JOSEPH J. ANDREWS, PLAINTIFF IN ERROR,
vs.
LEWIS W. POND, THOMAS M. CONVERSE, AND FRANCIS L. WADSWORTH, DEFENDANTS IN ERROR.

*68 The case was argued by Webster, and Mr. D.F. Webster, for the plaintiff in error; and by Mr. Ogden for the defendants.

*73 Mr. Chief Justice TANEY delivered the opinion of the Court. —

This case comes before the Court upon a writ of error, directed to the judges of the Circuit Court for the ninth circuit and southern district of Alabama.

The action was brought by the plaintiff as endorsee, against the defendants as endorsers of a bill of exchange in the following words: —

"Sixty days after date of this first of exchange, second of same tenour and date unpaid, pay to Messrs. Pond, Converse, and Wadsworth, or order, seven thousand two hundred and eighty-seven 78/100 dollars, negotiable and payable at the Bank of Mobile, value received, which place to the account of

The case, as presented by the record, appears to be this. The defendants were merchants, residing in Mobile, in the state of Alabama. H.M. Andrews and Co. were merchants residing in New York; and before the above mentioned bill was drawn, the defendants had become liable to H.M. Andrews and Co. as endorsers upon a former bill for $6000, drawn by E. Hendricks on Daniel Carpenter, of Montgomery, Alabama. The last mentioned bill was dated at New York, and fell due on the 21st of February, 1837, and was protested for non-payment. The defendant Pond, it seems, was in New York in the month of March, 1837, shortly after this protest; when H.M. Andrews and Co. threatened to sue him on the protested bill: and the defendant Pond, rather than be sued in New York, agreed to pay H.M. Andrews and Co. ten per cent. damages on the protested bill, and ten per cent. interest and exchange on a new bill to be given, besides the expenses on the protested bill.

According to this agreement an account, which is given in the record, was stated between them on the 11th of March, 1837, in which the defendants were charged with the protested bill, and ten per cent. damages on the protest, and interest and expenses, which amounted altogether to the sum of $6625 25, and ten per cent. upon this sum was then added, as the difference of exchange between Mobile and New York, which made the sum of $7287 78; for which the defendant Pond delivered to H.M. Andrews and Co. the bill of exchange upon which this suit is brought, endorsed by the defendants in blank. The bill was remitted by H.M. Andrews and Co. to S. Andrews, at Mobile, for collection. The drawees refused to accept it, and it was protested for non-acceptance; and after this refusal *74 and protest, it was transferred by S. Andrews to J.J. Andrews, the present plaintiff. It is stated in the exception, that after this transfer it was a cash credit in the account between H.M. Andrews and Co. and S. Andrews. The bill was not paid at maturity, and this suit is brought to recover the amount.

There is no question between the parties as to the principal or damages of ten per cent. charged for the protested bill of $6000; nor as to the interest and expenses charged in the account herein before mentioned. The defendants admit that the principal amount of the protested bill, the damages on the protest which are given by the act of assembly of New York, and the interest and expenses, were properly charged in the account. The sum of $6625 25 was therefore due from them to H.M. Andrews and Co. on the day of the settlement, payable in New York. The dispute arises on the item of $662 53, charged in the account as the difference of exchange between New York and Mobile, and which swelled the amount for which the bill was given to $7287 78. The defendants allege that the ten per cent. charged as exchange, was far above the market price of exchange at the time the bill was given, and that it was intended as a cover for usurious interest exacted by the said H.M. Andrews and Co. as the price of their forbearance for the sixty days given to the defendants. This was their defence in the Circuit Court, where a verdict was found for the defendants under the directions given by the Court.

Many points appear to have been raised at this trial, which are stated as follows, in the exception taken by the plaintiff.

The defendant offered evidence —

1. To prove that the said bill of exchange was usurious, according to the statute and laws of the state of New York. The plaintiff objected to the reading of the statute and depositions aforesaid, because the contract was not made with a view of the statute or laws of New York. But the bill of exchange was usury or not by the laws and statutes of Alabama; and that the contract was subject only to the laws of the state of Alabama, as to its obligatory force and validity: and he further objected, that if this contract were to be decided by the statute of New York, that this proof could not be given under this issue: but the Court overruled all these objections, and permitted the depositions and statute to be read, to show the bill of exchange to be void by the laws of New York: to all which plaintiff excepts.

2. Plaintiff then offered to prove by Joseph Wood, that the banks purchased bills at a far less rate of exchange than others, that they never bought any than undoubted paper; that from the facility of collecting, remitting, &c. they had many advantages over the citizens at large, and that the exchange of the banks was therefore much lower than the community at large; that there was no fixed rate of exchange between Mobile and New York; that it varied from one to twenty per cent. according to the solvency, punctuality, risk, &c.; that exchange was ever fluctuating, and was high or low as *75 the risk was great or small. The Court rejected this testimony also, to which plaintiff excepts.

3. Plaintiff asked the Court to instruct the jury, that if they were satisfied that the excess over legal interest retained in this bill was taken and contracted for innocently by the parties; without intending to violate the laws against usury; that they might find for plaintiff: but the Court refused this also, and plaintiff excepts.

4. Plaintiff moved the Court to charge the jury that the contract expressed in this bill of exchange, if to be executed in Alabama, was subject alone to the laws of Alabama against usury; and that the usury laws of New York had no force, or any thing to do with this investigation. This was refused by the Court, and plaintiff excepts.

5. Plaintiff next requested the Court to charge the jury, that if they believed S. Andrews received the bill before maturity, for a valuable consideration, without any notice of usury, and that plaintiff received it from S. Andrews, without notice of usury, and before maturity, that the plaintiff might recover; notwithstanding plaintiff offered no proof of the consideration he gave for it. To this refusal there was also an exception.

6. Plaintiff next moved the Court to charge that the variance between the bill declared on, and the one set up as the same bill by defendants' deposition, was fatal in a plea of usury; to which the Court refused, and plaintiff excepts.

7. It appeared that before the bill was delivered by S. Andrews to the plaintiff, it had been, while in the hands of S. Andrews, protested for non-acceptance, which appeared on the face of the bill. There was no evidence of any settled account between H.M. Andrews and Co. and S. Andrews, or which was creditor or debtor upon the statement of accounts. It was also proved that the expense of transporting specie from New York to Mobile, including insurance and interest, would not exceed one and one-half per cent. on the sum transported. Upon the whole case, and the several points stated, the Court charged the jury, that if they believed from the evidence, that by the usages of trade between New York and Mobile, there was an established rate of exchange between those places, the drawers and drawees of the bill of exchange here sued on, had a right to contract for such rates of exchange; and that even for a higher rate to a small amount, if under the circumstances it did not appear to have been intended to evade the statute against usury, might be allowed by them.

8. But if they believed that no such usage existed, the parties had no right to contract for more than the actual expense of transportation of specie from one place to the other, including interest, insurance, and such reasonable variations therefrom, as above stated.

9. And, further, if they believed from the evidence, that the drawers of the bill of exchange contracted with the drawee in the state of New York, at the time the bill was drawn, for a greater rate of interest than seven per centum per annum, for the forbearance *76 of the payment of the sum of money specified in the bill, although it may have been taken in the name of exchange, the contract is usurious; and unless they believe from the evidence, that the plaintiff took the bill in the regular course of business, and upon a fair and valuable consideration bona fide paid by him, and without notice of the usury, they ought to find for the defendants, otherwise for the plaintiff.

From the manner in which the points are arranged in this exception, and the similarity of the questions presented in some of them, we shall be better understood by expressing our opinion on the whole case, as it appears before us, without regarding the order in which the questions are stated in the exception; and without examining separately each one of the instructions asked for by the plaintiff, and refused by the Court.

The transaction, upon the face of it, does not profess to charge any interest for forbearance. It is a bill of exchange in the usual form; and in the account stated at the time, and which formed the basis of the bill, the only item in relation to interest is the small sum charged for the eighteen days which intervened between the time when the first bill became due and the present one was given. This interest is charged at seven per cent., which is the legal rate of interest established in New York. The transaction, taken altogether, was indeed a ruinous one on the part of the defendants. A debt of $6000, payable at Mobile on the 21st of February, was converted into a debt of $7287 78, payable at the same place on the 25th of April following; being an increase of $1287 78 in the short space of eighty-one days. Yet, if the defendants brought it upon themselves by their failure to take up the first bill at maturity, and the transaction was not intended to cover usurious interest, they must meet the consequence of their own improvidence. The sum of $6625 25 was undoubtedly due from them to H.M. Andrews and Co. on the day the bill in question was drawn. They were entitled to demand that sum in New York, or a bill that was equivalent to it at the market price of exchange; and if ten per cent. discount was the usual price at which others purchased bills of this description in the market of New York, they had a right to take the bill at that rate, in satisfaction of their debt. There is nothing, therefore, upon the face of the papers, from which the Court can undertake to say that usurious interest was exacted.

But although the transaction, as exhibited in the account, appears on the face of it to have been free from the taint of usury, yet if the ten per cent. charged as exchange, or any part of it, was intended as a cover for usurious interest, the form in which it was done, and the name under which it was taken, will not protect the bill from the consequences of usurious agreements; and if the fact be established, it must be dealt with in the same manner as if the usury was expressly contracted for in the bill itself. But whether this item was intended as a cover for usury or not, is a question exclusively for the jury. It is a question of intent. And in order *77 to enable the jury to decide whether usury was concealed under the name of exchange; evidence on both sides ought to have been admitted, which tended to show the usual rate of exchange between New York and Mobile, when this bill was negotiated. There is no rule of law fixing the rate which may be lawfully charged for exchange. It does not altogether depend upon the cost of transporting specie from one place to another; although the price of exchange is, no doubt, influenced by it. But it is also materially affected by the state of the trade, by the urgency of the demand for remittances, and by the quantity brought into the market for sale: and sometimes material changes take place in a single day, although no alteration has happened in the expenses of transporting specie. The Court, therefore, can lay down no rule upon the subject. H.M. Andrews and Co., when about to take this bill in payment of an existing debt, had a right to include in it a fair allowance for the difference in exchange. Whether they exacted more or not, for the forbearance of their debt, is a question for the jury to decide: and in order to enable them to decide it correctly, they must be allowed to hear the evidence which either of the parties may offer, as to the rates of exchange for such a bill as this; which was payable in specie, and not in any depreciated currency. Taking this view of the subject, we think the Court below erred in rejecting the testimony of Joseph Wood, who was offered by the plaintiff to prove the rate of exchange; and also in the direction given to the jury, that if there was no fixed rate of exchange, the creditor had a right to take no more than the actual expense of transporting the specie, or a small amount more, where the addition was not intended to cover usury.

Another question presented by the exception, and much discussed here is, whether the validity of this contract depends upon the laws of New York or those of Alabama. So far as the mere question of usury is concerned, this question is not very important. There is no stipulation for interest apparent upon the paper. The ten per cent. in controversy is charged as the difference in exchange only, and not for interest and exchange. And if it were otherwise, the interest allowed in New York is seven per cent., and in Alabama eight; and this small difference of one per cent. per annum, upon a forbearance of sixty days, could not materially affect the rate of exchange, and could hardly have any influence on the inquiry to be made by the jury. But there are other considerations which make it necessary to decide this question. The laws of New York make void the instrument when tainted with usury; and if this bill is to be governed by the laws of New York, and if the jury should find that it was given upon an usurious consideration, the plaintiff would not be entitled to recover; unless he was a bona fide holder, without notice, and had given for it a valuable consideration: while by the laws of Alabama he would be entitled to recover the principal amount of the debt, without any interest.

The general principle in relation to contracts made in one place *78 to be executed in another, is well settled. They are to be governed by the law of the place of performance — and if the interest allowed by the laws of the place of performance, is higher than that permitted at the place of the contract, the parties may stipulate for the higher interest, without incurring the penalties of usury. And in the case before us, if the defendants had given their note to H.M. Andrews and Co., for the debt then due to them, payable at Mobile, in sixty days, with eight per cent. interest, such a contract would undoubtedly have been valid; and would have been no violation of the laws of New York, although the lawful interest in that state is only seven per cent. And, if in the account adjusted at the time this bill of exchange was given, it had appeared that Alabama interest of eight per cent. was taken for the forbearance of sixty days given by the contract; and the transaction was in other respects free from usury; such a reservation of interest would have been valid and obligatory upon the defendants; and would have been no violation of the laws of New York.

But that is not the question which we are now called on to decide. The defendants allege that the contract was not made with reference to the laws of either state, and was not intended to conform to either. That a rate of interest forbidden by the laws of New York, where the contract was made, was reserved on the debt actually due; and that it was concealed under the name of exchange, in order to evade the law. Now, if this defence is true, and shall be so found by the jury, the question is not which law is to govern in executing the contract; but which is to decide the fate of a security taken upon an usurious agreement, which neither will execute? Unquestionably, it must be the law of the state where the agreement was made, and the instrument taken to secure its performance. A contract of this kind cannot stand on the same principles with a bona fide agreement made in one place to be executed in another. In the last mentioned cases the agreements were permitted by the lex loci contractus; and will even be enforced there, if the party is found within its jurisdiction. But the same rule cannot be applied to contracts forbidden by its laws and designed to evade them. In such cases, the legal consequences of such an agreement must be decided by the law of the place where the contract was made. If void there, it is void everywhere; and the cases referred to in Story's Conflict of Laws, 203, fully establish this doctrine.

In the case of De Wolfe vs. Johnson, 10 Wheat. 383, this Court held that the lex loci contractus must govern in a question of usury; although by the terms of the agreement the debt was to be secured by a mortgage on real property in another state. And the case of Dewar vs. Shaw, 3 T.R. 425, shows with what strictness the English Courts apply their own laws against usury to contracts made in England. In the case under consideration, the previous debt for which the bill was negotiated was due in New York; a part of it, that is to say, the damages on the protest of the first bill *79 were given by a law of that state; and the debt was then bearing the New York interest of seven per cent., as appears by the account before referred to. And, if in consideration of further indulgence in the time of payment, the parties stipulated for a higher interest, and agreed to conceal it under the name of exchange; the validity of the instrument, which was executed to carry this agreement into effect, must be determined by the laws of New York, and not by the laws of Alabama.

In this aspect of the case, another question arose in the trial in the Circuit Court. By the laws of New York, as they then stood, usury was no defence against the holder of a note or bill who had received it in good faith, and to whom it was transferred for a valuable consideration, and without notice of the usury. The present plaintiff claims the benefit of this provision. But upon the evidence in the case, it is very clear that he does not bring himself within it. The bill of exchange was protested for non-acceptance, while it was in the hands of S. Andrews, the agent of H.M. Andrews and Co., to whom it had been sent for collection; and this fact appeared on the face of the bill at the time it was transferred to the plaintiff. Now, a person who takes a bill, which upon the face of it was dishonoured, cannot be allowed to claim the privileges which belong to a bona fide holder without notice. If he chooses to receive it under such circumstances, he takes it with all the infirmities belonging to it; and is in no better condition than the person from whom he received it. There can be no distinction in principle between a bill transferred after it is dishonoured for non-acceptance, and one transferred after it is dishonoured for non-payment; and this is the rule in the English Courts, as appears by the case of Crossley vs. Ham, 13 East, 498. Now it is evident, that no consideration passed between Carpenter, the drawer of the bill, and the defendants, who are the payers and endorsers. The bill was made and endorsed by the defendants, for the purpose of being delivered to H.M. Andrews and Co., in execution of the agreement for further indulgence. And if that agreement was usurious, then the bill in question was tainted in its inception; and that taint must continue upon it in the hands of the present plaintiff.

There is one other direction given by the Circuit Court, which remains to be considered. It is the third, as stated in the exception. The vagueness and generality of the terms in which this instruction was asked for by the counsel for the plaintiff, justified the Court in refusing it. It will be seen from what we have already said, that if the rate of exchange taken upon this bill was a fair one, and was not intended to cover usurious interest, the plaintiff is entitled to recover; and if the payer means nothing more than this, there could be no objection to it. But, if it was intended to maintain that although a higher rate of exchange was allowed than the fair market price, and that this was done in consideration of the forbearance of payment, under the belief that the law would not in that shape regard it as usury, the mistake of the parties in this respect, *80 will not alter the character of the transaction. The instruction as asked for was framed in such general terms, that it might have misled the jury; and the Court, therefore, were not bound to give it.

In fine, if the parties intended to allow no more than a fair rate of exchange, testing it by the market price of good bills of this description, it was not usury; and the plaintiff is entitled to recover. If, on the contrary, more was intended to be taken, it was usury; and the plaintiff is not entitled to recover. It is true, that after this bill had been negotiated between H.M. Andrews and Co. and the defendants, other persons might have lawfully purchased it at a much greater discount than the market rate of exchange; and might have considered and estimated in the price they gave for it, the known embarrassments, the want of punctuality, and the loss of credit of the defendants, whose former bill had already been protested. But, as between the debtor and his creditor, no difference in the rate of exchange can be made on that account. If, in consideration of further forbearance, the creditor receives a new security from his debtor for an existing debt, he cannot enlarge the amount due by exacting any thing either by way of interest or exchange, on account of the additional risk he may suppose he runs by this extension of credit; nor on account of any doubts he may entertain as to the punctuality of payment, or the ultimate safety of his debt.

It is hardly necessary to add, that the right of the defendant to offer in evidence, under the plea of non assumpsit, that the instrument was given upon an usurious contract, has been too well settled to be now disputed: and we see nothing in the record, upon which a question for the Court could be raised, upon the supposed variance between the bill mentioned in the testimony produced by the defendants, and the bill declared on by the plaintiff.

Upon the whole, we dissent from the Circuit Court in the second and eighth points in the exception, as we have already mentioned; and we concur with them in the residue.

The judgment of the Circuit Court must, therefore, be reversed with costs.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the southern district of Alabama, and was argued by counsel.

On consideration whereof, it is ordered and adjudged by this Court, that the judgment of the said Circuit Court in this cause be, and the same is hereby, reversed with costs; and that this cause be, and the same is hereby, remanded to the said Circuit Court, with directions to award a venire facias de novo.