A deed charged in the bill, and admitted in the answer, may be read at the hearing, without being an exhibit before the examiner, and without a previous notice or rule to produce and prove it at the hearing. The case is not within the reason of the general rule of practice on the subject, and there can be no surprise on the defendant.
[ * 189 ]
*The Chancellor. The first and principal question is, whether the assignment to the plaintiffs will carry the title to the 50 lots, in preference to the prior deed to the defendant.
The deed to the defendant of the 50 lots was, on its face, an absolute deed, in fee, with full covenants, and it was acknowledged and recorded, as a deed, on the day of its date. It is admitted, however, that the deed was taken in the first instance as a security for the payment of three notes, to the amount of 10,000 dollars, payable in six months, and bearing date about the same time with the deed, in January, 1810. Afterwards, on the 27th of July, 1810, and about the time that the notes became due, other notes were given in lieu of them, and an agreement under seal executed by the defendant, admitting that the deed of the 50 lots was only held as a security, and that if the substituted notes were paid, the deed was to be given up, and the lots reconveyec^ This agreement, operating as a defeasance or explanation of the design of the deed, was never registered, yet it is to be considered in connection with the deed, and relates back to its date, so as to render the deed, from its commencement, what it was intended to be by the parties, a mere mortgage, securing the payment of the notes.
As a mortgage, the deed and the subsequent agreement
An absolute deed with a defeasance is a mortgage; and must be recorded as such to give it priority. Therecord’of the deed, only, A notice tnat is to break in on the registry act, mustbesuchas, with the attending circumstances, will affect the subsequentpurchaser with fraud. A notice merely to put the party on inquiry is not sufficient for that purpose. A defendant will be ordered to account for moneys overpaid in pursuance of a usu-*189ought to have been registered, to protect the land against the title of a subsequent bona fide purchaser. This is the language of the statute concerning the registry of mortgages ; and recording the deed, as a deed, was of no avail in this case, for the plaintiff was not bound to search the record of deeds, in order to be protected against the operation of a mortgage.
[ * 190 ]
[ * 191 ]
The plaintiff is to be considered as a bona fide purchaser. A conveyance in trust to pay debts is a valid conveyance founded on a good consideration. (Stephenson v. Hayward, Prec. in Ch. 310.) Nor do I think that the plaintiff is chargeable with notice sufficient to postpone *the operation of his assignment in trust. All the notice in the case is contained in the schedule to the assignment, stating that the title to the 50 lots is, in the name of the defendant, given as collateral security to pay certain notes. The notice that is to break in upon the registry acts must be such as will, with _ _ the attending circumstances, affect the party with fraud; and here is certainly no fraudulent intention to be imputed to the plaintiff. The ground of the numerous decisions on this subject seems to be, the actual fraud of the party in taking a second conveyance with knowledge of the first, and with intent to defeat it. There may possibly be cases, as Lord Hardwicke observes in Hine v. Dodd, (2 Atk. 275.) in which the registry acts are set aside upon notice devested of fraud ; but then the proof must be extremely clear. In this case, the notice arising from the schedule was lame and defective. There was no notice as to the amount of the notes, or how many, or when payable; whereas every registry of a mortgage must specify, with certainty, the mortgage money, and when payable. The plaintiff in this case might not have inferred from the schedule that the defendant held any thing more than a nominal title, and, perhaps, as a mere trustee upon some extinguished debt. It was not even said to be a subsisting debt. If notice that is to put a party upon inquiry be sufficient to break in upon the policy and the express provisions of the act, then, indeed, the conclusion would be different; but I do not apprehend that the decisions go that length. This would be too slight a foundation to act on in opposition to the statute. Here is no evidence that any possession was ever taken under the mortgage. There was nothing except the loose information in the schedule; and under such an equitable and meritorious assignment as this, I do not deem that sufficient to render the assignment fraudulent in the hands of the plaintiff. Nothing can be stronger than the language of Lord Alvanley in Jolland v. Stainbridge, (3 Ves. 478.) “The person,” he *says, “ who takes subsequently, must know exactly the sit-*191nation of the prior deed, and have meant to defraud.” All the cases appear to me to turn upon fraud resulting from the notice.
The limitation of the statute against usury must be pleaded or insisted on in the answer, otherwise the party cannot have the benefit of it, at the hearing.This is one of the last cases in which the doctrine of notice ought to be pressed with much strictness. The assignment was for a just and meritorious purpose, in which the defendant was included, and the defendant had taken an absolute deed, and recorded it as such, though he secretly-intended it only for a mortgage, and he afterwards gave a separate defeasance. Lord Talbot said, (Cas. temp. Talbot, 89.) that this was not a proper practice, and ought to be discouraged. “ To me,” he observes, “ it will always appear with the face of fraud, for the defeasance may be lost, and then an absolute conveyance is set up.” Here the. party did not even give a concurrent defeasance. He takes an absolute deed, and records it as an absolute deed, and left the agreement by which it was taken as a mortgage to rest only in secret confidence.
The only question remaining is, whether he is accountable for the commissions, as unlawful interest, which he received on the exchange of notes. There is no doubt that this Court will order a defendant to account for moneys overpaid in- pursuance of a usurious contract. This was done in the case of Bosanquet v. Dashwood. (Cas. temp. Talbot, 37.) It is equally settled, that the defendant cannot avail himself of the time limited in the statute of usury, which defence his counsel suggested at the hearing; for the statute of limitations must either be pleaded or insisted on by the answer, tp entitle the party to the benefit of it, though the Court will often, in cases of stale demands, take the time in the statute as a guide to its discretion. (Prince v. Heylin, 1 Atk. 493.)
Let us then see what is the charge, and what is the proof of usury, in this case.
[ * 192 ]
*The bill charges, that between the 27th of January, 1810, and the date of the assignment to the plaintiff in May, 1812, the Wards had various dealings with the defendant by exchanging notes, the defendant giving to the Wards his notes for different sums at different periods, and, at the same time, receiving from the Wards their notes payable at the same or other periods, upon which transactions, under the name of commissions, the defendant extorted usury to 2,000 dollars and upwards, over and above lawful interest. In answer to this charge, the defendant says, that between that period the Wards had various dealings with him, by way of exchanging notes; but he denies that he “ extorted any sum above lawful interest under the name of commissions,” he admits he received, by *192agreement, and in the course of trade, of the Wards, commissions from a half, to two and a half per cent., and which were received, not as usury, but as a legal mercantile compensation.
A commission of21-$2per cent, taken on the re-of to another in exchange for his notes, for same sums, at ornear the same periods of time is not But if lawful interestbetaken for the notes, for the time, and the commission is exacted, addition, it will beThe testimony of M. Ward, was competent proof. By his release he had discharged himself of all interest in the cause. He certainly does not come within the case of Winton v. Saidler, (3 Johns. Cas. 185.) in which it was held, that a person is not a competent witness to impeach the validity of negotiable paper which he had signed. The validity of the notes is not now the question. They are not before the Court. They have been discharged, and the testimony only incidentally affects their posthumous reputation. In the case cited, and in that of Walton v. Shelly, the suit was directly on the note, and the witness was offered to impeach it, and defeat the recovery.
[ * 193 ]
Ward, proves, that in the exchange of notes in January, 1810, there was paid to the defendant, by agreement between him and the Wards, a commission of, at least, 250 dollars, for such exchange. That when the exchange of notes was repeated, in July, 1810, the witness paid, in behalf of the Wards, and the defendant received, 250 dollars, *at the least, as a commission for the exchange and renewal; and that the business of exchanging notes, upon the old notes falling due, continued for some time, and on every such occasion a commission was paid to the defendant; and that the amount of the commissions paid on the various exchanges and renewals of the notes, until the failure of the Wards, and the assignment to the plaintiff, was 1,200 dollars; but for all exchanges and renewals of notes, other than those above mentioned within the said period, the commissions paid thereon by the Wards, to the defendant, amounted to upwards of 7,000 dollars, all of which was paid for the loan of notes, and not for loans of money.
*193[ * 194 ]
*192The testimony of Edgar, the defendant’s witness, proves equally the receipt of the same commission on the exchange and renewal of the notes. But did the demand and receipt of the commissions amount to usury ? The defendant gave his notes for a given sum, say 10,000 dollars, payable in six months, and took the notes of the Wards for the same sum, payable at the same time, and this operation was frequently repeated. This was not a cash advance. It was lending his credit or security to the Wards. They were enabled to raise money by discount on the notes of the defendant, as being of better credit in the market than their own; and if the defendant had not taken any commission for the transaction, he would have had nothing for his risk and trouble. If he had taken more than at the rate of seven *193per cent, for the amount of his notes for the time they had to run, it would, probably, have been usury in disguise. It would then have come within the reach of the cases of Kent v. Lowen, (1 Camp. N. P. Rep. 177.) and of Dunham v. Dey, (13 Johns. Rep. 40.) But the two and a half per cent., in this case, was less than at the rate of lawful interest. It was but 5 per cent., and it appears to me to have been a lawful compensation for the loan of his risk and credit. If the defendant had taken lawful interest upon bis notes, as for so much cash advanced, and *had then exacted the additional commission, I should have had no doubt of the usury. It is said to be settled, in England, that a country banker may take a reasonable commission for discounting, though it be for a person resident in London, and paid through a banker there, unless the bills were sent into the country as a mere color and device. The ground of the allowance is the expense of remitting checks, establishing a credit with bankers in London, keeping an unproductive balance there, and keeping a clerk. (Jones ex parte, 17 Vesey, 332.)
Form of decree, Decree,October 11th.
I shall, therefore, decree, that the defendant deliver up the deed of the 27th of January, 1810, and release to the plaintiff his right and title to the lots in question, with proper and apt covenants, to be settled by a master, against his own acts, and that he pay the costs of this suit.
Some questions arose on settling the form of the decree in this case.
It was admitted, that recitals in the decree must not be argumentative, but should only state the propositions or conclusions of law and fact, which are necessary to show the reason and meaning of the decree; (see a precedent for this purpose in the decree, in 2 Sch. & Lef. 455.) though Lord Alvanley said, in 7 Vesey, 373, that it was very uncommon to express in the decree the reasons for it. It was further observed, that if a deed be set aside as only constructively fraudulent, it is usual and proper to direct a release of the right of the party under the deed so set aside, with covenants against his own acts; and the chancellor directed the decree to be so drawn in this case. But in Bates v. Graves, (2 Vesey, jun. 294.) Lord Rosslyn thought a reconveyance altogether unnecessary, where the deed was declared absolutely null for fraud; and yet, it was there said to be the practice to direct a reconveyance, ex abundanti cautela, for the sake of purchasers. It was, however, not done in this case.
[ * 195 ]
*The following decree was entered in the cause:—
*195[ * 196 ]
*193“ It satisfactorily appearing to the Court, that the deed of conveyance, mentioned in the pleadings in this cause from *195Matthias Ward, also in the pleadings mentioned, to the defendant David Dunham, bearing date the twenty-seventh day of January, in the year of our Lord one thousand eight hundred and ten, for fifty lots of ground, situate, lying, and being in the ninth ward of the city of New-York, though an absolute and unconditional deed upon the face thereof, was intended by the parties only as a security, in the nature of a mortgage of the said premises to David Dunham; and it also satisfactorily appearing to this Court, from the pleadings and proofs therein, that the said deed of conveyance of the twenty-seventh day of January, in the year of our Lord one thousand eight hundred and ten, from Matthias Ward to the defendant, was never registered, nor recorded as a mortgage, and that the instrument in writing, in the pleadings mentioned, of the twenty-seventh of July, in the year one thousand eight hundred and ten, whereby the said deed of conveyance of the twenty-seventh day of January, in the year one thousand eight hundred and ten, appears to have been intended only as a security in the nature of a mortgage, was never registered, nor recorded with the said deed, or otherwise, according to the directions of the act of the legislature of this state, in such case made and provided; and it also appearing to the Court, that the defendant omitted to register or record the said deed of conveyance, and instrument in writing operating as a defeasance thereof; and it also satisfactorily appearing to this Court, that Matthias Ward, afterwards, in form of law, conveyed and assigned the same premises to the complainant, by deeds of conveyance, the one bearing date the eleventh day of May, in the year of our Lord one thousand eight hundred and twelve, and the other bearing date the sixteenth day of November, in the same year, in trust for the payment of the debts of Matthias *Ward, and one William Ward, his co-partner in trade and business, justly due to their creditors; and it also satisfactorily appearing to this Court, that the defendant David Dun-ham has sold and conveyed away two of the said lots of ground, contained in the said deed of conveyance from Matthias Ward to him, before mentioned, and received the consideration money for the same from the purchasers: It is therefore ordered, adjudged, and decreed, and his nonor the chancellor, by virtue of the power and authority of this Court, doth accordingly order, adjudge, and decree, that the defendant David Dunham forthwith deliver up to the complainant Anthony Dey, the said deed of conveyance from Matthias Ward to the defendant, in the pleadings mentioned, bearing date the twenty-seventh day of January, in the year one thousand eight hundred and ten, to be cancelled; and that the defendant also, by a competent deed of conveyance *196for that purpose, release and convey all his right, title, and interest of, in and to the premises in the last mentioned deed specified, and thereby conveyed to the defendant by Matthias Ward, (excepting the two lots, parcels thereof, ■ afterwards sold and conveyed by the defendant as aforesaid,) to the complainant in this cause in fee; and that the said deed of conveyance from the defendant to the complainant hereby directed, shall contain proper and apt covenants from the defendant, against his own acts and transactions subsequent to the eleventh of May, one thousand eight hundred and twelve, whereby the title to the said premises may be impaired, or the said premises encumbered; the said deed and covenants to be settled by a master, if the parties cannot agree respecting the same. And it is further ordered, adjudged, and decreed, that the defendant pay to the complainant the costs of this suit, to be taxed, and that the complainant have execution for the same, according to law, and the course of this Court.”