Gerber v. Karr

Hammond, J., delivered the opinion of the Court. Mr. and Mrs. Charles S. Gerber, the appellants, signed a formal .contract with Dumbarton Construction Company, Inc., for the purchase of a lot in Baltimore County and the building thereon of a residence, giving a down payment of $3,500. ¹⁸³ Several months earlier Dumbarton, through its legal alter ego, Eido Construction Company, Inc., had obtained a construction loan from Construction Credit Corporation, secured by a deed of trust to Karr and Smith, trustees (two of the appellees), covering the lot the Gerbers subsequently bought and five other lots. The principal of the loan was payable after nine months, the interest being payable monthly. Dumbarton and Eido fell upon evil financial days, and both went into bankruptcy.

The interest on the construction loan was not paid, and on October 20, 1961, two months after the Gerbers had signed their contract with Dumbarton, the trustees procured a decree for the sale of the mortgaged lots, including the Gerber lot. The deed of trust provided that “in the event of any default in any covenant of this deed of trust or of the note * * * then the whole loan with interest shall, at the option of the holder of the note, be and become due and payable * * The foreclosure, it is conceded, duly sought to recover the whole amount advanced to that time, with unpaid interest. At the sale on November 28, 1961, Construction Credit Corporation, the mortgagee, became the purchaser of the six lots covered by the deed, and in due course the sale was finally ratified. On February 12, 1962, Construction Credit Corporation sold the lots to the Weiss brothers, taking back a mortgage for part of the purchase price.

In April 1962 the Gerbers filed their bill of complaint against the trustees, Karr and Smith, and the Weiss brothers, seeking to impress a lien for $3,500 upon the lot they had purchased. The theory of their bill was this: the deed of trust, by its terms, permitted the mortgagor to call for reconveyance of any lot upon payment “of a sum equal to the total amount theretofore advanced with respect to any lot so released, together with interest to the date of such payment”; that they, the Gerbers, had a lien, as against Dumbarton and Eido, for the $3,500 of the purchase price deposited; that they, being in privity with and claiming under Dumbarton and Eido, were entitled, equitably, to exercise the right of redemption by offering to the mortgagee the total amount advanced on account ¹⁸⁴ of their lot, and interest; and that they made such a tender, their offer was refused and, therefore, they had an equitable lien for $3,500 on the lot. The respondents demurred, and the chancellor ruled (1) that in order to call for a conveyance, the Gerbers would have had to tender the entire amount advanced under the deed of trust, not just the amount advanced in respect of their lot, and they had not alleged that they had done so, and (2) that the Gerbers knew of the foreclosure proceedings and had negotiated for the release of their lot after its institution but took no action to prevent the final ratification of the sale, and so were barred from seeking to impress a lien on the property which had been sold. Saying that “* * * counsel for the Complainants convinced the Court that no useful purpose would be served by permitting further amendment of the Bill,” the chancellor sustained the demurrer without leave to amend.

We are convinced his action was proper. The parties agree that a vendee has in equity a lien on the land bought for any payment upon the purchase price in case the contract is not consummated by the fault of the vendor. Ahrens v. Ijams, 158 Md. 412, 423 . It may be assumed (a) that prior to default in the terms of the deed of trust, the Gerbers could make their equitable lien effective by redeeming the lot they had bought from the deed of trust by paying the total amount advanced with respect to the lot, with interest, The Kent Building & Loan Company v. Middleton, 112 Md. 10, 15 , and (b) that after default the Gerbers could have paid the full amount due under the deed of trust and received a conveyance of the title held by the