Willard v. Ramsburg

Golusbokough, J., delivered the opinion of this Court. Peter Young, one of the appellees, executed a mortgage to Abraham Willard, the appellants’ testator, on the 24th day of August 1858, to secure the payment of the respective sums therein stated. The appellants after the death of the mortgagee, filed their bill of complaint in the Circuit Court for Frederick County, on the 14th day [216] of October 1859, to obtain a decree for the sale of the mortgaged premise’s. The appellees to whom Young had also given a mortgage on the same property on the 21st day of August 1858, were made defendants to the above suit, and by their answer assented to a decree and sale of the mortgaged property, and to have all questions of the priority of right settled before the auditor in the distribution of the fund arising from the sale. The evidence shows that Willard’s mortgage was received to he recorded, on the 25th day of August 1858, at half past nine o'clock in the morning, and that the appellees’ mortgage was received for record some time after on the same day. The property was sold by the trustee appointed by the Court, the sale reported and finally ratified. The cause being sent to the auditor, he stated two accounts: No. 1, under the instruction of the complainants’ solicitor, allowing the complainants’ claim, and appropriating the balance of the proceeds of sale, after deducting expenses of suit to the satisfaction thereof; and No. 2, under the instruction of the defendants’ solicitor, allowing the claims set forth, excluding the complainants. The appellants filed exceptions to the auditor’s report No. 2, the Circuit Court overruled these exceptions, and by a pro forma decree passed by agreement, finally ratified the auditor’s report No. 2. From this decree the complainants prosecuted this appeal. The exception taken to the testimony of Peter Young involved his competency to testify, he being a party defendant, and alleged to be liable for costs, and interested.in the suit. This exception was overruled by the Circuit Court, and we think correctly. When the exception was taken, the case was before the auditor. Young’s equity of redemption had been foreclosed by the decree, a sale of the property had been made, and the fund arising [217] from the sale was about to be distributed to the mortgagees entitled thereto. In this attitude of the case, where the contest was between the prior and subsequent mortgagees, Young must be regarded as holding a perfectly impartial relation both to the parties, and the fund in controversy, and without any interest which would render him incompetent. We are next to consider the important question, whether the mortgage ’of Willard being first recorded, such registration gave to the mortgagee a priority of lien, to the exclusion of the rights of the appellees under their mortgage. This involves the further question, whether by the true construction of the Act of 1856, ch. 154, a priority of registration will exclude all consideration of the attendant circumstances connected with the execution of conflicting mortgages, such as notice, &c. Though the terms of the 114th section are very comprehensive, they do not substantially vary from the pre-existing law, and we do not feel justified in so construing the Act as to allow a mortgagee to take advantage of his own wrong, and to be guilty of mala fides in the obtention and registration of his junior mortgage. To give such an interpretation to the Act would be to disregard an unbroken current of decisions in this State since the Act of 1825, ch. 203. Clabaugh et al. vs. Byerly, 7 Gill, 361. U. S. Ins. Co. vs. Shriver et al. 3 Md. Ch. Dec., 381. Gen. Ins. Co. vs. U. S. Ins. Co., 10 Md. Rep., 517. In conformity with these decisions, we think the proper construction of the Act of 1856 is that priority of lien may be secured only where a subsequent mortgage is recorded without notice, and such mortgage has been obtained bona fide. This view of the Act is sustained by the incorporation of the Act of 1856 into the Code, Art. 24, sec. 16; where it is expressly enacted that the preference in favor of the junior mortgage can arise only upon the ground that it was obtained bona fide, and upon good and valuable consid [218] eration. But while the decisions in this State have settled the question as to the relative rights of prior and subsequent mortgagees, it is uniformly announced as a governing principle, that a subsequent mortgage, if first recorded, will not be postponed unless the notice of a prior mortgage is so clearly proved, as to make it fraudulent in the junior mortgagee to take and register his mortgage, in prejudice to the known title of the party holding the first mortgage. (Decided October 31st 1864.) Testing the case before us by the above rule, and having decided that the testimony of Young was admissible, we entertain no doubt from his evidence and the evidence of John Ifert, that Willard, the appellants’ testator, had not only positive notice of the appellees’ prior mortgage, but that he assented to its prior execution. The conduct of Willard, manifested by his anxiety to have his mortgage first recorded, tends further to prove his mala fides. Indeed we can hardly conceive óf a case in which the requisitions of the above rule could be more thoroughly gratified. It may be further said in reference to the character of this case, that no appeal can be consistently made by the appellants to the conscience of this Court, as a Court of Equity, on account of the delay on the part of the appel-lees in having their mortgage recorded, as it was recorded within four days after its execution. The decree of the Circuit Court will he affirmed with costs to the appellants. Decree affirmed.