190 A. 393 | Pa. Super. Ct. | 1936
Argued November 16, 1936. This amended bill in equity filed by the plaintiff building and loan association prayed that the satisfaction of a mortgage, alleged to have been mistakenly entered upon the records, be expunged.
The bill contained, inter alia, the following averments: In October, 1923, the defendants borrowed from the plaintiff association the sum of $3,000 and gave as security the mortgage involved, and also assigned 15 shares of stock of the association which were taken out at the time the loan was made. On the 29th of March, 1934, the attorney-in-fact for plaintiff inadvertently and mistakenly entered satisfaction of the mortgage on the record before the stock was cancelled or payment made to retire it. The amount due on the mortgage was $1,365, with interest from April 19, 1935, at 6 per cent, and fines at 2 per cent a month. The board of directors did not authorize or direct this satisfaction; it was done on information given to the attorney-in-fact by the secretary of the association "or some other officer thereof."
Defendants filed the following preliminary objections to the bill: (1) The bill fails to state that the *22 alleged mistake was mutual or induced by fraud or any conduct on the part of the defendants. (2) The averment that the stock had not been matured or paid is sufficient, as payment is not a prerequisite to satisfaction. (3) The calculation of the amount due is not sufficiently specific and excessive and illegal fines were imposed. (4) The bill fails to name the officer who directed the satisfaction.
The court below sustained the objections principally for the reason that there was no proof that the mistake was mutual, and that equity will not relieve the plaintiff from the consequences of its own acts, especially where the true facts were within its knowledge. The plaintiff was given leave, however, to file a second amended bill, and, upon the filing thereof, the entire proceedings were to be transferred to the law side of the court to determine whether anything was due on the mortgage. The plaintiff refused to amend and appealed.
The barrier of lack of mutuality may not be raised to prevent the correction of this alleged error if the rights of third persons are not involved. The record is not necessarily conclusive upon the parties as there is nothing so sacrosanct about the satisfaction of a mortgage that stops the truth from being shown. All that is incumbent upon the part of this plaintiff to attain the relief it seeks is to prove that the defendants were not entitled to have the mortgage satisfied. The rule is well recognized that equity will afford relief where an encumbrance has been discharged through a mistake. It is stated in 2 Pomeroy's Equity Jurisprudence (3d Ed.), § 871, p. 1549: "Where an instrument has been surrendered or discharged or an encumbrance or charge has been satisfied through mistake, the jurisdiction may be exercised by granting such relief as will replace the party entitled in his original position, either by setting aside the formal *23
discharge, or by compelling a re-execution of the instrument." The rule is set forth in 41 C.J. § 993, p. 822, as follows: "On the same principle, a release or satisfaction entered by accident or inadvertence, as where it is made to apply to the wrong mortgage, or by a mistake as to an essential fact, so that it is not in accordance with the real intention of the party, may be set aside and the mortgage reinstated, except as the rights of third persons may prevent." See, also, Madson v. Ballou et al.,
(S.D.)
True, in the case at bar, the exact nature of the mistake is not disclosed. We do not know whether it was due to an erroneous calculation or unwarranted assumption that the shares had matured or mere inadvertence in instructing the attorney-in-fact. The entry of a satisfaction under any of the above circumstances, however, may be explained and should not bar equitable relief to one otherwise entitled to it, provided, of course, the rights of third parties have not interfered.
In Callahan's Appeal,
If this mortgage has not been paid, it should not have been satisfied. An officer of a building and loan association has no right to direct a satisfaction of an unpaid mortgage and thus impose upon the other stockholders standing in the relation of partners with the favored stockholder.
The lower court relied upon, and quoted extensively from Felinv. Futcher,
Our conclusion is that the plaintiff association should not lose part of its security through a mistake prejudicial to the shareholders of the association when the rights of third persons are not affected. We find no merit in the defendants' objections that the plaintiff failed to aver definitely that the stock had not matured or the indebtedness had not been paid, nor do we think it absolutely essential that the plaintiff should have named the officer who directed the satisfaction. Furthermore, if there is not due to the association the amount alleged in its bill, as a result of the imposition of illegal fines, or if it has failed to give proper credits, those matters may be worked out on a sci. fa., as the only issue properly before us is whether the satisfaction should be stricken off.
Decree of the learned court below is reversed, and the bill is reinstated.