199 F.2d 438 | 3rd Cir. | 1952
Lead Opinion
The plaintiff, Berkshire Land Company, a Pennsylvania corporation, by its complaint filed May 13, 1949, against the defendant, Federal Security Company, a Delaware corporation, seeks to have satisfied of record a mortgage which became due September 19, 1916 and an adjudication that the debt for which the mortgage was security has been. paid. The amount of the mortgage was $200,000 and jurisdiction is based upon diversity of citizenship. The complaint was dismissed with prejudice and Berkshire has áppealed.
It is not disputed that the mortgage became due on the date stated or that it still stands as a lien of record against certain undivided interests in coal rights in Greene County, Pennsylvania, now owned by Berkshire.
Here, Berkshire bases its case on two alternative positions: (1) the prima facie presumption of payment has not been rebutted, and (2) the debt has been paid. To this attack Federal interposes two defenses: (1) that the presumption of payment is not here applicable because the presumption may serve as a shield but not as a weapon of attack, and (2) that it, Federal, has carried the burden of proof required to rebut the presumption of payment. It should be noted that if Federal has proved the fact of nonpayment not only is the presumption rebutted but also Berkshire’s claim for relief based on payment must fall.
As to the first defense asserted by Federal, namely that the presumption of payment is not applicable because it cannot serve as a weapon of attack, it must be conceded, on analogy to the statute of limitations, that the argument carries some weight and there are Pennsylvania cases which support Federal’s position. See Louchbaum’s Estate, 7 Pa.Dist.R. 100 (Orphans’ Court, Franklin County, 1897) and Sprowles’ Estate, 15 Pa.Dist. & Co. 440 (Orphans’ Court, Philadelphia County, 1931).
We are not 'bound by the rule of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, or that of Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, to apply the doctrine laid down in the two Orphans’ Court cases referred to in the preceding paragraph under the circumstances of the case at bar. See Sunbeam Corp. v. Civil Service Employees’ Coop. Ass'n, 3 Cir., 187 F.2d 768, 771-772. The Orphans’ Courts of the several Pennsylvania Counties are not common law courts but tribunals of limited jurisdiction. See In re Brereton’s Estate, 355 Pa. 45, 55, 48 A.2d 868, 873. Orphans’ Courts are of a grade and rank like unto the Courts of Common Pleas of Pennsylvania. In re Hohein’s Estate, 265 Pa. 14, 18, 108 A. 173, 174. A single Orphans’ Court decision can be disregarded by another Orphans’ Court of the Commonwealth of Pennsylvania and we conclude, therefore, that the two decisions
Is the second defense asserted by Federal valid? When Berkshire proved the existence of a mortgage unsatisfied of record and payment due in 1916 it made out a prima facie case. See Reed v. Reed, 46 Pa. 239, 242-243, and Gregory v. Commonwealth, supra, 121 Pa. at page 622, 15 A. at pages 453-454. The burden of proof thereby was shifted to Federal and the question then became whether or not Federal carried the burden of proof required to rebut the presumption of payment. To answer this question requires an examination into the nature of the proof necessary under Pennsylvania law to overcome the presumption of payment, and an analysis of the testimony offered by the parties.
The most recent full exposition of the law applicable to the case at 'bar appears in the opinion of Mr. Justice Horace Stern in In re Grenet’s Estate, 332 Pa. 111, 113— 114, 2 A.2d 707, 707-708. Mr. Justice Stem •stated: “The presumption of payment •arising from lapse of time does not work •an extinguishment of the debt, nor, unlike the bar of the statute of limitations, does it require a new promise or its equivalent to revive it. It is a presumption merely of fact, and amounts to nothing more than a •rule of evidence which reverses the ordinary burden of proof and makes it incumbent upon the creditor to prove, by preponderance of the evidence, that the debt was not actually paid. This burden may be met by direct testimony as to non-payment, or by proof of circumstances tending to negative the likelihood of the claim having been satisfied and explaining the delay of the creditor in attempting to enforce it, — for example, that there existed a relationship between the parties which would account for the failure of the creditor to insist upon collection, that the debtor’s financial condition was such as would have prevented his paying the debt, that the bond, note or other instrument upon which the claim rested remained at all times in the creditor’s possession, that the creditor had died and, no administrator being appointed, there was no one to whom payment legally could have been made. These and similar circumstances, while not, singly or collectively, conclusive, are admissible in evidence for the purpose of rebutting the presumption of payment.” This view was reiterated with approval by the same court only last year in In re Snyder’s Estate, 368 Pa. 393, 396-397, 84 A.2d 318, 320-321.
It will be noted that alternative methods of rebutting the presumption of payment are specified: “direct testimony as to non-payment,” or “proof of circumstances tending to negative the likelihood of the claim having been satisfied” accompanied by some explanation of the creditor’s failure to enforce his claim. These alternatives have long been part of the Pennsylvania law dealing with this presumption, Reed v. Reed, supra, 46 Pa. at page 242, and we understand them to mean that an explanation of the creditor’s delay in enforcing his claim is required only when no direct evidence of nonpayment is available.
We must therefore review the testimony to determine whether the defendant here has sustained, under one or both of the above alternatives, the burden of proving nonpayment. Since the judgment of the court below, the trier of facts, was for Federal, every permissible inference from the testimony must be taken in Federal’s favor. Thompson, the mortgagor and first owner of the coal,
Early in 1915 the First National Bank failed and in 1917 Thompson was adjudicated a bankrupt. Throughout this period Thompson was in great financial difficulties and various holders of notes given by him demanded partial assignments of the mortgage with which we are concerned as well as Stone’s endorsements of Thompson’s notes. Some of Thompson’s creditors demanded new notes which were supplied by W. A. Stone & Co. That partnership paid off such notes as had been endorsed by Stone as they matured and also the new notes given by W. A. Stone & Co. as they also fell due. Stone in turn received reassignments of those “portions”
The record contains no evidence as to whether Thompson was discharged of his debts or whether any disposition was made of the mortgage obligation in the bankruptcy proceedings.
Seifert, a member of the Bar of Allegheny County, who was a stockholder and treasurer
The record contains evidence the mortgage was not paid prior to the meeting in 1922. There was proof Thompson was not in a position to pay. In addition the relationship of father and son existing between Thompson the mortgagor and A. A. Thompson aids in explaining why payment was not pressed by Federal after acquisition. The existence of the assignments is, we think conclusive of the question of payment. One does not assign a paid bond or mortgage. If the assignments from Stone to Federal occurred after the payment alleged to have been made by Bortz, fraud or mistake must be presumed unless we attribute to Federal a desire to buy a valueless paper for $51,500. If the assignments were executed before the payment to Stone, the payment would have been improper and ineffective for all of the parties were aware that Federal as assignee had succeeded to the right to payment. It is very reasonable to conclude, as did the court below, that the assignments and payment to Stone were substantially simultaneous and constituted a purchase by Federal of Stone’s rights in the mortgage. Seifert identified the recorded assignments of the bond and mortgage from Stone to Federal as being those he had prepared and he identified also the unrecorded assignments from Thompson, the mortgagor, which were witnessed by A. A. Thompson.
To test the evidence in the instant case against the principles expressed in the Grenet decision it is convenient to divide the period covered into three sections: (1) from maturity of the mortgage until its acquisition by Federal in 1922; (2) from 1922 until 1937 when Seifert ceased to be an officer of Federal; and (3) from 1937 until the institution of this suit. We have no difficulty in holding that defendant has proved nonpayment in the period between 1922 and 1937. Seifert’s testimony, which the court below regarded as credible and comprehensive, is direct evidence of this, and in the view we take of the Grenet decision defendant is thus not required to furnish an explanation of its failure to enforce the mortgage during this period. There is also no difficulty in establishing nonpayment following 1937. The parties have stipulated that no payment was made. The disputed evidentiary problem is whether defendant has sufficiently accounted for the period prior to the acquisition of the mortgage by Federal in 1922.
Plaintiff uges that the record contains no direct evidence that the mortgage was not paid prior to the meeting between Bortz, Thompson and Stone in 1922. Even accepting this view, we hold that there was ample indirect evidence of nonpayment, and of the mortgage holder’s reasons for not enforcing his claim, to establish by a pre
We conclude, therefore, that the second defense asserted by Federal is valid, that it has carried the burden of proof to rebut the presumption of payment, and that it has in fact proved nonpayment within the purview of Grenet’s Estate.
Accordingly, the judgment of the court below will be affirmed.
. The court below filed findings of fact and conclusions of law, 98 F.Supp. 4, but did not hand down an opinion.
. No bond was offered in evidence.
. The Act of June 10, 1881, P.L. 97, § 1, 21 P.S.Pa. § 688, has no bearing in the instant ease for its operation has been suspended. 21 P.S.Pa. § 688. See Rule 1455, Pa.R.O.P. 12 P.S.Appendix. In any event the right to satisfaction depends upon the general law. See Richards v. Walp, 221 Pa. 412, 414, 70 A. 815, 816.
. Appellant contends that Russo v. Roberts, 331 Pa. 173, 200 A. 76, requires an explanation of the creditor’s delay even where there is direct evidence of nonpayment. This case was decided prior to the Grenet case, and we do not think that it supports appellant’s contention. Although in Russo the presumption of payment was held not to have been overcome despite the fact that the creditor’s evidence of nonpayment was not contradicted, this evidence was not convincing to the jury and did not adequately cover all the circumstances under which payment might reasonably have been made.
. The chain of title is not disputed.
. See testimony of Bortz, Joint Appendix, p. 21a.
. The absence of such evidence is also unexplained, but we do not remand for testimony upon this point for in the view we take sueb evidence, if available, becomes immaterial.
. Bortz was asked: “Well, then, is this: correct, Mr. Bortz, that all you know of' your own knowledge about this transaction with Mr. Thompson was that W.. A. Stone and Company got fifty thousand! dollars?” Bortz answered, “Yes.”
. The deposit book is in evidence as plaintiff’s exhibit No. 1, and, coneededly, it does not contain all of the deposits made by W. A. Stone & Co.
. Seifert stated he might also have been president of Federal.
. The cheek was not produced in evidence and testimony as to its contents was objected to as not being the best available. No explanation for nonproduction was given. But the assignments were the best evidence of purchase, and these were produced. The check was collateral thereto, only a means of purchase. See McCullough v. Holland Furnace Co., 293 Pa. 45, 51, 141 A. 631, 633; Delvitto v. Schiavo, 164 Pa.Super. 338, 343-344, 64 A.2d 496, 499; Pecoraro v. Pecoraro, 105 Pa.Super. 543, 161 A. 591.
. These unrecorded assignments are in evidence as defendant’s exhibits D and E.
. See Joint Appendix, pp. 256a-257a, as follows:
“14. On May 26, 1922, Thompson handed a cheek in the sum of approximately $50,000.00 to Stone, in the presence of Bortz. This check was not introduced in evidence. The available documentary evidence and depositions, however, lead me to the determination that this check was the identical check for $51,500.00, which was signed by one*444 William A. Seifert, as treasurer of defendant, was drawn on a Cleveland or Mc-Keesport bank, and was made payable to the order of Stone.”
“15. Stone and Bortz treated the check as discharging all debts which Thompson owed the W. A. Stone and Co. firm and which had been secured by the 1914 mortgage. Stone simultaneously handed Thompson the mortgage.”
“18. The available documentary evidence and depositions convince me that defendant prepared the two Stone and the two Thompson assignments at about the same time, and that execution of the four instruments was part of a plan whereby defendant succeeded to all unsatisfied mortgagee rights.”
. We have encountered some small difficulty in this case due to the fact that both Bortz’s and Seifert’s testimony was taken by deposition and neither witness appeared before the trial court. If there had been substantial conflict in their tesmony we would have had difficulty in perceiving how the trial court could have determined the truth as expressed in one deposition rather than in the other. Cf. Toebelman v. Missouri-Kansas Pipe Line Co., 3 Cir., 130 F.2d 1016, 1022; Frederick Hart & Co., Inc., v. Recordgraph Corp., 3 Cir., 169 F.2d 580, 581, and Sarnoff v. Ciaglia, 3 Cir., 165 F.2d 167, 168. But little efficacy remained in Bortz’s testimony after his cross-examination while that of Seifert is corroborated by the potent evidence of the assignments which are physically in the record. Bortz’s evidence in unconvincing.
In making this statement we do not intend to reflect on his veracity. We merely point out that a long time has elapsed between the meeting in 1922 and taking of the evidence by deposition in 1950. Anyone accustomed to handling witnesses and testimony is aware of the difficulties in recollecting events which transpired some twenty-seven years before.
. See again finding of fact No. 18, quoted in Note 13, supra.
Dissenting Opinion
(dissenting)-
It is well settled under the Pennsylvania decisions that “whether the facts and evidence relied upon to rebut the presumption of payment are true is a question of fact for the jury; but whether, if true, they are sufficient to rebut the presumption, is a question of law for the court.” Corn v. Wilson, 1950, 365 Pa. 355, 358-359, 75 A.2d 530, 532. I do not believe that the record and the evidence sustain the conclusion of law of the District Court that the defendant had successfully rebutted the presumption of payment.
Unfortunately, the District Court did not write an opinion but merely stated its findings of fact and conclusions of law. They contain no mention of what I deem to be a critical fact — that the defendant corporation dissolved on October 25, 1948,
The majority in its opinion gave no consideration at all to this vitally important factor of dissolution without any attempt at collection of the mortgage. It should have done so, particularly under the requirement of the applicable Pennsylvania decisions that the defendant must “sufficiently” account for its delay in securing payment, particularly where, as here, it had held the mortgage for 26 years.
In my opinion, the defendant has failed to meet its burden, under the Pennsylvania decisions, to rebut the presumption of payment.
For the reasons stated I would reverse.
. The Complaint in Paragraph 1 alleges the fact of dissolution on October 25, 1948, and the defendant’s Answer to Paragraph 1 admits the allegation.
. “There is a long established presumption that a mortgage * * * unclaimed and unrecognized for 20 years, has been paid. * * * This presumption of payment after a lapse of 20 years is a strong one and is favored in law as tending to the repose of society, the protection of the debtor, and the discouragement of stale claims. * * * The presumption of payment may be rebutted only by clear, satisfactory and convincing evidence beyond that furnished by the specialty itself, that the debt has not been paid, or