Case ID: whart_1/html/0241-01.html
Source: Caselaw Access Project
Author: {"author": "Gibson, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[Philadelphia,
    
    February 6,1836.]
    SOLOMON against WILSON.
    APPEAL.
    A. the holder of a mortgage for $450, by an instrument under seal, assigned the mortgage to B. with condition that if the receipts of a certain theatre should on a certain night amount to $300, B. should re-assign the mortgage to him and pay him whatever the said receipts should amount to beyond the said sum of $300; and if the receipts should be less than $300, B. was to hold the mortgage as security for the deficiency; and if the same should not be paid by a certain time, (one week thereafter), the mortgage was to be considered as absolutely assigned to B., his executors, administrators, &c. B. assigned the mortgage to C., who brought suit upon it and sold the mortgaged premises at sheriff’s sale, the proceeds of which were brought into Court for distribution. Upon an issue directed by the Court, it ivas ascertained that the receipts of the theatre on the night mentioned in the assignment were $155. Held, that the clausfe respecting the absolute assignment of the mortgage was to be considered in the nature of a penalty, against which equity would relieve after the appointed day; and that B. was entitled to receive, out of the money in Court, only the difference between the actual receipts of the theatre and the sum of $300.
    This was an appeal from a decree of the District Court for the city and county of Philadelphia, in the distribution of the proceeds of certain real estate, sold by virtue of a writ of levari facias in a suit, wherein Samuel M. Solomon was plaintiff, and William Wilson was defendant.
    The material circumstances were these. Elijah Heaton, being the owner of certain real estate, sold the same to the defendant Wilson, and in part payment of the purchase money took from him a bond, conditioned for the payment of four hundred and fifty dollars, which was secured by a mortgage of the premises. On the twenty-fourth of November, 1829, Elijah Heaton, the mortgagee, executed the following instrument.
    “ Por a valuable consideration, I assign, transfer, and set over to Aaron J. Phillips, manager of the Arch Street Theatre, a bond and mortgage from Wm. Wilson to Elijah Heaton, dated the eighth day of July, 1829, in which the said Wm. Wilson is bound to me the said Elijah, in the penal sum of nine hundred dollars, conditioned for the payment of four hundred and fifty dollars.
    “ The condition of this assignment is, that if the receipt of the Arch Street Theatre on Saturday evening, November 28, 1829, shall amount to three hundred dollars, the said Aaron J. Phillips, shall reassign the said bond and mortgage to me, and pay unto me whatever sum of money may be received in the said theatre, upon the said night, beyond the aforesaid sum of three hundred dollars, or if the receipts upon the above night shall be less than three hundred dollars, the said Aaron J. Phillips is to hold the said bond and mortgage as security for such sum as may be necessary to make up the said amount, which if not paid by Saturday, December 6th, 1829, the said bond and mortgage is to be considered as absolutely assigned to the said Aaron J. Phillips, his heirs, executors, administrators, or assigns.
    “Witness my hand and seal this twenty-fourth of November, one thousand eight hundred and twenty-nine,
    Elijah Heaton, [l. s.]
    Sealed and signed in the
    presence of us,
    
      T. H. Copeland,
    
    
      Samuel Irwin.:”
    
    On the 3d of February, 1830, Aaron J. Phillips executed the following instrument.
    “Whereas by virtue of the within written instrument a certain bond and mortgage therein referred to, were assigned to me, Aaron J. Phillips, on certain conditions, which conditions have not at this day been complied with, and the said bond and mortgage have become absolutely vested in me.
    “ Now, know all men by these presents that I, Aaron J. Phillips, of the City of Philadelphia, for and in consideration of the sum of one hundred and twenty-five dollars, to me in hand paid by Samuel M. Solomon, also of the said city, the receipt whereof is hereby acknowledged, have assigned, .transferred, and set over, and by these presents do assign, transfer, and1 set over, unto the said Samuel M. Solomon, Esq., nis heirs and assigns, the said bond and mortgage and all my right, title, and interest- therein, and all future benefit and profit to be derived therefrom.
    
      “ Witness my hand and seal at Philadelphia this third day of February, one thousand eight hundred and thirty.
    Aaron J. Phillips, [l. s.]
    Sealed and delivered in the presence of us,
    
      Geo. P. Hood,
    
    
      J. A. Phillips.”
    
    Solomon, the assignee, brought suit upon the mortgage, and proceeded to a sale of the premises, the purchase money of which having been brought into Court, was claimed by several lien creditors. ■ The Court directed an issue to ascertain (inter alia) the amount chargeable as receipts, for tickets of admission to the Arch-Street Theatre on the 28th of November, 1829, agreeably to the terms of the assignment.
    • ■ The issue was tried, and the jury found that the receipts amounted to one hundred and fifty-five dollars, twenty-five cents.
    The Court then ordered distribution, and (inter alia) to S. M. Solomon, the principal and interest of the mortgage given by the defendant to Heaton, amounting, to • #493 73
    Deducting therefrom the receipts of the Arch-Street Theatre and interest thereon 183 18
    To be received by him $310 55
    From this decree Elijah Heaton appealed to this Court, and assigned for error,
    “ 1 st, That the Court below erred in ordering the payment to S. M. Solomon of the sum of three hundred and ten dollars, fifty-five cents, being the amount of the mortgage money after deducting the receipts of the theatre, instead of giving him the sum of one hundred and forty-four dollars, seventy-five cents, being the difference between the sum of three hundred dollars and the actual receipts of the theatre.
    2d, That the Court erred in not awarding to Elijah Heaton the balance of the mortgage money, after deducting the sum of one hundred and forty-four dollars, seventy-five cents.”
    Mr. W. M. Meredith, for the appellant,
    contended that the assignment by Heaton to Phillips was merely as a pledge or collateral security; and that the condition was in the nature of a penalty, against which the Court would relieve. He cited Hart v. Ten Eyck, (2 Johns. Ch. Rep. 100).
    Mr. Phillips, contra.
    The assignment contained an express stipulation that if the money was not paid by a certain time the mortgage should be considered as absolutely assigned. Now, it is-important that no offerto redeem is shown, and no claim set up until the premises are sold, and the 'proceeds brought into Court. Here the mortgage was not payable for some time. The security was insufficient, being upon frame buildings ; the risk of loss therefore fell on the assignee. This was not á hard bargain for Heaton. If the receipts of the theatre had amounted to $1500, which has been the case sometimes, he would have received all above $300. Besides, Heaton has no right to ask this Court to interfere. He was not a party in the Court below. If Solomon has received more than he is entitled to, he may be considered a trustee for Heaton.
    
      Reply. — The proceedings, on a question of distribution, are in the nature of Chancery proceedings. Every one having an interest in the fund is supposed to be a party, and is bound to take notice of what is going forward. In fact the issue in the Court below was directed for the benefit of Heaton.
   The opinion of the Court was delivered by

Gibson, C. J.

The difference between a mortgage and a pawn, if there be any, serves but to strengthen the case of the pawner. It is said by Mr. Powell in his treatise pp. 3, 4, that, by forfeiture, the interest of the mortgagee becomes absolute at law, while the pawnee has but a special property as a security. But it seems to be agreed that whether the title of the pawnee beabsolute orqualified, his redemption in equity is at least equal to that of a mortgagor, (Bac. Abr. Bailment, B.) What were the terms of the pledge here ? The mortgage was assigned as a security for whatever the receipts at the theatre might fall below a specified sum, on condition that it should become absolute if the assignor failed to make up the difference by a given day. Was not this condition a penalty, against which equity will relieve ? In Stoever v. Stoever, (8 Serg. & R. 434,) it was agreed that a mortgagor against whom an ejectment waspending, should confess judgment with stay of execution, at the expiration of which, if the debt were not paid, a habere facias should issue, and the rents of the current year be paid to the mortgagee. And this, as equity will but in very special circumstances enlarge the time of redemption after foreclosure by agreement, was held to be a foreclosure on terms that had subsequently become absolute. It is to be remarked, however, that among the ingredients of that case, were material ones which do not enter into this. The value of the premises but little exceeded the amount of the debt, and the creditor had made improvements in which the debtor had long acquiesced ; so that there was clearly enough in the transaction to show that it was a conditional sale of the equity of redemption. Such was not the case here. The mortgage was pledged as a security for what turned out to be less than a third of its value; and, as time does not seem tohave been a cardinal point of the agreement, the delay being susceptible of compensation by interest, the question seems to be whether the condition had respect to a penalty or to stipulated damages. As the inclination of the Court is to relieve wherever the loss admits of compensation, stipulated damages result but from an explicit antecedent valuation of the loss by the parties themselves. It is an inflexible rule, and apparently applicable here, to relieve wherever the act to have been done, was payment of money. “ There is one case,” said Justice Chambre in Astley v. Weldon, (2 B. & P. 354,) “in which the sum agreed for must always be a penalty; and that is where the payment of a smaller sum is secured by a greater.” And Lord Loughborough in Orr v. Churchill, (1 H. B. 227,) having stated that for non-performance of collateral acts, the damages may be estimated by a jury or by previous agreement, says : “ But where the question is concerning the non-payment of money, in circumstances like the present, the law, having by positive rules fixed the rate of interest, has bounded the measure of damages ; otherwise the law might be eluded.” Now the agreement being in effect to pay the amount of the mortgage by an absolute transfer of it, if the difference were not made good by a certain day, was not the alternative a penalty ? It was a forfeiture to enforce payment, and therefore a penalty in substance if not in form. But the character of the forfeiture is ascertainable from no particular words, but, as said by Loi’d Eldon in Astley v. Weldon, from the whole instrument. It is in fact only in cases of informal expression that questions of the sort arise; for where the parties themselves call it a penalty, relief is of course. Had the assignor given his own bond in the same amount as the mortgage, with condition to assign the mortgage unconditionally in default of payment, there could not have been a question; and what is the difference where the assignee has the assignor’s sealed 'agreement that a transfer simultaneously made shall be absolute on the happening of the same contingency? It is in substance equally an agreement to forfeit the same sum by failure to pay; and it is immaterial to the assignee as well as to the guestion, whether it be secured by the engagement of the assignor or the engagement of another. The difference in amount between the value of the mortgage and the sum intended to be secured by it, being in the ratio of more than three to one, is enormous; and to hold the alternative for payment at the day to be stipulated damages in the form of a conditional sale instead of a penalty, would be unreasonable and unjust. The parties themselves did not so understand it. The decree of the Court below therefore is reversed, and it is ordered that the appellant have leave to take out of Court the balance of the fund, after paying to the holder of the mortgage the principal and interest due on the original demand.

Decree accordingly.