Whistler v. Hanna

Parke, J., delivered the opinion of the Court. Florence Hanna, a widow, was the owner in fee of a farm in Harford County which was subject to the lien of two mort ⁵⁹⁹ gages. The first was given by herself and her husband to A. Henry Strasbaugh on June 4th, 1894, to secure a loan of $3500, and the .second bore the date of March 1st, 1907, and was to Jacob A. Doxen for a loan of $3000. .The two mortgages were later assigned, and part payments had been made thereon, so that on March 17th, 1920, the first mortgage was field by Eannie H. Strasbaugh, and the principal indebtedness secured thereby had been reduced to $3000, and the second mortgage had been transferred to James O. Morgan, and the principal remaining due was $1300. About the first of March, 1920, the assignee of the first mortgage demanded payment, and Doxen suggested to' the mortgagor, whose husband had died, that he would lend or procure for her the money to pay off the outstanding indebtedness of $4300 on both the mortgages, if she would give him a mortgage lieu on her farm to secure this loan.

The widow accepted this proposal, and executed and delivered to Doxen a mortgage deed to secure to him the repayment of the loan, which the mortgagor left in the hands of Doxen to apply to the extinguishment of the two prior mortgage liens. The mortgage deed to Doxen was executed on March 17th, 1920, and, on March 22nd of the same year, the mortgagor conveyed her farm to a third party, who, in turn, made a deed to the mortgagor and her daughter, Zenobia, Hanna, so as to put the title to the property in the mother and daughter as joint tenants. On May 20th, 1920, Doxen paid and had released the first mortgage lien of $3000, but he never did pay off the $1300 remaining unsatisfied on the second mortgage, and this amount is now owing to James O. Morgan as assignee. It further appears that Doxen, on April 6th, 1920, transferred his mortgage for $4300 to the appellant, Harry W. Whistler, an innocent assignee, for full value.

There was no mortgage note, and the mortgage recited that it was taken to secure, at the expiration of one year from its date, the repayment of cash that day loaned, with interest. The mortgagor paid her interest on the original mortgage indebtedness to Doxen, who paid the interest to the mortgagees and their assignees. After the execution of the mort ⁶⁰⁰ gage to Doxen for the loan of $4300, the mortgagor paid her interest on that amount, and nothing on account of the mortgage held by Morgan; and it was not until November, 1025, that the mortgagor was informed by counsel for the assignee that the residue owing to Morgan under his mortgage had not been paid by Doxen, and that Doxen had made over his mortgage of $4300 to' the appellant, who claimed the full principal amount. The mortgagor and her daughter thereupon employed counsel, who advised them of the facts here narrated, and of the state of the record title.

The appellees Florence Hanna and Zenobia Hanna, as the owners of the land affected, promptly filed a bill in equity for relief, making Jacob A. Doxen and his assignees of mortgages, James O. Morgan and Harry W. Whistler, the. defendants. After the parties were at issue, testimony was taken, and the chancellor decreed that James O. Morgan had a first mortgage lien to secure the sum of $1300, the residue of his mortgage claim; and that Harry W. Whistler’s mortgage indebtedness must be abated to the extent of $1300, and that the indebtedness remaining of $3000 was a second lien on the property. It is from this decree that Harry W. Whistler has 'appealed. Ho question is raised as to the mortgage claim and priority of Morgan, but a, reversal is asked in order to permit Whistler, as the assignee of Doxen, to' enforce the full amount ($4300) of his mortgage claim as a second lien.

The principal reasons advanced for the reversal are (a) that the mortgagor and her daughter did not meet the burden of establishing by a fair preponderance of the testimony that there was a failure in part of the consideration for the mortgage in controversy; (b) that the facts on this record take the case at bar out of the operation of the decisions in Hunter v. Chase, 144 Md. 13 , and Riley v. Woodall, 145 Md. 125 , and (c) that there was error in the refusal to admit certain evidence which the appellant contends was relevant and material, as tending to show the reality of the consideration for the mortgage loan in controversy. The mortgage which the appellant acquired from Doxen was for an indebtedness in a certain amount, which it had ⁶⁰¹ been, agreed, by the mortgagor and mortgagee should not be paid to the mortgagor, but would be applied by the mortgagee to the payment and release of two prior and outstanding mortgage liens upon the same property then conveyed by the mortgagor. There is no- direct proof of any fraud in the inception and creation of the mortgage loan, but the proof is ample and convincing that the mortgagee subsequently perpetrated a fraud upon the mortgagor, by his, breach of faith in failing to pay off both of the subsisting prior mortgage debts. When he assigned the mortgage to the appellant on April 6th, 1920, he was, in total default, .since it was not until May 20th, 1920, that Doxen satisfied the Strasbaugh mortgage of $3000.

Hence at the time of the assignment the mortgagee could not have enforced the mortgage against the mortgagor; and the records gave the appellant constructive notice of the two mortgages in question, and, if he had inquired of the mortgagor in reference to the mortgage debt' or its consideration, he would have been led to the knowledge that there was then a total failure of consideration by reason of the mortgagee’s not having discharged the two mortgage liens. The mortgagor said and did nothing to- induce the