Windsor Construction Corp. v. Kolker

JOHNSON, J., delivered the opinion of the Court. This is an appeal from an order of the Circuit Court of Baltimore City extending a decree in personam against complainants and in favor of appellee for $4,675.45, with interest from January 7, 1941. On July 27, 1938, appellants executed unto appellee a mortgage for $7,280, payable in weekly sums of $100 per week, beginning on the first of August, 1938, with interest thereon payable at six per centum per annum, payable semi-annually, accounting from the date of the mort ¹¹⁵ gage, and with the right to mortgagors to prepay said mortgage indebtedness at any time prior to default or maturity, the interest on said prepayments to cease when paid. The mortgage was secured by two lots of ground known as 2900, 2902, 2904, 2906 Silver Hill Avenue, and upon 5534, 5536, 5538, 5540, 5542 and 5544 Gwynn Oak Avenue in Baltimore, Maryland.

Default having occurred in the terms and conditions of said mortgage, appellee on June 9, 1939, filed the same for foreclosure, and on the same date the court filed its decree appointing Joseph Fax, trustee to make sale. Four days later, Fax, the Trustee, petitioned to the court that he had been appointed trustee to make sale of the properties on Silver Hill Avenue, the other property having been sold under first mortgages; that he had filed his bond which had been approved by the clerk, and under the terms of the mortgage filed in the cause the plaintiff was entitled to immediate possession of the property mentioned therein after default had occurred in the covenants; that two first mortgages on the properties were held by American National Building and Loan Association, which were in default and the petitioner desired to collect the rents accruing out of said properties and to apply the same towards the payments required by the covenants of said two first mortgages, the expenses of managing said property and the surplus, if any, to the mortgage held by the plaintiff in this case. Upon that petition the court on June 13, 1939, passed its order granting the relief prayed, and further ordering “that the tenants occupying said properties pay the rent to said Joseph Fax, trustee, or his agent, and no one else.” From that time on to-wit, June 13, 1939, until December 6, 1940, the said Joseph Fax, as trustee, managed the properties and collected the rents amounting to §5,691.50, while his total disbursements were §5,836.54. The auditor’s account, therefore, allows the whole §5,836.54 to the trustee and shows a deficiency in the sum of §4,820.49, for which sum a motion for decree in personam was filed by the appellee.

This motion was answered by the de ¹¹⁶ fendants who charged generally that the auditor’s account did not correctly show the balance of money due the complainants by the defendants; that the trustee had collected in rentals the sum of $5,691.50, and his expenses as therein related amounted to $5,836.54, and if the court disallowed to the trustee such items as were not proper the amount found due by the auditor would be materially reduced. In paragraph 12 of their answer, the defendants stated that they did not “oppose the appointment of a trustee in these proceedings, and the authority of this court granted him to manage the properties, for the reason that they were deluded into the belief, by the actions of the complainant, that such action was to the best advantage, benefit and profit of all concerned; and, therefore, if a loss has resulted, the same should- not be charged to these defendants, but the same should be absorbed by the complainant, inasmuch as it appears that the loss sustained was due to its management of the properties, over which management these defendants had no control and no say therein.” It is appellants’ position that the decree in personam against them for the alleged deficiency as stated in the auditor’s account is made up of many items of expense for which they did not make themselves liable by covenants contained in the foreclosed mortgage. Under the decisions of this State, no doubt exists that after default (and before default in cases of leasehold property) the mortgagee is entitled to possession. Jamieson v. Bruce, 6 Gill & J. 72, 26 Am.

Dec. 557 ; McGuire v. Benoit, 33 Md. 181, 186 ; Bank of Commerce v. Lanahan, 45 Md. 396, 407 ; Chelton v. Green, 65 Md. 272 , 4 A. 271 ; Deakins v. Rex, 60 Md. 593 ; Commercial Bldg. Ass’n v. Robinson, 90 Md. 615, 618 , 45 A. 449 ; Gibbs v. Didier, 125 Md. 486, 492 , 94 A. 100 , Ann. Cas. 1916E, 833; Griffin v. Wilmer, 136 Md. 623 , 111 A. 114 ; Owens v. Graetzel, 149 Md. 689 , 132 A. 265 . The question arises as to whether the mortgagee may make necessary repairs and expenditures connected with the properties. The statement of management filed in ¹¹⁷ these proceedings shows that the bulk of expenditures were applied to the payment of prior mortgages §2,040-.74, to taxes and water rents of §901.89, and to heat, light and plumbing $1,705.87, totaling approximately $4,648-.50, out of an entire expenditure of $5,836.54, leaving only a small balance of $1,188.04 for general repairs, papering, painting, re-leasing all of the eight apartments over a period of nineteen months from June 13, 1939, until February 5, 1941.

The specific complaint of appellee was that the rentals of the properties were not being applied toward liquidation of the first mortgages, and an attempt by the owners to place the property in trust and appellee was unable to have collection of rents turned over to himself caused him to make application to the court, and when the trustee was appointed it was not deemed a good time to sell the class of property conveyed by the mortgage, so with the permission of the