Gribble v. Stearman & Kaplan, Inc.

Finan, J., delivered the opinion of the Court. This case involves the conflicting claims of two sets of victims-, of what the lower court termed a “slippery operator,” who are trying to salvage as much as possible of the loss they sustained at his hands, by establishing a right in a fund which is held by trustees who foreclosed a deed of trust resulting in a surplus of $10,879.97. Stearman & Kaplan, Inc., the appellee, entered into a contract with H. Glenn Garvin, individually, on November 15, 1961 for the purchase of 10 acres of a 26.8 acre tract near College Park, Prince George’s County, Maryland, making a down payment of $7,500 on the purchase price of $165,000. It is this $7,500 down payment which the appellee seeks to recover.

The sale was subject to obtaining R-10 zoning. Record title to the property was held by PI. Glenn Garvin and Glenda Dale Garvin, his wife, as tenants by the entireties. Although Mrs. Garvin did not join in the contract of sale, the down payment was-deposited by her husband in a joint bank account on which her name appeared, and she subsequently signed, together with her husband, as joint owners of the property, the applications for re-zoning.

Several amendments were made to the contract extending the time for obtaining the required zoning. Although legal counsel was engaged in December of 1962 to process the zoning applications and petitions were filed in January of 1963, no hearings appear to have been held until September of 1965. In the meantime the Garvins were busy. On December 21, 1962 they conveyed the 26.8 acre tract to Gregg Properties, Inc. ²⁹² At the top of this deed appeared the wording, “no consideration.” The deed carried no revenue stamps or state stamps, ■nor did it appear that any county transfer tax was paid on the transaction.

The Garvins in their pleadings filed in an equity suit, which will be discussed later, stated that in the transfer to Gregg Properties, Inc., resort was made to a corporate fiction, for the purpose of enabling them to obtain a loan on the ■ subject property at an interest rate which would have been considered usurious if applied to individuals. Mr. and Mrs. Garvin ■ also appear to be president and secretary, respectively, of ■ Gregg Properties, Inc. On May 20, 1964 Gregg Properties, Inc. executed a deed of 'trust covering the 26.8 acre tract, in the amount of $116,000 in ■favor of Sidney Hantman and S. Dorothy Sills, trustees for Bert M. Tracy. This instrument was timely recorded. In July of 1964 the appellee heard rumors of a sale which the Garvins proposed to make to other parties of the 10 acre tract which was the subject of the sales contract existing between the appellee and the Garvins.

To forestall such action the ■ appellee filed an equity suit against H. Glenn Garvin and Gregg Properties, Inc. in the Circuit Court for Prince George’s County. The appellee did not join Mrs. Garvin as a party defendant nor ■did it request a return of its deposit but simply sought to enjoin the transfer of the 10 acres. A timely answer was filed and subsequently when the court issued an order requiring the parties to show cause within 30 days why the case should not be •dismissed for lack of prosecution, the appellee requested, and •obtained, an order extending the time in which the case could be prosecuted. The Garvins had other dealings involving the subject tract, having entered into a contract with the appellants, Messrs.

Gribble and Novak, under date of April 27, 1964 agreeing to pay them a realtor’s brokerage commission in the event they procured a purchaser for the 26.8 acre tract. The record is not ■ clear as to just what transpired thereafter. Apparently the appellants were successful in obtaining a purchaser and thus became -entitled to commissions in the amount of $19,000, although the ■ sale was never consummated. ²⁹³ On June 14, 1965, Sidney Hantman and S. Dorothy Sills, trustees under the deed of trust, filed foreclosure proceedings on the 26.8 acre tract in Equity No. C-6381 in the Circuit Court for Prince George’s County. On July 19, 1965, the appellee filed its claim directly in the foreclosure proceedings, pursuant to Md. Rule W75, contending it had an equitable lien on the property foreclosed in the amount of $7,500, representing its down payment on the property and therefore on the proceeds of the sale.

On July 21, 1965, the appellants filed suit against Gregg Properties, Inc., in the Circuit Court for Montgomery County to attach before judgment any surplus resulting from the sale under the foreclosure proceedings in Prince George’s County and held by the trustees (garnishees) Hantman and Sills. The trustees, while parties to the foreclosure proceedings in Prince George’s County, were also residents of Montgomery County. The trustees, as garnishees, filed an answer in the Montgomery County attachment case confessing assets of Gregg Properties, Inc., but alleged that the assets were subject to an audit by the Circuit Court for Prince George’s County in the foreclosure proceeding. On January 24, 1966, the appellants filed their claim (the same as that on which the attachment proceedings were predicated) in the Prince George’s County foreclosure proceeding.

On March 11, 1966, the Circuit Court for Montgomery County granted a judgment of condemnation absolute in the attachment proceedings, “subject to an audit of the proceeds of a foreclosure sale in the case pending in the Circuit Court for Prince George’s County, Maryland, entitled: Tn the matter of Sidney Hantman and S. Dorothy Sills, Trustees v. Gregg Properties, Inc., Equity No. C-6381.’ ” On April 15, 1966, the auditor’s report in Equity No. C-6381 was ratified showing a surplus of $10,879.97 from the foreclosure sale in the hands of the trustees. On June 27, 1966, Mr. and Mrs. Garvin made a brief sortie into the arena, filing a petition in the foreclosure suit, the object of which was to establish their own claim to the surplus funds and at the same time urge that the claims filed by the appellants and appellee be disallowed. However, the Garvins ²⁹⁴ withdrew their petition in December of 1966 and its chief significance in the present litigation lies in the admission contained in the pleadings filed by the Garvins’ attorney, on their behalf, alleging that the conveyance of the 26.8 acre tract to Gregg Properties, Inc., had in effect been a sham transaction. The pleadings are also significant in that, although they allege that the appellee was guilty of laches and its claim subject to limitations, they made no denial of Mr. Garvin’s authority to act as agent for his wife.

After hearing testimony and argument from counsel the lower court found that the claim of the appellee in the amount ■of $7,500, representing the down payment on the purchase price, was senior to that of the appellants, who were awarded the balance of the surplus remaining in the hands of the trustee after ■payment of the appellee’s claim and $300 covering the bond ■premium. The appeal was taken from this decree. The general question to be decided by this Court is whether ■■the lower court was correct in finding that the appellee had a lien against the surplus funds in the hands of the trustees, and ■■that this lien had priority over any claim existing in favor of the appellants. In order to resolve the general question it is ■necessary to answer the minor premises on which the general •question must rise or fall: (1) what was the effect of the judgment of condemnation absolute obtained in the attachment pro■ceedings in Montgomery County; (2) was the appellee’s contract of sale with H. Glenn Garvin, (which is the basis for the -appellee’s vendee’s lien) binding on the wife; and (3) can the -appellee successfully invoke the doctrine of “marshalling assets” to sustain its lien against the surplus proceeds resulting ■from the sale of the 26.8 acre tract, when its contract embraced •only 10 acres of the tract?

We shall answer these questions ■seriatim. i The appellee filed its claim for $7,500 directly in the Prince George’s County foreclosure proceedings on July 19, 1965, two days prior