Court Opinion

ID: 6234561
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:29:29.735137+00
Date Added: 2024-06-11T08:58:00.120465
License: Public Domain

The opinion of the court was delivered, February 13th 1873, by
Sharswood, J.
It is clear upon the facts as reported by the master, that on the 15th of December 1860, the debt due by Burns to the National Safety Insurance Company, for which the mortgage now in question was one of the collateral securities, crediting upon it the proceeds of the seven hundred shares of stock of the Union Canal Company, and of the one hundred and' twenty-five shares of Lehigh Coal and Navigation stock, was then more than paid. It did not appear that the creditor, the pledgee of the first-named stock, had in possession during the pledge at all times, such stock on hand, ready to redeliver on redemption, which was necessary to bring the case within the decision of Gilpin v. Howell, 5 Barr 41. That the assignee of the mortgage, unless the mortgagor had estopped himself from taking the defence, held it subject to all the equities with which it was affected in the hands of the assignor, is a principle too familiar and well settled, to need the citation of decisions to sustain it. But undoubtedly the debtor may be estopped as against the assignee, by the declaration that he has no defence or set-off to the debt assigned. In the face of such a declaration, he cannot set up his defence against an assignee, who takes on the faith of it. The complainant had made such á declaration on the twenty-second of December 1857. Before that, the Union Canal stock had been sold, and a defence to that extent then existed. The sale of the Lehigh Coal and Navigation stock was on the 6th of January 1858, subsequent to it, and of course, the defence arising therefrom was not precluded. We agree with the court below, that the benefit of it is not confined to the immediate assignee to whom or for whose security it was made; but that any subsequent assignee claiming under him may avail himself of it. To hold otherwise, would have the effect of closing, the market for the sale of his security on the first assignee, if the debtor should refuse to give a new declaration. Upon the same principle, a purchaser with notice of fraud or trust, may take shelter under the wing of a prior purchaser, without notice, otherwise such prior purchaser would be deprived of the principal value of'his privilege.. *162But to avail himself of such an estoppel upon the debtor, the assignee who sets it up, must show that either he or some prior assignee from whom he claims, was an assignee for value, and without notice. It is not pretended that Stephen Coulter, the first assignee, sustained such character. In regard to the defendant Ashton, the master has reported it as his opinion upon the evidence, that the circumstances under which he became assignee, were such as ought to have put him on inquiry, and he ought, therefore, to be considered as affected with notice. We think he had good reasons for this conclusion, if we compare with the date of the note of March 20th 1861, for $18,009, upon which the stocks and mortgage were marked as collateral, the date of the assignment of the mortgage to Ashton, and the dates of the various assignments of the stock as stated in the testimony of Oscar Thompson, the secretary and treasurer of the Union Canal Company.
But without entering upon au examination of this question, we think that Ashton has not shown that he was a purchaser for value. A creditor who takes a mortgage, note, or other chose in .action only, as security for a pre-existing indebtedness, and not for money advanced at the time, is not such a purchaser: Petrie v. Clark, 11 S. & R. 377; Irwin v. Tabb, 17 Ibid. 419; Hartman v. Dowdel, 1 Rawle 282; Twelve v. Williams, 3 Whart. 485; Depeau v. Waddington, 6 Id. 220; Trotter v. Shippen, 2 Barr 358; Ludwig v. Highly, 5 Barr 139 ; Kirkpatrick v. Muirhead, 4 Harris 123. If, therefore, when the note of Burns and the accompanying collateral were assigned to Ashton, it was merely as security for a pre-existing indebtedness, he cannot claim as a purchaser for value to exclude Burns from his equitable defence or set-off by reason of the estoppel raised by his declaration. It is plain, such an estoppel can only avail a purchaser for value as well as without notice. The onus is always on him who sets up such a plea, to prove it. The answer of Ashton on this point, upon which it ought to have been precise and clear, is general, and consequently vague and indefinite. He says: “ Between the fall of 1860 and the spring of 1861, I loaned to Stephen Coulter, in cash and securities, upwards of $50,000. For my security certain col-laterals were transferred and delivered to me, among others the note of $18,009, 700 shares of Union Canal stock, and the mortgage of $8000.” Nor does his testimony render it any more certain. He testified: “ I received the mortgage for $8000 and 700 shares of Union Canal stock. I got them from Stephen Coulter. I loaned money to him at or abotit that time. I was constantly loaning him money. I had loaned him altogether in the neighborhood of $50,000.” Taking the answer and testimony together, certainly the most natural interpretation of the whole is, that the note of March 20th 1861, for $18,009, with the mortgage *163and stock, was taken as security for loans previously made between the fall of 1860 and the spring of 1861.
The complainant has shown that when he suffered judgment to be entered by default for want of an affidavit of defence, the scire facias on the mortgage in the District Court, he did not know of this defence; and it is certainly settled by Wistar v. McManes, 4 P. F. Smith 318, that his failure to obtain relief by his motion in that court to open the judgment, will not preclude him from resorting to a court of equity, even if his case had been heard, and his rule, after hearing, discharged. It follows, that the injunction decreed against Ashton’s proceeding to recover the amount of the mortgage, was right. But we think that the court below was in error in confirming that part of the decree reported by the master, which directed that the appellant, Ashton, and the assignee, Spering, should pay the complainant the balance found on the account with the insurance company in his favor. Ashton certainly had not received the proceeds of the Union Canal stock; nor, as far as appears, of the Lehigh Navigation stock. Spering, the assignee, with whom by the decree, Ashton is made a joint debtor, had not received any of it. There is no ground, therefore, upon which they can be held personally liable for the balance due to the complainant by the company. As the decree in this respect is joint, it must be reversed, though Spering has not appealed. It was insisted, indeed, upon the argument, that Burns is entitled to have refunded to him, with interest, the $2000 paid by him to Ashton, on account of the mortgage. Mr. Clay testifies, that this payment was to be “without prejudice.” But this evidently meant without prejudice to his defence, that it should not operate as an admission by him that anything more was due. By this payment he purchased a stay of proceedings. It was, therefore, a perfectly voluntary payment, which, though not owing by Burns, yet Ashton could, with a good conscience, retain, and had it been intended that in any event it should be refunded, it should have been specially so agreed.
Decree reversed, and now it is ordered and decreed, that the defendants be restrained by injunction from issuing any executions on the judgment of the said George H. Ashton, No. 202, of June Term 1866, of the District Court for the City and County of Philadelphia, and from proceeding to levy any such execution upon the mortgaged premises, or to sell the said premises upon any levari facias or execution on said judgment, and from proceeding any further to enforce payment of the same, and that said Ashton shall enter satisfaction on the record of said mortgage, upon payment to him by the said Burns of the legal costs thereof, and that each party to this appeal shall pay his own costs.