
    *Selby v. Morgan.
    March, 1832.
    (Absent Tucker, P.)
    Usury — Loan of Bank Stock — Sale. — Question, whether, under the circumstances of the transaction, a sale of bank stock upon a credit, at par, the cash value of the stock at the time of sale being twenty per cent, below par, was a bona fide sale, or an usurious loan under cover of a pretended sale.
    Same — Sale of Bank Stock at Par — Harket Price below Par — Bffect-Case at Bar. — S. being under an urgent necessity to raise a sum of money, requests M. to assist his agent in negotiating a loan thereof at bank; M. lends his assistance, but the bank refuses to lend the money; then M. proposes to S. to sell him bank stock at par upon a credit, the stock being then 20'per cent, below par in the market; and M enters into a negotiation with the bank to borrow the money S. wanted, for S., upon a pledge of the stock; the bank offers to lend the money upon a pledge of the stock and S.’s note indorsed by M. and M. having thus settled the terms of the loan with the bank, sells his stock to S. at par on a credit, and, immediately, the bank lends S. a sum equal to 4-5ths of the par value of the stock, on a pledge of the stock and on S. ’s note indorsed by M. Held, this is a fair sale of bank stock by M. to S. and not a device to cover an usurious loan of money.
    In January 1825, a mercantile house of Baltimore having recovered a judgment against Walter Selby of Jefferson, and sued out a writ of fieri facias thereon, which was levied on Selby’s property ; and Selby having given a forthcoming bond for the delivery of the property at the day and place of sale, and having forfeited the bond ; and an award of execution thereon, in the month of March following, being expected as a matter of course; Selby was under an urgent necessity to raise funds, about 4000 dollars, to discharge the debt, and anticipate the award of execution. Therefore, he got a Mr. Hunter, to go first to Baltimore, to procure indulgence from his creditors, if possible, and if he should fail in that effort, then to proceed to Alexandria, and to obtain a loan from some of the banks there, or of any of the banks in the district of Columbia; and he sent a letter by Hunter to Jacob Morgan of Alexandria, requesting him to assist Hunter in negotiating the loan. Hunter’s efforts to procure indulgence from the creditors, having ^proved abortive, he proceeded to Alexandria, delivered Selby’s letter to Morgan, and explained to him the necessity Selby was under to raise money. Morgan lent his aid to Hunter, to negotiate a loan for Selby, at the banks in Alexandria, and at a bank in Georgetown ; but no loan could be obtained. And then Morgan wrotfe the following letter to Selby :
    “Alexandria, 21st January 1825. Dear sir, Mr. Hunter handed me your letter of the 10th inst. — Mr. Hunter’s efforts, together with my own, have proved unsuccessful in procuring a loan for you. Indeed, all our banks are in a situation, which forbids their lending, except at short periods. I mentioned to Mr. Hunter, that I had bank stock, which you might have, if you thought it would answer your purpose : I would sell it upon such time as would enable you to meet the payments, if nothing better can be done. I can accommodate you to whatever amount you may require. Let me hear from you— and believe me &c. (signed) J. Morgan.”
    Upon the receipt of this letter, Selby (it seemed) wrote to Morgan, inquiring upon what terms he would sell him 5000 dollars of bank stock; and Morgan wrote him the following letter in reply :
    “Alexandria, 5th February 1825. Dear sir, I duly received your letter of the inst. I will sell you 5000 dollars of bank stock of the banks of this town, at par, payable in two years, upon -your note with collateral security, with interest at six per cent, payable semi-annually. With this stock, you can immediately command 4000 dollars, either by giving a stock note to the banks, or an individual one, payable in one or two years, or to sell the stock for money. In the first case, you can at your leisure, sell the bank stock, if you do not like the present price of it; in time, the stock may get to par. I should think, then, it would he preferable to borrow what money you want, upon it. The dividends upon the stock will more than pay the interest on the sum you require ; and your collections perhaps, *will enable you to pay the amount, without recourse to a sale at all. This is the way I have recently sold a considerable quantity of stock, to those who require loans of money for a' longer time than the banks are willing- to lend. And I can now sell, in the same way, at any moment, upon the same terms, all the stock I have. If this will answer your purpose, please let me know, and immediately you can command the money. I am &c. (signed) J. Morgan.”
    The market price of stock being at the time as Selby was informed, some twenty or thirty per cent, below par, he hesitated to purchase on the terms proposed ; and sent Hunter to Baltimore again, to solicit indulgence from his creditors, with authority, in case he should fail, to accede to Morgan’s terms, and purchase his stock. The creditors proving obdurate, Hunter wrote the following letter to Morgan :
    “Baltimore, 11th February 1825. Dear sir, I am now here in relation to the claim of T. & G. against Mr. Selby, in satisfaction of which, the offer from you of the bank stock is proposed by Mr. Selby to be acceded to, in case Messrs. T. & G. do not agree to withhold their execution against him, which I have little hope of their doing. Mr. Selby has executed a bond payable to you for 5000 dollars, the amount he wishes to purchase, (and which I have with me) and also a covenant binding himself to execute a deed of trust forthwith upon his property, for the payment (and which I shall see attended to) for the purpose of obtaining the money immediately and without delay, as the scarcity of time does not admit of s more definite arrangement. If this arrangement accords with your arrangements, let me know immediately upon receipt of this, as I shall wait here for your answer. Respectfully &c. (signed) P. P. Hunter.”
    To this letter, Morgan wrote the following answer: “Alexandria, 14th February 1825. Dear sir, I have just received your letter of the 11th inst. I cannot consent to the arrangement you propose in relation to my stock. I am still ^disposed to sell Mr. Selby the amount of bank stock he requires, but in payment of which I must be fully secured, and that security accorded and approved of, before the sale can be consummated. The length of time he requires on the stock, alone renders this condition indispensable. I am &c. (signed) J. Morgan.”
    With this letter, Hunter returned to Selby, who thereupon repaired himself to Alexandria, in the hope of making better terms with Morgan. The only change of them to which Morgan would assent, was to allow him a credit of two and three years, instead of two years, for the price of the stock, payable in instalments with interest to be paid semiannually : he still insisted on the par value. Selby still hesitating to purchase on such terms, returned home. But, on or about the 24th March 1825, he went again to Alexandria; and on this second visit, the arrangement was concluded. Morgan sold Selby seventeen shares of stock of the bank of Alexandria of 200 dollars each, and sixteen shares of the bank of Potowmac of 100 dollars each, at par, amounting to 5000 dollars, which Selby was to pay in two instalments, half within two years, and the other half within three years, and to pay him the interest on the whole, half yearly; and on the 26th March, upon Selby giving Morgan his bonds for the instalments, and a deed of trust of two parcels of valuable land in Jefferson to secure the payment, the stock was transferred to Selby. And on the same 26th March, a loan of 4000 dollars, for twelve months, was made by the bank of Alexandria to Selby, upon his own note indorsed by Morgan for his accommodation, and upon a pledge of the whole of the stock purchased of Morgan.
    At the time of this sale by Morgan to Selby, of this bank stock at par, the market price of the stock was, at the least, twenty per cent, below par; and this was known to both parties. The stock was afterwards, in April and June 1827, sold to pay the debt it was pledged for to the bank ; and the proceeds was only 3560 dollars 25 cents.
    So far the facts of the case were incontestable and uncontested.
    *In August 1827, the trustee to whom Selby had conveyed his lands in Jefferson, to secure the debt to Morgan, having, at Morgan’s instance, advertised the lands for sale, in pursuance of the deed, to satisfy so much of the principal as was then due, and all arrears of interest—
    Selby exhibited a bill against Morgan, in the superiour court of chancery of Winchester, setting forth the undisputed facts of the transaction above stated, and alleging moreover, that in the interval between Selby’s first visit to Alexandria, when he declined to purchase the stock on the terms proposed, and his second visit, when the bargain was concluded, Morgan had himself negotiated with the bank of Alexandria, the terms of the loan of 4000 dollars to Selby, upon Selby’s note indorsed by Morgan, and upon a pledge of thirty-three shares of bank stock ; and that on Selby’s second visit, Morgan informed him of this negotiation with the bank, and of the terms on which the bank had agreed to lend the money, and engaged to indorse the note for Selby’s accommodation, in order to induce him lo purchase the stock on those hard terms ; that this, at last, was Selby’s inducement to assent to the terms; and that the negotiation of the loan at bank, was part of, and connected with, the transaction of the sale of the stock by Morgan to him : charging, therefore, that the sale of the stock was a device to cover usury extorted from him by Morgan, and that that contract was, in effect, not a sale of stock, but an usurious loan to Selby, of money obtained from the bank upon the Credit of Morgan’s indorsement and the pledge of Morgan’s stock : and praying an injunction to inhibit the sale of his lands under the deed of trust, and general relief.
    The injunction was awarded.
    Morgan, in his answer, admitted all the facts above stated as being uncontested ; but he denied the other allegations of the bill in very explicit terms.
    In March 1828, the chancellor dissolved the injunction, and Selby appealed to this court. The cause was heard here in March 1829, before judges Brooke,-Cabell, Carr *and Green ; and upon the proofs then in the cause, the court was equally divided in opinion, upon the question of fact, Whether Morgan’s engagement to indorse the note for Selby’s accommodation, in order to obtain the loan of 4000 dollars from the bank of Alexandria, was so connected with the contract between Selby and Morgan for the sale and purchase of the stock, as to constitute apart of this contract, and the consideration in part of Selby’s purchase of the stock? Judge Carr held the negative, and that, thterefore, there was no pretense for Selby’s complaint, that the transaction for the sale and purchase of the stock, was usu^ rious : judge Brooke was of opinion that the transaction was not usurious, in any view of the case; and judges Cabell and Green held the affirmative on the above question of fact, and thence inferred, that the transaction was usurious. By this decision of this court, the chancellor’s order dissolving the injunction was affirmed ; and the cause remanded to the court of chancery.
    After the cause was returned to the court of chancery, it was clearly proved, that on the 7th March 1825 (whether or no Selby was chen at Alexandria upon his first visit, did not certainly appear) Morgan requested the president of the bank of Alexandria, to ascertain from the directors, whether they would lend Selby 4000 dollars, upon the hypothecation of seventeen shares of stock of the bank of Alexandria, and sixteen shares of the bank of Potowmac ; and they refused to lend the money on that security, but came to the resolution to make the loan to Selby, upon the security of a pledge of the stock, and of Selby’s note indorsed by Morgan : that Morgan was immediately informed of this resolution, by the president of the bank: that Selby had no share in the negotiation with the bank for the loan, and never was apprised of it, till informed by Morgan : and that the delivery of Selby’s bonds and mortgage to Morgan, to secure the purchase money of the stock, the transfer of the stock by Morgan to Selbjq the hypothecation and transfer of the stock by Selby to the bank, the execution and delivery to '*the bank of Selby’s note indorsed by Morgan, and the payment by the bank to Selby of the 4000 dollars lent him, were contem-porarj' acts. And it was also proved, that in December 1824, Morgan held only ten shares, and in February 1825, only thirteen shares, of the stock of the bank of Alexandria ; so that he must have purchased part of the stock he sold Selby, after the treaty with him commenced.
    Upon this new evidence, Selby moved the court of chancery to reinstate the injunction. This motion was overruled. And Selby again appealed to this court.
    The cause was very earnestly debated here, by Leigh for the appellant, and by Nicholas and Johnson for the appellee.
    Leigh said, that Morgan knowing Selby’s urgent necessity for money and his purpose to borrow it, was the first to propose to sell him bank stock, if that would answer his purpose, namely, his purpose of raising money ; and, in his letter to Selby, of the 11th February 1825, after pointing out to him the advantages of the purchase of the stock, upon the terms proposed, as a method of raising the money, either by the hypothecation of the stock, or by selling it for money, he told him, that “this was the way he had recently sold a considerable quantity of stock, to those who required loans of mone3>' for a longer time than the banks were willing to lend that “he could now sell, in the same way, at any moment, upon the same terms, all the stock he hadand he desired Selby, “if this would answer his purpose” (namely, of raising money) “to let him know, and immediately he” (Selby) “could command the money.” The transaction, then, commenced in an effort of Selby to borrow money, under an urgent necessity, known to Morgan ; and 'this letter amounted to an avowal of an usurious intention; an avowal, that this proposed sale of stock was the way which Morgan had devised and practised, to cover loans of money to those who, like Selby, could not borrow it of the banks. And that this was his real design, was the more apparent from the fact, that he did not, at the time, hold as *much stock as he proposed to sell; that he had to buy part of the stock he sold Selby. It was then the scheme of Morgan to get usury on his money : he bought at twenty percent, below par, for the purpose of selling to Selby, on a credit, at par (though the purchase money was to bear legal interest, and so was made equal to cash, and to be perfectly secured by a deed of trust of real estate) in order, that Selby might raise monev on the stock, to the amount of its real value. Then, in the consummation of the transaction, the money that Selby got of the bank, was not, in truth, lent to Selby, at his request, upon the credit of his note and an hypothecation of his stock, but was lent at Morgan’s solicitation, upon the credit of Morgan’s indorsement, and of an hypothecation of stock furnished by Morgan for the purpose; which, in substance and effect, was the same thing, as if Morgan had borrowed the money of the bank upon his own note indorsed by Selby, and an hypoth-ecation of his own stock, and then lent the money to Selby. And the effort of the counsel was, to liken this case to those of Lowe v. Waller, 2 Doug. 736 ; Kent v. Lowen, 1 Camp. 177 ; Dunham v. Dey, 13 Johns.-Rep. 40 ; Dunham v. Gould, 16 Id. 367, S. C.
    Nicholas and Johnson maintained, that the transaction was exactly what it purported to be on its face — a sale of bank stock by Morgan to Selby, upon a credit of two and three years, at a price of twenty percent, above the cash market price at the time of sale ; and that the case was, in principle, the same with that of Greenhow’s adm’x v. Harris, 6 Munf. 472.
    
      
      He decided the cause in the court of chancery.
    
    
      
      Usury — Sale of Bank Stock at Par — Market Value below Par — Effect.—Nothing is better settled, in Virginia than that stock, bonds and notes may be sold, like any other property, at any price not above par which may be agreed between the parties. And the sales of stock and notes on credit at par when the market price was as much as 20 per cent, below par have been sustained as lawful. Brockenbrough v. Spindle, 17 Gratt. 33, 41, citing West v. Belches, 5 Munf. 187; Greenhow v. Harris, 6 Munf. 472; Selby v. Morgan, 3 Leigh 577. To the same effect, the principal case is cited in Gordon v. Dooley, 10 Fed. Cas. 785; foot-note to Bank of the Valley v. Stribling, 7 Leigh 26; Thornton v. Gordon, 2 Rob. 728.
      See monographic note on “Usury” appended to Coffman v. Miller, 26 Gratt. 698.
    
   CARR, J.

When this case was before this court at a former time, the only question which I discussed in my opinion then delivered, was the question of fact, Whether Morgan engaged to indorse Selby’s note at bank, as a part of the contract for the sale and purchase of the bank stock? Coming to the conclusion, that the promise to indorse formed no part of the contract, there was no necessity for my investigating *the law of the case. I think the impression on my mind was, that, if the promise to indorse formed a part of the contract, the transaction was usurious; but it was an impression taken up without examination. The new evidence has changed my view of the facts. When it was found that Selby could not effect a loan of the banks, and the treaty for Morgan’s stock commenced, the idea seems to have been, that by depositing the stock with the bank, it would lend the money, on the note of Selby without an indorser. But on the 7th March, 1825, (when Selby was, probably, at Alexandria, and the treaty on foot) the president of the bank, at the request of Morgan, applied to the directors, to know whether they would lend Selby 4000 dollars on his depositing as a security stock of the banks of Alexandria and Potowmac, to the amount of 5000 dollars? The board refused the loan on the stock, unless Selby’s note should be indorsed by Morgan. An entry to this effect was made on its journal, and of this, the president says, he gave Morgan information. From this time, I cannot but suppose, that the treaty for the stock, proceeded upon the ground, that it was to be hypothecated, Selby’s note given to the bank, and Morgan to indorse it. Selby bought the stock at par, executed his bonds to Morgan for 5000 dollars, payable with interest, in two and three years, and secured by deeds of trust; he gave about twenty per cent, above the cash price in the market; Selby then deposited the stock with the bank, with a power of sale ; executed his note, which Morgan indorsed; and the bank paid Selby the money lent. It is contended, that the transaction, though in appearance a sale of stock, was, in truth, a loan of money at exorbitant usury. This is the question for examination.

In all such cases, lord Mansfield tells us, “The view of the parties must be ascertained, to satisfy the court, that there is a loan and borrowing, and that the substance was, to borrow on the one part, and to lend on the other.” We have decided often, that the sale of stock, or any other ^property, at whatever price, does not of itself constitute usury. In Greenhow v. Harris, judge Roane says, “I distinctly admit the right of a party to sell property, such as bank shares, at whatever price is agreed on. The transaction becomes usurious, only, when the object is to borrow money, and not to purchase stock, and the price of the stock is graduated as a device to effect the purpose ; or where there is a combination between the seller of the stock on a credit, and the purchaser for cash.” Does the case before us fall within the definitions here given? Was the substance, to borrow on the one part, and to lend on the other, and not to purchase stock? I can have no doubt, that Selby meant to buy Morgan’s stock, and Morgan to sell it. It is equally clear that Selby was in distress for money, and wanted the stock as a means to raise it ; and that Morgan knew this. Indeed, their first communications on the subject, grew out of a request of Selby that Morgan would assist his agent Hunter, in an attempt to negotiate a loan with the banks The attempt failed, and then Morgan wrote to Selby telling him that he had stock, which he would sell him at par, giving him such time as would enable him to make collections ; pointing out the facilities which the stock would afford in raising money, especially by giving a stock note to the banks, or an individual one, by which he tells him he could command the money at once. The whole aspect of the case exhibits Morgan as the seller of stock, not the lender of money. And the difficulty with me has been to bring this within any of the cases which have been cited. In Stribling v. Bank of the Valley, 5 Rand. 132, we decided, that the sale of stock at twenty per cent, above the market price was usury, because (solely because) there was indissolubly linked to that sale, a loan of money by the seller to the buyer. Here that distinctive feature is wanting. Morgan sells his stock, the bank lend its money, not to Morgan but to Selby; not on Morgan’s credit, but on the credit of Selby, the stock and Morgan : a loan not influenced by the purchase and rate *of the stock, but made by the bank, in the course of its every day business ; a. loan- agreed on all hands to be free from usur3', T cannot well imagine, how a loan thus distinct, thus fair in itself, where no combination, no community of interest or profit can be detected, between the seller of the stock and the lender of the money, should make the sale of the stock usurious, which without it all admit would be untainted.

This case was likened to Howe v. Waller. There, Waller wanted to raise ¿200. on a bill of exchange. Stratton & Harris hearing of it, sent their broker to let him know, that they would lend him ¿100. in money and ¿100. in goods, but that the goods should be choice sorts ; be should have them at the warehouse price, and should not lose by them. When Waller went to see them, they pretended that they had no money then, but goods only, and desired that the business might lay over. Thus, they lured him on for about three weeks, knowing his extreme distress for money. At length, they sent him word, if he would come the next day, he should have ¿50. in money, and the rest in goods. He attended. One of the partners went out, and soon returned, saying he could get no money, but if Waller would take the whole in goods he should have them directly. Waller agreed : a broker who was present, sorted out the goods : they were immediately taken by him to an auctioneer, who sold them for ¿117. a sacrifice of nearly fifty per cent. Lord Mansfield said, it was impossible to wink so hard, as not to see, that there was no idea between the parties, of any thing but a loan of money ; and that the only purpose of Stratton & Harris was to contrive to get more than legal interest. The device was, to give the transaction the colour of the sale of goods. Stripping .off this covering, the court considered the goods sent to auction, as still the goods of Stratton & Harris ; the money raised by the sale, as their money ; and this money advanced by them to Waller, at a premium of near fifty per cent. And this has always been, and I trust always will be, considered a perfectly *sound decision. But does our case fall within it ? I cannot think so. There seems to me some strong distinctions between them : from first to last, the treaty between Selby ar.d Morgan, was for a sale of stock. Morgan never offered to lend Selby money. It was, in truth, a sale of stock. If you connect it with the bank transaction, it was still a sale of stock, which Morgan knew Selby meant to hypothecate with the bank for a loan of money, and to enable him to effect which, Morgan agreed to indorse his note. Still there was no borrowing and lending between Selby and Morgan ; no sale of the stock to the bank to raise the money ; nor any sale or sacrifice of it contemplated. The 5000 dollars in stock were pledged, as a collateral security for the 4000 dollars borrowed by Selby of the bank, not of Morgan ; and it was understood, that the loan was for twelve months. Thus Selby would have twelve months to return the loan, and redeem his stock ; and within this time, he seemed very confident that he could make his collections. In truth, eighteen months were given him : if within that time he had paid him off his note, the stock would not have been sacrificed : he would have held it. 'In Pollard v. Baylors, 6 Munf. 433, it is strongly laid down, that a penalty from which a party may deliver himself, by complying with his contract, does not make' such contract usurious. While Selby kept the stock, the dividends represented its par value in money ; and, in the mutations of the market, the stock might have risen far above its par value. We have known this the case with more than one bank. This case, therefore, does not fall within the principle of Lowe v. Waller.

The case of Kent v. Bowen was also relied on. There, Bowen made a promissory note to Coales & Co. for £153. 15. 0. payable at ninety days ; it was indorsed to the plaintiff, who brought assumpsit on it; the defence was usury ; the facts were these ; Coates & Co. accommodated Bowen with their acceptance at three months, in consideration of which Bowen executed his note to them at ninety days for the same sum, with the addition of two and a half per cent. ^commission. The device attempted there, was to cover the usury by that usage, under which country bankers have been allowed to take a certain commission, besides legal interest, for their trouble and expense ; but that was for discounting bills : here (lord RUenborough said) there was no colour for a commission, Coates & Co. being the acceptors, and not the discounters of the bill ; and the commission was a mere cloak for usury. I consider that just as plain a case of usury, as if Coates & Co. had advanced money to Bowen to receive two and a half per cent, above legal interest. Their acceptance bound them to pay the money unconditionally, and it was their money on which they took the usury. But our case is not like that. Morgan sold stock to Selby, and indorsed Selby’s note to the bank : but this did not make him the lender of the money : the bank was the lender : he was a mere surety for the borrower, lending his name to him. The difference of his position from that of Coates & Co. is strikingly illustrated by the fact, that indorsers are allowed to taire a commission for the loan of their credit and responsibility.

The case of Dunham v. Dey was cited. It turns on precisely the same point with Kent v. Lowen; and admits of the same answer. I beg leave to refer, though, to what justice Spencer says, upon the subject of indorsers : “It has been said (he observes) that it is the usage for indorsers of bills of exchange, and sureties on custom house bonds, to take a per centage, for advancing their responsibilities. I see nothing improper in this ; there is no loan of money directly, or indirectly, in either of these cases ; they come neither within the terms nor the mischiefs of the statute; and they are innocent transactions.”

Thus the case before us seems to me essentially different from those cited in its support. The sale of the stock being by Morgan, and the loan of the money by the bank, without the slightest proof of collusion or combination between them, I cannot so connect the transactions, as to taint the sale of the stock with usury.

*1 think the chancellor was right in refusing to reinstate the injunction.

CABEBB, J.

Upon a careful re-examination of this case, I am now of opinion, that the transaction was not usurious ; and. therefore, that the order of the chancellor overruling the motion to reinstate the injunction, must be affirmed.

BROOKE, J. I am clearly of the same opinion.

Order affirmed.  