Case Name: EARLE v. HAMMOND
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1872-05
Citations: 2 Abb. N. Cas. 368
Docket Number: 
Parties: EARLE v. HAMMOND.
Judges: 
Reporter: Abbott's New Cases
Volume: 2
Pages: 368–372

Head Matter:
EARLE v. HAMMOND.
N. Y. Supreme Court; Special Term,
May, 1872.
Defenses in Fobeclosube.—Application of Bonus.
Where the purchaser of a mortgage has received a bonus in excess of lawful interest paid by the borrower for consenting to an extension of the time of payment of principal, the borrower, when sued in foreclosure, is entitled to have such excess credited on the mortgage as a payment.
Form of an answer setting up this defense.
A certificate given by the borrower to the purchaser, at the time of the assignment of the mortgage, that it is a valid mortgage, &c., does not necessarily preclude this defense.
Direct evidence that the purchaser knew that the bonus he received came from the borrower is not essential.
Trial by the court.
William P. Earle brought this action against William A. Hammond and others, to foreclose a mortgage on real property.
The defendant, William A, Hammond, executed the mortgage in question, on certain real estate in in the city of New York, to one John J. Brown, about December 30, 1873, to secure the payment of $12,000 on June 30, 1874. The said John J. Brown assigned the same to Henry J. Burchell, for $12,000, on January 27, 1874.
On July 23, 1875, the latter assigned the same to William P. Earle, the plaintiff, who gave him his check for $12,053.66, being the face of the mortgage with the accrued interest. At the same time, Earle received an affidavit made by the defendant William A. Hammond, declaring the said mortgage and bond good and valid and free from the taint of usury, and that there was no set-off or defense at the time the transfer to Earle was being negotiated. On the same or following day, Earle received from one Huntley, a broker, through whom the sale of the mortgage had been negotiated, $1020. The defendant, William A. Hammond, claimed that he paid this money to the plaintiff as a bonus to induce him to purchase the mortgage, in order that the payment thereof might be extended, and insisted that the judgment should provide for allowing him the amount so paid, with interest thereon from the time of payment thereof.
The plaintiff disclaimed any knowledge of the fact that the $1020 came from the said defendant Hammond, but supposed it came from BurchelL
Rowland M. Hall (John M. Martin, attorney), for plaintiff.
Chauncey B. Ripley, for defendant, William A. Hammond.
The answer of the defendant William A. Hammond was as follows :
The defendant herein, William A. Hammond, by this his answer, shows to the court:
I. That on or about January 1, 1874, he executed to John J. Brown a bond, and on the same day a mortgage, which he presumes to be the same described in the complaint herein. [The answer then informally put in issue the allegation that the transfer was afterwards made to H. J. Burchill, as described in the complaint, but with the same effect it would appear as if defendant had denied information or knowledge sufficient to form a belief as to such allegations.]
H. First, for a first defense: This defendant further shows that immediately after the purchase of said bond and mortgage by said plaintiff, as set forth in folio 11 of the complaint, and on the same day, to wit, about July 23, 1875, this defendant paid to said Earle, plaintiff, on account of said obligations, the said bond and mortgage, the sum of §1020, thereby reducing the principal sum due on said, bond and mortgage to $10,980.
HI. Second, for a second defense : This defendant further shows, that on or about January 1, 1876, he paid to the plaintiff above mentioned the sum of $420, as interest or forbearance on the said principal of $10,980.
That on or about July 1, 1876, this defendant again paid to plaintiff as interest or forbearance the further sum of §420.
That both these sums, in all $840, was paid plaintiff by defendant for the use and forbearance of the said $10,980, for and during the period of one year, and that the lawful interest on said principal sum was not more than $768.60. That a greater sum than at the rate of 7 per centum per annum was paid by this defendant and received by plaintiff, and that the said plaintiff made this corrupt and unlawful requirement of defendant on said July 23, 1875, and that defendant consented to pay.plaintiff such an unlawful and usurious interest under pressure of plaintiff’s requirement and defendant’s need of securing the use of said principal sum, at the time said plaintiff agreed to take said bond and mortgage from said Burchill hereinbefore referred to.
IV. Third, for a third defense : Defendant denies each and every allegation in said complaint contained, except as herein admitted or controverted.
V. Defendant admits that some of the defendants whose names follow that of Helen N. Hammond in the title of this cause claim to have an interest in the said premises.
VI. Defendant admits that the defendant Helen N. Hammond has an interest in said premises.
VII. Defendant specifically denies that the amount claimed by plaintiff' is due him on account of said bond and mortgage, and the transaction set forth in the complaint and this answer, and this defendant hereby offers to pay the amount equitably due with legal interest.
Wherefore this defendant asks that the complaint be dismissed with costs, or that this defendant have such other or further relief as to the court may seem just, and as the nature of the case may require.

Opinion:
Van Brunt, J.
[Indorsed the following memorandum on the papers.]—The eases of Real Estate Trust Co. v. Keatch (7 Hun, 254), and Church v. Maloy (9 Id. 148), expressly decide that the defendant is entitled to the relief which he claims by his answer in this action.
Judgment accordingly.
Subsequently the following opinion was written.
Yan Brunt, J.
Since making the memorandum upon the papers disposing of this case, I have received* some points upon the part of the plaintiff, m which it is claimed that the defense raised by the defendants cannot be sustained because of the certificate given by him at the time of the assignment of the mortgage to the plaintiff, and also because the plaintiff had no knowledge that the money that he received came from the defendant.
The first ground of objection to the defense might well be urged, if the defendant was claiming a defense against the bond and mortgage as it existed in Mr. Burchell's hands, but he admits the certificate to have then been entirely true, and barely claims that because of payments subsequent to the assignment made to the plaintiff, this credit must be allowed.
It is not any defense which he had against the bond and mortgage while in Burchill's hands that the defendant seeks to avail himself of now, but one which has arisen since the plaintiff became the owner, or which arose at the time he became the owner, and therefore such defense is not at all in conflict with the certificate.
The next ground of objection is, that the plaintiff supposed that it was Burchill's money he was receiving, and not the defendants, as a consideration for the extension of the time of payment of the mortgage. The plaintiff certainly had the appearance of being an intelligent man; a man of at least ordinary mental capacity. And how any person of ordinary intelligence could suppose that a mortgagee or an assignee of a mortgage could have sufficient interest in the getting an extension of the time of payment of a mortgage to pay over a thousand dollars for it, to the person to whom he was assigning it, I cannot comprehend. If there had been no question of an extension, if the $1,000 had not been paid for the consideration of such extension; but the plaintiff had bought the mortgage at a discount of $1,020'from Burchill, the holder, an entirely different case would have been prescribed. But the evidence in this case shows, that the plaintiff paid Burchill the full amount of the mortgage, and then received the $1,020 for the extension. The plaintiff must have known, and did know, that this money was paid by the mortgagor to procure, this extension, as he was the only person who could possibly be interested in the procurement of such extension.
I do not think the objections- are well taken, and judgment must be rendered as stated in my original memorandum.