Summary
In Mason v. Lord (40 N.Y. 476) the plaintiff, claiming title in fee as purchaser under an execution issued on his judgment, brought an action of ejectment against the defendant who was in possession as purchaser of a leasehold under a usurious mortgage given by the judgment debtor.
Summary of this case from Halsey v. WinantOpinion
Argued April 3, 1869
Decided June 14th, 1869
J.L. Jernegan, for the appellants.
Stephen P. Nash, for the respondent.
If the fact found by the judge, that Michael Dougherty loaned the $5,000 to the defendant, Lord, with which the latter redeemed the mortgage given by him upon the property in question to Herrick, from the executrix of the latter, is to be assumed as true by this court, there can be no question of the plaintiff's right of recovery, irrespective of the further fact found that such loan was usurious. The appellant's counsel excepted to the finding of the above facts. The case contains no evidence tending to establish them, but, on the contrary, the evidence shows that Dougherty, instead of loaning the money to Lord, agreed to purchase the property, and advanced the money to Lord with instructions to procure a conveyance of the property to him therewith from the executrix of Herrick. Nothing was said about a loan or the reconveyance of the property by Dougherty to Lord or the repayment thereof by Lord to him. The finding is not against the weight of evidence merely, but the finding of a fact against a party entirely without evidence. Relief against the former error could only be given by the General Term of the Supreme Court to which the appellant might appeal for the correction of errors, either of fact or law, committed by the judge who tried the cause, without a jury. An appeal to this court can only be taken upon the law. The question, then, is, whether finding a fact without any evidence to sustain it is an error of law. The statement of the question would seem to suggest the answer: A finding of facts must always be based upon evidence; and where none is given tending to show an affirmative fact, it is contrary to law to find such fact against a party traversing it. This is recognized in numerous cases in this court, where it has been held that a judge erred in refusing to direct a jury to find the non-existence of a fact when there was no evidence of its existence, and also in refusing to direct the finding of a fact when the uncontroverted evidence proved it. When the alleged error is a finding of fact contrary to the weight of the evidence, it is within the meaning of the Code providing for appeals on error of fact, of which this court can take no cognizance. When it is the finding of a fact without any evidence, or the refusal to find a fact proved by uncontroverted evidence, it is a legal error which is available in this court. It follows that, in finding the above facts, a legal error was committed which entitles the appellant to a reversal of the judgment unless it appears from the other facts, legally found, that this error could not have prejudiced the appellant. From the latter it appears that, although the assignment of the lease by Lord to Herrick was absolute upon its face, yet it was only a mortgage, having been made as a security for a loan of money by Herrick to Lord, and that this was known to Dougherty at the time he negotiated for the purchase of the property and advanced the money for that purpose to Lord. This fact being established, Lord, notwithstanding the apparent absolute assignment of the lease by him, continued the legal owner of the term and Herrick had only a lien thereon for the security of his debt. ( Runyon v. Mersereau, 11 Johns., 534; Kortright v. Cady, 21 N.Y., 343; Merritt v. Burtholick, 36 id., 44.) Lord, thus being the legal owner of the lease, held an interest in the premises. The judgment, under which the plaintiff makes title, became a lien upon such interest at the time of the entry thereof, long prior to any negotiation by Dougherty for the purchase; Dougherty knowing that the assignment by Lord to Herrick was only a mortgage, nothing done by him, Lord, and the executrix of Herrick affected this lien. The most favorable view that can be taken of the interest acquired by Dougherty is that he, by purchase from the executrix of Herrick, acquired the same title held by Herrick under the assignment to him from Lord, and that this title was not in equity subjected to the lien of the judgment by reason of the reassignment of the lease by the executrix to Lord, for the reason that, under the circumstances under which such reassignment was taken, Lord took the same as trustee for Dougherty, such trust resulting from the advance of the money by the latter to the former, for the purpose of obtaining a transfer of the interest of Herrick to him. In this aspect of the case, Dougherty acquired precisely the interest of Herrick, as assignee of his mortgage interest, and the judgment continued a lien upon the legal interest of Lord in the term. This legal interest of Lord passed to the plaintiff under the sale and conveyance of the sheriff under the judgment, and became a valid title in the plaintiff, subject to the mortgage, if that was valid. But the fact was found that the mortgage was given to secure a usurious loan by Herrick to Lord. It is claimed that Lord could waive this invalidity of the mortgage. This is true as to his own rights and the rights of all acquired from him subsequent to such waiver. But the lien of the judgment had attached before anything done by Lord, that could possibly constitute a waiver. The judgment creditor having a lien upon the property has the right to avoid a mortgage prior to his lien by showing it usurious. ( Dix v. Van Wyck, 2 Hill, 522; Post v. Dart, 8 Paige, 632; Thompson v. Van Vechten, 27 N.Y., 568.) This right was also acquired by the plaintiff upon his acquisition of title under the judgment. The right is equally available against an assignee of the mortgage as the mortgagee himself. A mortgage not being negotiable by the law merchant, the assignee, acquires only the right of the mortgagee and takes subject to all available defences against the latter. The mortgage was thus shown to be void as against the plaintiff, irrespective of the question whether Dougherty knew its usurious character at the time of its purchase. There was, therefore, no title shown in Dougherty and he could not, therefore, have been in any way prejudiced by the finding that he loaned the money to Lord, which the latter paid to the executrix of Herrick upon the transfer of the mortgage by her, instead of paying it as purchaser of the property. The judgment must be affirmed with costs.
The judge before whom this case was tried without a jury, found as a fact, that Michael Dougherty, who devised the leasehold estate in controversy to his widow, Hannah Dougherty, who is one of the defendants in this action, was informed before he advanced his money or took the assignment of the lease, that Elias H. Herrick, to whom the judgment debtor, the other defendant, had assigned it, held it by way of security for the payment of a debt owed him by such debtor. This conclusion was fully warranted by the evidence given, both by the defendant Lord, who was the judgment debtor, and the testator himself, and no exception was taken to it by the defendants. After having been so informed, if the testator had received an assignment directly from Herrick's executrix, it would have transferred to him only such rights as she, in that capacity, had in the lease, which were those of a mortgagee, notwithstanding the fact that she held it under an assignment which was absolute upon its face. For it is now well settled that such an assignment may be shown by parol evidence to be defeasible as a mere security. ( Hodges v. Tennessee Ins. Co., 4 Seld., 416.) And that evidence may be given not only against the mortgagee or assignee himself, but also against all persons acquiring title from him, knowing the legal nature of the transaction. The second assignee would succeed to all the rights and be subjected to all the disabilities possessed by and imposed upon the person assigning the security to him. ( Williams v. Thorn, 11 Paige, 459; Bush v. Lathrop, 22 N.Y., 535.)
The judge also found, as a fact, that the lease was assigned by the judgment debtor to Herrick for the purpose of securing a usurious loan of money made by him to the judgment debtor. And no exception was taken to that conclusion. For the purpose of disposing of the present appeal that must be therefore assumed as a fact, without reference to the condition of the evidence on which it was predicated. For this court can only review questions of law in cases presented in the form of the present one, and an exception is required to raise such a question. Assuming then that the assignment was made to Herrick to secure the payment of an usurious loan of money made by him to the assignor and judgment debtor, it was by the terms of the statute and the construction placed upon them by the courts, void as to the latter, and to all persons deriving title to the leasehold estate under him. If Herrick, or his executrix, had continued to hold the assignment until the plaintiff had perfected his title to the leasehold estate under his judgment and execution, it would have found no legal obstacle to the recovery of the possession of the premises, if he, or his executrix, had, in the meantime, gone into the occupancy of the property. For being void on account of usury against the judgment debtor, and assignor, himself, it would, likewise, be so against the creditor, whose title had become perfected under the execution sale. ( Dix v. Van Wyck, 2 Hill, 522; Schroeppel v. Corning, 5 Denio, 236; Thompson v. Van Vechten, 27 N.Y., 568, 585.) And as the assignment would have been void between the purchaser under the judgment and execution and the assignee, it would necessarily have been the same in the hands of Michael Dougherty, if Herrick's executrix had assigned the lease directly over to him, as it was claimed he should have done according to the terms of the agreement made between Dougherty and the judgment debtor. If full effect could be given to that agreement, Michael Dougherty would have acquired the lease directly by assignment from the executrix. And as he had notice that he held it only as a security, Dougherty would have afterwards held it precisely in the same way.
The judge found as a fact that Dougherty had notice that the assignment had been made to Herrick, as security for a usurious loan of money. And that finding was excepted to by the defendants. But it cannot be very material whether the judge was right or wrong in his view of the evidence upon this subject; for it was not necessary that Dougherty should have had notice of the usurious nature of the transaction, in order to render the security as invalid in his hands as it was in those of Herrick and his executrix. It was sufficient for that purpose, that he showed that the assignment had been made to Herrick, simply as a mortgage, for with that understanding, it would have continued to be a mortgage in his hands, if it had been assigned directly to him, and he would have then been incapable of enforcing the collection of the usurious debt by means of it. Conceding, therefore, in the defendants' favor, all that they claim should have been awarded by way of rectifying the assignments, and still they would remain unable to make a successful defence to the plaintiffs' action for the recovery of the premises in dispute.
When his judgment was recovered, it became a lien upon the debtors' interest in the leasehold estate. And after the title was perfected to it under the execution sale, the plaintiff became entitled to recover the possession, not only from him, but also from the usurious mortgagee, and such other persons as might have acquired the same interest from him by way of assignment.
No reason existed for supposing that Michael Dougherty believed that he was to acquire a complete legal title to the property by an assignment of the lease from Herrick's executrix, for in his own evidence, he stated that he understood that Lord owned it. And if that was his understanding, it was clear that he must have known that the executrix held it only as a security, and could therefore assign it in no other manner to him.
By the assignments that were made, Dougherty acquired the same rights in the property which he would have had if the business had been done precisely as he directed it. For the intention with which Lord took his assignment from Herrick's executrix, prevented the security from becoming merged in the legal estate. ( James v. Morey, 2 Cowen, 246.) And the intervening lien of the plaintiffs' judgment had the same effect.
But if that had not been the case, the court had no power to relieve Dougherty, either in the action which he brought, or in the defence made in the present case, for he accepted the assignment taken from Lord, with knowledge that his directions had been departed from in the preceding portion of the transaction. It is true that this was done under the conviction produced by Lord's misrepresentation, that there were no judgments against him. And that would have been sufficient, when the truth was first discovered, to have entitled Dougherty to a rescission of the transaction, if the proper action had been instituted by him for that purpose. But an action to change the nature of the assignment, by giving them the effect of one from Herrick's executrix, directly to him, even if that could have been done, would have afforded him no benefit, as long as the security was void for usury in her hands. Changing the form of the transfer of the usurious security from the executrix to Dougherty, would have produced no change whatever in the legal nature of the security itself. The pervading vice of usury would have still rendered the security invalid in his hands, and in the hands of those acquiring title under him, as against the title secured to the property by the plaintiff under his judgment and execution, no matter in what shape the assignment of it may have been placed. It was the usury in the security, not the form in which it was transferred, that legally disabled the defendants from maintaining their defence. The judgment on that account was right, and it should therefore be affirmed.
All the judges were for affirmance, on the grounds stated in the opinion of GROVER and DANIELS, J.J.
Judgment affirmed.