Kinsey v. Drury

• Decision Date: 21 June 1924
• Docket Number: 43.
• Citation: 126 A. 125,146 Md. 227
• Parties: KINSEY ET AL. v. DRURY ET AL.
• Court: Maryland Court of Appeals

126 A. 125

146 Md. 227

KINSEY ET AL. v. DRURY ET AL.

No. 43.

Court of Appeals of Maryland

June 21, 1924

Appeal from Circuit Court, Howard County, in Equity; Wm. Henry Forsythe, Jr., Judge.

"To be officially reported."

Petition by William R. Kinsey and others against D. H. Roland Drury and another, trustees, subsequent to ratification of sale of real estate under a deed of trust, asserting a right to participate in the proceeds. From a decree dismissing the petition, petitioners appeal. Affirmed.

See also, 141 Md. 684, 119 A. 646.

Argued before PATTISON, URNER, ADKINS, OFFUTT, and BOND, JJ.

William H. Surratt and Paul R. Hassencamp, both of Baltimore, for appellants.

James Clark, of Ellicott City (William Stanley, of Baltimore, on the brief), for appellees.

URNER J.

The decree to be reviewed on this appeal denied the claim of the appellants, as judgment creditors, to an interest in the proceeds of the sale of certain real estate in Howard county. The sale was made under the terms of a deed of trust of the Brightwood Sanatorium Company, Incorporated, securing its promissory notes to the amount of $22,500. It is contended by the appellants that the deed of trust was in effect a mortgage, and that, having been recorded without an authorizing order of the court, after the expiration of the statutory period of six months from the time of its execution (Code, art. 21, §§ 13 and 19), the debt it secured must be postponed to the judgments of the appellants, which are said to have been obtained upon claims contracted by them after the date of the deed of trust and without notice of its existence. The same contention was made in an injunction suit, by two of the present appellants and another, to restrain the exercise of the power of sale conferred by the deed of trust, but the claims of the creditors who instituted that suit had not then been reduced to judgments, and a dismissal of their bill of complaint was affirmed by this court on the ground that, as general creditors, they had no interest in the land which entitled them to an injunction against the impending sale. Kinsey v. Drury, 141 Md 684, 119 A. 646. After the trustees named in the deed of trust had sold the property which it conveyed, and before the sale was ratified by the circuit court for Howard county in the equity proceeding in which it was reported, the appellants procured judgments on their claims. No objection was made to the ratification of the sale, but subsequently the appellants intervened in the proceeding for the purpose of asserting a right to participate in the distribution of the $15,000 fund which the sale produced. It was the dismissal of their petition to that end which occasioned the present appeal.

The proceeds of the sale made under the deed of trust being insufficient for the payment of the debts therein mentioned the pro rata allowance of the appellants' claims, out of the funds to be distributed, would reduce the amounts to be received by those holding the notes which the deed of trust was intended to secure. The controversy arises from this conflict of interest.

The argument for the appellants is that, as the object of the deed of trust was to provide security for money borrowed, it should be viewed and treated as a mortgage for the purposes of our present inquiry and decision. This theory is sought to be supported by citations of Maryland cases in which it has been held that the nature of the transaction and the intention of the parties will be considered upon the question as to whether an instrument having the form of a deed should be held to be a mortgage. But those cases did not involve issues like the one now presented. They were mainly concerned with questions relating to the right of redemption by a grantor or subsequent lienor, and to the operation of the usury law upon the agreement which the deed in dispute fulfilled. The question in this case is simply whether an instrument concededly designed to secure a loan, but having the form and effect of a deed of trust, should be classified as a mortgage or as a deed with respect to the statutory provisions that any duly acknowledged deed or conveyance of land, "except deeds or conveyances by way of mortgages," may be recorded after the prescribed six months' period, and when so recorded shall have, as against the grantor, and his heirs or executors, and against all purchasers with notice, and against all creditors who shall become such after the recording of the deed or conveyance, the same validity and effect as if recorded in the time previously limited, and as against all creditors who shall become such before the recording of the instrument, and without notice, it shall have effect only as a contract for the conveyance of the estate to which it refers. Code, art. 21, §§ 19 and 21. The recording of a mortgage after the six months' period does not have a similar effect, as to constructive notice, unless it is recorded pursuant to an order of court as provided by section 34 of article 16 of the Code. Harding v. Allen, 70 Md. 395, 17 A. 377; Nally v. Long, 56 Md. 567.

It has been definitely decided by this court that a deed of trust securing an indebtedness is not a mortgage within the meaning of various provisions of the recording statutes. In Stanhope v. Dodge, 52 Md. 483, it was held that a deed of trust to secure the payment of promissory notes of the grantor might be recorded after the expiration of six months from its date, and would then have the same validity as if recorded within that period. The requirement of section 32 of article 21 of the Code that no mortgage...