Opinion
October 27, 1931.
January 30, 1931.
Equity — Real estate — Sale of — Failure to mention existing mortgage in deed — Deed — Covenant against encumbrances — Covenant of quiet enjoyment — Rights of a subsequent purchaser — Act of May 28, 1715, 1 Smith Laws, 94 Sec. 6.
In a bill in equity to restrain execution on a judgment, it appeared that the defendant had been the owner of a farm which was subject to a mortgage in favor of his father and that he had sold it to the plaintiff's predecessor in title by a general warranty deed containing a covenant of quiet enjoyment. The plaintiff's predecessor in title borrowed money from it and gave it a mortgage on the land. Subsequently upon default the plaintiff entered judgment on the bond secured by its mortgage, issued execution and purchased the property at the Sheriff sale. After the sale of the farm by the defendant to the plaintiff's predecessor in title, the defendant's father died and in the settlement of the estate the mortgage held by the father on the farm was assigned to the defendant. Subsequent to sale on the plaintiff's judgment the defendant confessed judgment on the bond accompanying his mortgage and issued execution. The testimony established that there was an express understanding and agreement between the defendant and the plaintiff's predecessor in title at the time of the sale that the latter was taking title subject to the mortgage owned by the defendant's father and that at the time of the plaintiff's loan the former mortgage was duly recorded and indexed and unsatisfied.
Held: (1) That there was sufficient evidence to overcome the effect of the covenant in the defendant's deed (2) that the plaintiff had constructive notice of the prior mortgage (3) that no equity arose in favor of the plaintiff which entitled it to the injunction and (4) the decree of the Court below will be affirmed.
Under the Act of May 28, 1715, 1 Smith's Laws, 94, Sec. 6, the words "grant, bargain and sell" in a duly recorded fee simple deed amount to a covenant to the grantee that the grantor has done no act or created any encumbrance whereby the estate granted by him might be defeated, and also to a covenant for quiet enjoyment against the grantor, his heirs and assigns, unless limited by express words contained in the deed.
A grantee under such a deed may be estopped from invoking the protection of the covenants in the deed where the parties mutually agreed that an existing mortgage was to remain as an encumbrance on the premises.
Appeal No. 41, October T., 1930, by plaintiff from judgment of C.P., Huntingdon County, No. 297, May T., 1929, in the case of The Grange Trust Company v. George W. Shade and Samuel H. Beaver, sheriff.
Before TREXLER, P.J., KELLER, LINN, GAWTHROP, CUNNINGHAM, BALDRIGE and WHITMORE, JJ. Affirmed.
Bill in equity to restrain execution on a judgment. Before BAILEY, P.J.
The facts are stated in the opinion of the Superior Court.
The court dismissed the bill. Plaintiff appealed.
Error assigned, among others, was the decree of the court.
C.H. Whittaker, for appellant.
W.M. Henderson of Henderson Henderson, for appellee.
Argued October 27, 1931.
On September 27, 1919, Edward P. Shade conveyed to his son, George W. Shade, one of appellees, a farm in Huntingdon County, took from him a purchase money mortgage for $1,750, and forthwith recorded it in that county. On August 15, 1921, George W. Shade, by deed of general warranty, conveyed this farm to Charles L. McCoy, for the consideration of $3,500. $1,750 of the consideration was paid by McCoy and the balance thereof was covered by his assumption of the mortgage above mentioned which, by agreement of the parties, was to remain a lien upon the land. No mention of the mortgage was made in the deed. On December 14, 1923, McCoy borrowed from plaintiff, appellant, $2,500 and gave it a mortgage on the above mentioned land for that amount. On January 1, 1924, McCoy paid Edward P. Shade $750 on his mortgage and the interest up to that date. On January 7, 1924, Edward P. Shade died, still owning the mortgage which had been reduced to $1,000, and in the settlement of his estate the mortgage was assigned to George W. Shade, covering his share in his father's estate. The assignment was duly noted on the record of the mortgage. On January 17, 1929, plaintiff entered judgment on the bond secured by its mortgage against McCoy, and under it the mortgaged premises were sold to it at public sale by the sheriff and a deed was delivered therefor. On February 16, 1929, George W. Shade entered judgment on the bond accompanying his mortgage and an execution was issued thereon. Whereupon, appellant filed a bill in equity against him and the sheriff of the county, praying for an injunction to restrain further proceedings upon the execution. This is an appeal by plaintiff from a final decree dismissing the bill.
The contention of appellant is that by the covenant of general warranty and the covenant for quiet enjoyment arising from the words "grant, bargain and sell" in the deed from George W. Shade to McCoy, the former is estopped from proceeding upon his bond and mortgage to sell this real estate; that the title which he gave to his grantee McCoy is paramount to any that he could acquire under an encumbrance existing against the property at the time he sold it, and against which he covenanted to defend. Reliance is placed upon the rule of law followed in George v. Brandon, 214 Pa. 623; Waslee v. Rossman, 231 Pa. 219; Shaffer v. Greer, 87 Pa. 370, and kindred cases. As stated in Waslee v. Rossman, supra, it was held in George v. Brandon, supra, "that the grantor in a general warranty deed is bound by the warranty, and cannot, as against the grantee, acquire title to the land in a proceeding on a mortgage which was a lien on it at the date of the deed." It is well settled that under the Act of May 28, 1715, 1 Smith's Laws 94, Sec. 6, the words "grant, bargain and sell" in a duly recorded fee simple deed amount to a covenant to the grantee that the grantor has done no act or created any encumbrance whereby the estate granted by him might be defeated, and also to a covenant for quiet enjoyment against the grantor, his heirs and assigns, unless limited by express words contained in the deed. See Waslee v. Rossman, supra. But it is equally well settled that a grantee under such a deed may be estopped from invoking the protection of the covenants in the deed against the encumbrance. This principle was recognized in Waslee v. Rossman, in which the Supreme Court considered the question whether, notwithstanding the covenants, there was enough in the evidence to justify submission of the question whether the parties mutually understood and agreed that the plaintiff was to hold the mortgage as a subsisting encumbrance against the real estate conveyed to the defendant.
In Johnston v. Markle Co., 153 Pa. 189, one of the inquiries was whether the covenant implied from the words "grant, bargain and sell" ought, as between the vendors and vendees, to be enforced in a court of equity. In discussing the question, the Supreme Court said: "If the vendees were not misled, but bought with knowledge of the encumbrance and provided a mode for indemnifying themselves against it as part of the contract of purchase, then they have no equity that entitles them to relief at the hands of a chancellor. ..... The evidence ...... is sufficient to show that the existence of the mortgage was well understood."
In the case at bar there was no breach of covenant giving McCoy a right of action against his grantor, because there was an express understanding and agreement that McCoy was taking title subject to the Shade mortgage which he assumed to pay as part of the consideration. Parol evidence was admissible to prove that at the time the deed to McCoy was executed he assumed the mortgage as part of the consideration paid his grantor. That such evidence is sufficient to overcome the effect of the covenant as prescribed by the Act of 1715, supra, was recognized by Mr. Justice SHARSWOOD in Shaffer v. Greer, supra, in which it was held that it was not error to reject the offer of certain parol evidence, because it did not amount to an offer to prove that the grantee assumed the payment of a lien on the property as part of the consideration in the deed.
In Buckley's Appeal, 48 Pa. 491, it was held that parol evidence was admissible that at the time of the sale the purchaser agreed to pay certain mechanics' liens which were upon the property when the conveyance was made, but which were not mentioned in the deed. The court said: "The rule excluding parol evidence to contradict or alter a written instrument does not prevent giving parol evidence of a consideration not mentioned in a deed, if it be not directly inconsistent with that expressed." See also Miles v. Waggoner, 23 Pa. Super. 432, referring to numerous decisions in Pennsylvania upon this question.
As it is clear that McCoy bought subject to the mortgage, he could not have invoked the covenants in his deed as a protection against it. Appellant stands in his shoes. If McCoy could not rely upon the covenants of general warranty and quiet enjoyment in his grantor's deed for protection against the mortgage, neither can appellant, his mortgage creditor. There is evidence in the record, and the chancellor found, that before appellant made its morgtage loan to McCoy its cashier and treasurer learned that McCoy owed George W. Shade $1,000 on his mortgage. But it is unnecessary to predicate anything upon this finding. The mortgage was duly recorded and indexed and unsatisfied. This was constructive notice to appellant when it made the loan to McCoy.
On the whole case, we conclude that the learned chancellor rightly decided that the appellee, George W. Shade, was not estopped from proceeding upon the bond secured by his mortgage on the real estate here involved, and that no equity arose in favor of appellant which entitled it to the injunction prayed for.
The assignments of error are overruled and the decree is affirmed at appellant's costs.