Philips v. Bank of Lewistown , 18 Pa. 394 ( 1852 )

The opinion of the Court was delivered, by

Lewis, J.

On the 23d January, 1841, the Bank of Lewistown discounted a note for $4600, made by John Norris, and endorsed by William B, Norris, John Norris, Jr., and Hardman Philips. The note was protested for non-payment at maturity, and judgments were recovered against the executors of the maker, and against William B. Norris and John Norris, Jr. (two of the endorsers), for large sums of money, including the amount of the note above described. On the 22d July, 1844, Hardman Philips executed a mortgage to the Bank of (Lewistown, to secure the payment of the balance remaining due on the note. On the 4th October, 1847, the bank assigned 'the mortgage to A. Wright & Nephew, “as collateral security for the payment of their acceptances made for the accommodation of the bank.” On the 7th December, 1847, the same William B. Norris (who was also one of the directors of the bank), signed a written report made to the board, in which the acceptances of Wright & Nephew, for the bank, are stated to have been made on the 22d September, 1847, and are particularly enumerated and described, and stated to amount in the aggregate to $40,000. It is admitted in this report that the proceeds of the acceptances “ were applied to the benefit of the Bank of Lewistown.” On the 14th December, 1847, the bank made a general assignment for the benefit of its creditors. On the same day, or the day before, according to the testimony of Samuel S. Woods, Mr. Norris asked Mr. Woods if the latter “was not the attorney of Wright & Nephew with regard to the Philips mortgage,” and being answered in the affirmative, requested Mr. Woods “not to put any cost, or any more cost, on it,” stating that he or they “expected money by the next steamer from Mr. Philips, and would arrange it.” On the 30th December, 1847, while Mr. Burnside, at the instance, and with the funds of the executors of John Norris, was on the road to Philadelphia, for the purpose of obtaining the notes of the Lewistown Bank (then depreciated and no longer current), he was informed by the attorney of Wright & Nephew that the mortgage had been assigned to them for a valuable consideration. Mr. Burnside, notwithstanding this notice, proceeded upon his mission, obtained the notes of the Lewistown Bank, and gave them to William B. Norris, who, as executor of his father, the maker, and as endorser of the note, tendered the notes thus obtained to Mr. Woods, the attorney of Wright & Nephew.

The assignment of the mortgage to Wright & Nephew "was recorded in Huntingdon county, where the mortgaged premises were situated, and an office copy was received in evidence, under objection from the defendant below. In Craft v. Webster, 4 Rawle 242, Mr. Justice Kennedy endeavored to show that an assignment of a mortgage was not within the Recording Act, so as to secure to the assignee any additional protection against a subsequent assignment. But the instrument before him was not a mortgage, and the learned judge admitted that the question which he discussed did not arise in the cause. It is to he regretted, that under such circumstances, he permitted his mind to be committed on a question so important. In Mott v. Clark, 9 Barr 406, Mr. Justice Rogers, in view of the opinion of the judge who delivered the judgment in Craft v. Webster, stated the law to be, that “the assignee is not bound to register his assignment.” But the question whether an assignment of a mortgage may not be recorded so as to make a certified copy of it evidence, seems not to have been decided. The Act of 28th May, 1716, expressly declares, that “all bargains and sales, deeds and conveyances of lands, tenements, and hereditaments, may be recorded.” A mortgage is in form a conveyance of the land, and an assignment of it is another formal conveyance of the same land. The assignment of a mortgage is therefore within the language of the recording Act of 1716. It has been the usage to record such instruments, because they affect the land, and are links in the chain of title. A release or satisfaction of a mortgage. executed by an assignee, would be worthless without the production of the assignment. Its registry is therefore as important to the owner as the registry of the release or the entry of satisfaction. A construction which promotes public convenience, accords with long usage, is productive of no evil whatever, and at the same time follows the letter of the statute, may fairly be held to be within its true intent and meaning. The indications of an intention to give it a different construction may have produced the Act of 9th April, 1849, which expressly declares that “ all assignments of mortgages and letters of attorney authorizing the satisfaction of mortgages” “may be recorded,” and that “certified copies” of such records “shall be evidence.” This Act, although not to he received as an authoritative construction of the previous legislation on the subject, is entitled to consideration as showing that the construction 'now given to the Act of 1715 accords with the views of public convenience which are entertained by the representatives of the people. A mortgagee stands on the footing of a purchaser of the land, and his assignee, without notice, takes it discharged of the latent equity of third persons : Mott v. Clark, 9 Barr 405. Forms are not to be regarded when opposed to justice and public convenience, hut when th& form of an instrument can he made subservient to both, such an application of it is justified by the soundest principles of jurisprudence. Every man is hound to enjoy his property so as to do no unnecessary injury to another. Upon this principle it has been held to be the duty of an assignee of a judgment to docket it for his use, in order that others may not he defrauded by the former owner: Fisher v. Knox, 1 Harris 622. The same principle, independent of the words of the statute and the form of the instrument, justifies the assignee of a mortgage in placing it upon record. We give no opinion upon the effect of such a record, further than to say that a certified copy of it is evidence.

In this case the debt was secured by a note, a judgment against the drawer, another judgment against one of the endorsers, and a mortgage against Philips, the other endorser. An assignment of the debt is an assignment of all the securities for it, and any order, writing, or act, which amounts to an appropriation of a fund, is an assignment of the fund. Even an assignment of a bond, which has been extinguished by a judgment, will carry the judgment, because it is sufficient evidence of the purpose of the assignor, which was to assign the debt, not the mere paper on which the obligation was written. The rule of common sense is the rule of law on this subject; and the assignment of the mortgage, is an assignment not only of the claim against the mortgagor, but of all the securities which the assignor may hold against him, or other parties, for the same debt. In Selfridge v. The Northampton Bank, 8 W. & Ser. 311, the assignment in its language embraced the mortgage alone, but it was treated by all the counsel, and by the Court, as an assignment of the debt. That it was so intended by the parties, was too clear for argument.

The case before us does not require an opinion on the question how far one who receives, as collateral security for a pre-existing debt, an assignment of claims against others, takes them subject to the equities which existed between the parties at the time of assignment. The question here is, whether a debtor, after notice that- Ms creditor had assigned the debt to a third person, to secure the latter for acceptances made for the creditor, the proceeds of which had been received by him, and after notice also of the insolvency of the assignor, could purchase, for a trifling consideration, desperate claims against the insolvent creditor, for the purpose of tendering them in payment of the debt, in the hands of the innocent assignee. The plainest principles of justice require that this proposition should be answered in the negative. It is perfectly lawful for any one who has incurred liabilities for another, to receive the transfer of a chose in action, as a security to cover any loss which may accrue. By accepting the transfer he acquires a right which the debtor is bound to respect, and which cannot, according to the rules of equity, or the principles of the common law, be defeated by the debtor.

But it is said that by the statute of 12th March, 1842, it is provided that when a bank makes a general assignment for the benefit of its creditors, “ the assignees shall receive in payment of debts due to the bank, its own notes and obligations.” If this provision be confined to the notes and obligations of the bank which the debtor had taken, in the usual course of business, before notice of the assignment, its justice is so obvious as to need no support from the statute. But when a right is claimed under it by which a debtor is to make large gains out of the insolvency of an institution, whose failure has been accelerated by his own refusal to meet his engagements; and when this is to be accomplished by defeating the just claims of creditors, after full notice of their rights, through the purchase, for a trifling consideration, of the depreciated notes of the bank, after its insolvency and general assignment for the benefit of creditors were known, we are called upon by the highest considerations of duty to confine the statute to the cases for which its provisions were intended. The construction adopted by the plaintiff in error would not only place it in the power of the debtors of a bank to make large fortunes out of its ruin, to the injury of its honest creditors, but would present a constant temptation to the directors, and others having a controlling influence in its management, to obtain large loans from it, and. then reduce it to insolvency for the purpose of purchasing its depreciated paper, at enormous discounts, to meet their engagements. By the letter and spirit of the statute the notes of an insolvent bank, purchased after notice of a general assignment for- the benefit of creditors, can only be tendered in payment of “ debts due to the bank,” that is, to such as belonged to the bank, at the time of the assignment — and passed to the trustees; and not to such debts as were transferred before the assignment, in good faith, for a valuable consideration, with the knowledge of the debtors.

The purchase of depreciated notes, after knowledge of such an assignment, is an act of bad faith, injurious to the rights of others. It is immaterial in what manner the knowledge of the transfer was acquired, so that it existed at the time" of the purchase. It is not necessary that notice should be given by the party claiming the transfer, nor is it required that it be in writing. In the ease of Northampton Bank v. Balliet, 8 W. & Ser. 311, the knowledge was derived from conversation with an agent of the assignor, who had no further interest in the demand. And in the case of McKinney & Heller v. Brights, 4 Harris 399, where the party injured by a misapplication of funds was aware of the injury about to be done, he was not required to give any notice whatever of his rights, because the parties concerned were already possessed of such knowledge. In a case of this kind, all that is required is to lay before the jury such circumstances as justify them in drawing the inference that a knowledge of the assignee’s rights existed at the time the measures were taken by the debtor for the purpose of defeating them. Such evidence existed in this case, and was properly left to the jury. The evidence of a consideration for the transfer, in the acceptances of Wright & Nephew (the proceeds of which were received by the bank), was also ample, if not conclusive.

There is nothing in this record affecting injuriously the rights of the plaintiff in error, and the judgment is therefore to be affirmed.

Judgment affirmed.