First Mortgage Bond Homestead Ass'n v. Nelson

Walsh, J., delivered the opinion of the Court. The appellees filed their bill below seeking to restrain the appellants from selling the appellees’ property at a mortgage foreclosure sale, and from a decree granting this relief the appellants have appealed. In the spring of 1920, the appellees purchased from a Dr. Carter a house and about thirty-two acres of land at Jessups, in Howard County. The purchase price of this property was $4,000, of which sum $2,600 was to be paid in cash, and the balance of $1,400 was to be secured by a second mortgage on the property.

Not having any cash, the appellees applied to the Eirst Mortgage Bond Homestead Association, Inc., one of the appellants, for a first mortgage loan of $2,600, and after inspecting the property and examining the title the association agreed to make this loan. Thereupon the owner conveyed the property to the appellees as tenants by the entireties, and they in turn conveyed it by way of mortgage to the association as trustee, to secure certain bonds or notes of varying amounts representing the first lien of $2,600, and also to secure a bond or note for $1,400, representing the second lien, all of said bonds or notes maturing in ten years. ¹⁸⁴ The bonds representing the first lien were sold by the association to certain of 'its members at par 'and accrued interest, and the $1,400 bond was accepted by the original owner, Dr. Garter, in payment of the $1,400 balance due on the purchase price. At the time the appellees first applied for the loan, May 17th, 1920, they apparently signed a preliminary application in which it was stated, among other things, that they were to1 pay a bonus of $500 for the loan “to be carried in note and taken first out of dues,” and there was a further provision that “the undersigned agree, if granted, to pay dues, semi-monthly, interest and expenses, dues $17, interest $11.44, E. & F. $4.06, ea. % mo. $3'2.50.” The dues mentioned in this application represented the semi-monthly payments to be made by the appellees on forty-four shares of Glass B stock of the association costing $104 per share, which the appellees subscribed to when they secured the loan. On July 12th, 1920, the mortgage was executed, the $500 bonus note, which was not secured by the mortgage, was signed, and the appellees also executed at that time what is termed a “sworn application for loan.” .This sworn application contains the following provisions: “We also agree to pay for said stock in semi-monthly installments of $17.00 each on 1st and 3rd Mondays of each month hereafter.” Then latex*, “That if the said First Mortgage-Bond Homestead Association, Incorporated, secures said loan for us, we agree to pay as a premium the sum of $500, payable on demand, and a commission of 2%%; and for all expenses of searching title, recording and preparing all necessary papers, all to be deducted in advance from the money borrowed. “We further agree that the payments on accoxmt of our stock shall in no wise be a credit upon our bonds and said association shall be our agent in the creation of the sinking fund to meet this loan and not the agent of the bond-holders, with no risk or responsibility on the pax't of the person or persons advancing the money for this loan in any manner’, and that the bonds issued by the applicants shall remain a lien for the full ¹⁸⁵ amount thereof until the full amount is paid the bondholders all at one time.

"We also agree to deposit in addition to the installments aforesaid, on 1st and 3rd Mondays of each month, hereafter, the sum of $11.44 as interest on said loan (to be paid by said association each six months to the holders of our bonds), and the sum of l/26th part of the annual expenses on said property semi-monthly, or $4.06 to pay the expenses on said property such as taxes, water rent, ground rent (if any), and fire insurance or such, other sum as may be necessary to meet said expenses. “It is also understood and agreed that said association will invest and keep invested all monies deposited by us, in similar securities, and after we have deposited on our stock the sum of $104, that the association on each $104 so deposited will assume, if invested, the interest on this amount, and the same may be deducted from the semi-monthly payments of the applicants, or added to the dues or the applicants hereby elect the drop interest plan in lieu of our rights to share in the profits of this association. “It is also agreed that if the applicants shall fail to pay any one or any portion of the aforesaid installments at the time when they are payable, they agree to pay to said association, as liquidated damages, the sum of 4 cents per share per week for each default for the breach of this contract.” The mortgage contains the following clause: “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 in semi-monthly installments of $32.59 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 ¹⁸⁶ of their bonds and coupons or as hereinafter provided; and in order to secure the prompt payment of the said bonds and the interest coupons attached thereto, as they shall respectively 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 bonds themselves contain the provision that the “mortgagors shall pay in full the principal sum in accordance with the terms of the application for the loan and the mortgage or deed of trust.” And the further provision that “it is also understood and agreed by the undersigned that the money deposited by them on their stock in said association, together with the interest and a proportionate part of the expenses on said property, in accordance with the terms of the application for this loan and the mortgage deed of trust which are hereby made a part of this obligation, shall be considered as a sinking fund to meet this bond, the interest coupons attached thereto and the expenses, when they shall respectively become due and payable.” At the time the mortgage and note were executed the appellees also1 owed a balance of $59.40 for conveyancing costs, including a $50 fee for examining the title to the property, so that on July 12th, 1920, they owed $4,000 under the mortgage, $500 on the bonus note, and $59.40 for expenses incident to the transaction, and on this they were to pay $82.50 semi-monthly, divided into $17 dues to apply on stock and to be placed in a sinking fund for the purpose of retiring the mortgage bonds or notes at maturity, $11.44 for interest on the bonds, which interest was to be adjusted from time to time under the drop interest plan in accordance with the amount paid into the sinking fund, and $4.06 for expenses, which included taxes and insurance on the property. The payments made by the appellees were entered in a pass book, ¹⁸⁷ given them in lieu of separate receipts, and in the front part of this pass book the mortgage loan was set up, while the $500 bonus note and the $59.40 conveyancing expenses were consolidated and set up in the back of the book. In applying the payments made by the appellees, the association credited the mortgage account with the amounts paid for interest and expenses, but the payments made for dues were credited against the note and conveyancing costs, and at the time these proceedings were instituted $517.32 had been so credited. The appellee Thomas B. Nelson was, in 1920, employed as a brakeman by the Baltimore and Ohio Railroad Company and earned about $160 per month.

For a year or more after executing the mortgage he made the required payments with fair regularity, but his wife’s sickness and other family expenses caused him to become less regular, and the last payment, made by him in February, 1925, only brought his payments up to August, 1924. In addition to this he did not always pay the full amount due, so that when he discontinued paying in February; 1925, he had only paid $2,042.52 instead of the $3,575.00 he should have paid. Accordingly in May, 1925, O. P. Baker, the attorney named in the mortgage, docketed a foreclosure suit, and the property was advertised for sale on June 17th, 1925. Prior to the sale the appellees filed a bill asking that the sale be enjoined, but the appellants’ demurrer to that bill was sustained, the court holding that the averments of the bill did not- comply with the provisions of section 16 of article 66 of the Code, which section relates to and regulates the enjoining of foreclosure sales.

Thereafter the appellants advertised said property for sale on September 8th, 1925, and on September 7th, 1925, the appellees dismissed the suit filed by them to restrain the sale advertised for June 17th, 1925, and on September 8th, 1925, filed the bill in this case asking that the sale advertised for September 8th; 1925, be enjoined. ¹⁸⁸ The bill alleges that the payments made by the appellees were missapplied to the bonus note, that the appellees tendered a certified check for the amount due on the first lien of $2,600, and on the refusal of the appellants to accept it placed the check in the hands of the clerk of court, paid the costs of the second advertisement of sale, and were prepared to pay the costs of the first advertisement as soon as they could ascertain the amount, and alleged further that the $1,400 bond secured by the second lien of the mortgage was held by one of their solicitors, who did not wish to press its collection at that time. The appellants demurred to the bill, and upon the demurrer being overruled they ans.wered denying that the payments were wrongfully applied to the note, but stating that this application was in accordance with the agreement of the parties. They further stated that the entire matter is res adjudicate that the alleged tender was refused because it was insufficient in amount and not made in legal form, that the association is responsible for the collection of the $1,400 bond, being trustee in the mortgage given to secure it, and finally alleging that the appellees cannot maintain the suit because, as members of the association, they are bound by a covenant not to bring any action against the trustee until after the directors and stockholders of the association have passed upon the complaint. After a full hearing the learned court below decided all the questions thus raised in favor of the appellees, and from a decree perpetually enjoining the sale and requiring the association to accept a designated sum in full settlement of the amount secured by the first lien in the mortgage the appellants have appealed.

We do not see any merit in the contention that because a demurrer to the bill seeking to enjoin the first sale was sustained, and the bill subsequently dismissed by counsel for the appellees, the entire matter is res adjudicata. The opinion filed by the court in sustaining this demurrer shows that the sole ground for sustaining it was the failure of the bill to set out the facts which section 16 of article 66 of the ¹⁸⁹ •Code requires must be shown before a foreclosure sale will be enjoined. This opinion, and the order sustaining the demurrer, were not filed until July 29, 1925, so that the sale .advertised for June 17, 1925, was necessarily prevented, and it accordingly became necessary to re-advertise the property. When this was done the appellees dismissed their first hill and filed the present one, and in this one the facts needed to comply with the provisions of section 16 of article 66 of the Code are alleged.

The general rule covering situations •of this kind is thus stated in 34 Corpus Juris, 797, 798: “A judgment rendered on a demurrer is equally conclusive, by way of estoppel, of the facts confessed by the demurrer, •as would be a verdict and judgment finding the same facts. But a judgment on demurrer, based merely on formal or technical defects and raising only a question of pleading or want of jurisdiction, is no bar to a second action for the rsame cause. And where the ground of the demurrer is the ■omission of a material allegation from plaintiff’s pleading, a judgment sustaining the demurrer wfill not prevent the maintenance of a new suit on the same cause of action, in which •the declaration or complaint supplies the missing averment.” In the present ease the action on the demurrer to the first bill of complaint did not go to the merits of the case, it simply determined that the allegations of that bill were insufficient. The second bill alleges certain additional facts, and these additional facts, under the rule above stated, serve, in our opinion, to prevent