Remsen v. Duvall

Offutt, J., delivered the opinion of the Court. On May 20th, 1928, the Greenberry Beach Company, a corporation, executed to the Greenberry Land & Development Company, Incorporated, hereinafter referred to as the development company, a purchase-money mortgage on a tract of land containing about 301 acres of land, known as the Green-berry Point Farm, in Anne Arundel County, Md., to secure the payment of four notes, one for $15,000, payable November 1st, 1928, one for $15,000, payable November 1st, 1929, one for $25,000, payable November 1st, 1930, and one for $54,500, payable November 1st, 1931, together with interest thereon until paid at six per cent, per annum, payable quarterly on the 20th day of October, January, April and July of each year. At the time that mortgage was executed, Frederick J. Kemsen, president of the development company, was indebted to Dolores L. Kemsen, his wife, for alimony accrued and unpaid, and for a counsel fee. The mortgaged land was subject to the claim of the Mutual Life Insurance Company of Baltimore for the unpaid balance of a mortgage to it and ³⁵⁴ other secured and unsecured claims, and the development company with Frederick J. Eemsen were indebted to Etta L. Boynton, of Washington, D. C., for money advanced by her for the purchase of the property by a predecessor in title of the Greenberry Beach Company.

Mrs. Eemsen had filed a bill in the Circuit Court for Anne Arundel County against the development company, in which, on the basis of her claim for alimony, she asserted an interest in the land and prayed for the appointment of a receiver for the company; and Mrs. Boynton had instituted in the Circuit Court for Anne Arundel County an attachment proceeding against the development company and Frederick J. Eemsen. For the purpose of freeing the land from the embarrassment of these liens and claims, the development company, of which Frederick J". Eemsen was the principal but not the sole stockholder, proposed to assign the mortgage from the Greenberry Beach Company to it to Wirt A. Duvall and J. Craig McLanahan, hereinafter called trustees, in trust to collect the principal and interest of the mortgage debt, and to pay from the funds thus collected to Mrs. Eemsen and Mrs. Boynton amounts which they had agreed to accept as a sufficient consideration for the dismissal of the proceedings respectively instituted by them against the development company. The proposed assignment, among others, contained these recitals and provisions: “And Whereas, Dolores L. Eemsen, wife of Frederick J. Eemsen, the principal owner of the stock of the Greenberry Land and Development Company, Inc., has asserted claim for alimony, interest thereon and a counsel fee of Fifty Dollars against the said Frederick J. Eemsen, and has filed a suit in the Circuit Court for Anne Arundel County in Equity, entitled, Dolores L. Eemsen v. The Greenberry Land and Development Company, Inc., and Frederick J. Eemsen, in which proceeding she has asserted an interest in the tract of land described in the mortgage, aforesaid, and has prayed, among other forms of relief, that a Eeceiver might be appointed for the same, but the said Dolores L. Eemsen has agreed, upon the execution of this as ³⁵⁵ signment of mortgage, in consideration of the protection afforded to her claim by the terms thereof, to dismiss the suit aforesaid brought by her, and for the purpose of evidencing her consent to the dismissal of said suit, has signed a consent to the execution of this assignment, which is attached hereto. * * * “Now, therefore, * * * the Assignor does hereby assign and transfer to the Assignees, the mortgage aforesaid, together with the mortgage debt thereby secured, and all the right, title and interest of the Assignor therein, in trust, however as follows: * * * “Out of the payment due under the terms of said mortgage on November 1, 1929, to pay to Dolores L. Eemsen or her duty constituted attorney, the following: 1/3 of $10,532.50 being the total alimony, interest and counsel fee due her as of July 1, 1928.........................$3,510.83 Interest on said sum of $10,532.50 from July 1, 1928, to November 1, 1929, @ 6%................................ 841.26 Aggregating......................$4,352.09 —together with any and all alimony, with interest thereon, calculated on an annual basis, which may legally accrue in favor of said Dolores L. Eemsen from Frederick J. Eemsen, and he unpaid, from July 1st, 1928, to November 1, 1929. “Out of the payment due under the terms of said mortgage, on November 1, 1930, to pay to said Dolores L. Eemsen or her duly constituted attorney, the following : Balance of alimony, interest and counsel fees to July 1, 1928..................$7,021.67 Interest on said sum from November 1, 1929, to November 1, 1930, at 6%...... 421.30 Aggr ega ting......................$7,442.97 ³⁵⁶ —together with any and all alimony which may legally accrue in favor of said Dolores L. Remsen from the said Frederick J. Remsen and be unpaid, from November 1, 1929, to November 1, 1930.” It also provided that, if it were judicially determined, in a pendjng suit by Charles E. Remsen, a brother of Frederick J. Remsen, against the development company, that he was entitled to an interest in funds remaining in the hands of the trustees after payment of the claims of Mrs. Remsen, Mrs. Boynton, and the insurance company, such interest should be assigned to him out of moneys “yet to be collected under the terms of the mortgage,” and in that event payments made to Mrs. Remsen should be charged against the interest of the development company.

Mrs. Remsen, for the purpose of indicating her assent to-the proposed assignment and to the offer upon which it was based, executed a written and sealed agreement which contained this provision: “The said Dolores L. Remsen does hereby assent aná. consent and authorize the execution and delivery of said assignment to said trustees (with said original mortgage and the promissory notes secured thereby) for the purposes stated therein. Expressly reserving all of her rights and remedies against the said Frederick J. Remsen, in the State of New York, and in her action for a separation pending therein, or otherwise, as well as contempt proceedings, except that she shall credit the account of said Frederick J. Remsen, with payments actually made pursuant to said assignment, but without waiving any rights or remedies against the said Remsen, individually, in the State of New York, or elsewhere, excepting as to' the premises included in the said mortgage.” The note for $15,000; payable November 1st, 1928, was paid in due course, and $125.67 paid on account of the note payable November 1st, 1929; but the mortgagor failed to pay either the balance of that note or the interest installments ³⁵⁷ which accrued and were payable on October 20th, 1929, and January 20th, 1930. As a result of those defaults, J. Craig MeLanahan, the attorney named in the mortgage, on April 17th, 1930, docketed a suit in the Circuit Court for Anne Arundel County to foreclose the mortgage; to collect $97,-205.55, the amount of the principal and interest then due and unpaid; and he in due course reported a sale of the mortgaged property to the development company for $76,000. That sale was finally ratified and confirmed, and an account auditing $72,054.76 to the trustees for distribution was filed, and, on February 5th, 1931, finally ratified.

On January 21st, 1931, the trustees filed in Circuit Court No.. 2 of Baltimore City the bill of complaint in this case, in which, after alleging in substance the facts recited above (except the final ratification of the auditor’s account), they prayed the court to assume jurisdiction of the trust, to determine the respective interests of Mrs.. Bemsen and Mrs. Boynton in the fund in their hands for distribution, to direct them in the distribution of said fund, and for general relief. In that bill, the trustees took the position that, as the payments to Mrs. Bemsen and Mrs. Boynton were to be made out of the proceeds of two definitely ascertained and described notes, one for $15,000, payable November 1st, 1929, and one for $25,000, payable November 1st, 1930, and as these notes were never paid, neither Mrs. Bemsen nor Mrs. Boynton had any right to participate at all in the distribution of the fund audited to the trustees out of the proceeds of the mortgage foreclosure. The development company in its answer to the bill definitely adopted the same position.

But Mrs. Bemsen, in her answer filed on February 14th, 1931, asserted that, under the terms of the assignment, her claim for alimony as liquidated and specified therein was entitled to preference over any and all other claims against the fund in the hands of the trustees, for distribution, excepting only the mortgage claim of the Mutual Life Insurance Company of Baltimore. The case was heard on the issues presented by those pleadings, and the mortgage, agreement, records, notes, and other papers referred to above, formally proved. ³⁵⁸ It appeared from the testimony of Colonel J. Craig Mc-Lanahan, one of the trustees, and from those exhibits: That prior to October 25, 1921, the development company owned the property and had executed a written contract to sell it to William E. Richardson for $125,000; that it further agreed that Richardson might transfer his rights under the contract of sale to a corporation to be formed to develop the property; that he did form the Greenberry Beach Company, a corporation, and did assign his rights under the contract of sale to it; that the development company then conveyed the Greenberry Point Farm to that corporation, which paid $15,-500,in cash on account of the purchase price, and executed to the development company the mortgage described above for the unpaid balance; that when the development company was ready to transfer the property under its contract with Richardson, which he had assigned to the Greenberry Beach Company, it was found to be “plastered all over with liens and mortgages of various kinds,” and that suits against - the development company asking for the appointment of a receiver had been severally instituted by Charles E. Remsen and by the appellant, and were pending, as was an attachment proceeding against the same company instituted by Mrs. Boynton; that, in order to clear the title to the property, it was agreed, before the mortgage was executed, that, when executed, it should be assigned to trustees in trust to satisfy or settle from moneys to be collected under it the claims, mortgage liens, and litigation which prevented the development company from conveying the property by a good and merchantable title to the purchaser, the Greenberry Beach Company; and that the mortgage and assignment were made in pursuance of that agreement. In addition to that evidence, Colonel McLanahan proved a “Statement of the Receipts and Disbursements” of the trustees, which showed that all claims against the fund, including the claims of Etta L. Boynton and Charles E. Remsen, had been fully satisfied, and that there remained in the hands of the trustees $19,-913.09 to be distributed to Dolores L. Remsen and the development company, the mortgagee, as their interests might ³⁵⁹ be determined by the court. So that the question finally submitted to the trial court was, what if any part of that sum Dolores Remsen, the appellant here, was entitled to receive.

In connection with that inquiry, three theories were considered: (1) That of the trustees and the development company, that under the assignment Mrs. Remsen’s claim was payable only out of the proceeds of definitely ascertained and described notes, and as those notes were never paid, her claim failed; (2) that of Mrs. Remsen, that her claim was not only payable out of the entire mortgage debt, but was preferred to all other claims except that of the Mutual Life Insurance Company of Baltimore; and (3) one which the court itself formulated and adopted, that Mrs. Remsen and the development company were co-owners of the fund remaining in the hands of the trustees for distribution, and that therefore said fund should he distributed to them pari passu. The ground for the conclusion last stated as given in the opinion of the chancellor is: “All the three mortgage notes were made the same day and by virtue of the mortgagors’ default before or coincident with the maturity of the note due ^November 1, 1929, they all three become automatically due át the same time. Clearly there is no distinction in point of time in the creation of or date of maturity of the three. “Under such circumstances the rights of the parties must be controlled by the authority expressed in Dixon v. Clayville, 44 Md. 513, that: “ ‘Different parties holding respectively several notes, or being entitled to different notes, secured by one mortgage, unless there is something in the terms of the contract to indicate a different intention, stand m equali jure, and if the property conveyed by the mortgage he insufficient to pay the whole debt, they are entitled to participate in pari passu in the fund.’ ” Accordingly, a decree was signed, by which the court assumed jurisdiction of the trust, fixed the allowable claim of Mrs. Remsen at $15,661.18, and directed the trustees to pay ³⁶⁰ her “12,054.68/99,057.48ths of that amount.” From