Court Opinion

ID: 3612259
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:56:04.75435+00
Date Added: 2024-06-11T13:50:51.037123
License: Public Domain

The only question presented for our decision on the present appeal is, whether it was competent for the defendants Sedgwick and Cowles to interpose *Page 636 
the defence of usury, set up by them in their answer, and I have arrived at the conclusion that it was not.
Conceding the general rule to be that the subsequent grantees of premises covered by a usurious mortgage can impeach it on that ground, where they are not conveyed subject thereto, this case does not come within it. The deed from Dillaye to those defendants, and the agreement executed by and between them at the time the deed was given, must be considered and deemed as constituting one transaction; and although the premises are not declared in the deed to be conveyed subject to the mortgage, the agreement shows that such was the necessary result and consequence of the two instruments. The agreement recognizes the existence of the mortgage and its apparent lien on the property, and shows that the sum of $7,500, being the principal sum secured by that mortgage, was retained out of the purchase-money, and was to be applied to its discharge, unless Dillaye should be able to set it aside. It was not the intention of the agreement that the grantees should in any event, or under any circumstances, be released or discharged from the payment of that portion of the purchase-money, but on the contrary it was expressly provided that it should be paid either to Dillaye or Berdan the plaintiff, and it was declared that the mortgage placed in the hands of Comstock should be disposed of by him "to pay off the said
mortgage given to Berdan," and that the proceeds thereof should be given to the said defendants "for that purpose," if Dillaye should fail to set aside the said mortgage. In no contingency was it contemplated or intended that those defendants should be at liberty to question its validity, or hold the premises discharged therefrom, without payment of that portion of the purchase-money which, by the terms of that agreement, was to be applied to its satisfaction, on a failure of Dillaye to invalidate it.
The transaction was in substance and effect the same as if the deed had contained in it the terms and provisions of the agreement, and had declared that the premises were subject *Page 637 
to the said mortgage given to Berdan; that the amount thereof had been retained out of the purchase-money, to be applied to the payment and satisfaction of that mortgage, unless Dillaye, their grantor, should succeed in setting it aside and have the premises discharged therefrom, in which case the amount so retained was to be paid to Dillaye; but if Dillaye failed in accomplishing that result, then that the said sum should be applied by them "to pay off the said mortgage given to Berdan."
In order to protect Dillaye and give him the proper security for the money so retained, and to protect him against his absolute conveyance, free from encumbrances, and at the same time release the grantees from the necessity of paying that money in cash, it was agreed that a mortgage for the amount, to be the first mortgage, from the grantees to the grantor, on the property covered by the Berdan mortgage, should be placed in the hands of Comstock and disposed of by him, as provided and directed in that agreement.
The obligation assumed by Sedgwick  Cowles to pay the amount retained to Berdan had, before the commencement of this action, become fixed and determined by the judgment of the Superior Court against Dillaye, adjudging that the bond (and consequently the mortgage accompanying it) was not usurious.
The delivery by Comstock to Dillaye, as found by the court, of the mortgage executed to him by Sedgwick  Cowles, and placed in the hands of Comstock for the specific object and purpose of having the proceeds thereof applied to such payment, if valid for any purpose, cannot affect the plaintiff. He, under the agreement specifying that object and purpose, was entitled to the benefit of its provisions, to the same extent at least as if they had been inserted in the deed from Dillaye to his grantees, in the form and in the manner before stated by me, and he could not be deprived or divested of the benefit thereof without his assent. (See Hartley v. Harrison, 24 N.Y. Rep., p. 170.)
It is conceded by the respondent's counsel in his points, *Page 638 
and such is unquestionably the law, that a purchaser of the equity of redemption, merely, in the mortgaged premises, or one who assumes to pay the mortgage as part of the purchase price, cannot set up the defence of usury.
The views above expressed show that Sedgwick and Cowles are purchasers standing in both those relations, and that they did not, as the counsel claims, purchase and obtain a conveyance of "the entire interest" of Dillaye in the premises, "without any provision" on his part "to pay the mortgage or any part of it." They consequently cannot interpose this defence.
It is claimed on behalf of the defendants, in opposition to these views, that "the contract made with Dillaye, by which the mortgage of $7,500 was deposited with Comstock, was merely as an indemnity to them (the defendants) in case the mortgage to Berdan should be held valid."
That position is clearly untenable. It is shown, and there is no question of the fact, that a portion of the purchase-money, equal to the principal of that mortgage, was not paid by the purchasers and grantees, and under that agreement it was provided that it should not be paid until the mortgage was either set aside by Dillaye, or he had failed to effect that result, and the mortgage should, as the counsel says, "be held valid." They consequently had incurred no risk, or any liability against which indemnity was necessary, or indeed in any manner proper. They assumed no personal liability, under the deed to them, or otherwise than by the said "contract." They had retained the sum above mentioned out of the purchase-money because the mortgage, although its validity was denied, was an apparent, and might be held to be an actual lien on, and payable out of the property. They thus held as full and perfect indemnity as was secured by the contract, and did not require it for that or any such purpose.
Its special provisions, moreover, show that it was not intended as an indemnity to the grantees, but on the contrary, that its object was to permit Dillaye to take such proceedings as he might deem proper, to set aside the said mortgage *Page 639 
and also to declare and provide that the mortgage deposited with Comstock for the unpaid purchase-money therein specified, for which the defendants acknowledged themselves to be liable, should be disposed of, on the determination of those proceedings as therein provided. The judgment of the Superior Court of New York is conclusive upon Dillaye as to the validity of the said mortgage, and the fact of his failure to set it aside is thereby established. The contingency on which the defendants were to be entitled to the disposition of their mortgage to pay off that given to Berdan the plaintiff, and to the receipt by them of the proceeds thereof for that purpose, has occurred. They should have availed themselves of their right and discharged their obligation and duty under the contract, instead of interposing a defence which, if successful, would have permitted them to hold the full and absolute title to the mortgaged premises without payment of a large portion of the purchase-money, confessedly unpaid, or have given the benefit thereof to Dillaye, thus practically in its effect, overruling the judgment of the Superior Court in the suit of Berdan against Dillaye, deciding and adjudging that as between those parties, Berdan and not Dillaye was entitled to the whole amount secured by the mortgage in question.
I have shown that they are precluded from setting up such a defence. The decision of the judge at Special Term sustaining it was therefore erroneous, and the General Term also erred in affirming the judgment based thereon. It follows that the judgments both of the General and Special Term must be reversed and a new trial ordered, costs to abide the event.