Felgner's Administrators v. Slingluff

Boyd, C. J., delivered the opinion of the Court. Mrs. Ann M. Slingluff filed a hill in equity against Edward L. Feigner for an accounting for all sums of money re ⁴⁷⁷ ceived by him from a property previously owned by her, and prayed for a discovery and a decree in personam against Mm for such amount as may be found to be due her. The lower Court decreed that he pay her the sum of $3,802.03 and co'sts, and Mr. Feigner having died, his administrators were made parties defendant and entered an appeal from that decree. A cross-appeal was entered by Mrs. Sling-luff.

On the 26th of September, 1899, Horace Slingluff, husband of the plaintiff, gave a mortgage, in which she joined, to Mr. Feigner for $22,000.00 on a property in Baltimore County county called “llpton.” Mr. Slingluff afterwards took the benefit of the Bankrupt Law, and on March 27, 1900, the mortgage was foreclosed and the property purchased by Mr. Feigner. At that time large improvements which Mr. Sling-luff had begun were incomplete and the dwelling house was consequently in bad condition. Mr. Feigner agreed with Mrs. Slingluff that he would complete the repairs which were in course of construction, keep an account of the moneys expended thereon and, when completed, would convey the property to her, who with her husband was to give Mr. Feigner a note secured by mortgage upon said property. The parties do not materially differ as to the terms of that agreement'— the principal difference being that the plaintiff claims it was made before the foreclosure sale of March 27, 1900, and the defendant that it was made shortly afterwards.

On May 1, 1901, a deed was executed for the property to Mrs. Slingluff", and Mr. and Mrs. Slingluff gave Mr. Feigner a mortgage of that date to secure a note for $30,495, payable three years after date and six interest notes for $913.85, each, one being payable every six months after date. The principal sum included the original mortgage of $22,000, the repairs made by Mr. Feigner amounting to $4,896.74, the costs of the foreclosure proceedings $687,40, including a fee of $500.00 to Mr. Dillehunt, who was the attorney who made the sale, and $2,367.90 interest to May 1, 1901, which together with an adjustment of taxes, $17.97—amounted to $30,495.01. We do not understand the correctness of those ⁴⁷⁸ sums to be questioned, but the plaintiff claims that there should have been a credit of $1,400.00 for rent received from David Hutzler, which will be referred to later. As additional security, Mr. and Mrs. Slingluff agreed to assign to Mr. Feigner an endowment policy of insurance issued on the life of Horace Slingluff for the sum of $5,000, which at the time, by reason of certain accumulations, had a cash value of something over $7,000.

The Slingluffs also agreed to furnish the dwelling house, to provide a gardener and do what they could towards securing a good rental. The object of this was to get the property in a condition that would enable them to dispose of it to the best advantage, in order, to pay off the mortgage and have some surplus for the benefit of Mrs. Slingluff, which she claims it was agreed she should have. The insurance policy was assigned to Mr. Feigner, but the trustees in bankruptcy of Mr. Slingluff made a demand for it, and after some litigation the matter was finally compromised by- dividing the value of the policy, which resulted in Mr. Feigner receiving $3,574.15. Mr. Slingluff, who represented his wife, and Mr. Dillehunt, who represented Mr. Feigner, who was his father-in-law, practically agree as to what that agreement was, excepting Mr. Sling-luff claims that the rents for 1900 were to go to Mr. Feigner while Mr. Dillehunt contends that the payment of rents to him was to begin with those of 1901.

The rents were derived from the property during the summer season. Mr. Slingluff. rented the property to David Hutzler for the summer of 1900 at $1,400.00, to Louis Hamburger for the summer of 1901 at $1,400. and to Levi Greif for the summer of 1902 at $3,200.00, and Mr. and Mrs. Slingluff expended money and time with a view to making the property attractive to purchasers. There were a number of interviews between Mr. Slingluff and Mr. Dillehunt, and considerable correspondence passed between them, some of which will be hereafter referred to— the letter of October 11, 1902, bearing more particularly on the agreement that Mrs. Slingluff was to have the surplus, ⁴⁷⁹ over and above the claims and expenses of Mr. Feigner, out of a sale of the property. On February 24, 1903, a deed was executed by the Slingluffs to Mr. Feigner for the property embraced in the mortgage which was duly delivered 1o Mr. Dillehunt. hut he put it in his safe and never recorded it.

On April 17, 1903, Mr. Dillehunt, as assignee of the mortgage, reported a sale of the property under the power of sale to the Circuit Court for Baltimore County, in which report he states that he sold the property on April 8, 1903, to Mr. Feigner for $24,000. That sale was in due course ratified by the Court, an Auditor’s report was filed and ratified and the deed was made by Mr. Dillehunt, assignee, to Mr. Feigner on May 13, 1903. Both Mr. and Mrs. Slingluff deny any knowledge of that foreclosure sale until the matters connected with this suit were placed in the hands of Mr. Bartlett, who, they allege, first told them of it, and they claim that they supposed the deed which they executed had passed the title to Mr. Feigner, subject to the agreement which they say then existed. Before this hill was filed Mr. Feigner had sold part of the property to Charles D. Fitzgerald for $27,500.00 (as we understand the amount), and the balance to the Western Maryland Bailroad Company for $5,812.50, and the plaintiff claims that the purchase money received, the insurance money and rents more than paid Mr. Feigner, who she alleges was compelled to give her the surplus under the agreement.

The defendant denies there was any surplus, hut contends that if there was the foreclosure proceedings preclude any recovery. The first question therefore to be determined by us is the effect of those proceedings. 1. We cannot agree with the counsel for Mrs. Slingluff that there was a merger by virtue of the deed of February 24, 1903. A sufficient answer to that contention is that before the deed was made, to wit, on October 31, 1902, the morí gage had been assigned to Mr. Dillehunt.

While he undoubtedly took the assignment subject to all equities existing between the mortgagor and mortgagee, the legal title was transferred to him and hence there was no merger by reason ⁴⁸⁰ of the deed to Mr. Feigner. T¿e general rule is that: “In order for the mortgage to be extinguished by the union of titles of the mortgagor and the mortgagee, such titles must unite in the same person at one and the same time.” 20 Am. & Eng. Ency. of Law 1068. Even when a mortgagee acquires the equity of redemption in his own name it does not necessarily follow that the mortgage becomes merged and extinquished, but it depends upon the intention of the mortgagee, and when it is for his benefit to do so the presumption is that he intended to keep the mortgage alive.

Ibid, 1064; Polk v. Reynolds, 31 Md. 106 . 2. But notwithstanding there was no merger, and assuming for the present that there was an agreement that the stir-plus derived from the sale of the property was to go to Mrs* Slingluff, which we will consider later, was the effect of the foreclosure proceedings such as the defendant contends for ?' It cannot be doubted that the doctrine of res adjudícala applies to a mortgage foreclosure proceeding, such as this, as it does to other judicial proceedings, and of course the proceedings taken in reference to the foreclosure of the mortgage cannot be attacked collaterally. Again we must differ from the position taken by the counsel for the plaintiff that inasmuch as Mrs. Slingluff had no title at the time of the foreclosure* the sale passed no title. The statute expressly provides that: “All such sales, when confirmed by the Court and the purchase money is paid, shall pass all the title which the mortgagor had in the said mortgaged premises at the time of the recording of the mortgageSec. 11 of Art. 66 of Code.

If that were not so, and it only passed the title which the mortgagor had at the time of the foreclosure, the mortgagor could deprive the mortgagee of the security by selling the properly. The case of Queen City B’g. A’n. v. Price, 53 Md. 397 , cited’ by the plaintiff, involved an altogether different question. There it was held that the supposed power of sale was invalid,, and hence the sale and the subsequent proceedings were void..

It was there said that: “The mortgage stood as if no power of sale had been inserted in it,” but in this case there is no- ⁴⁸¹ question about the validity of the power of sale, and if it could no longer be exercised by reason of the deed, the objection should have been made in the foreclosure case, or if the plaintiff was kept in ignorance of it, by reason of the conduct of the mortgagee, a bill of review or some appropriate proceeding in that'Court, was the proper remedy, if it be necessary to have that sale set aside. 3. But is that necessary under the circumstances of this case ? The plaintiff is not contending that title to the property did not pass to Mr. Feigner—on the contrary, she contends that it had already passed by the deed. Mr. Dillehunt thus explains in his testimony why the foreclosure proceedings were taken: “After having gotten that deed I was afraid to record it because of the relationship between the mortgagor and mortgagee—I was afraid that somebody would say that they made it under duress, or something of that sort—I was a little fearful of it, and I did not record the deed, and then followed those foreclosure proceedings.” He also said he thought at first of having the deed made to him, “so in case there was any trouble, the mortgage then could be foreclosed,” but he changed his mind and thought it looked better to have it made to Mr. Feigner.

The object of the foreclosure proceedings is thus clearly shown to have been simply to acquire the title in a way that Mr. .Dillehunt thought was free from question, hut he does not say that he ever notified either Mr. or Mrs. Slingluff of those proceedings, or of his intention to so proceed, and both of them swore that they were not aware of them. ILe never told them that he had not placed the deed on record, and Mr. Slingluff testified that when he heard of the sales made by Mr. Feigner he supposed they were made under the deed. It is difficult to believe that Mr. and Mrs. Slingluff would have executed the deed on February 24, 1903, if they had supposed, or if Mr. Dillehunt had then told them, that he would advertise the property for sale under the mortgage in less than a month, which he did; In Mr. Slingluff’s letter of March 1st, 1902, he appealed to Mr. Dillehunt not to advertise the property as he was then thinking of doing. ⁴⁸² He said, that they would “be mortified and humbled in the eyes of the community, and all our efforts set at naught and my business injured by having the place advertised for sale at foreclosure proceedings.” He offered to make a deed which Mr. Dillehunt was to hold until April 1st, and if they in the meantime paid the interest due he was to return the deed, and if the interest was not paid by that time, Mr. Dillehunt was to put the deed on record and they were to give quiet and peaceful possession of the property. No deed was then given, but on April 4, 1902, $911.51 was paid, for interest.

On October 11, 1902, Mr. Dillehunt wrote a letter to Mr. Slingluff in which he said: “Enclosed please find deed to be executed by yourself and wife under the agreement. In consideration of Mr. Feigner’s forbear anee to foreclose the mortgage on Upton you were to give him an absolute deed for the property, he agreeing on his part to allow you to sell the property before March 1st next and pay him his claim and expenses, you to take any balance left. After March 1st next, he will be privileged to sell the property at his own price withou.t any recourse to him by you or your wife or anyone else.” That deed was not executed for some reason and was lost, but another one was sent later which was the one executed February 24, 1903. Mr. Dillehunt was asked whether that deed was drawn in accordance with the letter of October 11th, and replied that it was not—“it was a new agreement with the same contents in it,” “really a renewal of the old agreement; that is what it was;” and he admitted on cross-examination that the Sling-luffs did not agree on February 24, 1903, that all their rights were to 'expire on March 1st.

It therefore appears from Mr. Dillehunt’s own testimony, and the letters, that the object in making the deed was to avoid a foreclosure, and that the foreclosure proceedings were taken in order that the title might be perfected, which Mr. Dillehunt thought doubtful under the deed alone, and not for the purpose of getting rid^of whatever rights Mrs. Sling-luff had acquired under the agreement. Indeed, no other conclusion could be reached without implying that Mr. Dille ⁴⁸³ limit was guilty of fraud, for he does not pretend that he informed Mr. and Mrs. Slingluff that he would not make use of the deed, or that he had not recorded it. The sale was made under proceedings which had been begun on October 31, 1902—nearly four months before the deed of February 24, 1903—and must have been advertised in about three weeks after the deed was made, as the report shows it was advertised for more than twenty days before the day of sale, which was April 8, 1903. It cannot be pretended that there is anything in the record to suggest, much less prove, any agreement or arrangement between February 24, and the advertisement or sale of the property, by which such rights as Mrs. Slingluff had in the surplus, by virtue of the agreement, were surrendered, or were intended to be surrendered, and it is difficult to imagine a more effectual way of misleading the Slingluffs than was adopted, if such effect must be given the foreclosure proceedings as is now claimed for them.

In justice to Mr. Dillehunt we must say that his testimony shows that no such effect was intended, but the sale was made, according to him, to perfect what he deemed would be a defective title under the deed. That being so, we must hold that the title acquired by Mr. Feigner under the foreclosure sale was not intended to, and did not, destroy the equity, if any, which Mrs. Slingluff acquired under the agreement and which resulted in the execution of the deed. If the Slingluffs were not aware of the sale, they could not be expected or required under the circumstances to object to it, and if they did know of it, they could not be supposed to believe or know that'it was intended thereby to give any greater effect to it than Mr. Dillehunt admits, namely, to perfect what he thought was a defective title—they certainly did not have any reason to believe that such equity as they acquired when or before the deed ivas given was intended thereby to be destroyed. We cannot, therefore, hesitate to hold that under the peculiar circumstances of this case the plaintiff is not precluded by the ratification of the sale from obtaining the relief sought in this case. ⁴⁸⁴ 4.

The ratification, .of the audit at first seemed to present more difficulty, in so far as some of the items involved are concerned. But on further consideration we have no doubt about them. If Mrs. Slingluff had either actual or constructive notice of the foreclosure proceedings, as may be conceded,, it is clear that if she is right in her contention as to the agreement, it could not have been the intention of the parties that after she and her husband had executed and delivered the deed, with the understanding that she should have the surplus,, if any, if the property could be sold for more than the claim of Mr. Feigner, she was to be further subjected to large expenses in perfecting the title—especially without any notice to her of the necessity or desirability of proceedings to accomplish that end. She not only did not contest the proceedings, but if she had actually known of them she might very well have concluded that they did not affect' her.

She was not claiming the equity of redemption which the law gave her as mortgagor—on the contrary, she had surrendered it, as she- and her husband believed then, and do not deny now. The sale under the power was to pass the interest she had when the mortgage was recorded—and not such as she acquired afterwards from the mortgagee. If she had filed exceptions to-the sale, and the Court was of the opinion that Mr. Dillehunt’s fears were well founded, it might have very properly overruled the exceptions on the ground that Mrs. Slingluff could not be financially injured by the proceeding, if her contention as to the agreement was right. And after the sale-was ratified, the assignee of the mortgage might very well have claimed the right to have an audit made, so as to have-the accounts between him and the real owner of the mortgage-stated.

There was no attempt to- secure- a decree in personam against Mrs. Slingluff for the balance as shown by that audit, and there could not have been without service on her, and then a Court of equity would not have passed a personal decree against her, if she had established the claim she now makes. It would be a fraud on her which a Court of equity would not assist in, if satisfied that her agreement was such ⁴⁸⁵ as she now claims. After discussing the subject, it is said in Story’s Equity Pleading, sec. 783 a: “But a former adjudication, even in a Court of equity, will not be a bar to a subsequent bill, unless the case made by the latter, ana the equity, are substantially the same. It is said the grounds of the latter suit must be substantially identical with those of the former.” That being so, as it undoubtedly is, and the equity claimed in this case being substantially different, and by no means identical, from that determined by the ex parte proceedings in the Circuit Court for Baltimore County, we are of opinion that they do not preclude the plaintiff from asserting her claim under this bill.

As it was not raised at the argument, we have not deemed it necessary to discuss the question whether the defense of res adjudicata was properly presented in this case;