Donald v. Chaney

• Decision Date: 01 September 1984
• Docket Number: No. 57,57
• Citation: 302 Md. 465,488 A.2d 971
• Parties: Robert B. DONALD et al. v. Steuart CHANEY et al. ,
• Court: Maryland Court of Appeals

Page 465

302 Md. 465

488 A.2d 971

Robert B. DONALD et al. v. Steuart CHANEY et al.

No. 57, Sept. Term, 1984.

Court of Appeals of Maryland.

March 7, 1985.

William M. Simmons, Annapolis (Michaelson & Simmons, P.A., Annapolis, on brief), for appellant.

Sara H. Arthur, Annapolis (Steven R. Migdal, Manis, Wilkinson, Snider & Goldsborough, Chartered, Annapolis, on brief), for appellee.

Argued before MURPHY, C.J., and SMITH, COLE, RODOWSKY and COUCH, JJ., and W. ALBERT MENCHINE, Associate Judge of the Court of Special Appeals (retired), Specially Assigned.

W. ALBERT MENCHINE, Judge.

This appeal is a spin-off from real estate mortgage foreclosure proceedings instituted in the Circuit Court for Anne Arundel County on behalf of Huffman, et ux., mortgagees against Herring Bay Partnership (Partnership) and others, mortgagors. The waterfront real estate of substantial acreage had been operated as a marina with slips for 200 boats.

The appellants, Robert B. Donald, Arnold C. Gay and Donald E. Zinn (Claimants), occupied a dual role in the proceedings: (1) as three of four limited partners in the Partnership ¹ and (2) as Claimants to a distributive share of the proceeds of the mortgage sale as creditors of the Partnership. The Appellees, Steuart Chaney, Richard Chaney and George M. King (Purchasers), were the high bidders for the property at $1,150,000 at the mortgage sale.

Claimants' entitlement to payment from the proceeds of sale was junior to all other creditors. Those proceeds were insufficient to pay Claimants in full unless Purchasers were The relief sought by Claimants was denied by the chancellor and on appeal the Court of Special Appeals affirmed in a unreported opinion. We granted certiorari to consider the question.

                required to pay interest upon the unpaid balance of the sales price from ten days after the date of the court's ratification of the sale (December 27, 1982) to the date of settlement.   Claimants filed a petition seeking a court order "to require assignee to collect and purchaser to pay" such interest.   Purchasers answered the petition seeking dismissal on equitable grounds.   The assignee for foreclosure did not respond to the petition and has taken no position with respect to the dispute
                

Claimants contend that the general rule applicable to sales at foreclosure requires purchasers at mortgage sale to pay interest upon the unpaid balance of the purchase price from the date prescribed for settlement to the actual date thereof, and that there are no equitable considerations justifying relaxation of the rule. Purchasers contend that under the facts and circumstances of the case, determination of the question fell within the judicial discretion of the chancellor and that the same was properly exercised.

The general chancery practice concerning interest payments on sales under court decree is of ancient lineage. Chancellor Bland, in Brown v. Wallace, 2 Bland 585, 594 (same case 4 G. & J. 479, 486) (1830), had declared:

"It is a general rule as to sales under decrees of this Court, that the purchaser always pays interest, according to the terms of the decree, from the day of sale, whether he gets possession or not. His getting possession is, in no case, allowed to be a condition precedent to the payment of either principal or interest of the purchase money. The purchaser is presumed to regulate his bidding with a view to the known powers and rules of the Court as to delivering possession. There is, therefore, nothing in this objection, even supposing this purchaser himself to have been in no default; and, by promptly Again in Wagner, et al. v. Cohen, 6 Gill 97, 102-03 (1847), it was said:

giving his bond, to have so clothed himself with an equity to demand a delivery of possession immediately after the sale had been finally ratified." (Emphasis added.)

"It is certainly true that a contract of sale made between the Court as the vendor of the property, through the agency of a trustee, and the purchaser, is never regarded as consummated until it has received the sanction and ratification of the Court....

"Although this is the character of the imperfect right acquired by a purchaser at a sale of this kind; yet, it gives to him, an inchoate and equitable title which becomes complete by the ratification of the Court. When this is accomplished, the ratification retroacts, and he is regarded by relation as the owner from the period of the sale. He is as such proprietor entitled to the intermediate rents and profits of the estate; he cannot escape from the sale, because, he may believe it to be disadvantageous, and is bound to pay interest on the purchase money from its date ; and has, therefore, a direct and strong interest in protecting the property from injury, and rendering it as productive as possible." (Emphasis added.)

To the same effect is Latrobe and Whistler v. Winans, 89 Md. 636, 43 A. 829 (1899), wherein it was said at page 655, 43 A. 829:

"If the delay in completing the contract be attributable to the purchaser, he will be obliged to pay interest on the purchase money from the time the contract ought to have been carried into effect ...."

That the general rule should not be applied inflexibly, however, was made clear in Oldenburg v. Regester, 118 Md. 394, 85 A. 411 (1912). The late Judge Urner, after noting that settlement had been delayed by the filing of exceptions to the sale in no way induced by action of the purchaser, and after recognizing that the cases cited supra had declared a general rule that the purchaser is ordinarily liable "The cases cited were concerned with conditions altogether different from the present, and the rule invoked is not one of absolute and unvarying application. In a very recent case this Court has manifested its disposition to be governed by equitable considerations in dealing with such questions. Leviness v. Consol. Gas Co., 114 Md. 573 ." ²

for interest upon the unpaid purchase price upon ratification of sale, said at page 398, 85 A. 411:

In Oldenburg, supra, the purchasers had filed exceptions to a sale conducted in March, 1910, because examination of the land records disclosed an unreleased mortgage for $15,000. Although the mortgage had been paid prior to the sale, the purchasers were not so informed. When so informed, the exceptions were voluntarily dismissed and the sale ratified in October, 1910. At settlement shortly thereafter, the trustee demanded payment of interest by the appellants for the period of delay. Interest for that period was allowed by the auditor with exceptions overruled by the lower court. On purchasers' appeal the decree requiring payment of interest was reversed. The Court after observing that the trustee might at any time have obviated the difficulty by causing the release to be recorded, found the record showed "affirmatively and without contradiction that the appellants [purchasers] earnestly endeavored to accomplish that result." 118 Md. at 398, 85 A. at 412.

In Raith v. Bldg. & Loan Ass'n, 140 Md. 542, 118 A. 67 (1922), this Court gave consideration to and rejected a purchaser's contention that equitable considerations justified relaxation of the rule. In Raith, a second mortgagee filed exceptions to the first mortgagee's sale. The exceptions were overruled on October 2, 1920 and the second mortgagee appealed, but without filing an appeal bond. The order of the trial court ratifying and confirming the sale was affirmed on May 21, 1921. Raith sought relief from the payment of interest on the unpaid balance during that interval. We pointed out, citing then Maryland Code, Art. 5, § 29 (1911 Bagby) ³ that an appeal without bond did not affect the rights of a purchaser at a judicial sale even if the order of ratification is reversed on appeal and that "Raith could have had possession of the properties and have been protected ... if he had complied with the terms of sale at that time." 140 Md. at 546, 118 A. 67. The order requiring Raith to pay interest upon the unpaid balance was affirmed.

In Merryman v. Bremmer, 250 Md. 1, 241 A.2d 558 (1968) where the trustees had failed to seek resale at the risk of the purchaser under then applicable Maryland Code, Article 16, § 163 (1957) ⁴ and the purchaser was at all times able to pay the relatively small amount involved and ready and willing to do so when the amount of that balance was made known to the purchaser by the trustees, we said: "The delay, ⁵ therefore, must be attributed to the trustee The present issue was initiated on January 25, 1983, when Claimants filed a petition to require the trustee to collect and the purchasers to pay interest on the unpaid balance of the purchase price. Purchasers answered Claimants' petition, claiming relief on equitable grounds. Trustee did not answer, taking no position on the question. The trustee did, however, file a petition for resale at the risk of Purchasers, ⁶ pursuant to Maryland Rule BR6. ⁷

Merryman, and not to Bremmer." 250 Md. at 10, 241 A.2d 558.

On March 9, 1983, the lower court called the case for hearing on trustee's petition for resale and Claimants' petition as to interest. At the outset of that hearing the Purchasers, Claimants, mortgagees, and trustee agreed that a consent order ⁸ should be passed requiring resale of the property at the risk of the Purchasers unless stipulated conditions for payments to the mortgagees were met and settlement occurred. Settlement ultimately occurred at a much later date than was prescribed in the conditions of sale. ⁹

The trial court then proceeded to consideration of Claimants' petition. After hearing statements from counsel for The mortgage sale itself furnishes no factual dispute. The dispute arises from antecedent, concurrent and subsequent events incident thereto that Purchasers contend give rise to equitable considerations justifying relaxation of the general rule and entitling them to equitable relief from any obligation to pay interest upon the unpaid balance...