or affect the rights of other persons, by shewing that they agreed to exhibit themselves under false colours— (7 To IL SCO — FuUij on Jlgencij, 250.)
    if Halicome had been the owner of the note, he might have sold it to Ruffin, and transferred to him the liabilities of all persons who had become responsible for tins payment. If Armstrong had been present at such negotiation, and had not contradicted it, he-would not have been permitted afterwards to gainsay it. Now if Hall-combe was his agent, the representations made by him, were the representations of Armstrong, viz : that the property was ilallcoine’s, and that Armstrong liad no interest.
    Usury is a corrupt contract — -It is indictable at Common Law. There can be no usury, where there is not a corrupt contract — (1 Saunl. 295 a.)
    it must be so pleaded, where it is Accessary to plead It specially — (2 Chiiiy, 4A6,) and so proved, whether specially pleaded, or given in evidence under the gene ral issue.
    
      But did the evidence here, shew any corrupt contract. He had a legal right to purchase a note: tiie payee of the.note had indorsed it to Hallcome ; and Hallcome in-j»ormc(j [,|m that he was the owner.
    The mistake of an agent shall not make that usurious, which was intended to he fair — (Cro. Jac. 678, Buckley v. Guildbank) — much less shall one, by false representation* involve a man in guilt, who intended nothing but what he'might rightfully do.
    A corrupt contract, in which the minds of the parties meet, is necessary to constitute usury. Therefore, when more than lawful interest was reserved, with the knowledge of the lender, but without the knowledge of the borrower, the transaction is not usurious — Smith et als. v. Beach, (3 Day’s Cases, 268.)
    In the pleadings, what corrupt agreement could be here alleged ? Would it be between Armstrong and Hallcome ? It could not; there was no loan as between them, and no usury. It could not bo between Hallcome and Ruffin, because Ruffin did not lend, nor contract to lend to Hallcome. It could not be between Armstrong and Ruffin, for between them there was no dealing, no mutual agreement.
    To permit Armstrong to allege usury, is to encourage fraud, to violate justice and pervert the statute. The object of the statute is to be a shield to the oppressed ; and no cunning or contrivance on the part of the oppressor shall take away this shield ; and shall cunning be encouraged to turn the statute into an instrument of oppression ?
    No man shall be permitted to avail himself of his own fraud, or that of his agent — (Paley 230 — 1 Vern. 239.)
    For the appellee. — It is a general principle, that usury avoids any transaction or security into which it enters, The statute is express. This extends to a note or bill in the hands of a bona fide indorser'for a valuable consi deration and without notice. — (Lowe v. Waller, Doug. 7So — Munn v. Commission Go. 15 Johns. 44,)
    .But if the transaction were not originally usurious, but in the course of negotiation the note has become tainted with usury, and then is indorsed to an innocent person without notice, yet it is void in his hands as against the maker, if the indorsee have to make title through the party to the usury — (Lowe v. Mazando, i Starkie 385, per Lord, Mlenborough.)
    
    No device, no ignorance of the usury, and no substitution of a new security, will be sufficient to avoid the statute: so ruled in 1819, per JUbbot, C. J. in Chapman v. Black, (1 Barnewall & Jllderson, 589.)
    But if Plaintiff could recover from the makers, notwithstanding he has to claim through an usurious in-dorsement, upon the ground that the note, as to them, is not affected by any illegality subsequent to the making; yet he cannot recover against the indorser, Armstrong, upon his indorsement. That indorsement is usurious, 1. Because iiallcome was Armstrong’s agent, and quifacii per alium. fadi per se. This agency is expressly proved by Iiallcome: although he denied it to Iluffirt, that makes no difference, because the validity of the instrument does not depend upon notice, but upon the fact of usury. The agency here is found by the Jury expressly. 2. If Hall-come was not the agent of Armstrong, so far as regards Ruffin, for want of notice of the agency, then the indorse-merit by A. to II. was usurious, because made with the intent that the note should he sold, and Iiallcome never could have recovered from Armstrong. Why ? Because if a note be made to be sold to raise money at a greater discount, than legal interest, it is usurious in its concoction, and void against the maker and payee who indorses it — (15 Johns. 44 — Bcnnet v. Smith, Idem 855.) So here, the indorsement of Armstrong was so made with that intent. Although the note here was originally good, yet that does not affect the liability of Armstrong upon his jiidovsemenlj if that be usurious. The hr’e-r'U'ment is a new contract between the indorser and indorsee» As an indorser for the accommodation of the maker is liable to the indorsee, though there be no consideration- — (6 Granch 224) — and likewise if a forged note, or one void for gaming or usury be indorsed, although the indorser cannot recover against him who in the one instance appears to be, and in the other is, maker,’yet he may recover against the indorser upon his indorsement, which guarantees the genuineness or validity of the note — (Hussey v. Jacob, Salk. 844 — 5 Mod. 175 — Bowycr v. Bmvpim, Stra. 11550 . The consequence follows, that an indorsement may likewise, as against the maker, pass the note, which will not render the indorser liable j because the note was originally valid, and is not destroyed, as s aspects the maker, by subsequent illegality j but the in-dorsement was in itself illegal and void from the beginning.
    If this be not the law', the statute of usury will be effectually evaded by <lie intervention of a broker. But this Plaintiff, at all events, has no claim upon the Court, because he seeks the protection of an illegal contract made by himself. All the cases that can be found of a recovery, even against the maker, upon a note or bill originally good, but infected with usury in its negotiation, arc those of subsequent innocent indorsees for full value, and not the usurer himself, who is never supported against any party.
   Taylor, Chief-Justice.

The act of Assembly which the Defendant pleads, and insists is violated by the in-dorsement sued on, prohibits the taking directly, or indirectly, for loan of anj monies, wares, merchandizes or commodities whatsoever, above the value of six pounds, by way of discount or interest, for the forbearance of one hundred pounds for one year ; and makes utterly void all bonds, contracts, and assurances, whatsoever, made iipon usury.

in. the construction of ibis part of the act, which sets aside the usurious transaction, the Legislature must be understood to comprehend every device and stratagem intended to evade the law; and although, itbenotprov-ed in direct terms, that there was a loan, and a taking of-more than legal interest for the forbearance of repayment, yet. if the appearance of a loan, and forbearance be evaded, or concealed, by some artifice contrived for that purpose, when in truth it was such, the law will equally avoid it; for as a great Judge has observed, where the real truth is a loan of 'money, the wit of man cannot find a shift to take it out of the statute.”

The Legislature has fixed the rate of interest on principles of policy, which are at least as powerful now, under the improvement of the State, in all its aspects, government, population, manners, and commerce, as they were-nearly a century ago, when the law was passed. It is not less important now, than it was then, to restrain the power of amassing wealth without industry, and to prevent' tiiose who possess money from sitting idle, and battening on the toil of others. It is not less important to prevent those, who desire profit from their money without hazard, from receiving larger gains, than those who employ it in undertakings attended with risque, calculated to encourage industry, and to multiply the sources of public prosperity. Nor is it less important to facilitate the means of procuring money on reasonable terms, and thereby to render the lending of it more extensively beneficial, ilence Courts of justice bught to watch with jealousy, against any attempt, to evade the statute, least persons under the disguise of ordinary dealings, should be allowed to obtain more than legal interest.

I have availed myself of the very full and able discussion which this case has undergone from the counsel on both sides, and of the authorities and illustrations which their industry and learning have furnished the Court; and after all these lights, my mind has settled down in the conviction, that the transaction now before us, though veiled with more than ordinary precaution, and so flex-terously contrived as to invest it with a plausible exte-rj01>j jg jn truth and substance, a shift to evado the statute.

It is contended, in the first place, that this was a fair sale of the bond, which the Plaintiff might lawfully purchase for less than the sum due upon it> and after-wards receive the whole amount with interest. The legality of such a sale cannot be questioned. But the character and substance "of this transaction, bespeak it to be a loan of money, although the parties constantly speak of a sale, and not a whisper is heard relative to a loan.

But if it had been a sale in truth, Armstrong would have had nothing more to do in the affair, than to receive the price, and leave Ruffin to obtain the money as he could, from the obligors. The money was to be raised for Armstrong’s benefit, and, if he had meditated a sale of the bond, lie would, undoubtedly, have withheld his indorsement. But by adding that to the bond, he undertook, on his part, to repay the money, which should he raised on it, in the event of the obligor’s delinquency. This appears to me, to be the unequivocal characteristic of a loan, that the money is, in all events, to be repaid with interest by the borrower himself, or out of his funds ," except in the cases where a contingency is introduced merely for colour, and for the purpose of avoiding the statute. A sale of the bond on the contrary would have left no recourse to Ruffin, except the liability of the obligors, on whose credit alone the bond would have been purchased, and who would have received no part of the price which he had paid for it.

The force of this conclusion is attempted to ho weakened by the circumstance, that there was no communication between Armstrong and Ruffin; and that the latter dealt wholly with HaSlcome, who represented himself as owner of the bond. But Halcome was the agent of Armstrong and authorised by him to create a privity between himself and any person to whom the bond should he transferred. And the law looks to the substance ami essence of the contract, to the plot and structure of the drama, not to the dramatis persona’; for upon no other principle could it have been decided (as in Lowe v. Waller — Doug. 735) that a bill of exchange given upon an usurious consideration is void, even in the hands of an indorsee for valuable consideration without notice of the usury. Is the I’laintiiF, in this case, entitled to the same consideration with an innocent indorsee ? Did he not make an usurious agreement with llallcome} not to be, enforced against him, it is true, but against his principal, Armstrong ? And I might add another question, why was liallcome’s indorsement made without recourse upon himself? it is said in the case cited, that the most usual form of usury, was a pretended sale of goods.: and in this State, the most usual form, and that by which the statute is most successfully evaded, ia a pretended sale of bonds and notes- If the statute can be evaded, because the person who received tiie money represented himself as the owner of the note, when in truth he was not, and he by his indorsement, could give a right of recovery against others, which could not be had against himself, then nothing would be more easy than the process of committing the offence, without incurring the penalty. Bui if it.be, as the sages of the law tell us, a law made “to protect men who act with their eyes open ; to protect them against themselves,” then ought the construction of the law to be liberal enough to suppress the offence in whatever garb or form it may appear ; more especially since the Legislature has studiously avoided particularising specific modes of usury, because that only led to evasion, but to enact, generally, that no shift should enable a man to take more than the legal interest upon a j,ou«.

If Hallcome had been, in truth, the owner of the bond, and had bonaf.de sold it to Ruiilu, with Armstrong’s in dorsement, but- vdftkoul his own. the transaction migitf have been sustained ; for in that case., there would have been no stipulation for the repayment of the money by the borrower. Bui as the case stands, Ruffin's title is vitia- ^ being derived through IlallcoiRc’;; indorsement, made on an usurious consideration. Rmlin could not recover from FMIcome, for Ids indorsement was without recourse: Hallcome could not recover from Armstrong, for his indorsement was without considera;ion, except the usurious one which was paid to Hallcome for his use: nor could RuEim in a suit against Armstrong, protect himself by those authorities which say, that a note, originally good, shall not be vitiated by a subsequent in-dorsement that is usurious, (which authorities, however, have been overruled by later cases, cited at the bar,) because here the suit is not against the obligors, but against the. indorsor, win indorsed it for the purpose of having it discounted for his own use : his indorsement, therefore, was a new contract. The opinion of a late distinguished Judge, in a slider State, is so applicable to this view of the question, and conveys my sentiments so much more, perspicuously than I could myself express them, that I beg leave to quote his words — 6i Í take it to be clear, that if a bill, or note, be made for the purpose of raising money upon it, and it is discounted at a higher premium than the legal rate of interest, and where none of the parties, whose names are on' it, can, as between, themselves, tnaintai-.) a suit on the bill when it becomes mature, provided it, bad not been discounted, that then such discounting of the bill would be usurious, and the bill would be void” — (15 Johns. 56.) The same question again occurs in 17 Johns. 17, and is derided the same way. Every position stated in the opinion quoted, applies to the faces of this ease so exactly, that it may be said, r,míalo nch'Jne, de te retalio varralur. Upon the tv hole, I am dearly of opinion that the charge of the J udge was perfectly correct, and f liy.t there ought not to be a new trial,< '-''v

Hall, Judge.

The bond in question was assigned by the Defendant to Hallcome, for the purpose of being assigned by Hallcome, to the Plaintiff, thereby to raise money for the Defendant. The note was transferred, accordingly, for B900, and S600 only was loaned to Armstrong. I say it was loaned, because the Plaintiff had taken the Defendant’s obligation, or indorsement, to return it: and I must say, the contract was usurious, because a greater premium than six per cent, per annum, was reserved for the use of it. This appears to me to be the common case of usury. Hallcome had no interest whatever in the transaction: the contract really was between Ruffin and Armstrong : the one loaned the money the other received it, and made his indorsement to secure and repay it. But it has been argued, that as JIallcome declared to Ruffin that he was the real proprietor of the note, and as he did so in consequence, of a fraudulent combination and agreement of Armstrong and himself, entered into for that purpose, that Ruffin should be considered a fair purchaser of the note from Hall come: and let the contract between the Plaintiff and Hallcome, he what it may, Armstrong should not be considered as a party to it, but bound to pay the full amount of the note to the Plaintiff, because there was no usurious contract between Armstrong and Hallcome.

Whether the assignee of a bond, upon a usurious consideration, can recover against the obligor, when the bond was given upon no illegal consideration, this case does not make it necessary to decide, because this is not that case. Armstrong never was indebted to Hallcome j of course, Hallcome never could have brought suit against him, and recovered. Armstrong became debtor to Ruf-sirs, in the first instance. No doubt Hallcome deceived Ruffin, when he declared himself to be the owner of the note $ but hie declaration to that effect, did not make him the owner : facts were not thereby altered : all that Hallcome did. was, to make an assignment to Ruffin; to enable him to sue Armstrong’, to whom the money was i'1 fact loaned : that assignment completed the first contract that was made between those three persons. I therefore think the rule for a new trial must be discharged.

Henderson, Judge, concurred.  