Kellogg v. . Adams

The agreement and transaction between the plaintiff and Adams being usurious, the question is, did it invalidate the title of the plaintiff to the mortgage assigned to him by Sampson? I answer no. That mortgage was valid at its inception for such sums as Sampson should advance to Adams upon it. On the 14th day of August, 1858, it was valid in Sampson's hands for $3,000, actually advanced, and on that day it was assigned by Sampson to the plaintiff for the amount then actually due. What circumstance has intervened to invalidate this security in the plaintiff's hands? On the part of the defendants, it is assumed, that the usurious loan of the additional $1,000 to Adams is part of an entire transaction with the assignment by Sampson to the plaintiff, and that its vice vitiates the whole; and counsel truly say, "Usury, like fraud, taints every portion of the contract into which it enters, and the law makes no distinction between parts of an entire contract." But these familiar rules fail of application to the case in hand, because here the usury did not enter into the *Page 30 contract of assignment; nor were the usurious loan and the assignment of the mortgage parts of an entire contract. They were not separate merely, they were absolutely separate and distinct. They were between different parties, — the contract for the usurious loan, between the plaintiff and Adams; that for the assignment of the mortgage, between Sampson and the plaintiff, — and the answer to the question propounded by counsel for the defendants as the true inquiry in the case, viz., whether Sampson assigned the mortgage to the plaintiff upon an unlawful agreement between the plaintiff and Adams, must be fatal to their position. For, certainly, he did not assign his mortgage upon any agreement between other parties, but upon an agreement of his own making with the plaintiff. He was asking for his money on the mortgage, and, we may suppose, was ready to assign it to any body who would pay him what was due. The usurious contract with Adams was, doubtless, the inducement for the plaintiff to take the assignment; but it did not induce the assignment by Sampson, who, so far as appears, was not only uninfluenced by it, but was ignorant that such contract existed. I am wholly unable, on principle, to see how the plaintiff's title to the mortgage can be affected by the unlawful contract with Adams, and the authorities cited on the part of the defendants do not sustain this position. Two cases especially relied upon are Schroeppel v. Corning (5 Denio, 236), and Johnson v. Bush (3 Barb. Ch. 207). In the former of these, it was held that the assignment and delivery of certain bonds and mortgages, from the borrower tothe lender, as part of the consideration of a usurious loan, conveyed no title to the assignee, and that his possession of the property was tortious from the beginning. So, in Johnson v.Bush, the assignment of the bond and mortgage was from a corporation to one of its own stockholders, in consideration of a surrender by the stockholder to the corporation of a portion of the capital stock for cancellation, — an act expressly prohibited by statute. In both of these cases the contract of assignment was between the same parties as the usurious or illegal contract, and was distinctly a part of that contract, *Page 31 and by this essential characteristic both are distinguished from the case now under consideration. In the cases of Dewitt v. Brisbane (16 N.Y. 508), andTallmadge v. Bell (3 Seld. 328), also relied upon, the assignments were merely collateral to an illegal contract, and were void for that reason. In this case, had the plaintiff taken the assignment of Sampson's mortgage as collateral to the usurious contract, or had the plaintiff loaned the whole $4,000 to Adams, and the latter had paid Sampson his $3,000 and procured him to assign his mortgage to the plaintiff as collateral to Adams' undertaking to repay the usurious loan, it is clear that the assignment would have been void within the principle of the two cases last noticed. But such was not the contract here. The assignment to the plaintiff was absolute, and for a consideration unconnected with the usurious loan. I am, therefore, clearly of opinion that the assignment from Sampson to the plaintiff was not affected by the vice of the usurious contract, and that the plaintiff's title to the mortgage is valid for the amount for which it was valid in Sampson's hands, viz., the $3,000 and interest. The attempt to make it cover the additional $1,000, fails for two reasons: first, because it was in fraud of the holders of subsequent liens; and, second, because the loan of the $1,000 was usurious. The judgment of the General and Special Term should be affirmed.