Lloyd vs. Scott. chattels in Spencer vs. Tilden, 5 Cowen, 144, Cummings vs. Williams, 4 Wend. 679, Hall vs. Haggart, 17 Wend. 280, Whipple vs. Powers, 7 Verm. 457. The loan intended to be embraced by the statutes against usury, has been defined to be "a temporary letting for profit of the use of money, goods, and to be returned to the lender." It is this quality of being returnable, that constitutes a loan, and excludes from usury all contracts in which the principal is put at stake. Such contracts may be unreasonable, and as such, furnish ground for relief in a Court of Equity: but they are not usurious. The contingency, however, to produce this effect, must be, 1, lawful; 2, fair and reasonable, so as to rebut the presumption of its being a colorable device to conceal usury. But it is not necessary that the transaction should be upon its face, a loan. Such a construction would have, in effect, repealed the statute; on the contrary, whatever form it may assume, the highest judicial authority has declared that, if it was in fact a loan of money, the wit of man cannot find a shift to take it out of the statute. The usurer has resorted to every species of artifice for the purpose of protecting his illegal traffic, but the courts have been astute in proportion in detecting and foiling him. Sometimes, a colorable risk was added to the loan, or it was disguised under the form of a post obit or bottomry bond; sometimes under what was called a dry exchange. The borrower drew a bill on a fictitious person, supposed to reside abroad. The bill was never sent abroad, but protested for non-payment, and the borrower charged with exchange, re-exchange, and other expenses beyond legal interest. Sometimes, stock was lent, or money in the funds to be returned by the borrower at a future day, until which time he is charged with interest for more than the market price of the stock. Sometimes, by advancing money on a pretended partnership, by which means the lender gets exorbitant interest under the pretext of partnership profits. Sometimes, by giving the loan the shape of the purchase of a life annuity. Sometimes, by obtaining a beneficial lease, in consideration of a loan of money. Sometimes, by discounting notes and bills of exchange under the cloak of a purchase and sale. Sometimes, by selling goods for cash, at auction, at a price greatly beyond their value. Sometimes, by lending an endorsement upon which money may be raised, for a compensation exceeding indemnity for the principal and interest which may be advanced. But in all these cases, there must be circumstances to show that the transaction was not bona fide what it purported to be, but a device of the lender of money to elude the statutes against usury. Opinion of Judge Carr, Whitworth vs. Adams, 5 Ran. 333, Douglas vs. McChesney, 2 Rand. 109. Bank of the Valley vs. Stribling, 7 Leigh, 26; Dowell vs. Vannoy, 3 Dev. 43; Steele vs. Whipple, 21 Wend. 103; Cleveland vs. Loder, 7 Paige, 557; Ketchum vs. Barber, 4 Hill 224; Morgan vs. Schermerhorn, 1 Paige's Rep. 544; Perkins vs. Dye, 3 Dana, 173. But a greater rate of interest must be received, than is allowed by the statute. It is immaterial, however, in what shape the usurious gain may be reserved. It may be money, or property, or the use of either. "A profit made, or loss imposed on the necessities of the borrower, whatever form, shape, or disguise it may assume, where the treaty is for a loan, and the capital is to be returned at all events, has always been adjudged to be so much profit Lloyd vs. Scott. taken upon a loan; and to be a violation of those laws which limit the lender to a specified rate of interest." Opinion of Judge Johnson, in the Bank of United States vs. Owings et al., 2 Peters, 536. S. P. in the following cases, Galloway vs. Logan, 4 Lou. N. S. 167; Hemer vs. Harral, 2 Stew. & Post. 223; Richardson's Adms. vs. Brow, ib. 207; Mitchell vs. Preston, 5 Day, 150. To invalidate a security, the usury must be reserved upon an agreement, either prior to or at the time of its execution. It must precede the contract, and make a part of it. If pure in its inception, no subsequent usurious agreement can infect it with pollution. Parker vs. Ramsbottom, 3 B. and C. 357. Chastain vs. Johnson, 5 Hill, 523. If, however, the contract was usurious in its inception, it was considered in England (until recently), and in most of the States of this country, wholly void-not only in the hands of the original payee but an innocent endorsee. It has been said to be “born a nullius filius; it comes into the world with no rights, and goes through it in the same condition." Lowe vs. Waller, Douglas, 736, Churchill vs. Suter, 4 Mass. 156, Wilkie vs. Roosevelt, 3 John. Cas. 206, Bailey vs. Lumpkins, 1 Kelley, 392. This construction has been founded upon the language of the statutes against usury, declaring that they shall be considered wholly void. Without such a provision, the contract would have been valid in the hands of persons who were strangers to the usury. Fleckner vs. Bank of the United States, 8 Wheat. 338. But although the radical vice of an usurious contract attaches to and infects all future securities for the same loan, yet the contract may be purged. The law allows the guilty party a locus penitentia. For example, if there is an accounting between the parties, a deduction made of the usurious excess which has been paid, and a new security given for the balance, the contract is said to be purged, and the last security taken is valid. Barnes vs. Hedley, 2 Taunt. 184. Wright vs. Wheeler, 1 Camp. 165. M'Clure vs. Williams, 7 Ver. 210. Bailey vs. Lumpkin, 1 Kelley, 392. Kilbourn vs. Bradley, 3 Day, 356. But the mere change of securities will not give life to the contract. Every subsequent security given for a loan originally usurious, however remote or often renewed, is void. Tuthill vs. Davis, 20 J. R. 285, Thomas vs. Cartheral, 5 Gill. and J. 23, Walker vs. the Bank of Washington, 3 How. 62. Besides the cases which have been cited, the student will find much interesting matter in the learned note of the Reporter to Jones vs. Davison, 1 Holt. 255; and a copious collection of the American decisions and statutes in Blydenburgh's Treatise on Usury. GUARANTEE. Construction of a Guarantee. Notice must be given of its acceptance. When notice must be given of amount of advances made on its credit. Guarantor not responsible until demand of payment made upon principal debtor, and notice given of his default. DOUGLASS et al. vs. REYNOLDS, BYRNE & Co.* MR. JUSTICE STORY delivered the opinion of the Court. This case comes before us upon a writ of error to a judgment of the District Court of the District of Mississippi, in which the plaintiffs in error are the defendants in the Court below. The original action is founded upon a guarantee given by Douglass and others in favor of one Chester Haring, by the following letter: "Port Gibson, December, 1807. "Messrs. REYNOLDS, BYRNE & Co. "Gentlemen :-Our friend, Mr. Chester Haring, to assist him in business, may require your aid from time to time, either by acceptance or endorsement of his paper, or advances in cash. In order to save you from harm by so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you at any time for a sum not exceeding eight thousand dollars, should the said Chester Haring fail to do so. Your obedient servants, "JAMES S. DOUGLASS, The declaration contains two counts. The first alleges that upon the faith of the letter, the original plaintiffs accepted and endorsed drafts or paper of Haring to the amount of eight thousand dollars, which they were obliged to pay, and did pay 7 Peters 113. Douglass and others vs. Reynolds and others. at the maturity thereof; and of which they gave due notice to defendants. The second count is for money lent, and money had and received. But this may be laid entirely out of the case, since it is very clear, that, upon a collateral undertaking of this sort, no such suit is maintainable. At the trial upon the general issue and the plea of payment, the plaintiffs, who are resident merchants at New Orleans, offered evidence to prove the payment of five promissory notes, dated on the 1st of May, 1829, payable to Daniel Greenleaf or order, and endorsed by him, viz. one note due on the 20th of November, 1829, for four thousand dollars; one due on the 20th of December, 1829, for four thousand five hundred dollars; one due on the 20th January, 1830, for five thousand five hundred dollars; one due on the 20th of February, 1830, for five thousand five hundred dollars; and one due on the 20th of March, 1830, for five thousand five hundred dollars, in the whole amounting to twenty-five thousand dollars; and that the notes had been discounted with the plaintiffs' endorsement thereon, and were taken up by them at maturity. It also appeared in evidence, that soon after the letter of guarantee had been received, acceptance had been made of the drafts of Haring by the plaintiffs to the amount of eight thousand dollars; and that other large transactions of debt and credit took place between them, upon which, on the 1st of May, 1829, there was a balance of principal of twenty-two thousand five hundred and seventy-three dollars and twenty-three cents, besides interest, due to the plaintiffs; and credits to a larger amount than eight thousand dollars had come into possession of the plaintiffs. And on that day the foregoing notes were received, and the following receipt written on the account containing the balance: "Received, Port Gibson, May 1, 1829, in part and on account of the above account, and interest that may be due thereon, the following notes, to wit, [enumerating them] amounting in all to twenty-five thousand dollars, which notes, when discounted, the proceeds to go to the credit of this account. "REYNOLDS, BYRNE & Co." There was a good deal of other evidence in the cause, but it does not seem necessary to state it at large, since no part of it Douglass and others vs. Reynolds and others. becomes important to a just understanding of the merits of the controversy, as it now stands before us. In the progress of the trial the depositions of several witnesses who were clerks in the counting-house of the plaintiffs were read, in which they stated, that they knew that the letter of credit was considered by the plaintiffs as covering any balance due by Chester Haring to the plaintiffs, for advances from that time to the extent of eight thousand dollars; and that advances were made and moneys paid by them on account of Haring, from the time of receiving the said letter of credit, predicated on the said letter, always protecting the plaintiffs to the amount of eight thousand dollars, whenever the said amount or less might be uncovered; and that it was considered in the said counting-house of the plaintiffs as a continuing letter of credit, and so acted upon by the plaintiffs. To the admission of this part of the depositions the defendants objected; but the Court overruled the objection, and permitted the evidence to be read to the jury as evidence of the reliance of the plaintiffs upon the letter of credit, to the amount of the eight thousand dollars, for acceptances, payments, advances and endorsements made to Haring. The defendants excepted to this admission of the evidence; and the propriety of this ruling of the Court constitutes the first question in the case. We are of opinion, that the evidence was rightly admitted, in the view, and for the purposes stated by the court below. It was not offered to explain or establish the construction of the letter of credit (See Russell vs. Clarke, 3 Dall. 415, S. C. 7 Cranch's Rep. 69), whether it constituted a limited or a continuing guarantee; and was not thus open to the objection which has been relied on at the bar, that it was an attempt by parol evidence to explain a written contract. It was admitted simply to establish that credit had been given to Haring upon the faith of it from time to time, and that it was treated by the plaintiffs as a continuing guarantee; so that if, in point of law, it was entitled to that character, the plaintiffs' claim might not be open to the suggestion, that no such advances, acceptances, or endorsements, had in fact been made upon the credit of it; an objection which, if founded in fact, might have been fatal to their claim. Nothing can be clearer upon principle, than that if a letter of credit is given, but in fact no advances are made upon the faith of it, the party is not entitled to recover for any debts due to him from |