Galeano v. Galeano

Gilbert, J., delivered the opinion of the Court. In this appeal we are asked the questions whether the Chancellor erred in sustaining appellees’ exceptions to an account and in modifying the account as made by an auditor in a foreclosure proceeding. Our answer to the specific questions is no, but for the reasons stated infra we, nevertheless, reverse the judgment of the Circuit Court for Baltimore County and remand the matter for the entry of an order not inconsistent with this opinion. The facte giving rise to the instant case succinctly stated are as follows.

Daniel and Joann Galeano (for purposes of simplicity hereinafter referred to collectively as Daniel), on June 18,1965, executed a deed in the nature of a mortgage of their property known as 721 50th Street, Dundalk, Maryland, to Galeano Construction Company (Galeano Co.) to secure the loan of $7,290.39. Simultaneously therewith Daniel executed a confessed judgment note payable to Galeano Co., for the identical sum. Thereafter on May 20, 1966, Galeano Co., for a valuable consideration, conveyed the property to Joseph and Vera Galeano, appellants. Neither deed was at the time of its execution recorded.

Subsequently, Allied Plumbing and Heating Company (Allied) obtained judgment against Galeano Co. in the amount of $5,127.69 upon which a payment was made reducing the then balance to $4,066.19. Appellants recorded both deeds, i.e., the one from Daniel to Galeano Co. dated ²¹⁰ June 18, 1965 and the other from Galeano Co. to appellants dated May 20,1966, approximately three months after Allied had obtained its judgment against Galeano Co. The mortgage from Daniel being in default, appellants filed in the Circuit Court for Baltimore County a foreclosure proceeding against Daniel. A trustee was appointed and the property was sold at a public auction for $43,500.00. Following the auction sale, Allied filed a petition to intervene in the foreclosure proceeding, and the petition was granted.

It was the position of Allied that their judgment was superior to the mortgage lien of appellants because it was obtained prior to the time the two deeds, one in the nature of a mortgage and the other in the nature of an assignment of the mortgage, were recorded. That issue, however, was not decided in the trial court and is not now before us. Md. Rule 1085. On August 27, 1973 the auditor stated his account in which he credited the appellants, inclusive of interest and cost, with $8,072.93.

He further charged as a claim against Daniel the then balance due on Allied’s judgment, including interest and cost, of $5,331.06. Two judgments in favor of Baltimore County were allowed in the account, but a third judgment against Galeano Co. was disallowed. Although the County excepted to the auditor’s report, it has not appealed from the Chancellor’s overruling of that exception. Allied was never a creditor of Daniel, and its judgment was not against him.

We are unable to comprehend how the auditor could have charged Daniel with the debt of the appellants, so that the appellants not only received payment in full of the mortgage indebtedness due them by Daniel, but also received the unusual benefit of having their obligation, if indeed it be their obligation as distinguished from that of the Galeano Co., paid for them out of the surplus funds resulting from the mortgage sale. In his “Memorandum” accompanying his order, the Chancellor stated: “ This Court cannot conceive of any rule or principle of law that would allow a claim against the mortgagee to be satisfied from the interest of the mortgagor.” ²¹¹ The Court then concluded: “Allied cannot prevail against [Daniel] but is entitled to have its claim satisfied out of the funds allowed to [appellants].” We agree with the first quoted statement of the Chancellor, but he was without authority to satisfy Allied’s judgment against appellants as a result of Allied’s petition to intervene in the foreclosure proceeding. It is well established in this State that a lien of a judgment creditor does not attach to bare legal title held by an equitable mortgagee or one holding a similar interest as security for an outstanding debt. Kingsley v. Makay, 253 Md. 24 , 251 A. 2d 585 (1969); Stebbins-Anderson Co. v. Bolton, 208 Md. 183 , 117 A. 2d 908 (1955); Caltrider v. Caples, 160 Md. 392 , 153 A. 445 (1931).

This is so because the holder of a mortgage does not own the land but merely the right to possess the land in the event of default of the mortgage terms. A mortgage has long been regarded as personalty 1 — a chose in action or chattel interest. Duval v. Becker, 81 Md. 537 , 32 A. 308 (1895); Washington