Albright v. Lafayette Building & Savings Ass'n

Mr. Justice Clark delivered the opinion of the court, October 1st 1883. The first point involved in this controversy is, as to the admissibility of the evidence, offered by the plaintiffs in error, the purpose of which was to establish the Deininger mortgage, as a purchase money mortgage. The Act of March 28th 1820, § 1, Purd. Dig. 478, pi. 103, which provides that mortgages are to have priority according to the date of their recording, and that no mortgage shall be a lien until the same shall have been recorded, contains a provision as follows:— Provided, that no mortgage given for the purchase money of the land, so mortgaged, shall be affected by the passage of this act, if the same 'be recorded within sixty days, from the execution thereof. . It is alleged that the mortgage, from Samuel Albright and Elizabeth his wife, to E. Jonathan Deininger dated April 26th 1876, is a mortgage given for purchase money of the land — 416 — mortgaged, and that a sale thereon, of the mortgaged premises, discharged the lien of the prior recorded mortgage, of Lafayette Building and Savings Association ; this is the first question in the cause. The first and second specifications of error are to the same effect, and are to the refusal of the court to admit the evidence of William P. Bard Esq. who was the attorney of James T. Eeber, assignee of George J. Heilig, for creditors, and conducted the transaction between Eeber, Deininger and the Al-brights. These offers were, to prove by Bard, “ That the conveyance of the property and the giving of the mortgage, were, in point of fact, one and the same transaction ; that the mortgage was given directly in consideration of the land; that a deed,-or agreement, was actually drafted between the parties, to wit: Eeber and Deininger, conveying the property to said Deininger, and a deed or agreement conveying the property from Deininger to the Albrights; that in order to save the expense of these multiplied conveyances, by consent of the parties, the conveyance was made directly from Eeber to the Albrights, the latter executing their mortgage for the purchase money directly to Deiniiiger; that the conveyance of the property to the Al-brights, — the execution of the mortgage by them to Deininger,- — -the cancellation of Deininger’s judgments against Heilig being subsisting liens upon the property conveyed, — -and the recording of the mortgage of the Albrights to Deininger upon the same property, were one simultaneous, undivided transaction; that all the said parties were informed of, and had notice of, and agreed to the above arrangement; that no money passed from Deininger to the Albrights; that the mortgage to Deininger was, in fact, for purchase-money.” Purchase money results, of course, from the contract relation of vendor and vendee; except that relation exist there can be no mortgage for purchase money; such a security passes from the vendee to the vendor on the footing of the contract of sale. A purchase money mortgage too, is executed and delivered simultaneously with the conveyance of the land, and there is necessarily unity of time, contract and parties to the transaction ; the execution and delivery of the deed and of the mortgages being cotemporaneous, the law regards them as one transaction, in the same manner-as a deed of defeasance forms, with the principal deed, to which it refers, but one contract, although it be by a distinct and separate instrument. A purchaser of lands, finding a lien of record against his vendor, is bound to inquire into the incipiency of the vendor’s title: Gutherie v. Watson, 24 Pitts. L. J. 57; and a judgment or mortgage creditor of a vendee, finding a lien in the name of — 417 — a vendor against the vendee, entered or recorded within the period regulated by law, is bound to take notice of it; he is thereby put upon inquiry, as to the nature, character and consideration of the lien so found ; no other notice is required ; it is not even necessary that the lien should disclose upon its face the material fact that it is for purchase money, if, in point of fact, whether it be a mortgage or judgment, it was given for purchase money: Parke v. Neeley, 90 Penn. St. 52; Cohen’s Appeal, 10 W. N. C. 544. A purchase-money mortgage, however, may not always be in the name of the vendor, he may assign his right, and the security be taken in the name of the vendor, for use of the assignee, or indeed, it may, under the operation of an assignment, legal or equitable, be taken in the name of another. It can' only, however, be in the name of another by the act or deed of the vendor as no other than the vendor, or those representing him, can have title to purchase money as such. In Campbell’s Appeal, 12 Casey 247, Weldon & Tomlinson advanced the money, to pay out the purchase, on a contract with the vendor himself, who made the deed and delivered it to the vendees, under the express agreement, that a mortgage and bond should be made, at thé same timé, to Weldon & Tomlinson for the purchase money, as such. The mortgage professed, upon its face, to be for the purchase money, and, although given to a third person, was held to be a purchase-money mortgage, and to have precedence of mechanics’ liens, entered against the equitable estate. Lewis, C. J., in delivering the opinion of the court, says :— ‘‘ The money was not advanced on the credit of the equitable estate at all, but distinctly upon the security of a mortgage upon the legal estate, for the purchase money, under a contract with the vendor himself.” A number of cases might be referred to, from which the general doctrine will appear, that the vendor may take the security in his own name, or in the name of another, .under .contract or by assignment from him. It will be quite sufficient here, however, to refer to the case of Cohen’s Appeal, 10 W. N. C. 544, which is the latest adjudicated case bearing upon this point. In that case, a mortgage was given to secure a loan, made by the mortgagee to the cestuis que trustent of the mortgagor, who subsequently conveyed his interest in the mortgaged premises to his cestuis que trustent by deed reciting the mortgage, and conveying the title, expressly subject to the payment thereof. On the same day the cestuis que trustent confessed a jndginent to the mortgagee, expressed to be for. the amount of the mortgage, whereupon the mortgagee satisfied the mortgage, — 418 — and it was held that the judgment given to the mortgagee was to be deemed a purchase money incumbrance. Mr. Justice Green, delivering the opinion of the - court, says “ But we think that the judgment of the bank must be considered as a purchase-money judgment in view.of all the circumstances. It is true, it is not so stated on its face, but we do not understand that to be necessary, in any given case, where, in point of fact, the lien, whether it be judgment or mortgage, is given for purchase money. It is also true, that, the bank was. not the vendor of the property conveyed. But it was .a lien creditor of the vendor, by a mortgage antedating the conveyance, and the payment of the lien was a part of the consideration of the conveyance, and so recited therein. If this judgment had.been given by the grantees to Stunner [the- vendor], and by him assigned to the bank, it would undoubtedly have-been a purchase money judgment. Why, then, should the fact that it is given directly to the bank prevent its being so regarded, when; in point of fact, the money which it secures does constitute a part of the purchase money of the property. By consent of the vendor, the vendees contract directly with the bank, to pay it this part of the consideration of the sale.” On tiie contrary, however, money borrowed by the vendee to pay for land, becomes the money of the borrower, and he may apply it as he pleases ; it follows, that a mortgage given to secure its repayment would not be a purchase money mortgage, whether the money was so used, or used for any other .purpose. In Nottes’s Appeal, 9 Wright 361, Hoover advanced to the vendee the money to pay out the purchase, and the bond he took for the money recited, that it was for purchase money of the laud, but the legal title was not conveyed to Trost, the vendee, for the purpose of being mortgaged to Hoover; between the vendors and him, no treaty whatever occurred; they assigned and transferred nothing to him, there' was no privity between them and him, and - upon these grounds it was held, that the money due him was not purchase money within the - meaning of the statute. The cases of Hendrickson’s Appeal, 24 Penn. St. 363, and Dungan v. American Life Ins. Co., 52 Penn. St. 253, are not in conflict with the principle of the cases cited; they were-both determined on the fact, in each case, that the mortgages, • although expressly stated therein to be ' for purchase money, in point of fact were not. If therefore the testimony, embraced in the offers,- had been received, its undoubted tendency was, to show that; as between the parties to the transaction, the Deininger mortgage was for purchase money of the land ; but there was no evi — 419 — denee already adduced, nor was there any offer to show that the Lafayette Building and Savings Association were affected with any notice, of the real nature of the transaction. The effect of the recording acts is, to make priority between mortgages, generally, depend upon the time of recording, and that general rule must not yield to the merely exceptional case of a purchase-money mortgage, unless there is enough either in the mortgage itself, or elsewhere in the transaction, to evince its true character and operation. The Deininger mortgage not only fails to state that it was given for purchase-money, but, if that was its real character, its recitals are positively misleading. According to the recitals and description, contained in the mortgage, the premises mortgaged consist of two distinct and several lots of ground, one of which is expressly stated to have been conveyed to Albright and wife, by Pinton A. Strang and Catharine his wife, by deed dated August 25th 1869; the other, to have been convoyed to said Albrights, by James T. Reber, assignee of George J. Heilig and wife, by deed dated, April 26th 1876. It is not pretended that the mortgage was for the purchase money of the first described piece, it was well known then, and the fact is now admitted, that it was not; nor is there any intimation or suggestion in the mortgage, that it, or the holder of it, stood in any relation to the premises, last described, different from the first. The deed from Reber was receipted in full in the usual form. That the mortgage to Deininger was delivered by Albright, at the time of receiving his conveyance from Reber, could not affect the Lafayette Building and Savings Association with notice of the secret arrangement with Deininger; nor would it put the association to inquiry ; the fair influence under the eir-. cumstances being that the mortgage was given to Deininger to raise money to consummate the purchase, and that the transaction, in fact, was just what, according to the record, it appeared to be. Nor would the circumstance, that Deininger was a judgment creditor of Heilig, change the force of the facts, as, at the most, the inference would be, that Albright had assumed the debt and the money had thus been reinvested as an' ordinary loan. There was nothing therefore apparent in this transaction which was sufficient to put the Building Association upon inquiry. If the lien had been entered by Reber that fact would nave been sufficient; the title came from him, and whatever put the association upon inquiry was equivalent to notice.. Inquiry of Reber must either have resulted in knowledge of the fact or an estoppel of Reber from after asserting it, and in, either case, the association would be protected from injury. It is true, as held in Parke v. Neeley, 90 Penn. St. 52; Cohen’s — 420 — Appeal, 10 W. N. C. 544, and other cases, that it is not necessary that the lien should upon its face disclose its true character, but in no case has it ever been held, that notice or its equivalent must not somewhere be found. In Campbell’s Appeal, 12 Casey 247 the fact was published on the face of the lien ; in Cohen’s Appeal, supra, it was found in the manifest features of the transation itself, and indeed in the actual knowledge of the parties interested, as stated in the opinion of the court. The second point in this contention is that the Lafayette Building and Savings Association is not an association under the Act of April 12th 1859 and is, therefore, only entitled to recover the amount actually advanced with interest. In the case of Rhoads v. Hoernerstown Building and Savings Association, 82 Penn. St. 187, it was distinctly held that the Act of April 22nd 1850, was repealed by the Act of April 12th 1859. The repeal was not expressed in the words of the statute, it was by implication. The Act of 1850, which was local, was fully supplied by that of 1859, which was general, and a complete revision of the law on the subject. The Act of 1859 not only defined the powers and peculiar privileges ofj building and savings associations, incorporated under its provisions, but it promoted associations, formed under previous statutes, to the exercise of the same powers and privileges ; thus establishing a uniform, consistent and general law, for the observance of all. This was practically the first encouragement, which the scheme for establishing associations of this character received from the state; all previous legislation had been merely local, tire courts were severe in their strictures upon it, the receipt of premiums and fines was held to be usurious, and the recovery of the sum loaned only, with interest upon it, allowed ; all in excess of this was held to be usury. The Act of 1859, however, after putting all upon the same footiug, provided that thereafter, “ no premiums, fines or interest on such premiums, that may accrue to the said corporations, according to the provisions of this Act, shall be deemed usurious.” If, therefore, the Act of 22d April, 1850, was repealed by the Act of 1859, and, at the time of the incorporation of the Lafayette Building and Savings Association, there was no other statute but that of 1859, under which the court of common pleas of Berks county could have any authority to grant the charter of a building association, this affords the strongest evidence that the court intended to grant the charter under that Act. The announcement of the decision of this court, in the case of Rhoads v. Hoernerstown Building Association, supra; although subsequent to the granting of this charter, was not the introduction of any new principle, but was simply the application of an old and familiar rule of construction, to the Act of — 421 — 1859, which declared its meaning and effect from the date of its passage. The presumption is that the court, in the granting of this charter, was neither ignorant of the rule, nor incapable of applying it. This presumption is greatly strengthened by a reference to the proceedings, under which the charter was granted. The first section of the Act of 1859 provides, that tlie application for a charter shall be made to a court of common pleas of the proper county, in the manner and at such times and, as prescribed by the 13th section of the Act of 13th October 1840, and, the 13th, 14th and 15th sections, of that Act, were extended to and made part of the Act of 1859, with regard to such associations. Referring to these sections of the Act of 1840, and to the proceedings to obtain this charter, it will be found, that the latter closely pursued the provisions and requirements of the former. The application was in almost the precise language of the Act, and “ specified the objects, articles conditions and name, style and title under which they associated.” What the court intended to do would probably best appear from what the court actually did, but the several orders and decrees of the court are not given in the testimony; we assume, therefore, that nothing appears in the orders and decrees entered, inconsistent with proceedings under the Act of 1859, or those sections of the Act of 1840 which are part thereof. It is argued, however, with great ingenuity, upon the part of the plaintiffs in error, that some of the essential and material parts of the charter are inconsistent with the provisions of the Act of 1859, and that although the validity of the charter cannot be collaterally questioned here, these inconsistencies are so apparent, that we must therefore conclude, this charter whatever it may be, or whatever powers it may confer, is not a charter under tlie Act of 1859, and was not so intended. It is an abundant answer to this contention, that this association is unquestionably and essentially a building association, not only in name but in nature. Although some of the powei’s conferred are inconsistent with the Act of 1859, the acceptance of the charter is necessarily subject to its provisions ; thus these inconsistencies are rendered inoperative. If the court exceeded its power, for this excess the charter is ineffective. The objects and purposes of the association, as set forth in the charter, are not, we think, in any respect different, from the objects and purposes of associations, expressly organized under the Act of 1859, as defined by that Act. The purpose of a building association as thus defined is to afford the indigent an opportunity to save and profitably invest savings, induce habits of economy, etc., and further to enable them thereby to purchase and build houses, increasing the number of small real estate owners, etc. — 422 — The legitimate object of these associations is, therefore, by investment of savings, to enable, not to oblige, indigent persons to purchase and own their own houses. They cannot compel such an investment, they can simply put it in the power of their members to have homes. A suitable home is often beyond the reach of a poor man, he would most willingly invest his labor in the purchase of one, but his labor is not ordinarily available for that purpose. The aim of the association is, therefore, to bring a home within his reach, and to enable him, under its peculiar policy and management, by his own effort, to pay for it. The funds accumulated are loaned or advanced to the members only, to be repaid in monthly savings ; if, however, a member chooses to be an investor simply, an owner of shares of the capital stock, “ investing his savings in stock payments, with a view, at the winding up, to make a profit on his savings, no one can dispute his right so to do, for, as we have seen, the object of the law is two-fold, to afford an opportunity to invest savings, and to enable the purchase of real estate. The member may avail himself of one or both of these purposes of the law. At the winding up, the investor receives the paid-up value of his stock, and may ‘ invest the same as it may be deemed, by him, most profitable this is the practical operation, as well as the avowed, purpose of the law. ” We cannot see how it could impair a charter, under the Act of 1859, to write in the body of it, as its avowed object and aim, that which the actual operation of that statute effects, viz.: — “ The accumulation of a fund, by the savings of the members thereof, sufficient to enable every stockholder to invest his savings safely and speedily, and to purchase real estate, or to invest the same as it may be deemed by him most profitable.” In the case of the Juniata Building and Loan Association v. Mixell et ux., 84 Penn. St. 313, we have held, that there is nothing, either in the letter or the spillt of the Act of 1859, that makes it the duty of the association, to inquire for what purpose loans are being obtained, or to require any stipulations from the borrower, as to the use he shall make of the 'money, or in any manner to supervise or control its disbursement. In Workingmen’s Building Association v. Coleman, 89 Penn. St. 428, it was held, that where the leading features of the charter correspond with the provisions of the Act of 1859, and, so far as appears, the association was organized and its business conducted, in accordance therewith, it can not be doubted, that the application for the charter, and the action of the court thereon, were intended to be under that Act, although the application was signed by nine persons, only ; and that this defect was cured by Act of May 11th 1874, P. L. 133. — 423 — The case of Becket v. Uniontown Building and Loan Association, 88 Penn. St. 211, had some of the peculiarities of this case, and we quote from the very able opinion of the learned Judge S'rowe, which was affirmed here as follows : — “ The validity of the charter of plaintiff cannot be questioned in this proceeding. That the court intended to grant the charter, under, and in accordance with, the provisions of the Act of 12th April, 1859, I think sufficiently appears, not only from the fact, that the association in the order of the court is termed a building and loan association, but also from the general provisions contained in the articles. It is true that the charter contains a provision not authorized by this Act, but throwing that aside, I find nothing absolutely inconsistent or in conflict with it. “No term is fixed for the duration of the association, but this alone amounts to nothing, as the law limits its duration to twenty years, and therefore it cannot exist beyond that period. “ If, under article 9, the charter was terminated before that period, as it might possibly be, the end has come, consistent with the Act. If that article does not terminate it before, the law steps in and ends the corporate existence at that time, and there is nothing in the charter indicating a contrary intent. “ The provision, that under certain circumstances, money may be loaned to others, than members, is certainly not within the provisions or powers of the Act of 1859, and therefore, as against such, the ■ association could not recover more than six per cent, interest; but this certainly does not affect the right to recover more as against a member. “ 1 think the law to be clear, that in corporations formed under the general laws, it is no objection that the articles of association contain provisions not authorized by the act. If unauthorized provisions are added, all acts done in pursuance of such, will be void; but until the corporation is proceeded against for an abuse of its franchises, its rights as a corporation will not be affected by such unauthorized powers. Such too has been expressly stated in New York, in Eastern Plankroad Co. v. Vaughan, 14 N. Y. 546. The case of Rhoads v. Hoernerstowm Building and Loan Association, 1 Norris 180, does not seem to me to cover this case. Whatever else appears in that ease, the controlling idea was, that the court that granted the charter then, could not and did not intend to charter it under the Act of 1859, because it had no authority under the petition to do so, and further, because the provisions of the charter were such as also to rebut any such intention. “ Here the jurisdiction of the court under the Act of 1859 was clear, and I find nothing to the contrary indicated by anything in the charter, and much that leads me to the conviction that the purpose of the court was to incorporate an association — 424 — under the Act of 1859, having all the powers of what are ordinarily termed building and loan associations incorporated under that Act.” In Stiles’s Appeal, 95 Penn. St. 122, there was a minimum premium fixed by the building association, below which, loans could not be made, as in the present case ; such a provision was clearly in conflict with the Act of 1859 and was so declared. Yet, assuming that its charter was under that Act, it was held, that the association had a right to loan to its members, according to the provisions of the Acts. It was further held, to be a gross perversion of the spirit and design of such an association to fix a minimum premium, as it was the right of the member under the Act of 1859 to obtain the money at the least price he could, by bidding at a regular meeting, and that when a member was obliged .to take at a minimum rate, he could defend on that ground, when payment was required. This defence is, of course, limited to the person who in any particular case is affected or injuz-ed by the illegal provision in the charter, or bylaw. If a purchase of a loan is made upon competition in bidding, beyond the minimum pz’emium fixed, the purchaser cannot coznplain of the fixed pz’emium, as his purchase was znade in accoz’dance with the law; but where he is obliged to take the loan at the minimum fixed premium, because of the rule of the. .■association siznply, and in the absence of competitive bidding, he may complain, and defend on that ground. The same principle will, of couz’se, apply in the repayment of a loan, when the rule for settlement under the charter or by-laws, differs, in ■any z'espeet, from that fixed by law. Whilst building and loan associations are entitled to all the privileges, powers and immunities allowed by law, they znust be held to contz’act in confoz’mity therewith. Wé az-e of opinion, therefore, that not only the court but the incorpoz-ators intended the charter of the Lafayette Building and Savings Associatiozi to be under the general law of 1S59, and its acceptance being necessarily subject to the pz’ovisions of that act the clauses of the charter inconsistent therewith az’e inoperative and void. It follows, thez’efore, that the court below in the determinatioiz of this case was right in results, if not in the reasons assigned for them, and therefore the judgment is affiz-med.