Philip v. Kirkpatrick

1 Add. 124

• Court: Pennsylvania Court of Common Pleas, Alleghany County
• Decided: September 15, 1793
• Status: Published

Opinion

President.

If money be lent, payable on a contingency, which may never happen, as the arrival of a ship; more than legal interest may be reserved on payment, and it is not usury : for the lender risks the loss of the whole. But wherever the principal is payable at all events, and the risk only applies to the interest, no more than legal interest can be reserved. The principal was secure here, in the legal view of security : for a bond was taken for absolute payment. The possible or probable insolvency of the borrower is not one of those risks, which the law has, or, agreeably to its intention, can have in view ; and will not justify taking more than legal interest. If the only object of the indenture was to give security for the money lent and interest, a security, which, while it might be a gain, might, as if in this case the lad had become sick, be none, or might be a loss: the defendant might lawfully carry this agreement into execution, by enjoying the benefit of the security (since the loss might also have fallen on him, and so reduced even his principal sum) and exacting interest also; and, on this supposition, you ought to find for the defendant. But if the meaning of the contract was, that the indenture and probable service of the son was equivalent to the interest of the money borrowed by the father ; then exacting interest afterwards was usury, the money lent is forfeited, and you ought to find for the plaintiff. If the indenture were, of itself, sufficient to ascertain the intent of the parties, we should feel ourselves bound to give a decisive opinion. But as it does not exclude the reservation of interest besides (as the words “ cash lent,” might have been inserted with a view to interest) we leave it to be explained by other circumstances; only declaring our opinion, that, from the nature of the transaction, and the provision in the indenture, that the time, which might be lost at school, should be made up to the defendant, it was the meaning of the parties, that the indenture and service should be equivalent to interest. If a certain gain was reserved in the contract, to the lender, besides interest ; the contract is usurious. And if, without any express reservation, in the contract, a certain gain, uncompensated by expence and risk, was taken ; this taking is usurious. If the taking be usurious, you ought to find for the plaintiff.

4T.Rep.353. Note.—The case of Morse v. Wilson, of all which have come within my knowledge, most nearly resembles the preceding. To secure the repayment of a loan of 2000l. with five per cent. interest, a bond, in the penalty of 4000l. was given; and also, in further security, an assignment of two shares in a brewery, valued at 1000l. each; the surplus profits of which, together with five per cent interest, the lender was to receive. Here it was argued, that, though the lender, by this agreement, was not subjected to the losses in trade, yet, from his reception of the profits, he was, with respect to others than the partners, liable for the partnership debts; which might risk, not only his interest, but his principal advanced. But the court held it a clear case. For not being liable, with respect to the partners, for the losses in trade, his principal was no farther risked than, in the case of every lender, by the insolvency of the borrower; from his being liable to debts, on the insolvency of the partners.

The jury found for the defendant.

Esp. Ca. Ni. Pri. 11. Dall. 216. It will be observed, that if in this case, the lender had been immediately liable to losses contingent, it would not have been usury, and that, in the case of Kirkpatrick, my opinion went on the ground, that, from the relation of master and servant, he was immediately bound to maintain and provide for the borrower’s son, in case of sickness, without any compensation or recourse, on the son, the borrower, or any person whatever; and that this contingency might have affected even the principal lent. The decisions in England seem to go very far, to supress usury. Compare the case of Doe v. Barnard, with the last point in the case of Musgrove v. Gibbs.