Manhattan Land Corp. v. New Baltimore Loan & Savings Ass'n

Pattison, J., delivered the opinion of the court. In this case one Clarence C. Tracey opened negotiations with the appellant, the Manhattan Land Improvement Cor^ poration, for the purchase of three lots of land at Mt. "Washington, in the City of Baltimore, upon which hei wished to erect three houses, each to coat six thousand five hundred dollars, should he become the purchaser thereof. ⁵³⁰ The appellant offered to sell to. him the said three lots at and for the sum of three thousand five hundred dollars. Tracey, however, had no money with which to purchase them or with which to erect the houses thereon, but the appellant agreed that if ha could borrow the sum of nineteen thousand five hundred dollars, the aggregate cost of the said three houses, hy giving a first mortgage on said lots to secure the payment of said loan, it would accept from him a second mortgage thereon to secure the payment of the purchase money.

Tracey procured the loan of nineteen thousand and five hundred dollars from the New Baltimore Building and Loan Association, through its attorney, John H. Richardson, upon the terms and in the manner stated above, with the understanding, however, that the sum so borrowed should he expended solely in the erection of said houses; and, to be assured that it would be so expended, it was agreed between Tracey and Richardson that the money should he deposited with the association, to he used as needed in the payment of the costs of the building of said houses, and that its withdrawal from the association should be subject to tbe control and supervision of Richardson. The above provision was essential to the security of both the appellant and appellee. The appellant was to convey its property to Tracey without receiving any part of the purchase money in cash, the payment of the whole of which was to he secured by a mortgage subject to a mortgage to the appellee for an amount five times as great as the purchase price of said lots.. Consequently it was absolutely essential to the security of both that the money that was to he loaned hy the appellee to Tracey should he expended in the erection of said houses, thereby increasing the value of the mortgaged premises.

In accordance with the arrangement so made, in -which the appellee, as well as Tracey and the .appellant, was involved, the said lots of land were .conveyed hy the appellant to Tracey, and on the 22nd.day of November, 1919, Tracey and his wife ⁵³¹ executed unto the said building and loan, association three mortgages, one on each of said lots, and each for the sum of six thousand five hundred dollars; and upon the same day he and his wife executed to the appellant a mortgage on said three lots for the sum. of three thousand and five hundred dollars, being the whole amount of purchase money therefor, the same being, as therein stated, subject to the aforesaid mortgages to the appellee. On the 13th day of July, 1920, Tracey, the mortgagor, having defaulted in the covenants; and conditions in his mortgage to the appellee, as claimed by it, foreclosure proceedings were instituted for