Pfeaff v. Jones

Bowie, J., delivered the opinion of the Court. This appeal is taken from an order of the Circuit Court of Baltimore City, passed on the 23rd February, 1877, dismissing the petition of the appellant, theretofore filed in the cause of the Citizens’ Security and Land Company of Baltimore City, against James McClenahan therein pending. By a decree in the above cause, certain property mortgaged by McClenahan to the Company, had been sold, and the proceeds distributed by an account of the auditor, first to pay the mortgage debt, and the balance amounting to $974, assigned to the mortgagor. — 267 — This account was finally ratified hy order of the Court on the 80th August, 1875. On the 18th of July, 1876, the appellees Jones & Roche, Adm’rs of Roche, filed a petition in the cause, alleging that the mortgagor, McClenahan, after the execution of the mortgage to the Company, had mortgaged the same lot to their intestate, to secure the payment of the sum of fifteen hundred dollars; that there was still due thereon, a large balance, and prayed the final order of ratification in the original cause awarding the balance to McClenahan he stricken out, and the cause remanded to the auditor, for the purpose of allowing the petitioners’ claim. The Court granted the prayer of the petition so far as to modify the order of ratification, assigning the balance to McClenahan, and the cause was remanded to the auditor to state another account. The auditor stated another account in conformity with the petition of the appellees which was ratified nisi. On the 22nd November, 1876, the appellant filed a petition alleging that he obtained a judgment on the 16th of January, 1875, against McClenahan for $178.75 and costs, which was still unsatisfied; that an attachment hy way of execution issued on the same on the 21st of October, 1875, which was laid in the hands of the trustees on the same day, and since then, the appellees had filed their petition and procured the proceedings before recited, and without notice to the appellant, by the consent of the complainant and trustees, the first order of ratification had been rescinded, the cause referred to the auditor for another account, a second account stated and ratified nisi, and the trustees still held the balance in their hands. The appellant’s petition charged that the order of rescission was improvidently and illegally passed, a term having expired since it was signed and enrolled; and prayed he might be made a party to the cause, that the trustees and the petitioners, Jones & Roche, the appellees, — 268 — may answer, and the order of the 18th of July, 1876, so far as it affects the ratification of the first account he rescinded, and the ratification of the second he suspended until further order, etc. The Court on the 22nd of November ordered that the appellant be made a party defendant, and the order of the 18th of July be rescinded nisi, etc. The appellant also filed exceptions to the ratification of the account last filed to the effect following: First. Because the same was stated by the auditor without authority of law. Second. Because the order referring the papers to the auditor, dated the 18th July, 1876, being passed after the term at which the auditor’s report was ratified, was erroneous and void. Third. Because the Court had no power to pass the order of the 18th of July, 1876. Jones & Roche, administrator’s of Roche, appellees, filed an answer to the appellants petition, admitting the facts therein alleged, but averring that they had an equitable lien on the balance of the fund created by the mortgage from McOlenalian to Roche, dated the 6th of February, 1873, and recorded on the 7th of Octobor, 1873, a date long prior to the laying of the attachment, and claiming they were entitled to the fund, whether the order rescinded the final order in the auditor’s account, or directed the money to be paid over to the respondents. They insisted, the laying of the attachment did not divest the equitable right of the respondents to the money, and the petitioner had an adequate remedy at law. The cause being argued by the petitioner’s and respondent’s counsel, the petition of the appellant was dismissed, his exceptions overruled, and the second account of the auditor finally ratified and confirmed, from which orders this appeal is taken. — 269 — There can be no doubt, that an order ratifying and confirming an auditor’s report, and directing the trustees to apply the proceeds accordingly, is an order in the nature of a final decree, from which an appeal may be taken. Wayman vs. Jones, 4 Md. Ch. Dec., 512; Contee vs. Dawson, 2 Bland, 264; Lovejoy vs. Irelan, 19 Md., 56. And the general rule is, that after a decree has been enrolled, the Court will not entertain any application to vary it, except upon consent of parties, or in respect of matters which are of course. Lovejoy vs. Irelan, 19 Md., 56. In the present case, the complainant in the original cause expressly assented to the order rescinding the decree, and the defendant made no objection, although a copy of the petition, asking for the rescission and other relief, was duly served, by leaving the same at his place of residence, with his wife. This case may therefore without any forced construction, be assumed to be within the exceptions to the general rule. It is proper however to observe, that in the case of Marbury vs. Stonestreet, 1 Md., 158, this Court did not regard the rule as inexorable and of universal application, but seemed to intimate that under circumstances in which equity and justice demanded it, the rule even as above qualified might be departed from. There is a very distinct opinion to the same effect in the case of Penniman vs. Cole & Worthington, 41 Md., 609. The appellant occupies the position of a creditor, claiming by judgment rendered on the 16th January, 1875, on a cause of action originating after the date of the mortgage,- and after its actual registration without notice. The appellee relies on the mortgage though recorded after the time prescribed by law, as giving him an equitable priority. — 270 — The proceeds of the land in the hands of the trustees, are liable to the liens of the several creditors in the same order as the lands themselves if unsold. , The Court below by its order affirming the auditor’s account and awarding the balance to be paid to the mortgagor, did not and could not conclude the rights of third persons, not parties to the proceedings; as long as the fund was in the custody of the Court, it possessed full power to dispose of it among the several creditors of the mortgagor, according to their equitable priorities. The question recurs which of these claimants is entitled to preference in the distribution of the balance. The mortgage being deprived of its legal effect as a prior incumbrance, for want of registration in six months from its date, the inquiry is: What operation or effect has it in equity as a lien ? There are two distinct modes of correcting the omission to record deeds within the prescribed time, provided by the statute law of this State. The one, is a judicial power vested in the Courts of Chancery, by the Act of 1785, ch. 72, and its supplements, codified in Art. 16, sec. 23, title Chancery. The other, is the right conferred by the Act of 1860, ch. 133, upon every grantee, (except mortgagees,) to record his deed, without previous judicial sanction, codified in Art. 24, sec. 19, title Deeds. Courts of Chancery had the power to compel the specific execution of contracts defectively executed, prior to the Act of 1785, in virtue of its general equitable jurisdiction, and that power and jurisdiction still remains unimpaired. Wicks vs. Chew, 4 H. & J., 547, but the Legislature by the Act of 1785, first prescribed a specific remedy for a party who has failed to record his deed within six months from its date. The provisions of the Act of 1785, (Code, Art. 16, sec. 23,) and of the Act of 1860, (Code, Art. 24, sec. 19,) must be construed to refer exclusively to deeds which are executed — 271 — and acknowledged according to law, and are perfect in all respects, so far as depends upon the act of the grantor or mortgagor. The privilege of registering a deed after the prescribed period of six months, conferred upon all grantees, (except mortgagees,) by the nineteenth section of Art. 24, was given by the Act of 1860, ch. 133, as an additional and more simple means of accomplishing the same end, in a particular class of cases, giving the deeds when recorded, as against the grantor and his heirs or executors, and against all purchasers with notice of such deed or conveyance, and against all creditors of such grantor and his heirs, who shall become so after the recording of such deed or conveyance, the same validity and effect as if recorded within the time before prescribed. It is obvious from the exception embodied in this section, that mortgages were expressly excluded from its operation, leaving them to he disposed of under the provisions of Art. 16, sec. 23, title Chancery. Registration under the latter, is a judicial proceeding requiring an application in writing and notice to the grantor. The Court must be satisfied that the omission to record was without fraudulent intention, and that the applicant has a fair and equitable claim to the premises; the Court must order and decree that the deed be recorded, and when recorded, “such deed shall not destroy or in any manner affect the title of any purchaser made after the date of the deed without notice, nor shall such deed, though recorded as aforesaid, in any manner affect the creditors of the party making such deed who may trust such party after the date of the said deed.” Art. 16, sec. 23, Code Pub. Gen. Laws. Although the sub-section is entitled “Deeds,” and the word “mortgage ” is not used therein, yet mortgages are included in the general term “ deeds,” under which alone any legal authority exists for registering mortgages, after the time prescribed by law has elapsed. — 272 — The general words of the section above cited, must be understood with this qualification, that the recording of the deed made in pursuance of the decree, operates as constructive notice; and creditors, who become so thereafter, are affected by such notice and are not protected against the deed. The mere clerical act of registering a mortgage after six months from its date, without the order or decree of a Court, must in view of the language of the Code, be regarded as null and void. The Act of 1785, ch. 72, sec. 11, now codified as sec. 23, Art. 16, title Chancery, has been construed in several cases decided by this Court, prior to the adoption of the Code. In these it was held, “ a deed cannot be recorded under the Act 1785, ch. 72, sec. 11, so as to affect any purchaser after the date of the deed without notice of it, nor any creditor of the grantor, who trusted the party after its date.” Wicks vs. Chew, 4 H. & J., 547; Carroll vs. Norwood, 5 H. & J., 155; 1 H. & J., 180; Pannell vs. Farmers’ Bank, 7 H. & J., 205. In the case of Johnston vs. Canby, 29 Md., 211, in which a subsequent judgment creditor sought to obtain priority over a previous mortgage not recorded in time, it was held, that it being clearly established that the complainants Johnston, when they obtained their judgment, had actual notice of the mortgage, they should he postponed to the mortgage, upon the equity that they had notice of it, relying upon Le Neve vs. Le Neve, 3 Atk., 646; Alexander vs. Ghiselin, 5 Gill, 181; hut no reference was made to the Act of 1785, ch. 72, nor to the provisions of the Code. In the case of the Sixth Ward Building Association, which was a contest between persons claiming under defective mortgages, and trustees representing creditors, this Court referring to the peculiar features of the case, says: “ It is not a case where a priority is claimed for an — 273 — unrecorded, or defective mortgage over a subsequent encumbrancer with notice, nor where such a mortgage or contract for a specific lien is sought to be enforced against existing creditors.” ***** “Here the rights of subsequent creditors (that is those who became such after the execution of the instrument,) are sought to be affected, and in our opinion, their rights in this respect are protected by the Registry Laws.” Construing the Registry Acts referred to, this Court held, “mortgages are expressly excepted from the operation of sec. 19, (of Art. 24,) which allows any deed to he recorded at any time after six months, and makes it valid against the grantor, purchasers with notice, and all creditors of the grantor who may become so after its recording.” “ This does not allow the recording of a mortgage after six months, but under sec. 23, of Art. 16, a Court of equity may, upon a proper case being made, decree it to he recorded, but when so recorded, it is expressly provided, it shall not ‘in any manner affect the creditors of the party making such deed who may trust such party after the date of said deed.’ ” 41 Md., 513, 514. In a preceding page of this opinion, we have stated what, in our judgment, is the true construction of this section above referred to, viz: that the recording of a deed, or mortgage, pursuant to its provisions, constitutes constructive notice, and creditors becoming so after such recording, are affected by the same, and not preferred to the deed, or mortgage. The mortgage of Roche, in the present case, was not recorded within six months from its date, nor was it recorded in pursuance of the provisions of the Act of 1785, ch. 72, (Art. 16, Code, sec. 23,) but it was filed after the time prescribed by law, at the instance of the mortgagee alone. The cause of action, on which the judgment of the appellant was rendered, was after the date of the mortgage, and its entry on the records, but there is no — 274 — evidence, that the appellant had notice of the existence of the mortgage. (Decided 29th January, 1879.) The appellant therefore comes clearly within the exception made in favor of creditors in the 23rd sec. of Art. 16, Title Chancery, as construed hy this Court, and is entitled to preference over the appellees in the distribution of the balance in the hands of the trustees. It follows, that the Court below erred in dismissing the petition and overruling the exceptions of the appellant, and in finally ratifying the account in favor of the appellees. The orders appealed from will he reversed, and the cause remanded for further proceedings. Orders reversed, and cause remanded for further proceedings.