Knickerbocker Life Insurance v. Hill

I think the referee erred in excluding the proof offered to show usury on the mortgage given by Hill to plaintiff.

The defendants (Iremongers) succeeded to Hill’s estate, by virtue of the sale under their lien, judgment against North and the Hills. They may avoid, for usury, a mortgage claiming priority.^[4] The cases are conflicting on this question, but it seems well settled, that a purchaser of property under an execution, may attack a previous usurious lien. The defendants (Iremongers) have such an estate as permits them to set up this defense. At the sale, Mr. Kuhn, who seems to have been their attorney, bid in the property

This not being an express trust authorized by statute, no estate vests in the trustee.^[4] The title would be in the beneficiaries subject to the execution of the power in trust,^[5]

The judgment should be reversed, and a new trial granted at Special Term, costs to abide event.

. This is an appeal, by certain of the defendants, from a judgment entered upon the report of a referee, in favor of the plaintiff, in an action for the foreclosure of a mortgage.

The only questions which will be considered in the opinion, are, whether the defendants (Iremongers), had acquired an interest in the mortgaged premises which entitles them to question the validity of the mortgage, and whether the defense of usury, set up in their answer, is available to them as subsequent incumbrancers or purchasers of the premises.

The complaint avers a mortgage made by the defendant, Charles A. Hill; a guarantee thereof, in writing, by the defendant, Curtis L. North; and that the defendants therein, including the defendants, Iremongers, who defend this action, have or claim some interest or lien in the mortgaged premises, which lien or interest, if any, accrued subsequent to the lien- of the mortgage; and the usual judgment of foreclosure and sale is sought..

Among other matters set up by the defendants, Iremongers, in their answer, is an averment that they furnished labor and materials toward the erection of a house on the premises; that they filed a builder’s lien on the 6th of September, 1873; that they foreclosed the lien and had judgment on the 24th of February, 1874, and a sale thereunder, whereby they became the purchasers and owners of all the right, title and interest of the defendants, Hill, North, etc. They further aver that the mortgage in suit was

At the trial, the referee ruled that the defendants had no right to interpose the defense of usury, and that no testimony to establish it would be received, and the defendants excepted. The referee also refused to allow them to show that they went into possession under the deed made on the sale under the judgment foreclosing their builder’s lien.

It appears by the testimony, that the defendant, Curtis L. North, was, at one time, owner of the premises; that conveyance went from him to Hill; and that Hill mortgaged to the plaintiff.

The facts show that the defendants, Iremongers, had acquired by operation of law, and not as strangers, an interest in, or lien on, the premises, entitling them to question the plaintiff’s mortgage ; and the defense of usury is available to them.

The case of Cavan v. Kelly,^[4] holds that an execution creditor, having a levy, may avoid a prior chattel mortgage for usury; and that such defense is available, is also held in Dix v. Van Wyck,^[5] and in Thompson v. Van Vechten.^[6]

In Williams v. Tilt,^[7] quoting Post v. Dart,^[8] it is said, a mere stranger cannot insist on the invalidity of an usurious security, but it may be set up by one claiming under the mortgage. In Mason v. Lord,^[9] it is held, that a judgment creditor, having a lien upon the property, has a right to avoid a mortgage prior to his lien, by showing it usurious. Numerous authorities are quoted at the foot of this case, as to what parties may, and what parties may not, raise the defense of usury; and while the courts seem to have been occasionally in conflict on this question, yet the weight of authority and the later decisions are all in favor of the proposition, that it may be set up by a subsequent lienor' or a grantee who does not take the estate with an express reservation as to the mortgage security sought to be defeated. Other cases are cited in The Merchants' Exchange Bank v. Commercial Warehouse Co.,^[10] which case also embodies the opinion of Jones, J., of the Superior Court, in which certain rules are stated and approved upon this question. On the authority of these .eases, we hold, that, on establishing an