Harris v. Hooper

• Decision Date: 26 February 1879
• Citation: 50 Md. 537
• Parties: BENJAMIN G. HARRIS and John H. Neale, Surviving Partners of Francis Neale and Others, Trading as Neale, Harris & Co. v. WILLIAM E. HOOPER, Duvall & Iglehart, George F. Wilson and Others.
• Court: Maryland Court of Appeals

50 Md. 537

BENJAMIN G. HARRIS and John H. Neale, Surviving Partners of Francis Neale and Others, Trading as Neale, Harris & Co. v. WILLIAM E. HOOPER, Duvall & Iglehart, George F. Wilson and Others.

Court of Appeals of Maryland

February 26, 1879

Appeal from the Circuit Court for St. Mary's County, in Equity.

The facts of the case are stated in the opinion of the court.

The cause was argued before BARTOL, C.J., BOWIE, MILLER and ALVEY, JJ.

William M. Merrick, for the appellants.

It was not competent for the parties to said mortgage at any period subsequent to the judgment, by any new parol arrangement, to revise said mortgage, neither could they by bill, answers and decree, affect the rights of the appellants who were not parties to those proceedings. Story's Eq. Pl. sec. 193; Griffith v. Hammond, 45 Md. 88; Code, Art. 64, sec 2.

George F. Wilson, standing as assignee of a non-negotiable claim, is charged with all the acts, and all the knowledge of his assignors affecting its integrity. These complainants base the right to assail the decree and sale reported under it, by an independent proceeding, and were under no obligation to intervene, nor could they rightfully have intervened as parties to that cause. Lee v. Early, 44 Md. 92; Griffith v. Hammond, 45 Md. 88.

There having been no opportunity of payments between Hooper and Duvall, other than certain specific appropriations to the mortgage debt, the law will make the appropriation to the mortgage debt, upon the double ground that it is the oldest debt in point of time, and it was more advantageous to the debtor to make the appropriation to the mortgage than to the later items of open account. Lee v. Early, 44 Md 80; Neidig v. Whiteford, 29 Md. 178; Given v. Whittaker, 1 H. & J. 754; Dorsey v Gassaway, 2 H. & J. 402; Laeber v. Lankhor, 45 Md. 480.

The account kept by Duvall and Iglehart being a running account of all the debits and credits, the law will appropriate payments, even to the defeat of a lien, to earliest items. Ger. Luth. Church v. Heise, 44 Md. 471.

Where the account is entire, as the account of Duvall and Iglehart was at the time of the payments made and entered, the creditor will not be allowed to separate or split such demand into parts, and appropriate a general payment to that part most advantageous to him to be paid. The payments being once entered on general account by operation of law, the appropriation is instantly made to the discharge or reduction of the first items on the debit side of the account. Ger. Luth. Church v. Heise, 44 Md. 471, 472.

Under the prayer for general relief upon the case, made by the bill and the proofs, the complainants might have an alternative personal decree against George F. Wilson in his double character as purchaser and assignee of the supposed mortgage, for the amount of the complainants' judgment represented in the purchase money, and in default thereof, a decree to sell for the satisfaction of the judgment. Even if the whole of the mortgage debt had not been cancelled, it was quite apparent from the proofs that a very large proportion had been cancelled, and the court below should have referred the case to an auditor to ascertain the true amount due, and therefore should have charged the respondent, Wilson, with the surplus in favor of the complainants. Until full payment of the purchase money, the respondent, Wilson, could not be protected from the claims of the complainants as an innocent purchaser without notice, as was erroneously decided by the court below. Boone v. Childs, 10 Pet. 211.

Henry Stockbridge, for the appellee, George F. Wilson.

The judgment creditors were not necessary parties to the foreclosure proceeding, and consequently their omission was not an error and injury of which they could make complaint and seek redress through the aid of a court of equity. When the mortgage was made there was no other incumbrance upon the property, and the security given by the mortgagor had a priority to any incumbrance that the mortgagor could thereafter place upon it. To permit him to embarrass the action of his creditors to whom he had then and thus given security would be to permit him to annul his act of giving security for his debt after he had consumed the consideration, and thus defraud the creditor whom he had assumed to secure when perfectly competent to give the security. The mortgage creditor held the first claim against the mortgaged property, and no act of the mortgagor could deprive him of his priority or embarrass him in converting his security into payment, in accordance with the terms of his mortgage. This is so irrespective of the peculiar provisions of our statute and the peculiar rights conferred by the terms of the mortgage itself, but in the mortgage itself the mortgagor declares "this mortgage subject to any and all laws which are now or may hereafter be in force in said St. Mary's County, designed to facilitate the foreclosure of mortgages, and assents to the passage of any decree by any court of adequate jurisdiction for the foreclosure of this mortgage, in accordance with the provisions of any and all such laws." This assent, then, and so given, obviated any necessity of a formal issuing of process and summoning of the mortgagor or any person thereafter acquiring an interest in the mortgaged property under him, as parties to a proceeding for foreclosure. The mortgage itself, with such assent embodied in it, is the commencement of the equity proceeding, and no transfer of the property afterwards can embarrass the progress of those proceedings or impose upon the complainant the necessity of noticing them, at least unless he is formally notified of the transaction; and if he is not required to notice a conveyance, much less could he be required by a subsequent mortgage or a confessed judgment to change the right of procedure which had been conferred upon him. Calvert on Parties, 128-138, 135; Story's Eq. Pl. sec. 198; Kauffman v. Walker, 9 Md. 241; Knell v. Green St. B. Asso., 34 Md. 67; Sumwalt v. Tucker, 34 Md. 89.

Even if it were so that the payments made on account were improperly credited by the appellees, Duvall & Iglehart, and should have been applied to the mortgage debt as alleged by the complainants, still the complainants have mistaken their remedy and cannot maintain the present suit. The original suit was a foreclosure suit under statute. By the settled practice and all the decisions of our courts, any person interested in the property, or in the equity of redemption, has a right to intervene and to except to the sale, or to claim to have their interests respected in the distribution of the proceeds of sale, according to their respective priorities. But these appellants took no exception to the sale, but allowed the same to be finally ratified and the rights of the purchaser to become perfected. Neither then did they file any claim to be allowed out of the proceeds of sale, but while those proceeds were lying wholly undistributed in the hands of the trustee, and the audit was unratified, instead of making any claim for allowance out of the excess beyond the payment of the mortgage debt, they institute the present proceeding to vacate a regular and proper decree, to set aside a sale made by the court's officer, and ratified and confirmed by the court, to divest a title acquired under due process of law, without any allegation of fraud, surprise, or mistake, and to obtain a sale of the property for the payment of a subsequent incumbrancer, to the exclusion of a prior incumbrancer claiming under an undisputed bona fide mortgage.

But there is no proof in the case to sustain the allegations of the bill that the mortgage debt, for the payment of which the property was sold in the foreclosure case, was not due at the time of the institution of that case and of the sale of the property. The proceedings in that case, although read as a part of this case at the hearing below, are not in the record and cannot be passed upon by this court. The only direct and positive evidence upon that point is the evidence of the appellants' witness, Henry Duvall. He is there asked, "State whether the sum alleged by you in your bill to foreclose the mortgage, that had been assigned to you by A. Needham & Sons, was actually due at the time of filing of the bill?" His answer is, "It was; the amount was due on the mortgage." This testimony is corroborated by the appellants' other witness, William E. Hooper. His testimony makes it evident that the mortgage debtor was indebted to Duvall & Iglehart while they owned the mortgage, on open account as well as on mortgage; that being so indebted he sent them money, never enough to pay off the open account, and without instructions as to the application of the payment. It was their right then to apply it as they saw fit, and having so applied it without complaint on the part of the debtor, it cannot now be called in question by the appellants. This appellee, Wilson, is a purchaser under a valid and subsisting decree, without any notice of anything affecting its validity, or of any equities of the complainants, and is to be protected accordingly.

Bartol C.J., delivered the opinion of the court.

On the 3rd of September, 1858, William E. Hooper of St. Mary's County, being indebted to Asa Needham & Sons, merchants, in the City of Baltimore, in the sum of $3500, to secure the same, executed a mortgage of his farm in said county, which was duly acknowledged and recorded.

On the 16th of October, 1866, Asa Needham & Sons, the mortgagees assigned the mortgage to Duvall & Iglehart, by indenture duly acknowledged and recorded. The deed of assignment recites that Hooper the mortgagor had paid all the mortgage debt and interest, except the sum of $2824.11,...