Crossley v. Hartman

Singley, J., delivered the opinion of the Court. This case comes before us on an agreed statement of facts, as permitted by Maryland Rule 828 g. 1 If the appellants’ brief contains a statement of facts which the appellees accept as accurate and sufficient, no evidence in appellants’ appendix and no record references are necessary. Naughton v. Paul Jones & Co., 190 Md. 599 , 59 A. 2d 496 (1948). For purposes of this opinion, we have adopted the agreed statements of facts: That prior to May 1964, Emma S. Hartman, as surviving joint tenant, was the fee simple owner of a tract of land con ¹⁹⁸ taining about 0.41 acres on the South side of State Route 64 in Washington County, Maryland, which was the remaining portion of a larger parcel of land conveyed to said Emma S. Hartman and her mother Anna M. Wolfinger as joint tenants on May 24, 1935.

Mrs. Hartman is a widow 80 years of age living on a pension of $720.00 a year, who “is suffering a bit from loss of memory.” The facts show that in May of 1964, James L. Wolfinger, her nephew, called upon Attorney Elwood Hauver to prepare a deed to said property reserving a life interest to Emma S. Hartman, and granting a life estate to the said James L. Wolfinger and granting the remainder upon the death of the survivor unto Colonial Estates, Inc. A deed was so prepared and delivered to her home. That on July 28, 1964, Emma S. Hartman executed a different deed in fee simple to Colonial Estates, Inc., for said property, which was recorded among the Land Records of Washington County, Maryland, in Liber 411, folio 552. This deed contained an identical description of the property conveyed as was in the deed prepared by Attorney Hauver, except that the life estates did not appear therein. Subsequent to recording said deed, Herman Stouffer, President and major stockholder of the grantee, Colonial Estates, Inc., applied to Home Federal Savings and Loan Association for a mortgage loan on the same, and on October 8, 1964, Colonial Estates, Inc., executed a mortgage to Home Federal Savings and Loan Association in the amount of $15,900.00 covering said 0.41 acres and improvements and also an adjoining tract of land of 0.53 acres which had previously been conveyed by Emma S. Hartman to said Herman Stouffer and on which he had built a stable or barn.

At the time this mortgage was executed no reservation of life interest appeared in the land records, nor did the mortgagee have any knowledge of any outstanding life estates in the property mortgaged, nor any other legal or equitable interest claimed by anyone other than Colonial Estates, Inc. The testimony shows that Franklin Miller, an officer of Home Federal Savings and Loan Association, inspected the property on November 5, 1964, that people were in the house at that time, but he did not inquire as to who they were or what rights ¹⁹⁹ they claimed therein. Other evidence produced indicated that Emma Hartman and her nephew were the people occupying the property at that time. That only after the mortgage was in default and foreclosure proceedings were begun, and this cause filed by Emma S. Hartman, did Home Federal Savings and Loan Association learn of such claim of life interests. Emma S. Hartman testified that the signature on the deed to Colonial Estates, Inc., was her signature, but she did not know how it got on the deed and denied asking Attorney Hauver to prepare a deed for her or that she sold the property in question, but did believe she had gone to the office of Attorney Hauver and consulted him to see “if everything was all right.” She did remember selling 0.53 acres to the rear of the property in question to Herman Stouffer (President of Colonial Estates, Inc.) who built a barn thereon for horses.

The conveyance of said property being by deed from her dated December 30, 1960, and recorded in Liber 364, folio 44. Mrs. Hartman denied that any mortgage was against the property at the time the deed to Colonial Estates, Inc., was recorded and denied ever discussing the sale of the property or receiving any consideration therefor or signing any papers. Her nephew, James Lloyd Wolfinger, a handicapped man, age 58, who lived with Mrs. Hartman for over 30 years, testified that he had asked Attorney Hauver to prepare the deed giving himself and Mrs. Llartman life estates. He testified that Mr. Stouffer bought the property for $10,000.00 “plus both of us’s life interest,” which he was either to put in the deed or give to them otherwise.

That said price was paid by Stouffer paying off an existing $3,000.00 mortgage, paying taxes and other debts, painting the house and paying $800.00 cash and building a garage and shop for James Wolfinger to use for $2,200.00, the balance to be paid over a 3-year period. He testified that he knew his Aunt Emma S. Hartman had sold the property but he had no knowledge of Emma S. Hartman actually signing the deed to Colonial Estates, Inc., and never saw the deed that was recorded. He testified that he approached Mr. Herman Stouffer “at least forty times * * * for that contract for that life interest. ²⁰⁰ I either got evaded or ‘he’d bring it up tomorrow’, it was the same evasion all the time.” That he and Emma Hartman continued to live in the house after July 1964 and paid no rent and Stouffer never tried to evict them or ask them for rent, although he lived in the area and was frequently seen. That he, Mr. Wolfinger, was not present when Mr. Miller from Home Federal Savings and Loan Association made the inspection and knew of no mortgage being placed thereon by Home Federal Savings and Loan Association until the property was advertised for foreclosure.

A Mr. Avey testified that Stouffer permitted him to place his trailer on said property to the rear of the house occupied by Emma S. Hartman about 2 years ago and that Emma Hartman consented thereto on request of Mr. Stouffer. That Stouffer told him Mrs. Hartman and Mr. Wolfinger had life interests in the property. Witness Frank Wilson, employed by Mr. Stouffer and a resident of the area, testified that Mr. Stouffer told him of the life interest of Mrs. Hartman and Mr. Wolfinger and that such life interests were fairly common knowledge among the people in the area of Holiday Acres development adjoining this property. Witness Roger William Wolfinger, brother to Mrs. Hartman, indicated that she had asked his opinion about her conveying the property to Mr. Stouffer and that he would pay off the mortgage and current debts and that she and James Wolfinger would have a life interest in the place.

He testified he never saw a contract in that regard, but that Mr. Stouffer did tear down the old garage to get access to the barn in back of his sister’s-property. The notary who subscribed to the affidavit attached to the deed executed by Emma S. Hartman to Colonial Estates, Inc.,, on July 28, 1964, testified that he did not see Mrs. Hartman sign the deed, that he was in the habit of notarizing instruments, brought to him by Herman Stouffer, as a matter of course, after calling the parties to the instruments, and that he therefore must have asked Mrs. Hartman if she signed the deed. The Circuit Court found that the mortgagee, Home Federal Savings and Loan Association, had constructive notice of the ²⁰¹ rights of Emma Hartman and James Wolfinger, arising out of the fact that they remained in the property and ordered that the said property be sold at the foreclosure sale subject to said life interest. The property was so sold with the understanding that the right to appeal from the decree would be assigned to the purchaser.

Elwood W. Grimm and Mary C. Grimm his wife, purchased the 0.41 acre parcel at public sale on September 6, 1966, for $6,000.00 from Evan Crossley Assignee for Foreclosure and Collection of mortgage to Home Federal Savings and Loan Association of Hagerstown, the same being sold, pursuant to the decree of the Circuit Court for Washington County, in the case of Emma S. Hartman, et al. vs. Llome Federal Savings and Loan Association, No. 24,876 Equity, subject to the life estates of Emma S. Hartman and James L. Wolfinger and with the right of appeal from the decree in No. 24,876 Equity being specifically included in the sale and assigned to the purchasers Elwood W. Grimm and Mary C. Grimm. Said purchasers elected to pursue said appeal in the place and stead of said Home Federal Savings and Loan Association of Hagerstown, mortgagee. The appellee does not agree that the property was first visited by a representative of Home Federal on November 5, 1964, but under our view of the case, the date of this visit is not controlling. The case presents two questions.

Prior to argument of the case on its merits counsel for the appellees presented a motion to dismiss the appeal under Maryland Rule 835 b (l) 2 and assigned as reasons in support of the motion: (1) that appellants acquiesced in the decree ordering the property to be sold subject to the life estates, by not objecting to the ratification of the sale; (2) that the appellants were not injured by the decree below; and (3) that real parties in interest in the appeal ²⁰² are Elwood Grimm and wife, purchasers at the foreclosure sale, who are prosecuting the appeal in the names of Crossley, the assignee, and Home Federal, the mortgagee. We reserved our ruling on the motion to dismiss, and that motion is now denied. The appellants contend, and we think correctly, that their right to appeal is accorded by Code (1957) Art. 5 § 6: “Any party may appeal to the Court of Appeals from any final decree, or order in the nature of a final decree, entered by a court of equity.” The decree appealed from was-clearly the decree entered on September 2, 1966 in Equity case No. 24,876 which fixed the quantum of the interest to be sold in the foreclosure proceeding, i.e., the sale of the remainder subject to the Hartman-Wolfinger life estates. The foreclosure proceeding (Equity case No. 24,864) was conducted in accordance with the September 2, 1966 decree; the sale was not ratified until after the entry of the order of appeal; and the rights of the appellants, clearly reserved at the foreclosure sale, were in no way prejudiced by their failure to except to the ratification of the sale.

Crossley and Home Federal were parties in case No. 24,876 below, and assigned their rights to Grimm, who properly determined to prosecute the appeal in their names. A second and more important question is presented by the appeal: Was continued possession of real property by the grantor and her nephew constructive notice of the life estates claimed by them as against a subsequent mortgagee who relied on a recorded fee simple deed signed by the grantor? This question must be answered in the negative, notwithstanding the fact that Mrs. Hartman was the innocent victim of Stouffer’s fraud. In a series of cases, this court has recognized the principle that undisturbed possession of land by a stranger to the record chain of title may, depending on the circumstances, put a purchaser on notice as to the rights of the person in possession.

In Ringgold v. Bryan, 3 Md. Ch. 488 (1850) the complainant Mrs. Ringgold and her husband sold a tract of land to Hobbs, under a contract which provided that Hobbs was to expend, for Mrs. Ringgold’s benefit during his life, a sum equivalent to the interest on the purchase price, and grant Mrs. Ringgold a life interest in the dwelling house and appurtenant buildings on the farm. The Ringgolds executed a deed conveying an absolute fee ²⁰³ simple title to Hobbs; Hobbs subsequently mortgaged the property to Bryan; and Bryan purchased at a sheriff’s sale. Mrs. Ringgold then sought to charge the property in Bryan’s hands with the undertaking contained in her contract with Hobbs. The Chancellor held that the possession of a portion of the property by Mrs. Ringgold was sufficient to put Bryan on notice of the existence of the Hobbs contract, and to charge him with responsibility for performance of the unrecorded agreement.

But the case can be distinguished from the later Maryland cases, and from the case at bar, by the Chancellor’s finding that Bryan had actual notice of the provisions of the contract between the Ringgolds and Hobbs before he made the mortgage loan or purchased at the sheriff’s sale. Hoffman v. Gosnell, 75 Md. 577, 24 A. 28 (1892) involved an absolute conveyance on July 10, 1877 of a valuable distillery property. The deed was duly recorded, and on the day when the deed was executed, the grantee of the distillery entered into an agreement with the grantors which recited that the grantee was taking title in order to make a sale of the distillery and to apply the proceeds of sale toward the satisfaction of certain obligations of the grantors. This agreement was never recorded, and apparently never performed.

Thirteen years later, on October 11, 1890, the grantee of the distillery made a deed of trust for the benefit of creditors. The case came before the court as a result of an effort to subject the distillery property to the provisions of the unrecorded agreement, in derogation of the claims of the creditors of the grantee. The record showed that one of the grantors had been in possession of the distillery for the thirteen year period between the conveyance and the deed of trust for creditors. After a careful review of the purposes and history of the recordation statute, the court held that the claims of those who took under the recorded deed were superior to the rights of the claimants under the unrecorded agreement.

In disposing of the contention with respect to continued