Boyd v. Parker

Bartol, O. J., delivered tbe opinion of tbe Court. The questions presented by this appeal, are 1st. Whether tbe promissory notes held by the appellees, and.exhibited with the bill of complaint are the same notes as are mentioned in Kilgore’s mortgage of May 31st, 1869? 2nd. Whether the mortgage according to its true construction and effect, was a mere indemnity to Mrs. Warner to secure her against loss, by reason of her endorsement, or was a security for the payment of the notes themselves to the holders thereof? 3rd. Whether if the latter be its true construction, the appellant is entitled, as a bona fide purchaser without notice; or on any other equitable ground, to be protected against its enforcement ? 4th. If it be held that the mortgage can be enforced against the' property, is the appellant entitled to have abated therefrom, the amounts paid by him in satisfaction of the prior liens which rested upon the property, when the mortgage was executed ? 1st. We have no doubt of the identity of the notes described in the mortgage, with those held by the appellees and exhibited with the bill of complaint. The only vai’iance between them, pointed out by the appellant’s counsel consists in their not being stamped, while the notes mentioned in the mortgage are described as, "being duly stamped.” In all other respects, they correspond ; being all drawn by Kilgore, and endorsed by Margaret Warner. The date, amounts, and times when they are payable respectively are the same as described in the mortgage. In addition to this, the testimony in the cause, showing the circumstances attending the execution and delivery of the notes, and mortgage, ¡Move conclusively that they are the same notes now held and claimed by the appellees. 2nd. After the most careful examination of the terms of the mortgage, we can give no other construction to it than — 199 — that it is a security for the payment of the notes, as well as an indemnity to Mrs. Warner the endorser. It is not to be distinguished from the mortgage which was before this Court in Kunkel vs. Fitzhugh, 22 Md., 567. Eor though the instruments are not in the same words, they are substantially the same, and so far as this question is concerned must be construed as having' the same operation and effect. The mortgage being held by Mrs Warner, not only for her own indemnity, but as a security for the payment of the notes, inures to the benefit of any one into whose hands the notes may be, provided he is a bona fide holder of them ; and as a consequence, it was not in the power of Mrs. Warner to release the same, so as to deprive the appellees, by whom the notes were held, of the benefit of their security under the mortgage. This conclusion rests upon well settled principles which have often been recognized in this State. We may refer to the decisions of the late Chancellor in Clark vs. Levering, 1 Md. Ch. Dec., 178; Ohio L. Ins. and T. Co. vs. Winn & Ross, 2 Md. Ch. Dec., 26; to Owens vs. Miller & Mayhew, 29 Md., 145, and Kunkel vs. Fitzhugh, before cited. The counsel for the appellant has contended that a surety who has taken a mortgage for his own indemnity, may assign or release the same, while solvent, and thus defeat or prevent the creditor from claiming under it by subrogation as a security for his debt; and therefore that the release executed by Mrs. Warner, the mortgagee, is valid, and operated to defeat the claim now set up by the apjjellees, and for this they have cited Woodville vs. Reed, 26 Md., 181. If the general proposition were conceded ; the consequence above stated would not follow ; because the mortgage in this case is not merely one of indemnity to the endorser, but is by its terms a security for the payment of the notes. We do not understand however, the case of Woodville vs. Reed, as having decided the general — 200 — proposition for which it has been ciied. The particular mortgage which had there been assigned to J. D. Roman, (viz: that of May 18, 1856,) was not a mortgage of indemnity at all, but an absolute mortgage to H. Easton, to secure the payment of a debt of $15,000 due him from the mortgagor. The question as to the effect of an assignment by a surety of a mortgage of indemnity did not arise in the case, and was not decided • "What was said by the Court on that subject, (page 191) was stated as the result of decisions in other States, which had been cited at the bar, and has been erroneously copied by the Reporter in his. head note, as part of the Court’s decision. There is nothing in the case of Woodville vs. Reed, in conflict with the decision in Kunkel vs. Fitzhugh, which is conclusive of the second question. 3rd. The mortgage having been duly recorded, was notice to the appellant of the existence of the promissory notes which it was intended to secure, as well as of its legal import and effect. It appears that he was either mistaken as to the construction and effect of the paper, or was misled by the statements of Kilgore, upon whose representations he relied. It is impossible for him to claim equitable relief- and protection on either ground. The appellees had no agency in misleading him; they are not responsible for the misrepresentations of Kilgore, and had no knowledge of the purchase by appellant, till after it had been completed. It is no objection to the validity of the mortgage that the names of the appellees, the holders of the notes, were not mentioned therein. The notes being-negotiable might have been passed to any other persons, and under the terms of the mortgage it would have operated as a security for their payment, no matter in whose hands they may have gone. .Besides, the appellant cannot be said to have been .entirely without laches, in relying upon Kilgore’s statements, without making further inquiry to ascertain whether the notes were still in existence, or whether they had been paid. — 201 — It is conceded that the notice which induced the appellees to take the mortgage to the endorser, instead of directly to themselves, was to avoid the clanger of its being assailed as an illegal preference under the Bankrupt law, in case Kilgore should be forced into bankruptcy. But this fact can have no significance or effect upon the rights of the parties in this suit: Kilgore has not applied for the benefit of the Bankrupt law. The mortgage, in its present form, is legal and valid under the laws of Maryland ; and this being so it cannot be impeached on the ground of a secret intention on the part of the appellees, to avoid the operation of the Bankrupt law. This never has had any application to the case; and as was said in Horwitz vs. Ellinger, 31 Md., 504, “We are dealing with the act of the parties, and if that be such as the law authorizes and approves, the secret motives that prompted it are wholly immaterial.” The appellant is not entitled to claim exemption of the property, from the mortgage debt, on the ground of being a bona fide purchase]' without notice ; nor upon any other equitable ground which has been suggested in the argument, or which we can discover. 4th. Upon the fourth question we confess we have had very great hesitation and embarrassment; not on account of thNlegal propositions involved ; for these have been too firmly settled by the decided cases in Maryland, to be now called in question. Our hesitation has been caused by the hardship of the particular case; a consideration which it has been said sometimes leads the Courts to “ depart from precedents and make shipwreck of legal principles.” To these it is our duty to adhere, we have no right to depart from them to meet, what we may think, is the abstract justice of any particular cases. It certainly is a hardship upon the appellant, that the property purchased by him should not only be charged with the mortgage debt due to the appellees, to the extent of its value at the time the mort — 202 — gage was executed, when it was subject to prior liens and encumbrances ; but that the payment of those liens with the money of the appellant, should re-enforce the mortgage, and inure to the benefit of the appellees. But we cannot escape the conclusion, that such is the legal effect of the transaction, as disclosed by the record. When the appellant purchased the property, the pre-existing mortgages were released to Kilgore, from whom he derived the title, and at the same time the mortgage now in question was also released to Kilgore by Mrs. Warner. But it has turned out that the release of Mrs. Warner was not effectual ; because the notes which the mortgage was intended to secure were outstanding in the hands of the appellees, who are now entitled to enforce it against the property. The legal effect and operation of the payment and releases of the prior mortgages was to remove or extinguish them as liens. The appellant having been disappointed as to the validity and effect of Mrs. Warner’s release; now seeks to set up the prior mortgages as subsisting liens. But this would be not only against the terms and legal effect of the deeds, but contrary to the manifest intention of the appellant himself, at the time of the transaction. As very correctly said in the opinion of the Com't below: “There is no general rule better settled or more just in itself, than that parties who enter into contracts, and especially contracts in writing, must be governed by them as made, according to their true intent and meaning, and must submit to the legal consequences from them.” “The principle is well settled that the payment of an encumbrance by one whose duty is to pay, extinguishes it, and that if a purchaser desires to keep a previous encumbrance alive he should do so, by taking an assignment. ’ ’ These principles apply to the present case, the fact that the prior encumbrances, were paid out of the purchase money, cannot take it out of the operation of the rule. — 203 — (Decided 24th June, 1875.) We think the question before us has been conclusively settled in this State by Clabaugh vs. Byerly, 1 Gill, 354; Woolen vs. Hillen, 9 Gill, 185; Brawner vs. Watkins, 28 Md., 226; Swan vs. Patterson, 1 Md., 164; Walker vs. Stone, 20 Md., 195, 198; Alderson vs. Day, 6 Md., 52, and Virginia vs. C. & O. Canal Co., 32 Md., 504. From these decisions it follows that the appellant is not entitled to claim as assignee of the prior mortgages, or in any other way to hold them as subsisting liens upon the property. We concur entirely in the views expressed by the learned judges who decided this case in the Circuit Court, and the decree must therefore be affirmed and the cause remanded. Affirmed and remanded. Stewart, J., dissented.