Prodis v. Constantinides

PARKE, J., delivered the opinion of the court. The appeal on the record at bar is from the decree of the chancellor which refused to enter a deficiency judgment against a mortgagor in favor of the mortgagee who had foreclosed a chattel mortgage, the foreclosure sale having failed to pay the mortgage indebtedness to the extent of $846. The facts in parol were disputed. After a review of all the testimony, the court is in agreement with the conclusions of the chancellor on the facts and the equitable principles to be applied.

No statement will be made of the testimony, nor would its analysis be of lasting interest nor required in vindication of the findings of fact. The proof is manifest, and what happened may be briefly stated. Jordon Prodis was the lessee of certain premises in Baltimore City, where he had a confectionery store. He sold his business, equipment, and stock in trade to Pete Constantinides, who paid something on account, and secured the payment of the residue of the purchase price by giving to the seller, on October 14th, 1930, a chattel mortgage upon all of the “stock, merchandise, good will, fixtures and utensils” of this store.

The mortgage debt was covenanted to be paid in specified monthly sums, beginning at the end of the first month after date of the mortgage. It was agreed that the mortgagor was to possess the mortgaged chattels until default, when a consent decree was authorized in accordance with the local statute in force in Baltimore City (Acts of 1898, ch. 123, secs. 720-732). ³⁵ Two days later the seller assigned the term of the lease to the buyer and mortgagor, Pete Constantinides, who, on the same day, October 16th, 19.30, transferred all his interest in the term of the lease and in the goods and chattels in the store, including those covered by the chattel mortgage, to his son-in-law, Terry Cañaras, upon the latter’s assumption of the debt for which the chattel mortgage was given. By barter and sale, Cañaras, with the consent of Pro-dis, disposed of all the goods and chattels which were in the store at the time the chattel mortgage was taken, except several mirrors, a fan, scales, and a few other articles. The goods and chattels removed were replaced by other and more desirable equipment; and the mortgagee and purchaser agreed that these subsequently acquired articles would be subject to the chattel mortgage, and the mortgagee advanced one hundred dollars to pay on account of the purchase price of the new equipment.

From October, 1930, Cañaras conducted the business on the demised premises until business conditions compelled him to stop. The first installment, due on November 14th, 1930, and all the other sixteen payments on the mortgage debt, amounting to $837.40, were made by Cañaras by checks drawn to the order of Prodis. Business fell off, and in the summer of 1932 Cañaras could not make the stipulated payments required by the mortgage, and, on his default, asked, and obtained of Prodis, a gratuitous extension for nine months of the time for the monthly payments under the covenant of the mortgage. At the end of this period, the payments were not resumed; and Pro-dis foreclosed his chattel mortgage.

The trustee named under the consent decree provided for in the mortgage advertised not only the goods and chattels which were on the premises when the mortgage was given but also those which Cañaras had later purchased.' The court granted an injunction restraining the trustee from selling the subsequently acquired goods and chattels. The trustee then sold the goods and chattels which remained and were intended to be included in the mortgage1. ³⁶ An account was stated, which showed that the goods and chattels sold had failed to pay the mortgage debt in the amount of $846, with interest from May 18th, 1933. The audit was ratified,"and the mortgagee filed his petition to obtain a judgment against Pete Constantinides, the original mortgagor, for a judgment for this deficiency. Charter & P. L. L. of Baltimore City (1927) sec. 731A, p. 440; Code of Public General Laws, art. 21, sec. 50, art. 16, sec. 232, art. 66, sec. 24.

From these facts and circumstances, it is clear that the purchaser of the mortgaged chattels had assumed and agreed to pay the mortgage debt, and that this assumption of the mortgage debt by the purchaser was accepted and ratified by the mortgagee. The mortgagee was, accordingly, bound to treat the mortgagor as a surety, and to do nothing to impair