Iula v. Progress Federal Savings & Loan Ass'n

McWileiams, J., delivered the opinion of the Court. The mortgage foreclosure which generated this litigation was first treated in Carozza v. Peacock Land Corp., 231 Md. 112 , 188 A. 2d 917 (1963). The effect of our decision in that case was to set the sale aside and order a new sale. After the resale was finally ratified appellants filed a suit for damages in the Court of Common Pleas of Baltimore City which resulted in a summary judgment against them for costs.

To promote the cause of brevity and clarity we have prepared a cast of participants which is set forth below: Peacock —Peacock Land Corporation. lula —Frank J. lula, an appellant, president and one of the three stockholders of Peacock. Carmela ■ — -Carmela A. lula, an appellant, the second of the three stockholders of Peacock. Margie —Margie R. lula, an appellant, the third of the three stockholders of Peacock. Chipman —Nolan P. Chipman, Esq., an appellant, trustee for the benefit of creditors of Peacock.

Progress ■ — Progress Federal Savings and Loan Association, an appellee. ⁴²³ Phillips —John J. Phillips, Esq., an appellee, trustee appointed by the Circuit Court for Baltimore County to foreclose the mortgage from Peacock to Progress. Carozza —Frank A. Carozza, representing himself and others, the successful bidder at the first foreclosure sale. In 1957 Peacock owned a parcel of land at York and Timonium Roads in Baltimore County containing approximately \2/z acres on which it conducted a drive-in restaurant. On 22 April 1957 Peacock conveyed .083 acres (of the 1 Yz acres) to Baltimore County.

On 31 December 1957 Peacock mortgaged the remainder of the property to Progress to secure a loan of $140,000. Included in the description was the .083 acres sold to Baltimore County 8 months earlier. lula signed the mortgage both as president of Peacock and as an individual. The mortgagors warranted “specially the property [t] hereby conveyed.” On 4 August 1961, default having occurred, the Circuit Court for Baltimore County appointed Phillips trustee to make sale of the mortgaged property. On 25 September 1961 Peacock conveyed the property, including the .083 acres, to Chipman, “in trust for the benefit of [Peacock’s creditors].” Chipman was successful in having the foreclosure sale postponed so as to attempt an advantageous private sale of the property.

His efforts were in vain. On 31 October 1962 Peacock’s charter was forfeited because of the non-payment of its franchise tax. On 10 November 1961 Phillips sold the property to Carozza, the highest bidder at the foreclosure sale, for $275,000. When a title examination revealed the prior conveyance of the .083 acres, Carozza excepted to the ratification of the sale.

The decision of the trial court overruling his exceptions was reversed in Carozza v. Peacock Land Corp., supra. In March 1963 the property was resold for $224,000. No exceptions were filed by Peacock, lula or Chipman, nor was any complaint made to Progress or Phillips in respect of the manner in which the sale was conducted. ⁴²⁴ Carozza succeeded in having the Baltimore County court rule that Phillips had to pay for the cost of the title examination and certain court costs but the greater portion of his claim was denied. An appeal by Carozza was subsequently dismissed.

Chip-man also sought, unsuccessfully, to charge Progress and Phillips with costs, interest and expenses incident to the first sale. No appeal was taken from the court’s ruling. The instant case arises out of the second amended declaration of lula, Carmela and Margie as “sole stockholders, directors and trustees” of Peacock (and Chipman), filed April 1966, against Progress and Phillips. The declaration charges Progress with violating its duty “to use due and reasonable care in handling” the transaction for Peacock, and “to search the title correctly, so that the mortgage would include only the land owned by” Peacock.

The declaration further alleges that “by virtue of the gross and wanton negligence, carelessness and irresponsibility” of Progress and Phillips, the plaintiffs “lost the benefit of the best marketable [sic] price of the subject properties.” The ad damnum was $1,100,000. Progress and Phillips moved for a summary judgment and in support thereof filed an affidavit, the substance of which is as follows: 1. As a result of the deed from Peacock to Chipman neither Peacock nor its stockholders and directors had any interest in the land. 2. Progress, in accepting the mortgage and subsequently foreclosing it, relied on independent counsel and the special warranty of lula and Peacock.

Phillips was not employed by Progress. He was a court-appointed fiduciary, entirely independent of Progress. Neither Progress nor Phillips knew of the inclusion of the .083 acres until after the filing of exceptions to the sale. lula knew of the conveyance of the .083 acres and that Peacock had been paid for it. lula did not disclose this, although he and Peacock warranted specially the property described in the mortgage. 3. lula was a party to the foreclosure proceedings, he was represented by counsel and he learned of the error in