Case Name: Swanson vs. White et al.
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1844-12
Citations: 5 Hum. 373
Docket Number: 
Parties: Swanson vs. White et al.
Judges: 
Reporter: Tennessee Reports
Volume: 24
Pages: 373–378

Head Matter:
Swanson vs. White et al.
Where goods or choses in action are furnished to the buyer at a price greatly above their value, to enable him, by selling them at their real value, to raise money, such transaction is held to be usurious.
Bodenhamer was embarrassed, and applied to White for a loan of money. White told him he would get some bonds of the State of Tennessee, if he would take them. White procured two bonds calling for a thousand dollars each, which, at the market price, were worth about six hundred each. They were sold to Bodenhamer at $2100, for which sum Bodenhamer executed his note to White. Bodenhamer sold them to Goff & Balentine at $1200. Bodenhamer gave a deed of trust to White for his land and slaves, to secure to him the payment of the said sum of $2100. Swanson had recovered a judgment in the Circuit Court of Giles county against Bodenhamer for the sum of $559; execution was issued, and returned without satisfaction; and thereupon this bill was filed against Bodenhamer, White and the trustee, charging that the sale of the State bonds was a contiivance to loan money and evade the statute against usury, and praying that the deed of trustbe executed by a sale of the land and slaves, and that the sum really due said White, to wit, $1200, with interest thereupon, be paid to him, and the balance of proceeds be applied to the satisfaction of complainant’s judgment.
The case was tried by Chancellor Cahal, on bill, answers, replications and proof. The Chancellor being satisfied that the transaction between White and Bodenhamer was usuiious, decreed a sale of the estate conveyed and a satisfaction of the claims, according to the prayer of the bill.
The defendant White appealed.
Wright, for complainant.
1st. The transaction in relation to the State bonds between Bodenhamer and White is usurious and the latter only entitled to receive of the former what the bonds were re-sold for and six per cent, interest. Vide Comyn on the Law of Usu ry, 5 Law Library, top pages 36, 37, 43 and 44; Barker vs. Vansommer, 1 Br. Ch. Cases, 149; Lowe vs. Waller, Douglas’ Rep. 236; Potheir’s Treatises on Contracts, sec. 88, page 22. Vide also, Usury Acts 1741, (1 Scott’s Rev. 53,) 1819, (2 Scott’s Rev. 485,) 1835, (Nich. & Car. Rev. 407.) The words “directly or indirectly,” in the statute, cover the case. The British acts and those of Tennessee are alike. (Vide those in the Appendix to Comyn on Usury, top page from 96 to 107.)
This is not like the cases of a loan or transfer of stock, &c. to be found in Comyn on Usury, 40, 41 and 42; the cases of Taic vs. Willings, Pike vs. Ledwell and others. Here is no risk or contingency of any kind to White. His money is certain. Comyn, 43 and 44.
2nd. The creditor has a right to recover the usury from the usurer, if it is paid over; for it is a chose in action and debt, between the debtor and usurer, and under our act of 1832, (Nich. & Car. Rev, 222,) enlarging the chancery jurisdiction, the creditor may recover it. In N. Carolina it has been decided, that a conveyance infected with usury is no bar to the widow’s dower. Norwood vs. Morrow et al. 4 Dev. & Batt. Law Rep. 442; and in Moffat et al. vs. McDowell et al. 1 Me Chord’s Ch. Rep. 434, it seemed to be conceded that cases might exist, where creditors would be let in to show usury and enlarge the fund to pay their debts.
If the usury has not been paid (as is the case here) of course the creditor has a right to cut down the dealings to the real debt; for the contract is really void for the excess and the deed only a security for the sum actually due and interest, in this case the value of the State bonds.
But the act of 1843-4 (p. 204) covers this case. By it creditors may recover the usury, if paid. Here it is not paid, but only secured to be paid; and when paid, may be recovered, because the act says so. The payment, if ever made, will be after the act. Now why may not the creditor prevent its payment? Here is a fund for real hona fide creditors. In its distribution, is it not material to enquire who have debts and their real amounts?
N. S. Brown, for the defendant.
It is insisted, as one of the principal grounds, in the bill, that the sale of the State bonds by defendant A. C. White, to Bodeij-hamer, was usurious, and to that extent the consideration in - the deed of trust inadequate.
1. This allegation in the bill is denied in,the answer of White, and there is no proof which shows that the object was to evade the statute. On the part of White, the transaction was a sale with the ordinary accompaniments, and made in good faith. The seller was endeavoring to get as high a price as he could for his property, and the purchaser to get it at the lowest rate. The deposition of Bo'denhamer himself proves the fairness of the transaction.
How then is the transaction to be impeached?
“The court will never presume a contract to be usurious, without proof.” See McGuire vs. Warder, 1 Wash. 368.'
“Usury is the taking of more than the law allows upon a loan or forbearance of a debt. To make a contract usurious, it must be apparent upon the face'of it, or by, evidence, that the intent of the parties in the creation of it, was by means of shift or device to take more than legal interest for the loan or. forbearance of money.” See Moore vs. McKay, 1 Beatty, 2S7.
Again: To constitute usury there must be a borrowing and a lending, with an intent to exact exorbitant interest, &c. See 4 East, 55; 1 Taunton, 449; 7 John. C. R. 77; 4 Hen. & Mun. 490; 2 Call, 92, 121. And there must be a corrupt agreement. 2 Call, 111.
Again: There are three requisites to constitute usury. 1st, a loan, either expressed or implied: 2nd, ah understanding that the money lent shall or may be returned: 3rd, that a greater rate of interest than is allowed by statute shall be paid. See Peters’ U. S. Reports, 205, 224; 2 Cowen, 712; 7 Peters, 109.
There is some proof to show that White was in the habit of shaving notes. But the general character and habit of a usurer is not a foundation for presuming usury in a particular loan. See.Ja-cJcson vs. Smith, 7 Cowen, 712.
That a sale of State bonds, upon tlie terms of the present, might be made, without usury, I suppose will not be questioned. For “a bona fiie sale of bank stock, at however high a price, is not usury; to constitute which, there must be a treaty for the loan or forbearance of money.” See SJcipwith vs. Gibson, 4 Hen. & Munford, 490, and Greenhow vs. Harris, 6 Munford, 472.
“Depreciated bank paper may be the subject of sale, without the imputation of usury. And if an individual executes his note for specie at a future day, in consideration of the present delivery of depreciated bank paper, whether for a greater or less amount, it' is not evidence per sc of usury.” See Boswell vs. Clarkson, 1 J. J. Marshall, 49.
“Borrowing and lending, or any device to avoid the statute, must be established before there can be usury. The Chancellor will not, from the solitary fact that, a note for specie payable in twelve months was executed for the same amount of depreciated bank paper, conclude ■ that there was usury.”,See Talbot vs. Wmfield, 3 J. J. Marshall, 84: see also 2 Munford, 36.
2. The proof shows, that the cash value of the note executed for the State bonds, exceeded very little, if any, the cash value of the bonds themselves, at the time of the transaction; and at the time of the maturity of the notes, the balance was still nearly equal; for as the discount upon such paper diminished, so did that upon State bonds. Usury, therefore, cannot be imputed on the ground of inadequacy in the consideration.
The proof also shows, that at the time of the trade, White was of opinion that State bonds were advancing, and was reluctant therefore to consummate it. There is no proof to show that he knew at what rate Bodenhamer sold the bonds, or would be compelled to sell them, or whether it was his purpose to sell them or not. And suppose he did know the precise object of Bodenhamer, that he intended to convert the bonds, and at a discount of 33£ per cent, does this prove a usurious intent on the part of White? a shift or device to evade the statute? For his motives must concur, in order to implicate him. There must be a corrupt agreement. See 2 Call, 111.

Opinion:
Turley, J.
delivered the opinion of the court.
This is a bill of complaint filed against Newton White and others, by William E.' Swanson, a judgment creditor of John W. Bodenhamer, to have certain deeds of trust, made by said Bodenhamer for the benefit of Newton White and others, executed, and the balance of the proceeds, after paying what is legally due the several cesiuis que trust, appropriated to the payment of his judgment.
White alone appeals from the decision of the Chancellor; and the question presented by the record as to him, is, whether there was usury in the transaction out of which arose the liability for which the deed of trust from Bodenhamer for his benefit was executed. The proof shows, that Bodenhamer was much embarrassed with debt; that he applied to White to borrow money; that White informed him that he could not lend him money, but that he would in a short time have some Tennessee State bonds which he would let him have, if they would answer his purpose. Afterwards, White procured two bonds of the State for one thousand dollars each, which he let Bodenhamer have for the sum of two thousand one hundred dollars, it being an advance of one hundred dollars upon the nominal value of the bonds, and took the deed of trust which forms the subject matter of this controversy, to secure the payment of that amount of consideration.
The proof also shows very satisfactorily, that at the time White let Bodenhamer have the notes he knew that he procured them with the view of raising money on them in the market for the payment of .his debts; that he knew who they were in all probability to be sold to, viz, Ballentine & Goff, they having offered $1262, the best price that could be had for them, and this by them in pai;t consideration that an account of Bodenhamer should be settled as a part payment. The proof abundantly shows also, that six hundred dollars each was as much as the bonds were worth at the time in the money market, being about three fifths of their nominal value, and that this fact was well known to defendant White at the time he let Bodenhamer have them.
Now, was this a usurious transaction between White and Bodenhamer? We are well satisfied that it was. All attempts to evade the usury laws are watched by the courts with anxious jealousy, and promptly put down. Such attempts as the present are of no new origin; they have been resorted to again and again, in England and the United States, and no doubt in every other country where usury is forbid: our lawbooks are full of such cases ariéing out of them; and they have been universally held to be usurious, no matter what kind of property has been given instead of money, if the design of the parties at the time was that money was to be obtained upon it: indeed, vain would be our usury laws if such were not the case. I will not lend you money: oh no, I cannot legally charge more than six per cent, for money, but I can charge what I please for any property: here is a negro that you can readily sell for six hundred dollars; I know a man that will give that price for him: you give me a thousand dollars and you may have him. What is this but taking a thousand dollars for the loan and forbearance of six hundred? Indeed it is the worst and most dangerous of all attempts at usury, because generally the most-difficult of detection.
The present case is one of great oppression. Tennessee State bonds are sold for the known and express -purpose of raising money on them; it is well known to both parties that they are at an actual discount of two fifths of their nominal value; and yet they are sold at a premium of one hundred dollars, an advance of nine hundred, upon what, it was well known to both, would only yield about twelve, seventy-five per cent; the most extortionate transaction that has yet been before us, though we have had many of the kind in the last three or four years.
The law provides, that not more than six per cent, shall be reserved, directly or indirectly, and applies to this case and avoids the contract, so far as there is usury in it.
The decree of the Chancellor is therefore affirmed.