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IN RE SOLOMON

July 31, 1941

In re SOLOMON


The opinion of the court was delivered by: KALODNER

The facts in this case are stated clearly and succinctly by the referee in his opinion as follows:

"While one Anthony Narkiewicz and Waleryz Narkiewicz, his wife, owned title to premises 2052 Fairmount Avenue, Philadelphia, Pa., as tenants by the entireties, the husband, without the joinder of his wife, gave to the petitioner's assignor his bond for $10,000 and a mortgage, purporting to secure the loan by a first lien upon the said premises. At the same time the husband, again alone, gave his bond for $6,000 and executed what purported to be a second mortgage on the premises to a building and loan association. Then, about a year later, husband and wife joined in a deed conveying their title by the entireties to the bankrupt and another, as tenants in common, 'under and subject, nevertheless, to the payment of two mortgage debts aggregating the sum of $16,000.' About three years after this conveyance and while the bankrupt was still the owner of a one-half undivided interest in the property, the building association carried out foreclosure proceedings on a judgment entered on the husband's bond. The bankrupt apparently assumed the foreclosure proceeding to be effective against his interest in the title to the property for he did not include it in his schedules and it was not administered as an asset of his bankrupt estate. The bankrupt's trustee was in due course discharged and the case closed. The petitioners, however, discovering the defect in the execution of the mortgage, filed a bill in equity in Common Pleas Court joining all interested parties as defendants, including the trustee in bankruptcy, and praying that the mortgage be declared enforceable in equity and that the premises be sold to satisfy the mortgage. Pursuing what seems a dubious course, the petitioners have obtained decrees pro confesso against all party defendants in that suit including the husband and wife, the building association and the assignee of the bankrupt's tenant in common but not against the trustee in bankruptcy. Now, on petitioners' initiative the case has been reopened to permit of an adjudication of the trustee's interest in the property, he having been reelected to that office.

 "The petitioners pray for an order (a) that the trustee's title to the one-half undivided interest in the premises be declared subject to the petitioner's mortgage, and (b) to be authorized to join the trustee as a defendant in the equity proceeding in the Common Pleas Court, there to be permitted to enter a decree pro confesso against him and thereafter to proceed to final decree and sale of the premises to satisfy the mortgagee."

 The specific question before the court is whether the bankrupt's one-half undivided interest in the premises 2052 Fairmount Avenue is subject to the above-mentioned first mortgage in the sum of $10,000.

 I am of the opinion that the referee was in error in denying the relief sought by the mortgagee.

 The case at bar is governed by the principles of "estoppel by deed" of which the following is a clear statement:

 "Estoppel of the grantee of a deed, viewed generally, is of the nature of equitable estoppel rather than technical estoppel by deed, since the estoppel is not predicated primarily on the execution of a formal written instrument which cannot be denied or rebutted, but rather on the inability of a person, in the eyes of the law, to acquiesce in, and enjoy the benefits of, a transaction and at the same time reject the accompanying burdens. A person cannot claim under an instrument without confirming it. He must found his claim on the whole, and cannot adopt that feature or operation which makes in his favor, and at the same time repudiate or contradict another which is counter or adverse to it." 19 American Jurisprudence 619, § 21.

 The doctrine of estoppel by deed, particularly as it relates to the law of the State of Pennsylvania, was exhaustively considered by the Supreme Court of the United States in Gibson v. Lyon, 115 U.S. 439, 6 S. Ct. 129, 133, 29 L. Ed. 440, wherein the court states:

 "* * * If that recital [that it is made under and subject to the payment of the mortgage under which the defendants claim] does not create a personal liability for the payment of the debt, enforceable against the purchaser in an action of covenant, it is, nevertheless, a condition upon which his title vested and depends. He certainly cannot be permitted to claim both under and against the same deed; to insist upon its efficacy to confer a benefit and repudiate a burden with which it has qualified it; to affirm a part and reject a part. The whole title of the plaintiff in error rests upon that conveyance, and the continued existence of the mortgage as an incumbrance forms part of it. The deed comes into the case as evidence on behalf of the plaintiff, as the necessary support of any title whatever, and when he proves it for that purpose, he proves the existing mortgage of the defendant by the same act. The defendant's title, in other words, is part of the plaintiff's title, and by the very document relied on to establish the latter, the former is shown to be its superior, for it declares the title of the plaintiff to be subject to that of the defendant. It is a plain case of an estoppel. This view is supported by the decisions of the supreme court of Pennsylvania, in which the objections to it presented in argument here, have been fully met. Stackpole v. Glassford, 16 Serg. & R. [Pa.] 163; Zeigler's Appeal, 35 Pa. 173; Crooks v. Douglass, 56 Pa. 51; Ashmead v. McCarthur, 67 Pa. 326. * * *"

 See, also, Federal Trust Co. v. Bristol County Street Railway Co., 218 Mass. 367, 105 N.E. 1064 (distinguishing Weed Sewing Machine Co. v. Emerson, 115 Mass. 554, cited by counsel for the trustee in bankruptcy), and Fair Oaks Building & Loan Association v. Kahler, 320 Pa. 245, 181 A. 779, 111 A.L.R. 1108; American Waterworks Co. v. Farmers' Loan & Trust Co., 8 Cir., 73 F. 956; Cheffee v. Geageah, Supreme Judicial Court of Massachusetts, 253 Mass. 586, 149 N.E. 620.

 In American Waterworks Co. v. Farmers' Loan & Trust Co., supra [73 F. 961], it was held:

 "The New Jersey Company, we think, is estopped from asserting the invalidity of the mortgages executed by its predecessor, the Illinois Company, by virtue of the well-established rule that a purchaser of property who accepts a conveyance thereof which describes incumbrance existing thereon, and expressly declares that the conveyance is made subject thereto, will not be allowed to question the validity of such incumbrances. One who thus buys property has no right to challenge the validity of a mortgage lien existing thereon at the date of his purchase, which his grantor by the terms of his conveyance did not see fit to challenge, but recognized in the most formal manner by declaring that he conveyed the property subject to the existing lien. Whether such mortgage is valid or otherwise is no concern of the purchaser, for in contemplation of law he only acquires an equity of redemption in the property conveyed to him, -- that is to say, a right to discharge the mortgage debt, -- and it would be a breach of good faith, having purchased this right and nothing more, to deny the validity of the incumbrance, and seek to avoid the payment thereof on that ground. As between the grantor and grantee in a conveyance made subject to an existing mortgage, the amount of the incumbrance should be regarded as a part of the purchase price left unpaid at the date of the conveyance which the grantee undertakes to pay. At all events, he impliedly agrees not to challenge the validity of the incumbrance. The authorities to this point are amply sufficient, in our opinion, to preclude the New Jersey Company ...


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