Russell v. . Nelson

Andrews, J. The purchase-price of the Saugerties property, the sale of which by the Knickerbocker Life Insurance Company to Nelson entered into the transaction of October 15, 1874, was fixed at $20,000, the approximate amount of the loan of $17,000, made by the company to Nelson upon the same property in 1871, with interest. The company had foreclosed the mortgage given upon that loan, and bought in the property for $7,000, and had a deficiency judgment against Nelson for $11,160.65. The original loan was represented in the company’s assets by the Saugerties property and the deficiency judgment. The company conveyed the Saugerties property to Nelson October 15, 1874, according to its agreement. But no part of the purchase-price was paid by Nelson. It was secured by an equivalent amount included in the Brooklyn mortgages. The handing back by Nelson to the company of $20,000 out of the $70,000, nominally advanced on the Brooklyn mortgages, was a.mere cover. The real transaction Was a retention by the company out of the mortgages, of the *123 agreed price of the Saugerties property, and an actual advance of only $50,000. The agreement of the company to satisfy the deficiency judgment was a necessary incident of the arrangement, by which it was to take a substituted security for its debt against Nelson and reinstate him in the ownership of the Saugerties land, free from incumbrances. In substance, the company was to be reimbursed through the Brooklyn mortgages for the loan of 1871, and the giving of those mortgages was the only consideration it received for its agreement to satisfy the deficiency judgment. This security was effectually destroyed by the judgment obtained by Nelson, declaring the mortgages void for usury. If there was nothing more in the case, there could be no question that this judgment operated to revive the debt represented by the deficiency judgment, or if that judgment had been actually satisfied, there can be no doubt that the court would set aside the satisfaction upon the application of the company. (Gerwig v. Sitterly, 56 N. Y. 214; Patterson v. Birdsall, 64 id. 294.) It is insisted, however, that as the company has enforced by foreclosure the mortgage for $10,000, given in the same transaction to secure the usury agreed to be paid by Nelson, and has re-acquired under the foreclosure, the title to the Saugerties land, and also obtained a judgment for deficiency against Nelson in that proceeding, this action, brought to prevent the de-, livery of the satisfaction of the first deficiency judgment for $11,160.65, cannot be maintained. The company, it is insisted, was bound at least to restore to Nelson the title acquired under the foreclosure of the $10,000 mortgage, as a condition of relief, and cannot hold any of the fruits of the usurious transaction, and at the same time be relieved from the obligation to perform its agreement to satisfy the deficiency judgment. This objection comes with very ill grace, from a party who has obtained $50,000 of the funds of the company, and has successfully defeated the security given for it, and makes on his part no offer of restitution. The answer to the claim is that Nelson was the actor in repudiating the transaction of October 15,1874, for usury. He has succeeded in setting aside the Brooklyn mortgages, and *124 in so doing, has deprived the company of the only consideration for its agreement to satisfy the deficiency judgment. Its enforcement of the $10,000 mortgage was in affirmance, and not in disaffirmance of the usurious transaction, and any advantage the company has derived from the restoration of its original title to the Saugerties property, and the judgment over against Kelson, is only a partial indemnity for its loss, arising from the judgment setting aside the Brooklyn mortgages. The company will still he a large loser if it is allowed to retain the deficiency judgment, and the equity of the company to retain it should prevail. The satisfaction-piece, though executed, has never been delivered, and the judgment requiring the custodian who holds the paper to deliver it to the plaintiff, and declaring that the judgment is a valid lien upon Kelson’s property, should be affirmed. All concur. Judgment affirmed.