Jones v. Burgess

²⁷³ Johnson, J., delivered the opinion of the Court. This is an appeal from an order of the Circuit Court of Baltimore City over-ruling a demurrer to appellees’ amended bill of complaint. By that order, the chancellor determined that, under the facts alleged, liability existed on the part of a mortgagee of certain leasehold property to the owner of the reversionary interest for certain ground rent overdue, and for taxes and minor privilege charges paid by the owner of the ground rent, which items accrued while the mortgage remained in default and unreleased. The allegations of the amended bill justify the statement that Lily Early Burgess, late of Baltimore City, departed this life on February 17th, 1935, and, by her last will and testament, duly probated, disposed of her real and personal property and appointed as executors of her will John E. Burgess and the Safe Deposit and Trust Company, who have qualified as such.

Alice J. Jones, the defendant in the original bill, filed October 28th, 1935, died on May 20th, 1938, testate. Her will was duly probated and letters testamentary upon her estate were granted unto Edmund T. Jones and N. Irvin Gressitt, the executors named therein, who have duly qualified and are named as defendants in the amended bill. On November 28th. 1857, Henry Rieman et al. created a renewable ninety-nine year ground rent upon certain property known as No. 13 West Pratt Street, Baltimore City. That lease was in usual form and duly recorded.

It reserved an annual rent of $550, payable in equal semi-annual installments of $275 each, on the 10th days of April and October of each and every year “over and above all deductions for taxes and assessments of every kind levied or assessed, or to be levied or assessed on said premises, or the rent issuing therefrom,” and therein the lessees covenanted for themselves, their personal representatives and assigns, “to pay the aforesaid rent, taxes and assessments when legally demandable.” Prior to January 1st, 1920, the reversion of and ground ²⁷⁴ rent on the property had become vested in Mrs. Burges's, who held title thereto until her death. By the residuary clause in her will, those interests passed to her son, John E. Burgess, but the items claimed in this suit matured in his mother’s lifetime. On December 22nd, 1919, the leasehold interest in the property was assigned to the Baltimore Candy and Tobacco Company, which corporation, on September 10th, 1920, executed to Mrs. Jones a mortgage to secure a loan of $15,000 made by her to that company. That loan was to mature three years from date, with the privilege to the mortgagor to renew the mortgage for an additional term of two years.

In the mortgage Mrs. Jones is described as “life tenant under the last will and testament of Thomas L. Jones, deceased, dated August 18, 1903.” Professedly, the mortgage was executed “for the purposes and subject to the conditions set forth in said last will and testament.” It assigned the property to the mortgagee “for all the residue of the term of years yet to come and unexpired therein * * * subject to the payment of said annual ground rent of $550, and contained the usual covenant of redemise. In addition to the leasehold property above referred to, other property owned by the mortgagor was included in the mortgage, which mortgage Mrs. Jones held until May 16th, 1934, when it was released. Mrs. Jones accepted the mortgage for her personal and exclusive benefit, and collected and applied to her own use the entire interest paid thereunder from the date of its execution until its release. The principal of the mortgage was not paid at maturity, and was in default from and after September 10th, 1925.

Additional defaults occurred in 1933 and 1934 as follows; Taxes due the State of Maryland and Baltimore City, likewise minor privilege charges due Baltimore City for said years and ground rent to April 10th, 1934, of $275, making a total of $2278.41. Demand for the payment of those amounts was made upon Mrs. Jones in her lifetime, and after her death upon her executors, but none of s&id sums have ever been paid and, although the ²⁷⁵ taxes and minor privilege charges upon the property, with interest and penalties, for the years 1933 and 1934, were due at the time the original bill was filed, they had not then been paid by the plaintiffs, but on July 21st, 1937, the plaintiffs actually paid to the Mayor and City Council of Baltimore the whole of said taxes, minor privilege charges, interest and penalties, amounting in the aggregate to §2003.41. The mortgage upon the Pratt Street property having been released May 16th, 1934, Mrs. Burgess’ executors, on October 28th, 1935, filed their original bill in the Circuit Court of Baltimore City against Mrs. Jones to enforce payment of said sums. Promptly thereafter, the defendant filed a combined demurrer and answer to the bill, and, according to the record, no further proceedings were had by either of the parties to the cause until June, 1936, when, after hearing counsel, the chancellor sustained the demurrer to the bill, with leave to file an amended bill in twenty days.

Subsequently, the present amended bill was filed, and, with respect to the items heretofore mentioned, which were sought to be recovered in the original bill, an accounting was sought to determine the exact amounts of such items, with interest and penalties, for which the defendant’s estate was liable, and a decree against appellants to pay the sum so ascertained to the plaintiffs. The mortgage against the leasehold property having been released before recourse was sought against the mortgagee, whose mortgage was in default, for collection of the items of rent and taxes accruing during the period of default in the mortgage, it is not disputed that equity was the proper forum. Williams v. Safe Deposit & Trust Co., 167 Md. 499 , 175 A. 331 ; Hart v. Home Owners’ Loan Corp., 169 Md. 446 , 182 A. 322 . Nor is any contention made that the mortgagee of a leasehold estate is not ordinarily responsible for the payment of taxes which accrue against the property while the mortgage is in default; nor that in such a case the owner of the reversionary interest, who pays such taxes, may not recover the amount ²⁷⁶ thereof from the mortgagee, in a suit at law, if the mortgage is outstanding, and, if released, may recover in equity.

Williams v. Safe Deposit & Trust Co., supra; Mayhew v. Hardesty 8 Md. 479 ; Lester v. Hardesty, 29 Md. 50 ; Duval v. Becker, 81 Md. 537 , 32 A. 308 ; Baltimore City v. Peat, 93 Md. 696 , 50 A. 152, 698 ; Worthington v. Cooke, 52 Md. 297 ; Donelson v. Polk, 64 Md. 501 , 2 A. 824 ; and Hart v. Home Owners’ Loan Corp., supra. But it is insisted, in support of the demurrer, that the ordinary rule respecting liability can have no application in the present case for several reasons, principal among which are: (1) Limitations; (2) laches; (3) that Mrs. Jones was under no personal liability to pay the claims in question; (4) that, in any event, the suit cannot be maintained for taxes and minor privilege charges, because those items had not been paid by appellees at the time of the filing of the original bill, and their subsequent payment prior to filing the amended bill is unavailing, because not brought forward by supplemental bill. Those contentions will be considered in the order last above named. 1. As to the contention that limitations is a defense to the present suit,, it should be kept in mind that liability in cases of this character is predicated upon the facts that the mortgage of the entire interest in the original lease operates as an assignment thereof, the mortgagee as assignee becoming liable on the covenants of the lease running with the land which arise from privity of estate; but, since in the present case the assignment contains a provision that the mortgagor shall retain possession of the property until default, liability of the mortgagee did not arise until default had occurred under the mortgage.

Williams v. Safe Deposit & Trust Co., 167 Md. 499 , 175 A. 331 . As was said by Judge Offutt, speaking for this court, in Hart v. Home Owners’ Loan Corp., 169 Md. 446 , 182 A. 322, 323 , “it has long been the settled law of this state that the holder of a mortgage on leasehold property is, where the mortgage contains no provisions for a re-demise, and, from the date of any default by the mort ²⁷⁷ gagor in the covenants of the mortgage where it does contain such a provision, bound by all the covenants in the lease which run with the land including covenants to pay rent and taxes.” See also Union Trust Co. v. Rosenburg, 171 Md. 409 , 189 A. 421 , and Williams v. Safe Deposit & Trust Co. supra. It is therefore clear that the remedy against the mortgagee as assignee, for breach of covenants running with the land, such as rent and taxes, accruing after default under the mortgage, is enforceable by an action at law unless the mortgage upon the leasehold estate has been released or assigned, in which case the remedy is in equity, because by either the release of the mortgage or its assignment the privity of estate no longer exists. Williams v. Safe Deposit & Trust Co., supra, and cases there cited; Hart v. Home Owners’ Loan Corp., supra; Union Trust Co. v. Rosenburg, supra.

But in an action at law upon the covenants, the period of limitations is twelve years. Code, art. 57, sec. 3; Citizens Nat. Bank v. Custis, 153 Md. 235, 241 , 138 A. 261 ; Marshall v. Marshall, 164 Md. 107, 114 , 163 A. 874 ; Kaliopulus v. Lumm, 155 Md. 30, 40 , 141 A. 440 ; Earnshaw v. Stewart, 64 Md. 513, 516 , 2 A. 734 . It is generally held that in obedience to this and other applicable sections of the article, equity follows the law in applying, according to the facts in each case, the proper period of limitations.

Miller’s Equity Procedure, secs. 548, 549; Pomeroy’s Equity Jurisprudence, sec. 419; Knight v. Brawner, 14 Md. 1 ; Weaver v. Leiman, 52 Md. 708, 709 ; Insolvent Estate of Leiman, 32 Md. 225 , 3 Am. Rep. 132 ; Hagerty v. Mann, 56 Md. 522, 523. See, also, Farmers Banking & Trust Co. v. Bender, 175 Md. 625 , 3 A. 2nd 743. No good reason would, therefore, seem to exist for the view that, since, in an action at law on the claim here sued upon, the period of limitations would be twelve years, a shorter time would prevail in equity, it having been specifically held in Outtoun v. Dulin, 72 Md. 536 , 20 A. 134 , that an assignee of the reversion at the time rent became due could sue on the covenants of the lease for its recovery.

But if it were conceded that the claim is barred by the ²⁷⁸ statute of limitations after three years (Code [Supp. 1935], art. 57, sec. 1), appellants are, we think, in no better position, because the