Lyle v. Ducomb

5 Binn. 585 | Pa. | 1813

Tilghman C. J.

The plaintiff had a mortgage on a lot of ground, the property of the defendant, oar which was erected a wooden house. The mortgage was regularly acknowledged and recorded, after which the defendant pulled down the wooden building, and erected a brick one. The different mechanics wjho furnished the materials, and did the work, of the brick building, claim a lien on it in preference to the plaintiff’s mortgage, by virtue of the act of the 11th of March 1806. By that act it is enacted, that “ all buildings “ thereafter erected within the city and county of Philadeluphia, shall be subject to the payment of the debts contract- “ ed for or by reason of any work done or materials found “ and provided by any brickmaker, bricklayer &c. &c. before “ any other lien which originated subsequent to the commence-ument of the said building.” At the first reading of this clause, it seems a very plain provision, that the lien of the workmen &c. shall be preferred to mortgages, judgments &c. given by or obtained against the proprietor of the house, after the commencement of the building. But by an argument which appears to me too refined, it is contended that mortgages &c. prior to the commencement of the building, may be said according to the intent of this act, to originate subsequent to the commencement of the building, so far as respects their lien on the building; and the argument is simply this, that it is impossible to have a lien on a thing not in existence, and therefore a mortgage cannot be a lien on a building before it is erected. In answer to this, it is to be considered that a mortgage is a legal conveyance of the land itself, and of course the mortgagee has the legal title as long as the mortgage is in force, to the land and every building erected on the land. It may be asked, and I see not how the question can be answered, at what moment the mortgage began to be a lien on the building, in the sense contended for by the defen(jant. Was it when the building commenced, or during the time that it was carrying on, or not until it was finished? The idea of separating the building from the ground on which it stands, is altogether novel, and cannot be carried into practice without great difficulty. It is -confessed that the land itself remains to the mortgagee, and of course that he may proceed to sell it under the mortgage. But the land cannot be sold without the house. In order to remove this difficulty, it is said that both land and house shall be sold, and the value of each ascertained by arbitrators appointed by the Court. I know not whence the Court derive this power. There is not a word of it in the act of assembly. Thus the obvious meaning of the expressions of the law are rejected, in order to introduce difficulties, which cannot be removed without the assumption of powers, which, to say the least of them, are very doubtful. Besides, this construction may do manifest injustice to the mortgagee, as it does in the case before us. At the time of the mortgage there was a wooden house; this has been pulled down, and the mortgagee has lost the benefit of it. It would be the same if the first building had been of brick instead of wood. In the rapid improvement of this city, we are every day pulling down old brick-buildings, and putting up new ones in their place. In such cases then the mortgagee who had the security of a good house and land, is to rest contented with the land alone; and he is to trust to the decision of arbitrators to fix the value even of that; and all these difficulties and inconveniences are to be resorted to, in order to protect persons, who certainly have been unfortunate, but who have no right to complain, because they undertook the building with full notice of the mortgage. It is far better to follow the plain meaning of the words used in the act, which involves us in no difficulties, and protects all persons who make use of due diligence in searching for liens which existed before the commencement of the building. I will add that the legislature, by mentioning subsequent liens, must have supposed that there might have been prior liens which were to keep their preference. But if a mortgage bearing date before the commencement of the building was not prior, it is not easily to be conceived what could be prior. In fact, the defendant’s argument proves too much, for, if it proves any thing, it must prove, that it was impossible there should be any lien prior to the commencement of the building. I have said more on this subject than I should have thought necessary, had it not been mentioned by the defendant’s counsel, that the construction for which they contend had been sanctioned by the decision of the Courts of Common Pleas, and District Court of this city. We have no report of the cases; perhaps they may have been attended with particular circumstances.

' But there is another question in this cause. Supposing the plaintiff’s mortgage to have the preference, shall it be preferred to the amount of his whole demand? The mortgage appears by an indorsement on it, to have been intended as a security to the plaintiff, for notes drawn or to be drawn by the plaintiff and by Lyle and Newman, in favour of the defendant, and for his use and accommodation, to the amount of 9000 dollars. These notes were to be renewed, from time to time by the plaintiff for twelve months, when they were to be taken up by the defendant with his own funds. By another indorsement on the mortgage, subsequent to the commencement of the brick building, it was agreed between plaintiff and defendant, at the request of the defendant and for his convenience, that instead of Lyle or Lyle and Nexvman being the drawers of all the notes, some of them might be drawn by the defendant and indorsed by the plaintiff or by Lyle and Nexvman, but the whole amount was still limited to 9000 dollars. It is said that this was a departure from the original agreement, and therefore the mortgage lost its force as to all the indorsed notes. I cannot think so. The parties to the mortgage had a right to alter the agreement as they pleased, and so far as they were concerned, there cannot be a particle of doubt. With respect to third persons, the mortgage could not be altered to their prejudice; but I do not consider this as an alteration to their prejudice. It is perfectly immaterial to them, whether notes to the amount of 9000 dollars were drawn or indorsed by James Lyle and Lyle and Newman. The object was to raise 9000 dollars for the defendant on their credit, and this sum would have been raised by drawing, if it had not been done by indorsing. The drawing or indorsing was but the form; the raising of 9000 dollars, and an indemnity to that amount by mortgage, the substance. I am of opinion that the parties had a right to vary this form, without impairing the force of the mortgage, either as it regarded themselves or others. It was opened by the defendant’s counsel, though not much insisted on, that a mortgage intended as an indemnity against' acts to be performed at a subsequent time, ought not to have any effect against third persons. This point was very properly abandoned. There cannot be a more fair, bona fide, and valuable consideration, than the drawing or indorsing of notes at a future period, for the benefit and at the request of the mortgagor; and nothing is more reasonable than the providing a sufficient indemnity beforehand. On all the points which have been made in this case, my opinion is in favour of the plaintiff.

Yeates J.

I have not a particle of doubt as to the mortgage executed by the defendant to the plaintiff on the 21st of February 1811, duly acknowledged and entered upon record on the 28th of the same month, that it operated as an incumbrance on the lot of ground, and frame house thereon from the time of its execution, according to the true intent and meaning of the parties at that period, although no money was actually paid until after the month of November following. It took effect by way of indemnity, and notes were furnished to the mortgagor, upon a reliance on its security. I have known several instances of mortgages given to indemnify sureties, and never heard their legal operation questioned before on this score.

The equity of redemption on the face of the mortgage, rests on the payment of 9000 dollars on demand to Lyle. But by an indorsement thereon signed by all the parties, and bearing equal date therewith, it is stated “ that the “ bond and mortgage recited therein had been given to se- “ cure Lyle and Newman and James Lyle against any in- “ convenience or damage he or they might sustain, by rea- “ son of divers promissory notes already drawn by the said “ Lyle and Newman, and of other notes about to be drawn “ by James Lyle in favour of Ducomb, to the amount of “ 9000 dollars, all of which notes , have been or are about to “ be drawn for the use and accommodation of, and lent to “ Ducomb, and which notes Lyle thereby promised,to renew “ from time to time as they might become due, and so to “ continue to renew the same for the space of twelve ca- “ lendar months from that time, besides the days of grace.” It was further stipulated, that Lyle should not at any time be called upon by Ducomb, to furnish cash to take up or pay all or any part of the said notes, but that the same should be paid and taken up by Ducomb.

By another indorsement on the mortgage likewise signed by all the parties, bearing date the 5th of September 1811, it is recited that “ whereas it appeared by the declaration of “ Ducomb, that in some cases it would be most convenient “ for him to have the indorsements of Lyle and Newman and “ of James Lyle on notes drawn by Ducomb, instead of notes “ to be drawn by them or either of them, as was mentioned “in the first agreement, and Lyle and Newman and James “ Lyle were willing so to accommodate Ducomb: It was “ agreed, that the bond within recited, and the within mort- “ gage, should be held not only to indemnify James Lyle “ and Lyle and Newman from such notes of which they “ might be drawers as before mentioned, but also in like “ manner to indemnify them against any inconvenience or damage they or either of them might sustain by reason of “ any indorsements lent or to be lent as abovementioned; “and that the said Lyle and Newman and James Lyle “might have the same advantages and benefits for the reco- “ very of any money they might be compelled to pay as in- “ dorsers, as by the first agreement they might be compelled “to pay as drawers of notes; and that generally the above “ agreement and every thing therein contained, should ex- “ tend to such indorsements as they might give, in as full “ and ample manner as if they had been notes drawn by “ them or either of them.”

I have been minute in my extracts from these two agreements. I shall hereafter more particularly consider the light in which I view their influence upon the questions before the Court.

In opposition to the claim of the mortgagee to take out of Court the money raised by the sheriff, it has been contended that the mortgage having been given subsequent to the 17th of March 1806, when a law was enacted conferring a lien on dwelling houses and other buildings thereafter to be erected within the city and county of Philadelphia, in favour 'of workmen and material men, must be considered as controlled thereby, as to its general legal operation; that the mortgagee relied for his indemnity on the vacant lot and frame house thereon, and that he ought not to receive the superadded value of the property bv the new brick building, inasmuch as he would thereby materially affect the interests of other persons, and violate the spirit of the law. It was admitted that the lien of the mortgage, if it operated as an incumbrance under all the circumstances of' the case, extended to the ground covered by the new erection; and therefore it had been mutually agreed, that if the Court should be of opinion, that the persons who claimed liens, were intitled to a preference out of the proceeds of the building, persons were to be appointed to ascertain what proportion of the proceeds of sale should be considered as the value of the building, and what proportion thereof should be considered as the value of the lot. Decisions of-the District Court, and of the Court of Common Pleas of this county, were referred to during the argument, from whénce it was said the principles insisted upon might fairly be inferred, but we were not furnished either with the particulars of the cases, or the grounds of decision. I am compelled to acknowledge that the observations of the counsel made a considerable impression on my mind during the argument, but more mature reflection since has effaced them.

We are now called upon to construe this law upon general principles, and to declare what effect it ought to have. It makes no distinction between the operation of liens prior or posterior to the passing of the act; and yet it is certain, that if the doctrine contended for is applied to incumbrances done or suffered previous to the t7th aiMarch 1806, it would impair the obligation of a preceding contract. Erections made on lands which have been mortgaged, operate as a further security to the mortgagee, for cujus est solum, ejus est usque ad caelum. It cannot be asserted with any shadow of reason, that, a mortgagee shall be placed at the mercy of a mortgagor; that ;he latter may prostrate what erections are on the ground, and build up others at his sole will and pleasure, which might diminish the security of the former upon a sheriff’s sale, if they are to be paid for out of the proceeds ©f the sheriff’s sale.' The mortgagor might thus cover the whole of a vacant city lot with expensive buildings, and if the mortgagee is eventually compelled to buy it in for his own security, he would be subjected to pay monies out of his own pocket according to the ideal value of those buildings in the estimation of others. Many inconveniences would flow from the principles which have been insisted upon. The law confers on us no power to appoint persons to ascertain the proportional value of the buildings as to the lot, against the will of the mortgagee. It is much better therefore, to adhere to the words of the act of the 17th of March 1806, which are susceptible of a plain and obvious meaning. “ All “ and every dwelling house or other building hereafter con- “ structed and erected within the city and county of Philadelilpkia, shall be subject to the payment of the debts contract- “ ed for or by reason of any work done or materials found “ and provided by any brickmaker &c., before any other lien, which originated subsequent to the commencement of the “ said house or other building.” The mortgage here preceded the building, and must prevail against the claims of the artisans and materialists according to its legal operation, and the true intent and meaning of the parties at the time of its execution, as I have mentioned before. The purposes of the mortgage must be first answered, before the other claimants can be let in. This leads me to inquire into the legitimate extent of the mortgage, as far as it affects those claimants, in which I am so unfortunate as to differ in opinion from my brothers. I will give the reasons of my dissent.

I regard the indenture of mortgage, and the indorsement on it bearing equal date therewith, as one act, in the same manner as if they had been incorporated in the same instrument. They show the intention of the parties accurately and precisely defined at the moment. The mortgage was expressly declared to be an indemnity against divers promissory notes drawn by Lyle and Nexvman, and of other notes about Jo be drawn by James Lyle in favour of Dücomb, to the amount of 9000 dollars. To the amount of the notes thus drawn and taken up by them, the mortgage takes effect from the date of the 21st of February 1811, but no further as between the litigant parties. Above six months after, viz. the 5th of September 1811, a new agreement was entered into, whereby it was declared, that the indemnity of the mortgage should extend to indorsed notes in order to meet the wishes of Ducomb, and to suit his convenience. If it is possible to doubt what was intended by the first agreement, these doubts would be removed by the inspection of the second indorsement; wherein it is declared that the mortgage should be held, not only to indemnify James Lyle and Lyle and Newman against such notes of which they might be drawers, but also against their indorsements of notes drawn by Ducomb himself. Previously thereto, the building of the house commenced, and the liens of the workmen and materialists attached under the law, subject however to the priority of the mortgage, according to its legal effect and the contract of the parties. If the terms were changed by the second contract, as I think clearly they were, for the reasons I have given, was it competent to the parties to make this alteration to the.injury of intervening creditors by a statutable lien? This then is the question.

It has been urged on the part of the mortgagee, that the spirit of the contract was an indemnity against notes lent or indorsed for the accommodation of Ducomb; and that third persons have no right to object that the notes were indorsed by James Lyle or Lyle and Newman, instead of being drawn, by them or either of them. The same substantial benefit was conferred on Ducomb in either mode.

True: as between the original parties, the whole transaction is perfectly right and fair. But how far it should affect third persons, now becomes the point of inquiry. That the mortgage was meant as an indemnity, there can be no question; but it must be limited and governed by the agreement of the parties. To warrant a recovery upon it, there must have-been a damnification within the precise terms of the contract. If those original terms have been enlarged to the injury of other lien creditors, those creditors have a right to make objections. I will exemplify my system of reasoning by putting a few instances. It would be of no moment to a mortgagor, whether the consideration money of the mortgage was grounded on the delivery to him of meal or of malt, or of his individual debts due to other persons for such articles advanced and paid by the mortgagee. But if a mortgage is given to indemnify a person against an advancement of money for debts due for meal, it will not be construed an indemnity to the mortgagee for monies paid by him for debts due for malt. So in the principal case, if James Lyle or Lyle and Newman had purchased in the notes of Ducomb, or had given him bonds instead of notes, I should hold the gage could not take effect as an indemnity in such cases to the injury of other lien creditors, so as to squeeze them out. The present is a struggle between two classes of creditors, whom I will suppose to be equally meritorious; their several legal rights should prevail.

Upon the whole matter I am of opinion, that the plaintiff is, intitled to a preference as to receiving the proceeds of sales to the amount of the notes drawn by himself or by Lyle and Newman, and taken up by them in pursuance of the mortgage, but no further.

Brackenridge J. concurred with the Chief Justice.

Judgment that the money be paid to the plaintiff.