Blum v. Apitz

Paeke, J., delivered the opinion of the Court. The appellee, Anne M. K. Apitz, a widow, owned a leasehold property in Baltimore, known as 2715 Hugo Avenue, where she lived with her unmarried daughter, Johanna Apitz, a school teacher. Her married son, Ered W. Apitz, was a pharmacist, who lived in another section of the city. Mrs. Apitz and her son desired, in October, 1923, to move into the country.

She saw a newspaper advertisement of suburban homes for sale by the Allied Construction Company, and, as a result of her inquiry and request, a salesman of that company, Louis J. Samuels, took her and her son on several occasions to see houses in Mt. Washington and Pikesville, which she could not afford to purchase; but, finally, she was shown an improved leasehold property at 5437 Bland Avenue, which she decided to buy for $5,200. Her son desired to buy an -adjacent house, but he had no means. The mother had no resources other than her equity of redemption in her home at 2715 Hugo Avenue, which was subject to two outstanding building association mortgages in the original principal amounts of $2,500 and $500, respectively.

It was estimated that the Hugo Avenue property was worth $5,500, and its sale would net $2,000 over the mortgage liens, and the value of this equity of redemption afforded the basis for negotiations, which resulted in the construction company agreeing to sell 5437 Bland Avenue to Mrs. Apitz -and to enter into a conditional rental contract of sale with the son for a similar leasehold property. The contracts of the son and of the mother were signed on ⁹³ the night of October 29th, 1923, at the home of Mrs. Apitz. Her contract of purchase was simple in form, and set forth the contract price of $5,200, acknowledged the receipt of $2,000 as having been paid on account thereof “prior to the signing” of the contract, although no money, but a mortgage for that amount, passed from Mrs. Apitz to the vendor; and provided that the residue of $3,200 was to be financed by the vendor, and that, upon payment as above of the unpaid purchase money, a deed for the property should be executed, at the vendor’s expense, by tbe vendor, conveying the property by a good and merchantable title, with an adjustment of taxes, ground rent and other charges to the date of settlement, which was not specified in the contract. The. appellee conceded that there was no fraud in the making of this contract, and none was shown.

But immediately after the contract was signed and, as a part of the transaction, Mrs. Apitz gave to the Allied Construction Company a third mortgage for $2,000 on her Hugo Avenue property, payable sixty days after date. On November 1st, 1923, the Allied Construction Company assigned this mortgage, for value and before maturity, to Philip Blum, the appellant, with the personal guaranty of Morris Myerhoff, the vendor’s president, and of Joseph Myerhoff, its attorney. On the proof Blum is an assignee for value and without notice of the alleged fraud in the obtention of the mortgage from Mrs. Apitz. About two weeks after the contract of sale, Mrs. Apitz concluded that she did not want the property because it was located too fa'r from street car lines, and she notified the construction company that she would “cancel” the contract.

The son, likewise, and for the same reason, repudiated his contract. The company did not agree to a cancellation and, after Mrs. Apitz was notified, on March 11th, 1924, by the assignee, of her default under the mortgage and of his purpose to foreclose, she employed Mr. Gunther, an attorney, who advised her to take the property, and so save the two thousand dollars she had invested in it by reason of tbe ⁹⁴ execution of the mortgage. The Bland Avenue property which Mrs. Apitz had bought was subject to mortgage liens, which were about equal to the residue of the purchase money owing by Mrs. Apitz, and the testimony is that the vendor was in a position to complete the contract of sale so late, at' the least, as the period from February 28th, 1924, to April 10th, 1924, during which the vendor’s affairs were being-administered by a committee of creditors. Mrs. Apitz, however, had determined that she did not want the property, and her early decision to repudiate the contract was not' influenced by any doubt of the ability of the vendor to convey, or by any lack of diligence on its part in endeavoring-to close the transaction.

At no stage, of the proceedings did Mrs. Apitz make an effort to secure her title. As a matter of fact, in December, 1923, she began negotiations to buy another property of another owner, and closed the purchase in March, 1924. The ultimate result of this repudiation of’ her contract was a sale, after May 15th, 1924, of the property in question by the trustees in bankruptcy of the vendor. The leasehold property was sold as one of a groups of similar-properties, and the amount realized was insufficient to pay off the mortgaged indebtedness.

The assignee, Blum, instituted foreclosure proceedings- and sold to James H. Harris the Hugo Avenue property at public sale on November 28th, 1924, for $2,500, subject to-the two prior mortgages on which $1,939.78 was due at the time of the sale. On December 26th, 1924, Mrs. Apitz, theappellee, filed her exceptions to the ratification of the sale, and, after testimony taken in open court, the sale was not ratified, but the mortgage was set aside on the ground of its having been obtained by the fraud of the Allied Construction Company at the time of its execution. The present appeal brings before us for review the correctness of the decree, which should not be disturbed on appeal unless the finding-of the chancellor on the issue of fact is clearly opposed to-the weight of the evidence when considered in relation to the controlling equitable principles governing the instant cause. ⁹⁵ It is not controverted that the vendee was bound by an enforceable contract to buy the property for $5,200, and forthwith to pay in cash the sum of $2,000, and that the contract acknowledged that the sum of $2,000 had been paid before the signing of the contract, although in fact no money had then passed. It is further conceded that this credit of $2,000 was to he realized out of the proceeds of sale of the vendee’s Hugo Avenue property, which was to be sold and converted for that purpose by the vendor.

But here the points of agreement cease. The assignee asserted that the mortgage was given to secure the payment of this sum of $2,000, which the vendor had acknowledged to have received in the delivery to it of the mortgage. The vendee, while admitting the execution of the mortgage, denied that she knew its nature and maintained it was obtained through fraud practiced upon her. The record is rather unusual iu that the principal contract is not questioned, but the manner -of the performance by the vendee of her, obligation to pay $2,000 is assailed as fraudulent.

In other words, the vendee’s position is that she was, bound to pay $2,000 in cash, and that she was bound to raise that amount by letting the vendor make sale of her Hugo Avenue property for that purpose, but that through fraud she was duped into executing a mortgage on the Hugo Avenue property to secure to the vendor •the payment of the sum of $2.000. The mortgage was executed under these circumstances. The vendor had the contracts of sale between it and the mother and son, and the mortgage on the Hugo Avenue property to it from the mother for $2,000, prepared from information in their possession and obtained in the course of the negotiations, and arranged with the son for the meeting at the mother’s home. The son notified his mother of the engagement, and Louis Samuels, the salesman and notary, and Jacob Myerhoff, the vice-president of the vendor, called for the son at his home, and the son and his, wife went with Samuels and Myerhoff to the residence of Mrs. Apitz, where they found her and her daughter, Johanna Apitz, waiting. ⁹⁶ The six then seated themselves about an oblong table, preparatory to the execution of the papers, which had not been before submitted to the purchasers.

The following quotation from the testimony of Mrs. Apitz will give her version of what took place about the table. “Mr. Samuels and Mr. Myorhoff came in the evening on the date of the contract. Mr. Myerhoff told me if I wanted this house and I should sign the contract, and what I had to pay on it, and I said I had no money to pay on it but if they would sell by (my) Hugo Avenue house, probably there would be $2,000 left, and we could pay that on the houses and he said, ‘All right, we will sell your house for you, and we will take that then/ so they must have marked that in the contract because when I read the contract, it said, ‘Paid $2,000,’ and I was so- surprised, I said, I have not paid you $2,000. He said, ‘That is all right. That means the $2,000 when you sell your house,’ and after I had signed the paper he came around and put another paper there, and I did not pay any attention, and then he said, ‘You sign this paper too.’ I said, ‘Why do I sign another paper?

I just signed a contract/ He said, ‘That belongs to the sale.’ So' I signed the other paper, too. That is all I know about the other paper.” “Q. Well, now, had you talked prior to this evening to> Mr. Samuels about the fact you did not have any money? A. Yes, and he said that would be all right, they would sell my house. They often sell houses like that and they would sell my house and take, the money on the other house.” She further testified that she did not read the second paper or mortgage nor was it read to her, and that she would not have executed the paper if she had known it was a mortgage, and that she did not discover it was a mortgage until March 11th, 1924, when she received a letter from the assignee .notifying her that the mortgage was due.

The daughter, the son, and his wife, who were present all of the time at the execution of the papers, corroborated, with some minor conflicts in their narratives, the evidence of the mother. They are positive in their statements that the mort ⁹⁷ gage was not read by any one before its signing. In direct conflict with all tbe material testimony of Mrs. Apitz and her family in reference to the preparation of the mortgage and its execution, is the evidence of Louis J. Samuels and Jacob Myerhoff. These two witnesses swore that the contracts of sale for the mother and for the son, and the mortgage deed conveying the Hugo Avenue premises to secure a recited indebtedness of Mrs. Apitz of $2,000, payable in sixty days, were drawn from information which was given to the vendor’s agents by tbe vendees two or three days before tbe papers were executed, and are the embodiment of tbe terms of sale previously agreed upon by tbe vendor and tbe mother and son in the course of the negotiations for the sale of the two Bland Avenue houses.

And they also stated in effect, that all the papers, including the mortgage, were read, before their execution at the table, to tbe vendees, who understood their object and that the credit of the payment of $2,000, which was