Loewenthal v. Haines

Scott, J.:

The action is upon a mortgage containing a covenant to pay the sum of $10,000. This mortgage was given as collateral to another mortgage which has been foreclosed and the present action is not for foreclosure, but to enforce defendant’s liability upon her covenant to pay. Two defenses are pleaded: First, that the consideration for the instrument sued on was an usurious agreement for the forbearance of a debt, to wit, an agreement to extend a mortgage; and second, what is described in the answer as a “separate equitable. defense and counterclaim ” in which defendant alleges that the clause by which she undertook to pay $10,000 was inserted in the instrument either by mutual mistake of all parties or by fraudulent purpose and intent on the part of plaintiff and his agents and representatives.

It is unnecessary to review the fact further than to say that the evidence fully justified a finding in defendant’s favor on both defenses. While the evidence of defendant’s husband, who acted as her agent, was in some minor matters confused and perhaps self-contradictory, it was evident that such confusion resulted from lack of memory and not from any intention to deceive, and on all vital points his evidence was sufficiently clear. On the other hand, the evidence given by plaintiff and his attorney who acted in the transaction in his behalf was of such a character that the jury were fully justified in rejecting it altogether.

The appellant’s chief reliance on this appeal is upon what he deems to have been a fatal irregularity in trying the cause at Trial Term, instead of Special Term. Both sides noticed the cause for trial at the Trial Term. When it came on for trial plaintiff moved to dismiss the defense founded upon usury upon the ground that that defense is personal to the borrower and cannot be availed of by a surety. He also moved to dismiss the second defense upon the ground that as a counterclaim it could not be tried at a Trial Term and .that by failing to separately notice it for trial at Special Term the defendant had abandoned it, and that as a defense it was insufficient. All of these motions were denied and exception taken. The trial then proceeded and evidence was received tending to establish both defenses, without any objection from plaintiff, based upon the supposed irregularity involved in trying the issues at Trial Term.

But there is no merit in the contention even if it had been properly presented. The case is in all respects similar to Bennett v. Edison Electric Ill. Co. (164 N. Y. 131), in which, as in this, an equitable plea was interposed asa “ defense and by way of counterclaim.” The claim was, as in this case, that the contract sued upon was not the contract upon which the minds of the parties met and, consequently, that the contract as written was not defendant’s contract. In that case it was charged that the defendant had been induced by fraud to sign a paper which did not express the true contract, while in this case the error is charged to a mutual mistake, but the result is the same and both pleas present a defense available only upon equitable principles. The Court of Appeals pointed out that the facts pleaded constituted a good defense, which was open and available to the defendant in any action at law brought upon a contract. Referring to section 974 of the Code of Civil Procedure, the court said: “ The provisions of the Code referred to, we think, have no application to an issue of this character, but were intended to provide for the mode. of trial of an issue arising upon a counterclaim in which the facts alleged do not constitute a defense ar.d are not available as such.” City of New York v. Matthews (156 App. Div. 490), upon which appellant relies, was a case in which it was essential to defendant’s plea that the court should grant affirmative relief by way of reforming the contract sued upon. It was not contended that the contract as signed was not precisely what the parties had agreed upon and intended to execute, but it was claimed that they so agreed and intended in ignorance of certain facts which if known to them when the contract was executed would have led to a different agreement. The case was, in the end, decided upon another ground.

The judgment should be affirmed, with costs.

Ingraham, P. J., and Clarke, J., concurred; Laughlin and McLaughlin, JJ., dissented.