Case Name: Crawford and Another v. Johnson and Another
Court: Supreme Court of Indiana
Jurisdiction: Indiana
Decision Date: 1858-12-03
Citations: 11 Ind. 258
Docket Number: 
Parties: Crawford and Another v. Johnson and Another.
Judges: 
Reporter: Indiana Reports
Volume: 11
Pages: 258–260

Head Matter:
Crawford and Another v. Johnson and Another.
Under the statute of 1852 (1 E. S. p. 344, \ 4), usury, or illegal interest, may exist without the actual loan of money.
Where notes were given for the purchase-money of real estate, drawing 6 por cent, interest, and secured by a mortgage, and other notes were given for 2 per cent, upon the whole amount, so as to reserve 8 per cent, interest: Held, that in a suit to foreclose the mortgage, after the notes for the 2 peícent. had been paid, the mortgagor could set up usury, under § 4 supra.
Friday, December 3.
APPEAL from the Montgomery Circuit Court.
Counsel for the appellants cited the following authorities:
The appellees take the position that, as the notes were given on a contract for the purchase of property, the contract is not, therefore, usurious, and rely upon Beete v. Bidgood, 14 E. C. L. 206. The English statute in force when Beete v. Bidgood was decided, reads as follows: “No person, upon any contract which shall ho made after the 29th of September, 1714, shall take for loan of any money, wares, &c., above the value of 5;£ for the forbearance of 100dS for a year; and all bonds and assurances for payment of any money to be lent upon usury, whereupon or whereby there shall be reserved or taken above five in the hundred, shall be void; and every person which shall receive, by means of any corrupt bargain, loan, exchange, chovizance, shift, or interest of any wares, other thing, or by any deceitful way, for the forbearing or giving-day of payment for one year, for their money or other thing-, above 5£ for 100;£ for a year, &c., shall forfeit treble the value of the monies or other things lent.” 10 Bac. Abr. tit. Usury, B., ed. 1852, p. 266.
In Barclay v. Walmsley, 4 East, 55, Lord Ellenborough, C. J., says: “ To constitute usury, there must bo either a direct loan and a taking of more than legal interest for the forbearance of repayment, or there must bo some device contrived for the purpose of concealing or evading the appearance of a loan and forbearance, when in truth it was such.” See, also, Dewar v. Span, 9 Term R. 425, and the opinion of Lord Chancellor Hardwicke, in Chesterfield v. Janssen, 1 Lead. Cases in Equity, 442, from 2 Ves. 125.
Our statute on the subject differs materially from the English statute. See 1 R. S. p. 344.
The case of Thompson v. Nesbit, 2 Rich. (S. C.) 73, as cited in U. S. An. Dig. 1847, at p. 476, § 12 (the report is not before us), is in point, and is there stated as follows:
“A. asked 1,000 dollars for a negro, which B. was willing to give, but would not pay cash, and A. was willing to give any time which B. might want, if he could have the price increased by the addition of 10 per cent, per annum, until payment. After consultation as to the best method of carrying out their bargain and avoiding usury, they agreed that B. should fix the time, and A. the price. B. said he must have three years; and the plaintiff said he must then have 300 dollars more. A bill of sale was thereupon drawn, expressing the consideration to be 1,000 dollars, and a note was given by B. to A. in the following words: ‘Three years after date, I promise to pay A. or bearer 1,300 dollars, to be paid at Each time as I please, and to deduct 10 per cent, per annum off of the amount paid, at each payment.’ Held, that the contract was usurious.”
In the same case, tho general principle (which we suppose will not be controverted), is decided, to-wit: “It is not necessary to prove a corrupt agreement; for a contract may be usurious, though the parlies did not know it was contrary to law.” The parties to this suit knew that their contract, as first arranged, was contrary to law, and therefore destroyed the notes first drawn, in pursuance of it, and drew other notes which they probably supposed would obviate the difficulty, because they would, on their face, furnish no evidence of tho transaction. The separation of the illegal interest from the principal and legal interest, tends to invalidate the contract, rather than legalize it. See 2 Pars, on Cont. 380, citing Warren v. Crabtree, 1 Greenl. R. 171.
Our statute against usury also shows what constitutes the offense; and if there could be any doubt as to the construction of ch. 57, 1 R. S. § 51, 2 R. S. p. 440, would dispel it. It reads thus : “Any person who shall directly or indirectly bargain for, receive, or reserve, on any contract or agreement whatever, a greater rale of interest than at the time is allowed by law, shall be fined in five times the interest so unlawfully bargained for, taken, or reserved.”

Opinion:
Perkins, J.
Suit to foreclose a mortgage. Defense, usury. Issue of fact. Trial by the Court, and judgment for the plaintiff for the amount of the debt and interest.
The evidence is upon the record, and is as follows:
Francis M. Heaton testified that the notes secured by the mortgage in suit, were given for the purchase-money of the land described in the mortgage; that witness drew up the notes; that he first drew them to the amount of 8,000 dollars, with 8 per cent, interest, but that, on consultation, the parties thought they would be illegal, and they destroyed those notes; that witness then drew up new notes for the 8,000 dollars, the price of the land, bearing 6 per cent, interest, being the notes mentioned in the mortgage, and for the other 2 per cent, he drew up separate notes, being those set up in the answer; that it was all one transaction, and the notes were given for the price of the land and the delay of payment. The notes for the 2 per cent, set up in the answer, had been paid.
Under our present statute, usury, or illegal interest, may exist, without the actual loan of money. The statute reads thus:
"If a greater rate of interest than is hereinbefore allowed [6 per cent.] shall be contracted for, or received, or reserved, the contract shall not, therefore, be void; but if, in any action on such contract, proof be made that illegal interest has been directly or indirectly contracted for, or taken, or reserved, the defendant shall recover costs, and the plaintiff shall recover only his principal without inter est; and if interest shall have been paid thereon, judgment shall go for the principal deducting interest paid."
J. M. La Rue, D. Royse, S. C. Willson, and J. E. McDonald, for the appellants .
I. Naylor, for the appellees.
We think the facts in this case bring it clearly within this section of the statute, and that the Court should have been governed by its provisions in rendering judgment.
Per Curiam. — The judgment is reversed with costs. Cause remanded, with instructions to the Court below to render judgment as the section provides in cases of usury.