[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 71 The question whether the mortgage was got up to be sold at a discount, with the knowledge of the plaintiff or his agent, has been passed upon by the court below, upon evidence sufficiently conflicting to make the decision conclusive upon this court, but the judgment is claimed to be erroneous in three respects:
First. In allowing the plaintiff any more than he actually paid for the bond and mortgage, with interest.
Second. In allowing him the $500 paid before the defendant made her affidavit which created the estoppel.
Third. In ordering judgment for a deficiency against the defendant, she being a married woman.
It is undisputed, and was found by the court below, that the bond and mortgage had no inception before the plaintiff purchased it, that they were made for the purpose of being sold at a discount greater than the legal rate of interest, and that they were in fact sold to the plaintiff for $1,755, being a discount or shave of $245. The statute declares such a transaction void, and this would be the necessary judgment of any court, except for the affidavit made by the defendant, Mrs. Burnham, which it is claimed operates to estop her from urging the real truth. It is but recently that this court first adjudged that an estoppel inpais could be urged to obviate the effect of an act which the statute, for reasons of public policy, declared to be absolutely void. (3 Keyes, 609.) The propriety of extending the doctrine of estoppel to such cases had been previously questioned, and combatted by high judicial authority. (13 N.Y. [3 Kern.], 316, per DENIO, J.; Truscott v. Davis, 4 Barb., 495, per MARVIN, J.) This court has, however, uniformly adhered to the decision in favor of its application whenever the question has been presented, and it must be regarded as the settled law of the State. *Page 73
An estoppel in pais is very well defined by NELSON, J., in 8 Wendell, 483. He says: "As a general rule, a party will be concluded from denying his own acts or admissions which were expressly designed to influence the contract of another, and did so influence it, and when such denial will operate to the injury of the latter." The court finds that the affidavit which creates the estoppel was not, in fact, sworn to, until after $500 had been advanced upon the purchase of the bond and mortgage by the plaintiff's agent, although a promise had been made by some one that it should be made. An indispensable requisite of an estoppelin pais, is that the conduct or representation was intended to, and did, in fact, influence the other party to his injury. It is not sufficient that a person is made to believe that an estoppel will be made in the future. It cannot be said that the $500 was advanced upon the faith of Mrs. Burnham's affidavit, which she had not made when it was paid, nor is it material that the agent advanced that sum for his principal. When the latter repaid it he ratified the payment and adopted it as his own. Mrs. Burnham is precluded from contradicting the statements contained in her affidavit that the mortgage was valid, but only to the extent that the plaintiff acted upon the same. Neither he nor his agent acted, or could have acted upon it, in paying the $500. He paid, in fact, upon the strength of the affidavit, only $1,255. The sum of $500 should be deducted, at all events, from the amount, and the only question is, whether it should be deducted from the amount paid, or from the face of the bond and mortgage, thus giving the plaintiff the benefit of his usurious bargain. It is urged on the one hand that the doctrine of estoppel in pais is based upon principles of morality and good faith, and should be applied to the extent of securing a full indemnity; and that good conscience and honesty in dealing requires nothing more; and that in a case like the present, when the plaintiff is protected to the extent of the money advanced upon the faith of the defendant's representations, his equity has ceased, or at all events is not superior to that *Page 74 of the defendant, and that there is neither reason or justice in enforcing in his behalf a rule of ethics to enable him to recover usurious profits. On the other hand, it is insisted that the rule forbids the denial by the defendant of the truth of her statements; that this is an action on the bond and mortgage, and not on the false representations, and hence, as the defendant is estopped from denying the fact, they must be regarded as valid for the whole amount. The courts in Massachusetts seem to favor this view (13 Allen, 123; 97 Mass., 498), although the circumstances in those cases were somewhat different. On the other hand, the authorities in this State favor the defendant's position. (Hills v. Vant, 3 Leg. Obs., 105; Merrill v.Tyler, 2 Seld. Notes, 47.) It is not necessary to lay down a rule applicable to all cases, if it was practicable to do so, but the case of Merrill v. Tyler (supra), was quite analogous in its facts, and is not distinguishable in principle from this, and we are inclined to follow it, and as a matter of abstract justice, the rule of indemnity for actual loss in a case of usury commends itself to our sense of right more strongly than the other.
If a person attempted, by the construction of an estoppel claimed, to enforce a mortgage of $1,000 purchased for $100, it should be permitted upon some other ground than the principles of morality and good conscience. These principles would denounce it as oppression and extortion, and courts should be cautious in establishing an iron rule, and give it a practical operation which subverts the very principle upon which it is based. It was error to order judgment for a deficiency against Mrs. Burnham. The money was paid to her husband for his own use, and the effect of the mortgage was only to bind so much of her separate estate as it covered. (33 N.Y., 371; 18 id., 265; 22 id., 450; 36 id., 600; 53 id., 422; Manhattan Brass Co. v. Thompson, not reported.*)
The judgment must be reversed and a new trial ordered, costs to abide the event.
All concur. Judgment reversed.
* 58 N.Y., 80. *Page 75