House v. . Carr

78 N.E. 171, 185 N.Y. 453, 23 Bedell 453, 1906 N.Y. LEXIS 917

• Court: New York Court of Appeals
• Decided: June 19, 1906
• Status: Published

Opinions

Cullen, Ch. J.

• This appeal presents the single question whether a court of equity will, on the ground that the Statute of Limitations has run against a mortgage, restrain a sale under the power of sale contained in the mortgage. There is neither allegation in the complaint nor finding by the court that the bond and mortgage have been paid. The complaint charged and the trial court found merely that no payments had been made within twenty years upon the bond and mortgage and that, therefore, they were, under the statute, barred by lapse of time. I can find no case in the books and none has been cited to us in which such an action has been maintained. On the contrary, in the only cases in which the precise question has been presented it has been held that the action would not lie. (Goldfrank v. Young, 64 Texas, 432; Hutaff v. Adrian, 112 N. C. 259.)

■ It is settled law, as appears by the cases cited in nay brother Vann’s opinion, that equity will not set aside as a cloud upon title a lien outlawed by the Statute of Limitations. In Matter of Willett (70 N. Y. 490) it was sought to vacate an assessment, the enforcement of which was barred by lapse of twenty years from the time of its imposition. In affirming a denial of the application this court said: “ In this proceeding taken by him (the petitioner), seeking affirmative relief, depending upon the fact of payment, he cannot rely upon the presumption, but must show actual payment by competent proof.” Hence, I assume it to be conceded that had the defendant not sought to execute under the statute the power of sale, that is to say, to foreclose by advertisement, as it is usually called, the plaintiffs could not have cleared their lands from the apparent lien of the mortgage. The controversy is, therefore, further narrowed to this question: Did the attempt of the defendant to sell and the effect of such a salej if had, entitle the plaintiffs to relief against the sale which would have been denied against the mortgage itself.

In support of the affirmative of this proposition it is urged that under this statute the effect of a sale is the same as that of a decree of foreclosure in a court of equity, and the question is then asked : “ Is it possible that a landowner can be deprived of his land by an attack out of court which has the same effect as an attack in court, with no opportunity to defend himself ? ” To this (assuming that the sale will cut off every defense, which it will not if notice of the defense is given at the time and place of sale) I answer yes, and assert that the exact question has been determined in this state nearly a century ago. At the time of the decision to which I refer the statute law was substantially the same as at present, the Eevised Laws of 1813 (Ch..32, sec. 14, p. 375) enacting that the sale should have “ the like effect as if any of the said mortgages had been foreclosed in the court of chancery by a decree against all parties in interest.” At that time, as at present, the law declared usurious securities void. At the. same time the courts had also held that at a sale under a usurious mortgage a purchaser without notice would acquire a good title. (Jackson v. Henry, 10 Johns. 185.) Such being the state of the law, in Fanning v. Dunham (5 Johns. Ch. 128) a bill was filed to restrain a statutory sale under a usurious mortgage. Chancellor Kent held that the plaintiffs could not get relief except on payment of the amount actually owing on the mortgage. The chancellor recognized perfectly the point that is now made, that by a foreclosing by advertisement the owner of the equity of redemption might be deprived of a defense which he could successfully interpose had an action been brought to foreclose the mortgage, for he said : “ If the defendant was endeavoring to enforce any of his securities in this court, and the present 'plaintiff had set up and made out the usury by way of defense, the remedy would have been obvious. The securities would have been declared void and ordered to be delivered up and cancelled.” Nevertheless, he held that as the plaintiff was compelled to resort to a court of equity he must do equity as a condition of obtaining relief. The authority of Fanning v. Dunham, has never been questioned. The case is cited with approval in Williams v. Fitzhugh (37 N. Y. 444), the court saying: “ He (the defendant) might stand on his legal rights and defend any and every endeavor to compel him to pay, but if he invoked the aid of a court of equity to give him affirmative relief, that court recognized his equitable obligation to refund what he had received.” The case is also cited as authority in nearly every state where either our system of statutory foreclosure or the practice of giving .trust deeds to secure debts obtains. The Fanning case equally disposes of the contention that a. suit to enjoin a sale is not an attack, but a defense.

It must be borne in mind that 5the Statute of Limitations in this state never pays or discharges a debt, but only affects the remedy. It would be within the constitutional power of the legislature to repeal the Statute of Limitations and revive claims, the enforcement of which have been barred by the statute for'a generation. (Campbell v. Holt, 115 U. S. 620.) Therefore, though the statute may have barred one remedy on the debt, if there be another remedy not affected by the statute, or one to which a different limitation applies, a creditor may ..enforce his claim through that remedy. ‘Thus, Hulbert v. Clark (128 N. Y. 295) was an action to foreclose a mortgage given to secure payment of a promissory note. The note itself was outlawed, more than six years having elapsed since its maturity, and there was no promise to pay contained in the mortgage. Nevertheless, this court held the action could be maintained, Judge Earl saying: “ The Statute of Limitations does not after the prescribed period destroy, discharge or pay the debt, but it simply bars a remedy thereon. The debt and the obligation to pay the same remain * * *. These notes were, therefore, not paid, and so the referee found. The condition of the mortgage has, therefore, not been complied with. The notes being valid in their inception the only answer to the foreclosure of the mortgage is payment. The mortgage was given to secure payment of the notes, and until they are paid-the mortgage is a subsisting security and can be foreclosed.” There is in the case of a mortgage containing a power of sale a third remedy open to the creditor, a sale under the power. It is unnecessary to determine whether the "exercise of that power is barred by the lapse óf time or not. If it is not, then the defendant had the undoubted right to pursue it and was very wise in so doing, just as- wise as the plaintiff was in the HuTbert case in not suing on the note, where he would have been beaten, but in bringing an action to foreclose the morí- ■ gage. But assuming that the Statute of Limitations bars the right to exercise the power of sale, and further assuming that the plaintiffs could not set up that bar in answer ■ to a title acquired by a sale under the barred power (which I deny), and, therefore, is in the unfortunate (?) position of being compelled to seek relief in a court of equity, nevertheless the court will require them, as a condition of relief, to do equity and pay the debt which they do not deny they owe. For, as Judge Earl has said, the statute does not discharge or pay the debt; the debt and obligation to pay the same remain and the arbitrary bar of the statute alone stands in the way of the creditor seeking to compel payment.

The case of Butler v. Johnson (111 N. Y. 204) has no application to the case at bar. There at the suit of the devisees an executor was restrained from selling their lands for the payment of outlawed debts. The action was not against the creditor but against one who, as Judge Peckiiam said, was a trustee for the devisees. The learned judge recognized the general rule that the Statute of Limitations is not a ground for affirmative relief, but, as he pointed out, the action of the executor w-as a breach of his trust for the beneficiaries. There the fealty of the defendant was due not to the creditor but to the landowner. - Here the fealty of the defendant was due solely to himself and to the beneficiaries whom he represents. That case was decided on the ground of a breach of trust. There is nothing of the kind here.

Hor is the position in which the plaintiffs are placed anomalous. A pledgee may retain or sell the pledge, though the debt to secure which the pledge was given is outlawed (Jones v. Merchants' Bank of Albany, 6 Robt. 162; Jones on Pledges, § 582.) This is not on the theory that by lapse of time title has vested in the pledgee, for the law is otherwise (Jones on Pledges, § 5SI), but because the statute bars merely the remedy by action.

Doubtless from lapse of time the court might find that a mortgage had been paid, though there wore no direct evidence of payment. (Bean v. Tonnele, 94 N. Y. 381; Matter of Neilley, 95 N. Y. 382.) But to the statement already made that there is no such claim in the pleadings or in the findings, I may add that no such question is presented by the evidence, go far from proving any payment or anything that might lead the court to believe that payment had been made, the plaintiffs took pains to show affirmatively that nothing' had been paid on the mortgage. They proved by witnesses, relatives of the plaintiffs, that Mrs. Gilbert, the defendant’s intestate, had on several occasions shown them the bond and mortgage and stated her belief that they had become outlawed, and that her attorney had advised her to that effect. There is, therefore, no equity in the plaintiff’s claim, and we can indulge in no speculation or surmise that were it not for the lapse of time and the death of all the parties actual payment might be proved. If the plaintiffs have any such ¡woof, however, that may be given upon a nevr trial under an amendment to the complaint.

The judgment appealed from should be reversed and a new; trial granted, costs to abide the event.