Norris v. Wood

The plaintiff proved that before he purchased the bond and ' mortgage in controversy, he caused an inquiry to be made of Wood, the mortgagor, whether “ it was a good and bona fide mortgage,” and Wood was at the same time informed that the inquiry was made for the purpose of faking an assignment -of the *197mortgage. Wood answered the inquiry in the affirmative. This suit is one for the foreclosure of the mortgage. Wood set up the defense of usury, and upon the trial testified that the mortgage was usurious. No other evidence of usury was given. Wood also denied that he made the statement that the mortgage was good and bona fide. The court below found that the statement was made, and gave judgment for the plaintiff. We cannot reverse that finding.

The statement of Wood -was manifestly designed to induce the plaintiff to purchase the bond and mortgage, and it had that effect. Upon principles of equity, therefore, Wood is concluded from denying the truth of his statement. (Cont. Nat. B’k v. Nat. Bank of the Commonwealth, 50 N. Y., 581, and cases cited.) It is argued that Wood’s statement may be true, and yet that the bond and mortgage may be void for usury. That cannot be. A security which the law declares is illegal and void cannot be either good or bona fide. To be a good security it must be a valid one. We are of opinion that Wood was precluded from availing himself of the defense of usury.

The plaintiff is entitled to recover all that he paid for the assignment of the mortgage, but no more. (Payne v. Burnham, 62 N. Y., 69.) The testimony on this subject is rather loose, but it is fair to infer that the consideration of such assignment was the sum due on the mortgage, which was paid partly in cash and the residue by the satisfaction of a bond of the assignor for |1,700 or thereabouts, which the plaintiff held. The satisfaction of the assignor’s bond was in contemplation of law equivalent to money, so that in fact the plaintiff has parted with a sum equal to the amount of the bond and mortgage.

It is claimed that Wood is entitled to have the bond and mortgage avoided to the extent of that part of the consideration which the plaintiff paid for the assignment thereof by discharging the bond of the assignor, for the reason that the assignment of a usurious mortgage does not constitute a valid consideration for such discharge, and that upon the avoidance of a usurious security the original indebtedness is revived. We think that the rule invoked should not be applied. It is applicable when a usurious mortgage has been given in payment or discharge of a pre-existing indebt*198edness against the mortgagor. (Gerwig v. Sitterly, 56 N. Y., 214.) But it could not be applied in a case of this kind without the risk of doing injustice, for the assignor of the bond and mortgage is not a party to this action. The avoidance of the bond and mortgage now would not be binding upon him. On the contrary he would have the right in any proceeding to enforce-his liability upon his bond, to show that the bond and mortgage of Wood were not usurious. The plaintiff parted with a full consideration for the assignment of the bond and mortgage; he was induced by the representations of Wood to do so, and it would in our opinion be inequitable to substitute for the protection due to> an innocent assignee a doubtful remedy against his assignor.

The judgment should be affirmed with costs.

Judgment affirmed with costs.