Cope v. . Wheeler , 41 N.Y. 303 ( 1869 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This action was properly continued in the name of the plaintiffs. The surplus was personal property and belonged to the plaintiffs jointly, and the interest of the plaintiff, John, on his death passed to his representatives.

The form of the action was also proper. Where money has been received, which in equity belongs to another, an action for money had and received will lie for its recovery; and now, under the Code, any defence, legal or equitable, may be interposed by the defendant.

The defence of usury, while the statute against usury remains, is entitled to the same consideration as any other defence. It cannot be disregarded, or treated as unconsionable, and subjected to more strict rules of construction than other defences.

One of the important questions in this case is, whether the bond and mortgage for $1,669 was usurious; and that depends upon whether the $1,000 bond and mortgage was a New York or a Wisconsin contract. Upon that question I entertain no doubt.

At the time of negotiating and executing the $1,000 bond and mortgage, both parties resided in this State; the agreement for the loan was here made; the instruments were both executed here; the money paid here; and the excess of interest received here. Although the land covered by the mortgage was situate in the State of Wisconsin, yet neither bond or mortgage named any place of payment, and hence the same were payable here, where the parties resided.

This question was very thoroughly examined in the Supreme Court on a former appeal in this same cause, and an opinion written on that occasion by Justice MASON gave the true exposition of the law on this question, and may well be adopted as the opinion of this court on that question. (53 Barb., 350.)

It being a New York contract, the question of usury was for the jury, and their finding is conclusive upon the fact. The evidence fully sustained the verdict.

That mortgage being usurious, and it having entered into and formed a part of the consideration of the mortgage on which the defendant seeks to apply the surplus money in his hands, the latter is also tainted with usury, and is void. (Giblet v.Averill, 5 Denio, 88; Jacks v. Nichols, 5 N.Y., 178;Price v. Lyons Bank, 33 id., 55.)

Such latter mortgage was void for the whole amount; but as no exception was taken by the plaintiffs to the instructions of the judge to the jury, as to the amount of recovery, no question arises on that point.^*

The appellant insists that the court erred in refusing to submit to the jury the question "whether or not the said loan was intended to be made and said mortgage executed by the parties, in good faith and with sole reference to the laws of Wisconsin; and if the jury should find in the affirmative, then, that the same was governed by the laws of Wisconsin." A sufficient answer to this exception is the fact that there was no evidence on which to base such a request. On the contrary, the evidence was all the other way, and a verdict finding such proposition would have been set aside as against evidence. The request was properly refused.

It is next insisted that the court erred "in ruling that the $1,000 mortgage was not a valid lien upon the Wisconsin land conveyed to Huntington, from the date of the conveyance to him, subject to that mortgage." This exception presents a question of some difficulty. Within the ruling of this court, in Hartley v.Harrison, (24 N.Y. Rep., 170), this mortgage did become a valid lien on the Wisconsin property as against Huntington. It was held in that case "that a purchaser who takes a conveyance of the premises from the mortgagor, subject to the lien and payment of a mortgage, cannot set up the defence of usury against such a mortgage, and thus obtain an interest in the land which the mortgagor never agreed or intended to transfer to him." In this case, the land was sold to Huntington subject to the lien of the said $1,000 mortgage; Huntington did not covenant to pay said mortgage, but the sum was deducted from the purchase price on account thereof, and Huntington paid one year's interest thereon. The mortgage, therefore, became a valid lien upon the land as against Huntington, although he did not become personally responsible for the debt; and the defendant, had he not parted with the mortgage, could have enforced it against the land. But before it can be said the court erred in refusing to charge as requested, we must see whether the question was at all material. Although the plaintiffs, when they conveyed to Huntington, had concluded to waive the usury, they subsequently changed their minds; and whether they could have recalled that waiver is not material here, because the mortgage while executory was, by the defendant, transferred to and became a part of the $1,669 mortgage. "The conditional sale to Huntington was not a confirmation of the original debt;" a usurious contract, while it remains executory, is wholly incapable of confirmation; and although the deed to Huntington was such a waiver as enabled the defendant as against Huntington to enforce the mortgage against the land, if he chose; yet, as against the borrower himself the waiver was of no force; so that, had these Wisconsin lands afterward become the property of the plaintiffs by conveyance from Huntington, this mortgage remaining unpaid, the defence of usury would have been available to them against its enforcement.

In this case, the usurious mortgage was neither paid nor collected from the fund to which the waiver was extended. As to any other fund, the defence of usury remained. It was carried into, and made part of another instrument; it is this latter instrument which is sought to be enforced against the borrower, to be collected from another fund. To this attempted enforcement of said latter instrument, the defence of usury may be interposed by the borrower.

Something is claimed by the appellant, because the usurious mortgage was assigned to one of the plaintiffs, and its lien discharged from the Wisconsin property, whereby they received the unpaid balance of its purchase price. Surrendering a valid collateral security to an usurious instrument, would not purge that instrument of the usury; the invalidity would still remain. In this case the taint of usury was not removed from the original mortgage by the borrower's waiver of it as against a particular fund; nor was it wiped out by taking a new mortgage for the old one, and assigning the latter to the borrower, whereby the fund to which the waiver attached was still retained by the borrower. The statute of usury cannot be avoided in that way. The substituted instrument had all the vice of the original one, and the defence of usury was fatal to its enforcement. The evidence offered by the defendant constituted no defence, was wholly immaterial, and was, therefore, properly excluded.

It is next insisted, that the court below erred in declining to charge the jury that "the $1,669 mortgage, being founded upon other consideration in part than the said $1,000 mortgage, and given upon other lands, and with an additional party as mortgagor; the same is not affected by any usury in said $1,000 mortgage, if it was not intended by the parties as, and in fact was not, a mere contrivance to evade the statute of usury, which was a question for the jury to determine. There was no error in this ruling. The usurious character of the $1,669 mortgage depended upon the character of the $1,000 mortgage. If that was usurious it tainted the other, whether the parties to the latter intended to violate the statutes of usury or not.

These are all the exceptions that I deem it important to notice. The judgment of the General Term must be affirmed.

^* In Williams v. Fitzhugh (37 N. Y. R., 451), it was expressly and sharply decided, by this court, that where a mortgage or other security was given to secure several notes, some of which were usurious and some not, the mortgagor (notwithstanding the act of 1837, chap. 430, 4, and 1 Rev. Stat., p. 77, 8), cannot have the mortgage delivered up by a court of equity, to be cancelled, except upon offering to pay the amount due on the notes not usurious. The statutes, providing that the borrower filing a bill in chancery, for relief against usury, shall not be obliged "to pay, or offer to pay, any interest or principal on the sum or thing loaned," c., as a condition of relief, applies to the principal and interest of the amount usuriously loaned, and not to the other non-usurious loans secured by the same security.

This decision is, perhaps, an authority for the judgment of the court below in this case.