Mercantile Bank v. Maryland Title Guarantee Co.

Digges, J., delivered the opinion of the Court. ■ The appeal in this case is from an order of the Circuit Court for Baltimore County, overruling exceptions of the appellant to the auditor’s account in the case of T. Bayard Williams, assignee, v. Clarence M. Griffin and Virginia B. Griffin, his wife. This proceeding was for the sale of the mortgaged premises belonging to' Clarence M. Griffin. Default having occurred in the payment of the mortgage in ³²² debtedness, and the mortgage having been assigned to T. Bayard Williams, the property was sold. Junior to the lien of the mortgage, 'there were two judgments of record in the office of the clerk of the Circuit Court for Baltimore County, one in favor of the Maryland Title Guarantee Company, the appellee here, dated November 6th, 1924, in the amount of $618.47, and 'another in favor of the Mercantile Bank of Baltimore City, the 'appellant here, obtained in the Superior Court of Baltimore City and recorded in Baltimore County on the 17th day of December, 1924, in the amount of $8,824.

Petitions were filed by the respective owners of these judgment lien claims for the allowance thereof out of the proceeds of sale of the mortgaged premises in the said case of Williams v. Griffin. The auditor stated his account, allowing to the appellee its judgment in full, 'and allowing the appellant the balance. The appellant excepted to the ratification of the auditor’s account, alleging that the judgment of the appellee, allowed in said account in full, was void, and that the whole balance, after the payment of the costs and the mortgage claim, amounting to $879.48, should have been allowed to the appellant on account of its judgment. Upon the hearing on these exceptions, the lower court finally ratified the auditor’s account, from which, as stated, the appeal here is taken.

The claim of the appellee, upon which judgment was obtained, arose in the following manner. The Kosciusko Permanent Loan & Savings Association held a mortgage against Charles A. Howell and wife on land located in Baltimore County. Default having occurred in this mortgage, foreclosure proceedings were instituted in April, 1924, culminating in a sale of the mortgaged premises to Clarence M. Griffin, which sale was reported to and finally ratified by the Circuit Court for Baltimore County on July 2nd, 1924. The purchaser, Griffin, failing to comply with the terms of sale, the attorney named in the mortgage, who made the sale, filed a petition asking the court for an order of re-sale at the purchaser Griffin’s risk.

On this petition an order nisi was passed, requiring Griffin to show cause, on ³²³ or before August 14th, 1924, why a re-sale should not be had at his risk, provided a copy of the petition and order nisi be served upon him on or before the 6th day of August, 1924. The petition and order were served on Griffin on August 2nd, 1924, and no cause having been shown, the court passed a final order for the re-sale on August 15th, 1924. The purchase price at the first mortgage sale, to Griffin, was $2,600, and on the re-sale the property was sold to the mortgagee for the sum of $2,130, being less than the first sale, to Griffin. The auditor’s account in the second sale showed a balance due to the Kosciusko Permanent Loan and Savings Association, the mortgagee, of $618.47, for which amount the petition of the mortgagee asked for a personal judgment against Griffin.

The petition for the personal judgment was filed on November 6th, 1924, on which day, without any further notice to Griffin, the court passed the following order: “Upon the foregoing petition and affidavit, it is this 6th day of November, in the year one thousand nine hundred and twenty-four, ordered and decreed, that a judgment in favor of the Kosciusko Permanent Loan & Savings Association, be and is hereby extended against Clarence M. Griffin for the balance of $618.47, shown by the auditor’s account in this case, to be due by the said Clarence M. Griffin, defaulting purchaser.” The record discloses, that Clarence M. Griffin was indebted to the appellant prior to the entry upon which its judgment of December 17th, 1924, was obtained, and prior to the entry of the judgment in favor of the Kosciusko Permanent Loan & Savings Association of November 6th, 1924; and that the judgment of November 6th, 1924, against Griffin was duly assigned by the Kosciusko Permanent Loan & Savings Association to the appellee here. The above facts present for our determination two questions: Eirst, Is a court of equity empowered, under section 239 of article 16 of the Code, when it has ordered a re-sale at the risk of the purchaser at the mortgage foreclosure sale, to enter a judgment against such defaulting purchaser for ³²⁴ the deficiency shown by the auditor’s account, without notice to said purchaser or service on him of any nisi order or other process? Second, whether or not a judgment so entered is void and can be set aside at the instance of a creditor who was such at the time of the entry of the judgment and who subsequently reduced his debt to a judgment. Section 239 of article 16 provides: “The court shall have full power and authority, on application by bill or petition of the trustee appointed by said court to sell real estate, to compel the purchaser thereof to comply with all or any of the terms of such sale, by process of attachment or other execution suited to the case; or the said court, upon such application, may direct the property purchased to be resold, at the risk of such purchaser, upon such terms as the court may direct; and in such case, if the proceeds of the re-sale, after payment of the expenses thereof and of all costs of proceeding, shall not be equal to the payment of the purchase money originally bid therefor, the court may order and direct the difference to be paid by the said purchaser, and enforce such order by execution.” The last of the methods provided by this section, namely, that of ordering a re-sale of the property at the risk of the defaulting purchaser, was the one 'here pursued.

Application was made by the party authorized to sell the property, by petition, asking that it be re-sold at Griffin’s risk. A copy of this petition, with the order nisi requiring Griffin to show cause, was served upon him; and no cause being shown, the property was sold for an amount less than that for which he purchased it, the auditor’s report showing the deficiency to be $618.47. Immediately upon the final ratification of the auditor’s report, and upon the petition of the party making the sale, without any further notice to Griffin, the court entered a judgment in personam against him for this amount. Is such a judgment valid and binding upon the appellant?

We think not. In our opinion this question was answered and settled by this Court in the case of McDonald v. Workingmen’s ³²⁵ Bldg. Assn., 60 Md. 589 . That case arose under the provisions of chapter 327 of the Acts of 187 6, now section 232 of article 16 of the Code, which provides: “When any suit is instituted to foreclose a mortgage, the court may decree that, unless the debt and costs be paid by a day fixed by the decree, the property mortgaged, or so much thereof as may be necessary for the satisfaction of said debt and cost, shall be sold; and such sale shall be for cash, unless the plaintiff shall consent to a sale on credit; and if upon the sale, under such decree, of the whole mortgaged property, the net proceeds thereof, after the costs allowed by the court are satisfied, shall not suffice to satisfy the mortgage debt and accrued interest, as this shall be found by the judgment of the court upon the report of the auditor thereof, the court may, upon the motion of the plaintiff, enter a decree in personam against the mortgagor, or other party to the suit, who is liable for the payment thereof; provided, the mortgagee would be entitled to maintain an action at law upon the covenants contained in said mortgage for said residue of the said mortgage debt so remaining unsatisfied by the proceeds of such sale; which decree shall have the same effect as a judgment at law, and