Taylor v. Cornelius

• Decision Date: 11 May 1869
• Parties: Taylor <I>versus</I> Cornelius <I>et al.</I>
• Court: Pennsylvania Supreme Court

Page 187

60 Pa. 187

Taylor versus Cornelius et al.

Supreme Court of Pennsylvania.

January 11, 1869.

May 11, 1869.

January 11th 1869.

Before THOMPSON, C. J., READ, AGNEW and SHARSWOOD, JJ. WILLIAMS, J., at Nisi Prius

Error to the District Court of Philadelphia: No. 217, to January Term 1867.

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W. S. McElroy and C. Gibbons, for plaintiffs in error.—The deeds to Taylor and his declaration of trust together constituted a mortgage. A conveyance of land directly to a creditor to secure his own debt is not an assignment for creditors generally: Chaffees v. Risk, 12 Harris 432; Henderson's Appeal, 7 Casey 502; Griffin v. Rogers, 2 Wright 382. The recording of the papers made the mortgage valid against subsequent creditors. A mortgage is good for contingent responsibilities and for future advances to the full extent of it, where the record gives information of the agreement, so that a junior creditor may by inspection of the record, and by common prudence and ordinary diligence, ascertain the extent of the encumbrance: Stewart v. Stocker, 1 Watts 140; Garber v. Henry, 6 Id. 57; Parmentier v. Gillespie, 9 Barr 87. Taylor being a mortgagee in possession, receiving rents, was bound to keep down encumbrances, and the service of the attachment would not relieve him. They can claim no more than their debtor, and he could not compel Taylor to collect rents and pay him, and let encumbrances and taxes go. This would be so, notwithstanding advances made after a junior lien would be subject to it according to Terhoven v. Kerns, 2 Barr 96; Bank of Montgomery County's Case, 12 Casey 170.

In the equity proceedings the whole of this matter was adjudicated. The amount due Taylor was definitely settled, and by the decree nothing was left in his hands to meet the attachments. The attaching creditors were called into court and contested Mrs. Douredoure's right to a conveyance, and it was decided that they had no available rights against her. Mrs. Douredoure was surety for her husband, and had a right to be subrogated to the mortgage: 2 Story's Eq. Jur. § 1373; Robinson v. Gee, 1 Ves., Sen. 252; Aguilar v. Aguilar, 5 Mad. Ch. 414; Parteriche v. Powlet, 2 Atk. 383; Pocock v. Lee, 2 Vern. 604; Gahn v. Niemcewiez, 11 Wend. 312; 3 Paige Ch. 614; Sheidle v. Weishlee, 4 Harris 134.

E. S. Miller (with whom was J. S. Price), for defendants in error.—The deeds of February 1856 and the declaration of trust together amounted to an assignment for the benefit of creditors: Englebert v. Blanjot, 2 Whart. 240; Watson v. Bagaley, 2 Jones 167; Lucas v. Sunbury & E. Railroad, 8 Casey 464; Driesbach v. Becker, 10 Id. 152. This case is distinguishable from Griffin v. Rogers, 2 Wright 383; The York County Bank v. Carter, Id. 446; Fallon's Appeal, 6 Wright 235. The first was a pledge for money lent; the latter two were sales. The fact that Taylor was to have commissions shows that he was an agent to pay debts. These papers being an assignment, and not having been recorded within thirty days, it was void: Act of March 24th 1818, § 5, 7 Sm. Laws 132, Purd. 61, pl. 6. A mortgage to secure advances will not protect advances made after execution or attachment: Terhoven v. Kerns, Bank of Montgomery County's Case, supra.

The opinion of the court was delivered, May 11th 1869, by SHARSWOOD, J.

Bernard Douredoure, at a time when he was unquestionably solvent, made a settlement of part of his estate for the separate use of his wife. He afterwards embarked in business and failed. He assigned all his estate for the benefit of his creditors. He then made an arrangement with William Taylor, to which the consent of the assignees and all his creditors was given, by which not only all the assigned but also the settled estates of his wife were to be conveyed to Mr. Taylor, who executed a declaration of trust, dated December 24th 1855, that he held the same upon condition that they were to be sold and the proceeds to be applied to repayment to him of the sum of $20,634, or thereabouts, already advanced and expended by him in purchase of debts and liabilities of said Bernard Douredoure, and of all other sums to be advanced by him for account of said Bernard Douredoure, and upon repayment to him of all sums so due together with lawful interest, that he would convey all of the property remaining unsold, that is to say, those formerly belonging to Mrs. Douredoure, to her or to her order, and those formerly belonging to Mr. Douredoure, to him or his order. The plaintiffs below subsequently, in 1858, obtained a judgment in the District Court against Bernard Douredoure, upon which an attachment of execution was issued and served on William Taylor, June 28th 1858, who pleaded nulla bona, upon the trial of which issue the jury, under the instructions of the court, found a verdict for the plaintiffs. The learned judge charged that the several conveyances to Taylor, and the declaration of trust by him, were fraudulent and void as to the attaching creditors. The ground of this instruction seems to have been that they amounted to an assignment for the benefit of creditors, and not having been recorded within thirty days, were void under the 5th section of the Act of March 24th 1818, Pamph. L. 287. We think that in this there was error. Together they constituted merely a mortgage to Taylor, with a power of sale for the purpose of securing advances already made or thereafter to be made for the use and benefit of Douredoure. For what purposes the advances were to be made, or whether they were to be applied to their objects by the mortgagor or mortgagee, does not appear to be material. It was a security for debts thereafter to be contracted by the advance of money: Griffin v. Rogers, 2 Wright 382. There was no trust for any creditor: the grantee could not be called on to account except by the grantor. Such a mortgage without any power of sale in the mortgagee has often been decided to be valid in Pennsylvania. "It is now settled," says Mr. Justice Huston, in Stewart v. Stocker, 1 Watts 140, "that a mortgage or judgment may be given to secure a creditor, not only for a debt due, but for responsibilities, which are contingent, nay, for future advances:" Lisle v. Ducomb, 5 Binn. 585; Garber v. Henry, 6 Watts 57; Parmentier v. Gillespie, 9 Barr 86; Moroney's Appeal, 12 Harris 372. The power of sale does not vary the case: it creates no trust for creditors: it no more converts a mortgage to secure future advances to be applied in payment of the debts of the mortgagor into an assignment in trust for the benefit of creditors than would such a power in an ordinary mortgage given to secure a loan. The equity of redemption is subject to levy and sale on execution against the mortgagor, and the proceeds of sale, after payment of the advances, to an attachment in the hands of the mortgagee as garnishee. Neither do we regard the provision for commissions or compensation to the mortgagee as impressing the instrument with the character of an assignment within the Act of 1818. Whether such a provision ought to be pronounced usurious and therefore void, or whether a court of chancery, which watches with jealousy all unusual agreements between the mortgagor and mortgagee, clogging or embarrassing the equity of redemption, would consider it as oppressive and inequitable, and therefore not to be enforced, it is unnecessary here to determine. It does not render the mortgage void. We are dealing only with the question whether the instruments are within the 5th section of the Act of March 24th 1818. We are of opinion that they are not. This disposes of the first two specifications of error.

Assuming the assignment to be void, the learned judge proceeded to apply to the case the principle settled in Re Wilson, 4 Barr 431, that for payments made under the trust before an adverse claim the assignee by a void assignment is protected, but only for such; and on that assumption his ruling was undoubtedly correct. But if the conveyances to Taylor were not void, but constituted a valid mortgage to secure past and future advances, then his instructions to the jury as complained of in the 3d and 4th specifications were erroneous. If there...