Court Opinion

ID: 7317732
Source: CourtListenerOpinion
Date Created: 2022-07-25 21:09:00.071546+00
Date Added: 2024-06-11T16:19:42.200122
License: Public Domain

Beaming, Y. C.
It has been repeatedly held by the courts of this state that the purchaser of a mere equity of redemption in premises covered by a usurious mortgage, who buys subject ce the lien of such mortgage, cannot set up usury as a defence to the encumbrance; the repudiation of the mortgage by such purchaser would enure to his benefit against the terms of his purchase, and would not enure to the benefit of the original borrower. In Warwick v. Dawes, 26 N. J. Eq. (11 C. E. Gr.) 548, 556, this principle was applied where the purchase was made at a sale under a decree of foreclosure of a second mortgage, the purchaser in that case having made his purchase with reference to the existence of the prior mortgage which he assumed to' be a valid prior encumbrance according to its terms, but which was, in fact, usurious.
This inability of one who purchases the mere equity of redemption to set up the defence of usury against the foreclosure of a mortgage subject to which the purchase was made, is not based upon the idea that the taint of usury has been purged by a conveyance in which'the mortgagor has recognized the usurious mortgage as valid; the defence of usury may still be available to the mortgagor. It would seem that as between the original parties the taint of usury can only be removed by the borrower re*468ceiving the full amount called for by the security. Taylor v. Morris, 22 N. J. Eq. (7 C. E. Gr.) 606; Warwick v. Dawes, supra; Trusdell v. Dowden, 47 N. J. Eq. (2 Dick.) 396. It necessarily follows that the original mortgagor, notwithstanding his eonvejíuneé subject to the mortgage, is still entitled to be protected against liability on his bond in the event of a deficiency at sale; and if such mortgagor is made a party to a foreclosure suit against his vendee, the decree will be operative as a bar to such defence on the bond, unless the defence is asserted by him in the foreclosure suit in which he is made a party. This is expressly held in Andrews v. Steele, 22 N. J. Eq. (7 C. E. Gr.) 478.
From the principles above defined it seems to clearly follow that defendant Howard P. Idler, who now holds the legal title-under a conveyance from the mortgagors, is not entitled to the' benefit of the defence of usury if his purchase was in fact a purchase of the mere equity of redemption subject to the lien of the mortgage now held by complainants; and that defendants Charles A. Idler and Lucretia P. Idler, who were the mortgagors and who executed the bond secured by the mortgage now sought to be foreclosed, are entitled to urge in this suit the defence of usury to the end that the decree may not be operative to bar them such defence on their bond.
The bill asserts that these mortgagors, subsequent to the execution of the mortgage now sought to be foreclosed,
“made, executed and delivered unto Howard P. Idler a deed wherein they granted, bargained and sold unto the said Howard P. Idler all the premises heretofore described, but your oratrices charge that whatever interests the said Howard P. Idler acquired by virtue of the said conveyance was under and subservient to the interests of your oratrices.”
The present hearing is upon bill and answer, and the answer makes no denial of the above averment. This averment is not,, however, in my judgment, the equivalent of a positive and direct averment that a mere equity of redemption was in fact purchased by Howard P. Idler expressly subject to a lien for the amount appearing to be due on the mortgage now held by complainants, or in a manner in which the purchaser necessarily deducted from *469the purchase price the amount appearing to be due on that mortgage. That element is the one which must exist to deny to the purchaser the defence of usury; under the averments of the bill that element may not have been present in the transaction. This is made clear in the case of Hackensack Water Company v. DeKay, 36 N. J. Eq. (9 Stew.) 548, in which Mr. Justice Depue, speaking for the court of errors and appeals, said: “There is a class of cases in which a purchaser taking title subject to an encumbrance prior in point of time, is precluded from disputing its validity. DeWolf v. Johnson, 10 Wheat. 367; Dolman v. Cook, 14 N. J. Eq. (1 McCart.) 56; Conover v. Hobart, 24 N. J. Eq. (9 C. E. Gr.) 120, are cases of this class. In those cases the lands conveyed were subject to mortgages claimed to be void for usury. In DeWolf v. Johnson, the mortgagor had conveyed the premises expressly subject to the mortgage of DeWolf; and in Dolman v. Cook and Conover v. Hobart, the mortgagor’s conveyances of the mortgaged premises were expressly subject to the mortgages, and it so appeared in the deeds of conveyance. In each of these cases, the grantee, having accepted a conveyance under the mortgagor, subject in express terms to the payment of the usurious mortgage, was held to be estopped from contesting its validity. The theory on which cases of this class are founded is that the mortgagor having elected to affirm the usurious mortgage, by selling the mortgaged premises subject to the mortgage, the purchaser, by his contract as expressed in his deed, took an equity of redemption only, and therefore could not dispute the validity of the mortgage, and thus obtain an interest in the land which the mortgagor never intended to transfer to him. Shufelt v. Shufelt, 9 Paige 137; Post v. Dart, 8 Paige 639; Green v. Kemp, 13 Mass. 515; Morris v. Floyd, 5 Barb. 130. But this principle does not apply to sales by officers under judicial process. A purchaser at a sheriffs sale, either under an execution at law, against the mortgagor or at the foreclosure sale of a second mortgage, may defend against a prior mortgage on the premises on the ground of usury, although in fact by his purchase he acquired the property subject to whatever prior encumbrances there might be upon it. Brolasky v. Miller, 8 N. J. Eq. (4 Halst.) 789; S. C., 9 N. J. Eq. (1 Stock.) 807; Pinnell v. Boyd, 33 N. *470J. Eq. (6 Stew.) 600.” The averments of the bill cannot, I think, be properly regarded as more than a general averment that the rights of complainants under the mortgage are superior to the rights of defendant Howard P. Idler, as purchaser, in that the purchase by the latter was subsequent to the date of the registration of the mortgage now held by complainants; this becomes even more apparent by a consideration of the paragraph of the bill above quoted in connection with a subsequent paragraph of the bill in which an averment is made to the effect that complainants are without knowledge whether the conveyance to Howard P. Idler was an absolute conveyance or whether that conveyance was made through some secret understanding whereby an interest was reserved in the vendors.
As the mortgagors were made defendants and the answer filed in behalf of the mortgagors and the purchaser set forth that only the sum of $1,800 was actually loaned, I think no decree in excess of that amount can be properly entered on the bill and answer.