[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 349 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 351 One of the questions involved in this case is, how far the defense of usury is personal to the debtor, or may be available to other parties.
The defendants who seek to set it up in this case are merely purchasers of the equity of redemption under a sale on the foreclosure of a junior mortgage. Relying upon the case ofMorris v. Floyd, (5 Barb. 130,) the supreme court held that those purchasers had a right to set it up, and seem to intend to overrule *Page 352 the case of Mechanics' Bank v. Edwards, (1 Barb. S.C. Rep. 271.) The court in 5 Barb. and the counsel in this case on the argument, treat the case in 1 Barb. as a hasty decision of a single judge at the special term, and overlook the fact that the case was afterwards considered on appeal at general term, before Cady, P.J., Willard and Edmonds, justices, and the ruling at the special term affirmed. (S.C., 2 Barb. S.C.R. 545.) The conflict upon this point is not confined to the present supreme court of this state. In the supreme court of the United States it has an abiding place also.
In Lloyd v. Scott, (4 Peters, 205,) that court, (McLean, J. delivering the opinion) held that the assignee of the debtor, of the property bound by the usurious security might avail himself of the defense. But in De Wolf v. Johnson, (10Wheat. 392,) it was held that he could not.
In Lloyd v. Scott, the learned judge who delivered the opinion, disposed of the case in 10 Wheaton, quite summarily, by saying that the question whether the purchaser of the equity of redemption can show usury in the mortgage to defeat a foreclosure was not involved. I have carefully examined that case and I cannot arrive at that conclusion. Prentiss, the mortgagor to De Wolf, conveyed the mortgaged premises to Barry for the benefit of his creditors. Barry sold them and the Johnsons bought them, and on a bill by De Wolf to foreclose his mortgage, the Johnsons set up the defense of usury as between De Wolf and Prentiss.
On the argument of that case the plaintiff's counsel took the point that if the contracts were usurious, the Johnsons could not take advantage of the usury, and the court in delivering their opinion say there were two views of the subject upon which the court below ought to have sustained the bill: one was that it was perfectly established that the plea of usury, at least as far as to landed security, is personal and peculiar, and however a third person having an interest in the land may be affected incidentally by a usurious contract, he cannot take advantage of the usury. *Page 353
Now it seems to me that this is an express adjudication upon the point, and that too under circumstances very like those which exist in the case now under our consideration. In both cases, the mortgagor was a party to the suit and suffered judgment by default, thus refusing to avail himself of the defense, and in both the purchaser took subject to the prior mortgage which he sought to impeach. And it is upon this state of things that the United States supreme court say, "the case presents a third person, the "assignee of an equity of redemption, setting up a defense, "which, in one aspect, Prentiss himself cannot set up, and in "another which he has not set up, but on the contrary under "the state of the pleadings must be supposed to have refused "to set up or to have abandoned." And "had they [the Johnsons] "purchased from Prentiss, in the most absolute and general "manner, and altogether without notice actual or constructive, "they still could have acquired no more than the equity "of redemption, and that would not have transferred to them "the right of availing themselves of the plea of usury. We "have examined the cases quoted to this point, and are satisfied "with their application and correctness. It would indeed be "astonishing were it otherwise, for the contrary rule would hold "out no relief to the borrower; it would be only transferring "his money from the pocket of the lender to the pocket of the "holder of the equity of redemption."
Such is the state of the question in the U.S. supreme court; and it would seem to be in a similar condition in our state courts. In 5 Barb. 130, the court say they have been able to find no case to sustain the ruling in special term, in 1 Barb. 271. Aside from the same case affirmed at general term, (2Barb.) and the case of De Wolf v. Johnson, (10 Wheat.) already referred to, the case of Post v. Bank of Utica, (7Hill, 406,) is somewhat in point, for there one of the majority of the court, upon the strength of Reading v. Weston, (7Conn. Rep. 413,) and of De Wolf v. Johnson, states the proposition broadly that no one but the party to the usurious loan should be permitted to avoid the contract, and says that those cases regard the party *Page 354 to the contract or those liable upon it, as the only persons who, upon principle, should be allowed to avail themselves of the usury, and that they are cited merely to show that the grantee of a mortgagor is not regarded as a party to the usurious contract, and hence should not be permitted to take the place of such party in avoiding his contract. And in Green v. Morse, (4 Barb. 335,) Mr. Justice Gridley, both as vice chancellor and afterwards on appeal at general term, holds that a stranger cannot set up the defense, and that it can be taken only by the party or his privies in blood or estate.
But after all, the conflict in our own courts is not as great as it may appear. The case of the Mechanics' Bank v. Edwards, in 1 Barb. does not decide as the court in 5 Barb. seem to suppose, viz. that the defense is confined merely to the party to the usurious contract, nor indeed does it go as far in that respect as either the case of De Wolf v. Johnson, in the U.S. supreme court, or Post v. Bank of Utica, in our court of errors; for it, in terms, excepts the sureties, heirs, devisees and representatives of the debtor.
In order that its precise ruling should be understood, it ought to be considered in connection with the circumstances out of which it arose. It was a contest between two creditors in respect to the surplus produced by a sale on a mortgage to which neither of them were parties, and the younger of these two incumbrancers claimed that the elder was usurious. The court held that he was a stranger to the contract and could not set up the defense of usury, the debtor himself not having interposed it. It was not necessary to inquire, nor did the court inquire whether heirs, devisees, or personal representatives, or subsequent purchasers could set up the defense. All that was necessary to decide, and all that was decided, was, that as between two incumbrancers, the subsequent incumbrancers were strangers to the first contract, and could not avoid it for usury; and that as to them, the defense was personal to the debtor, and in no respect attached to them.
The question is however still left in this case, (untouched by *Page 355 that,) whether the purchaser of the equity of redemption can avail himself of the defense of usury in a suit on the mortgage to which the mortgagor is a party, and which defense, by allowing judgment to be taken against him, he refuses to set up.
Now in regard to this, the supreme court in Morris v.Floyd, while they held that the defense is not so personal but that the debtor's grantee may set it up, yet do hold that it is so far personal that the debtor may waive it, and that by granting subject to the debt, he does waive it so that the grantee cannot avail himself of it. Their language is, "the defense of usury may "be waived by the mortgagor or any subsequent owner, so that a "subsequent purchaser cannot set it up," or in other words he may waive it so as to bind his grantee. If he can do this by selling subject to the payment of the debt, may he not do it by suffering judgment and refusing to set it up? If he can do it by an act towards a third person, can he not do it by agreement with his creditor?
These are questions and difficulties which necessarily arise if we adopt the principle that the grantee may set up the defense of usury in the original loan, and that yet the borrower may by an act of his own waive it, so that a subsequent purchaser cannot set it up. But it seems to me that they do not necessarily arise in this case, and that there is another element in it quite material to its determination; and that is, not merely that the mortgagor sold subject to the debt, but that the purchaser took it so incumbered, and thereby bound himself, in a measure at least, to the payment of the debt. That obligation could be enforced against him by the mortgagor, and in some cases by the mortgagee.
For this reason, and irrespective of the question as to the personal character of the defense of usury, it could not be available to the purchaser. He had made a valid contract and for a valuable consideration, that so far as he owned or was interested in the mortgaged premises, he would hold subject to the payment of the debt.
It would be contrary to equity to allow him to avoid its payment. *Page 356 It would be discharging him from his obligation and leaving the mortgagor still liable. It would be releasing the land from the incumbrance when he had agreed that it should be subject to it. It would be continuing the mortgagor under an obligation which his vendee had assumed upon himself, and in the language of DeWolf v. Johnson, "it would hold out no relief "to the borrower, but would be only transferring his money from "the pocket of the lender to the pocket of the holder of the "equity of redemption;" and I may add, in open violation of his own valid contract. It is upon this ground, therefore, and not upon the ground that the defense of usury is personal to the borrower, that I think the judgment below was right.
Another objection is however made by the appellants to the judgment below, and that arises under the 267th section of the code.
It appears from the bill of exceptions that the cause was tried before a justice without a jury, and it is one of those cases which under § 254, is triable by the court. Upon the trial the justice directed an order to be entered by the clerk in the minutes of the court, that judgment be given for the plaintiff, and thereupon, without the further order or direction of the court, or decision in writing of the said justice, judgment was entered for the plaintiff, "to which," as the record says, "the defendant "excepts."
By § 267 of the code it is provided, that "upon the trial of a "question of fact by the court its decision shall be given in "writing and filed with the clerk," c.; "judgment upon the "decision shall be entered accordingly."
This language is very explicit, and as I understand it, provides that a judgment in a case where the court acts both as judge and jury, to determine both law and fact, cannot be rendered orally, but only in writing. The decision may be made either at the trial or at any time within twenty days afterwards, and the meaning evidently is that whenever it is made, whether in open court in the presence of the parties, or after the court has adjourned and the justice has retired to his private apartment, *Page 357 that there shall be something to authenticate the judgment, something that shall place it beyond doubt, what is the precise point decided. Unless such be the meaning of the section in question I can imagine none of any practical utility.
But this consideration is by no means sufficient to warrant us in reversing the judgment, for it does not appear certainly that the point was raised below. If it had been, it was an objection, not affecting the merits, which could easily have been obviated by an amendment.
It does not appear to have been raised or considered at all at the general term, whereas if it had been, the court by an amendment might have cured the defect. And it does not appear that the attention of the judge was called to the point on the trial. The exception then taken is so broad that it might have been well understood by the judge as pointing rather to the fact of his rendering judgment for the plaintiff, than to the form in which he did so; and we cannot say now, on perusing the bill of exceptions, that either the special or general term had passed upon the question.
An exception so vague as to leave such a doubt on the mind of the appellate tribunal is too broad to be of any avail to the party, or to be noticed by the court. The judgment should be affirmed.
All the other members of the court, (except WATSON, J. who was absent,) without passing upon the question of the personal character of the defense of usury discussed in the foregoing opinion, concurred in affirming the judgment, on the ground that the appellants could not on the facts presented in this case, avail themselves of the defense relied upon; and that the exception to the judgment was too general to raise the question whether the 267th section of the code of procedure, rendered a decision in writing by the judge, in all cases of the trial of an issue of fact before him, indispensable.
Judgment affirmed. *Page 358