Harrison v. Galilee Baptist Church

234 A.2d 314, 427 Pa. 247, 1967 Pa. LEXIS 476

• Court: Supreme Court of Pennsylvania
• Decided: September 26, 1967
• Docket: Appeal, 371
• Status: Published

Opinions

Opinion by

Me. Justice Jones,

This appeal challenges the efficacy as an estoppel of a declaration of no set-off to a mortgage given by the mortgagor to an assignee for value of the mortgage.

Galilee Baptist Church (Galilee), agreed in writing with Bernard Kanter (Kanter), to purchase a building-located on Parrish Street, Philadelphia, which Galilee contemplated using for church purposes. According to this purchase-sell agreement, Galilee was to pay Kanter $35,000 of which $8,000 was to be paid in cash by the time of settlement and the balance of $27,000 was to be secured by a purchase money mortgage to be held by Kanter. Attached to and, by reference thereto, made a part of the agreement was an “addendum” under the terms of which Kanter agreed that, within 60 days of the settlement date, he would furnish the labor and materials necessary to make certain specified repairs and renovations to the building.

In order to satisfy certain liens against the property and clear the title thereto, Kanter approached an attorney, M. H. Weissman, for a $13,750 loan. Weiss-man agreed to secure $13,750 for Kanter provided that Kanter would assign to Weissman, or his nominee, the $27,000 purchase money mortgage to be executed by Galilee, this mortgage to be collateral security for the $13,750 loan. Weissman then had checks totalling $13,750 credited to Kanter’s bank account, settlement under the Galilee-Kanter agreement was effected and title was taken in the name of Galilee, a mortgage and a bond for $27,500 was executed and delivered and Galilee then executed a declaration of no set-off. This declaration recited, inter alia, that Galilee, as owner of the property covered by the mortgage, had received notice of the assignment about to be made of the mortgage and bond by Kanter, the mortgagee, to Esther Harrison (Weissman’s nominee), and that it then had “no charge, claim, demand, plea or set-off upon, for or against” the mortgage and bond. The bond, mortgage, assignment and declaration were then forwarded to Weissman for Esther Harrison, the assignee.

Thereafter, Kanter failed to make the repairs and renovations which he had agreed to make under the provisions of the “addendum”. Galilee had to engage someone else to make the repairs and renovations and, from the date of the mortgage — January 3, 1961 — until June 2, 1961, Galilee did not pay either interest or principal on the mortgage.

Esther Harrison, assignee, then entered judgment on the mortgage bond and issued an execution against Galilee’s property in the Court of Common Pleas No. 2 of Philadelphia County. On July 2, 1961, the court stayed a sheriff’s sale of the property on such execution and granted a rule to show cause why the judgment should not be opened and Galilee let into a defense. After answer filed and depositions taken, the court below refused to open the judgment and from that order this appeal has been taken.

Initially, it must be noted that, when the declaration of no set-off was given, Galilee had, in fact, no claim against Kanter because Kanter was not then in default under the “addendum” and it was not until some time after Galilee had notice of the assignment and gave the declaration that it had any claim against Kanter. Moreover, the claim of Galilee against Kanter was and still is an unliquidated claim.

When Galilee gave the declaration of no set-off it (a) acknowledged receipt of notice of the assignment of the bond and mortgage to Esther Harrison and (b) admitted the validity of the mortgage debt of $27,000 and the absence of any defense to the payment of that obligation. Cf. Ladner, Keal Estate Conveyancing, 2d ed. Yol. 1, p. 283.

Normally and ordinarily, one who takes an assignment of a bond and mortgage does so at his peril be* cause lie becomes subject to every defense then existing or that it might be subjected to in the hands of the assignor. However, that rule is not applicable where the mortgage debtor, who has notice of the assignment of the bond and mortgage, gives a declaration of no set-off to the assignee. See: Much v. Gorsuch, 307 Pa. 56, 61, 160 A. 774 (1932).

The claim which Galilee would interpose against this judgment arises from events which took place after it had had notice of the assignment and after it had given the declaration of no set-off. In Snyder v. Southwestern Nat’l Bank, 294 Pa. 1, 5, 6, 143 A. 206 (1928), we said: “There was notice to the bank of the intended assignment at the time it issued the obligations; after notice of an assignment of an instrument the party liable thereon cannot set off claims subsequently accruing against the assignor: [citing authorities].” In Much v. Gorsuch, supra, at page 61, we said: “It is inevitable that the defendant’s claim existed or accrued either before or after he signed the declaration of no set-off. If it accrued before, his declaration would most certainly estop him from now asserting that he has such a claim, and if it accrued afterwards, it is clear from what has been stated above that it could not be used as a set-off.”

The declaration of no set-off given by Galilee to Esther Harrison effectively estops Galilee from defending on the ground of its claim against Kan ter, the assignor of the mortgage and bond. To hold otherwise under the instant circumstances would nullify completely the clear language of the declaration. See: Fort Pitt Real Estate Co. v. Schaefer, 96 Pa. Superior Ct. 497 (1929); Quigley v. Breyer Corp., 362 Pa. 139, 142, 66 A. 2d 286 (1949); 51 A.L.R. 2d 886 et seq.

Quigley, supra, upon which Galilee places great reliance, is not presently apposite. In Quigley, the question was whether the assignee of the mortgage, before or at the time of receipt of the declaration of no set-off, had notice that the mortgagor and mortgagee had agreed that the former conld pay off the mortgage at any time before the due date. . The court below in Quigley believed the testimony that the mortgagee-assignor had told the assignee’s agent of the existence of the agreement and disbelieved the agent’s testimony that he had received no such notice. This Court, on the record in Quigley found that notice had been given to the assignee’s agent prior to the declaration of no set-off. In the case at bar, the record does not "reveal notice given of any claim which Galilee had against Kan ter, either by way of notice to Esther Harrison or Weissman, her attorney.

Furthermore, Kanter’s undertakings under the provisions of the “addendum” were collateral to and not expressed in the mortgage and, ordinarily, an assignee would not take the mortgage subject to any equities or set-offs arising from such side agreements. See: McCune v. Gross, 377 Pa. 360, 364, 105 A. 2d 367 (1954); Hickey v. Stern, 351 Pa. 466, 468, 41 A. 2d 551 (1945).

. Lastly, it is well settled that, in the absence of fraud, an unliquidated set-off is not ground for opening a judgment confessed under a warrant of attorney. See: Harrison v. Stoeckert, 369 Pa. 143, 146, 85 A. 2d 154 (1952); McKee v. Verner, 239 Pa. 69, 75, 76, 86 A. 646 (1913); McRoberts v. Stadelman, 168 Pa. Superior Ct. 489, 492, 493, 79 A. 2d 119 (1951). The claim of Galilee is clearly unliquidated.

We have inquired into and examined Galilee’s other contentions and we find them without merit.

While we sympathize with the plight of Galilee, we can find no such abuse of discretion on the part of the court below in refusing to open this judgment as would justify a reversal of its action. On the contrary, the record reveals that Esther Harrison is an assignee for value of the bond and mortgage, that Galilee had notice of such assignment and declared in writing that it had no set-off against the claim represented by the bond and mortgage and that Esther Harrison had no notice of any claim arising from any failure of Kanter to perform the terms of the “addendum”. Under such circumstances, Galilee has no defense based upon a set-off to justify the opening of this judgment.

Order affirmed. Each party pay own costs.

Mr. Justice Cohen dissents.