Descent and Distribution

Costs and Counsel Fees.

McKinnie's Estate.

-Audit

-Suspended Payment Pending Suit

A fund suspended in the Orphans' Court pending suit in another Court cannot be depleted by expenses and counsel fees in defending the same when such depletion would reduce the full amount of the debt, which was recovered including costs and interest thereon. The creditor is entitled to the payment of his debt, which always has preference over the right of the volunteer.

Exceptions to Accountant's Report. No. 129 April Term, 1915. O. C. Allegheny County.

Bradley McK. Burns, for assignee of exceptant.

G. W. Williams and Watson B. Adair, for creditors.

David Merlin McCloskey, for exceptant.

E. Y. Breck, for accountant.

MILLER, J., October 16, 1916.-The question is whether a fund suspended pending suit in another Court can be depleted by expenses and counsel fees in defending the same when such depletion would reduce the full amount of the debt, which was recovered including costs and interest thereon.

At the former audit of this estate the sum of $500 was suspended to meet the judgment of Purdy Brothers, the principal of which at that time was $409 with interest thereon from March 26, 1915. From the record, in substance, the following is the agreement: That a sufficient sum be suspended to cover the alleged judgment including costs and interests with a statement by the counsel for the claimant that probably the administrator would want something added for expenses. The judgment, which had been opened, following proceedings by the counsel for the estate, was reinstated on appeal to the Superior Court, and the full amount thereof now, including costs and interest, is $482.15.

The amount suspended, $500, with interest thereon amounts to $531.46. Counsel for the estate requests that his expenses and the cost of paper book, $6.50, and counsel fees, $50, be allowed out of this fund before the creditor receives the amount due him.

This contention is refused. The fund was set apart primarily for the benefit of the creditor; he is entitled to the full amount thereof, including interest and costs, before consideration can be given to any other claimant. The accountant in this case was the mere stakeholder of the fund; the contestants were the heirs or ultimate distributees of this estate and the creditor, and necessarily as between them and the creditor, he is entitled to the payment of the debt, he has preference over the right of the volunteer. Inasmuch, however, as there seems to be an implication in the agreement that the same might include some allowance to counsel for expenses and inasmuch as the residue of this fund would be payable to the heirs or distributees for whom counsel appeared, and they not objecting, the difference, whatever it may be, between the full amount of the creditors' claim, interest and costs, and the amount in the accountant's hands, less the costs of this audit, may be awarded to the counsel for the estate on account of his claim. This must be deemed a payment by the heirs.

Byrne vs. Cohen.

Mortgages-Foreclosure-Deficiency—Liability of Vendor for Deficiency -Vendee-Implied Indemnity-Act of June 12, 1878, P. L. 205.

Where real estate is conveyed "subject" to a mortgage, and the property is later sold at a foreclosure on the mortgage for a sum insufficient to satisfy the entire debt and the grantor is compelled to make up the deficiency, he can recover this sum from the grantee in an action of assumpsit upon the implied covenant of indemnity in the absence of averment and proof of accident or mistake in the use of the language. An averment by vendee that he declined to assume any liability for the mortgage is without avail in that it is a contradiction of the terms of the deed.

The Act of June 12, 1878, P. L. 205, relating to the personal assumption of payment by the vendee refers to the vendee's liability to the mortgagee and not to the implied covenant in the deed for liability to the vendor. Prior negotiations and arrangements are merged in the deed, and it becomes the contract between the parties, and evidence to alter, amend or change the terms therein recited is incompetent, except for fraud, accident or mistake.

Motion for a New Trial and for Judgment N. O. V. No. 549 April Term, 1913. C. P. Allegheny County.

W. C. McClure, for plaintiff.

L. S. Levin, for defendant.

SWEARINGEN, J., December 7, 1914.-February 16th, 1911, Patrick J. Byrne et ux., by their deed subsequently recorded, conveyed unto E. Arch Cohen, in fee, certain premises situated in the Fourth Ward, Pittsburgh, Pennsylvania, known as Nos. 3931 and 3933 Forbes Street. In said deed there appears the following:

"This conveyance is made subject to the two following mortgages, to wit:

Patrick J. Byrne to the Third United Presbyterian Church of Pittsburgh, for the sum of $22,000, bearing date the 29th day of January, 1909, and recorded in the Recorder's Office of said County in Mortgage Book Vol. 1377, page 377.

Patrick J. Byrne to J. L. Ritchey, assigned to H. T. Seifers, and assigned to William L. Sloan, for the sum of $6,500, bearing date the 2nd day of February, 1909, and recorded in the Recorder's Office of said County in Mortgage Book Vol. 1378, page 537."

On the same date E. Arch Cohen, by his deed subsequently duly recorded, conveyed unto Patrick J. Byrne in fee two certain pieces of real estate situated in Ross Township, Allegheny County, Pennsylvania, one of which was conveyed subject to a mortgage of $2,500, and the other was conveyed subject to a mortgage of $3,000. In addition thereto, Cohen paid to Byrne the sum of $2,200, as stipulated in their previous written agreement hereinafter mentioned. The deeds aforesaid consummated an exchange of property by said parties, in accordance with a written agreement, made February 10, 1911, between Patrick J. Byrne et ux., the first parties, and E. Arch Cohen, the second party, which, inter alia, provided:

"Said parties of the first and second part agree to pay taxes on their own respective property for the year 1910; taxes for the year 1911 each party is to assume the same on property they are to take one from the other, that is to say said party of the second part is to pay taxes for 1911 on the Forbes Street property, and said first parties are to pay taxes for 1911 on the Ross Township property."

The second of said mortgages, referred to in the deed from Byrne to Cohen, was made to secure Byrne's judgment bond of even date, conditioned for the payment of $6,500, at any time within the period of two.

Byrne vs. Cohen.

years thereafter, with interest. In said bond it was further covenanted, inter alia, that said obligor should "pay all taxes, municipal assessments or charges, assessed against or upon the premises described" in the accompanying mortgage (being the one above mentioned), and that, in case of default in payment thereof, for the period of thirty days, then the whole debt and interest should become due and payable and the usual proceedings might be taken for collection. Subsequently the time of payment of the debt secured by said bond and mortgage was extended for the period of two years from and after February 2, 1911.

Judgment was entered upon the bond aforesaid at D. S. B. No. 205 March Term, 1911, of the Common Pleas No. 1, Allegheny County, Pennsylvania. The said E. Arch Cohen did not pay the March installment of taxes, amounting to $207.48, assessed by the City of Pittsburgh against the premises Nos. 3931 and 3933 Forbes Street, as he had agreed to do, but he defaulted in the payment thereof for a period of more than thirty days. Accordingly, an execution was issued upon the aforesaid judgment, for the collection of the whole debt, interest and costs, including attorney's commissions, aggregating $7,045.66. By reason thereof, the said premises, Nos. 3931 and 3933 Forbes Street, were sold by the Sheriff on September 9. 1911, to William L. Sloan, the use plaintiff in the writ, for the sum of $5,000. After payment of costs and taxes, the sum of $4,392.36 was applied to said judgment, leaving a balance thereon unpaid of $2,653.30, with interest from September 9, 1911. Prior to said Sheriff's sale, Patrick J. Byrne notified E. Arch Cohen that the latter had defaulted in the payment of said taxes and that the said premises had been advertised for sale, and he required Cohen to protect him, Byrne, from liability for the mortgage debt; and this the said Cohen failed to do.

Thereafter, an other execution was issued upon the same judgment against Byrne for the collection of the balance thereof, hereinbefore mentioned, and the Sheriff made a levy upon other real estate belonging to Byrne and advertised the same for sale. Accordingly, Byrne was obliged to pay, and on June 29, 1912, he did pay, the sum of $2,851.03 in satisfaction of said writ of execution.

This action was then brought by Byrne against Cohen to recover the sum of $2,851.03 with interest, which the former was obliged to pay as aforesaid. The defendant denied that he had assumed or undertaken to pay the said mortgage debt, denied that it formed part of the consideration for the exchange of property, denied the plaintiff had been compelled to pay the sum of money aforesaid, and averred that, by "accident or mistake," the scrivener had omitted to set forth in the deed aforesaid, that "defendant in no wise assumed any liability whatsoever" on account of said mortgage against the premises, at Nos. 3931 and 3933 Forbes Street. At the trial, the Court declined to affirm the defendant's point requesting binding instructions for him, and charged the jury that it should return a verdict in favor of the plaintiff for the full amount of his claim and interest, if it found that the plaintiff paid said sum of $2,851.03, as claimed. There was really no dispute that he had paid this money. The verdict was for the plaintiff in the full amount of the claim. Motions were then made by the defendant for judgment non obstante veredicto and for a new trial, and the same have been argued.

The plaintiff founds his right of action upon the implied covenant of indemnity, contained in his deed to the defendant. That deed was made to and was accepted by, the defendant expressly "subject to" the Sloan mortgage. We can perceive no difference in meaning between the words "subject to," as used in this deed, and the words "under and subject to," which

Byrne vs. Cohen.

are sometimes used.

Either form of expression conclusively indicates the. same thing, which is that the full consideration has not been in fact paid. When, therefore, the defendant accepted the plaintiff's deed, which expressly stated that the "conveyance was made subject to" the Sloan mortgage, he thereby impliedly undertook to protect the plaintiff from loss by reason of the said mortgage. Such is the legal meaning of that expression in a deed, as has been frequently decided. The reason is plain. The amount of the mortgage was made part of the consideration. This sum was retained by the defendant for the purpose of paying that debt and for no other. Hence arose his obligation to pay the mortgage debt, and this was a continuing obligation which could only be discharged by payment. His failure to so apply the money, after having obtained the property, thus causing the plaintiff to be held upon his bond accompanying the mortgage, is not only a breach of the defendant's obligation, but is likewise a fraud upon the plaintiff. In consequence, the taking of the above conveyance by the defendant subject to the Sloan mortgage must be construed as a covenant on his part to indemnify the plaintiff for any loss he might suffer by reason of the defendant's default. This is the law as we understand the authorities.

In May's Estate the contention was that one who took title under and subject to a mortgage did not assume an obligation to indemnify the vendor for the whole amount of the mortgage debt. Justice Elkin, speaking for the Court, said:

"If this position is sound law, it will have the effect of overruling a long line of cases in which a different doctrine has been recognized and followed. In Burke vs. Gummey, 49 Pa., 518, it was held that a vendee of property taken expressly subject to a mortgage, makes the debt his own, and if, on the foreclosure of the mortgage, there is a deficiency which the vendor is obliged to pay, he may recover the amount of his loss in an action against the vendee. That case followed the rule announced in Campbell vs. Shrum, 3 Watt, 60, and recognized the principles stated in Blank vs. German, 5 W. & E., 36, and Woodward's Appeal, 38 Pa., 322. Attempts have been frequently made in many later cases to modify or overrule this doctrine. Chief Justice Sharswood in Moore's Appeal, 88 Pa., 450, reiterates the principles upon which the earlier cases were decided by holding that the words 'under and subject' import that the vendee takes the land encumbered, and, at most, that on taking it as an agreed consideration, which includes the encumbrance, he will indemnify the vendor to the extent of that consideration, in the same manner as if it had been paid in cash and so applied at the time. If the rule of these cases is still in force, the contention of the appellant cannot prevail on this branch of the case."

May's Estate, 218 Pa., 64.

* * *

Defendant contends that there was no evidence that the said mortgage formed part of the consideration. We think that the language of the deed conclusively shows the contrary. When words are so used in a deed, such as above quoted, the law implies a covenant of indemnity, and, in the absence of averment and proof of accident or mistake in the use of the language, the legal implication must prevail. There is no pretense in this case that, by accident or mistake, the above words were used. There is an averment that the defendant declined to assume any liability for the mortgage, but that is an entirely different averment, and it is, besides, a contradiction of the terms of the deed.

The defendant also avers that, by accident or mistake, the scrivener omitted to insert in the deed that he had in no wise assumed any liability.

Byrne vs. Cohen.

He failed, however, to prove any accident whatever on the part of the scrivener or of anyone else, and he did not aver any mutual mistake, which alone could have availed him, nor did he prove the same.

The argument of the defendant's counsel, that the parties were only exchanging equities and, therefore, there was no understanding to pay encumbrances, is unsound. The deeds, above mentioned, conclusively show that the parties conveyed land, not equities, each to the other. Each was obliged by the agreement to convey land, each did convey land, in fee, and free from all encumbrances, except certain ones expressly named. To our mind, these circumstances make it even more certain that the Sloan mortgage did form part of the consideration for the conveyance by the plaintiff to the defendant. It makes no difference that the consideration named in the deed from Byrne to Cohen was not the actual consideration. Their written contract shows that they undertook to convey the land, each to the other, and not mere equities.

It is true the evidence showed that the agreement between the parties, as originally drafted, contained a clause to the effect that defendant agreed and assumed to pay the Sloan mortgage, and that this was stricken out of the final agreement at the instance of the defendant. But that clause neither added to nor impaired the implied covenant upon which the plaintiff relies for a recovery here. It only related to the assumption of liability for the mortgage debt to Sloan, the holder thereof, as provided in the Act approved June 12, 1878, P. L. 205. But that Act does not relate to the implied covenant aforesaid at all.

May's Estate, 218 Pa., 64 supra.

Besides, the prior negotiations and arrangements are merged in the deeds, and we are obliged to look to them for the contract of the parties. The evidence aforesaid was really incompetent, and it was only admitted upon the averment of accident and mistake made by the defendant, which, however, he failed to prove.

In view of the foregoing, we are obliged to hold that the defendant was liable to the plaintiff for the amount of the latter's loss. This the jury has found upon testimony which was substantially undisputed.