4 Barb. 332 | N.Y. Sup. Ct. | 1848
Further reflection has confirmed me in the views expressed in the opinion delivered by me when this cause was before me as vice chancellor of the fifth circuit. In addition to what was said in that opinion, I will only add a few brief remarks.
It should be borne in mind that the ground upon which the defendants refuse to appropriate any portion of the assigned funds to the payment of the complainant’s demand, in defiance of a special direction in the assignment, is not that they have been requested or authorized to do so by the assignor, nor by any creditor under the assignment, nor on their own behalf as creditors of the assignor; but solely because they have been advised that the demand is usurious ; and that it is their duty to apply the funds to the payment of the other demands mentioned in the assignment, which are unaffected by usury.
Upon this state of facts, the question is whether the defendants stand in a situation to raise the defence of usury against a demand which they have been directed to pay, by the positive provision of the deed of trust which they have accepted, and agreed to execute. They are mere naked trustees, bound to execute the trust according to its prescribed conditions, with no
I. The assignor, who owes the debt in question, does not set up this defence, and no one has a right to do it for him, without authority. This may be tested by supposing the case of an assignment for the payment of a single creditor only; and that the assignee had accepted the trust and converted the funds assigned, into money. No one will be hardy enough to contend that the assignee in such a case could be allowed to pocket the funds, and meet the creditor, whom, by the acceptance of the trust, he had undertaken to pay, with the defence of usury. For the plain reason, that he is a mere stranger to the usurious contract, and therefore cannot raise the question on his own account. Much less can he do it on account of the assign- or ; because that, in attempting to do so, he not only acts without authority, but in defiance of the assignor’s positive direction, and in violation of the trust under which he received the funds. It would indeed be a new exercise of the jurisdiction of this court, to uphold the defence of a party against the execution of a trust he had assumed, which defence was based upon an act of the foulest treachery against the debtor by whom, and the creditor for whom, the assignment was made.
II. I think it equally clear that the defendants cannot successfully urge this defence as the representatives of the other creditors for whom the assignment provides. (1.) They have received no authority from such creditors to take this course; and none is to be found in the deed of trust. The extent of their authority to act for such creditors is, to faithfully execute the plain conditions of the assignment, and to pay over to them, upon their debts, precisely what the assignor directed in the
(5.) The creditors under the assignment have no right to set up the defence of usury, and thus divert the funds appropriated to the payment of the complainant’s debt, on the ground that they are in equity the assignees of those funds for their own benefit. The defendants are, indeed, the assignees of the entire fund. But in equity they are assignees for their own benefit,1 of just so much as the assignor transferred for their benefit, and no more. When real estate is conveyed subject to the payment of an usurious mortgage, the grantee gets only the residue of the interest in the premises after the mortgage has been satisfied out of it. And he is bound to pay the mortgage, and is not allowed to set up usury to defeat the foreclosure and sale In Shufelt v. Shufelt, (9 Paige 140,) the chancellor, after declaring that the owner of land who should convey it to a purchaser, would convey to his grantee the same right to question a usurious lien upon the premises which he himself possessed before the conveyance, proceeds as follows: “ He may however, if he thinks proper to do so, elect to affirm the usurious mortgage by selling his property subject to the payment or the liens of such mortgage. And the purchaser, in that case, takes only the equity of redemption, and cannot question the validity of the previous mortgage on the ground of usury. (13 Mass. Rep. 515, 15 id. 103.”) (See also 10 Paige 591; 11 Id. 635, and 1 Barbour's Sup. Court Rep. 272.) This doctrine is decisive of the question we are now discussing. The two cases are precisely similar in principle. The assignor conveyed, by the assignment to the defendants as trustees for the complainant, so much of the assigned fund, as was necessary to pay the debt which she represents, or to pay a pro rata proportion of that debt, with the other claims in the same class of preferred demands. And all that was assigned to the other creditors, was merely the overplus, or residue of the assigned fund, after applying the prescribed amount to the payment of the complainant’s debt. Or, in other words, the whole fund was assigned to the defendants, to
On the former argument no question was made concerning the usurious excess; and nothing was said of it in the opinion. I perceive, however, that the decree is drawn so as to embrace this excess as well as the amount actually loaned, with the lawful interest. And I confess that I do not see why that is not right, upon the principle that the defendants are estopped from setting up the defence of usury, they not standing in a situation to raise that question. ' But in the case of Pratt v. Adams, the chancellor held that the court of chancery would not order the assignees to pay such excess. And perhaps this distinction may be supported on the ground that the bill is quasi a bill for a specific performance, and that the court will not, in its discretion, direct an unconscionable agreement or trust to be executed. In this case, notwithstanding our doubts, we will follow the decision of the chancellor. The decree will therefore be modified, by striking out the usurious excess; but in all other parts it must be affirmed.