Bismark Building & Loan Ass'n v. Bolster

Mr. Justice Trunkey delivered the opinion of the court, November 17th 1879. This ejectment is to recover possession of an estate for years which had been granted to A. Weinmann. The lease was dated March 30th 1877, executed on the 30th of the following May, and Weinmann, at the time- of its delivery, assigned all his interest therein and the improvements thereon to the defendants below, as collateral security for a debt he owed them; and gave them a power of attorney to collect the rents, as collateral security, until all debts due them are paid in full. At the trial the defendants claimed that the assignment was intended to be an absolute payment of the debt, and gave evidence tending to prove a mistake in the writings, and that actually they were given and received in payment; but the jury found against them on this point. Hence, in the present hearing, their title rests upon the assignment and power of attorney as written, and they concede it is a mortgage. The Friendship Building and Loan Association held a judgment against Weinmann for $3520, which was entered January 23d 1873; and June 19th 1877, by virtue of an execution issued to collect the same, the sheriff levied on the leasehold and improvements and sold them to the plaintiffs, to whom he delivered á bill of sale dated August 16th 1877. As between Weinmann and the defendants the mortgage is valid. The sheriff’s sale having been on a judgment prior in date, the [129] mortgage has no superior equity, and the purchasers can recover, unless the fact of possession in the mortgagees entitles them to hold the property till their debt shall be paid. If they were so entitled the defendants’ second point ought to have been affirmed, for there was sufficient evidence of possession, taken immediately under the -assignment, to warrant a finding of the fact. As a general rule, a mortgage of personal property, like a sale, is void as against creditors, if a corresponding change of possession does not accompany the same. But when a removal of the property is impracticable, when all has been done that reasonably can be to mark the change of ownership and possession, the law is satisfied. Here the property was occupied by tenants of Weinmann; and if the lease, at the time of its execution, was assigned and delivered to the mortgagees, with the knowledge of the lessor, and the lessee’s tenants were notified thereof, and that they should pay the rents accordingly, which they did, and the lessee, Weinmann, withdrew from the occupancy and control of the property, the transfer of possession was complete. Indeed, the learned judge of the Common Pleas deemed the evidence sufficient to submit, as shown by his instruction that if the defendants “took this property from Weinmann as absolute payment of what he owed them, and took possession of it,” the assignment would be good and they could hold it. He held, that if taken as collateral security — a mortgage —the plaintiffs could recover, even if the defendants had taken-possession. Mere possession of an estate for years is akin to that of an estate for life in fee. The term of a tenant is as immovable from a specific tract of land as is the freehold. Estates for years are often of greater value than life-estates, and not infrequently have been mortgaged. Anciently they were of little importance, and then those rules were established which still pervade our laws, marking the distinction between freeholds and estates less than freehold. A long term of years of very great value is not such an-interest in land as is subject to the lien of a judgment, it is a chattel, subject to seizure and sale by a constable on an execution issued by a justice of the peace. All kinds of property may be mortgaged to secure debts. A mortgage of personal property, in some respects, is like a pawn or pledge. Without delivery of possession to the mortgagee, it is a nullity as to creditors, unless made under some statute; but if possession be given, the mortgagee may hold it till his debt is satisfied. At most a creditor of the mortgagor can only sell it subject to the claim of the mortgagee, whose lien is not divested by the sale, and who is not entitled to share in the proceeds. The purchaser at a sheriff’s sale takes just the interest, if anything at all, which was left in the mortgagor. Whether the mortgage of a leasehold is within these familiar principles is the pivotal question in this cause. [130] The Act of May 28th 1715, section 8, provides that, “ No deed or mortgage, or defeasible deed in the nature of mortgages, hereafter to be made, shall be good or sufficient to convey or pass any freehold or inheritance, or'to grant any estate therein for life or years, unless such deed be acknowledged or proved, and recorded within six months after the date thereof, where such lands lie, as hereinbefore directed for other deeds.” Section 9 of the same act provides for the entry of satisfaction by mortgagees “ of any real or personal estates.” It is observable that no personal estate is within that act save estates for years in lands. By Act of March 28th 1820, all mortgages for any lands, tenements or hereditaments, shall have priority according to the date of recording the same; “ and no mortgage or defeasible deed in the nature of a mortgage, shall be a lien until such mortgage or defeasible deed shall have been recorded or left for record as aforesaidexcept mortgages for purchase-money, which may be recorded within sixty days from their execution. The same terms — lands, tenements and hereditaments — omitting estates for years, were used in the Act of 1783, which provided for the validation of mortgages executed between January 1st 1776, and June 18th 1778. In the Act of 1830, and subsequent acts, providing, in case of judicial sale, for the preservation of the lien of a mortgage, when prior to all other liens on the same property, the subject of the mortgage is described as “real estate.” Section 8, of the Act of April 27th 1855, authorizes mortgages by the lessees of collieries, mines and manufactories ; and the Act of April 3d 1868, Pamph. L. 57, directs the remedy for collection in all cases of mortgages upon leasehold estates. The statutes relating to mortgages reveal, at a glance, that it is not their intendment to include leaseholds in the words properly signifying freeholds. A principal purpose of the Acts of 1783, of 1820 and of 1830, was to define liens of mortgages, their commencement, their preservation; and estates for years were omitted, for no judgment is a lien upon them. Had the various acts all used the words, “lands, tenements and hereditaments,” which technically do not embrace estates less than freehold, in stating the subjects of mortgages, then, for reasons given by Chancellor Kent in Johnson v. Stagg, 2 Johns. 510, we might adopt his conclusion that leaseholds are within their meaning. But the legislature having employed apt words for the different classes of estates, it would be a misinterpretation to confound one with the other. Therefore, the Act of 1820 has no relation to mortgages of leaseholds; nor have any other acts which relate exclusively to mortgages of “ real estate.” Unrecorded mortgages are good between the parties, and against a purchaser with notice, as settled by numerous decisions. It is manifest, that the Act of 1820 was passed for security of liens by judgment: there was no such reason respecting chattels, and they [131] were left under the terms of the Act of 1715. Consequently, it is unnecessary, for any purpose, to record a mortgage for an estate for yeai-s immediately; it may be done within six months, when it does not come within the Acts respecting collieries, mines and manufactories. If the mortgagee take and retain possession of the property, it will be as free from liability to answer an execution against the mortgagor, as would any other personal estate; and once free, because under his dominion, it would continue so. If levied on and sold, the claim of the mortgagee would be no more divested, than if the property were a horse and sold subject to the mortgage. The mortgage is of such a nature, that under no circumstances can it come into competition with the judgment for the proceeds of sale on the execution — the claim is on a chattel, and notice to the purchaser supplies the place of recording. An adverse claimant of a chattel, sold on execution against another, cannot take the money made, from the execution-creditor — his remedy is by action for recovery of the property or damages. It is so clear, that a mortgage of personalty must be accompanied by possession, to make it valid against an execution in favor of a creditor of the mortgagor, and that a sale on such execution is subject to the mortgage^ that it is perhaps, not singular that no case has been cited similar to this. Luckenback v. Brickenstein, 5 W. & S. 145, is not in point, though it seems to have been understood, by court and counsel, that possession of a mortgaged leasehold was an essential as against creditors, and, that existing, it was good. Of course, what has been said of the necessity and effect of a change of possession, applies to an unrecorded mortgage. When recorded within six months, possession not changed, of the effect of a sale on execution, before the date of record, we say nothing. Whether a mortgage of a leasehold, duly recorded, not accompanied by possession, is good against execution-creditors, is not a question in this cause. Possibly such mortgage is valid under the Act of 1715, the record standing for possession. The sheriff’s sale was less than six months after the execution of the mortgage, and neither creditors nor purchasers can complain because it was not then recorded. We are of opinion, that the fifth assignment of error must be sustained. It is unnecessary to specially remark upon the others, they follow the fifth, and what has already been said, gives our views on the various points they present. The jury should have been instructed, that if they found the facts, as assumed in the defendants’ second point, the verdict should be in their favor, otherwise for the plaintiffs. Judgment reversed, and a venire facias de novo awarded