Case ID: ad_24/html/0327-01.html
Source: Caselaw Access Project
Author: {"author": "Follett, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John P. Myers and Robert L. Ingalls, as Executors, etc., of David S. Ingalls, Deceased, Appellants, v. Bradley P. Wheeler and Hattie L. Wheeler, his Wife, Respondents, Impleaded with Others.
    Foreclosure— a counterclaim that the mortgage is usurious and a demand that it be canceled — allegations insufficient to charge usury.
    
    Where an action is brought to foreclose a mortgage, the mortgagor, owning the mortgaged premises, may interpose a counterclaim that the mortgage is void for usury and is a cloud on his title, and may demand that it be canceled, but an answer interposed by the mortgagor, in which he alleges that he received only §3,200 on a mortgage of §3,800, and that the sum of §28 was reserved upon the false statement that it was charged as a commission for procuring the loan, but which does not state why the §800 were reserved, or that the mortgagee retained the sums mentioned with the intent or for the purpose of exacting more than legal interest on the loan, or that the mortgagor permitted the mortgagee to retain these sums for the purpose or with the intent of paying more than the legal rate of interest for the loan, fails to present the issue that the mortgage is usurious.
    Appeal by the plaintiffs, John P. Myers and another, as executors, etc., of David S. Ingalls, deceased, from a judgment of the Supreme Court in favor of the defendants, Bradley P. Wheeler and Hattie L. Wheeler, entered in the office of the clerk of the county of Erie on the 19th day of February, 1897, upon the decision of the court rendered after a trial at the Erie Special Term, canceling of record a mortgage on real estate because it was usurious, with notice of an intention to bring up for review upon such appeal an order entered in said clerk’s office on the 19th day of" February, 1897, granting the said defendants’ motion for judgment on the pleadings.
    This action was begun January 30,1895, to foreclose a mortgage, accompanied by a bond, executed by Bradley P. Wheeler and Hattie L., his wife, to Helen E. Chaddock, January 2, 1891, and recorded in the office of the clerk of the county of Erie January 22, 1891, in book 586 of Mortgages, at page 420, to secure the payment of $2,800 — $300 and interest at the rate of six per cent on the whole sum April 2, 1891, and $2,500 January 2, 1896, with interest at the rate of six per cent payable semi-annually until the whole sum should be paid; which mortgage was transferred to D’avid S. Ingalls by an assignment executed November 3,1892, and recorded in said cleric’s office April 12, 1893, in book 69 of Mortgages, at page 610.
    The foregoing facts are alleged in the complaint, and it is also alleged that nothing has been paid on the mortgage except the interest thereon to January 2, 1893 ; that David S. Ingalls is dead, and that December 23, 1893, letters testamentary on his estate .were duly issued to the plaintiffs.
    The foregoing allegations are admitted in the answer, and, as a defense to the mortgage, it is alleged that the mortgagee was the sister of David S. Ingalls, and the loan was in fact made by him, and that he reserved out of the amount secured by said mortgage §628, §28 of which was for a commission of one per cent on the amount of the mortgage, which was in excess of the legal rate of interest, and that §600 were reserved and never paid over by him for some purpose and on some consideration not stated. It is further alleged that David S. Ingalls was • not acting as an agent of the mortgagee, but that the money loaned belonged to him, and that the mortgage, in fact, was his from the date of its execution.
    The foregoing facts were also alleged as a counterclaim, the defendant demanding. as affirmative relief that the record of the mortgage be canceled on the ground that the mortgage was void for usury. The plaintiffs failed to reply to this counterclaim. When the case came on for trial at Special Term the defendants moved for a judgment on the counterclaim, which motion was resisted. Neither party offered any evidence. Subsequently defendants motion was granted, an order entered, and the court filed a decision stating the facts as alleged in the counterclaim and directed a judgment canceling the record and ordering that the bond and mortgage be canceled and surrendered.
    
      John G. Milburn, for the appellants.
    
      J. W. Russell, for the respondents.
   Follett, J.:

A mortgagor owning the fee of the land covered by an usurious mortgage may maintain an equitable action to have the mortgage surrendered and the record thereof canceled as a cloud upon his title. (Morse v. Hovey, 9 Paige, 197; Hartson v. Davenport, 2 Barb. Ch. 77; Williams v. Ayrault, 31 Barb. 364; S. C., sub. nom. Williams v. Fitzhugh, 44 Barb. 321; affd., 37 N. Y. 444 ; 5 Trans. App. 61; Tyler Usury, 435 et seq.)

The cases of which Minturn v. Farmers’ Loan & Trust Co. (3 N. Y. 498); Allerton v. Belden (49 id. 373) and The Town of Venice v. Woodruff (62 id. 462) are types, are not in point. These cases simply hold that the maker of a promissory note or of a bond is not entitled to maintain an action to cancel the obligation without alleging some special circumstance, because his defense to an action on the note or the bond is an adequate remedy.

In case an action is brought to foreclose a recorded mortgage against the mortgagor, who is the owner of the land mortgaged, he may set up as a counterclaim that the mortgage is void for usury, and is a cloud on his title, and ask that it be canceled. (Equitable Life Assurance Society v. Cuyler, 12 Hun, 247; affd., 75 N. Y. 511.)

In the case at bar usury as a defense or as a ground for affirmative relief is not well pleaded. The allegation that the mortgagor received but $2,200 on the mortgage of $2,800 is not sufficient to present an issue that the mortgage is usurious. (Booth v. Swezey, 8 N. Y. 276.) The answer contains no information why or for what consideration the sum of $600 was reserved. The allegation that the sum of $28 was reserved on the false statement that it was charged as a commission for procuring the loan does not amount to an allegation that the mortgage was usurious. (Morton v. Thurber, 85 N. Y. 550; Guggenheimer v. Geiszler, 81 id. 293.) It is not alleged in the answer that the mortgagee retained the sums mentioned for the purpose or with the intent of exacting more than the legal rate of interest for the loan, or that the mortgagor permitted the mortgagee to retain those sums for the purpose or with the intent of paying more than the legal rate of interest for the loan. When usury is pleaded as a cause of action, as' a counterclaim, or as a defense, it must be set out with such certainty and precision that it appears on the face of the pleading that an usurious contract has been entered into. (National Bank v. Lewis, 75 N. Y. 516; 27 Am. & Eng. Ency. of Law, 1040; Boone’s Code Pleading, § 67, and cases cited.)

The judgment should be reversed and a new trial graúted, with costs to abide the event.

All concurred.

Judgment reversed and a new trial ordered, with costs to the appellant to abide the event.