Court Opinion

ID: 3672674
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:20:33.127662+00
Date Added: 2024-06-11T15:15:46.545187
License: Public Domain

The best definition which can be given of usury will be found in the words of the statute by which it is prohibited: No person or persons whatsoever, upon any contract, shall directly or indirectly take for the loan of any moneys, wares, merchandise or commodities whatsoever, above the value of six dollars by way of discount or interest for the forbearance of one hundred dollars for one year, and so after that rate for a greater or lesser sum, or for a longer or shorter time, and all bonds, contracts and assurances whatever for the payment of any principal or money to be lent or covenanted to be performed upon any usury, whereupon or whereby there shall be reserved or taken above the rate of six dollars in the hundred, as aforesaid, shall be utterly void." Usury consists then in taking directly or indirectly, upon a loan of money or commodities, either by way of discount or interest, above the value of six dollars for the forbearance of one hundred dollars for *Page 351 
one year, or that rate for a greater or less sum, or for a longer or shorter time. It follows then, that the test proper to be applied to the loan, which in this case is alleged to be usurious, is whether it was made upon an agreement to render therefore a higher rate of compensation than the statute sanctions. Now if the agreement was that the borrowers should receive the amount lent, after deduction of the discount, in notes known to be depreciated at their nominal value, and at the expiration of the term should repay that amount in lawful money, or in a currency less depreciated than that in which it was advanced, without further explanation, an assurance to carry that agreement into execution would be usurious. It is manifest that by that assurance there is reserved  (529) to the lender, after taking out the legal discount, the difference between the actual value of what was lent and what is to be returned. This is prohibited gain. If upon a loan it is agreed that the borrower shall be paid in bills at a premium, which they actually command in the market, all will admit that in this there would be no usury, and it must follow that if he be required to take it in bills at par, which are then at discount, this must be usury. Whatever may be the motives which induced the Legislature to regulate the value of the use of money, and by severe penalties to prohibit all bargains for its use at a higher price, the standard of this value is the gain taken by or reserved to the lender, not the price paid or to be paid by the borrower. Accordingly, we cannot doubt, if it was a part of the considerations for a loan, that in addition to the principal and lawful interest to be paid by the borrower, a stranger should allow a gratuity to the lender, such loan would be usurious under the statute. The proper subject of enquiry is what is the lender to receive, and not always what the borrower is to pay, for the forbearance. Where the entire gain of the lender is derived from the borrower, the profit of the former and the loss of the latter, are necessarily commensurate. But it is always safer to apply, when we can, the standard given by the law, than to make use of any other, however exactly in general it may appear to correspond therewith.
In this case, it seems to us, that his Honor, after laying down very accurately the general rules of law applicable to it, in considering the explanations, by which the agreement was sought to be rescued from the imputation of usury, has permitted his intelligent mind to be perplexed and finally led into error by an unnecessary enquiry about the loss of the borrowers. And having arrived at the conclusion that, in consequence of the use to which the money borrowed was applied, they had not subjected themselves to a loss upon the loan greater than at the rate of six per centum per annum, he was of opinion that     (530) the assurance was not tainted with usury, although the lender *Page 352 
was thereby to receive more than the compensation for forbearance fixed by law. That error, we think, was occasioned by not regarding the loss as determined by the agreement, but as ascertained by combining therewith the gain of the borrowers in their disposition of the money lent. Upon these combined transactions, they may not have finally lost the premium allowed upon the depreciated notes, but, if it be so, it is because their creditors have consented to allow it. They did lose more than the lawful interest by the agreement, but they were enabled to throw off this loss upon others.
If the depreciated notes — depreciated in the money market or even with all other persons, had been to the borrowers intrinsically worth the value at which they were received, then there would have been no usury in requiring that they should be received at that value. It might have been fortunate for the holder to meet with a person to whom these notes were as cash, but, if they were, then in effect there was a loan of themoney which the notes called for, and six per centum per annum interest thereon, would not have been a greater gain on such loan than the law authorized. Such a case might be put; as if the borrowers had been permitted to deposit, as cash, Virginia notes to that amount, on a promise to take them back at the same rate, or were under any other valid obligation to redeem them. And perhaps there are others, but it will be sufficient to state these as illustrations of this position. It is very probable that neither the borrowers not the lender had an actual intent to violate the statute against usury, and it is not unlikely that the loan, as made, under the then pressure of the times and embarrassments of the banks, was not only prompted by commendable public motives, but in truth also an act of favor to the borrowers. But if, by the agreement, it was intended to obtain in fact a greater compensation for the money lent that the statute allows, the law pronounces the agreement corrupt, whatever misapprehensions might have prevailed as to the construction of the statute, or however free the agreement (531) from every taint of moral turpitude. This may be hard, but  sic lex scripta est, and we must obey it.
The Court is of opinion that there was error in the instructions given to the jury, and that the judgment must be reversed and
PER CURIAM.                                               New trial.
Cited: Stedman v. Bland, 26 N.C. 300; Bank v. Ford, 27 N.C. 696;Webb v. Bishop, 101 N.C. 102; Moore v. Beaman, 112 N.C. 565. *Page 353 
(532)