Sellers v. Benner , 94 Pa. 207 ( 1880 )

Mr. Justice Sterrbtt

delivered the opinion of the court,

The Act of June 11th 1879, under which this issue was directed, provides in substance that if' the holder of a mortgage fails from any cause to enter satisfaction upon the record of the same for six months after the debt secured thereby has been paid, the mortgagor, his heirs or legal representives, or the terre-tenant of the mortgaged premises, may present a petition to the court, setting forth the facts, and obtain an order for notice to the parties interested to appear and answer the petition ; and if due proof be made that the debt has been paid, the court shall direct the recorder to enter satisfaction; “ but if either of the parties shall desire any matter of fact that is affirmed by the one and denied by the other, to be tried by a jury, an-issue shall be framed, and the same shall be tried accordingly, and if the jury shall find that the full amount for which the said mortgage was given has been paid, then satisfaction shall be entered on the record as aforesaid:” Pamph. L. 141.

The petition was presented by the plaintiff, alleging, among other things, that the premises were duly conveyed to him September 29th 1877, at which time the mortgages were fully paid. The defendants, in their answers, denied that they were paid; Benner, the mortgagee, alleging that the plaintiff had purchased subject to the mortgages, and assumed the payment of the debt secured thereby, and that the mortgages were subsequently assigned, for value and in good faith, to Mrs. Bodder; she in her answer claims that they were assigned to her in June 1879, without notice of payment or of any arrangement between the plaintiff and the mortgagee, and that she has since been informed by the latter that the plaintiff sold or exchanged his livery stock for a note of $500, and a conveyance of the premises subject to the mortgages. The court thereupon ordered an issue between the plaintiff and defendants, to determine whether or not the mortgages had been paid, and directed that the petition and answers should stand as pleadings.

On the trial of the issue, plaintiff introduced testimony which it is claimed was sufficient to establish all the material allegations in his petition; but the court thought otherwise, and directed a verdict in favor of defendants, thus sustaining the validity of the mortgages in the hands of Mrs. Bodder, the assignee. This is assigned as error, and the only question is, whether the testimony should have been submitted to the jury.

In the absence of any evidence on the part of the defendants, the plaintiff was entitled to the full benefit of his testimony, and any inferences of fact which the jury would have been justified in drawing therefrom. It cannot be doubted that they could have justly found that on or about September 29th 1877, the plaintiff sold and transferred to James F. Benner his livery stock consisting of stock on hand, horses, carriages, &c., valued at $3500, in consideration of which he was to receive an endorsed note for $500, and a conveyance of the premises described in the mortgages at a valuation of $3000, clear of encumbrances. This, of course, involved the satisfaction of the mortgages held by Benner against his father, and • the plaintiff testified positively that they were to be satisfied on the record. At first it was proposed to procure a conveyance from the father to the son, and then from the latter to the plaintiff, but upon the suggestion of the scrivener that it would avoid unnecessary expense, the conveyance was made directly from the father to the plaintiff. The deed shows the date of the transaction, expresses the consideration named, and contains a special warranty against the grantor, his heirs and all persons lawfully claiming under him. This covenant as between the vendor and vendee would be available to the latter in case of eviction under the mortgages. The words, grant, bargain and sell also imported a covenant against encumbrances : Cathcart v. Bowman, 5 Barr 317; Shaffer v. Greer, 6 Norris 370. So that it was to the interest of Lewis Benner that the mortgages should be satisfied in the transaction, otherwise he might be liable on his warranty as well as implied covenant. There is no evidence that the conveyance was under and subject to the mortgages; on the contrary, the testimony is all the other way, and the jury would have been fully justified in finding as a fact that the conveyance was intended to operate and did operate as a payment to the extent of $3000 on account of the livery stock, and at the same time as a payment in full of the mortgage debt, or what amounts to the same thing, that the plaintiff, by transfer of the livery stock to the mortgagee, discharged the mortgage debt, and to that extent was reimbursed by the conveyance from the mortgagor. Viewing it in either light, it was a payment and extinguishment of the mortgage debt, and the plaintiff had a complete defence against the mortgages in the hands of the mortgagee. Why has he not an equally good defence against the assignee who subsequently accepted the assignment without making any inquiry ? The plaintiff who derived title from the obligor had an equal right with the latter to interpose the defence of payment, unless he did or omitted to do something that might be set up as an estoppel as to him. It is said that he permitted the bonds and mortgages to remain in the hands of the mortgagee, and thus enabled him to impose on Mrs. Bodder. This is all that can be truthfully urged against an otherwise valid and meritorious defence; and there might be some force in it if she had inquired of the obligor or his personal representatives and endeavored to ascertain whether the debts were unpaid, or there was any defence to the mortgages. That this was a duty which the law imposed on her cannot be doubted: Eldred v. Hazlett, 9 Casey 307; Ashton’s Appeal, 23 P. F. Smith 153. It is not a sufficient answer to say that the mortgagor, having parted with his title, had no equities which he or his personal representatives were interested in asserting. We have already seen that recourse might be had against him or his estate on the warranty, and, moreover, the land might not be worth the mortgage debts, and in that event there would be a personal liability on the bonds for the deficiency. These equities were of sufficient importance to-render the usual inquiry necessary, and if it had been made before the assignments were accepted, it would doubtless have led to a discovery of the fact that the mortgages were paid and should have been satisfied at least it is fair to presume that such would have been the case.

The learned judge in his charge conceded that Mrs. Rodder having failed to make inquiry was bound by all the equities subsisting between the mortgagor and mortgagee at the time the mortgages were assigned, but he instructed the jury that as there was “no evidence of a prior payment by Lewis Benner to James E. Benner, the rule requiring her to make inquiry of the former does not apply to the vendee of the mortgagor of his equity of redemption.” In this we think there was error. There was testimony from which the jury might have fairly found a payment. No other consideration than the payment of the mortgage debts was shown for the conveyance to the plaintiff. The testimony tended to prove that the mortgagee procured the conveyance, and that to the extent of the mortgage debts at least he received the consideration in the form of a credit on his purchase of the livery stock. Nor did the testimony justify the inference that nothing more than the mortgagor’s equity of redemption was conveyed or intended to be conveyed; on the contrary, in connection with the deed, it tended to prove that the conveyance was intended to be clear of encumbrances, and that the mortgages were to have been satisfied. It was not a secret equity of a third party that was attempted to be set up. It was the equity of the mortgagor against the mortgagee, based on the allegation of payment, that the terfetenant was seeking to enforce. If he had accepted a conveyance under and subject to the mortgages, or had assumed their payment, a very different case would have been presented. The case of Jeffers v. Gill, 10 Norris 290, on which defendants in error rely, is essentially different from the present case. There the terre-tenant had assumed the payment of the mortgage, had actually paid part of it, and gave his negotiable note for the residue, and renewed the same several times under a collateral agreement with Gill that the bond and mortgage were to be held as security for the note and its renewals. The mortgage was also accompanied with a certificate of no defence. In view of these and other circumstances it was truly said in that case that the terre-tenant had been “ grossly negligent. He gave his note for the balance due on the mortgage when it was yet in the liands of McCullough, and when it came into Gill’s possession he took no steps to have the arrangement endorsed either on the papers or upon the record. The mortgage bond and certificate of no defence were left in Gill’s possession as security for the note ; in other words they were to be of full force until the note was paid.”

In the present case, if the position which the plaintiff’s testimony tended to sustain be correct, the mortgages were actually paid at the time the property was conveyed, and they should have been satisfied on the record and delivered to the mortgagor. The mortgagee in fraud of the rights of the mortgagor, as well as his vendee, afterwards assigned these paid securities to one of the defendants who took them without resorting to sources .of information from which, in all probability, she would have learned the fact of payment. Where inquiry becomes a duty the party who neglects to perform it should be visited with at least constructive knowledge of the facts which probably would have been revealed.

Judgment reversed, and a venire faeias de novo awarded.