Basiliko v. Welsh

Horney, J., delivered the opinion of the Court. This is the second time that this case has been before this ²¹ Court. On the first occasion, Constas G. Basiliko et ux. (the Basilikos, mortgagors or exceptants) appealed from the refusal of the chancellor to set aside a sale of mortgaged property.

That appeal was dismissed. This appeal is from the order ratifying and confirming the report and account of the auditor. The Basilikos, who were the original owners of the property sold in the foreclosure proceeding, executed a mortgage or deed of trust to T. Hammond Welsh, Jr. and Wilfred M. Dyer, Jr. (the trustees or appellees) and subsequently conveyed the mortgaged property outright to Edward Schweitzer (a second mortgagee and the apparent owner of the equity of redemption, often hereinafter called Schweitzer), who was the owner of record on the day of sale. The mortgagors, who had remained in possession of the mortgaged property until they were dispossessed by the purchasers following the dismissal of the first appeal, claimed then and still claim that they are the equitable owners, that Schweitzer is only a nominal owner and that the property was conveyed to him for a security purpose.

In Basiliko v. Welsh, 219 Md. 602 , 150 A. 2d 220 (1959), where the mortgagors had either neglected or declined to file a supersedeas bond to stay execution of the final order of ratification and the trustees had conveyed the mortgaged property to the purchasers as they had a right to do under the circumstances, we held that the question concerning the ratification of sale had become moot and dismissed the appeal. In the per curiam we also stated that if we were to decide the case on the two questions presented by the mortgagors—■ whether or not they had standing to except to ratification because they were not the record owners and whether or not the trustees had properly conducted the foreclosure sale—the result would not be different. Sometime after the mandate issued on the first appeal had been returned to the lower court, the auditor stated an account of the gross proceeds of sale, in which, among other things, he distributed the surplus proceeds of sale to “Edward Schweitzer” as the “record owner of property foreclosed on date of sale.” Schweitzer was not a party to the proceeding ²² and the record does not disclose that he ever filed a petition to be made a party or a claim for the surplus proceeds. While the first appeal was pending in this Court, the Basilikos filed a separate bill in equity against Schweitzer and his wife as well as Irene R. Fenik (who purported to be the assignee of an alleged third mortgage from Schweitzer and his wife to Sara Somers) and the trustees named in the foreclosed first mortgage, in which bill, among other things, the mortgagors sought to have the second and third mortgages (and trust notes) declared null and void and prayed for an injunction to restrain the trustees-appellees from disposing of the proceeds of the foreclosure sale.

Later, when the audit distributing the proceeds of sale was filed showing distribution of the surplus proceeds to Schweitzer, the Basilikos filed exceptions to the audit, in which, among other things, it was stated that they, and not Schweitzer, were entitled to the surplus proceeds, and prayed the court to direct the trustees to retain the “balance of the proceeds” until such time as the questions raised by the separate bill—a copy of which was attached to the exceptions—had been determined. No testimony was taken in connection with the exceptions to the audit; and the chancellor heard only the arguments of the parties to the foreclosure