Shirk v. Oak Street Bldg. Assn. , 137 Md. 314 ( 1921 )

The three orders appealed from in this case are: (1) the order of the Circuit Court of Baltimore City, dated January 13th, 1920, dismissing exceptions to and ratifying the auditor's account; (2) the order of said court, dated January 14th, 1920, dismissing exceptions to and ratifying a sale of certain leasehold property made by the trustee at the risk of the appellant, to whom the property had been previously sold, and (3) the order of said court, dated January 14th, 1920, dismissing the petition of the appellant to have the trustee removed, etc.

The proceedings in the case were begun in January, 1915, by a petition in the Circuit Court of Baltimore City for a decree for the sale of the leasehold property in Baltimore City, known as No. 1624 St. Paul Street, in pursuance of the terms of a mortgage from the appellant to the Oak Street Permanent Building and Loan Association of Baltimore City, dated July 3rd, 1912, and containing the usual assent of the mortgagor to a decree. A decree was accordingly passed on the 26th, of January, 1915, and John L. Cornell was appointed trustee to make the sale. The property was sold by the trustee at public sale on the 6th of April, 1915, to the mortgagor, the appellant, as the highest bidder, for the sum of $500, subject to an annual ground rent of $141, upon the following terms: one-third cash, and the balance in six and twelve months, the "credit payments to bear interest from the day of sale, and to be secured to the satisfaction of the trustee," and the sale was reported to and was finally ratified by the court on the 10th of May, 1915. Thereafter an account was stated by the auditor on the 12th of May, 1915, from which it appeared that the mortgage claim was $707.43; that the commissions, costs, taxes to April 6th, 1915, ground rent and other expenses amounted to $176.20 more than the proceeds of sale, and that the amount due by the mortgagor to the mortgagee was $883.63. Exceptions to the account were filed by the mortgagor, and on the 8th of June, 1915, the account, with the exception of two small items, was finally ratified by the court, leaving the balance still due to the mortgagee $830.85. On the same day the mortgagee filed a petition for a decree in personam against the mortgagor for the sum of $830.85. On the 17th of June the mortgagor filed a petition asking the court to vacate its order ratifying the auditor's account, and on the 29th of June filed his answer to the petition for a decree in personam, but the court, on the 15th of July, 1915, passed a decree against the mortgagor for $835.83, with interest from the date of the final ratification of the auditor's account. On the 10th of September, 1915, an attachment was issued on said decree and laid in the hands of a garnishee, and on the 5th of April, 1916, an order was filed by the mortgagee's attorney directing the clerk to enter the decree in personam "satisfied." On the 17th of April, 1916, John L. Cornell, trustee, filed a petition setting out the sale of the property to the mortgagor upon the terms we have mentioned, and alleging that the purchaser had only paid $166.66 on account of the purchase-money; that he, the trustee, had collected rent from the tenant occupying the property to the amount of $250.12; that the taxes, ground rent, water rent, etc., that had accrued since the sale were greater than the amount of rent collected, and praying that the purchaser be decreed to pay the balance of the purchase-money with interest thereon, and that in default thereof the property be sold at his risk. In pursuance of an order of court the purchaser answered said petition, and alleged that taking the day of sale as the date of settlement, he had overpaid the amount of the purchase-money; that the trustee had been allowed by the court to collect the rents from the property in lieu of the purchaser giving his notes for the deferred payments; that in addition to the $166.66 paid by him and the amount the trustee admitted he had collected on account of rents, there was another installment of rent due on May 1st; that in the adjustment of expenses on the property to the day of sale the trustee should allow the sum of $22.50 as his proportion of the taxes for the year 1915, and should also allow the sum of $59.55, "the proportionate part of the ground rent due" on May 1st, 1915, and prayed the court to pass an order allowing him to collect the rents; referring the papers to the auditor to state an account; requiring the trustee to make a deed to him, and dismissing the petition of the trustee. On the 26th of May, 1916, the purchaser filed an additional answer in which he denied that the trustee was liable for taxes, ground rent, and water rent accruing after the sale of the property, and alleged that he had "tendered to the said trustee a bond of the United States Fidelity and Guaranty Company against any such liability," but that he had refused to make a deed to him for the property. On the 13th of October, 1916, the court passed an order requiring the trustee to execute a deed to the appellant for the property, provided the appellant filed with him a bond executed by himself and the United States Fidelity and Guaranty Company in the penalty of $250, "conditioned for the payment of all expenses accrued on the property * * * between the 26th day of January, 1915," and the day on which the property was conveyed, and which had not theretofore been paid. After several other petitions of the purchaser and answers of the trustee, from which it appears that the purchaser never executed the bond referred to and the property was never conveyed to him, an account was stated by the auditor of the court and filed in the case on the 15th of February, 1919, in which the trustee was charged with all amounts collected by him or coming into his hands from the date of his appointment, and allowed for all payments made by him, and which showed an overpayment by the trustee of $3.79. On the 14th of March, 1919, the appellant filed exceptions to this audit on the following grounds:

"1. Because the auditor has included and charged in said account an item of 24.00 dollars and 58 cents, the proportion of taxes for the year 1915, which had already been charged against your exceptant in the auditor's account filed in said cause on the 12th day of May, 1915.

"2. Because there has been charged against your exceptant in like manner an item of two dollars and forty cents, being the proportion of water bill for the year 1915, and afterwards the entire water bill for that year, and again charged against your exceptant.

"3. Because an item of sixty-one dollars and ten cents was charged against your exceptant in the auditor's account filed on the day aforesaid, and afterwards the six months' ground rent was again charged against this exceptant.

"4. And for other reasons to be assigned at the hearing of these exceptions."

On the 30th of June, 1919, the trustee filed another petition in the case, setting out the sale made by him to the appellant, and alleging that the appellant had only paid $166.66 on account of the purchase-money; that the appellant had failed to comply with the order of court of October 13th, 1916, directing a conveyance of the property to him upon his furnishing a bond in the penalty of $250; that the trustee had, in accordance with the suggestion of the court, proceeded to collect the rents from the property and to apply them to the payment of costs and expenses accruing against the property as shown by the last account of the auditor; that the taxes for the years 1916, 1917, 1918 and 1919 were unpaid to the amount of $382.77; that there was due the owner of the ground rent about $300, and that the attorney of the owner of the ground rent had notified him that he would hold him personally responsible for the expenses accruing against the property during the time he held it as trustee, and praying that said purchaser be required to pay the balance of the purchase-money, and the expenses that had accrued against the property, and that in default thereof the property be decreed to be sold at his risk. The appellant answered this petition and resisted the relief therein prayed, but on the 19th of August, 1919, the court below, with the assent of the appellant, passed a decree for a resale of the property at his risk after September 10th, 1919. The property was accordingly resold at public sale on the 23rd of October, 1919, to Annie L. Walburg and Frank X. Walburg, as the highest bidders, for $2,600, and the sale was duly reported to the court. On the 29th of November, 1919, the appellant filed exceptions to this sale on the following grounds:

"1. That the entire amount of the mortgage indebtedness had been paid before the decree of this honorable court was passed to resell the property, at the risk of the former purchaser.

"2. That the court had no right or jurisdiction to decree a resale of the same.

"3. That there were only a small amount of back ground rent and back taxes due on said property when the said decree was passed in this case, and two hundred dollars in the hands of the trustee to pay these, which your exceptant is ready and willing to pay if allowed by this honorable court to do so.

"4. That the above court had no right to decide a question and decree a resale not relating to the mortgage debt, and between persons who were not parties to the suit.

"5. That the said property is abundantly liable for the payment of the amount of back taxes and ground rent which are at present due and owing on the property.

"6. And for other reasons to be assigned at the hearing of these exceptions, including inadequacy of price."

On the 10th of December, 1919, the appellant filed a petition in the court below asking that the trustee be removed. The petition was answered by the trustee on the 27th of December, 1919, and on the 12th of January, 1920, the exceptions to the auditor's account filed of February 15th, 1919, the exceptions to the sale to Annie L. Walburg and Frank X. Walburg, and the petition for the removal of the trustee were heard and submitted on testimony taken before the court, and were disposed of by the three orders involved in this appeal to which we have already referred.

We have set out the proceedings at some length in order to show the precise questions with which we are here concerned.

A careful examination of the testimony fails to disclose any evidence in support of the exceptions to the audit. In the first account of the auditor, filed in May, 1915, shortly after the sale of the property to the appellant, the trustee was charged with the entire purchase-money of $500, and after allowing for costs and expenses and for taxes and other charges to the day of sale, the account showed an overpayment or shortage of $176.20, which added to the mortgage debt made the amount due by the mortgagor to the mortgagee $883.63. This audit, as we have said, was ratified on the 8th of June, 1915, except as to certain small items, making the amount due the mortgagee $830.85. While in that audit the trustee was charged with the entire purchase-money, the appellant as the purchaser had in fact only paid the first installment of $166.66, and as he was unable to give the security required by the terms of the sale for the remaining two-thirds of the purchase-money, he entered into an arrangement with the trustee, which was apparently sanctioned by the court, by which the trustee was to collect the rents from the property and to apply the same, after, of course, paying the accrued and accruing charges, etc., against the property, to the payment of the balance of the purchase-money. In consequence of the numerous petitions filed by the appellant and the answers thereto of the trustee, the second account of the auditor was filed in February, 1919, in which, as we have said, the trustee was charged with all money collected or received by him from the date of his appointment and credited with all sums paid out, and which showed an overpayment by the trustee of $3.79, and that no part of the deferred payments of the purchase-money had been paid by the appellant. In his testimony the appellant did not refer to the particular items mentioned in his exceptions to the account, or state definitely in what particular the audit was incorrect or erroneous, but said that at the time the decree for a resale of the property was passed the trustee owed him $400, enough to pay the taxes and ground rent due on the property, without stating how such indebtedness arose, or of what items it was composed. There is nothing in the evidence to account for this statement, unless it was based upon the erroneous theory that as the trustee, in the first account, was charged with the entire purchase-money of $500, he could not afterwards demand any part of it from the appellant, notwithstanding the appellant had only paid $166.66. The first account was stated for the purpose of ascertaining what part of the proceeds of sale, if any, would be applicable to the payment of the mortgage debt, and was based upon the assumption that the entire purchase-money would be paid, but it was not intended to operate as, and cannot be given the effect of, a discharge or release of a defaulting purchaser. John L. Cornell, the trustee, testified that the account was a correct statement of the funds collected and disbursed by him from the time he was appointed trustee to the date the account was filed, February 15th, 1919; that he had gone over the matter frequently with the appellant and his various representatives, including attorneys and auditors; that these attorneys and auditors had stated in the presence of the appellant that the account was correct, and that at the time of the decree for a resale of the property there was due on account of ground rent $381.91, and that the taxes for the years 1916, 1917, 1918 and 1919 and other charges against the property were due.

In support of his exception to the sale on the ground of inadequacy of price, the appellant testified that the property was worth from $3,000 to $3,500, but he admitted that he was present at the sale with his attorney, who was ready and willing to "put up" the money to buy the property, and said he did not know how much his attorney bid for it. Mark W. Wright, a witness for the appellant, testified that he was, "in a way," in the real estate business; that he knew the property, and while he could not tell what it was worth, he thought it ought to be worth $3,500 in the market "today." On cross-examination he stated that he knew nothing about the condition of the property. Mrs. Annie L. Walburg, who purchased the property at the sale objected to and who was called by the appellant, testified that if she had seen the condition of the house she would not have purchased it, and that she had paid out $800 for repairs; that when the appellant approached her after the sale with the view of inducing her to give up the house, she told him that he would have to give her an advance of $1,000, but that at that time she had already made arrangements with men to repair the house. On cross-examination she testified as to the condition of the house and that she had spent $800 for repairs; that she purchased No. 1618 St. Paul Street for $3,000 about a month before she purchased the house in question, and that No. 1618 was in very much better condition than No. 1624, and the ground rent on No. 1618 was $135; that the appellant offered the house to a Mrs. Groves about a month before the sale for $2,000; that there were lots of men at the sale who did not "overbid" her, and among them the appellant and his attorney, who told her all about the house on the day of sale, but that if she had seen the condition of the house she "would not have given that price." The trustee testified that the appellant, and his attorney, Mr. Tippett, were present at the sale, and told him that they were there "for the purpose of bidding unless the property brought more than it was worth"; that there "were a number of people present and there was quite a lot of bidding," and that he was sure that the property brought all it was worth at the time. This evidence was clearly not sufficient to justify the court below in setting aside the sale. Even if we were of the opinion that the price at which the property was sold was less than its real value, that would not be sufficient ground for vacating the sale, for the settled rule in this State is "that mere inadequacy of price, standing by itself, is not sufficient to vacate a sale, unless it be so gross and inordinate as to indicate fraud or misconduct on the part of the trustee and purchaser." Garritee v. Popplein,73 Md. 322; Hunter v. Highland Land Co., 123 Md. 644; HoltonPark Co. v. Gary, 133 Md. 509.

The only other objection to the sale was that the court below had no jurisdiction to decree a resale of the property because the mortgage debt had already been paid. It is true that the mortgagee had, as we have said, recovered under the attachment issued on the decree in personam the amount due on the mortgage, but the amount of that decree was ascertained by charging the trustee with the whole of the purchase-money under the sale to the appellant in 1915, and as the appellant only paid one-third of the purchase-money, and failed to pay the balance, the court below, upon the application of the trustee, had ample authority in default of said payments to decree a resale of the property at his risk. The appellant's assent to the decree amounted to a waiver of any irregularities, and the only possible question open under this exception was as to the jurisdiction of the court below, in regard to which we have no doubt.

There was no evidence in the case in support of the petition for the removal of the trustee, and it appears from the appellant's brief that he was accidently killed in July, 1920, and that a new trustee had been appointed in his place.

It follows from what has been said that the orders appealed from must be affirmed.

Orders affirmed, with costs and cause remanded.