Myerstown Bank v. Roessler

Opinion by Mr. Justice Gbeen,

The plaintiff’s witness, George H. Horst, cashier, testified on the trial that at the time the assignment of the Roessler mortgage to Urich was taken he did not ask the mortgagor whether he had any defense to the mortgage. He also testified that the bank had no Roessler notes when the assignment was taken, .and that they had none when the present action of scire facias on the mortgage was brought, and also that they held no such notes at the time of the trial. He also testified that Urich, the mortgagee, was indebted to the bank, on other notes, not given by Roessler, to a considerable amount at the time the assignment of the mortgage was taken, and still held such notes at the time of the trial. It was also proved, and not contradicted, .that when the mortgage was given by George B. Roessler in July, 1891, to Samuel Urich, he held Roessler notes to the amount of about four thousand dollars, and that the mortgage was given at his, Urich’s, instance to secure the payment of those notes. It was further testified that although the original notes given by Roessler to Urich had been taken up and destroyed, other notes of the same amount were given in renewal of them, and these latter notes were still due and unpaid at the time the mortgage was assigned, and at the time of the trial. It will thus be seen that the present proceeding by scire facias ,on the mortgage given by George B. Roessler to Samuel Urich, for the purpose of securing the payment of notes which Urich held against Roessler, is an attempt to compel the payment of debts due by Urich to the Myerstown bank, for which Roessler was not responsible, and that if the plaintiff recovers in this proceeding, the debts due by Roessler to Urich will not be paid, but Roessler’s property will be sold to pay Urich’s debt to the bank. There is not the least question as to the law of this .case as it affects the plaintiff bank. That they took the mortgage subject to all the equities of the mortgagor against the mortgagee is as plain as the sun at noonday. A brief reference to a few of our own decisions will suffice. In Horstman v. Gerker, 49 Pa. 282 , we held that the assignee of a mortgage, though allowed to sue in his own name, takes it subject to all the equities in favor of the mortgagor existing at the time of the assignment. In this case a mortgage had been assigned as collateral security for the payment of certain promissory notes *437 held by the assignee. The assignee assigned the mortgage to another without notice to the mortgagor, who paid off the notes for which the assignment was made, and it was held a good defense to the mortgagee against the second assignee. In Lane v. Smith, 103 Pa. 415 , it was held that the assignee of a bond who fails to make inquiry of the obligor, takes it subject to any defense to which it was subject in the hands of the obligee. Where there is a secret agreement between the obligor and obligee of a bond restricting its collection to certain property of the obligor, an assignee of the bond for value who purchased without notice of the agreement, but without inquiry of the obligor, will be affected thereby. In Theyken v. Howe Machine Co., 109 Pa. 95 , Gordon, J., delivering the opinion of the court, said: “ The assignee of a specialty takes it subject to the equities of the obligor, and this rule holds good as well in the case of a mortgage as of any other sealed instrument. . . . In the absence of a certificate of no set-off, it is the business of the assignee of a mortgage to make inquiries of the mortgagor as to its condition in the way of payment or equitable set-off, and if he does not choose to so do he must take upon himself the risk of such neglect. Now if the evidence is to be believed, Deshler took an assignment of Tlieyken’s mortgage to Ruhf under the express arrangement that the commissions due him, Theyken, were to be applied in payment of it, and as these were in excess of the amount thereof, the moment the assignment was executed to Deshler the mortgage was, in equity, satisfied, and there was nothing left which he could assign to the company. In other words, the plaintiff having received a transfer of this specialty without a certificate of no set-off, and without inquiry of Theyken, is in no better position than its assignor.”

This decision is conclusive of the present contention, and it goes, in its facts, much beyond anything required in the case at bar. In the cited case the mortgage was to be paid in the future by commissions then unearned, whereas, in the case we are now considering, the mortgage was claimed to have been given (and the jury has so found) to secure existing and definite obligations. The same doctrine was applied in Morgan’s Appeal, 126 Pa. 500 , in which a boarding bill of the mortgagor was permitted to be set off against the assignee of a mortgage, and in Wilson v. Ott, 173 Pa. 253 . It is beyond all contro *438 versy that when the plaintiff bank took an assignment of the present mortgage, they took it subject to all the equities which the mortgagor might have asserted against the mortgagee.

The only reply made to this contention for the appellee, is, that the introduction of parol testimony to prove that the mortgage was to be held as security for certain promissory notes owing by the mortgagor to the mortgagee, and that the mortgagee was not to assign it to other persons, would be a violation of the rule which prohibits the alteration of written instruments by parol. But this contention is a very grave mistake and cannot be sustained for a moment. The evidence offered does not change, alter or contradict the terms of the mortgage in any respect. It was not offered for any such purpose, and it does not, and cannot, have such an effect. The evidence was offered and admitted simply to prove that the mortgage was to be held and used for a certain purpose, to wit: to secure the payment of certain promissory notes which were owing by the mortgagor to the mortgagee. Such evidence does not impair or change the instrument in any degree. It was entirely competent to prove such an agreement against the mortgagee if he had been the plaintiff, and the authorities already cited prove conclusively that it was equally competent to prove it against the plaintiff bank as assignee of the mortgagee. All the cases cited, and they are but few of the whole number to the same effect, must necessarily be based upon the same idea. Thus, in Lane v. Smith, supra, Mr. Justice Tbunicey, delivering the opinion, said: “ The first three assignments of error relate to the same question, namely, whether the assignee of the bond can be affected by the verbal agreement between the obligor and the obligee set out in the offer of testimony which is-the subject of the first assignment. At the argument the plaintiff contended that such agreement could not avail to relieve the obligor from personal liability, even as against the obligee. But the point has been settled in Pennsylvania, in Irwin v. Shoemaker, 8 W. & S. 75 , wherein it was decided that, in an action on a bond secured by a mortgage given for purchase money of land, the defendant may prove that it was part of the contract that the plaintiff was to look alone to the property sold for payment. As a general rule the assignee of a bond takes it subject to every equity which might have been set up against it in the hands of the obligee.”

*439 The contention that the proposed verbal testimony would prove that tbe bond and mortgage were not assignable, and that this was a contradiction of its terms, is entirely untenable. There was no offer to prove that the bond was not assignable, but simply to prove an agreement by tbe mortgagee that be would hold it to secure the payment of certain obligations, and that he, the mortgagee, would not assign it to other persons in prejudice of the mortgagor. This was merely an agreement by tbe mortgagee that he, the mortgagee, would not mate an assignment of the mortgage to tbe injury of the mortgagor. Under all tbe authorities it is competent to prove by parol that it was a part of the whole contract of. the parties that the written instrument, whatever it was, should not be used in a certain way. This was one of the excepted cases stated in tlie opinion in Phillips v. Meily, 106 Pa. 536 , in which parol testimony may be admitted to affect a written instrument, to wit: “ Where there has been an attempt to make a fraudulent use of the instrument, in violation of a promise or agreement made at the time the instrument was signed, and without which it would not have been executed.” It is not necessary to pursue the discussion, the question is entirely free of difficulty.

Turning now to the testimony in support of tbe defendant’s contention, it is only necessary to say that it was simply overwhelming, and not at all contradicted. The mortgagor liimself testified that he had made the agreement alleged, with the mortgagee, giving the most precise details, and the son of the mortgagor, who was present when the mortgage was executed, testified most explicitly to the same effect. Moreover the jury lias found that the alleged agreement was made, and we do not see how they could have found any other verdict. The foregoing views dispose of the first, second and fifth assignments of error, all of which are dismissed.

The letters offered and received in evidence were of no kind of consequence and could not help the plaintiff in any point of view. They expressed the precise fact that nothing had been paid on the principal or interest due upon the mortgage, and that the estate of G. B. Roessler still owed the whole amount of the mortgage. This resulted from the fact that the notes for securing which the mortgage was given were not paid, but renewed at maturity, and that the renewed notes were still un *440 paid when the letter of November 7, 1895, was written. The whole matter was fully explained by the testimony. As a matter of course the letters could not operate as an estoppel as the plaintiffs had parted with nothing on the faith of them. The assignment had been made long before. The third and fourth assignments have no merit, the questions asked were altogether unimportant, and they were put in cross-examination, which is subject to the discretion of the court.

The answer of the court to the defendant’s third point was entirely correct, and therefore the sixth assignment cannot be sustained, and the same is true as to the answer to the defendant’s sixth point, and hence the seventh assignment must be dismissed. We do not agree that the charge was inadequate, and hence the eighth assignment is not sustained.

Judgment affirmed.