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BANK OF COMMERCE v. LANAHAN.
agreement stipulated for “ a deed of trust " which should “provide, first, for the payment of the liens and encumbrances due and owing upon the property, and secondly, for the payment of all the other creditors of said Edwin Walters, in equal proportions, and the balance, if any, to be paid over to said Edwin Walters."
Deeds for the protection of creditors may be divided into three classes. The first includes mortgages properly so called, that is, conveyances from the debtor to the creditor, expressed to be for the security of indebtedness due the latter, or for his indemnification against a particular loss, and with a clause of defeasance contained in the instrument.
In such case, while the conveyance, after failure to perform the condition within the time specified, is apparently absolute, a purchaser from the grantee, without statutory aid given to the sale, does not acquire the land, but only the charge upon the land. In this class, or amongst mortgages properly so called, are embraced mortgages in trust, where the debts are specified, and the creditors either named or designated, and described in the instrument, but because of the great number of such creditors, or of other circumstances making a conveyance directly to them inconvenient, the mortgage is made to mortgagees who combine the office of trustees with that of mortgagees. These instruments, having the form of mortgages, are attended in general with the same statutory incidents. The second class consists of conveyances which are absolute in form, but being intended as securities of debt only, courts of equity, upon proof of the fact, will give effect to the intention, except as against the rights of bona fide purchasers, or other intervening equities. The third class consists of deeds of trust like the present. It is believed that the provisions of the Code, under the title - Mortgages," which bave been invoked by the appellant, art. 64, sections 7 and 14, have reference to instruments of the first class only, namely, mortgages properly so called. A reason can be perceived why guards or restrictive provisions of this kind should be thrown around such instruments — mortgages intended as such and given as the ordinary security for debt — but none whatever for applying them to conveyances to trustees for the payment of creditors generally. Charles v. Clagett, 3 Md. 82; Stockett v. Holliday, 9 Ib. 480, 492, 499; White v. Malcolm, 15 Ib. 541 ; Phillips v. Pearson, 27 Ib. 256; Reeside v. Peter, 33 Ib. 120; McIntosh v. Corner, 33 Ib. 598, 607.
ALVEY, J., delivered the opinion of the court.
This appeal presents the case of exceptions to a sale made under a deed of trust, and reported for ratification by the court, as required by the Code, art. 81, sections 107 and 111, as reënacted with amendments by the Act of 1874, chapter 483.
The deed was made by the grantor in pursuance of an agreement with his creditors for an extension of time on his indebtedness; and the appellant, according to the allegation in the exceptions filed, is the holder of part of the evidences of such indebtedness of the grantor intended to be secured by the deed, and has thus become interested in the execution of the trust.
The ratification of the sale is excepted to on several grounds : First, because the property, although situated in Baltimore County, was sold in Baltimore city, regardless of that provision of the Code, art. 64, section
BANK OF COMMERCE v. LANAHAN.
14, which requires that all mortgage sales shall be made in the county or city where the mortgaged premises are situated. Secondly, because the notice of sale was not given by advertisement in some newspaper printed in Baltimore County, where the property is situated; the Code, art. 64, section 7, requiring that all mortgage sales made in pursuance of the power authorized to be inserted in any deed of mortgage, where the notice is not provided for in the mortgage, or otherwise agreed upon, shall be made after twenty days' notice of the time, place, and terms thereof, by advertisement in some newspaper printed in the county where the mortgaged premises may be located. Thirdly, because the sale was not fairly made ; that it was made on the day of a general state election; and that the property was sold for a grossly inadequate price.
The two first grounds relied on, those relating to the notice and the place of sale, are involved in and dependent upon the question, whether the deed of the 17th of November, 1874, under which the sale was made, is a mortgage, such as is contemplated by the Code, art. 64, section 5, which provides that in all mortgages there may be inserted a clause authorizing the mortgagee, or any other person to be named therein, to sell the mortgaged premises ; the following sections, 7 and 14, before referred to, baving reference to the manner of executing the power authorized to be inserted by the 5th section.
1. As to the question of the character of the deed, upon careful examination of its provisions, we are of opinion that it is not a technical mortgage, within the contemplation of the 5th section of the 64th art. of the Code referred to, but a deed of trust, clearly denominated such by the Code, art. 24, sec. 55. It is a deed of trust to secure debts; and while it has some of the attributes of a mortgage, yet it presents features which distinguish it from that class of security strictly considered. By the legal, formal mortgage, as distinguished from instruments held to be mortgages by construction of courts of equity, the property is conveyed or assigned by the mortgagor to the mortgagee, in form like that of an absolute legal conveyance, but subject to a proviso or condition by which the conveyance is to become void, or the estate is to be reconveyed, upon payment to the mortgagee of the principal sum secured, with interest, on a day certain ; and upon non-performance of this condition, the mortgagee's conditional estate becomes absolute at law, and he may take possession thereof, but it remains redeemable in equity during a certain period under the rules imposed by courts of equity, or by statute. 1 Fish. on Mort. 7; Jamieson v. Bruce, 6 Gill & John. 72: Evans f Iglehart v. Merriken, 8 Ib. 39. And in accordance with this description of a strict legal mortgage is the formula given in the Code, art. 24, sec. 60. We do not, however, for a moment intimate that a mortgage can be in no other form than that here given ; but the form to which we refer clearly indicates the attributes and essential qualities of a strict legal mortgage, as distinguished from a deed of trust, such as that now before us. This deed was made for the benefit of all the grantors existing creditors ; and the grant was made to and the estate vested in but one of those creditors, in trust to secure his own debt and the debts of all the other creditors, in the manner and upon the terms specified in the deed. Lanahan is the trustee, and the creditors are cestuis que trust, not mortgagees, strictly and technically such. Upon default of
BANK OF COMMERCE v. LANAHAN.
payment, these creditors, as mere cestuis que trust under the deed, could not take possession of the estate and apply the rents and profits to the discharge of their claims ; nor have they any right of foreclosure, such as a mortgagee would have under a technical mortgage. Charles v. Clagett, 3 Md. 94, 95. Their Only remedy is the enforcement of the trust, and to execute the trust requires the property to be sold. Indeed, if this instrument were declared to be a mortgage, as contended by the appellant's counsel it should be, it would be difficult to maintain its validity at all, except as to the claim of Lanahan, the trustee. His is the only claim the amount of which is mentioned in the deed ; in fact he is the only creditor named; the names and amounts of none others are stated. Now it is provided by the Code, art. 64, sec. 2, that “no mortgage, or deed in the nature of a mortgage, shall be a lien or charge on any estate or property for any other or different principal sum or sums of money than the principal sum or sums that shall appear on the face of such mortgage, and be specified and recited therein, and particularly mentioned and expressed to be secured thereby at the time of executing the same; this not to apply to mortgages to indemnify the mortgagee against loss from being indorser or security.” It is plain, therefore, that this deed would be seriously imperilled by declaring it to be a mortgage, or even a deed in the nature of a mortgage; as the amounts of the debts intended to be secured, with one exception, are not made to appear on the face of the deed, nor specified and recited therein. This is not required in a deed of trust for the benefit of all the creditors of the grantor such as that in the present case.
The case of Wilson v. Russell, 13 Md. 495, relied on by the counsel of the appellant, and where the instrument in question was sometimes spoken of as a deed in the nature of a mortgage, and sometimes as a deed of trust, does not support the position of the appellant's counsel in this
There the deed was not a conveyance for the benefit of creditors generally, nor an assignment of the property of the grantors for the payment of their existing debts ; but it was intended to secure two named parties the payment of an old debt, and certain notes agreed to be loaned under the deed ; the amount thereof being specifically stated on the face of the instrument. It was not pretended, in that case, that the deed was a technical mortgage.
Being of opinion that the deed before us is not a mortgage within the meaning of the Code, art. 64, sec. 5, it follows that the requirements of the 7th and 14th sections of the same article of the Code have no application to the sale made and reported by the trustee in this case.
2. Having determined that the deed is not a mortgage, but a deed of trust, and therefore not within the meaning of the Code, art. 64, sec. 5, the next question is, was the sale fairly made, and for a price that ought to be sanctioned by the court ? And upon careful examination of all the evidence that the record contains we can have no hesitation in saying that there is nothing disclosed that would have justified the court below in refusing ratification of the sale. It is certainly true that the trustee was in duty bound to offer the estate under the best possible advantage for the interest of those for whom the trust was created. He was bound to due diligence in giving full and proper notice, so as to invite full and
BANK OF COMMERCE ». LANAHAN.
fair competition at the sale; and he was further bound to act in perfect good faith throughout in his management in relation to the sale. He could not, in any degree, subserve the interest of one cestui que trust to the sacrifice or detriment of the rights of otbers equally interested. But bad faith or negligence on the part of the trustee will not be presumed, but, on the contrary, the presumption is that he has discharged his duty faithfully, and that presumption prevails until it is made to appear otherwise by those seeking to impeach the sale. Sales like the present are not to be impeached by slight circumstances. It requires good and substantial grounds to justify the court in setting them aside when regularly made ; for otherwise all confidence in their performance and security would be destroyed, and the public would be loth ever to bid for property thus offered. The principles upon which the court acts in reference to these sales, when sought to be set aside, are well stated by the Vice-Chancellor, in the case of Woodhull v. Osborne, 2 Edwards' Rep. 616, quoted with approval by this court in Johnson v. Dorsey, 7 Gill, 287. It was there said, that " where a stranger or third person becomes the purchaser in good faith, something more than a mere offer of a higher price must appear, to induce a resale ; such as fraud or misconduct of the master, or other person, having the control of the sale, or surprise upon the party interested, or his having been misled as to the time and place of sale. Where circumstances of the latter description are relied upon, the party must show they proceeded from or were caused by the purchaser, or some person connected with or having the manageinent of the sale. If he be of full age and under no disability, he cannot be permitted to allege his own negligence or inattention as the cause of his surprise or mistake.” Here there is no pretence that there has been surprise or mistake on the part of those representing the appellant. More than usual diligence appears to have been observed in giving notice in all directions where bidders were likely to be found ; and all the creditors, as well as the public generally, appear to have had the amplest notice of the time and place of sale. Many of the creditors appear to be persons of large means, and if they did not attend the sale and make the property bring a better price, it would seem to be their own fault. Several of the creditors were present at the sale, but did not bid. The sale was conducted by an experienced auctioneer, at the Exchange Sales Rooms in the city of Baltimore, within convenient distance of the location of the property, and there is no suggestion that there were any unfair means used in the mode of conducting the sale; but, on the contrary, the proof shows that the fullest opportunity was afforded every one to bid who desired to
That the sale took place on the day of the general state election can, of itself, certainly form no sufficient ground for setting it aside. It is not shown that a single individual was prevented from attending the sale by reason of the election. The proof is that the attendance was fair, the number being about as great as usually attend such sales. And as to the inadequacy of price, that is not of a character to justify the rejection of the sale. În regard to the salable value of property there is always more or less diversity of opinion, even among those who are supposed to be competent judges. Every controverted case in regard to the value of property exemplifies the truth of this remark. But, with all the diver
BANK OF COMMERCE v. LANAHAN.
sity of opinion upon this subject, no witness ventures to say that he will give more than the bid reported, if the property should go to resale. Indeed, they say they would not; and there is nothing in any portion of the evidence that gives any degree of assurance that, if the property were put up at resale, it would bring more than the price reported. Why then order a resale? The sale reported should not be set aside and a resale ordered as a mere experiment. That is forbidden both by reason and the well established doctrine of the law upon the subject. No principle is better established or more uniformly applied than 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 some mistake or unfairness in the sale for which the purchaser is responsible, or misconduct or fraud on the part of the trustee. This is the doctrine maintained by this court in the cases of Cohen v. Wagner, 6 Gill, 236, and Johnson v. Dorsey, 7 Ib. 269, where the subject is fully considered. The proof in this case wholly fails to show any such gross inadequacy of price, if inadequate at all, as to indicate that there was either mistake or unfairness in the sale, or that the trustee has been guilty of any misconduct in relation to it. Moreover, in considering the question of the ratification of this sale, it should not be overlooked that a decided majority of the creditors in interest have strongly recommended that the sale should be ratified, being of the opinion, as they state, that the property would not sell for as much on resale as the price reported by the trustee.
Upon the whole, finding no sufficient ground for vacating the sale reported by the trustee, the order appealed from will be affirmed, with costs to the appellees.
Order affirmed, and cause remanded.