First Mortgage Bond Homestead Ass'n Ex Rel. Porter v. Mehlhorn

Thomas, J., delivered the opinion of the Court. On the 25th of April, 1912, the appellees executed what is termed in the record an “application,” by which they sub ⁴⁴¹ scribed to fifteen shares “of series A and B stock in the First Mortgage Bond Homestead Association, Incorporated,” and agreed to comply with the by-laws, rules and regulations of the association, and “to pay all payments in monthly installments of $16.67 each on said stock as dues on the first Monday of each month in advance,” and further agreed, in case a loan was procured by the association for them, that they would not withdraw any portion of the amount- deposited by thorn until the maturity of the stock, “or when the mortgage is released,” when the association, or trustee named in the mortgage to be executed by them, was authorized to pay to the holder or holders, of the bonds,, in the names of the appellees, all moneys due the appellees under the by-laws, and necessary to redeem the bonds and procure a release of the mortgage; “also in the meantime to pay all interest, coupons on the mortgage indebtedness, taxes, water rent, ground rent or other charges due or to become due on the property” therein referred to, and to deduct the same from any payments or deposits made by them to the association. Following a formal application to the asociation to procure far them, a loan of $1,500.00, at six per cent, interest, and an offer as security therefor of all moneys paid by them to the association, and No. 2016 St. Paul street, in Baltimore 'City, they agreed to-execute a mortgage to the association as trustee, and to execute coupon bonds in such denominations as might be desired, secured by the mortgage, and payable to- bearer or registered holder thereof at the maturity of the stock, or upon default, not later than ten years after date. After certain statements or representations in regard to the property to be conveyed by (lie mortgage and charges against the same, the applica^ lion contained, among others,, the following additional stipulations: “We further agree that said association shall be our agent in the creation of the sinking fund to meet this loan, with no risk or responsibility on the part of the person or persons advancing the money for this loan in any manner, and that we will deposit in addition to ⁴⁴² the dues above mentioned on the first Monday of each month, hereafter, the sum of $7.50, as interest on said loan, to be paid by said association each six months to the holders of the securities, and the sum of $16.25 as the expenses on said property' to the parties legally entitled to receive the same, and such other sum as may be necessary. “It is also understood and agreed that said association will invest and keep invested all moneys deposited by ns, and after we have deposited as dues the sum of $104.00, that the association will assume, if invested, the interest on this amount, and the same may be deducted from the monthly payments of the applicants, or added to the dues or in such other manner as may be agreed upon from time to time. * * * “It is also understood and agreed that if we adopt the drop-interest plan, we are not to share any of the profits of the association, and shall get credit for only such payments as we shall make as dues. “It is 'further understood and agreed that if we should become in arrears in our monthly installments of dues, interest, fines, expenses or any portion of either, or shall fail to pay any expense or public dues or charges on the property when due and payable, or shall fail to keep up the improvements on the property in their present condition, or make a false statement concerning said property herein, then the entire mortgage debt shall be deemed due and payable, and any method may he pursued for the collection of the mortgage debt at the option of the trustee as may he enumerated in the mortgage.” On the same day the appellees executed a mortgage of their said property to the association as trustee, and also two bonds, one for $1,000.00 and the other for $500.00, payable to bearer or -registered holder thereof, with interest, at six per cent., payable semi-annually from the 25th day of April, 1912, until the principal of the bonds was paid according to the terms of the application and mortgage, on surrender of the coupons at the office of the association. ⁴⁴³ The mortgage, after reciting that the appellees were members of the association; that they had subscribed to ten shares of series B stock, and five shares of series A stock of the association; that they had filed with the association an application to secure for them a, loan of $1,500.00; that the association, relying upon the truth of the statements contained in the application, had procured the money applied for from divers persons, and that the mortgagors had executed their two coupon bonds for $1,000.00 and $500.00, JSTo. 126 and No. 127, respectively, payable to bearer or registered holder thereof, with interest, at the maturity of the stock of the mortgagors, “not later than ten years from date, or upon default,” contained the following recital: “And in order to create a sinking fund with which to meet said bonds at maturity, the mortgagors have agreed in said application to deposit regularly on said stock monthly installments of $40.39/100 each, being principal, interest and expenses, as particularly set forth in said application, which is hereby made a part of this mortgage, with said Association, as their depository until their stock has matured (with no power of withdrawal in the mortgagors, and with no risk or responsibility on the part of the bondholders in any way) when it shall be paid by said Association to the bondholders upon presentation and cancellation of their bonds and coupons or as hereafter provided; and in o’-der to secure the prompt payment of said bonds and. ibi interest coupons attached hereto, as they shall res])('Oi.i\ely become due and payable, the performance of the agreement to create a sinking fund and all other covenants and agreements contained in the application, the bonds and this mortgage, these presents are executed.” The mortgage declared that the property thereby conveyed should he held by the association in trust for the benefit and security of the holders of the bonds and the enforcement of the payment of said bonds and interest thereon, “and the performance and compliance with the covenants and conditions ⁴⁴⁴ of the mortgage, the application for this loan and the bonds which are secured hereby,” and then provided: “That if the said mortgagors, their heirs, personal representatives and assigns, shall well and truly pay or cause to be paid, the aforesaid bonds, aggregating $1,500.00, and all interest or coupons attached to said bonds, when and as they shall respectively become due and payable, and shall perform all the agreements contained in the application for this loan, the bonds and .the by-laws of said association, and all the covenants ■contained herein on their part to be performed, then this mortgage shall be void.

And it is agreed that until default be made iu the premises, the mortgagors .shall possess the aforesaid property upon keeping up the improvements on said property in their present condition, which they covenant to do; and paying in the meantime all fixed charges and expenses, which charges and expenses, mortgage debt and interest the said mortgagors for themselves, their heirs, personal representatives and assigns, do hereby covenant to pay when legally demandable, but should any of the statements contained in the application for this loan be untrue, or if default be made in the payment of said bonds or the interest obligations attached thereto, or in the payment of the installments of principal and interest in the creation of the sinking fnnd to meet the bonds and interest obligations attached thereto as specifically set forth in the application for this loan- and the by-laws at the time limited for the payment in said application or by-laws, or any part of either or in any agreement, covenant or condition contained in said bonds, application, by-laws and this mortgage, then the entire mortgage debt shall be dne and demand-able.” The association was authorized by the mortgage in case of default to- take possession of the property and to hold the same for a period not exceeding five years and to collect the rents, etc., and to deposit the net income therefrom, if any, with the association “the same as if the mortgagors had de ⁴⁴⁵ posited under the terms of” the mortgage, and the mortgage .also contained the following provisions for a judgment by confession and a decree for the sale of the property: “And it shall be lawful for O. Parker Baker, Esq., or any attorney he may designate, of any court of record, to appear for the mortgagors in any court of law or equity having jurisdiction over mortgagors or their property, and waive all process and confess a judgment in favor of said trustee to the use of the holders of the bonds for the face value of all the bonds secured hereby, with accrued interest, and the cost of the proceedings. “And the said mortgagors hereby consent that a decree may be passed for the sale of said property under the provisions of the law in such cases made and provided, or this mortgage may be foreclosed under any law or laws of the State of Maryland, either public, local or general, or by the method usually practiced by mortgagees in the city or county where this mortgage is recorded. In any method the attorney conducting the proceedings shall be allowed a fee of $25.00 in addition to usual commissions.” The bonds executed by the appellees referred to the application and to the terms of the mortgage, and also contained the following provision: “It is also understood and agreed by the mortgagors tun f they will create a sinking fund to meet the series of bonds and the coupons attached thereto, and will deposit with the Eirst Mortgage Bond Homestead Association on the first Monday of each month the sum of sixteen sixty-seven-one hundred ($16.67) as a part of the principal and the sum of seven fifty-one hundred ($7.50) dollars as the accrued interest on this series of bonds and also all other expenses and charges and costs to the trustee as are particularly set forth in the sworn application for this loan and the mortgage or deed of trust which secures this bond. This bond shall become due and demandable at a time when the mortgagors should have to their credit on account of ⁴⁴⁶ the principal with the First Mortgage Bond Homestead Association, their agent or depository, a sum equal to the face value of all bonds issued in this series and secured by the mortgage or deed of trust aforesaid (if they continue to deposit regularly the installments aforesaid with the association on the property aforesaid, with all interest charges and costs which have accrued thereon in accordance with the mortgage or deed of trust and the application for this loan now in the hands of the trustee, or upon default as prer scribed by the mortgage or deed of trust; provided,