Diliansz v. Klatch

Barnes, J., delivered the opinion of the Court. This appeal involves the construction of a provision of a purchase money mortgage of certain land in Montgomery County, the propriety of the advertisement of the foreclosure sale and the standing of the mortgagee to foreclose the mortgage. ³¹⁶ The mortgaged property is part of a tract of land called “Joseph’s Park” in the Capital View Subdivision of Montgomery County. The improvements on the land were described as “The Corvin Inn, hotel and restaurant with parking lot adjoining, with address of 8 and 10 Old Post Office Road, in Silver Spring, Maryland.” The appellant, Joseph Diliansz, and his wife Maria (from whom he is now separated) were the mortgagors. The appellee, Bernard J. Klatch, unmarried, was the mortgagee.

The mortgage was for $74,000 for which the mortgagors had given their promissory note in that amount with interest at 6°fo per annum. Interest and principal were payable at $550 a month. The mortgage was due on or before the expiration of 20 years, with the privilege of making larger payments without penalty at any time during the 20 year period. The mortgage then provided: “Parties of the first part [the mortgagors] further certify that this mortgage is subject only to two other mortgages, the first one in favor of Perpetual Building Association of Washington, D. C. and the second one in favor of the Hartley family of Longmeadow, Massachusetts, the total balance on both these mortgages being less than twelve thousand dollars at the present time, and the party of the second part [the mortgagee and appellee, Klatch] has agreed to pity off these two mortgages(Emphasis supplied).

The mortgage provides that upon default in payment of principal or interest, “or any part of either of them, at the time limited for payment of the same, or in any agreement, covenant or condition of this mortgage, then the entire mortgage debt shall be deemed due and demandable; and it shall be lawful” for the mortgagee, his heirs and assigns or their attorney or agent “at any time after such default to sell” the mortgaged property. The usual provisions for advertisement of the sale and allocation of the purchase money then follow. The mortgagee paid off the Hartley mortgage and duly recorded the release of that mortgage. The mortgagee arranged with the Perpetual Building Association to assume the mortgage of that Association and to reduce the monthly payments on ³¹⁷ that mortgage.

The mortgagee has paid each monthly payment on the Association mortgage when due and that mortgage is not in default. This arrangement with the Association was not known to the mortgagors. Upon the mortgagors' default in the $74,000 mortgage, the mortgagee had advertised in the Montgomery County Sentinel on March 10, 1966, that a default had occurred and the mortgaged property would be sold at public auction on March 31, 1966. The advertisement gave the place and terms of sale, stating that the mortgaged property would be sold “subject to a prior mortgage to Perpetual Building Association of Washington D. C. in the approximate amount of $5,300, the exact amount of which will be announced at the time of sale.” The foreclosure sale was duly held on March 31, 1966, at 10:00 A.M. at the Rockville Court House door.

The mortgagee purchased the mortgaged property for $78,000 subject to a first mortgage in the balance of