Lahr's Appeal , 1 Law Times (N.S.) 279 ( 1879 )

Mr. Justice Trunkey

delivered the opinion of the court,

Speaking of the judgments against Andrew Bums, the auditor says: “ They are the first and only liens of record, and in point of law are entitled to the proceeds of sale. The unrécorded mortgage of the building association can take nothing as against these liens in point of law. Nor is it entitled to any preference in equity. If it is, it must be by bringing home to these several plaintiffs actual notice of the existence of this unrecorded mortgage, not only before their respective liens attached, but before the debts upon which they are founded were contracted by Burns.” .This principle, -governing-the distribution, has been uniformly held by the courts, from Semple v. Burd, 7 S. & R. 286, to Corpman v. Baccastow, 3 Norris 363.

In Britton’s Appeal, 9 Wright 127, it was decided that a mortgage, executed before, but not recorded until after, judgments had been entered against the mortgagor, is entitled to priority over them in the distribution, when the judgment-creditors had actual knowledge of the mortgage before the debts were contracted for which their judgments were obtained. The fact of such knowledge was emphasized by Justice Strong. His reasoning places him who gives credit and takes judgment after notice of the mortgage on the footing of a purchaser with notice, and does not apply to one- who gave credit without notice or knowledge. As respects the latter, the ruling of the auditor is a reflex of the professional understanding, as expressed in the phrase, “such mortgage is good against a judgment-creditor with notice before his debt was contracted,” repeated as late as McLaughlin v. Ihmsen, 4 Norris 364. No equitable principle demands postponement where the credit was given prior to the mortgage or the creditor’s knowledge thereof. Then he stands as clear of wrong as an innocent purchaser, and his judgment, though entered after knowledge of the mortgage, will take as the first lien. The reason for postponement where credit is given with notice or knowledge, is the same as applies to a purchaser under like circumstances, namely, that if he seeks to defeat the estate of the mortgagee he is guilty of fraud, but when the credit is given before, the element of fraud in contracting the debt is wanting. It matters not that the creditor was present at the execution of the mortgage and was silent. That will not preclude his use of lawful remedies, nor give the -mortgagee a superior equity. Creditors are equal in merit and the law favors the vigilant. Where a debtor gives one a.mortgage, and another, whose contract was prior, a judgment-mote, the latter, if first entered of record, is the prior equitable as well as legal lien.

Burns’s wife joined in the mortgage and undoubtedly knew the contents of both its parts and of the accompanying bond. About five years thereafter, 'he gave a judgment note to Elias Lahr for her use. The auditor finds the consideration of that note was money she got from her father’s estate, ten or eleven years ago, which she loaned to her husband, taking no security for it until this judgment was given. Hence, at the date of the mortgage, this debt had run a little over three years. To characterize it as a “stale debt,” “barred by the Statute of Limitations before the unrecorded mortgage was executed,” ill accords with the fact found, or the law. The Statute of Limitations does not begin to run against a married woman, on a loan to her husband, till his death: Towers v. Hagner, 3 Whart. 48; Kutz’s Appeal, 4 Wright 90.

Over thirty years ago it was enacted that “ all property, of whatever name or kind, which shall accrue to any married woman during coverture, by will, descent, deed of conveyance or otherwise, shall be owned, used and enjoyed by such married woman as her own separate property.” The husband is sometimes slow to comprehend the full extent of this innovation on rights he formerly enjoyed, and so are his creditors. The statute does not disturb the relation of husband and wife — a union of two persons — but to some extent upsets the theory that her legal existence is suspended during coverture. Their unity, his headship, his power and influence over her, are facts as distinctly recognised in the statutes as in the common law. Therefore, she cannot convey or encumber her property, save as authorized by statute ; and very rarely, if at all, will her silence or acts in presence of her husband operate as an estoppel. Nothing can be more natural than that she will lend her money to her husband, and that he will give her a security for it whenever he sees financial embarrassment approaching. Such loans and securities are sanctioned by numerous decisions. She has the same right to loan to him as to a stranger; it is as lawful for him to secure that loan as any other. Strangers may sue him and obtain judgment adversely — his wife cannot. The law permits an insolvent debtor to give judgments to his creditors as he prefers. An honest judgment, voluntarily given by a husband to secure a debt owing to his wife, is just in law, and he who denounces the act as wrong in morals, must take a singular view of the promptings of affection and interest. Who could be more worthy his preference than she ? And for whom could he feel greater concern? Until the legislature changes the law, these loans will be made and securities given. Her property vests in her as her separate estate; and the husband’s is his separate estate. In view Of their respective rights of property, why should her judgment be postponed to one who loaned him money, though he used it to improve his land. Were a stranger holding a judgment in the place where Mrs. Burns’s stands, he would take the money. Hers is equally meritorious. For prevention of fraud, clear and satisfactory proof of a wife’s claim against her husband is exacted in a degree not required of others, but when established she is entitled as another would be.

The association claims the money raised by sale of Burns’s land in virtue of the mortgage given to secure money he borrowed. It cannot tend to defeat the judgment of Harriet Burns to give a detailed description of the parts of the mortgage — one, in form, an absolute conveyance, the other a defeasance — when, if it be not a mere mortgage, for that reason, it cannot take a dollar of the fund. The rights and disabilities of married women, except as secured or removed by statutes, remain as at common law. We fail to discover, in the facts found by the auditor, an act of Harriet Burns which estops her from demanding and receiving the money due on her judgment. To hold that anything she did is an equitable estoppel, as between her and the mortgagee, would be to assert a principle most dangerous to the rights of married women, unsupported by-reason or precedent.

As distribution was made, the question of costs did not affect the appellant. Her judgment ought not to be prejudiced by costs accrued on a posterior lien which were unnecessary to affect the sale: Fry’s Appeal, 26 P. F. Smith 82. Costs on writs, set aside for cause or by consent, she not being in fault or a party consenting, cannot be paid out of money belonging to her. Allowance of $44,50 is said to be conceded, which sum seems to include a portion for which she is not liable.

Decree reversed, and it is now considered and decreed, that $44.50 be paid on costs of suit, as per auditor’s statement; that the costs of audit and respective amounts due on the three judgments, anterior to judgment No. 516, of March Term 1876, Elias Uffhr for use of Harriet Burns, be paid as per auditor’s report; and that the balance, of the fund, $271.32, be appropriated to said judgment, in favor of Elias Lahr for use of Harriet Burns. Costs of this appeal to be paid by the appellees.