ART NOVELTY MFG. CO., INC. v. KENWORTHEY, 370 Pa. 471 (1952)

88 A.2d 716

Art Novelty Manufacturing Company, Inc., Appellant, v. Kenworthey.

Supreme Court of Pennsylvania.April 23, 1952.
May 26, 1952.

Ground rents — Discharge — Sheriff’s sales — Failure to assert rights — Act of May 16, 1923, P. L. 207.

1. A ground rent can be discharged by a sheriff’s sale under the Act of May 16, 1923, P. L. 207. [476-7]

2. The validity of a sheriff’s sale, based upon a sheriff’s return as to service regular on its face, cannot be attacked in a collateral proceeding. [477]

3. Where it appeared that land, subject to a ground rent, and also subject to tax liens exceeding the value of the property was sold for unpaid taxes at a sheriff’s sale, pursuant to the Act of 1923, after notice to all interested parties, including the record ground rent owners; and that plaintiff, assignee of the ground rent at the time of the sale under an unrecorded assignment, for a small consideration, had done nothing until more than three years after the sale; it was Held, in an action by plaintiff to recover arrears of ground rent, that judgment was properly entered for defendants. [477-9]

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Argued April 23, 1952. Before DREW, C. J., STERN, STEARNE, JONES, BELL, CHIDSEY and MUSMANNO, JJ.

Appeal, No. 104, Jan. T., 1952, from judgment of Court of Common Pleas No. 1 of Philadelphia County, Sept. T., 1950, No. 2385, in case of Art Novelty Manufacturing Company, Inc., etc. v. John Kenworthey and Jack Lieberman et ux. Judgment affirmed.

Assumpsit.

The facts are stated in the opinion by HAGAN, J., of the court below, as follows:

The plaintiff, Art Novelty Manufacturing Company, Inc., as assignee of a ground rent issuing out of premises 727 Cherry Street, Philadelphia, instituted this action in assumpsit sur ground rent deed against the defendants, who are the covenantor in the original ground rent and the reputed present owners of the property. The action seeks to recover arrears of ground rent from October 20, 1930, in the total sum of $3,780.00. An Answer was filed by the defendant real owners, alleging that the ground rent and all arrears thereon had been discharged by virtue of a Sheriff’s sale of the premises held on April 7, 1947, under a tax lien of the City of Philadelphia.

The case was tried, by agreement of the parties, without a jury on September 20, 1951.

Statement of Facts.
The pleadings and the evidence disclose the following facts:

A yearly ground rent in the sum of $270.00 was reserved by deed between Michael Baker, grantor, and John Kenworthey, grantee and covenantor, dated April 20, 1831, and duly recorded.

Title to the ground rent became vested, by various and successive wills, as to one-half thereof in Mary Baker, who died May 21, 1897; and as to the other one-half

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thereof in Elizabeth W. Baker, who died October 15, 1900. By agreement dated June 1, 1891, and duly recorded, the said Mary Baker and Elizabeth W. Baker stipulated that the principal of said ground rent had been reduced to the sum of $180.00. No assignment of said ground rent or other agreement with reference thereto appears of record in the Office of the Recorder of Deeds of Philadelphia County until October 6, 1950, on which date there was recorded an assignment of the said ground rent to the plaintiff, which assignment bears the date July 22, 1946, and the assignors therein are Maurice Bower Saul and The Pennsylvania Company for Insurances on Lives and Granting Annuities, Trustees under the Will of Lillie I. W. Baker, deceased; and The Pennsylvania Company for Insurances on Lives and Granting Annuities and John Frederick Lewis, Jr., Trustees under the Will of Anne H. R. Baker Lewis, deceased. The consideration for this assignment was $100.00.

On March 5, 1943, the City of Philadelphia filed in the Court of Common Pleas No. 4 of Philadelphia County, as of March Term, 1943, No. 370, a lien for unpaid taxes for the year 1941 assessed against the premises out of which the ground rent issued. From the evidence it appeared that since the year 1933 the premises consisted of a vacant lot. In this tax lien proceeding Schneyer Building and Loan Association, the then registered owner of the premises, was named as defendant. On March 26, 1946, a Sci. Fa. sur Municipal Lien was issued, and the Sheriff’s return on this Sci. Fa. was Nihil Habet as to the defendant, and it recited that no person having been found in possession, a copy of the writ was posted upon the premises and advertisement of the contents of the writ was made by the Sheriff once a week for three successive weeks. Thereafter judgment was entered in favor of the City for want of an affidavit of defense, and damages were

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assessed. On March 22, 1946, an order was entered in the tax lien proceeding, adding Jack Lieberman as another defendant.

On August 16, 1946, a writ of Lev. Fa. was issued, in pursuance of which the premises were exposed to public sale by the Sheriff on September 16, 1946. At said sale there was no bid in the amount of the upset price fixed at $5,595.00; and thereupon the Sheriff, at the request of the City, postponed the sale, in accordance with the Act of Assembly of May 16, 1923, P. L. 207.

On November 26, 1946, the City filed its petition in the tax lien proceeding for a rule upon the defendants to show cause why the premises should not be sold free and clear of all claims, mortgages and estates in the land, in accordance with the above Act of Assembly; and attached to said petition was a guaranteed search disclosing the ground rent and the agreement reducing the principal thereof to the sum of $180.00, which, as hereinbefore recited, had been executed by the then owners of the rent, Mary Baker and Elizabeth W. Baker. Thereafter, in accordance with the Act of 1923, the Sheriff posted a copy of the said petition upon the premises and advertised a notice of its contents once a week for three successive weeks. The Sheriff also made a return of Nihil Habet in respect to said petition as to the defendant owner, Jack Leiberman, and as to Mary Baker and Elizabeth W. Baker, ground rent owners, and served a copy of the petition upon the defendant owner, Schneyer Building and Loan Association.

On March 3, 1947, the Court of Common Pleas No. 4 entered a decree by which, after reciting that the Court was satisfied that service of the above rule had been made upon all parties in accordance with the Act of 1923, it directed that the premises be sold on April 7, 1947, by the Sheriff, without further advertisement,

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and free of all claims, liens, mortgages, charges and estates, subject only to the right of redemption as provided by law.

On April 7, 1947, the premises were sold by the Sheriff, pursuant to the terms of the aforesaid decree, to Joseph Kirshbaum for the sum of $3,250.00; and thereafter the Sheriff executed, acknowledged and delivered a deed of said premises to the purchaser. On June 7, 1947, the said Joseph Kirshbaum conveyed an undivided one-half interest in said premises to Jack Lieberman, one of the defendants in this action. Although the other one-half interest in the premises remained in Joseph Kirshbaum, he was not named as a party defendant in this action and no motion to dismiss the proceeding because of the non-joinder of Joseph Kirshbaum was made by the other defendant, Jack Lieberman. However, at the trial it was stipulated and agreed between counsel for the plaintiff and the defendants that the plaintiff in this action was not seeking any personal liability as to the defendants for the arrearages of the ground rent, and that the sole purpose of the proceedings was to charge the premises for said arrears.

The Pennsylvania Company, as the representative of the owners of the ground rent, took possession of the premises in the year 1933, at which time there was no building erected thereon. For a time the Pennsylvania Company leased the property as a parking lot, and applied the rents to the payment of delinquent taxes, but the amount thus applied was but a small fraction of the total taxes due. As hereinbefore set forth, the Pennsylvania Company and the other Trustees executed an assignment of the ground rent to the plaintiff by assignment dated July 22, 1946, which was not recorded until October 6, 1950. The consideration recited in the assignment was $100.00, which was the actual consideration passing from the plaintiff to the

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owners of the ground rent. It appears from the testimony of an officer of the Pennsylvania Co. that there was no equity in the premises for the ground rent owners because of the arrears of taxes.

Discussion of Law.
The sole question for determination under the pleadings and the evidence is whether the ground rent, together with the arrears thereon, was discharged by the Sheriff’s sale held under the City’s tax lien.

The plaintiff, in its brief, argues that the Sheriff’s sale did not discharge the ground rent for either of two reasons, to wit: (1) That the Act of May 16, 1923, P. L. 207, under which the Sheriff’s sale was held, could not constitutionally operate to discharge the ground rent, which is an interest in the land and not a lien or encumbrance; or (2) that legal notice of the Sheriff’s sale was not given to the owners of the ground rent. Each of these reasons will now be discussed, in the above order.

1. Can a ground rent be discharged by a Sheriff’s sale held under the Act of May 16, 1923, P. L. 207?

The exact question here presented, as to whether the Act of 1923 was a valid exercise of legislative power in providing for the discharge of ground rents by a Sheriff’s sale of land subject to a ground rent, under a municipal claim for taxes, was decided on July 12, 1949, by Judge GORDON, in the case o Ercole DiSante v. Florence P. Smith et al. (C.P. No. 2 of Philadelphia County, December Term, 1948, No. 2832). The reasons supporting the constitutionality of the Act, as applied to the discharge of ground rents, are so well and incisively stated by Judge GORDON as to make further discussion of the question unnecessary. The decision of Judge GORDON, and the reasons supporting it, in the above case are adopted by this court; and we, therefore, hold that a Sheriff’s sale of land subject to a ground

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rent, held in pursuance of the Act of 1923, can discharge the ground rent.

2. Was legal notice given to the owners of the ground rent in the tax lien proceeding?

Whether or not the owners of the ground rent were served or given legal notice of the tax lien proceeding are questions which should have been raised in that proceeding by the owners of the ground rent. These questions could have been raised in that proceeding by the filing of a petition to set aside the sale. If, in such proceeding, the ground rent owners could establish that legal notice of the proceedings had not been given to them, then, of course, the sale could be set aside and the parties placed in the same position they were prior to the Sheriff’s sale.

The law is well established that the validity of a Sheriff’s sale, based upon a Sheriff’s return as to service regular on its face, cannot be attacked in a collateral proceeding. Thus, in Caplan v. Kent, 366 Pa. 87, the Court, in dismissing a Rule to quiet title, said (p. 89): “Defendant, Eleanor A. Kent, attacks the proceeding to sell the property free of liens by averring that the Sheriff did not, as his return shows, make diligent search and inquiry to locate the defendant before giving notice by publication. It is also averred that the agent of the County, in that proceeding, made a fraudulent affidavit that he had made personal investigation and he could not determine whether the defendant was in military service. The Sheriff’s return is regular on its face and cannot be attacked in this proceeding.”

The Sheriff’s sale on the tax lien in the instant case was held April 7, 1947, and the Sheriff’s deed to the purchaser was executed and acknowledged on April 28, 1947, and recorded on May 6, 1947. The plaintiff at that time was the owner of the ground rent, and following the Sheriff’s sale it could have pursued two remedies: It could have directly attacked the validity

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of the sale in the proceeding in the Court of Common Pleas No. 4; or, in the alternative, it could have exercised its right to redeem the property within one year after the Sheriff’s sale. Obviously, it did not suit the purposes of the plaintiff either to set the sale aside or to exercise its right of redemption, because of the fact that there was no equity in the property above the City’s liens. These liens amounted to the sum of $5,595.00, and at the Sheriff’s sale the property was sold to the highest bidder for the sum of $3,250.00, so that the City was unable to collect a large portion of the tax liens against the property. When to these circumstances is added the fact that the plaintiff purchased the ground rent for the sum of $100.00 on July 22, 1946, and did not record its assignment until October 6, 1950, a few days prior to the institution of this action, it is apparent that the equities are all on the side of the defendants.

The plaintiff claims that it received no notice of the Sheriff’s sale. This claim might have some validity if the plaintiff had promptly recorded its assignment of the ground rent. The City’s petition for an order to sell the property free and clear of all liens, claims and estates was filed on November 26, 1946, and at that time the record did not disclose that the plaintiff was the owner of the ground rent, because of the failure of the plaintiff to record its assignment. The record disclosed that Elizabeth W. Baker and Mary Baker were the record owners of the ground rent, and legal service was obtained upon them by the Sheriff in the tax lien proceeding by a return of Nihil Habet and by posting and publication in accordance with the Act of Assembly. Under these circumstances, it is difficult to see how the plaintiff can complain that it received no notice of the proceedings.

Furthermore, the record of the tax lien proceedings, which was produced and offered in evidence, disclosed that these proceedings were regular on their

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face and that proper service was made upon all necessary parties, including the record ground rent owners; and that the sale was held in strict compliance with the Act of 1923.

The cases of Hess v. Westerwick, 366 Pa. 90, and Ross Appeal, 366 Pa. 100, cited by plaintiff, are not in point. Neither of these cases involved the application of the Act of 1923, under which the tax sale in this proceeding was held; and in each of the cited cases there was an obvious defect in the service. Each case was decided the same day by Mr. Justice LADNER, who had this to say in his opinion in the Ross Appeal (p. 103): “This is the second instance that has come before us at this term in which a property of substantial value has attempted to be taken from the owner for a comparatively trivial amount of taxes and sold for a ridiculously inadequate sum. In the other case, Hess v. Westerwick, 366 Pa. 90, 76 A.2d 745, we held that the legislature could not in one breath require notice and in the next foreclose the right of a property owner even though the notice required by the Act was never given.”

In the instant case, as above set forth, there was not only no equity in the premises for the ground rent holder, but the proceeds of the public sale were sufficient to pay only slightly more than one-half of the City’s lien.

Finding.
The court finds no merit in the plaintiff’s claim, and therefore finds for the defendants.

Plaintiff appealed.

W. Horace Hepburn, Jr., for appellant.

Philip Dorfman, for appellees.

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OPINION PER CURIAM, May 26, 1952:

The judgment is affirmed on the opinion of Judge HAGAN for the court below.