Leisure Campground & Country Club Ltd. Partnership v. Leisure Estates

Digges, J., delivered the opinion of the Court. Leisure Campground & Country Club Limited Partnership, mortgagor in a purchase money mortgage transaction involving a 154-acre tract of land located near Ocean City, appeals from an order ratifying the foreclosure sale of that property. The appellant’s exceptions to the sale, and hence this appeal, rest on the ground that a portion of the property should not have been included inasmuch as the mortgage contained a clause entitling the mortgagor, at its request and in consideration of $75,000 already paid, to have forty acres of the land released from the mortgage. The ²²² appellee-mortgagee, Leisure Estates (a limited partnership), asserts principally that the mortgagor’s right to secure release of the forty acres was extinguished upon default on the mortgage, or, in any event, when foreclosure proceedings were initiated; subsidiarily, the mortgagee contends the court cannot enforce the release clause because it lacks the degree of certainty required of provisions in contracts relating to real property.

Since we conclude that the mortgagor’s right to request release of the acreage as. provided in the mortgage survived both default and foreclosure, and that the clause in question is enforceable, we will modify the order of the circuit court in this case. The purchase money mortgage executed on August 4, 1972 by the appellant to Leisure Estates secured a $175,000 debt — the balance of the purchase price after payment of $75,000, made by the time of settlement, for future release of forty acres. 1 The appellant, which planned to develop the land in stages as a campground, paid accumulated interest to February 4, 1974 on February 21 of that year, but made no subsequent payments of interest or principal; consequently, it should not have been surprising to the mortgagor when, on June 4, 1975, the mortgagee instituted foreclosure proceedings in the Circuit Court for Worcester County. By telegram and letter to counsel for Leisure Estates, the appellant on July 17 for the first time requested release of forty acres, but did not specify their location. In addition, it sought a court order that day to stay the foreclosure sale.

This petition was denied by the circuit court the following day, and the sale took place as scheduled on July 19. The appellant’s exceptions, filed on August 13, 1975, were overruled and the sale was ratified, the circuit court concluding that the mortgagor, having defaulted on its obligation under the mortgage, was not entitled to a partial release, and that, in any event, the court could not supply a ²²³ description of the forty acres to be released where the parties had failed to do so. The mortgagor, though failing to file a supersedeas bond, thereupon noted a timely appeal to the Court of Special Appeals; however, we granted certiorari before that court considered the case. Although the appellee does not raise the question, we pause to consider whether the appellant’s failure to file a bond pursuant to Maryland Rule 1017, to stay execution of the final judgment pending appeal, renders its claim for the forty acres moot.

The general rule is that the right of a purchaser to receive property acquired at a judicial sale cannot be affected by the reversal of an order ratifying the sale where a bond has not been filed, Lowe v. Lowe, 219 Md. 365, 368 , 149 A. 2d 382, 384 (1958), even though the purchaser may know that a claim is being asserted against ratification. City of Hagerstown v. Long Meadow, 264 Md. 481, 497 , 287 A. 2d 242, 250 (1972). The policy underlying this rule is to encourage nonparty individuals to bid at such sales. While there is language in our decisions indicating that “[t]he only exception to the rule is in cases where there is unfairness or collusion by the purchaser in the making of the sale . . .,” Sawyer v. Novak, 206 Md. 80, 88 , 110 A. 2d 517, 521 (1955), we agree with the Court of Special Appeals that a second exception exists when “a mortgagee purchases at his own sale and exceptions are taken to that sale, [in that] an appeal from the overruling of such exceptions does not require the posting of a supersedeas bond.” Scott & Wimbrow, Inc. v. Calwell, 31 Md. App. 1, 7 , 354 A. 2d 463, 467 (1976).

This is so because a mortgagee who buys at a foreclosure sale does not free himself from the underlying dispute to which he is a party, and with the land in his hands, there is no reason why he should not be bound by a decision of the court requiring delivery of the property. See generally City of Hagerstown v. Long Meadow, supra at 497-98 [250]; Silver v. Benson, 227 Md. 553, 559 , 177 A. 2d 898, 901 (1962); Durst v. Durst, 225 Md. 175, 182 , 169 A. 2d 755, 758 (1961); Maddox v. District Supply, Inc., 222 Md. 31, 35-36 , 158 A. 2d 650, 652-53 , cert. denied, 364 U. S. 872 (1960); Weiprecht v. Gill, 191 Md. 478, 484 , 62 A. 2d 253, 255 (1948). ²²⁴ Since counsel, during the hearing-on the exceptions to this sale,, stipulated that the persons who constitute the corporation which purchased at the foreclosure sale are the same persons who constitute Leisure Estates, the mortgagee, and the intervening rights of innocent nonparty purchasers are therefore not involved, the filing of a supersedeas bond was not required to avoid mootness in this case. The mortgagee’s primary contention in this action is that the mortgagor’s failure to request the forty acres until three days prior to the foreclosure sale divested it of its release right. We consider first the mortgagee’s suggestion that our decision in Gerber v. Karr, 231 Md. 180 , 189 A. 2d 353 (1963), prevents the mortgagor from invoking the release provision contained in the mortgage after having defaulted on its obligations under that instrument.

While the appellee is correct in pointing out that we stated in Gerber that “a mortgagor cannot call for a partial release after defaulting on his obligations under the mortgage,” id. at 185 [355], this language — read in light of the fact that payment for the land to be released had not been made before default, and in the context of our conclusion that the deed of trust indicated that no right of release was intended after default — is clearly inapposite here, where full payment for the release was made prior to default, and where the language of the release clause itself belies any suggestion that the right was not intended to survive default. We also reject the suggestion that the commencement of foreclosure proceedings affects Leisure Campground’s right to extinguish the lien on its property. 2 Neither default nor institution of foreclosure in any way negates the fact that where full payment has been made, the mortgagor has, at the least, complete equitable ownership of the property, and the mortgagee has, at most, only bare legal title to it. ²²⁵ Consequently, we now hold that, absent a contractual provision to the contrary, if a mortgagor makes full payment for a partial release of property prior to a default, he is not prevented from enforcing his accrued rights under the clause so long as he is capable of doing so without interfering with any interest nonparty bona fide purchasers have acquired at a foreclosure sale. 3 This view is in accord with the decisions of those courts which have considered the matter. See, e.g., Conley v. Poway Land and Investment Company, 232 Cal.App.2d 22 , 42 Cal. Rptr. 636, 639 (1965); Fidelity Mortgage Investors v. Louisiana Pur.

Corp., 297 So. 2d 772, 779 (La. App. 1974); Park Investment & Development Co. v. Vanderzee Bros. Bldg. Co., 119 NJ.Eq. 1, 180 A. 838, 839 (1935); Cook v. Leslie, 59 S.W.2d 302, 303 (Tex.Civ.App. 1933).

See generally Annot., 41 A.L.R.3d 7 (1972), 4 Here, although it is true that the mortgagor defaulted, it is obvious that it made full payment for the release of the acreage prior to that time. The total consideration for the ²²⁶ release, in fact, was paid by the time of settlement, and therefore necessarily prior to default on the mortgage obligation. The release clause itself clearly evidences that fact: “[T]he Mortgagor is entitled from and after the date thereof, at its request, in consideration of the monies paid to the Mortgagee on account of the purchase price, to have released, without further payment, forty (40) acres of the property secured by this Mortgage ...(Emphasis added.) We realize that some courts have indicated that a payment might not be treated as having been made to procure a release where the demand for release and the payment are not concurrent, Clason’s Point Land Co. v. Schwartz, 237 App. Div. 741 , 262 N.Y.S. 756, 762 (1933), but that principle, even assuming its validity under other circumstances, is clearly inapplicable where, as here, the release clause anticipates that demand will be made at a later date. Therefore, the mortgagor’s default in this case did not extinguish its release right inasmuch as full payment was made prior to default, and there is nothing in the instrument indicating that the parties intended the right to be divested upon default or foreclosure.

Since the mortgagee cannot avoid compliance with the terms of the release clause by virtue of the timing of the mortgagor’s request, we come to the question whether the provision is sufficiently definite to permit of enforcement. At the risk of being redundant, we refer once again to the language utilized: “[T]he Mortgagor is entitled from and after the date hereof, at its request, in consideration of the monies paid to the Mortgagee on account of the purchase price, to have released, without further payment, forty (40) acres of the property secured by this Mortgage ....” (Emphasis added.) We conclude, after careful consideration of the particular circumstances of this case, that the parties intended the mortgagor to select the acreage to be released; this being so, the provision, otherwise sufficiently definite in its terms, is not so uncertain as to preclude enforcement by a court of equity. In discussing the reasons for our conclusion in this case that the instrument is enforceable, we preliminarily set ²²⁷ forth some of this Court’s established rules for the construction of mortgages. As Judge Oppenheimer stated for the Court in Chapman v. Ford, 246 Md. 42, 51 , 227 A. 2d 26, 31 (1967): The mortgage is not only a security instrument, it is also a contract between the parties.

It is in the province of the court to determine if the agreement is susceptible of a clear and definite understanding and, if so, to state the clear meaning. [When] we find the contract clear .. ., its construction is therefore a matter for judicial interpretation. Where the language used in a mortgage is clear and unambiguous, we will interpret it according to what reasonable persons in the position of the parties would have thought it meant, Chesapeake v. Rolling Hills, 248 Md. 449, 453 , 237 A. 2d 1, 3 (1968); see, e.g., Billmyre v. Sacred Heart Hosp., 273 Md. 638, 642 , 331 A. 2d 313, 316 (1975) (citing cases); only when there is an ambiguity will we attempt to ascertain the intent of the parties by considering appropriate extrinsic evidence. See, e.g., Canaras v. Lift Truck Services, 272 Md. 337, 350 , 322 A. 2d 866, 873 (1974) (citing cases). However, if a provision is so vague and indefinite that it is impossible to gather the full intention of the parties, it is void, and the mortgagor at least is entitled to a refund of any payments made pursuant to the void provision.

See Paape v. Grimes, 256 Md. 490, 497 , 260 A. 2d 644, 648 (1970). But courts are reluctant to destroy contracts because of uncertainty, and the agreement will be sustained if the meaning can be ascertained “either from the express terms of the instrument or by fair implication.” Id. (emphasis in original). While it is certain that the parties could have been more explicit, we believe the language of the release clause here — viewed in light of the fact that the mortgage was executed for the purpose of facilitating a land development venture to be undertaken exclusively by the mortgagor — clearly and unambiguously entitles the mortgagor to request and have released forty acres of its choice.

Under these circumstances, ²²⁸ it is inconceivable to us that, if the mortgagee or some third party was meant to have any control as to which parcel of land was to be selected for release, there would be no additional words intimating that intention. In any event, we would reach the same result even were we to determine that the provision is ambiguous, since the mortgagee virtually concedes that the right of selection rests in the discretion of the mortgagor, 5 and the extrinsic evidence here bolsters this conclusion. The mortgagor planned to develop the 154 acres, together with an adjacent 68-acre tract, as a recreational facility and campground run on a country club-type basis. Memberships were to be sold, entitling purchasers to use the total complex of facilities on an unlimited basis and to share in the profits flowing from rental to the general public of campsites not used by members and from other campground revenues.

As for the forty acres to which the mortgagor was entitled, the mortgagee itself explains why conveyance was left to the future: “No property was released at settlement because the location depended on how the entire property was to be developed ....” That, in turn, depended on two contingencies — rezoning of the land to permit camping and tenting, and the approval of the State Health Department ²²⁹ for a sewer treatment plant and a point of discharge — neither of which ever occurred, though attempts to secure Health Department approval, upon which even partial