Hardy v. Gibson

⁴⁹⁸ Bruñe, C. J., delivered the opinion of the Court. The holders of a second lien on a house and lot appeal from an order overruling their exceptions to a sale made by trustees under a deed of trust securing the first lien on the property and ratifying the sale. The appellants, Russell Hardy, Sr., and Mrs. Katherine C. Hardy, who were formerly husband and wife but have been divorced for a number of years, were the owners as tenants in common of the premises in question. In May, 1955, they entered into a contract for the sale of this residential property, and settlement was to be made thereunder about the first of June.

The purchaser under the contract was Kenneth H. Frey, and the property was to be conveyed to him and his wife. After an investigation of the title, June 3, 1955, was agreed upon as the day, and the office of the Maryland Title & Escrow Corporation at Riverdale, Prince George’s County, as the place, for settlement under the contract. The sale price was $16,950, of which $11,500 was to be paid in cash, and the balance of $5,450 was to be secured by a second mortgage on the property under the terms of which $2,500 was to be paid in six months and the balance in eighteen months. $11,000 of the cash payment was to come from the proceeds of a first mortgage on the property in that amount. The contract contained usual provisions relating to the adjustment of taxes, insurance and other items as of the date of transfer or settlement.

It also provided that settlement should be made either at the office of a named real estate broker or at the office of the title company searching the title and that “deposit with the Title Company * * * of the purchase money, the deed of conveyance for execution and such other papers as are required of either party by the terms of this contract shall be considered good and sufficient tender of performance of the terms hereof.” In addition, the contract contained provisions that if legal steps were necessary to perfect the title they would be taken promptly by the seller and the time for full settlement by the purchaser would be correspondingly extended, and that possession of the prop ⁴⁹⁹ erty should be given to the purchaser “at or before settlement.” At the time fixed for settlement everything was in order on the part of the purchasers. Arrangements had been made for a loan of $11,000 by the Northwestern Federal Savings and Loan Association (referred to below as “Northwestern”) to the Freys, to be secured by a deed of trust (serving the purpose of a mortgage) constituting a first lien on the property, and for the use of the proceeds thereof to make the cash payment to the sellers. The purchasers duly executed a note dated June 3, 1955, payable to Northwestern, “or order”, for $11,000 with interest at 5%. Under it, instalments of $82 applicable to principal and interest were to be paid on the first day of each month, beginning on July 1, 1955; and the makers also agreed to pay monthly an amount equal to one-twelfth of the annual taxes, assessments and insurance premiums on the property securing the note.

Northwestern had the option to advance the amount of such taxes and other charges, and the amount thereof was to be added to the borrowers’ indebtedness and to be due and payable on demand, at the option of Northwestern. The purchasers also duly executed the first lien deed of trust securing this note. Likewise, they duly executed two notes, each in the amount of $2,725, payable to Russell Hardy, Sr., and Katherine C. Hardy, respectively, secured by a second deed of trust, which they also duly executed. On the part of the sellers, a deed apparently in proper form, executed by Mrs. Katherine C. Hardy, was presented.

A deed executed by Russell Hardy, Sr., alone was also presented. Following his divorce, he had remarried and the title company insisted upon having a deed in which his then wife joined, so as to obtain a release of her dower interest in the realty. It also insisted upon the dismissal of a pending partition suit between Mr. Hardy and his former wife. Neither of these requirements was met until a considerably later date.

The deed was received by the title company on August 8, 1955, and the partition proceeding was dismissed on September 1, 1955. ⁵⁰⁰ Northwestern did not make any disbursement on account of the Frey loan on June 3rd. It did, however, some days later send to an attorney, who was the president of the title company, its check dated June 9, 1955, for $10,704.50, which he turned over to the title company. It was deposited in that company’s escrow bank account on June 13, 1955, and is entered on the company’s escrow and settlement ledger under that date. Just how the amount of $10,704.50 was arrived at is not clear, but nearly all of the difference of $295.50 between the amount of the mortgage loan and the amount of the check seems to be accounted for by two insurance charges aggregating $92.50 and by estimated “advance taxes” of $200 for ten months, which appear on the Freys’ settlement sheet.

The funds placed in the hands of the title company remained there until the title difficulties were cleared up. On September 8, 1955, the title company remitted to the Hardys the net cash proceeds of sale to which they were respectively entitled by checks aggregating $10,504.43. (There is a slight discrepancy between this amount and that shown on a settlement sheet dated June 3, 1955, signed by the Hardys, but it is in accord with the title company’s escrow and settlement ledger.) The first deed of trust named Richmond H. Gibson and William K. Copenhaver as Trustees. Both of them were and are directors of Northwestern and Gibson was also its president.

The deed provided in part that: “Upon default in the performance of any of the terms and conditions of said note which the borrower does hereby agree to perform * * *, the said trustees shall at the request of the Association [Northwestern] sell *' * * said land and premises * * * at public auction * * The property was sold on June 27, 1956, pursuant to an advertisement in a Prince George’s County newspaper published for the first time on May 31, 1956. On June 22, 1956, the Trustees docketed this suit in the Circuit Court for Prince George’s County and filed their bond before the sale. It appears that only two persons made bids at the sale. The highest bid was $12,300.

It was submitted by Mrs. Mildred ⁵⁰¹ B. Welsh, who was acting on behalf of the law firm of Welsh, Dyer & Lancaster. Among those present at the sale were two members of that firm, the Trustees, their counsel, who was also counsel for Northwestern, and Mr. Russell Hardy, Jr., who seems to have attended as counsel for his mother. The Trustees reported to the Circuit Court the sale to Mrs. Welsh at the price above stated and asked that the sale be ratified. The appellants filed exceptions to the ratification of the sale.

Later they filed a motion to dismiss the suit, and they also claimed that the absence of a resident agent of Northwestern on whom they could serve a subpoena duces tecum deprived them of a fair and constitutional trial. The appellants’ contentions may be thus summarized: (1) that there was no default under the Frey loan from Northwestern; (2) that there was no request from Northwestern to the Trustees to sell the property; (3) that the advertisement of sale was so inaccurate as to be legally insufficient; (4) that the purchasers, being counsel for the mortgagors, acquired and hold title for the latter; (5) that the suit was barred under Section 87 of Article 23 of the Code (1951) because Northwestern had not met and continued to meet the requirements of Section 86 of that Article as to qualification to transact business in Maryland; and (6) that they were barred from getting compulsory process against Northwestern. The last of these contentions may be disposed of first. Essentially, the appellants’ position seems to be that if they could not obtain documentary evidence from Northwestern by serving a subpoena duces tecum on a resident agent of Northwestern at his address as shown on the records of the State Tax Commission, they were denied a fair trial.

There is no showing that they made any effort to locate the resident agent, who was one of the Trustees, at any other address (though there is a statement by his counsel that he had moved to a new address in the same neighborhood as the old one), there is no showing that any demand for such documents was made upon his counsel, and the record shows that the Secretary of Northwestern, who was the custodian of its ⁵⁰² records was present in court on the first day of the trial and had with him Northwestern’s file relating to the Frey loan. No demand for its production and inspection was made either in open court or by causing a subpoena duces tecum to be served on him. The offer of counsel to produce papers from the file was rejected by the appellants because it did not involve the production of evidence under compulsory process, but a “handful of papers” was submitted to the appellants for examination. The trial judge stated his willingness to grant a continuance if it was necessary for the appellants to obtain evidence required for the presentation of their case.

The matter of granting a continuance is usually in the sound discretion of the trial court. Millstein v. Yost, 197 Md. 348, 79 A. 2d 149 . See also Plank v. Summers, 205 Md. 598 , 109 A. 2d 914 , and cases therein cited. We think that the trial judge afforded the appellants full opportunity to obtain any needed documentary evidence and acted not only within the limits of the discretion confided to him, but with careful regard for the protection of the interests of the appellants.

We may also note that the appellants made no attempt to use the discovery procedure available under our then (as well as present) rules and none to serve a summons under the procedure provided under Sections 92-95 of Article 23 of the Code, when service cannot be effected upon a designated resident agent. We find no merit whatever in the appellants’ contention that they were denied a “fair and constitutional” trial. The appellants’ contention that the maintenance of this suit is barred under Section 87 of Article 23 of the Code (1951) will be considered next. (References to Section numbers will, unless otherwise stated, be to Sections of that Code Article.) The appellees seek to refute this contention by the provisions of Section 153 (e).

Under it, if a Maryland building and loan association is converted into a Federal savings and loan association by following the procedure prescribed by other subsections of Section 153 and by complying with the appropriate Federal statutes, the resulting corporation is to ⁵⁰³ be considered a domestic corporation, notwithstanding that it is organized under the laws of the United States and would otherwise fall under the definition of a foreign corporation contained in Section 83. That Northwestern resulted from such a transformation seems to be implicit in a statement by counsel for the Trustees made in argument on the Hardys’ motion to dismiss; and the Hardys’ brief in this Court almost concedes this to be true, since the Hardys do not deny the ultimate fact of conversion from a Maryland to a Federal association but takes the position that there is no proof that the requisite procedural steps to accomplish the conversion have been followed. However, we have been unable to find any evidence in the record of the original Maryland organization of Northwestern and its subsequent transformation into a Federal savings and loan association; and both the factual and legal situations on this phase of the case are complicated by the fact that Northwestern appears to have qualified under Section 86 to transact business in Maryland. That Section is in terms applicable to foreign corporations.

On this state of the record we do not