Vanderveer v. Holcomb

The Chancellor.

The material question involved is, whether, upon a bill filed by a mortgagee for foreclosure and sale of mortgaged premises, the mortgagor may by his answer set up usury against the claims of other mortgagees, who are made co-defendants, or whether he will be driven to a cross-bill, and thereby deprived of his defence. A decree between co-defendants may be grounded on evidence between plaintiffs and defendants. It is declared by Lord Eedesdalo *90 to be “ a jurisdiction long settled and acted on, and the constant practice of a court of equity.” Where a case is made out between defendants, by evidence arising from pleadings and proofs between plaintiffs and defendants, a court of equity is not only entitled to make a decree between the defendants, but is bound to do so. In the language of Lord Eldon, “ the defendant chargeable has a right to insist that he shall not be liable to be made a defendant in another suit for another matter, that may he then decided between him and his co-defendant. And the co-defendant may insist that he shall not be obliged to institute another suit for a matter that may be then adjusted between the defendants. And if a court of equity refused so to decree, it would be good cause of appeal by either defendant.” Chamley v. Lord Dunsany, 2 Sch. & Lef. 710, 718; Conry v. Caulfield, 2 Ball. & Beat. 255, 273; Elliott v. Pell, 1 Paige 263 .

If the defendant asks substantial relief either as against the complainant or a co-defendant, or a discovery, a cross bill may be necessary. But the court dispenses with the necessity of a cross-bill, where the whole matter is before the court, and the party is not thereby deprived of any of his substantial rights by a decree in the existing suit. Ames v. N. J. Franklinite Co., 1 Beas. 66.

Upon a bill for forclosure and sale of mortgaged premises, all the subsequent encumbrancers are necessary parties, and to effectuate a complete decree, the existence, validity, order of priority, and amount due upon the several mortgages, must be settled and decided. The rights of each mortgagee defendant are as fully established as those of, the complainant, and the decree is as conclusive against the mortgagor, both as to the validity and amount of the several mortgages, as though a separate bill had been filed, and decree made upon each. It is, to all intents and purposes, a foreclosure suit by each of the encumbrancers against the mortgagor. As against the complainant, the mortgagor may allege and prove that .the mortgage is usurious. Why not, as against every *91 other encumbrancer who seeks to enforce his claim against the mortgaged premises ?

It is urged that permitting the mortgagor to set up usury without filing a cross-bill, deprives the defendant mortgagee of the benefit of his answer. But if he were complainant seeking to enforce his mortgage, he could have no benefit of an answer to the defence of usury. He must file a replication, and go before the master upon substantially the same pleadings and proofs that he will do as defendant.

The fact cannot bo disguised, that the encumbrancers are before the court seeking to enforce their claims. The mortgagor is here in the character of a defendant, resisting the enforcement of a claim which he insists is usurious and void. He asks the protection which the law gives to every defendant against whom a usurious claim is sought to be established. Courts of equity follow the law, in the construction of the statutes against usury. If the lender come into equity seeking to enforce the contract, the court will give effect to the statute, and declare the contract yoid. But if the borrower seeks relief against the contract, the court will prescribe the terms of its interference. It will not actively interfere for the relief of the borrower, unless he will pay what is justly due. The principle of the court is, that he who will have equity must do it, So if a discovery is necessary to aid him in a defence at law or otherwise, equity will not require the defendant to answer under oath, and thus be a witness against himself in a matter which will subject him to a penalty or forfeiture, or to any loss in the nature of a forfeiture. 1 Story’s Eq. Jur., § 301; 1 Fonb. Eq. 25, note h; Fanning v. Dunham, 5 Johns. Ch, R. 143; Livingston v. Harris, 3 Paige 533 -4; Whitmore v. Francis, 8 Price Exch. 616. And it makes no difference as to the nature of the relief granted, that the remedy against the usurious contract is sought by cross-bill. Mason v. Gardiner, 4 Bro. Ch. R. 322, and note 2; Fulton Bank v. Beach, 1 Paige 433 ; Miller v. Ford, Saxton 364.

The principle of all the cases is, that if the defendant asks *92 the interposition of the extraordinary or equitable powers of the court to aid him in his defence against a usurious claim, he must consent to do equity before he can obtain that aid. But in this case the defendant does not ask the interposition of the extraordinary or equitable powers of the court. He seeks no discovery of the usury, nor does he ask that the contract should be surrendered or- delivered up to be cancelled. All that he asks is, that it should not be enforced as a valid encumbrance-upon the mortgaged premises.

The mortgagor is asking no favor. He is not in a position in which terms may be imposed upon him. The court is not at liberty to interpose or withhold the exercise of its powers at its discretion. The mortgagor relies upon his legal rights, and the court are bound to protect them. Hor has the third mortgagee any right to object that he is made a party unnecessarily, or brought into court against his will, or for the mere purpose of having his mortgage redeemed. The answer alleges that he is in fact the actor. That by collusion with the complainant, he caused the suit to be instituted, having first dismissed a bill which he had exhibited in his own name for the foreclosure of his mortgage, and to which the mortgagor had set up usury as a defence. These circumstances clearly take the case out of the operation of the decision in Hudnit v. Nash, 1 C. E. Green 550. They show that so far from the third mortgagee being brought by other parties unnecessarily, or involuntarily, before the court, he is in truth the actor, seeking under the color of the complainant’s rights, to deprive the mortgagor of the protection of the statute as against a usurious claim.

In this aspect of the case, I think the mortgagor was justified in setting up in his answer, those matters which the master has regarded as irrelevant. Viewed in reference to the claim of the complainant they clearly are so, but as against the claim of the third mortgagee, who is made a defendant by the complainant in order to the enforcement of his own rights, the allegations cannot be regarded as irrelevant or impertinent. They were obviously designed to remove the difficulties *93 which were suggested by the Chief Justice to the defence of usury in Hudnit v. Nash. It is material to observe, that none of these allegations are made by way of defence to the complainant’s mortgage. That is admitted, and no objection is made to a decree in his favor. They are designed solely as a defence to the claim of the defendant mortgagee, and the exceptions must be viewed in that light. The complainant in fact, if he is merely seeking the enforcement of his own claim, has no ground of exception to the answer.

I think all the exceptions taken to the defendant’s answer should have been disallowed by the master.

The order will be made accordingly.