Clemens v. Union Trust Co. of Maryland

• Decision Date: 09 June 1936
• Docket Number: 36.
• Citation: 185 A. 462,170 Md. 520
• Parties: CLEMENS v. UNION TRUST CO. OF MARYLAND ET AL.
• Court: Maryland Court of Appeals

185 A. 462

170 Md. 520

CLEMENS v. UNION TRUST CO. OF MARYLAND ET AL.

No. 36.

Court of Appeals of Maryland

June 9, 1936

Appeal from Circuit Court of Baltimore City; Eugene O'Dunne Judge.

Suit by Lennox B. Clemens, trustee, against the Union Trust Company of Maryland and others. Decree for defendants, and plaintiff appeals.

Affirmed.

Argued before BOND, C.J., and URNER, OFFUTT, PARKE, SLOAN, MITCHELL SHEHAN, and JOHNSON, JJ.

Joseph J. Rehm, of Baltimore, for appellant.

Charles Ruzicka and William L. Rawls, both of Baltimore (Brown & Brune and James B. Diggs, all of Baltimore, on the brief) for appellees.

MITCHELL Judge.

The appeal in this case is from an order passed by the circuit court of Baltimore City on the 7th day of November, 1935, dismissing an amended bill of complaint filed by Lennox B. Clemens, trustee, the appellant, against the Union Trust Company of Maryland, a corporation, Charles Ruzicka and James B. Diggs, trustees, and the Royal Realty Corporation, appellees.

The amended bill of complaint, in substance, alleges that prior to January 27th, in the year 1931, the appellant was indebted to the trust company for unsecured loans aggregating the sum of $71,000, and that on said date negotiations between the appellant and the trust company resulted in the execution of a mortgage from the former to the latter, securing, to the extent of the value of the property therein described, said prior indebtedness. The mortgage was duly recorded. Its preamble recites the authority of the mortgagor, as trustee under the will of Mary Clemens, to execute the same; a loan of $71,000, as of the date of the mortgage, to be paid, with interest in the meantime, half-yearly, at the rate of 6 per cent. per annum, in one year from date of the mortgage; and further recites the execution and delivery of a negotiable promissory note of even date, by the mortgagor to the mortgagee, for the principal of said loan and the interest to accrue thereon, payable in one year from date at the same rate of interest. The mortgage covered two unimproved lots or parcels of land, located within the limits of the city of Baltimore, and particularly described therein, which, according to the testimony of the appellant, contain in the aggregate 35 acres, and are susceptible of development as a desirable residential section. Among the terms and conditions of the mortgage which more particularly bear upon the instant case, are the following:

(a) The usual provision that upon default being made in any covenant or condition of the mortgage, then the whole mortgage debt thereby secured shall be deemed due and payable forthwith, whereupon it shall be lawful for the mortgagee, its successors and assigns, or its attorney or agent, "to sell at public auction, the property hereinbefore described, in whole or separate parcels at the option of the party selling, according to, the provisions of article 66 of the Code of Public General Laws of this State, * * * which sale shall be made upon the following terms, viz.: all cash upon ratification of the sale, or such other terms as the party selling may deem expedient."

(b) Provision declaring the assent of the mortgagor to the passing of a decree for the sale of the mortgaged property "in whole or separate parcels at the option of the party selling," in accordance with the general provisions of the Code relating to mortgages in the city of Baltimore.

While the mortgage, as hereinbefore indicated, recites a contemporaneous loan, the appellant by his own testimony establishes the fact that it was given to secure a previous existing indebtedness, and that a check for the amount of the mortgage, passed to him by the mortgagee on the day of the transaction, was forthwith indorsed and redelivered to the mortgagee in settlement of said prior indebtedness.

Notwithstanding, as will be hereinafter observed, our conclusion in the main is based upon the general principle that, in the absence of fraud, final ratifications should not be disturbed through collateral attack, we deem it expedient to review the undisputed facts as revealed by the record, and supported by the testimony of the appellant himself. These facts are as follows:

(a) That the appellant at the time of executing the mortgage, and at the time of its foreclosure, was a member of the Baltimore City Bar, and actively engaged in the real estate business.

(b) That nothing was ever paid by the mortgagor, or on his behalf, upon said mortgage, and that taxes and assessments for the years 1931, 1932, 1933, and 1934 were permitted by the mortgagor to accumulate, resulting in imminent danger of a sale of the mortgaged property under tax proceedings by the city of Baltimore. It may be added that the aggregate of these taxes, including interest and penalties, was the sum of $4,590.08, and that they were paid solely by the mortgagee, as late as September 29, 1934. Furthermore, the mortgagee, as early as April 17, 1933, wrote the mortgagor calling the latter's attention to his previous promise that the then existing taxes would be paid; and the mortgagor, replying thereto on the following day, asked for further extension, assuring the mortgagee of an arrangement with the city tax authorities to protect the property from the danger of a tax sale, and that every effort was being made to pay the taxes at as early a date as possible.

(c) The total assessment of the mortgaged property, for state and city tax purposes, is shown to be $33,340.

Briefly, except as to the actual payment of the taxes by the mortgagee, such was the status of the transaction between the mortgagor and the mortgagee, when, on or about the 20th of July, 1934, the mortgagee instituted foreclosure proceedings upon the mortgage, in the circuit court of Baltimore City. On said July 20, 1934, the mortgagor wrote the trust company to the effect that he had noted from the Daily Record that the company had instituted said proceedings, requesting that if the company contemplated immediate advertisement of the property covered by the mortgage, it defer action until Mr. Hopkins, his attorney, who was handling the matter for the mortgagor, returned from his vacation, in order that an opportunity would be furnished the mortgagor and his attorney to discuss the situation with the mortgagee. On the following day the trust company, replying to the foregoing letter, requested information as to when Mr. Hopkins would return, and advised the mortgagor that it did not feel warranted in continuing the mortgage in question, because of the large amount due for taxes and interest.

Nothing further appears to have transpired between the parties in this matter until about the first part of the month of September, when Mr. Hopkins returned to the city, and according to the testimony of the appellant, the following took place:

"Q. I wish you would tell the Court what, if anything, transpired after you received that letter from the Union Trust Company, dated July 21, 1934? A. Nothing, until Mr. Hopkins came back to town.

Q. Then what took place? A. That was about the first part of September. He made an appointment with the Union Trust Company, Mr. Dunn, of the Union Trust Company, to discuss the matter, and before attending the conference, Mr. Hopkins and I talked it over, and we decided we could not do anything, except give them a deed for the property--they had refused additional security prior to that time, and there was nothing further we could do. Mr. Hopkins called Mr. Dunn up in my presence, and told him we would not attend the conference, that we could not do anything further."

About six weeks after this conversation, the property was advertised in the Daily Record, a journal of many years' standing, principally devoted to the publication of legal notices and proceedings of the state and city courts, and circulated mainly among lawyers, realtors, and generally those interested in legal matters, especially public sales of real estate. The advertisement was inserted at least five times during the period of four weeks preceding the sale; and the sale took place on November 21, 1934, according to the advertisement, at 1:15 o'clock p. m., by public auction at the Real Estate Board rooms, the situs of numerous like sales. The property was sold to the Royal Realty Corporation, one of the appellees, for the sum of $20,000; and on the same day the sale appears to have been reported to the court by Charles Ruzicka and James B. Diggs, the trustees theretofore appointed to make said sale, being finally ratified and confirmed by the court on the 26th day of November, 1934.

Following the ratification of the sale, an audit of the proceeds thereof was made by the auditor of the court and filed in the proceedings on January 3, 1935, showing a deficit of $64,420.58; which report was finally ratified by the court, without exception, on January 15, 1935. On the latter date a motion for a deficiency decree in personam for the said sum of $64,420.58 was made on behalf of the trust company, and a subp na was thereupon issued to be served upon the appellant, to show cause why such decree should not be passed. This subp na appears to have been returned non est; but a subsequent subp na was served upon the appellant, and the motion for a deficiency decree is apparently yet pending in the lower court.

It is contended by the appellant that notwithstanding the procedure hereinbefore detailed, he was entirely ignorant of the sale of the property until on or about January 28, 1935; but it is admitted by him that during the interval following the date when, through his counsel, he notified the trust company that he could do no more than convey the property, he took no steps to inform himself of subsequent developments, and...