decided: May 4, 1973.
Appeal from decree of Court of Common Pleas, Orphans' Court Division, of Washington County, No. 63-70-705, in re estate of David Leroy Rabe, a former incompetent.
Roger J. Ecker, Special Counsel, with him J. Shane Creamer, Attorney General, for Commonwealth, appellant.
Kathleen Kelly Curtin, with her James M. Seif, Assistant United States Attorney, and Richard L. Thornburgh, United States Attorney, for United States, appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy and Manderino, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Manderino dissents. Mr. Justice Nix took no part in the consideration or decision of this case.
[ 452 Pa. Page 213]
David Leroy Rabe was adjudicated an incompetent in June of 1961, and the Mellon National Bank and Trust Company was appointed guardian of his estate. Almost nine years later, on April 23, 1970, David Rabe was declared competent and the guardian was directed to file its final account.*fn1 At the hearing on audit of the account, the Commonwealth of Pennsylvania filed a claim of $5,817.90 against the former incompetent's estate for care and maintenance provided to Rabe at Torrance State Hospital during the period November, 1960 through July, 1968. On the authority of the Act of June 1, 1915, P. L. 661, § 6, 71 P.S. § 1786, the Commonwealth argued that its claim must take precedence over those of all general creditors.*fn2
The Western Pennsylvania National Bank, holder of a first mortgage on real property owned jointly by the former incompetent and his wife, also filed a claim against the incompetent's estate for the unpaid balance of principal of the mortgage loan, for interest from June 24, 1965 through September 1, 1970, and for miscellaneous
[ 452 Pa. Page 214]
costs and insurance premiums paid by the bank, all in the sum of $7,393.98.
The lower court in its adjudication and decree of distribution allowed the claim of the mortgagee Bank as a preferred claim, taking precedence over that of the Commonwealth. Because the assets of the estate were insufficient to pay all claims proved, the decree allowed the Commonwealth only the sum of $419.58 in satisfaction of its claim. The Commonwealth's exceptions were overruled and this appeal followed. We will vacate the decree of distribution and remand the matter for proceedings consistent with this opinion.
It is elementary law that a mortgagee has a lien on the reality which secures the mortgage debt, subject to pre-existing liens and encumbrances of record. Beyond the mortgaged property, however, the mortgage does not constitute a lien and hence, as against other property, the mortgagee's status is that of a general creditor. 24 P.L.E. Mortgages § 101, at 521; Cake Estate, 157 Pa. 457, 27 A. 773 (1893); Elbert Estate, 3 Pa. C.C. 611 (1887) Should the mortgagee choose to seek satisfaction of the obligation secured by the mortgage without proceeding against the subject real estate, he is regarded as asserting the rights of an unsecured, general creditor only. Bank of America v. Sunseri, 311 Pa. 114, 166 A. 573 (1933); 25 P.L.E. Mortgages § 273, at 124 (and cases therein cited).
In the instant case there is no indication that the mortgagee Bank desires to proceed against the mortgaged property. Nor does that property appear in the guardian's second and final audit. It follows that the Western Pennsylvania National Bank in this proceeding is a general creditor only and has no lien on assets distributed by the decree of the lower court. Therefore, as between the Commonwealth and the mortgagee, a general creditor, the Commonwealth has statutory priority.*fn3
[ 452 Pa. Page 215]
By our calculation, the assets are sufficient to allow the entire claim of the Commonwealth, leaving some $900 for distribution to the general creditors.
Decree of distribution is vacated and the matter remanded for the entry of a decree consistent with this opinion.
Costs on appellant.
Decree vacated and matter remanded.