Demuth v. Old Town Bank

• Citation: 37 A. 266,85 Md. 315
• Parties: DEMUTH ET AL. v. OLD TOWN BANK OF BALTIMORE ET AL.
• Decision Date: 31 March 1897
• Court: Court of Appeals of Maryland

37 A. 266

85 Md. 315

DEMUTH ET AL. v. OLD TOWN BANK OF BALTIMORE ET AL.

Court of Appeals of Maryland

March 31, 1897

Appeal from circuit court of Baltimore city.

Petition by Charles H. Demuth and another against the Old Town Bank of Baltimore and others to rescind a decree of foreclosure. From a decree dismissing the petition, plaintiffs appeal. Affirmed.

Argued before McSHERRY, C.J., and BRISCOE, BRYAN, PAGE, BOYD, and RUSSUM, JJ.

Millard F. Taylor and Rob. F. Leach, Jr., for appellants.

Thomas Hughes, for appellees.

McSHERRY C.J.

This is a case of exceedingly great hardship, and we have diligently but in vain, sought for some tenable ground upon which the appellants could be relieved from the loss that an affirmance of the decree appealed from will necessarily subject them to. But hard cases, it has often been said, almost always make bad law; and hence it is, in the end, far better that the established rules of law should be strictly applied, even though in particular instances serious loss may be thereby inflicted on some individuals, than that by subtle distinctions, invented and resorted to solely to escape such consequences, long-settled and firmlyfixed doctrines should be shaken, questioned, confused, or doubted. Lovejoy v Irelan, 17 Md. 527. It is often difficult to resist the influence which a palpable hardship is calculated to exert but a rigid adherence to fundamental principles at all times and a stern insensibility to the results which an unvarying enforcement of those principles may occasionally entail, are the surest, if not the only, means by which stability and certainty in the administration of the law may be secured. It is for the legislature, by appropriate enactments, and not for the courts, by metaphysical refinements, to provide a remedy against the happening of hardships which may result from the consistent application of established legal principles.

Now, the facts before us are these: Samuel D. Price was in 1888 the owner of some leasehold property in Baltimore city. This on January 28, 1888, be assigned to Henry C. Fowler, an employé of his, for an alleged, but in fact for a simulated, consideration of $1,500. On the same day, and as a part of the same transaction, Fowler executed and delivered to Price a mortgage on the same property to secure the payment of $1,000, stated to be the balance of purchase money due by Fowler to Price; and Fowler also signed and delivered a promissory note of even date, payable to Price in 1 year, for the principal sum of $1,000, and two other promissory notes, each for the sum of $30, payable in 6 and 12 months, for the interest. These three notes are described in the mortgage. The deed and the mortgage were promptly placed on record. Simultaneously with the execution of the deed, the mortgage, and the notes, Fowler also executed and delivered to Price a deed reconveying and reassigning to him the identical leasehold property. This deed was not placed on record until November 12, 1891. The sale by Price to Fowler was not an actual sale at all. It was a mere device to which Price, who was a builder, resorted to raise money without himself executing a mortgage on his property. To all appearances, however, so far as the public records disclosed, it was a perfectly regular and bona fide transaction. On January 31, 1888, Price borrowed from the Old Town Bank of Baltimore the sum of $1,200, and indorsed to the bank, as collateral, the $1,000 mortgage note of Fowler, and another note, with which we have no concern. Price's note to the bank was repeatedly renewed, and, when each renewal was made, Fowler's note to Price was repledged. There can be no doubt about the entire good faith of the bank in this transaction. The bank continued to hold the note, which on its face showed that it was secured by a mortgage of even date, and on October 31, 1895, after Price had become insolvent, and shortly before he died, the bank filed in the circuit court of Baltimore city a petition praying for a decree directing a sale of the mortgaged premises, and under the terms of the mortgage the usual decree was forthwith signed. Within a month thereafter the appellants came into the case, and by petition asked that the decree be set aside.

They base the relief which they seek upon these facts: In November, 1891, the appellants, desiring to purchase the property in question, had the title examined, and, it being then discovered that Price held the mortgage thereon from Fowler, negotiations were opened, not with Fowler, the apparent owner, but with Price, who informed the appellants and their counsel that the mortgage had been paid, and that he held a deed from Fowler assigning the property back to him. He thereupon produced the deed of assignment, contemporaneous in date with the mortgage and with the deed from Price to Fowler; and he exhibited three promissory notes, purporting to be the three mortgage notes described in the mortgage from Fowler to him,--the one note for $1,000, and the other two each for $30. Without making any inquiry of Fowler, the appellants concluded the purchase with Price; and Price on November 12, 1891, released on the public records the mortgage of January 21, 1888, and then placed on record the deed of assignment from Fowler to himself, dated, as stated, on January 28, 1888, and delivered to the appellants a deed dated November 12, 1891, assigning to them the same property. Thereupon the appellants paid him $1,300, the amount of the purchase money. The appellants had no knowledge of the outstanding note in the hands of the bank, and they believed that the $1,000 note exhibited by Price, and stated by him to be the identical note secured by the mortgage, was in fact the mortgage note. The evidence, however, clearly shows that Fowler signed two $1,000 notes on the same day, and the one retained by Price, and subsequently exhibited to the appellants as the genuine mortgage note, was not in fact the note secured by and described in the mortgage at all, and that the note indorsed to the bank, and forming the basis of the decree, was in reality the mortgage note. About this the evidence leaves no room for doubt. The appellants claim that they are bona fide purchasers of the property from Price, for value, and are, as such, entitled to hold it against the claim of the Old Town Bank. They undoubtedly paid their money for the property to Price, who shamefully deceived and misled them; but whether these facts, under the circumstances, are sufficient to defeat the rights acquired by the bank, is the question brought before us. The court below dismissed the petition asking for a rescission of the decree, and from the order of dismissal, which permits the decree of October 31, 1895, directing a sale of the property to stand, this appeal was taken.

Now, it cannot be doubted that prior to the adoption of the act of 1892, c. 392 (which, however, has no application to this case), the law of Maryland was, and still is, except in so far as modified by the statute just named, that the indorsement or assignment of a...