Chatterley v. Safe Deposit & Trust Co.

Johnson, J., delivered the opinion of the Court. This is an appeal from a deficiency decree passed November 8th, 1934, by the Circuit Court of Baltimore City in favor of appellee, mortgagee, against appellants, mortgagors. From the testimony and certain facts which the parties have agreed should form a part of the record, it appears that on October 7th, 1925, appellants executed a mortgage, which was in the usual and customary form then in use in Baltimore City, to appellee, upon certain property in Baltimore, to secure the sum of $10,000, payable within three years, bearing interest at 5% per cent. The mortgagors, on July 31st, 1926, conveyed the property so mortgaged to Frederick R. Peddicord and Mabel S. Peddicord, his wife, by a deed in which the mortgage was referred to as follows: “Subject to the legal operation and effect of a certain mortgage for $10,000 from the said Grantors to the Safe Deposit & Trust Company of Baltimore, dated October 7th, 1925, and recorded among the Land Records of Baltimore City in Liber S. C. L. No. 4467, folio 586,” etc. Peddicord and wife on February 4th, 1927, conveyed the same property to Edward A. Strauff and wife, and the latter on May 15th, 1933, conveyed the property to Charles M. Perrigoy and wife.

In none of the deeds except the first was there any mention of the mortgage. Moreover, notwithstanding the Chatterley deed was to Peddicord and wife and the deed from the latter to Strauff and ⁶⁵⁸ wife was dated about six months later, the sale of the property was in fact made by the Chatterleys to the Strauffs and the Peddicords had no interest whatever in the transaction, both the Peddicord and Strauff deeds having been executed simultaneously. Before the conveyance from Chatterley and wife, which, as noted, was in effect to Strauff and wife, Mr. Chatterley, one of the mortgagors, discussed the sale of the property with the real estate officer of appellee, and requested the mortgagee’s consent to a sale to Strauff and wife, with the result that the officer agreed to give an answer within a few days, since he desired to look into the matter. Subsequently, Chatterley was informed by this representative that it would be satisfactory to convey to Strauff and wife subject to the mortgage.

This conversation took place with the same official of the appellee through whom the Chatterleys had first secured the mortgage loan. After the sale the Chatterleys received a notice of six months interest which was due on October 7th, 1926, which they immediately took to appellee’s cashier with the explanation that the property had been sold, and this officer took the notice and they at no time thereafter received any further notice of interest, and no notice whatever concerning the mortgage until Febuary 10th, 1934, when they were notified by letter from appellee's counsel that the latter had been appointed trustee to foreclose the mortgage in question, and they would be liable for any deficiency which might result from a sale of the property at a sum insufficient to cover the mortgage claim. At the time of the execution of the deed by the Chatterleys for the property, the first mortgage of $10,000 was deducted in a settlement memorandum,