Stock v. German Catholic Press Co.

Opinion by

Mr. Justice Elkin,

The question for determination here is whether appellant, a mortgagee named in a leasehold mortgage, is entitled to preference as a mortgage lien creditor in the distribution of a fund arising from the sale of the property on which the mortgage is alleged to be a lien by a receiver of the defendant company. The auditor who reported a distribution and the learned court below in passing upon exceptions to his report held that the mortgage had lost its lien and therefore its priority. The property mortgaged was a leasehold estate and the authority to mortgage such an estate in Pennsylvania is purely of statutory origin. These statutes being in derogation of the common law must be strictly construed and their requirements strictly complied with. This is the rule of all our cases affecting the validity of statutory liens. It includes leasehold mortgages as well as all other preferences and liens created by statute. The legislature has passed three acts of assembly relating to leasehold mortgages of the kind in question here. They are the acts of 1855, 1868 and 1876. Whatever rights these acts gave appellant should be enforced, but what they did not expressly provide cannot arise by implication. The first named act made it lawful for a lessee for a term of years, “to mortgage his or her lease or term in the demised premises with all the buildings, fixtures and machinery thereon to the lessee belonging, and thereunto appurtenant, with the same effect, as to the lessee’s interest and title as in the case of the mortgaging of a freehold interest and title, as to lien, notice, evidence and priority of payment; provided that the mortgage be in like manner acknowledged and placed of record in the proper county, together with the lease. . . The act of 1868 gives the mortgagee of a leasehold the same remedies for collection as those enjoyed by the mortgagees of other real estate. The act of 1876 has but slight bearing and has only to do with the recording of certain kinds of mortgages. The estate authorized to be mortgaged is “his or her lease or term in the demised premises with all buildings, fixtures and machinery thereon to the lessee belonging.” The term of the lease measures the duration of the lien. The pledge is of the lease together with the buildings, fixtures and machinery belonging to lessee and appurtenant to such lease. The foundation of the lien is the leasehold estate and the buildings, fixtures and machinery belonging to lessee are included as appurtenances to the lease, that is appurtenant to the term or estate mortgaged. Buildings, fixtures and machinery not connected with the lease nor appurtenant to it are not subject to mortgage under these acts. The act requires the mortgage and lease to be recorded in the county where the demised premises are located. The recording of the mortgage and lease in compliance with the requirements of the statutes is absolutely necessary to give validity to the lien. This is the method provided for giving notice of record to all persons dealing with the parties affected by the mortgage. The purpose of requiring both instruments to be recorded is to give notice of the terms and conditions of the mortgage and also the nature and extent of the leasehold bound, together with the property appurtenant thereto. This notice being of record, creditors and others are presumed to have knowledge of it and to act accordingly, at least they are bound by it. But they are only bound by what the record contains. In the case at bar there is nothing on record except the mortgage and original lease both of which by their express terms expired on April 1, 1904. It is contended that the lease was extended from term to term and that each extension of the term necessarily carried with it an extension of the lien of the mortgage. Whether this might be done in any ease if the recording acts are complied with, it is not now necessary to decide, but in the present case the contention cannot be sustained because the extensions of the lease were not recorded. The record shows that the term of the lease and the lien of the mortgage expired together on April 1, 1904, and this is the notice mentioned in the act with which creditors are affected. What may have been done by the lessor and lessee of the demised premises as to the extension of the term, not of record, can in no way affect the rights of creditors. The lien of the mortgage depends upon the mortgage record and must stand or fall upon that record.

It is argued for appellant that even if the lien of mortgage on the leasehold estate had expired, it was still a lien upon the buildings and machinery belonging to the lessee. This position cannot be sustained. As hereinbe-fore indicated the lien is primarily on the leasehold and the buildings and machinery are only affected as appurtenances. When the foundation is swept away the whole structure falls. The lien is an entirety and is either valid or invalid as a whole. It is not invalid as to the leasehold and valid as to the buildings and machinery. When the lien expired on the leasehold, it expired on all the appurtenances. Then, again, it is contended that the auditor should have allowed attorney’s commission for attempting to collect the mortgage. While there may be some doubt about this question we cannot say under all the circumstances that any clear error was committed.

The learned auditor gave all the questions careful and intelligent consideration and has convinced the court below and here that his conclusions are correct.

Assignments of errors overruled and decree affirmed. Costs of this appeal to be paid by appellant.