Gosser v. Yohn

Opinion by

Williams, J.,

This was a cáse stated to determine which of two lien creditors is entitled to the surplus remaining after the satisfaction of a first mortgage lien upon a foreclosure sale.

June 2,1913, one Lewis sold a property to Yohn, who, July 7,1913, gave Mary Gosser a first mortgage thereon for $2,800. July 12, 1913, Yohn gave Lewis a Second mortgage for $1,350, which was recorded October 15, 1913. Between July 12th and 15th, Yohn, upon a statement by Lewis that the mortgage could not be negotiated without it, gave Lewis a promissory note for $1,350 (the amount of the mortgage) which he sold to appellant July 15, 1913. Various payments were made by Lewis upon this note, reducing it to $855. May 6,' 1914, the second mortgage was assigned of record to the Real Estate Savings and Trust Company of Allegheny as collateral security for $1,175 borrowed by Lewis. Yohn had no notice of this transaction. Neither trust company had knowledge of the existence of the other evidence of indebtedness when their respective transactions occurred. The Pittsburgh company' took judgment on its note October 6,1916. The sheriff, in his schedule of distribution, assigned $499.41, the balance in' his hands after satisfying the first mortgage, to the Real Estate company on account of the second mortgage, it having-priority in date according to the list of liens certified to him'.

Did the court below properly hold that the second mortgage lien had priority over the judgment upon the note?

Appellant’s argument is based upon the proposition that the bond and mortgage were given as collateral to the note; that as they were accepted without a declaration of no set-off from the mortgagor, they were taken subject to any equitable defense he had; and that the transfer of Yohn’s promissory note to the Pittsburgh company was a transfer of the collateral security, to wit, the bond and mortgage, in so far as the right to enforce the debt existed..

We may concede that the assignee of the mortgage took it subject to any equities which Yohn had, but we cannot agree that the note was the evidence of the particular debt secured by the property out of which the present fund arose. There was only one such debt created, and that was evidenced by the bond accompanying the mortgage. As the mortgagor had no notice of the assignment, he might have defended pro tanto as to the amount paid by him on account of the mortgage, but the fund in thé hands of the sheriff was less than the amount still due, and the Pittsburgh company could not establish any right to the fund upon Yohn’s equities.

Under the Act of April 10, 1862, P. L. 364, the order of liens as they appear of record is prima facie the correct order. The burden of proof is upon the exceptant. If it can produce evidence that it is equitably entitled to priority, the ^order of payment will be changed: Young v. Brady, 250 Pa. 584. We cannot, however, discover any legal or equitable reason why the exceptant should have priority. It must gain it upon the strength of its own right and not upon the weakness of the prior record lien holder. Its note was an ordinary promissory note so far as the case stated informs us, and was not taken as representing any mortgage debt.

The decree is affirmed.