Lotterer v. Leon

Thomas, J., delivered the opinion of the court. On the 6th of August, 1919, "Robert, W. Maxwell sold and conveyed the property known as No. 1212 Bolton Street, in the City of Baltimore, to Nettie Leon, of said city, and on the same day took from her a mortgage of the property for ¡54,500 in part payment of the purchase money. The mortgage contained an agreement on the part of the mortgagor to pay said sum “at the expiration of three years from the date” of the mortgage, with interest at six per cent, per annum, payable semi-annually, and “to pay five hundred dollars yearly" on account of the principal, and her assent, to a decree for a sale of the property in accordance with Sections 720 to 723 of Chapter 123 of the Acts of 1898. Et contained also an agreement that until default the mortgagor, her executors, •administrators or assigns, should possess the property, “upon paving, in the meantime, all taxes and assessments, public dues and charges levied ox assessed, or to he levied or assessed," on the property, “which taxes, mortgage debt and interest, charges and assessments” the mortgagor covenanted to pay “when legally payable,” and the further provision that "in ease of any default being made in the payment of the aforesaid mortgage debt, principal or interest, in whole or in part, at the time or times limited and mentioned for the pay ³²⁰ ment of the same, as aforesaid, or in case of any default being made in any covenant or condition of the mortgage, then the whole mortgage debt hereby intended to be secured shall be deemed due and payable, and sale of said mortgaged property may be made by the trustee or trustees named in such decree as may be passed, as aforesaid, for the sale of said property.” By Section 40 of said Act of. 1898, as amended by the Act of 1914, Chapter 532, taxes are required to be levied in the month of November of the year preceding the year for which they are levied, and are due and may be paid on the first day of January following the levy.

They are, by that section, declared to be “in arrears” on, and to bear interest from, the first day of July following the date of the levy, and Section 51 of said Act of 1914 requires the City Collector, at least two weeks before the taxes “become in arrear,” to' give notice, by advertisement in two daily newspapers published in the city, and in the Mwmcipal Jo<iM'naiLs of the date when taxes “become in arrear,” and that if the taxes are not paid on or before that date the property on which they are levied will be subject to sale for taxes, and that if not paid before they become in arrear an amount equal to one per cent, per annum from that date will be added to each bill, as a penalty. The City Collector having, in June-, 1920, given the notice required by the Act of 1898, Mr. Maxwell, the mortgagee, on the 3rd of August, 1920, went to the Collectors office to inquire if the taxes on the property covered by the mortgage had been paid, and upon being informed that they had not, he asked for a bill of the taxes and later, on the same day, took the bill, amounting to $158.42, and hisi mortgage, to the office of J. Seymour T. Waters, Esq., an attorney at law, and employed him to “foreclose” the mortgage. Mr. Waters on the same day wrote to Mrs. Leon, the mortgagor, telling her that Mr. Maxwell had placed the mortgage in his hands to foreclose, and that he would be obliged to proceed to- advertise and sell the property, and on the following day, August 4th, ³²¹ 1920, lie filed in the Circuit Court of Baltimore City a petition alleging that there had been a default under the terms of the mortgage, and praying for a decree for a sale of the property, and a decree was passed on that day appointing him trustee to make the sale. It appears from the record that a certain Abraham Forschleger had obtained title to the property covered by the mortgage, and that he and his wife-, by deed dated the 30th of July, 1920, and recorded on August 6tli, 1920, conveyed it, subject to the mortgage in favor of Maxwell, to Joshua H. Green and Iantha G. Green, his wife; “as tenants by the entireties,” who executed a second mortgage on the property to the Hehroai Building and Loan Association, Incorporated, to secure an advance of $3,510.

On the 5th of August, 1920, Benjamin L. Freeny, Esq., as attorney for Mr. Eorschleger, and representing the building association, mailed to Mr. Maxwell his check for $500 and Mr. E'orschleger;s check for $135, to cover the payment on the principal and the interest on his mortgage due on the 6th of August, 1920, and when Mr. Maxwell received the checks on the 6th of August, he took them to Mr. Waters, who on that day returned them to Mr. Ereeny and told him they would not be accepted, because there had been a default' and the whole mortgage debt was due. Ho offer having been made in the meantime to pay the mortgage, the trustee on the 25th of August, 1920, advertised the property for sale under the decree of August 4th, and thereupon, on the 1th of September, 1920, 'Green and wife filed their petition in said court setting out their title to the property, alleging their tender to the mortgagee of said checks for $500 and $135 and the refusal of the mortgagee to accept the same ; that at the time of said advertisement of the property for sale there was no default under the terms of the mortgage, that the terms and conditions of the mortgage had been fully complied with as far as was in their “power and control,” that they were still ready and willing ³²² to place said checks in the hands of the mortgagee or his attorney, and praying the court to pass an order restraining the mortgagee and the trustee from “further proceeding with * * the sale of the property.” Upon this petition the court passed an order restraining the mortgagee and trustee as prayed, unless cause to the contrary be shown on or before the day named therein. In response to this order the mortgagee and trustee filed their answers setting out the default to which we have referred, admitting their refusal thereafter to accept the checks referred to, and alleging that no offer having been made by the petitioners, or on their behalf, to pay the whole of the mortgage debt, after waiting until the 25th of August, 1920, the trustee advertised the property for sale in accordance with the decree. On the 18th of September, 1920, The Neighborhood Corporation filed a petition in said cause alleging that it had- become the holder of the mortgage given by Green and wife to the building association; that the mortgagors were in default under the terms of said mortgage'; that while the sum secured by the two mortgages was more than the value of the property, if the property was sold at once it would bring “a sufficient sum to pay both mortgages in full,” and praying that the property be sold at once by the trustee in accordance with the advertisement.

After a hearing, at which evidence was taken disclosing the facts to which we have referred, the court below, on the 20th of September, 1920, passed an order enjoining the sale of the property advertised to take place on that day, and requiring Green and wife to pay into court to the credit of Robert W. Maxwell, mortgagee, $635, $500 of which “to- be applied to the amount of the mortgage debt” and $135 “to be credited to the interest, thereon due August 6th, 1920,” and also requiring Green and wife to pay the “court costs and advertising fees in the case.” From that order Robert W. Maxwell, mortgagee, J. Seymour T. "Waters, trustee, and The Neighborhood Corporation, entered separate appeals. ³²³ Eo opinion was filed by the court below and we do not know the ground upon which the decree appealed from was passed, but it is said in the appellee’s brief: “It is not contended by the appellee that the non-payment of the taxes for the current year does not constitute a default, but it does not constitute such a default, especially when the same were paid at once, as to permit the enforcement thereof for the purpose of oppression,” and that “equity never aids in enforcing' a penalty.” The mortgagor covenanted to pay “all taxes,” etc., “levied and assessed” on the property “when legally payable.” The undisputed evidence shows that taxes to the amount of $156.63 were payable on the 1st day of Jaunary, 1920, and had been in arrear from the 1st day of July, 1920, when the decree of August dth was obtained, and the mortgage expressly provided that “in case of any default being made in any covenant or condition” of the mortgage the whole- mortgage debt thereby intended to be secured “shall be dee-med due and payable,” and sale of the mortgaged property “may be made by the trustee” named in the decree. It is said in 1 Jones, Mortgages (5th Ed.), Section 16: “A stipulation that the whole sum shall become- due and payable upon any default in the- payment of the principal or interest is- universally held do be legal and valid. It is not objectionable as being in the nature of a penalty,” and in Section YY of the same volume it is said: “A stipulation in a mortgage that, upon a failure to pay the taxes levied upon the premises, the principal shall become immediately due and payable, is valid.

It is similar to the provision very common in mortgages, * * * that the principal shall become due on a failure to pay the interest promptly.” In Section 1181 of Volume 2 of the same work the author says: “Such a provision in a mortgage is not considered a penalty, but an agreement as to the time when the debt shall become due,” and in Section 1185 it is said: “The court has no- power to i’elieve a mortgagor from a forfeiture of condition that the ³²⁴ whole principal shall become due at the election of the mortgagee upon a failure to pay the interest, or to order a stay of proceedings until a further default, unless fraud or improper conduct on the plaintiff’s part is proved. * * * The mortgagor, having negligently permitted the time to pass, and the whole debt thereby to become due, cannot relieve the forfeiture by paying into court the interest or installment on which the forfeiture occurred.” The same rule is stated in 19 R. C. L., Sec. 289, p. 493, where it is said: “The proposition is accepted without dispute that a stipulation in a mortgage providing for the whole debt secured thereby shall become due and payable upon failure of the mortgagor to pay the interest annually or to comply with any other condition of the mortgage is a legal, valid and enforceable stipulation and is not in the nature of a penalty or forfeiture.” These rules and principles applicable to mortgages are fully recognized and have been uniformly applied in this