
    Edward W. Rider, Respondent, v. Saverio Gallo and Caterina Gallo, His Wife, Appellants, Impleaded with Others, Defendants. (Action No. 1.)
    Second Department,
    November 15, 1912.
    Mortgage — foreclosure — defense of usury — evidence — certificate of estoppel — innocent purchaser protected.
    In a suit for the foreclosure of one of a series of seven mortgages, given to secure the payment of $1,250 each, the defendants set up as a defense that the mortgage was usurious in its inception, and, therefore, void. They alleged that the plaintiff, acting as the- agent of one R, entered into an agreement to loan the sum of $1,250 upon each of seven parcels of land on condition that the defendants would pay a bonus of twenty per cent upon such loans, and claimed that the transaction involved a provision that the mortgages should be made to one H., attorney and agent of defendant, who was to transfer the same to R, who has since conveyed the same to the plaintiff. It was conceded that the mortgages were made to H., and that the defendant executed" an estoppel certificate to induce R to accept an assignment or to purchase the mortgage, and for the benefit and protection of the present and of any and all subsequent holders of said mortgage. Evidence examined, and held, that the defendants, having failed to establish an existing agency . between R and the plaintiff, there is no' foundation for the defense- of usury.
    R, being an innocent purchaser of the mortgage, could rely upon the certificate of estoppel, notwithstanding the rate of discount, and the plaintiff, having procured a good title from R, is protected in the present suit by the certificate of estoppel.
    Appeal by the defendants, Saverio Gallo and another, 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 3d. day of April, 1912, upon the decision of the court, rendered ■after a trial at the Kings County Special Term, directing the foreclosure of a certain mortgage.
    
      
      J. Stewart Ross, for the appellants.
    
      William B. Hurd, Jr. [John M. Rider with him on the brief], for the respondent.
   Per Curiam:

The complaint sets forth an action for the foreclosure of a mortgage upon certain real property in the borough of Brooklyn. The mortgage was one' of a series of seven, given to secure the payment of $1,250 each, and was a second mortgage. The defendant sets up as a defense that the mortgage was usurious in its inception, and, therefore, void. The facts relied upon by the defendant, as set forth in his answer, are to the effect that the plaintiff in this action, acting as the agent of one Conrad F. Bay, entered into an agreement to loan the sum of $1,250 upon each of the seven parcels, on condition that the defendant would pay a bonus of twenty per cent upon such loans, and it is claimed that the transaction involved a provision that the mortgages should be made to one Effingham L. Holywell, the attorney and agent of the defendant, who was to transfer the same to the said Bay, who has since conveyed the same to the plaintiff. It is conceded that the mortgages in question were made to Holywell, and that the defendant G-allo made an estoppel certificate in which he recited that “the said bond and mortgage were given for-the valuable considerations expressed therein, and that there is no counterclaim, offset or defense, in law or in equity, existing against the same, or any part thereof,” and that “ deponent makes this affidavit to induce Conrad E. Bay to accept an assignment of or to purchase the said bohd and mortgage and pay the consideration therefor, knowing that said Conrad F. Bay relies upon the truth of each and every statement herein contained,” and further that “ This affidavit is made for the benefit and protection of the present and of any and all subsequent holders of the said bond and mortgage.” It is clear, therefore, unless the evidence establishes the fact of an existing agency between Bay and the plaintiff Eider, there is no substantial foundation to the defense, for if Bay was an innocent purchaser of this mortgage, no matter what the rate of discount, he could rely upon the certificate of estoppel, and the plaintiff would get a good title from him, and the estoppel would operate to protect him in the present action..

The plaintiff contends that he was asked by the defendant to find a purchaser of this and the other mortgages, and that he produced one Onderdonk who was willing to purchase them at a discount of twenty per cent, and that Bay, the nephew of Onderdonk, became the agent of' the latter in the transaction, purchasing the seven mortgages at a discount of twenty per cent from their face value. These mortgages were dated on the 26th day of March,- 1908, but were not recorded until the 1st day of May, 1908, and this fact is emphasized, apparently for the purpose of discrediting the good faith of the transaction, but the defendant pleads that on or about the said twenty-sixth day of March, 1908, the said alleged bond and mortgage referred to in the complaint herein, were made, executed and delivered to Effingham L. Holywell, the agent of this defendant,” though it was not until the twenty-seventh day of April following that the same was assigned to Eay, at which time the defendant made his estoppel certificate' When Ray took the assignment the mortgage was in existence; it was, according to the certificate of the defendant, a good and valid obligation, without existing defenses, and after a careful reading of the evidence we quite agree with the learned court at Special Term that no proof exists-of any relation -of agency existing between Ray and the plaintiff in this action. The fair weight of evidence is with the plaintiff’s contention- that he was the broker employed by the defendant to procure a purchaser for these mortgages, then in existence, and that he produced Onderdonk, who made his nephew Ray his agent in the transaction. There is no evidence that Onderdonk or Ray had anything to do with the alleged agreement at the inception of the mortgage, or that they had any knowledge of it at the time of paying over the money. What the plaintiff, acting as the defendant’s agent or broker, may have known of the making of the mortgage was not notice to Onderdonk or Ray; they found a mortgage, regular upon its face, bearing date a month prior to the purchase, with the defendant’s estoppel certificate made on the day of the transfer, and they had a perfect right to purchase this mortgage at any figure that they could agree upon with the owner of such mortgage. It is true of course that as between parties to the alleged usurious agreement the estoppel would be of no avail, but as between the defendant and Onderdonk and Ray the defendant is estopped to question the validity of the mortgage unless he is able to establish that Onderdonk or Ray were represented in the transaction by Rider, the plaintiff here. Rider was the broker employed by the defendant to negotiate the mortgage, and there is no presumption that he was at the same time the agent of Onderdonk or Ray. The burden of showing this relation, or at least of some guilty knowledge on the part of these men, is upon the defendant, and he has not sustained that burden. The evidence indicates that the defendant had given this mortgage to Holywell for the purpose of enabling the latter to sell the same at a discount for the benefit of the defendant, and the latter, having received the benefits of the transaction, is how trying .to avoid the obligation by alleging that the purchaser was in some manner involved in his own contrivance for raising money upon the second mortgage. The fact that Rider may have aided him in placing the second mortgage in ■ a position where it could be sold does not make the subsequent purchaser a party to an alleged usurious contract; the evidence must go further and show that Rider was representing Onderdonk. or Ray in contriving the usurious contract, and it fails in this regard.

The judgment appealed from should be affirmed, with costs.

Jenks, P. J., Thomas, Oarr, Woodward and Rich, JJ., concurred.

Judgment affirmed, with costs.  