65 A. 346 | Md. | 1906
This is an appeal from a judgment rendered in favor of Charles A. Warfield and others (appellees) against Messrs. Stump and Herrman, trustees (appellants), in an action of ejectment brought to recover a tract of land in Baltimore County. On February 6th, 1869, Timothy A. Carroll, in consideration of the sum of $8,000, conveyed the property in controversy to Charles D. Warfield, in trust for the benefit of his *539 wife, Isabella, during her life or widowhood, she to collect the rents, issues, income and profits therefrom, for her sole and separate use free from the power, disposal and control of her husband, and after her death or marriage in trust for their children, etc.
Then after making provision that, in case Mr. Warfield survived his wife, upon her death the property should be for their children, etc., the deed proceeds as follows: "With power, however, to the said Isabella Warfield, with the consent and approbation of the said trustee, to grant and convey absolutely said property at any time, and the proceeds to reinvest in other property upon similar trusts as are herein declared, no purchaser, however, to be bound to see to the application of the purchase money."
On the same day "Isabella Warfield and Charles D. Warfield, her husband and trustee," gave a mortgage to Mr. Carroll to secure three promissory notes, amounting in the aggregate to $3,119. It recites that they were given in part payment of the purchase money for said property, and that the trustee united to show his consent and approbation of the conveyance.
On July 21st, 1870, Isabella Warfield and Charles D. Warfield, trustee, gave a mortgage to Clara A. Ross, which recites that she was the assignee of the mortgage and the three notes given to Carroll, which then amounted to $3,391.91, and that she had loaned Isabella Warfield $900 "which last sum the said Isabella, hath used in extinguishing claims against her incurred on account of the interest aforesaid and other debts contracted for the benefit of the property hereby mortgaged, making in all an indebtedness of four thousand dollars." It also states that Charles D. Warfield had given his note for the $900, and four notes of $120 each, being the interest on the said sum of $4,000, payable in six, twelve, eighteen and twenty-four months, respectively. The notes are all signed by him, individually. An assignment of the first mortgage and of the three notes described therein to Clara A. Ross was executed by Carroll and duly recorded. There was a power of *540 sale in the first mortgage to Timothy A. Carroll, or Samuel D. Schmucker, his attorney, and one in the second to Clara A. Ross, or Luther M. Reynolds, her attorney or agent. The second provides for the payment of the notes mentioned in the first, as well as the others mentioned above.
A petition was filed in the Circuit Court for Baltimore County by Clara A. Ross, showing that she was the holder of the two mortgages, alleging that they were in default, that she was desirous of selling the property and asked the Court "to accept and approve the bond of the attorney in the later mortgage named, that he may proceed to sell." Mr. Reynolds gave bond, advertised the property and on July 15th, 1871, sold it to Elias Livezy for $4,450. Exceptions were filed to the sale, but were overruled, a petition was filed to open up the decree, which was dismissed, and the case which will be hereafter referred to was brought to this Court. Finally on August 18th, 1873, a writ of possession was ordered, requiring Mr. and Mrs. Warfield to deliver possession of the property to Elias Livezy, the purchaser, which they did. On January 19th, 1874, Luther M. Reynolds, attorney, and Elias Livezy and wife conveyed the property to Eliza J. Miller — she having purchased the interest of Mr. Livezy. On March 28th, 1878, Mrs. Miller and her husband conveyed the property to William H. Reid and the appellants represent his interest, through some proceedings in the Circuit Court No. 2, of Baltimore City.
The defendant filed the general issue plea and a plea on equitable grounds. The latter was demurred to and the demurrer was sustained. The case was tried before the Court, and at the trial an agreed statement of facts and certain record evidence were offered. The Court found in favor of the plaintiffs (now appellees), and its rulings on the demurrer to the equitable plea and on the prayers present the questions before us. Before passing on the plea and prayers separately, it will be well to consider the principal points involved.
1. It is conceded by the appellees that the first mortgage — the one to Mr. Carroll — was validly executed, but it is contended *541
that the second only passed Mrs. Warfield's life interest, because the mortgagors had no power to mortgage any other interest. It is undoubtedly the general rule that "a power to sell and convey does not confer the power to mortgage." It was so held in Tyson v. Latrobe,
Although the appellees concede that the first mortgage was valid, it will be well to examine some of the authorities which announce an apparent exception to the general rule, and determine that when a trustee is authorized to sell and dispose of trust property and reinvest the proceeds, he can give a mortgage for the purchase money, or any part thereof, in order that we may see the reasons for such exception. In Gernert v. Albert,
In Mavrich v. Grier and Smith,
In Constant v. Servoss, 3 Barb. 128, the Court said that when upon the sale and purchase of land, a deed is executed and a mortgage given for the purchase money, or part thereof, the presumption is that the deed and mortgage were executed at the same time and the whole is considered one transaction, and taking the whole together the vendee only acquires the equity of redemption. "In such case the purchaser cannot avoid one part of the transaction and affirm the other. He cannot, nor can any one for him, take the land and repudiate the mortgage. He either holds the land subject to the mortgage, or he does not hold it at all."
In Hannah v. Carnahan,
Without citing other authorities on that question, it can be seen from the above why the Courts hold that a mortgage given by a trustee for part of the purchase money of trust property, purchased by him, is valid, unless there be something in the instrument creating the trust prohibiting it. This case is even stronger than most of those cited, because the instrument creating the trust and the mortgage given in part payment of the purchase money were not only executed on the same day and constituted one transaction; but there was in reality nothing for the trust to attach to until the deed and mortgage were executed and delivered, and effect cannot be given to the one to the exclusion of the other.
2. When we come to consider the second mortgage, as we now do, the authorities and reason as clearly show that it was not a valid execution of the power contained in the deed, as those cited above show that the first mortgage was valid. The power given Mrs. Warfield in this deed was limited to her granting and conveying the property, for the purpose of reinvesting the proceeds in another property, upon similar trusts. The power to grant and convey absolutely did not authorize her to mortgage the property, or, to state it in another way by repeating fromTyson v. Latrobe, supra, "a trust for sale with nothing to negative the settlor's intention to convert the estate, *544 absolutely, will not authorize the trustee to execute a mortgage." The property was vested in the trustee for the benefit of Mrs: Warfield and the children, subject to the purchase money mortgage, and her power of disposition was only such as the deed gave her — to grant and convey for the purpose of reinvesting the proceeds of sale, for that is what it meant.
It was settled in this State as early as Cooke v. Husbands,
In Hannah v. Carnahan, supra, the Court said, in speaking of Hannah the vendor: "But when the first mortgage was not paid, he could not take the second mortgage of $600 upon the premises, in the face of the notice he had of the terms and extent of the trust under which Carnahan held the property. Nor could any person, having notice of the trust, take such a mortgage, and enforce it against the property, as there was no power given Carnahan to execute such a mortgage." In Price v. Courtney,supra, the power was much more comprehensive than that given by this deed, but the Court held, after referring to many authorities, that no power was bestowed on the trustee to mortgage or otherwise encumber the property. In that case the lower Court held the deed of trust given to *545
secure a loan was null and void, because executed without authority, but as $459.29 of the sum loaned was paid for taxes, it decreed that there should be a lien on the trust property for that amount, with interest and costs. The Supreme Court of Missouri reversed that part of the decree, and said that the money was not loaned for that purpose, or any special purpose, and added: "But even had it been loaned for that specific purpose and applied in accordance therewith, such loaning and such application would have created no equity of subrogation or otherwise, in favor of him who loaned the money to remove the lien." In Gernert v. Albert, supra, the Supreme Court of Pennsylvania said, "It is no doubt true that if a trustee has already received a legal title to land belonging to the trust, he may not afterwards encumber it, unless empowered by a Court, or expressly or impliedly authorized by the instrument creating the trust." In Burroughs v. Gaither,
Nor do we think that they had the power to give a second mortgage for the purchase money. The mere fact that there was no such power given by the deed, and that the second mortgage was not embraced in the exception in favor of purchase-money mortgages, ought to be a sufficient reason for so declaring, in view of the authorities quoted, but if it could be allowed it is easy to see what the result would have been if the life tenant did not pay the interest on the first mortgage. This second mortgage shows on its face that $272.91 of interest due on the first was included in it as principal, and interest notes were given which included interest on the interest, as well as on the principal, and on the additional amount borrowed. If that be permitted, it could be repeated from time to time and it would not take many years to double the amount of the original mortgage to the great detriment of the remaindermen. There could have been no possible reason for giving another mortgage to secure the first, excepting to thereby raise the interest and other amounts wanted by the life tenant. This trust was created subject to the mortgage of $3,119.00, but there was no power in Mrs. Warfield to execute another mortgage on the trust estate, as the deed did not authorize that, even with the consent of the trustee. The second mortgage was therefore, in our opinion, of no effect against the interests of the remaindermen and was only binding on the life estate of Mrs. Warfield.
It is true that in the case of Warfield v. Ross,
Nor can there be any possible doubt that Mr. Reynolds could not sell under the first mortgage, for the simple reason that he was not named in it, but another attorney was, and it *548
is not claimed that it had been assigned to him. He was named in the second as the attorney or agent to sell, in case of default, and the presumption would be that he did sell under that mortgage, and the proceedings show that he did. As we have seen, the petition of Clara A. Ross, signed by him, asked the Court to approve "the bond of the attorney in the later mortgage named, that he may proceed to sell." His bond recites that mortgage alone — says that in pursuance of the power contained in that mortgage, which is accurately described, he "is about to proceed to sell the real estate in said mortgage mentioned." His advertisement likewise states that he would in pursuance of the power contained in the mortgage to Clara A. Ross (giving the date and place of record) sell the property, and his report of sale described the mortgage with the same particularity — neither the bond, advertisement nor the report of sale mentioning the first mortgage. The petition of Clara A. Ross evidently proceeded on the theory that as she held both mortgages, the sale could be made free and clear of both, and that she was willing to accept payment of both as the second included the indebtedness of the first. That was evidently the view adopted by the Court in
The appellants rely on the case of Madigan v. BuildingAssociation,
So in Price's case, which was an attempt to have Lowdermilk'scase in
3. This brings us to the consideration of the demurrer to the plea on equitable grounds. It shows on its face that Mr. Reynolds did not have power to sell, under the second mortgage, the interests of the remaindermen, in view of the law which we have announced above, and it does not show that he had power to sell under the first mortgage. In speaking of the latter it says, "with power in said mortgage contained to *550 said Carroll or his attorney to sell," but does not allege that Mr. Reynolds was the attorney named, which in point of fact he was not, as the mortgage shows. If the theory of the plea was that the defendants were entitled to be subrogated to the rights of the mortgagee in the purchase-money mortgage, it certainly is not sufficient. It alleges that the mortgage was paid and surely if the defendants can now be subrogated to the purchase-money mortgage, they could not ask a Court of equity to do that, and then declare the plaintiffs barred by reason of the possession of the defendants and those under whom they claim. Under no principle of equity could they be subrogated for such purposes or on such terms, but if entitled to be subrogated at all, it would only be to the extent of that mortgage, and in order to have made this plea a valid one on that theory, it should at least have alleged that they had made demand on the plaintiffs for the amount of that mortgage, which had been refused, or show their willingness to have surrendered the property upon payment thereof. There is nothing to suggest their willingness to do so, but on the contrary they not only filed their plea of not guilty, but set up this plea as a bar to the plaintiffs recovery, because as they alleged, they were entitled to be in "the shoes of Clara A. Ross, as assignee of Timothy A. Carroll, mortgagee." In other words they claim, in a plea which is supposed to be governed by equitable principles, that because, in equity, the plaintiffs ought to pay them $3,119, they are not entitled to the property, even if it is worth more, although they never offered to surrender the property on payment of the sum they allege the plaintiffs should in equity be required to pay.
If that was not the theory of the plea, it was defective on other grounds. Inasmuch as the sale was under the second mortgage, and the mortgagors had no power to convey anything more than the life estate of Mrs. Warfield, the purchaser did not acquire by the sale more than that life estate. He and his successors were therefore presumed to have been in possession under the life estate. They certainly could not claim to be in possession under a mortgage which they allege *551 was paid off. Again, the plea does not allege when Mrs. Warfield died, or that she had been dead for twenty years before this suit was brought. Therefore the concluding part of the plea, could not apply in bar of these plaintiffs. The agreed statement of facts shows that she did not die until 1904, and hence there could have been no amendment which would have been of any avail in reference to that. Until her death, the remaindermen could not have sustained an action of ejectment, as their right to possession did not accrue until the life estate was ended. It is not easy to understand just what was meant by the conclusion of the plea. If it was intended simply to set up a holding by adversary possession, the plea was bad, because that was not an equitable defense, but one at law, in addition to the fact that it does not allege that the possession was adverse. It alleges in one place that the payment of the mortgage put the defendants and those under whom they claim in the shoes of Clara A. Ross, and in another that they had been in constant, uninterrupted and exclusive possession of the property, "a period of over twenty years, without any recognition of the mortgage title or any account on the footing thereof." It therefore cannot be set up as an existing mortgage in default, as a bar to this action. For these and other reasons the demurrer to the plea was properly sustained.
4. After what we have said it is not necessary to discuss the prayers in detail. The concluding part of the defendant's first is clearly erroneous. The title to said land passing under the mortgage foreclosure was not "now vested in the defendants," because the life tenant was then dead, and the possession by the defendants was not a bar to recovery by the plaintiffs. Thesecond is also defective because possession was not heldagainst the appellees since 1873, and there was no evidence that the appellants were claiming under the mortgage offered in evidence. The third was also bad, because it was not necessary that the mortgage be satisfied by the mortgagee or the plaintiffs in this suit. It was satisfied by the sale — at least the attorney of the mortgagee received more than sufficient to *552 satisfy it and presumably did. So far as the fourth is concerned, it is only necessary to say that there was no evidence that the defendants had been in possession since July, 1871, and if they had, these plaintiffs could not sue until 1904. Thefifth was properly rejected because there was legally sufficient evidence to entitle the plaintiffs to recover. The plaintiff's second prayer was the converse of that, and under the pleadings and evidence we think they were entitled to recover, as the facts necessary to recover were either admitted by the agreed statement of facts, or proven by the record evidence, which was not contradicted. The Court was only required to apply the law to the uncontradicted and conceded facts. It is unnecessary to discuss the first prayer of the plaintiff.
We will only add that while we hold that the plaintiffs are entitled to recover in this action, we do not mean to preclude the defendants from going into equity and seeking to be subrogated to the purchase-money mortgage. That was a part of the consideration by which the life tenant and remaindermen acquired their interest in this land, and equity and justice demand that it should be paid, unless it is clearly established that it was intended to sell the life estate alone, or that the appellants are in some way barred of this relief. The peculiar circumstances of this case are such that it would have been almost impossible to properly set up the claim of subrogation by the plea on equitable grounds, so as to do justice between the parties. If the plea had been technically good, the Court would have been justified in striking it out under section 88 of Art. 75 of the Code. In Park Association v. Shartzer,
Of course we do not mean to be understood as determining that the appellants will be entitled to relief in equity to the extent of the purchase-money mortgage, or expressing any opinion on the subject, as that must depend upon the circumstances shown, but in view of the facts disclosed by this record and some apparent misapprehension by the profession as to the effect of our decisions on this question, we deem it proper to say what we have.
It follows from what we have said that the judgment must be affirmed.
Judgment affirmed, appellants to pay the costs. *554