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Miss., 108 So. 424.)

States, as the Exchange Bank, was prohibited from taking more than a certain rate. By the discount of the note, she did evasively take a greater rate of profit on depreciated paper given to the borrower at its nominal value, instead of cash, and the case was decided upon the prohibitory clause in the charter, and without reference to the usury laws of Kentucky, where the contract was made.

"Judgment affirmed."

Usury-requiring assumption of additional obligation.

This Hagan Case is controlling, and the contract of pledge was in violation of the rule of law therein announced. This was a contract the substance of which was the loan of money to Brewer, and, in addition, at the highest rate of interest. According to Mr. Gunter's testimony, he "required" Brewer to execute this indorsement; and this is especially true when Gunter declares in effect that he was undertaking to strengthen the bank's position and not looking after Brewer.

The Hagan Case is strengthened by the announcement of the same court in the case of Bank of Louisiana v. Briscoe, 3 La. Ann. at page 157. The pledge agreement is plain and unambiguous, and the law must be applied when both facts and law are clear.

It is insisted by the defendant bank that Brewer is estopped to set up this usury claim because Mr. Gunter says in his testimony that he would not have made the deal by which the bonds of the Tchula Stores (Inc.) were issued by Brewer, representing that corporation, and taken over by the Canal Bank, from which Brewer received the money with which he paid the $325,000 note.

The burden of proof was on the defendant to establish this affirmative defense. We hardly think it is necessary for us to

Evidence-burden of proof

estoppel.

devote time to the proposition that

estoppel must arise from some word spoken, some act

when arises.

done, or some fail- Estoppel-
ure to speak when

called on to speak, none of which
elements appear in the Tchula
Stores bond issue deal. It appears
to us quite clearly that Mr. Gunter
was not overreached or mistaken in
any fact in the bond issue deal; but,
on the other hand, the proof amply
sustains us in the statement that
by commissions, the collection of a
large amount of indebtedness, and
security of thousands of acres of
Delta land, the bank was in no wise
harmed or injured by Brewer in
that transaction,
Brewer was
then in a position

but

-to contest
promise.

where he had to sign on the dotted line as required by Gunter.

It is also urged that the renewal of the $325,000 note relieved the defendant of the charge of usurious exaction of interest, but the bank continued to carry Brewer's indorsement of the Holland note and required Brewer to pay the highest conventional rate of interest

Usury-effect of

permitted renewal note.

by the laws of Lou-
isiana, thus accentuating rather
than mitigating the offense of
usury.

It is next contended that error was committed in sustaining the demurrer to parts of the cross-bill of the Canal Bank. It is very clear to us that this error of the chancellor was in the cross-complainant's favor.

Set-off-in case

tion.

In our opinion the theory of the cross-bill rested upon the presentation of Brewer's indorsement of the Glidden-Townsend-McNally notes as a set-off to the asserted claim of of denial of acBrewer to the Bobo and Gates notes. The demurrer should have been sustained to the entire cross-bill, as it is not maintainable in any event although the chancellor found the facts against the cross-complainant, the Canal Bank.

The Glidden-Townsend-McNally

notes were not the primary obligation of Earl Brewer. He was secondarily liable thereon. At the time of the payment of his note for $325,000 not one of these notes was due, the first one becoming due January 1, 1926, and annually thereafter until January 1, 1930. There was no course of dealing between the Canal Bank and Earl Brewer with reference to these notes. Consequently there was no mutuality of dealings between these parties and no connection between the indorsement of Brewer of these notes and the collateral ity (the Bobo and Gates notes) held by Brewer in in the Canal Bank for the payment of his own personal note.

these

secur

Set-off cannot avail where there is no mutuality of indebtedness and where the defendant denies plaintiff's debt. 3 R. C. L. ¶ 219; Henry v. Hoover, 6 Smedes & M. 418; Shewalter v. Ford, 34 Miss. 417; Hoover Commercial Co. v. Humphrey, 107 Miss. 810, 66 So. 214. As sustaining this proposition, Judge Griffith, in Mississippi Chancery Practice, § 521, clearly states the rule as follows: "When and How Set-Off is Available under the Statutes. If the set-off under the statute is to be used only in defense to the cause set out in the bill, the set-off is preferred in the answer, but if it be for a larger demand than that sued for in the bill and a decree over is demanded then it must be by cross-bill; and in either event it must have annexed thereto the exhibits mentioned in the second section of the statutes above quoted. A set-off is not available, whatever may be the manner in which it is pleaded, if without, or independently of, the set-off the defendant make a total denial of the complainant's right of action, for the statute applies only to cases of mutual indebtedness, and there would be no mutual indebtedness for application if such a denial be true. The mutual indebtedness within the contemplation of the statute is not only one that is mutual as to parties, but

there must have been also a mutual dealing so that each became indebted to the other. 'Mutual' means reciprocally acting, giving, receiving, interchanging; and, the transactions must have been of such a nature that at the date of the institution of the suit the defendant on his part could have instituted a good separate suit against the complainant for the items constituting the set-off."

The decree of the lower court is affirmed.

Suggestion of error overruled May 31, 1926.

On June 21, 1926, Smith, Ch. J., handed down the following response to a motion to correct judgment (Miss., 109 So. 8):

On a former day the decree herein appealed from was affirmed by this court, and thereafter a suggestion of error was filed by counsel for appellee, and overruled by this court. After that suggestion of error was overruled, this motion was filed by counsel for the appellee "to set aside the decree of affirmance and overruling the suggestion of error, and render such decree herein for appellant as the record requires, or to set aside the decree of affirmance, and decree on the suggestion of error, and remand the cause for further consideration of the court upon further briefs and/or argument of counsel, and for grounds assigns," etc.

The grounds assigned in this motion for the setting aside of the judgments of this court, affirming the decree of the court below and overruling the suggestion of error thereafter filed, relate to errors alleged in the motion to have been committed in the court below, because of which this court erred in affirming the decree of that court. The motion, therefore, merely suggests that this court erred in affirming the decree of the court below, and to correct therefore is a sec- judgment. ond suggestion of error. Hatties

Appeal-motion

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Usury as affected by borrower's assumption of responsibility in respect

I. In general, 57.

of other debt.
[Usury, § 1.]

II. Other debt of borrower, 57.
III. Lender's debt to third party, 58.
IV. Third person's debt to lender, 58.

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I. In general.

No general rule can be laid down upon this question, because, as stated in 27 R. C. L. 230, there is a decided conflict of authority on the question whether a lender may exact some collateral advantage, additional to the legal rate of interest, without making the loan usurious.

II. Other debt of borrower. An agreement on the part of the borrower to pay subsisting debt of his

own in consideration of a further loan is not usurious, if the agreement is to pay only the amount actually due on the old debt, and the amount of the loan, with lawful interest. Marsh v. Howe (1862) 36 Barb. (N. Y.) 649.

An agreement by the borrower to pay, in addition to the full legal interest on the amount loaned, the sum for which his disputed prior debt to the lender was compromised, was held in Brooklyn Bank v. Waring (1843) 2 Sandf. Ch. (N. Y.) 1, not to be usurious, upon the ground that the payment of such sum did not appear to be extra compensation for the loan, or a cover to a usurious transaction.

The fact that a borrower is compelled as a condition of a loan to add to the face of his note, and the mortgage securing it, the amount of a prior debt to the lender which he considers

unjust, does not render the loan usurious, where the addition of the prior debt is not merely a cloak or device to evade the law against usury. Tuttle v. Finerty (1918) 67 Okla. 294, 171 Pac. 39.

The requiring by the lender as a condition of a new loan that the borrower obtain security for his former loan in the shape of an indorser on his note does not per se, or as matter of law, render the transaction usurious; but the question of usury in such case depends upon the intention of the parties-whether the lender simply intended to get security for the old loan, or whether the security was intended to be compensation for the new loan. Jarvis's Appeal (1858) 27 Conn. 432. It appears from this case that, if the object of the lender in requiring security for an old loan of the borrower before loaning him more money was to obtain compensation in addition to the full legal interest for making the loan, the loan would be usurious under a statute providing that no person shall, directly or indirectly, receive in money, goods, or things in action, or in any other way, any greater sum or greater value for the loan of money than the prescribed rate of interest; but it was held that the transaction was not usurious, as the object of the lender was simply to get security for the old loan, it appearing that the loan was made in order to enable the borrower to get into business so that he could pay the lender the money he owed him, and that the old loan would probably be

paid by the profits of such business, and that the indorser would never be held liable on his indorsement.

An old debt of the borrower to the lender was included in the amount of the loan, also, in Valentine v. Conner (1869) 40 N. Y. 248, 100 Am. Dec. 476, where the transaction was held not usurious; but no point was made of this fact.

III. Lender's debt to third party.

An agreement by a debtor with another whereby the latter, in consideration of the receipt in cash from the former of a sum much less than the former's debt, agreed to discharge such debt, was held in Watkins v. Taylor (1811) 2 Munf. (Va.) 424, 5 Am. Dec. 486, to be usurious, although the party so agreeing to assume the debt might derive advantage by buying the bonds of the creditor at a discount, or by selling him property at a high price. The court said that an agreement by which a higher premium than legal interest for the loan of money is directly or indirectly secured to the lender is usury within the statute, unless attended with some peculiar contingent circumstances, not existing in the case at bar, by which the money lent be put in evident hazard.

But the fact that the borrower, as a condition of the loan, undertakes and agrees to pay a judgment upon which he and the lender are liable, does not render the transaction usurious, even though the nature of the judgment is such that the party paying it cannot seek contribution from the other judgment debtors. Southern Trading Co. v. State Nat. Bank (1904) 35 Tex. Civ. App. 5, 79 S. W. 644.

IV. Third person's debt to lender. It is stated in Janes V. Felton (1925) 99 W. Va. 407, 129 S. E. 482, to be a well-settled law that a contract is usurious when any premium, profit, bonus, or charge, exacted or required by the lender in excess of the money actually loaned, in addition to the interest stipulated, renders the return. to the lender greater than the lawful rate of interest. The profit to the lender which will render the contract usurious may be the assumption by the

borrower of a debt to the lender of an insolvent third person, which the borrower is under no obligation to pay. Ibid.

The requirement by the lender, as a condition precedent to making a loan. upon which the full legal rate of interest is expressly charged, that the borrower shall assume and pay off a promissory note held by the lender against one who is known by the lender to be insolvent, and whose debt the borrower is under no obligation to pay, renders the transaction usurious. Bishop v. Exchange Bank (1902) 114 Ga. 962, 41 S. E. 43. This holding is based upon the wording of the usury statute, to the effect that it is unlawful to reserve, charge, or take for any loan any rate of interest greater than a specified per cent, either directly or indirectly, by way of commission for advances, discount, exchange, or by any contract or contrivance or device to charge more than the legal rate of interest on the loan.

And the requirement that the borrower, in addition to the highest legal rate of interest, sign as indorser the note of another held by the lender, and pledge security for both, makes the contract usurious under a statute permitting any person who shall pay a higher rate of interest than specified in the statute, as discount or otherwise, to recover the same back. CANALCOMMERCIAL TRUST & SAV. BANK V. BREWER (reported herewith) ante, 45.

An agreement by the borrower to pay, in addition to the full legal interest, a debt of a third party to the lender, renders the loan usurious. Brown v. Baer (1887) 79 Ga. 347, 5 S. E. 72.

Requiring the borrower, in addition to the full legal interest, to give a mortgage upon his property to secure the payment of the debt of a third person to the lender, renders the loan usurious. New Orleans Canal Bkg. Co. v. Hagan (1846) 1 La. Ann. 62.

The exaction by the lender as a condition of a loan, that the borrower take up the note of an insolvent third party, or of one in doubtful circumstances, would per se be usury in law; and where the securing of such doubt

ful debt forms any part of the lender's inducement to make the loan, it raises a suspicion of an agreement for more than lawful interest upon the money lent, which calls for an explanation on his part, and unless, upon his explanation, a jury would believe that in truth there was no such agreement, it would be their duty to find the transaction usurious; but if such note of the third person, though doubtful when in the hands of a lender, is worth, in the borrower's hands, the money which it calls for, or if such third person has requested the borrower to take up the note, and he has agreed to do so, or if the lender bona fide believed the note to be good in the hands of the borrower, it would appear that the lender did not intend to take a higher profit upon the sum loaned to the buyer than the lawful interest, and the agreement would not be usurious. Den ex dem. Shober v. Hauser (1838) 20 N. C. 222 (4 Dev. & B. L. 91).

a

A loan is not rendered per se usurious by the fact that the lender exacts, as a condition of making the loan, that the borrower assume and secure debt to the lender of a third person. Valentine v. Conner (1869) 40 N. Y. 248, 100 Am. Dec. 476. The court held that the onus was upon the party seeking to avoid the agreement as usurious, to establish an usurious intent, and such intent was not established in the case, because it appeared that the debt due from the third person to the lender arose from the sale of certain personal property by the lender to such third person; that such property had been sold by such third person to the borrower shortly before the loan, under circumstances rendering it doubtful whether the sale was not fraudulent as against the creditors of such third person, and that the lender was prosecuting proceedings for the purpose of subjecting such property to its claim against such

third person.

And a loan was held not to be tainted with usury in Roane v. Bank of Nashville (1858) 1 Head (Tenn.) 526, where the borrower, greatly involved in debt, proposed to a bank to loan him

a certain amount of money on long time, and that he would assume the debt of a third party, and would secure the loan and such debt, and it appeared that the borrower was alleged by the bank to be liable for part of the third party's debt, and that such third party was not insolvent, and that there was no serious doubt but that the whole transaction was fair, reasonable, and bona fide on all sides. It was insisted in this case that the loan was usurious to the extent of the amount of the third party's debt, because the borrower was not bound for such debt, and that the judgment in favor of the bank upon such debt was worthless, and that such part of the loan could only be regarded as interest given for the loan of the amount advanced to the borrower; and the court said that, if all this were true, the objection that the loan was usurious to such extent would be difficult to meet.

In. Crawford v. Benoist (1902) 97 Mo. App. 219, 70 S. W. 1098, where the lender complied with the request of the borrower for the loan of a specified amount, the borrower stating that he would take up the note of a third party and give his own note for the sum of such note and the amount loaned, it was held that the transaction was not usurious, even if the third party was insolvent, since the lender did not exact the assumption of the third party's note, but the proposition to assume such note came from the borrower.

The fact that, as a condition of the loan, the borrower assumes the note of a third person, which finally proves uncollectable by the borrower by reason of the insolvency of the maker and indorser, does not render the loan usurious, if the lender at the time believed the note to be good, and the loan was made in entire good faith and without any usurious intent. Thomas v. Murray (1865) 32 N. Y. 605.

And a loan of credit to two borrowers was held in Bullock v. Boyd (1840) 1 Hoffm. Ch. (N. Y.) 294, not to be rendered usurious by the exaction by the lender of a guaranty by one of the borrowers of a prior debt of the other borrower to the lender. G. V. I.

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