
29 U.S. 205 (____)
4 Pet. 205
JOHN LLOYD, PLAINTIFF IN ERROR
vs.
CHARLES SCOTT, BAILIFF OF WILLIAM S. MOORE, DEFENDANT.
Supreme Court of United States.

*213 The case was argued by Mr E.J. Lee and Mr Swann, for the plaintiff in error; and by Mr Jones and Mr Taylor, for the defendant.
Mr Taylor and Mr Jones, for the defendants in error.
*221 Mr Justice M'LEAN delivered the opinion of the Court.
This is an action of replevin, brought to replevy certain goods and chattels which the defendant, as bailiff of William S. Moore, had taken upon a distress for rent claimed to be due upon certain houses and lots in Alexandria, owned and possessed by the plaintiff. The sum for which the distress was made is five hundred dollars.
The declaration is in the usual form, and the damages are laid at one thousand dollars. The defendant filed his cognizance, in which he acknowledges the taking of the goods specified in the declaration; and states that a certain Jonathan Scholfield, being seised in fee of four brick tenements and a lot of ground in the town of Alexandria, by his indenture, dated the 11th of June 1814, in consideration of five thousand dollars, granted, bargained and sold to William S. Moore one certain annuity or yearly rent of five hundred dollars, to be issuing out of and charged upon the said houses and ground, and paid to the said Moore, his heirs and assigns, by equal half yearly payments of two hundred and fifty dollars, on the 10th of December, and on the 10th of June, in each year, for ever thereafter; to have and to hold the said annuity or rent charged and payable as aforesaid, to the said William S. Moore, his heirs and assigns forever. It also states, that the said Scholfield, for himself and his heirs and assigns, did, by the said indenture, among other things, *222 covenant well and truly to pay to the said Moore, his heirs and assigns, the said annual rent of five hundred dollars, by equal half yearly payments for ever. And if the rent should not be paid as it become due, it should be lawful for the said Moore, his heirs and assigns to make distress for it. That Moore was seised of the rent on the 11th of December 1814, and has since remained seised thereof.
The cognizance further states, that on the 29th of October 1816, the said Jonathan Scholfield, by his deed of bargain and sale, conveyed to Lloyd the plaintiff, for ever, certain tenements and lots of ground in the town of Alexandria, whereof the said four brick tenements and lot of ground were parcel, and subject to the rent charge stated. That Lloyd has been seised ever since and possessed of the same; and that on the 10th of June 1824, two hundred and fifty dollars, a part of the rent, was due, and on the 10th of December following, two hundred and fifty dollars, the balance of the annual rent, was due and unpaid; for which sums the defendant, as bailiff, levied a distress.
The cognizance is concluded by praying a judgment for one thousand dollars, being double the amount of the rent in arrear.
Moore covenants in the deed, that if Scholfield, his heirs or assigns, "shall at any time after the expiration of five years from the date of the deed, pay to the said Moore, his heirs or assigns, the sum of five thousand dollars, together with all arrears of rent, and a rateable dividend of the rent, for the time which shall have elapsed between the half year day then next preceding and the day on which such payment shall be made; he, the said Moore, his heirs and assigns, will execute and deliver any deeds or instruments which may be necessary for releasing and extinguishing the rent or annuity hereby created; which, on such payment being made, shall for ever after cease to be payable."
Scholfield covenanted for himself, his heirs and assigns, that he would keep the buildings in repair; have them fully insured against fire; and would assign the policies of insurance to such trustee as Moore, his heirs or assigns, might appoint, that the money may be applied to the rebuilding of *223 the houses destroyed by fire, or repairing any damage which they might suffer.
To this cognizance the plaintiff filed a special demurrer; which in the argument he abandoned, and relies upon the special pleas of usury. To each of the four pleas the defendant demurs specially, and assigns for causes of demurrer,
1. That the said pleas do not set forth with any reasonable certainty, the pretended contract which is alleged to have been usurious, and do not show an usurious contract.
2. That they do not state the time the said pretended loan was made.
3. That they do not state the amount of interest reserved or intended to be reserved, on the said pretended contract.
4. That they do not set forth any loan or forbearance of any debt.
5. That they neither admit nor deny the sale and conveyance of the premises charged with the annuity or rent to have been made by Scholfield to the plaintiff below.
Upon these demurrers the circuit court rendered judgment for one thousand dollars, the double rent claimed in the cognizance.
The plaintiff here prays a reversal of this judgment.
1. Because the deed which forms a part of the cognizance, on its face, shows an usurious contract.
2. Because the pleas set forth, with sufficient certainty, an usurious contract.
The statute of Virginia against usury was passed in 1793, and provides, that no person shall take, directly or indirectly, more than six dollars for the forbearance of one hundred dollars per annum; and it declares, that all bonds and other instruments, for a greater amount of interest, shall be utterly void.
In support of the demurrer, it is argued, that the pleas are defective, as they do not contain any allegation of facts which amount to usury; and that the decision must turn on the construction of the contract between Scholfield and Moore. And it is contended, that although usury appears upon the face of a deed, yet advantage can only be taken of it by plea. That the obligee may explain the contract, by *224 showing a mistake in the scrivener, or a miscalculation of the parties.
In Comyn on Usury, 201, it is laid down that in an action on a specialty, though it appear on the face of the declaration that the bond, &c. is usurious, still no advantage can be taken of this, unless the statute be specially pleaded. 3 Salk. 291. 5 Coke's Rep. 119. Chitty on Contracts, 240. 1 Sid. 285. 1 Saund. 295, a. The decision of this point is not necessarily involved in the case.
The requisites to form an usurious transaction are three:
1. A loan either express or implied.
2. An understanding that the money lent shall or may be returned.
3. That a greater rate of interest than is allowed by the statute, shall be paid.
The intent with which the act is done, is an important ingredient to constitute this offence. An ignorance of the law will not protect a party from the penalties of usury, where it is committed; but where there was no intention to evade the law, and the facts which amount to usury, whether they appear upon the face of the contract, or by other proof, can be shown to have been the result of mistake or accident, no penalty attaches.
At an early period in the history of English jurisprudence, usury, or as it was then called, the loaning of money at interest, was deemed a very high offence. But since the days of Henry VIII. the taking of interest has been sanctioned by statute.
In this country, some of the states have no laws against taking any amount of interest, which may be fixed by the contract.
The act of usury has long since lost that deep moral stain, which was formerly attached to it; and is now generally considered only as an illegal or immoral act, because it is prohibited by law. Assuming the position, that the pleas contain no averments which extend beyond the terms of the contract; the counsel in support of the demurrers have contended, that no fair construction of the deed, will authorise the inference that it was given on an usurious consideration. *225 It was the purchase of an annuity, it is contended; and though the annuity may produce a higher rate of interest than six per cent upon the consideration paid for it, yet this does not taint the transaction with usury.
If the court were limited by the pleas to the words of the contract, and it purported to be a purchase of an annuity, and no evidence were adduced giving a different character to the transaction, this argument would be unanswerable. An annuity may be purchased like a tract of land or other property, and the inequality of price will not, of itself, make the contract usurious. If the inadequacy of consideration be great, in any purchase, it may lead to suspicion; and, connected with other circumstances, may induce a court of chancery to relieve against the contract.
In the case under consideration, five thousand dollars were paid for a ground rent of five hundred dollars per annum. This circumstance, although ten per cent be received on the money paid, does not make the contract unlawful. If it were a bona fide purchase of an annuity, there is an end to the question: and the condition which gives the option to the vendor to repurchase the rent, by paying the five thousand dollars after the lapse of five years, would not invalidate the contract. 1 Brown's Ch. 7, 93. The right to repurchase, as also the inadequacy of price, would be circumstances for the consideration of a jury.
The case reported in 2 Coke, 252, is strongly relied on by the counsel for the defendant. In that case, an action of debt was brought upon an obligation of three hundred pounds, conditioned for the payment of twenty pounds per annum, during the lives of the plaintiff's wife and son. The defendant pleaded the statute of usury, and that he applied to the defendant to borrow of him one hundred and twenty pounds, at the lawful rate of interest; but that he corruptly offered to deliver one hundred and twenty pounds to him, if he would be obliged to pay twenty pounds per annum.
The court considered this as an absolute contract for the payment of twenty pounds per annum during two lives; and no agreement being made for the return of the principal, it was not considered usury. But, they stated, if there had *226 been any provision for the repayment of the principal, although not expressed in the bond, the contract would have been usurious.
This is a leading case, and the principle on which it rests has not been controverted by modern decisions.
Scholfield, it appears, was under no obligation to repurchase the annuity, but he had the option of doing so after the lapse of five years, which is a strong circumstance to show the nature of the transaction.
The purchase of an annuity, or any other device used to cover an usurious transaction, will be unavailing. If the contract be infected with usury, it cannot be enforced.
Where an annuity is raised with the design of covering a loan, the lender will not be exempted by it from the penalties of usury. 3 Bos. & Pul. 159. On this point there is no contradiction in the authorities.
If a party agree to pay a specific sum exceeding the lawful interest, provided he do not pay the principal by a day certain, it is not usury. By a punctual payment of the principal he may avoid the payment of the sum stated, which is considered as a penalty.
Where a loan is made to be returned at a fixed day with more than the legal rate of interest, depending upon a casualty which hazards both principal and interest, the contract is not usurious; but where the interest only is hazarded, it is usury.
Does the decision in this case, as has been contended, depend upon a construction of the contract? Are there no averments in the pleas which place before the court material facts to constitute usury, that do not appear on the face of the deed?
If the court were limited to a mere construction of the contract, they would have no difficulty in deciding that the case was not strictly embraced by the statute.
In the second plea, the plaintiff below prays oyer of the deed of indenture, and among other statements alleges, "that it was corruptly agreed between the said Scholfield and the said Moore, that the said Moore should lend to him the sum of five thousand dollars, and in consideration thereof, that he should *227 execute the said deed, &c." And in another part of the same plea it is stated, "that the said Moore did corruptly agree, that he would in the said indenture covenant, &c. that if the said Scholfield, his heirs and assigns, should, at any time after the expiration of five years from the date of said indenture, pay to the said Moore, his heirs and assigns, the sum of five thousand dollars, together with all arrears of rent, he, the said Moore, would release to him the said annuity."
And it is further alleged, "that the said Moore, in pursuance and in prosecution of the said corrupt agreement, did advance to the said Scholfield the said sum of five thousand dollars." And again, "that the said deed of indenture was made, in consideration of money lent upon and for usury; and that by the said indenture there has been reserved and taken above the rate of six dollars per annum in the hundred, for the forbearance of the said sum of five thousand dollars so lent as aforesaid."
The fourth plea contains, substantially, the allegations as to the lending, &c. that are found in the second plea.
The facts stated in the pleas are admitted by the demurrers, and the question of usury arises on these facts, connected as they are with the contract.
Although the second and fourth pleas may not contain every proper averment with technical accuracy, yet they are substantially good. All the material facts to constitute usury are found in the second plea.
It states a corrupt agreement to loan the money, at a higher rate of interest than the law allows. That the money was advanced and the contract executed, in pursuance of such agreement. That on the return of the principal, with a full payment of the rent, after the lapse of five years, the annuity was to be released. The amount agreed to be paid above the legal interest, for the forbearance, is not expressly averred, but the facts are so stated in the pleas as to show the amount with certainty. Five hundred dollars, under cover of the annuity, were to be paid, annually, for the forbearance of the five thousand dollars, making an annual interest of ten per cent. Do not these facts, uncontradicted *228 as they are, amount to usury? Is it not evident, from this statement of the case, that the annuity was created as a means for paying the interest, until the principal should be returned, and as a disguise to the transaction? Such is the legitimate inference which arises from the facts stated in the plea.
At this point in the case an important question is raised, whether Lloyd, the plaintiff in the replevin, being the assignee of Scholfield, can set up this plea of usury in his defence. It is strongly contended that he cannot. He purchased this property, it is alleged, subject to the annuity, and paid for it a proportionably less consideration. That knowing of the charge before he made the purchase, it would be unjust for him now to evade the payment. And the inquiry is made, whether Lloyd could plead usury in this contract, if the annuity had been purchased by Scholfield. He would be estopped from doing so, it is urged, by the obligations of his own contract, as he is now estopped from resisting the claim of Moore.
As to the injustice of the defence, it may be remarked that the objection would apply with still greater force against Scholfield, if he were to attempt, by a similar defence, to evade the payment of the annuity. He received the money after assenting to the contract; but he is at liberty to evade the payment of the annuity by the plea of usury. Is the position correctly taken, that no person can avail himself of this plea, but a party to the original contract?
The principal seems to be settled, that usurious securities are not only void, as between the original parties, but the illegality of their inception affects them even in the hands of third persons who are entire strangers to the transaction. Comyn on Usury, 169. A stranger must "take heed to his assurance, at his peril;" and cannot insist on his ignorance of the contract, in support of his claim to recover upon a security which originated in usury.
In the case of Lowe vs. Waller, Douglass, 735, the plaintiff was the indorser of a bill originally made upon an usurious contract: though he had received it for a valuable *229 consideration, and was entirely ignorant of its vice, the court of king's bench, after great consideration, determined that the words of the statute were too strong; and that after what had been held in a case on the statute against gaming, the plaintiff could not recover.
If a bill of exchange be drawn in consequence of an usurious agreement for discounting it, although the drawer to whose order it was payable was not privy to this agreement, still it is void in the hands of a bona fide indorser. 2 Camp. 599. In Holt's N.P. 256, Lord Ellenborough lays down the law, that a bona fide holder cannot recover upon a bill founded in usury; so neither can he recover upon a note where the payee's indorsement through which he must claim has been made by an usurious agreement. But, if the first indorsement be valid, a subsequent usurious indorsement will not affect him; because such intermediate indorsement is not necessary to his title to sue the original parties to the note.
If a note be usurious in its inception, and it pass into the hands of a bona fide holder who has no notice of the usury, and the drawer give to the holder a bond for the amount of the note, the bond would not be affected by the usury. 8 Term Rep. 390.
In the case of Jackson vs. Henry, reported in 10 Johnson, 185, a plea of usury was set up to invalidate the title of a purchaser at a sale of mortgaged premises. This sale, under the statute of New York, is equivalent to a foreclosure by a decree in chancery; and the court decided, that the title of the purchaser was not affected by usury in the debt for which the mortgage was given. The statute of New York declares, all bonds, bills, contracts and assurances, infected with usury, "utterly void." And so say the court, on the adjudged cases, when the suit at law is between the original parties, or upon the very instrument infected.
The case of D'Wolf vs. Johnson, reported in 10 Wheat. 367, is relied on by the counsel for the defendant, as a decision in point.
In that case it will be observed, that the first mortgage *230 being executed in Rhode Island in 1815, was not usurious by the laws of that state; and the second one, executed in Kentucky, in 1817, being a new contract, was not tainted with usury. The question therefore, whether the purchaser of an equity of redemption can show usury in the mortgage to defeat a foreclosure, was not involved in that case.
The Virginia statute makes void every usurious contract; and the second plea contains allegations which, uncontradicted, show that the contract between Moore and Scholfield was usurious in its origin.
This contract, thus declared to be void, is sought to be enforced against Lloyd, the purchaser of the property charged with the annuity. Between Scholfield and Lloyd there is a privity; and if the contract for the annuity be infected with usury, is it not void as against Lloyd?
In this contract, a summary remedy is given to enter on the premises, and levy, by distress and sale of the goods and chattels there found, for the rent in arrear; and if the distress should be insufficient to satisfy the rent, and it should remain unpaid for thirty days, Moore is authorised to enter upon the premises, and to expel Scholfield, his heirs and assigns, and hold the estate. Lloyd, as the assignee of Scholfield, comes within the terms of the contract; and is liable, being in possession of the premises, to have his property distrained for the rent, and if it be not paid, himself expelled from the possession. Under such circumstances, may he not avail himself of the plea of usury, and show that the contract, which so materially affects his rights, is invalid? Moore seeks his remedy under this contract, and if it be usurious and consequently void, can it be enforced?
If usury may be shown in the inception of a bill, to defeat a recovery by an indorsee, who paid for it a valuable consideration without notice of the usury; may not the same defence, be set up, where, in a case like the present, the party to the usurious contract claims, by virtue of its provisions, a summary mode of redress.
The court entertain no doubt on this subject. They think a case of usury is made out by the facts stated in the second plea, and that Lloyd may avail himself of such a defence.
*231 The judgment of the circuit court must be reversed, and the cause remanded, with instructions to overrule the demurrers to the second and fourth pleas, and permit the defendant to plead.
This cause came on to be heard on the transcript of the record from the circuit court of the United States for the district of Columbia, holden in and for the county of Alexandria, and was argued by counsel; on consideration whereof, it is ordered and adjudged by this court, that the judgment of the said circuit court in this cause be and the same is hereby reversed, and that this cause be and the same is hereby remanded to the said circuit court, with instructions to overrule the demurrers to the second and fourth pleas, and to permit the defendant to plead, and for such further proceedings as to law and justice may appertain.
