126 A. 125 | Md. | 1924
The decree to be reviewed on this appeal denied the claim of the appellants, as judgment creditors, to an interest in the proceeds of the sale of certain real estate in Howard County. The sale was made under the terms of a deed of *229
trust of the Brightwood Sanitorium Company, Incorporated, securing its promissory notes to the amount of $22,500. It is contended by the appellants that the deed of trust was in effect a mortgage, and that having been recorded without an authorizing order of the court, after the expiration of the statutory period of six months from the time of its execution (Code, art. 21, secs. 13 and 19), the debt it secured must be postponed to the judgments of the appellants, which are said to have been obtained upon claims contracted by them after the date of the deed of trust and without notice of its existence. The same contention was made in an injunction suit, by two of the present appellants and another, to restrain the exercise of the power of sale conferred by the deed of trust, but the claims of the creditors who instituted that suit had not then been reduced to judgments, and a dismissal of their bill of complaint was affirmed by this Court on the ground that, as general creditors, they had no interest in the land which entitled them to an injunction against the impending sale. Kinsey v. Drury,
The proceeds of the sale made under the deed of trust being insufficient for the payment of the debts therein mentioned, thepro rata allowance of the appellants' claims, out of the funds to be distributed, would reduce the amounts to be received by those holding the notes which the deed of trust was intended to secure. The controversy arises from this conflict of interest.
The argument for the appellants is that, as the object of the deed of trust was to provide security for money borrowed. *230
it should be viewed and treated as a mortgage for the purposes of our present inquiry and decision. This theory is sought to be supported by citations of Maryland cases in which it has been held that the nature of the transaction and the intention of the parties will be considered upon the question as to whether an instrument having the form of a deed should be held to be a mortgage. But those cases did not involve issues like the one now presented. They were mainly concerned with questions relating to the right of redemption by a grantor or subsequent lienor, and to the operation of the usury law upon the agreement which the deed in dispute fulfilled. The question in this case is simply whether an instrument concededly designed to secure a loan, but having the form and effect of a deed of trust, should be classified as a mortgage or as a deed with respect to the statutory provisions that any duly acknowledged deed or conveyance of land, "except deeds or conveyances by way of mortgages," may be recorded after the prescribed six months' period, and when so recorded shall have, as against the grantor, and his heirs or executors, and against all purchasers with notice, and against all creditors who shall become such after the recording of the deed or conveyance, the same validity and effect as if recorded in the time previously limited, and as against all creditors who shall become such before the recording of the instrument, and without notice, it shall have effect only as a contract for the conveyance of the estate to which it refers. Code, art. 21, secs. 19 and 21. The recording of a mortgage after the six months' period does not have a similar effect, as to constructive notice, unless it is recorded pursuant to an order of court, as provided by section 34 of article 16 of the Code. Harding v. Allen,
It has been definitely decided by this Court that a deed of trust securing an indebtedness is not a mortgage within the meaning of various provisions of the recording statutes. InStanhope v. Dodge,
In view of the decisions to which we have referred, and of the principle upon which they were based, we have no difficulty in holding that the deed of trust in this case, though not recorded until the expiration of six and one-half months after its execution, was valid and effective from that time as against all creditors of the grantor who became such after its registration, and that as to all creditors who contracted with the grantor after the date of the deed and before it was recorded, and without notice of its existence, it must be regarded as having the effect of a contract for the conveyance of the property it describes. It does not satisfactorily appear that a substantial portion of the appellants' claims accrued before the recording of the deed of trust on June 3, 1921, and they were not reduced to judgments until January 25, 1923. But if it be assumed that the appellants became creditors of the grantor to the full amount of their claims between the dates of the execution and registration of the deed, and without having notice of it, and if they had obtained judgments on their claims during that period, their rights would be surbordinate to those created by the unrecorded deed as a contract for a conveyance. The effect of such a contract is to vest the equitable ownership of the property in the vendee, subject to the vendor's lien for unpaid purchase money, and to leave only the legal title in the vendor pending the fulfilment of the contract and the formal conveyance of the estate. The right of the vendee to have the title conveyed upon full compliance with the contract of purchase is not impaired by the fact that the vendor, subsequently to the execution of the contract, incurred a debt upon which judgment was recovered. A judgment creditor "stands in the place of his debtor, and he can only take the property of his debtor subject to the equitable charges to which it was liable in the hands of the debtor at the time of the rendition of the judgment." *233 Cramer v. Roderick,
The loan secured by the deed of trust with which we are here concerned is said to be usurious. This assertion is disputed, and the right of the appellants to make such an objection is denied. But in reference to this subject it is sufficient to say that the funds produced by the sale under the deed of trust will be insufficient, after the allowance of trustees' commissions and other expenses of the proceeding, to pay the amount admittedly received by the corporate grantor as the result of the negotiation of the promissory notes secured by the deed. This fact would render the charge of usury immaterial, even if the grantor were not a corporation and precluded as such from interposing such a defense (Code, art. 23, sec. 101A), and if the right of the appellants to make the contention were conceded. Usury would not vitiate the entire loan, but the party entitled to plead it would simply be protected against the illegal excess.Chipman v. Farmers Merchants National Bank,
Decree affirmed, with costs. *234