County Industrial Corp. v. Francia

James W. Bailey, J. Plaintiff makes this application to strike the affirmative defense and counterclaim upon the ground that it is insufficient in law. The action seeks to foreclose a mortgage upon real property of the defendant. The mortgage was executed as security for five notes endorsed by the defendants. The defense asserts that plaintiff discounted the notes in violation of section 131 of the Banking Law; that the notes are, therefore, void and that the mortgage executed to secure the endorsement of the void notes may not be enforced. The discount of notes by a corporation other than a banking corporation is specifically proscribed. (Banking Law, § 131; Miller v. Discount Factors, 1 N Y 2d 275.) However this proscription does not extend to a mortgage executed to secure discounted notes. The notes are merely evidence of the debt to which the mortgage attaches. The execution of the mortgage to secure the debt is not a proscribed banking function. (See General Corporation Law, § 18; Williams-Dexter Co. v. Dowland Realty Corp., 259 N. Y. 581; Pratt v. Eaton, 79 N. Y. 449.) The defense is therefore insufficient to defeat this action to foreclose the mortgage. Motion granted. Submit order.