Stater v. Dulany, Assignee

Sybert, J., delivered the opinion of the Court. This is an appeal from an order of the Circuit Court for Carroll County which dismissed a petition by mortgagors to enjoin a foreclosure sale of their real property. The principal question presented is the validity of the mortgage given to the appellee’s assignor, the Ridge Pike Bond and Mortgage Corporation, by the appellants, Edwin S. Stater and H. Jacquelyn Stater, his wife. In 1962 the Staters owned an unimproved lot of land in Carroll County, Maryland, and, desiring to erect a house thereon, they visited a sample home of the Ridge Pike Lumber Company (Lumber Company), in Thurmont, Maryland, in October or November, 1962.

The Lumber Company, which has its home office in Conshohocken, Pennsylvania, sells precut or prefabricated homes. After several meetings between the Staters and Lee R. Saylor, of Thurmont, the local sales representative for the Lumber Company, the Staters decided in November or early December, 1962, to purchase a particular style precut house, completed an application for credit, and gave Saylor the deed to their land to aid in the credit investigation. Soon thereafter the Staters were notified that their credit application had been approved. They then executed an installment contract, dated December 12, 1962, covering the purchase, Saylor representing the Lumber Company in the transaction.

The cash purchase price stated in the contract was $10,700.00, which included the cost of the precut lumber and building materials, as well as the sum of $1,373.00 which was to be placed by the ⁴⁰² Lumber Company in an escrow account for disbursement to contractors (apparently to be procured by the Staters) as they completed preliminary work necessary for the erection of the dwelling. Under the agreement, the Lumber Company was to erect the outside or “shell” of the home and the Staters were to finish the inside on their own. However, the contract provided for the payment of 156 monthly installments of $122.08 each, to pay off the “time balance” price of $19,044.48. The appellants paid $100.00 down when they executed the contract, which was credited therein.

The Staters also executed a mortgage on their land to the Ridge Pike Bond and Mortgage Corporation (mortgagee), owner of the Lumber Company. The mortgage was acknowledged by the Staters on December 15, 1962, although it is dated December 10, 1962. The affidavit as to consideration, made by the president of the mortgagee, is dated December 19, 1962, and the mortgage was recorded January 11, 1963. It provided for the payment of $19,044.48 in 156 monthly installments of $122.08 each.

The credit officer of the Lumber Company testified, without contradiction, that the escrow account of $1,373.00 was established “at the time the contracts [the installment contract and the mortgage] were signed and sent back to the office.” Four checks were drawn on the account to pay contractors for such work as the digging and construction of a foundation, construction of a sewer system, etc. The Staters admitted that they sent the contractors’ bills to. the Lumber Company and that it forwarded covering checks to the Staters or the contractors. The precut house was delivered to the Staters in two “packages” at two different times. The first package contained materials for the outside and the second for the inside of the house. The appellants, on February 5, 1963, signed a certificate of completion for Saylor, indicating that the “shell” was completed.

In July 1963 the Staters moved into the house. Under the terms of the mortgage, payments were to commence 60 days after its execution. However, it is admitted by the Staters that they have made no payments to the mortgagee. On September 18, 1963, the mortgagee made a short assignment of the mortgage to the appellee, an attorney, for the pur ⁴⁰³ pose of foreclosure.

On October 16, 1963, the appellee docketed suit to foreclose the mortgage, filing with it a statement of mortgage debt claiming the principal sum of $10,700.00 plus simple interest from date of $267.50. Public sale of the property was scheduled for November 14, 1963. Appellants, on October 23, 1963, filed a petition to enjoin the sale, alleging that the mortgage was one to secure future advances, that it did not comply with Code (1957), Art. 66, sec. 2, and was therefore not a lien on the property. The appellants further alleged that they were fraudulently induced to execute the mortgage.

The lower court issued a show cause order, appellee answered, testimony was taken, and the petition was dismissed on November 12, the court holding that the mortgage was not one for future advances and that no fraud had been shown. The property brought $12,000.00 at public sale on November 14, 1963, and a report of sale was filed. An order nisi directing-ratification unless cause to the contrary be shown on or before December 23, 1963, was published. On December 9, 1963, the appellants appealed to this Court from the order dismissing their injunction petition, and on December 19, 1963, they filed exceptions to the sale, but no hearing was held thereon pending this appeal.

I The appellants contend that the mortgage is one to secure future advances (namely, the building materials 1 ) and that since it does not state on its face the amounts of the future advances and the times when they were to be made, it does not comply with Code (1957), Art. 66, sec. 2, and is therefore not valid as a lien against the property. On the other hand, the appellee