Harris v. Hooper

50 Md. 537 | Md. | 1879

Bartol, C. J.,

delivered the opinion of the Court.

On the 3rd day of September 1858, William E. Hooper of St. Mary’s County, being indebted to Asa Needham & Sons, merchants, in the City of Baltimore, in the sum of $3500, to secure the same, executed a mortgage of his farm in said county, which was duly acknowledged and recorded.

On the 16th day of October 1866, Asa Needham & Sons, the mortgagees, assigned the mortgage to Duvall & Iglehart, by indenture duly acknowledged and recorded. The deed of assignment recites that Hooper the mortgagor had paid all the mortgage debt and interest, except the sum of $2824.11, which remained as the balance due thereon.

In the deed of assignment it is further recited that Duvall & Iglehart had accepted two drafts of Hooper in favor of A. Needham & Sons amounting to $2824.11, which they had paid at maturity ; and that it had been understood and agreed by Hooper and all the other parties to the transaction, that the mortgage should be assigned to Duvall and Iglehart, to secure to them the payment of the sum of $2824.11, being the amount of the drafts, and also the amount of balance due from Hooper on the mortgage; and to secure the payment of the same the assignment was made.

On the 15th day of June 1872, a bill was filed by Duvall & Iglehart on the equity side of the Circuit Court for St. Mary’s County against Hooper, alleging that Hooper was largely indebted to them for balance due on the mortgage, &c., and on the 17th day of the same month a decree was entered “by consent” for the sale of the mortgage premises to pay the sum of $3857.56 with interest from June 5th 1872; and Henry Duvall was appointed trustee to make the sale. On the same day on which the decree was obtained, it was entered for the use of George F. Wilson. The mortgaged property was sold by Duvall,' the trustee, at public sale, on the 23rd day of November 1875, and George F. Wilson became the purchaser for the price of $3500. The sale was duly reported to the Court, and was finally ratified; and the case was referred to the auditor, who made his report, which was ratified nisi, but has not been finally ratified. Wilson to whom the decree had been assigned, being the purchaser has not actually paid the purchase money, inasmuch as the same was not sufficient to satisfy the decree, to which he was entitled as assignee.

Whereupon the appellants, on the 23rd day of August 1876, filed their bill of complaint, against Wilson, Hooper, Duvall & Iglehart, and Asa Needham & Sons stating the facts hereinbefore recited, and alleging that they, the appellants, obtained a judgment in the Circuit Court of St. Mary’s. County, against Hooper, on the 25th day of January 1869, for $2905.56, and that there .remained a balance due and unpaid thereon, on the 1st day of January 1874, of $2236.86, after deducting the several payments made by Hooper in the meantime.

The bill alleges, that “ Hooper was not at the time of the decree, indebted to Duvall & Iglehart on the mortgage, but that the same had been paid, and that the decree was in fraud of the rights of the appellants holding a judgment against Hooper subsequent to the date of the mortgage, and next in point of priority thereto.”

The bill further alleges, that the proceedings hy Duvall & Iglehart to enforce the mortgage, and the decree obtained thereon, without making the appellants parties thereto, were fraudulent and void, so far as their rights are concerned, and they have heen advised that they are entitled to have said proceedings and decree annulled and vacated, and a sale made of the property for the purpose of paying the amount due on their judgment; the bill prays specifically for this relief, and also for general relief.

A. Needham & Sons in their answer state, that they assigned the mortgage in good faith, and have no interest in the present controversy. This is shown hy the proof; they were therefore entitled to be dismissed with their costs.

The answer of Duvall & Iglehart denies the fraud alleged in the bill, and avers that Hooper was at the time the decree was obtained, justly indebted to them for the full amount stated in their bill of complaint, upon which the decree was obtained. They admit the assignment of the decree to Wilson as alleged, and aver that the sale hy Duvall, the trustee, was fairly made, after due notice, and has been finally ratified.

Wilson, after disclaiming in his answer, all knowledge of the several matters alleged in the bill with reference to other persons than himself, avers that he is advised, “if the facts stated in the bill are true, as therein set forth, with reference to the execution of the mortgage, and the rendition of the judgment therein referred to, yet under the laws of Maryland, the mortgage had a priority to the-judgment as the first incumbrance upon the property referred to, and it was not necessary, in any proceedings instituted for the purpose of collecting the mortgage debt, to make the holders of the subsequent incumbrance parties.”

The answer further states, upon information and belief, that it is not true, as alleged in the bill, “that Hooper was not at the time of the decree indebted to Duvall & Iglehart on the mortgage, that the same had been paid, and that the decree was obtained in fraud of the rights of the complainants; and avers that there was large indebtedness justly due and owing on the mortgage.”

The answer further avers, that the question whether any thing was due upon the mortgage, is one properly cognizable in the original proceeding for foreclosure, or in the distribution of the purchase money, and is not a proper subject for a distinct proceeding, and that the present suit is not necessary to the ends of justice, or for the the establishment or protection of any right, and is vexatious.

The answer further avers, that the assignment was made to the respondent in good faith, and for a valuable consideration, that the property was fairly sold, if any objection existed to the sale it ought to have been made, by any person interested therein, in due time by intervening in tbe original proceedings, but there was no such interven-, tion or objection, and the sale having been finally ratified, the title of the respondent became vested and fixed, and cannot be questioned collaterally, or successfully assailed in this proceeding; but the complainants in this case, if they have any right or claim to assert, should proceed in the original foreclosure proceedings against the proceeds of sale, “the trust fund undistributed in the hands of the trustee.”

We have thus stated at more length than usual, the pleadings in the case, in order to show the several questions presented for our decision.

The proof in the case will he referred to hereafter. First. — In the suit to enforce the payment of the mortgage debt, were the appellants necessary parties ? They held, as before stated, a judgment against the mortgagor, recovered after the date of the mortgage.

A reference to the authorities will show a good deal of conflict in the decisions in England upon the question whether in a proceeding to foreclose a mortgage, persons holding junior incumbrances are necessary parties. The cases have been collected by Mr. Calvert in his excellent work on “ Parties to Suits in Equity,” 128 to 183 (17 Law Lib.) The subject is also considered and the authorities cited in 4 Kent, 185, 186m, (11th Ed.,) in Daniel’s Ch. Pr. & Pl., vol. 1, 277, and in Story’s Eq. Pl., sec. 193.

We have examined the cases referred to by the text writers, and think the conclusion deduced from them by Mr. Calvert is correct:

“That while subsequent incumbrancers are not always necessary parties, it is generally proper to make them parties, with a view to a final settlement of the rights of all the parties in interest.” All the authorities concur in support of the principle, that where they have not been made parties to the suit, they are not hound by the decree. 4 Kent, 186.

As said by the learned Chancellor in Haines vs. Beach, 3 Johns. Ch. R., 464, “the necessity of making the subsequent incumbrancers parties, or holding their rights unimpaired, appears to he much stronger,' and is indispensable to justice, in cases of decrees for sales, according to our practice; for otherwise the mortgagor would take the surplus money or the cash value of the equity of redemption, and defeat entirely the lien of the subsequent creditor.”

Besides, the subsequent incumbrancer is interested in the account, and entitled to examine the same, otherwise his rights might be defeated by collusion between the mortgagee and mortgagor. Cockes vs. Sherman, 2 Freeman, 14; Needler vs. Deeble, 1 Ch. Ca., 289.

It follows that the appellants not having been parties to the suit, are not concluded by the decree.

Second. — The next inquiry is, were they hound to intervene in the cause, or may they maintain a separate bill ? They might have intervened in the original cause, by petition, and claimed satisfaction out of the purchase money, if any remained, after applying as much thereof' as might be required to pay the balance due upon the mortgage.

But this was not their only remedy, there is no reason why a separate bill for this purpose might not he maintained, such a proceeding was had in Needier vs. Deéble, before referred to, and many other precedents might be cited. By intervening in the original cause, the sale would remain unimpeached, whereas by filing their separate bill, the appellants might obtain fuller and more complete relief, not only by causing the account of the mortgage debt to be correctly stated, but also by annulling the decree and setting the sale aside, in case they should establish that the mortgage debt had been fully paid, and that there was fraud on the part of the purchaser in obtaining the decree, and in making the sale.

Third. — -We proceed to consider the relief to which the appellants are entitled. . It is clear that Wilson acquired as assignee of the decree, no other or greater rights than those held by his assignors Duvall & Iglehart; his claim under the mortgage and decree, is subject to the same abatement, as it would be in the hands of his assignors, and the account of the mortgage debt must be stated in the same manner as if the assignment had not been made.

But Wilson also occupies the position of purchaser, with respect to him no' fraud is charged, either in the obtaining of tbe decree, or in tbe sale; nor is there any evidence which would justify such a charge as against him; nor is there any charge made in the bill impeaching the bona Jides of the sale, or any proof that it was not fairly made, and for a fair and adequate price.

Under these circumstances it seems to us, he is entitled to be protected in the purchase. It has been said that “ Courts maintain with jealous vigilance the titles of purchasers under judicial sales, and go very far in favoring and supporting them.” 1 Gill, 345; 3 Md., 463 ; 14 Md., 121; 27 Md., 452; 30 Md., 90. In this last case it was said that “purchasers under subsisting judgments and decrees, obtain a good title, although such judgments and decrees may afterwards be reversed, and that fraud on the part of others, will not affect or taint the title of an innocent purchaser, at a judicial sale.”

In this case no sufficient cause is shown for annulling or setting aside the sale made by Duvall the trustee. But the purchaser not having paid the purchase money, and the fund remaining under the jurisdiction and control of the Court, the appellants are entitled to relief in respect thereto, to have an account stated showing the real amount of the mortgage debt remaining unpaid, and the surplus, if any, applied in satisfaction of their judgment; and for this purpose the bill ought to have been retained.

The proof shows that the mortgage was held by Duvall & Iglehart, to secure to them the payment of their two acceptances, amounting to $2824.11. It could not be lawfully held by them for, or operate as a security for any other debt due to them from the mortgagor. Code, Art. 64, sec. 2; Laeber vs. Langhor, 45 Md., 482.

It appears from the evidence that at the time the mortgage was assigned, and afterwards, there was a running account between' Duvall & Iglehart and Hooper, in which the latter was charged with the amount of the two acceptances, and with merchandise and money at various times. Several payments were made by Hooper which were credited upon the account; and for the balance due thereon, Duvall & Iglehart claimed to hold the mortgage, and for the amount of this balance the decree appears to have been entered. This was clearly erroneous.

Here arises the question of the application of payments. The rule upon this subject is well settled. Neidig vs. Whiteford, 29 Md., 179; Trustees of the German Lutheran Church vs. Heise, 44 Md., 471.

In the case last cited the rule is thus stated: “ Where divers debts are due from a person, and he pays money to his creditor, the debtor may, if he thinks proper, appropriate the payment to the discharge of any one or other of those debts; and if he does not appropriate it, the creditor may make an appropriation; but if there is no special appropriation by either party, and there is a current account between them, the law makes an appropriation according to the order of the items of the account, the first item on the debit side of the account being the item discharged or reduced by the first item on the credit side. And where the demand is entire, the creditor will not be allowed to separate, or split such demand into parts, and appropriate a general payment to that part which is most advantageous to him to be paid.” Applying this rule to the present case the auditor will have little difficulty in ascertaining the sums which ought to be credited to the mortgage debt, and the amount or balance due thereon at the time of the decree. It appears by the letters of Duvall & Iglehart addressed to Hooper, dated March' 1st and 27th 1866, February 11th and August 30tlrl867, and April 24th 1868, that as to some of the payments, Hooper directed that they should be applied in payment of the mortgage debt. Such appropriation he had a legal right to make, and they ought to be so applied; with respect to other paymeüts or credits, not referred to in those letters, the rule of . appropriation before stated, ought to be applied. In stating the account, the auditor ought to he allowed to take further testimony, if the parties so desire, upon the usual notice.

(Decided 26th February, 1879.)

The decree of the Circuit Court dismissing the hill as against George E. and Asa Needham will he affirmed; and as to the other defendants the decree will be reversed with costs, and the cause remanded for further proceedings, in accordance with this opinion.

■ As there is no sufficient ground for annulling, or setting aside the sale; and nothing remains to he determined except the amount due upon the mortgage, and the amount of surplus of money to he applied in satisfaction in whole or in part of the judgment, it will he proper for the Circuit Court to order the cases to he consolidated, to set aside the account of the auditor heretofore made and to refer the case again to him, so that a new account may he stated.

Affirmed in part, and reversed in part, and cause remanded.