
    Howard O. Wood, Respondent, v. Wilbur S. Scudder, Appellant.
    Second Department,
    February 7, 1913.
    Usury — action to recover unpaid balance on bond — defense of usury -'-demurrer to counterclaim for repayment of excessive interest — pleading provisions of General Business Law, section 373, limiting time in which to recover usurious interest—denial—issues — effect of estoppel agreement.
    In an action to recover. an unpaid balance on a bond executed by the defendant and duly assigned to the plaintiff, the answer after denying the allegations of the complaint, except as to the execution and assignment of the bond and the making of certain payments, alleged for a separate defense that the hond and a collateral mortgage were executed and assigned to the plaintiff pursuant to a corrupt and usurious agreement between the plaintiff and defendant; and for a partial defense it was alleged that the time for the payment of the balance due was extended by another corrupt and usurious agreement. For a counterclaim the answer repeated the allegations of usury and demanded judgment for sums claimed to have been paid by the defendant in excess of legal interest, all of which payments were made more than a year prior to the commencement of the action.
    
      Held, that plaintiff’s demurrer to the counterclaim on the ground that more than one year had elapsed since the making of the alleged usurious payments was properly sustained under the provisions of section 372 of the General Business Law.
    The provisions of said section need not be expressly pleaded as a statute of limitation.
    The partial defense was also ineffective under the provision of said section. As the defendant’s denial failed to raise an issue, it was properly stricken out.
    It was error to strike out the separate defense on the sole ground that the defendant was precluded from pleading it by an estoppel certificate declaring the validity of the bond and mortgage.
    Appeal by the defendant, Wilbur S. Scudder, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 1st day of July, 1912, upon an order entered in said clerk’s office on the 25th day of June, 1912, directing judgment upon a demurrer to a counterclaim set up in the amended answer, and striking out of the said answer a denial and certain defenses as false, sham, irrelevant and frivolous, with notice of an intention to bring up for review the said order.
    
      Albert A. Hovell [Harry W. McChesney with him on the brief], for the appellant.
    
      William G. Cooke, for the respondent.
   Hirschberg, J.:

The action is brought to recover an unpaid balance on a bond executed by the defendant to one Jean M. Jackson and duly assigned by the latter to the plaintiff. The complaint ■ sets forth the execution of the bond, its assignment to the plaintiff, and that there was due on it after crediting the payments made, the sum of $2,000 and interest, payment of which had been demanded and refused. The amended answer denies “each and every allegation contained in.said complaint, except as hereinafter admitted,” the admissions being limited generally to the execution, delivery and assignment of the bond, and the making of the conceded payments. For a first and separate defense the amended answer alleges, in addition to the admission stated, the allegation that the bond in suit is accompanied by a collateral mortgage on certain real estate, and that such instruments were executed and assigned to the plaintiff pursuant to a corrupt and usurious agreement between the plaintiff and the defendant, the precise terms of which are set forth in detail. For a second and partial defense it is alleged that by another corrupt and usurious agreement between the plaintiff and the defendant the time for the payment of the balance alleged to be due and unpaid was extended, the precise terms of this agreement being also set forth in detail. For a counterclaim the amended answer repeats and renews the allegations of usury, and demands judgment for the sums claimed to have been paid by the defendant in excess of legal interest, all of which payments were made more than a year prior to the commencement of the action, and also for the cancellation of the securities as null and void; but demands further that if such instruments are held to be good and valid in the hands of the plaintiff, the sum so paid in excess of lawful interest be credited and allowed to the defendant as payments thereon.

The plaintiff demurred to the counterclaim on the ground that it appears upon its face that more than one year has elapsed since the making of the alleged usurious payments, and that the defendant had, therefore, no legal right to recover them or set them off. The demurrer, I think, was properly sustained by virtue of the provisions of section 372 of the General Business Law (Consol. Laws, chap. 20; Laws of 1909, chap. 25), as the appellant concedes in his brief it would have been, had the demurrer been interposed to a complaint in an action brought by him to recover back the usurious payments. I know of no authority for the proposition that the terms of the section of the General Business Law {supra) must be expressly pleaded as a statute of limitation, and none is cited.

Upon the hearing at the Special Term of the demurrer as a contested motion, and on the hearing at the same time of a further motion by the plaintiff, based on affidavits setting forth the execution by the defendant of a so-called estoppel certificate ” executed by the defendant at the time of the assignment of the securities to the plaintiff, and certifying that the mortgage in question is a valid lien on the premises for the full amount of the principal and interest due, and that there are no defenses or offsets to the mortgage or the bond which it secures, the order on which the judgment appealed from has been entered was granted, by the terms of which it was “ Ordered, that the motion aforesaid be and the same hereby is granted. That the plaintiff have judgment upon his demurrer to said counterclaim. That the denial aforesaid be and it hereby is stricken out as irrelevant, redundant and insufficient in law. That that part of said amended answer designated ‘a first, separate and distinct defense ’ be and it hereby is stricken out as false and sham and that plaintiff have judgment upon that part of said amended answer designated c a second and partial defense to plaintiff’s alleged cause of action ’ as frivolous. ”

I think the denial was properly stricken out. The answer nowhere admits that any amount is due the plaintiff, and it would seem to follow that the denial is necessarily limited to the allegation in the complaint that the sum of $2,000 and interest is due and owing from the defendant to the plaintiff. As the denial, therefore, admits all the allegations of fact contained in the complaint, and the indebtedness is a mere conclusion of law which necessarily flows from and follows such allegations, it raised no issue. (Emery v. Baltz, 94 N. Y. 408.)

The first separate defense, however, clearly sets up usury, and it was error to strike out that defense on the sole ground that the defendant was precluded from pleading it because of the existence of the “estoppel certificate.” The certificate is evidence, of course, and may well be used to combat the defendant’s contention on the trial, but no authority is cited for the proposition that such a certificate, any more than the usual recitals in the bond tending to show the legal nature of the loan, can operate to prevent a borrower from asserting that the loan, however regular in form, is in fact tainted with the stain of usury.

I think the second partial defense must fall with the counterclaim, and for the same reason which justified the demurrer.

It follows that the judgment should he reversed and the order modified by denying the motion to strike out the first separate and distinct defense as set up in the amended answer, and as so modified affirmed, without costs.

Jenks, P. J., Burr, Thomas and Carr, JJ., concurred.

Judgment reversed and order modified by denying the motion to strike out the first separate and distinct defense as set up in the amended answer, and as so modified affirmed, without costs.  