Merchants Mortgage Company (Merchants) made a loan to Oak Hill Farms, Inc., a Maryland corporation, secured by a mortgage on about 2.7582 acres of land in Prince George’s County, Maryland, for $135,000. The mortgage was executed in Maryland by the appellant, C. Warren Bogan, as Vice President of Oak Hill Farms, Inc., and Bogan and his wife at the same time also signed in Marylаnd a separate, written “guarantee” for payment of the mortgage. By the terms of the guarantee, Bogan agreed to pay the principal sum of the mortgage and interеst thereon, and he agreed to be bound by the covenants, terms and conditions of the mortgage. The guarantee expressly provides that it would be construed in accordance with Maryland law. During the life of the mortgage, Bogan made several interest payments out of $10,000 which had been provided by the corporation for such purpose. Bogan is a consulting engineer, and he apparently believed his involvement with Oak Hill would create business for him. He had no money invested in the corporation, and he learned he was in fact thе Vice President of Oak Hill on the very day he signed the mortgage and guarantee at issue in this case, but his involvement had some degree of premeditation as his wife joined in executing the guarantee. Also, since he was making the interest payments out of corporate funds, he was aware that the money allocated to interest had run out and that interest was nо longer being paid. Upon default, the mortgage was foreclosed, the sale of the property for $100,000 ratified and confirmed, and on July 26, 1965 the auditor’s report showing an unpaid balаnce of $21,822.15 on the debt after application of the proceeds of the foreclosure sale, was finally ratified and confirmed by the Circuit Court for Prince George’s County, Mаryland, in Equity. The appellant was not given formal notice of the foreclosure proceeding. Subsquent thereto, Merchants sued Bogan in the United States District Court for the District of Columbia on the guarantee for $21,822.15 plus interest, and the District Court entered judgment for such amount.
One of the findings of fact of the trial court was that neither the mortgage nor the guarantee were properly acknowledged. Bogan, however, did sign both documents. Appellant asserts that the defects in the execution of the mortgage invalidate it. It is conceded that Maryland law controls this action, and in Maryland a defective acknowledg
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ment does not void the document as between the parties. The agreement in such case creates an equitable mortgage on the land. The recent Maryland Court of Appeals decision in Adams v. Avirett,
The law of Maryland is therefore that where one who has the right and powеr to do so intends by a writing to create a lien on his land to secure another but fails to create a statutorily valid security instrument, his expressed intention may be enforced in equity by the other party to the instrument.252 Md. 571 ,250 A.2d 893 .
Dyson v. Simmons,
The Curative Acts of Maryland would also validate the mortgage against such defects, and thus authorize its admission into evidence. The mortgage, according to the stamps thereon, was recorded in Liber 2944 page 229 on February 28, 1964. General Curative Acts validating mortgages for defective acknowledgment were enacted in Ch. 181 of the Md.Laws of 1964, Ch. 228 of the Md.Laws of 1967 and Ch. 138 of the Md.Laws of 1969. These laws validated documents executed prior to their respective effective dates of June 1, 1964; June 30,1968 and July 1, 1969, Ann.Code of Md. Art. 21 § 99 (Supp.1969). Since recording requirements are statutorily imposed their requirements may be altered by statute and the documents validated.
See
McDivit v. McDivit,
The second question raised concerns the effect to be given to the Maryland foreclosure proceeding as to the amount of the deficiency. No question is raised as to the adequacy of the foreclosure proceedings, but Bogan argues that the foreclosure proceedings in Prince George’s County, Maryland, are not binding on him, since he was not a party to the action. As a matter of equity, such a claim would seеm spurious, since Bogan was the very individual who dealt with Merchants, signed the mortgage and paid all the interest installments that were actually made. When the $10,000 allocated for interest wаs exhausted, Bogan was the first to know the mortgage was going into default, since he had control over the fund. Notwithstanding the realities of the situation, it is true that the appellant was not аn actual party to the foreclosure proceedings. Therefore, some examination of the effect of the Maryland judgment must be made.
We note that the guaranteе itself uses the same total amount of money as the mortgage, i. e., $135,000, and it is made subject to the terms, covenants and conditions of the mortgage. The guarantee clearly loоks to the mortgage as to the measure of liability subsumed within it. As a general proposition under Maryland law, the guarantor of a mortgage, in the absence of fraud, accident or mistake, is bound by the amount of the deficiency judgment on the foreclosure proceeding. Walton v. Washington County Hospital Ass’n,
However, Bogan is in a somewhat different posture than the guarantor in
Walton,
since Bogan did not have actual notice of the foreclosure proceeding. Yet, the tenor of the guarantee here is absolute and unconditional; and аn absolute guarantor in Maryland has no right to notice of default. Booth v. Irving Nat’l Exch. Bank,
* * * MERCHANTS MORTGAGE COMPANY * * * need not exhaust nor pursue all or any of its or their remedies under said Mortgage before MERCHANTS MORTGAGE COMPANY, its suсcessors and assigns, will be entitled to pursue its remedies against us jointly or individually. * * * (App. p. 80)
Therefore, Bogan was an absolute guarantor and as such he did not have to be notified of the default; but this is not dispositive of the question as to whether the foreclosure judgment was
res judicata
in the suit on the guarantee. However, it is not necessary to delve into the niceties of the binding effеct of the Maryland judgment. We only need to pass on the propriety of admission into evidence of the foreclosure judgment. There are two early Maryland cases holding thаt a confession of judgment is not binding upon a surety, but even such judgment was held to be
prima facie
evidence. Kearney v. Sascer,
Appellant’s final argument is that his liability as guarantor should be limited by his plea of usury. It is not questioned that the loan would be usurious in Maryland, if made to an individual. The Maryland usury law at the time this loan was made provided that the legal rate of interest was 6 pеr cent per annum, Md.Laws of 1832, ch. 152 (compare present law: Ann.Code of Md. Art. 49 §§ 1-11 (Supp.1969), Md.Laws of 1968, ch. 453). The interest rate of 6 per cent per annum here was payable in advancе which could not be done “in the case o.f loans secured by a mortgage * * Md.Laws of 1963, eh. 871, Ann.Code of Md., Art. 49 § 1A (1957). Therefore, the loan was usurious because it was made on mortgaged land with interest paid in advance. Secondly, the loan included a commission of $16,000 which was deducted by the lender’s attorney from the amount loaned, and an additional charge of that nаture is usurious. Real Estate Trustees, Inc. v. Lentz,
However, the fact that the loan if made to an individual would be usurious is without effect here. A corporation in Maryland is prohibited from pleаding usury by statute. Md.Laws of 1951, ch. 135 § 121, Ann.Code of Md. Art. 23 § 125 (1957): “No corporation shall interpose the defense of usury in any action.” Maryland decisional law also holds that an individual guarantor is bound by the corporation’s inability to plead usury. Reamer v. Kessler,
*494 Therefore, Bogan is required to pay the deficiency remaining, after the foreclosure sale. The judgment of the District Court is
Affirmed.