Frick's Appeal , 1878 Pa. LEXIS 171 ( 1878 )

Mr. Justice Paxson

delivered the opinion of the court,

The auditor found that the deed from John H. Beale to Henry Erick, dated January 22d 1876, was a mortgage, for the reason that it was accompanied with a defeasance, which was not placed upon record until after the judgment of Mr. Sheller had been entered. This, without more, would have brought the case within the rule laid down in Friedley v. Hamilton, 17 S. & R. 70, and followed uniformly since, that an absolute deed and defeasance, made at the same time, constitute a mortgage; and if the defeasance be not recorded, it is to be considered as an unrecorded mortgage and postponed to a judgment-creditor of a subsequent date, notwithstanding the absolute deed has been duly recorded. But the auditor also found that Sheller, the judgment-creditor, had notice of the true character of the deed before he entered his judgment. He therefore excluded Sheller from participating in the residue of the fund after the payment of the paramount mortgage, and gave it to the endorsers and parties interested in the deed. The court below reversed the auditor upon exceptions, and allowed Sheller to come in pro rata with the parties above referred to, for the reason that even if Sheller had notice of the true character of the deed when he entered up his judgment, he had not such notice at the time the debt was contracted.

We do not think it necessary to discuss this question, as we are of opinion there was not sufficient evidence in the case to establish the defeasance. The deed of January 22d 1876 is absolute upon its face. The paper executed by Frick on July 27th 1876 is a declaration of trust, and lacks every essential element of a defeasance. This was conceded by the auditor. He says: “The defeasance is not to be found in th'e deed dated July 27th 1876, and recorded August 7th following, but rests in parol, and began to exist as soon as the deed from John H. Beale to Henry Frick came into existence.” The auditor was evidently misled as to the true character of the transaction by the statement of some of the witnesses that Frick, the grantee, had declared that the deed was given “ to secure the endorsers.” There is no doubt it was given with a view to the security of the endorsers, but not in the sense of a trust in which Beale, the grantor, was to have any future or resulting interest. The consideration named in the deed was the precise amount of the endorsements, and was as much as the property was worth at a full valuation. The testimony of Beale, the grantor, is explicit upon this point. He says: “The character of the deed was that the property was to be sold and the proceeds go into bank to lift the notes these men were endorsers for. There was nothing said about what was to be done with the property in case I paid the notes on which these men became endorsers; I never took that into consideration. I knew that I had not the means to pay the notes. If Mr. Frick paid the notes the property was to be his.”

We are of opinion that the deed of January 22d was an absolute conveyance, qualified by the subsequent declaration of trust, and that having been recorded prior to the entering of Sheller’s judgment, Sheller has no right to receive any portion of the residue of the fund.

The decree is reversed, and it is ordered that the fund be distributed as reported by the auditor. The costs of this appeal to be paid by the appellee.