169 A. 891 | Pa. | 1933
Argued October 5, 1933. Landis, who dealt in real estate, sold on February 9, 1922, a partially completed house and lot to Robacker, receiving, as part consideration, a mortgage for $3,500. On August 21, 1922, Landis assigned the mortgage to *273 the Security Savings Trust Company of Erie, delivering the mortgage to it. Robacker, on March 9, 1923, reconveyed the land covered by the mortgage to Landis, who agreed to satisfy the mortgage; the deed, however, contained a clause by which Landis agreed to pay the mortgage debt of $3,500 as part of the consideration for the reconveyance. On March 15, 1924, Landis conveyed this land by general warranty deed to the Murphys. Before this conveyance was made Landis informed the Murphys that the property was clear and free of liens and furnished an abstract of title to show this. Murphys had to borrow to make the initial payment. Landis, before the conveyance, informed the attorney who examined the title that he would take the mortgage off, that is, satisfy it. The money was advanced to Murphys on their mortgage. The Murphys paid to Landis the total purchase price of $5,400. The trust company held the assignment of the mortgage from August, 1922, to February, 1929, and then recorded it. A letter written to Murphy, notifying him of that fact, was the first notice that Murphy or Robacker had that the mortgage had been assigned and was not paid.
A scire facias was issued on the mortgage against Robacker and Murphy, and as this proceeding was against the land owned by the Murphys, they were the only persons directly interested in the result. The court below, after a trial before a jury, awarded judgment in their favor, and from that judgment the trust company appeals.
The first and primary question to be considered is the right of an assignee of a mortgage, who has failed to record his assignment, to foreclose the mortgage against land in possession of an innocent purchaser who has purchased from a mortgagee without notice of the assignment. A further question is that of estoppel as it relates to the assignee of the mortgage.
When the bank became the assignee of the mortgage, it became a purchaser for valuable consideration. Unless *274
the assignee, directly or by conduct, authorized the assignor-mortgagee to use the mortgage as his own, it was not competent for the mortgagee to enter satisfaction of the mortgage on the record to its destruction or do acts equivalent thereto. To have attempted to do so would necessarily have been a fraud on the assignee: Roberts v. Halstead,
It was stated in Kinch v. Fluke,
Payments to a mortgagee without notice of the assignment are valid: O'Maley v. Pugliese,
While it is incumbent on the assignee to give the mortgagor notice of the assignment of the mortgage in order to complete the contract between assignor and assignee, the question as to how far that rule applies as to innocent *275
subsequent purchasers or succeeding title holders of the property who have become liable for the mortgage debt, has not been decided by this court. Nor has the question been decided as to the liability of such purchasers to pay the debt when they have bought from a mortgagee who is also the owner of the fee, without notice of the assignment of the mortgage. Had there been no assignment of the mortgage, there is no question but what there would have been a merger in fact, for where one who holds a mortgage, either as mortgagee or assignee, becomes the purchaser of the land covered by the mortgage, the latter is merged in the title. The mortgage is extinguished by law: Brown v. Simpson, 2 Watts 233; Koons v. Hartman, 7 Watts 20; Henderson, Hull Co. v. Stryker,
It has been stated, however, that merger is a question of intention, and where the intention is to keep the mortgage alive there will be no merger: Moats v. Thompson,
There is a fundamental, legal principle which works its way into situations of this kind. The assignment in possession of the assignee, while evidencing a valid interest between the parties directly affected, was, as to Murphy, an innocent purchaser, a secret lien or interest. As stated in Brown v. Simpson, supra, at page 245: "Secret liens or trusts are not to be encouraged upon any species of property whatever; but in no case can such a thing prevail as to real estate against an innocent purchaser of it for a full and valuable consideration without notice, unless our recording acts are to be overturned and set aside." This statement is reiterated in Frank v. Guarantee Trust Co., supra, at page 52, where the court quotes from Logan v. Eva,
A similarly analagous case is Frank v. Guarantee Trust Co., supra.* While there may be some distinguishing *278 features in these cases, the controlling principles should govern the instant case.
We return to the circumstances on appellants' part which are fatal to its present contention. Landis perpetrated a fraud on both appellant and appellee, but who made it possible for such fraud to be perpetrated? Which of the parties by a very simple act could have or should have prevented it by placing the assignment on record? Appellant bought the mortgage in good faith and appellee *279 did likewise as to the real estate. Did appellant unwittingly do anything to facilitate the perpetration of this fraud by Landis? As stated above, Landis had been dealing in real estate, borrowing money and pledging mortgages by assignment; evidently he conducted some considerable business. He took to the bank assignments of mortgages and, according to the testimony of the bank, he was permitted to treat these mortgages very much as he pleased; he was allowed to "deal with the mortgages largely according to his convenience." No doubt because of this authorization, the bank did not follow the usual practice of recording assignments. Landis did deal with the mortgages as suited his convenience. It suited him to deal with the mortgage by making the representation of payment to Murphy. The bank thus unwittingly permitted Landis to overreach his vendee. Murphy relied on his representation. When Landis represented to Murphy that these debts were paid, he was dealing with the mortgage. He was procuring a benefit. At that time he may have expected to make good, but, if he did not, the bank should not be heard to complain against an innocent purchaser who has been misled by its act.
We have examined with great care the several cases cited by appellant. The two cases, Purdy v. Huntingdon,
The facts in the case of Leonard v. Leonia Heights Land Co.,
For the reasons we have stated, we are brought to the conclusion that the decision of the court below was proper.
Judgment affirmed.
"The fact that the sheriff sold the land subject to the ground rents did not prevent their subsequent merger, nor was it notice to Frank, the mortgagee, that they were subsisting encumbrances when he took his mortgage. [This follows Brown v. Simpson, 2 Watts 233, and would have a decided effect here on the clause in the deed from Robacker to Landis where he assumed to pay the mortgage.]. . . . . . Prior to the time the fee was thus vested in him, there was no merger, but, when it was vested in him by the sheriff's sale, he became the owner of the rents, the two estates coalesced or united in him, and thereafter he could convey them to separate parties, or merge them and convey the fee, as he did, to one party. A judgment creditor would have a lien on the merged estates or fee, and a sale on execution would pass the whole title: Kreamer v. Fleming,