439 Pa. 304 | Pa. | 1970
Lead Opinion
Opinion by
Stephen and Elizabeth Orlando and a group of people interested in the financial health of the Little Miss Canning Company entered into an agreement with the Western Pennsylvania National Bank in 1966 in which WPNB agreed to lend the corporation substantial sums
A year later, in January of 1967, the Orlandos and several others borrowed $75,000 from the Peoples Union Bank and Trust Company, and each borrower gave Peoples a personal judgment note in that amount. Additionally, the Orlandos orally agreed with Peoples that a 1954 mortgage on their house, which Peoples then was holding and which had an unpaid balance of $2,-457, would serve as “side collateral” for their portion of the $75,000 loan. The 1954 mortgage made no provision for future advances and the $2,457 balance of the original loan was paid off a month later, on February 8, 1967.
On October 4, 1967, WPNB entered a $1,610,000 judgment against the Orlandos on their 1967 note. On November 20,1968, Peoples filed and took judgment on their $75,000 note. And on December 20, 1968, Peoples filed and took judgment on the 1954 mortgage bond.
Peoples quickly moved to sell the Orlandos’ home pursuant to an execution issued on the 1954 mortgage bond and WPNB instituted an action in equity seeking to enjoin Peoples’ sale of the house.
The trial court decided that a mortgage need not specifically state that it covers future advances in order to do so, that the parties to a mortgage which is silent as to future advances can orally agree that it does cover future advances, that such advances relate back to the date they were made and have priority over all subsequent liens, and that Peoples therefore enjoyed a prior lien on the Orlandos’ home. There is no authority on point.
The only question on this appeal is whether a mortgagee whose mortgage contains no provision with respect to future advances has a prior lien on the mort
We must emphasize that the 1954 mortgage did not, as it could have and as many mortgages do, provide for coverage of future advances. And our reluctance to obliterate the practical distinction between mortgages which specifically provide for the coverage of future advances and those that do not is one of the primary reasons for our decision. When the parties to a contract choose one of two alternative approaches they should not later be heard to say that the rejected approach should be read into their agreement. Accordingly, we refuse to insert into the mortgage agreement a provision which the author thereof failed to include.
A mortgage is a formal document of a specific character, and should be strictly construed. If a mortgage indicates on its face, as this one does, that it covers only a specific advance of funds, then it can secure only the unpaid portions of the original loan, no more. As the original debt is retired the lien of the mortgage is correspondingly reduced.
The trial court stated that WPNB failed to take the “reasonabe and prudent action” of calling Peoples and ascertaining the status of the mortgage, and that this failure was one of the reasons for its rejection of WPNB’s suit. The argument is an erroneous nonsequitur. First, Peoples did not have to tell WPNB anything even if they called, and second, the trial court assumes its conclusion by assuming that Peoples could have altered the status of the mortgage to include future advances without altering the recorded mortgage or filing a new document.
It seems more reasonable to assume that Peoples failed to act in a reasonable and prudent fashion when
We hold that a mortgage which does not specifically indicate that it covers future advances gives the mortgagee no lien on the mortgaged property other than for the unpaid portion of the original advance, together with any incidental charges properly provided for in the mortgage.
Decree reversed and case remanded for further consistent proceedings.
Concurrence Opinion
Concurring Opinion by
I join in the opinion of the Court, but deem it desirable to add this further statement of the reasons I think that reversal of the decision of the Court of Common Pleas is proper. While it is apparently true, surprisingly, that there is no authority directly in point on the facts, candor compels acknowledgment that the indications of the prior case law of our Court and the Superior Court point to the priority of the Peoples’ lien and the correctness of the lower court’s position in upholding it. Without here engaging in a thorough survey, we note that over fifty years ago this Court stated that “it is now established in Pennsylvania that, when a contract for advances or the assumption of future obligations accompanies a mortgage, it is not essential to its validity that the engagement governing the advance be placed upon record, or even expressly referred to in the mortgage. . . .”, and that “the lien of payments made under such an agreement relates back
The present holding of the court is, I believe, essential to give effect to the purpose of the recording statutes, which have been an integral part of the real estate law in Pennsylvania since colonial times. Act of May 28, 1715, 1 Sm. L. 94, Sec. 8, 21 P.S. 621.
The view here expressed is not new. As long ago as Irwin v. Tabb, 17 S. & R. 419, 423 (1828), Chief Justice Gibson said, by way of dictum, “It must, perhaps, be conceded that a mortgage to secure future advances, which does not contain notice of the agreement is void against creditors generally, because the land is apparently covered for more than it actually owes, . . .” In Batten v. Jurist, supra, Chief Justice Maxey observed (306 Pa. at p. 74) : “There is much logic in the argument that the judicial recognition accorded mortgages for unlimited future advances offends the spirit of our modern Recording Acts.” Justice Maxey felt that the matter was one for legislative rather than judicial action. It is not, however, too late or too onerous to require that in order to create an effective lien for future advances there must be some ap
See, also, Act of April 27, 1927, P. L. 440, §1, 21 P.S. 622, as amended; Act of June 2, 1959, P. L. 452, 21 P.S. 629, as amended; Act of June 28, 1951, P. L. 927, 68 P.S. 601, as amended.