Fulford v. Keerl

Stone, J., delivered the opinion of the Court. This case arises on a demurrer to a bill in equity, and the facts conceded by the demurrer are these: More than twenty years ago George D. Volkmar borrowed of William F. Burns seven thousand dollars, for which he agreed to pay him interest at the rate of eight per cent, per annum. In order to evade the usury law, instead of a mortgage, Burns took from Volkmar a deed in fee of his house and lot, and in turn executed to him a ninety-nine year lease, renewable for ever, upon the payment of the yearly rent of five hundred and sixty dollars, with a covenant in said lease that at any time within six months after the expiration of three years from the date of said lease, upon the payment to the said Burns of the sum of seven thousand dollars, he, the said Burns, would extinguish and merge said rent. The creation of this ground rent was a mere device to conceal the loan of money at a usurious rate of interest, and was, in fact, but a loan of seven thousand dollars for three years, with interest at the rate of eight per cent.

Some two or three months before the expiration of the three years mentioned in the lease from Burns to Volkmar, Volkmar borrowed from the appellant, Fulford, the sum of nine thousand dollars, and executed a mortgage on his leasehold estate, payable in one year from date, to secure the payment thereof. This mortgage, not being paid at maturity, was foreclosed by the mortgagee, Fulford, who bought in the property for nine thousand dollars, subject to the ground rent of five hundred and sixty ⁴⁰² dollars. This sale was made, and the property conveyed to the appellant Eulford in 1873. In the year 1880 Burns sold the fee in the property to the appellee, Keerl, who purchased the same in good faith, and without any knowledge that the original transaction between Burns and Volkmar was usurious.

Shortly before the sale to the appellee, Keerl, Eulford, for the first time, discovered the true nature of the ground rent, and demanded a deed from Burns in fee upon the tender to him of seven thousand dollars, less the sum of two per cent, which had been illegally exacted. But Burns refused to do' so, unless he was paid the sum of eight thousand dollars, and the rent that had already accrued, and soon afterward sold the fee to the appellee, Keerl, for eight thousand dollarsA There being rent due, and in arrear, the appellee brought ejectment for the property. The bill prayed for an injunction against the further prosecution of the suit by the appellee, and for an account, &c. Upon demurrer to the hill it was dismissed and Eulford has appealed.

In Hough vs. Horsey, 36 Md., 181 , this Court decided that where a purchaser bought property for a sum certain, and in addition thereto agreed to pay off a mortgage that was upon the property at the time of sale, that such purchaser would not he allowed, in a Court of equity, to set up the defence that the mortgage was usurious. That the mortgagor might avail himself of such a defence, hut that where the mortgagee sold the property for a specified amount in money, and the purchaser also agreed, as expressed in the deed, to pay off a mortgage then upon it for two thousand dollars, the purchaser was estopped from setting up the defence that the mortgage was tainted with usury. In that case the whole contract appeared by the deed. In Mahoney vs. Mackubin, Trustee, 54 Md., 268 , it was proved aliunde, the deed that a mortgage then existing ⁴⁰³ upon the farm, was a part