Scherr v. Preston Permanent Building & Loan Ass'n

Urner, J., delivered the opinion of the Court. The grantees of land subject to a mortgage covenanted in the deed to them from the mortgagors to assume the mortgage debt, to be primarily liable upon all the covenants contained in the mortgage, including the covenant for the payment of the debt thereby secured, and to be liable to a deficiency decree in foreclosure proceedings “to the same extent as though they had been the original mortgagors.” A sale of the property under a decree authorized by the mortgage having produced a sum insufficient to pay the debt in full, the mortgagee filed a motion for a deficiency decree against the grantees, predicating such a right upon the covenants by the latter in the deed conveying the equity of redemption. It was alleged in the motion that the mortgagee assented to the assumption of the mortgage debt by the grantees, and thereafter accepted payments from them on account of the principal and interest. The question, raised by demurrer to the motion, is whether the corporate mortgagee can avail itself of the covenants by the grantees with the mortgagors as a basis for the proposed deficiency decree.

The appeal is from an order overruling the demurrer. No right to a deficiency decree against the appellants can be recognized in this case unless it is conferred by section 731A of article 4 of the Code of Public Local Laws (1930), which provides as follows: “If, upon a sale of the whole mortgaged property by virtue of a decree passed under an assent to the passing of a decree contained in the mortgage under the provisions of section 720 of this article, the net proceeds of sale, after the cost and expenses allowed by the court are satisfied, shall not suffice to pay the mortgage debt and accrued interest, as the same shall be found and- determined by the judgment of the court upon the report of the auditor thereof, the court may, upon the motioli of the plain ¹⁰⁸ tiff, the mortgagee or his legal or equitable assignee, after due notice, by summons or otherwise, as the court may direct, enter a decree in personam against the mortgagor or Other party to the suit or proceeding, who is liable for the payment thereof, for the amount of such deficiency; provided the mortgagee or his legal or equitable assignee would be entitled to maintain an action at law upon the covenants contained in the mortgage for said residue of said mortgage debt so remaining unpaid and unsatisfied by the proceeds of such sale or sales; which decree shall have the same effect and be a lien as in a case of a judgment at law, and may be enforced in like manner by a writ of executioli in the nature of a writ of fieri facias by attachment or otherwise.” The effect of those provisions has been considered in a series of cases. In Kushnick v. Lake Drive Bldg & Loan Assn., 153 Md. 638, 645 , 139 A. 446, 449 , it was held that one who signed a mortgage only as guarantor of the debt was not liable to' a deficiency decree because not amenable to an action at law on the mortgage covenants. The opinion, by Judge Offutt, said: “The liability of the guarantor differs from that of the principal debtor in its origin and in its incidents; defenses may conceivably be open to him which would be closed to the principal debtor, nor is there any provision in the statute for a form of decree which would adequately protect persons whose liability is conditional and not absolute.

Again, there is no apparent reason why a mortgagee should be entitled to a deficiency decree against a mere guarantor who could not be sued on the covenants in the mortgage, merely because he could sue the principal debtor thereon, when he would not be entitled to such a decree against persons liable for the mortgage debt in cases where he would not be entitled to maintain an action at law on the covenants contained in the mortgage, and, when the Legislature said that such a decree could only be entered against a party to the proceeding, and then only where the mortgagee could have maintained an action at law on the covenants contained in the mortgage, it must have meant that such a decree could only have been entered against a party to the foreclosure proceed ¹⁰⁹ ing liable in an action at law on the covenants contained in the mortgage.” In Bletzer v. Cooksey, 154 Md. 568 , 141 A. 380 , a decree for a deficiency resulting from a sale under a mortgage was sustained against a wife who had joined with her husband in its execution. In Kirsner v. Sun Mortgage Co., 154 Md. 682 , 141 A. 398 , it was decided that a covenantor in a mortgage, who joined in its execution for the purpose of obligating himself as a principal debtor, could be subjected to a deficiency decree, even though he had no interest in the mortgaged property. In Gross v. Ben Franklin Bldg. & Loan Assn., 157 Md. 401 , 146 A. 229, 231 , a purchaser of property subject to a mortgage, by an agreement under seal with the mortgagee, obligated himself to “be primarily liable upon all the covenants” contained in the mortgage and for the payment of the mortgage debt, in consideration of the mortgagee’s forbearance to foreclose because of past defaults. By that agreement a direct liability to suit on the covenants in the mortgage was held to have been created.

In Allen v. Seff, 160 Md. 240 , 153 A. 54 , a deficiency decree was refused as against a person who by an agreement, not under seal, with the mortgagee, assumed the payment of