Smith v. Taylor

Cole, J., delivered the opinion of the Court. The initial question to be decided in the present posture of this case is whether the parties are entitled to appellate review. ¹⁴⁴ Coastal Discount Oil Company, Inc., a Virginia corporation (Coastal), contracted to purchase two parcels of land in Prince George’s County upon which it intended to construct a building to house a restaurant. It executed one contract of sale on January 6,1968 with Thomas B. 1 and Agnes M. Taylor (Taylor) and another on June 26,1968 with James F. and Mary L. Mundie (Mundie). Coastal agreed to give Taylor and Mundie a first deed of trust secured by the properties in the amounts of $41,750 for the Taylor tract and $40,000 for the Mundie tract.

Each contract contained the following provision: Said Deed of Trust shall contain a provision that by written approval from the noteholders, the trustees under said deferred purchase money trust, shall execute a subordination agreement subordinating said deferred purchase money to a bona fide construction and/or permanent loan made by a lending institution acceptable to the noteholders. 2 Settlement of the two land sales took place between November 5 and 7, 1969 at the office of the Lawyer’s Title Insurance Corporation (Lawyers Title) in Washington, D.C. Taylor and Mundie delivered deeds to Coastal, and Coastal executed two purchase money notes and two purchase money deeds of trust to secure the notes. Each note was made “[sjubject to Subordination as fully set out in the Deed of Trust securing this Note.” On November 5, 1969, also at the office of Lawyers Title, Coastal settled on a construction loan which was made by an interim lender, the Madison National Bank/Metropolitan Mortgage Fund, Inc. (Metropolitan) in the amount of $145,000. At that time Coastal executed a deed of trust note payable to Metropolitan for that sum and also executed a deed ¹⁴⁵ of trust by which it conveyed the tracts formerly owned by Taylor and Mundie to two trustees, L. W. Richardson and Richmond Moore, Jr.: 3 The construction loan was later converted into a permanent loan and the note was purchased by Home Beneficial Life Insurance Company (Home Beneficial). The record indicates that Lawyers Title did not at settlement or at any time prior thereto procure a formal subordination agreement from Taylor or Mundie as called for in their contracts with Coastal.

On November 26, 1969 Lawyers Title recorded with the Clerk of the Circuit Court for Prince George’s County the deed of trust securing the construction loan at 10:57 a.m. and the deeds of trust to Taylor and Mundie at 10:58 a.m. Coastal defaulted on the construction loan and the trustee opted to foreclose on the deed of trust. On January 25, 1978 the restaurant property was sold at public auction to the appellant, Nathan M. Smith (Smith), for $134,000. On February 2,1978 the clerk of the circuit court issued an order nisi that the sale be confirmed unless cause to the contrary be shown.

On February 16, 1978, Taylor, Mundie, and David Gwynn, substitute trustee for the Taylor and Mundie deeds of trust, filed exceptions and objections to the sale alleging that Coastal was in default as to their deeds of trust as well. Smith filed an answer to the exceptions and objections to the sale. On June 12, 1978 the matter came before the circuit court for a hearing, at the conclusion of which, the chancellor refused to ratify the sale, stating: All right, gentlemen. I’ve listened to you very carefully and I am sitting here as a court of equity on whether or not a sale should or should not be ratified.

Based on my review of the file and so forth, I feel that equitably the sale should not be ratified, so if someone will give me an order I’m not going to ratify the sale, and leave the parties to whatever ¹⁴⁶ respective rights they have in this matter, [emphasis supplied]. Smith filed an order for appeal on July 10, 1978. We issued a writ of certiorari on December 20, 1978, while the case was still pending in the Court of Special Appeals. The various arguments made by the parties before this Court