#### *Crenshaw’s Adm’r v. Clark and Others.

February, 1834,

Richmond.

(Absent Brooke and Green, J.)

Usury- -Personal Defense*— Case at Bar. — A. haying executed his bond, and B. being bound as his surety lor the debt, to C., mortgages property to 15. to indemnify him against this suretyship, and then sells the mortgaged subject to D. he undertaking to pay the debt lo C. ; then G. brings suit at law on the bond against A. who pleads usury, butC. recovers judgment; and then flies a bill in equity against A. B. and D., to have satisfaction of the debt out of the subject mortgaged by A. to B., and then sold by A. to D.; the debtors A. and B. say the debt is usurious, but insist, that the purchaser D. is bound to pay it; Held, 1. That D. is bound to pay the debt, and the mortgaged subject in his hands shall be subjected to the satisfaction of it; 2. That the answer of A. and B. is not evidence of the usury for D. ; and 3. That it is not competent to D. to set up the objection of usury practiced on A.

Charles Crenshaw administrator of Nathaniel Crenshaw exhibited a bill against James Penn, Robert Penn and Christopher Clark, in the superior court of chancery of Lynchburg, setting forth, that James Penn executed a bond to Robert Penn for *¿500.*and that the same was assigned by Robert to the plaintiff’s intestate in his lifetime, for valuable consideration; that the plaintiff had brought a suit upon this bond, and recovered judgment against James Penn, that, before that judgment was recovered, James Penn conveyed a large property of lands and slaves and other personalty to Clark, upon an express written agreement, that Clark should pay certain debts, and this particular debt among the rest, out of the purchase money; and this conveyance being made, James Penn was left wholly insolvent, and removed out of the state: therefore, the bill prayed a decree against Clark for the amount of the debt, and that the property conveyed to him by James Penn should be subjected to it.

Robert and James Penn, in their answers, stated, that upon a treaty between James Penn and Nathaniel Crenshaw *in his lifetime, Crenshaw agreed to lend James Penn money, upon an usurious premium of twenty per cent. ; in consequence of which James Penn executed the bond for ,£500. to Robert, and he assigned it the next day to Crenshaw, who discounted the twenty per cent, premium, and paid the balance to Robert, who paid it to James; Robert being in truth, only an indorser for James’s accommodation: that James, afterwards mortgaged all his property, real and personal, to Robert, to indemnify him against responsibilities by reason of suretyships he had incurred for him for several debts, and, among the rest, this particular debt due to Crenshaw: that James, afterwards, sold all the mortgaged property to Clark, upon an express agreement that Clark should pay all the debts for which Robert was any way bound as a surety for James, and, in particular, this debt due to Crenshaw, the payment of those debts being part of the consideration for which the mortgaged projjerty was sold to Clark; and thereupon, the mortgage was surrendered to Clark to be cancelled. And these defendants insisted, that Clark was bound to pay this debt.

Clark, in his answer, also insisted that the debt was usurious, and gave the same account of the transactions between James Penn and Crenshaw, with that contained in the answers of James and Robert Penn. He said, that when he purchased of James the property that . had been mortgaged to Robert, he entered into a written agreement with Robert, to indemnify him against all his suretyships for James; but it was never the intention of the parlies, that he should pay such usurious debts as that claimed by Crenshaw ; that he purchased the mortgaged property, in order to get satisfaction, as *36far as he could, of large and heavy debts due from James Penn to himself; and he was still a loser .to an amount exceeding 15,000 dollars.

The agreement between Robert Penn and Clark was exhibited by the defendants. In that instrument, — after reciting that James Penn had mortgaged his property to Robert, in order to indemnify Robert against sundry large debts, for which he had become responsible for James, specially ^'enumerated, among which was this debt to Crenshaw, and that Robert had delivered up the mortgage to Clark to be cancelled, — Clark, in consideration thereof, bound himself to save harmless and indemnify Robert from responsibility for each and all of the specified debts, and all interest and damages upon them, by paying or otherwise settling and adjusting the same, provided they should not exceed, exclusive of interest, the sum of 13,249 dollars.

• Depositions were taken to prove the usury charged against Crenshaw; but though these depositions proved, that Crenshaw was in the habit of lending money on usury, and that the method of taking a bond from the borrower to a third person, and an assignment thereof by the obligee to himself, was often resorted to by him to conceal the true character of the transaction, there was no sufficient proof of the usury alleged in this particular case.

It appeared, fi'om the record of the action at law brought by Crenshaw’s administrator against James Penn, to recover this debt, that Penn pleaded the statute of usury, and that the jury found against the plea.

The chancellor thought that the answers of James and Robert Penn, as to the usury, ought to be regarded as evidence along with the depositions touching that point, and that, upon the whole, the fact of the usury was sufficiently proved; and, therefore, he dismissed the bill: from which decree, this court, on the petition of Crenshaw’s administator, allowed an appeal.

Johnson, for the appellant.

Leigh, for the appellees.

*

Usury — Personal Defense. — If is established, that the plea of usury, as applied to landed security, is personal and peculiar; and. however a third party, having an interest in the land, may be affected incidentally by a usurious contract, he cannot take advantage of the usury. Christian v. Worsham, 78 Va. 109 ; Michie v. Jeffries, 21 Gratt. 334, 345, and *footnote;*Dickenson v. Bankers, etc., Co., 93 Va. 502, 25 S. *E.*Rep. 548 ; Lee v. Feamster, 21 W. Va. 113; Bensimer v. Fell, 35 W. Va. 23, 12 S. E. Rep. 1081, all citing the principal case. In accord, see Spengler v. Snapp, 5 Leigh 478. See principal case also cited in Hope v. Smith, 10 Gratt. 224.

Same — Proof of Necessary. — 'That strong and clear proof should be requirtd to convict a man of usury, and subject him to all the consequences of such conviction, is a proposition which rests on the plainest principles of law, and can require a citation of no authority for its support. It is emphatically affirmed by some of our judges in the following, among other cases : and is, I believe, denied by no j udge in any case. *Crenshaw v.*Clark, 5 *Leigh*65 ; Grigsby v. Weaver, 5 Leigh 197; Smith v. Nicholas, 8 Leigh 330. The usury ought to be proved beyond a rational doubt to the contrary.— MoNointE, P., delivering the opinion of the court, in Brockenbrough v. Spindle, 17 Gratt. 32. To the same effect, the principal case was also cited in Town of Danville v. Pace, 25 Gratt. 31.

To the point that usury is required to be set forth precisely in the plea and it must be proved as set forth, the principal case was cited in Turpin v. Povall. 8 Leigh 107 ; Smith v. Nicholas. 8 Leigh 352, 353, 355.

In Smith v. Nicholas, 8 Leigh 330. it was held that, where usury is relied upon by a defendant in equity to defeat the plaintiff’s whole claim, the facts constituting the usury must be distinctly alleged, and clearly proved according to the allegation ; but that it is not necessary to allege them with the formal strictness of a plea of usury at law. In that case it was held that the defense of usury had been well made in the answer.

See principal case also cited in Steptoe v. Haryey, *7*Leigh 539.

On the subject of usury, see generally, mono-graphic *note*on “Usury” appended to Coffman v. Miller, 26 Gratt. 698.

CARR, J.

The depositions in this case, though they raise a suspicion as to the consideration of the bond, are by no means such proof as a court can rest a decree on. The chancellor considered the answers of James and Robert Penn as evidence of the usury. But those answers are nowise responsive to the bill: the bill did not call on those ^defendants to answer to the charge of usury; the bill said not a word about the usury. The answers, on that point, contain substantive, affirmative allegations; and the defendants were bound to make out their case by proof. The chancellor’s doctrine is not only novel, but exceedingly mischievous. When a plaintiff in chancery attempts to enforce an usurious security, and the fact of usury is made out in the defence, we know that such security is declared void by the court, and ordered to be delivered up and cancelled. This, however, being a pretty severe penalty, is not inflicted without strong and clear proof: but if this new doctrine were to prevail, the very reverse would be the case. Indeed, a mortgage, now considered among the best securities, would rather tend to endanger than secure a debt; for upon a bill being filed to foreclose, the defendant would only have to answer that the debt was usurious, and unless the creditor happened to' be prepared to disprove it, he must lose the whole, however honest and fair. This would hold out a dangerous temptation to perjury, and would put into the hands of defendants a power not to be borne. The allegation of usury in the answers are, therefore, to be thrown out of the case; and I repeat, that there is little else but hearsay and conjecture. But suppose there was usury, can Clark make that defence? I strongly incline to think not. He bought this property when it was bound for this debt; he bought it, binding himself to pay this very debt as a part of the price. The Penns insist on this payment. Can he gainsay it? Quisquís potest renunciare jure pro se introducto. If the injured party chooses to waive the matter, what right has a subsequent voluntary purchaser, with full notice of the lien, to take advantage of it? I can perceive neither the law nor the morality of such an attempt; and I refer to the case of French v. Shotwell, 5 Johns. Ch. Rep. 555, as strong to shew that such an effort is not to be tolerated.

CABELL, J., concurred.

*TUCKER, P.

If it were competent, in this case, for the appellee Clarke to set up the defence of usury at all, I should be of opinion, that it was not adequately sustained. Where that defence goes, not merely to absolve the debtor from the usurious gain, but to vacate the contract, and to annihilate the debt, — to take from the usurer his just principal and interest, and put it in the coffers of the debtor to whom it does not fairly belong, — it is right, upon every principle of good sense and of law, that the fact should be clearly proved. At law, this is certainly the case. If usury be pleaded to a bond, and established, the bond is vacated, and the usurer loses his debt. Therefore, the usury is required to be set forth precisely in the plea, and it must be proved as set forth. The effect of this is, that if the party fails in his proof, or cannot establish the usury without resort to a court of chancery, he will be compelled, in receiving the aid of that tribunal, to pay up the principal which is justly due; and this is precisely the result that justice requires; for, while we look with aversion upon the usurer who demands twenty per cent, of a needy borrower, the moral sense revolts not less at the needy borrower who will pocket eighty per cent, of the usurer’s money.

Although I can cite no case, to shew that a plea of usury by a defendant in equity, must be as distinctly set forth, and as clearly sustained, as in an action at law, I incline to think that such is clearly the rule: nor is it injurious to the defendant; for if he fails in establishing the usury, he may still by an appeal to the conscience of the usurer by a cross bill, relieve himself from the usurious premium. If this be so, there can be no reasonable doubt, that there is not such reasonable proof in this case, as to sustain the allegation of usury, and *37'to destroy the plaintiff’s demand even for his principal.

But I am very clearlj'' of opinion, that the plea of usury could not be resorted to by the defendant Clark. It appears, that to secure Robert Penn, the indorser of the bond, James Penn gave him a mortgage specially providing for the payment of this bond. James afterwards sold the whole of *the mortgaged property to Clark, with a view to discharge his debts, and this among others; and, after-wards, Robert gave up the mortgage to Clarke to be cancelled, upon a like distinct engagement that Clark would pay the debts secured by it, and this among the others. The purchase money of the property, then, was (if I may so speak) the payment of these debts. That was the consideration. Clark has got the property; shall he not pay the consideration? If he gets rid of this debt, by this plea of usury, then he gets the property for 7(500. less than he agreed to give. This can never be. He has engaged to pay the debt, and must pay it. If the party who is the victim of fraud or usury, waives his remedy, and releases his adversary, it does not belong to a subsequent purchaser under him to recall and resume the remedy for him. If, then, in this case, James Penn had given Crenshaw a deed of trust, and had then sold to Clark, Clark could not set up the usurjr, provided James Penn had waived it. The case is stronger here; for the defence is not only waived, but the purchase is made with the express engagement on the part of the purchaser, to pay the debt: and moreover, the Penns in their answer, are found earnestly insisting that the debt shall be paid by Clark. Well, indeed, may James Penn do so, for he is now irrevocably fixed for it: he pleaded usury at law, and it was found against him; judgment has been rendered upon the verdict; and if he were now to seek redress In equity, he could only do so under the provisions of the statute of usurjr, by appealing to Crenshaw’s conscience ; in which case, he would have to pay the principal sum, at least. Indeed, as Crenshaw is dead, even this relief is, probably, taken from him. He is, therefore, exposed to the judgment of the administrator, while the appellee Clark holds his property, out of which that debt was to have been paid. It is impossible that this can be right.

I am of opinion, that there is error in dismissing the bill, and that the decree should be reversed, and the cause sent back to be further proceeded in. It is not in such a state as to enable us to decree finally ; 1. because the property to be ^charged does not distinctly appear; and 2. because, it having been agreed by Clarke to pay only to the extent of 13,249 dollars, if that sum be insufficient to pay all, and if he is chargeable no farther, this court is not in possession of the materials upon which to decide whether there ought to be preferences, or an apportionment, among the creditors.

Decree reversed, and cause remanded to the court of chancery for further proceedings.