In speaking thus far of the sale of notes, we have had particular reference to those which were transferred by delivery, or by indorsement without recourse. Another question has been raised, however, when the transfer was made by an indorsement which left the indorser liable if prior parties did not pay; and this question is, whether the transaction did not then become usurious, if the note was sold for less than its face, because the indorser would then be bound to pay a larger sum than that which he had received, with lawful interest upon it. The cases upon this subject are somewhat conflicting; but the difficulty has, we think, arisen from disregarding the peculiar character of negotiable paper, and also from forgetting that the whole law of usury is, in its nature, penal, and therefore to be strictly construed. If one transfer a note by indorsement, he does two things: he transfers the note, and he also becomes liable for its payment; but the latter is incidental to the former. The substance of the transaction is a transfer of the property in the note, - a sale, and nothing more than a sale; and therefore we say that the price paid has nothing to do with the question, as one of usury. But, besides this, it is important to observe, that such a transaction can be made usury only by a very large construction of that word; no money is loaned or borrowed or forborne, in any way whatever; it cannot therefore be usury, within any accuracy of interpretation. We do not mean to say, of course, that actual and intended usury could be successfully covered. by a mere disguise of this kind. In case of such an * attempt it would be declared a usurious loan, because it would be such, and would have the effect of usury; but if it were a bona fide sale of the note, the indorsement, and the liability derived from it, would not, in our judgment, impart to the transaction a usurious character.

(t) This view is supported by Law v. Sutherland, 5 Graft. 357; Whitworth v. Adams, 5 Hand. 333; Shackleford v. Morris. 1 J. J. Marsh. 497; Hansborough v.

Baylor, 2 Munf. 36; Holmes v. Williams, 10 Paige, 326; Capital City Ins. Co. v. Quinn, 73 Ala. 562; Central Trust Co. v. Burton, 74 Wis. 332.

A further question may then be raised: If the holder sues the indorser, can he recover the face of the note, or only what he paid, with legal interest? We are of opinion that he may recover the amount upon the face of the note, from his indorser, as well as from any prior party. It is this amount he buys; it is this which he had a right to buy, and which the indorser has a right to sell, and a right to guarantee.

By some authorities it has been held, that the indorsement of the note, by the nominal seller, or the giving of security in any way for its payment, in case of the failure of the party primarily liable, makes the transaction usurious, as matter of law. These cases seem to proceed upon the principle, that there is no substantial reason why the holder of the paper should dispose of it for less than its face, when he may be called upon to repay its full amount; and therefore the transaction must be regarded as intended by the parties to be an actual loan, upon usurious interest (u) According to the weight of authority, however, where there is sufficient evidence that the transaction was a sale, and not a covert loan, the fact that the seller indorsed the paper is not considered as changing the character of the contract, and making it usurious. Nevertheless these cases seem to admit, that if the purchaser could recover from the seller and indorser the full amount of the face of the paper sold, the contract would be a loan, and

(u) Ballioger v. Edwards, 4 Ired. Eq. 449; McElwee v. Collins, 4 Dev. & B. 209; Walworth, Ch., Cram v. Hendricks, usurious; and they therefore decide that the purchaser is limited in bis action against the seller and indorser, to a recovery of the amount actually paid by him, with lawful interest thereon. (v) We think, however, that these * cases proceed upon a wrong principle, and the courts seem to be misled by a difficulty in the application of their principles to practice. If a payee of a note actually sell it to a purchaser, with his indorsement, the whole transaction, upon analysis, will be found to be this: it is not a loan of money, but the purchaser of the note buys a right to sue the maker of the note, and also an engagement for value, on the part of the seller, that the maker shall pay the face of the note. There is no more loan in the case, than in the sale of goods, with a warranty that they shall be fit for the purposes for which they are bought It may be true that he can get much more for the note if he indorses, than if he does not; and it may be true that he will get more for the goods if he warrants them, than if he does not; but in neither case does this circumstance convert the sale into a loan. It often happens that the seller is known to be in insolvent or very precarious circumstances, without any probability of being able to refund, in case of the maker's default; here the value of the paper consists of the indorser's liability to pay; but it would be difficult to show that even this transaction was essentially a loan to the indorser. Undoubtedly, a usurious transaction might seek the disguise of this form of contract, as well as of any other. And neither this nor any disguise should protect it But we speak of actual sales of notes and bills, by indorsement, in good faith. And of these, the preceding considerations have led us to the conclusion we have above stated. We go, perhaps, beyond the authorities, but not beyond the practice; and we cannot but think that the rule of law should be, that in case of an actual sale of a note, at a discount, with an indorsement by the seller, the indorser should be held liable for the full amount, on the maker's default

7 Wend. 573; Cowen, J., Rapelye v. Anderson, 4 Hill, 472.

These considerations lead us to those cases where one indorses or gives accommodation paper, for a premium paid him which may be an outright sum or a percentage. Such a transaction has been thought by many courts and judges, to be usurious, if the sum paid exceed six per cent on the notes indorsed or given; but we think it is not so, on the plain ground that a man may sell his credit, as well as anything else that he has, and may sell it for the most that he can get

(v) Cram v. Hendricks, 7 Wend. 569; Rapelye v. Anderson, 4 Hill, 472; Ingalls v. Lee, 9 Barb. 647; French v. Grindle, 15 Me. 163; Farmer v. Sewall, 16 id. 456; Lane v. Seward, 20 id. 98; Brock v.

Thompson, 1 Bailey, 322. See also Freeman v. Brittin, 2 Harrison, 191; Metcalf v. Pilcher, 6 B. Mon 530; May v. Campbell, 7 Humph. 450.

* The earlier cases on this subject held that upon a sale of one's credit in this manner, the party indorsing or guaranteeing might receive a compensation for so doing provided it did not exceed lawful interest upon the amount of the debt guaranteed, or the credit sold. (w) But if a transaction of this kind can be regarded as such a sale of credit as that a price may be taken therefor by the seller as his payment, we do not see, upon principle, any limit to the amount which may be taken, other than that which belongs to all sales. When a party indorses a note, or guarantees a debt, as surety for another, he actually advances no money, and is therefore at no pecuniary loss, until compelled, by reason of his suretyship, to pay the debt for which he was bound. If he pays this, the law creates at once an obligation, upon the party whose debt he pays, to reimburse to him the sum he pays with legal interest And if the sum originally received by a party thus selling his credit, is to be considered as interest, added to the amount for which the law gives him this obligation, there is a larger amount secured for interest, than the legal interest, whatever be the amount paid for the credit; for all that is paid is excess. On this ground, therefore, the bargain is usurious, whether more or less is paid. But if the transaction is to be considered as a sale of the credit of the party indorsing; which credit is his property, to dispose of as he pleases, and property which the purchaser may profitably and lawfully buy, the price paid and received must be considered as entirely independent of the resulting right of the indorser or guarantor to get indemnity, if he can, for whatever he is obliged to pay. It is then no loan, but a sale, which, in respect to the price that may be paid, is like any other sale; and this view, we think, is sustained by the later and better authorities. (x)

In the case of cross-notes, where A gives his note to B, and B gives his note to A, but A's credit is much better than B's, and it is a part of the bargain that the notes from B to A shall be greater than the notes from A to B, or that A shall have any * sum by way of a premium on the transaction; this has been considered usurious; but not, as we think, on sufficient grounds. Here, as before, we deem it a lawful sale of one's credit, and neither borrowing nor lending nor forbearing money in any way. (y) We repeat, however, the remark, to avoid misconception, that we speak only of bona fide transactions of this kind, and not of those which are used as mere pretences for actual usury. This, however, would generally be a question of fact for the jury, and not a question of law.

(w) Dey v. Dunham, 2 Johns. Ch. 182; Fanning v. Dunham, 5 id. 122; Bollock v. Boyd, 1 Hoff. Ch. 294; Moore v. Vance, 8 Dana, 361.

(x) See Ketcham v. Barber, 4 Hill, 224; More v. Howland, 4 Denio, 264; Dry Dock Bank v. American Life Ins. & Trust Co. 8 Comst. 344. See also Cobb v. Titus, 10 N. Y. (6 Seld.) 198.

It has been held that the sale of a promissory note carries with it an implied warranty on the part of the seller that there is no legal defence to the note.(yy)