Shufelt v. Shufelt

| New York Court of Chancery | Apr 6, 1841

The Chancellor.

It is not important in this case, to examine the question whether Mynderse, one of the administrators, was a competent witness to sustain the validity of the judgment due to the estate which he represented; as the only material fact to which his testimony related was fully proved by Mr. Linn. This last witness establishes the fact that the defendant B. I. Mynderse, as the special administrator, had in his possession four promissory notes given by J. Shufeit to the decedent 5 and that Shufeit, upon being applied to by such admnistrator to pay or secure those notes, voluntarily consented to give the judgment in question for the amount of them. Upon that proof, which is undisputed, the important question arises whether a subsequent mortgagee, or incumbrancer, of the judgment debtor can call in question the validity of that judgment as a legal lien upon the real estate of the defendant therein. And the conclusion at which I have arrived upon that point, renders it also unnecessary for me to decide whether the defendant J. Shufeit, the mortgagor, who had suffered the bill to be taken as confessed, was a competent witness for his father, the complainant, to prove the allegations in his bill as to the illegality of the transactions which constituted the consideration of the notes for which this judgment was afterwards confessed.

There is no pretence in this case that the judgment was given in consequence of any fraudulent or collusive agreement between the special administrator and the defendant in the judgment, for the purpose of depriving the creditors of the latter of the means of recovering their just debts. Nor is there any evidence to show that the special administrator knew, or had any reason to suppose, at the time he obtained the judgment for these notes, that they were not legally due and collectable. Neither is there any allegation in the complainant’s bill, that any part of the debt, for which the complainant’s mortgage was given, was due from his son at the time the latter confessed the judgment in favor of the special administrator; or that the son was not at that time able to pay all his debts, in addition to this amount claimed to be due to the estate of A. Mynderse. And it appears, from the testimony, that the complainant took the mortgage with full knowledge of the existence of the judgment given to the special administrator ; and that the mortgage money, exclusive of that which was already secured by the bond and warrant of the 26th of February, 1835, was advanced after he had such knowledge. It is impossible therefore for any one to wink so hard as not to see that the advance of this additional $1200, and the giving of a mortgage sufficiently large to cover the whole value of the mortgaged premises exclusive of the previous mortgage thereon, was a mere device to enable the complainant to bring this suit for the purpose of contesting the validity of the judgment belonging to the estate of A. Mynderse ; the payment of which the defendant in the judgment could not successfully resist by a suit in his own name. In other words, it was an indirect purchase, by a stranger to the transaction, of the privilege of bringing a suit in this court to set aside or overreach this judgment, by the use of the testimony of the party against whom the judgment was recovered. And I doubt whether a court of equity ought to lend its aid to carry into effect such an arrangement, under any circumstances.

In the ordinary case of the giving of an usurious mortgage, by the owner of the mortgaged premises, the statute having declared the usurious security void, the owner of the premises of course has the right to sell his property, or to mortgage the same, as though such void mortgage had never existed. And the purchaser, in such a case, necessarily acquires all the rights of his vendor to question the validity of the usurious security. For if the original mortgagor had not that right, the premises would, to a certain extent, be rendered inalienable in his hands ; notwithstanding the incumbrance thereon was absolutely void as to him. 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 to the lien of such mortgage. And the purchaser, in that case, takes the equity of redemption merely, and cannot question the validity of the prior mortgage on the ground of usury. (Green v. Kemp, 13 Mass. Rep. 515. Bridge v. Hubbard, 15 Idem, 103.) Butin the case of a judgment, like the present, which is a valid and subsisting debt against the defendant, and a lien upon his real estate, at least until he thinks proper to institute some legal proceedings to set aside such judgment, there is a manifest impropriety in permitting every voluntary purchaser, or mortgagee, of any portion of the property upon which such judgment is a lien, to file a bill in his own name to impeach the consideration of that judgment. My learned predecessor Chancellor Kent, in the case of French v. Shotwell, (5 John. Ch. Rep. 567,) came to the conclusion that a subsequent purchaser, who was aware of the existence of such a judgment at the time of his purchase, was not authorized to call the judgment in question where the judgment debtor himself did not think proper to do so. He says, “ the judgment precludes on general principles ¿ for the purchaser voluntarily comes in under the judgment pro bono et malo ; and except in the special case in which the judgment was confessed collusively and by a corrupt agreement to defraud some subsequent purchaser, a case hardly to be supposed, he must take the lien as he finds it, and has no business to interfere with the contracts of other people.”

I am aware that the very distinguished counsel, the late Mr. Henry, who filed the bill and argued the case of French v. Shotwell, was not satisfied with the decision of the chancellor upon the plea in that case. And the reporter erred in supposing that there was an appeal from the chancellor’s decision upon the rehearing of the plea ; and that such decision was affirmed by the court of dernier resort, as is stated in the report. (See 20 John. Rep. 668.) It appears from the printed case, and from the opinion of the then chief justice delivered in the court for the correction of errors, both of which I formerly had occasion to examine, that the only appeal was from the decretal order of August, 1822, overruling certain exceptions to the defendant’s answer. (See 6 John. Ch. Rep. 235.) And the complainant having lost the right to appeal from the order allowing the plea, by his neglect to enter his appeal within fifteen days, his counsel attempted to review the decision of the chancellor upon the plea, under the appeal from the subsequent order of August, 1822. But the chief justice stated distinctly, in his opinion, that the court for the correction of errors could not upon that appeal examine the correctness of the plea ; and that the appellate court was confined to the question arising on the master’s report upon exceptions to the answer. I will not therefore say it is conclusively settled that a subsequent purchaser, or mortgagee, can in no case call in question the validity of a judgment voluntarily confessed by the vendor or mortgagor under whom he claims title. But in a case like the present, where an individual apparently indebted to the estate of a deceased person, upon being called on by the representative of the decedent to pay or secure the debt, voluntarily confesses a judgment for the amount, without intimating that he has any legal or equitable defence to the debt or any part thereof, I think the debtor himself is estopped from questioning the validity of such a judgment, in any court, unless he can show that some mistake has occurred ; in the same manner as he would be estopped if the judgment had been recovered against him in an ordinary suit at laxv for the collection of the debt. This bears no resemblance to the common case of giving a bond and warrant to secure the performance of an agreement for an usurious loan, or where the judgment itself constitutes a part of an immoral and void agreement; in which cases this court, as well the court of law in which the judgment has been entered, may set the same aside upon equitable principles. And if J. Shufelt himself would not have been authorized to file a bill in this case to set aside the judgment, on account of the alleged illegality of the consideration of the notes which constituted the original indebtedness, a subsequent grantee or mortgagee of the property upon which that judgment is a lien certainly cannot question the validity of such lien.

I am also inclined to think there is not sufficient on the face of the complainant’s bill to shoxv that the consideration of the notes for which the judgment was confessed was illegal. For it is not alleged that the foreign lottery tickets, for which those notes were given, were sold in this state, or that A. Mynderse, at the time of such sale, resided or kept his lottery office in the state of New-York. But this is a mere technical defect; as the proof shows that he resided at Schenectady, and the sales of the lottery tickets were unquestionably made there, from whatever place the vendor might have procured them.

There is, however, a substantial and fatal defect in the complainant’s bill, considering it as a bill for the foreclosure of the mortgage given to him by his son. For it appears from the bill itself, as well as from the evidence in the case, that the complainant has recovered a judgment in the supreme court for more than two-thirds of the debt secured by the mortgage. And the statute is imperative, that, upon a bill of foreclosure, if it appears that any judgment has been obtained in a suit at law for the moneys demanded by such bill, or any part thereof, no proceedings shall be had in such case unless to an execution, against the property of the defendant in such judgment, the sheriff shall have returned the execution unsatisfied, in whole or in part, and that the defendant has no property whereof to satisfy such execution except the mortgaged premises. (2 R. S. 192, § 146, new ed. § 162.) The judgment of the complainant, which was entered in this case in February, 1835, is a judgment for a part of the moneys demanded by him in this bill; for the recovery and satisfaction of which moneys he seeks a foreclosure and sale of the mortgaged premises. In such a case, as this court has recently decided, if the fact of the recovery of the judgment appears in the bill, the complainant must go still further and show that he has exhausted his remedy at law, upon the judgment; or the defendants in the foreclosure suit may demur to the bill on that account, or they may urge that objection in their answer, to prevent a decree of foreclosure. Or, if this objection does not appear upon the bill, and the complainant has falsely alleged that no proceedings at law have been had, the defendant may plead the recovery of such judgment in bar of the foreclosure suit. (The North River Bank v. Rogers, 8 Paige’s Rep. 648.) And if the fact of the recovery of such judgment appears in the bill itself, the court cannot make a decree of foreclosure until the execution has been returned unsatisfied ; although the defendant has suffered the bill to be taken as confessed against him.

For these reasons the decree appealed from must be reversed, with costs to the appellants. And the bill, so far as it seeks to call in question the validity of their judgment against the mortgagor, or to affect the priority of the lien thereof upon the mortgaged premises, must be dismissed absolutely and unconditionally, with costs to them. But so far as it seeks a foreclosure of the complainant’s mortgage, it must be dismissed as to all the defendants ; without prejudice to his right, after he shall have exhausted his remedy at law upon his judgment for the recovery of the part of the mortgage moneys included therein, to file a new bill to foreclose and obtain satisfaction of his mortgage out of the mortgaged premises, subject to the prior lien of the appellants thereon, by virtue of their judgment and the lien of the mortgage to the defendant Mynderse upon the same premises.