Doeller v. Mortgage Guarantee Co.

Offutt, J., delivered the opinion of the Court. On December 16th, 1927, the Club' Apartments Company, a Maryland corporation, executed to the Mortgage Guarantee Company, a Delaware corporation, herein called the guarantee company, a mortgage ory certain property located at the northeast corner of St. Paul and Eager Streets in the City oi' Baltimore to- secure the repayment of $315,000, together with the interest thereon payable quarterly at the rate of sjx per cent, per annum. The mortgage contained the usual “Assent to a Decree” and “Power of Sale” clauses, and the principal sum secured by it was -payable at the expiration of ten years from the date thereof. On May 9th, 1930, in consideration of $2,500, the mortgagee assigned to Carrie A. Doeller, herein called Doeller, an undivided 250/315,000 share in that mortgage, and on the same day it executed to her a policy of guaranty under which it guaranteed the repayment of said sum of $2,500, ’ together with the interest thereon to accrue.

Under that ⁵⁰³ instrument the guaranty company was constituted the exclusivo agent of Doeller for the collection of the interest due her under the mortgage and assignment, and for its services it was to retain onertwelfth of each interest installment, or onelialf per cent. The policy also contained this clause: “That until revocation hy a written notice to it, the Company shall have full power and authority, in its own name, hut for the benefit of the insured, and all other owners of undivided shares in the mortgage (a) to take all steps necessary to the protection of the common investment; (b)’ to collect in due course of maturity the mortgage debt and any part thereof, executing all proper releases and remitting to the insured his proportionate share.” On February 14th, 1933, the guarantee company addressed to the holders of its “5%% Guaranteed First Mortgages” an “open letter,” in which, after setting forth at some length the distressing effect- of the economic and financial depression on real estate values, as well as upon the ability of mortgagors to meet their obligations, it solieited their approval of a plan which would extend at the option of the guarantee company the maturity of the mortgages five years, and would permit the guarantee company to retain from interest installments one and one-half per cent, instead of the one-half of one per cent, authorized by the policy of guaranty. On August 22nd, 1933, James Charles .Byrne, an attorney at law, addressed as on behalf of Doeller a letter to the guarantee company notifying it that Doeller revoked its agency for her, and that she would in future collect tlm interest and principal due her under the mortgage directly from the mortgagor. On the same day Brvne wrote to the Club Apartments Company a letter, in which, among other (Lings, he stated: “We have this day revoked the agency of the Mortgage Guarantee Company, and hereby instruct you to make all future payments, as to her share in said mortgage, direct to- the undersigned, as Attorney.” On August 23rd, 1933, the guarantee company, in a reply signed hy Thomas B. Marshall, its vice-president, to Byrne’s ⁵⁰⁴ letter to- it, said in part: “I write to- acknowledge receipt of your letter of the 22nd listing mortgage certificates and stating that you will collect direct from the mortgagors the amount of interest and principal falling due under these certificates, and that you hereby revoke the- agency o-f the Mortgage Guarantee Company to do so.

This action discharges the Mortgage- Guarantee Company’s liability under the certificates. Of course-, I am very sorry that you have decided to- proceed in this manner. * * * However, my opinion is that this is undoubtedly your legal right if you wish to withdraw these mortgages- and handle them yourself, because the Maryland mortgages are in form an absolute recordable assignment which gives the assignee legal title to an actual part in a particular mortgage.” In addition to Doeller, Byrne also- represented other persons holding fractional. interests- in mortgages guaranteed by the guarantee company, and on behalf of one of those clients he instituted proceedings in the- Circuit Court of Baltimore City for the foreclosure of a mortgage on the St. Paul Co-urt Apartments-, the- principal and interest of which the guarantee company had guaranteed. On September 8th, 1933, the guarantee company filed in the same- court, under the assent to- a decree- contained in the mortgage-, a petition for the foreclosure of the mortgage on the Club Apartments Company’s property, and upon that petition Clarence A. Tucker, an attorney at law, was appointed trustee to make the sale. On September 16th, 1933, an installment of interest under that mortgage became due and payable, and on the same day the interest due Doeller was received by the guarantee company, which at once- returned it with a request that a check' for it be drawn to- the order of Byrne and returned to George M. Englar, a vice-president of the guarantee company.

That was done, and he on September 19th, 1933, sent it to- Byrne, who- refused to- receive it because, he said, the mortgage was in default for nonpayment of the- interest on September 16th, 1933. ⁵⁰⁵ On September 9 th, 1933, Byrne called upon Tucker, t-be trustee appointed on September 8th, 1933, and, although there was at that, time no default, of any kind on the part of the mortgagor, urged him to advertise and sell the Club Apartments property and other properties affected by other decrees passed in foreclosure proceedings instituted by the guarantee company to foreclose mortgages which it held on them, and in which Byrne’s clients held small fractional interests. At that interview, Byrne testified, the trustees told him that the several foreclosure proceedings had been instituted for the purpose of holding “a whip) hand” over them, and that it was not his intention to sell the properties at that time. Tucker, the trustee, denied the use of that precise phraseology, but admitted that, he had told Byrne “that his action as trustee in connection with the St. Paul Court Apartment showed the wisdom of holding some kind of a check over him if it could be gotten.” Three days later, on September 19th, 1933, the day on which Byrne refused to accept, a check for the interest due Doeller on September Kith, Doeller filed in the foreclosure proceedings, of the Mortgage Guarantee Company against the Club Apartments Company a petition in which, after alleging in substance the facts narrated above, she prayed: “1. That a co-trustee be appointed in the above entitled case. 2.

That the. said trustee be directed to advertise immediately the property secured by said mortgage for sale in accordance with the terms and conditions of said decree. 3. And for such other and further relief as their case may require.” Upon that petition a show canse order was passed, and on September 29th the guarantee company filed an answer in which, after sundry irrelevant and immaterial averments, it alleged as. a defense that it denied “that- the obtaining of a decree in thip case and the failure of said trustee to sell, up to this, time, the mortgaged premises is an attempt on the part of your respondent to force petitioners or anyone else to do anything, but its action in the premises was moved simply and solely by what, it regarded as the ⁵⁰⁶ best interests of all the parties holding any interest in said mortgage.” The case came on for testimony and a hearing, and at the conclusion of the hearing the court signed an order dismissing the petition. This appeal is from that order. In addition to what has been stated, there is nothing in the record that is material to the questions raised by the appeal except the following, which occurred in the cross-examination of Byrne: “You have referred to calling on the trustee and certain conversations you had with the trustee.

Did you mean myself? A. Yes. Q. When you called upon me it was in the early part of September, wasn’t it ? A. Yes.

Q. September 9th, I think. At that time there was not any default at all in the mortgage of the Club Apartments, was (there? A. I don’t know. The Mortgage Guarantee Company handled all matters in connection with it.

I could have assumed by taking out a decree that there was a default, which I did not. I knew a decree could be taken out prior to a default, but I had no definite knowledge as to whether or not there was a default. Q. You knew, so far as taking out decrees, you could do that immediately after the mortgage was made, if you felt so disposed? A. Yes.

Q. The only default you claim with respect to the Club Apartments is that you got your check on September 19th, when it ought to have been received on September 16th, 1933 ? A. That is the only default that we are now claiming, all that we know of.” The first question presented is whether there was any default on the part of the mortgagor in the payment of interest due the appellant. It is conceded that there was no default other than that, so that, if there was no default in the payment of interest, there was no default at all, the trastee named in the decree was wholly without power to sell the property, and his refusal to sell was not a matter of discretion, but of compulsion. Under the peculiar practice authorized by Code Pub.

Loc. Laws, 1930, art. 4, secs. 720, 721, the decree directed that the mortgaged property be ⁵⁰⁷ sold “at or after any one of tlie periods' limited in the mortgage filed for the forfeiture of said mortgage.” Such a decree may properly be entered at any time after the execution of the mortgage, whether there is or is not at the time a default on the part of the mortgagor in respect to the covenants' of tlie mortgage, but there can be no sale under the decree until there is a default (Miller, Equity Proc., sec. 477; Black v. Carroll, 24 Md. 256 ; Schaeffer v. Amicable Company, 47 Md. 127 ), which must be shown by a statement of the mortgage claim remaining due, verified by the oath of the mortgagee, his executors, administrators or assigns, and filed in the court in which the proceedings are pending. Code Pub. Loc.

Laws, 1930, art. 4, sec. 721. The principal debt secured by the mortgage in this case will not by its terms become due and payable until 1937. It is not denied that the mortgagor has performed all covenants in the mortgage to be performed by it except that relating to the payment of interest, and the only default alleged in respect, to that covenant, is that the interest due Doeller was not paid personally to her or to Byrne on the 16th day of September, the day on which it became due and payable. But it also appears without contradiction that on that day the interest was paid to the guarantee company, which had previously, as the agent by her appointment, collected it for Doeller, but that it was not paid or tendered to Doeller or to Byrne until September 19th.

So-that the question is whether, upon the facts stated, the failure of the mortgagor to pay the interest due to Doeller or Bvme on September 16th was such a default as justified the foreclosure of the mortgage. The appellant contends, and we think properly, that, if the mortgagor delayed paying the interest beyond the day on which it became due and payable, the entire mortgage debt became due and