Queen City Perpetual Building Ass'n v. Price, 53 Md. 397

Queen City Perpetual Building Ass'n v. Price

53 Md. 397 | Md. | 1880

Alvey, J.,

delivered the opinion of the Court.

This is an application for an injunction to restrain a trustee in insolvency for the benefit of the creditors .of the mortgagor from mating sale of the mortgaged premises, which are alleged to have been sold under a power in the mortgage.

*399The mortgage was made on the 16th of June, 1876, hy Conrad Nolte to the Queen City Perpetual Building Association of Cumberland, for $1820, money advanced hy the association for the redemption of certain shares of stock held hy the mortgagor in the corporation. In the mortgage there is a power, upon default of the mortgagor, to the mortgagee, “ or its attorney, to sell said mortgaged property at public sale for cash, in the city, &c., for the payment, in the first place, of the expenses incident to the sale, and a commission of eight per cent, on said sale ; and in the next place, to pay the fines, insurance, interest, and dues, that may then he due, and so much of said sum of $1820 as may he required to make said weekly payments of interest and weekly dues on said seven shares, until each unredeemed share of said stock is worth $260 in cash.” The default occurring, after giving a bond, and the notice required hy the terms of the power, the mortgagee, on the 28th of August, 1878, put up to public sale the mortgaged property; and hy the report of sale, the mortgagee stated that it did, in pursuance of notice, hy its solicitor and two of its directors, effect a sale to itself of the mortgaged premises for $500. The report of sale, made to the Circuit Court for the county, was hy and in the name of the Association, and was sworn to hy its solicitor only. This report of sale was ratified hy the Court on the 3rd of October, 1878. The case was referred to the auditor, who stated an account, and after allowing for all costs and expenses, and a commission of eight per cent., the balance of the amount of purchase was distributed to the mortgagee. And in the order ratifying the sale, the Court appointed the solicitor of the mortgagee to make the deed for the property purchased by it; and the deed was accordingly made.

In the case of the Frostburg Mutual Building Association vs. Lowdermilk, 50 Md., 175, this Court held, that sec. 5 of Art. 64, of the Code, which provides that “ in all mort*400gages there may he inserted a clause authorizing the mortgagee, or any other person to he named therein, to sell the mortgaged premises,” does not, when construed in connection with the subsequent sections of the same Article, embrace or apply to a corporation, as the depositary of the power of sale; that that is a personal, as distinguished from a corporate, trust and confidence, requiring of the person authorized to execute the power that he should act under the responsibility of an oatlí; and that if any other person than the mortgagee or his assignee he intended by the parties to the mortgage to execute the power, he or they must he specially named in the power. This is the plain import and meaning of the statute; and we find no reason for modifying or changing our former conclusion. And it follows, as a necessary consequence of that construction, that the power of sale contained in the mortgage in this case is simply void. It imparted no power of sale either to the mortgagee itself, being a corporation, or to any agent or attorney that it might appoint. The mortgage stood as if no power of sale had been inserted in it. , And there being no power of sale, it followed that there was no right or power to report a sale, under the statute, for ratification by the Court; and consequently the ratification of such sale by the Court gave to it no sanction or effect whatever. The whole foundation for the exercise of the summary jurisdiction by the Court,in the receipt of reports and ratification of sales under Article 64 of the Code, is based upon the assumption that there is a valid power of sale; for without that no sale under that statute can be made, and of course none- can he legally reported and ratified. It is not from the order of ratification of the sale, hut from the power of sale itselfj that the power and right to convey the estate is derived ; and if the power is void it can furnish no medium for the transfer of the estate to the purchaser.

But, while this is the case, it does not follow that the purchaser under such a void power, or, indeed, any of the *401parties concerned, in a case like the present, should necessarily suffer an injustice from the abortive attempt to sell. In such case, where the sale is made to a third party, if he has actually paid the purchase money, or to the extent that he has actually paid it, if not restored the money so paid, he would be held by a Court of equity to be equitably entitled as assignee of the mortgage, subject, of course, to the equity and right of redemption. And if he has been let into possession of the mortgaged premises, and has, as bona fide possessor or purchaser thereof made valuable improvements thereon, he would be entitled to compensation therefor, upon the principle settled in the case of The Union Hall Association vs. Morrison, 39 Md., 281. But where, as in this case, the mortgagee becomes the purchaser at his own sale, the sale being void, he acquires no rights, either legal or equitable, by means of the sale. In such case, the parties stand as they did before the ineffectual form of sale; and all the costs and expenses attending such ineffectual sale must be borne by the mortgagee, as the consequence of an unauthorized proceeding.

What may be the rights and powers of. a trustee in insolvency, acting for the benefit of all the creditors of the mortgagor, in respect to the property mortgaged, where the mortgage contains a valid power of sale, (which has been held to be a |>ower coupled with an interest, and to constitute a part of the security for the debt,) it is not necessary for us to decide in this case. The mortgage before us being in effect without such power, it becomes the exclusive right and duty of the trustee in insolvency to sell the property for the benefit of the creditors of the insolvent, and to distribute the proceeds to those entitled, according to the settled principles of law. Zeigler vs. King, 9 Md., 330. And that being so, it follows that there is no ground for the present application, and that *402the order appealed from must he affirmed and the hill dismissed.

(Decided 30th March, 1880.)

Order affirmed and bill dismissed, with costs to appellee.