Mills v. Matthews

Eccleston, J.,

delivered the opinion of this court.

On the 18th of August 1849, Mills and Milburn entered into a written contract under seal, which was recorded the same day, and therein the former agreed to sub-lease to the latter, for ninety-eight years, renewable forever, a lot of ground in the city of Baltimore. Milburn agreeing to erect on the lot, at his own cost and expense, five brick dwelling-houses, and Mills contracting to advance, as a loan to Milburn, to aid him in the erection of the houses, the sum of $300 on each house. Milburn covenanted that the houses should be finished, and that he would repay the money advanced and all interest thereon, on or before the 1st of January 1853. And in case of default in the payment of the money advanced or interest thereon, or of ground-rent, taxes, or insurance premiums, the contract secured to Mills the right to reenter on the premises, or any part thereof, in the name of the whole, and thereupon the contract was to be in trust, that Mills might enter into bond, as required by the laws of Maryland relating to the sale of property by trustees under deeds of trust, so that the premises, with the improvements, might be sold and the proceeds applied in reimbursing the money advanced, and paying all costs, &c., and the balance, if any, paid over to Milburn. The contract also provided, that upon the completion of the houses and the return of the advances, Milbunr was to receive five sub-leases at the yearly rents agreed upon.

It is conceded that on the 15th of August 1849, these parties made a parol contract, similar, in every respect, to the written one above mentioned. They applied to a conveyancer to reduce the contract to writing, but the delay until the 18th was occasioned by his sickness.

On the 15th Milburn commenced the houses. At first Mills-objected to this, but when Milburn said he could not help beginning, and was ready to sign the contract as soon as it was written, Mills made no further objection. On the same day materials for the houses were contracted for by Milburn, and part of them were then delivered.

Mills made the advances which he contracted to make, and *322 they were not returned to him. The claims for materials furnished were also left unpaid. The property was sold under the decree in this case, and the proceeds not being sufficient to pay the advances made by Mills and the claims on account of materials furnished, a question of preference arose between the parties. The court decided in favor of the material men, and from that decision the present appeal is taken.

No question is made in regard to the- amount of any or either of the claims, or in reference to the regularity of the proceedings, on the part of the material men, in filing- and recording their claims under the lien laws. But it seems to be admitted on both sides, that the decision of the controversy depends very much upon the construction of the 7th section of the act of 1845, ch, 287, as applicable to the facts disclosed in the record. This section enacts: “That when a building shall be erected by a lessee or tenant for life or years of a lot of ground, or by an architect, builder or other person employed by such lessee or tenant, that the lien for work and materials aforesaid, shall apply only to the extent of the interest of the-said lessee or tenant for life or years.” And after providing for the case of a lot belonging to a married woman, the section-then provides: “That the said lien for work and materials shall be preferred to all mortgages, judgments, liens and incumbrances, which attached upon the- said building or ground covered thereby, subsequently to the commencement thereof, provided always, that mortgages, incumbrances and liens, other than leáses which have attached thereto prior to-the commencement of the said building, and which, by the existing laws of this State, are required to be recorded, shall not be preferred, but be postponed, unless the same are-recorded prior to the commencement of the said building.” It is said on the part of the appellees that the claim for advances is in truth a mortgage, and as such, required by the-laws of the State to be recorded; that the written contract having been executed and recorded subsequently to the commencement of the buildings, that claim cannot be preferred to the liens of the appellees. They also insist that the appel *323 lant is not entitled to a preference under the parol agreement, whether they are right or not, in supposing his claim is a mortgage and necessary to be recorded, because the written contract merged the one by parol.

This last suggestion necessarily goes to the extent of holding the merger to effect such an entire extinguishment of the parol agreement, as to deny the appellant the right to rely upon it as evidence of his claim in any respect. Now if this be true, the same rule must exclude the appellees from looking to that contract as the foundation of their claims. Their liens can attach only to the interest of Milburn. If by the merger the parol agreement is excluded from consideration, then it is clear from the proof in the cause Milburn had no interest in the premises prior to the execution of the written contract. But we do not think the doctrine of merger prohibits either the appellant or appellees from resorting to the parol agreement to show what rights were acquired, and what acts were done under it.

It is undoubtedly true that if parties make a verbal agreement and afterwards it is reduced to writing, the latter merges the former so as to prohibit the introduction of proof to show any variance or contradiction between them. This rule was wisely adopted upon the principle, that instruments of writing furnish better evidence of the terms agreed upon than can be expected from the frail memory of man. But there is no necessity for the application of the rule, where, as in this instance, the verbal and written contracts agree in every respect. Moreover this parol contract was partly performed, which, of course, took it out of the operation of the statute of frauds, and under it equitable rights were vested, which gave a court of equity power to enforce a specific performance, if it had never been reduced to writing. In the case of Albert & Wife, vs. Winn & Ross, et al., 5 Md. Rep., 66 , referred to by the appellees, the promise or agreement was merely a verbal one, without any part performance, and consequently unlike this. Here the verbal contract conferred equitable rights which were binding upon the parties in virtue of the *324 part performance. By its terms one of the conditions precedent was, that upon the repayment of the advances Milburn should receive leases for ninety-eight years. His right therefore to the leases depended upon the performance of this stipulation. And without having made the payment, if he had complied with every other portion of the contract, he could not have obtained a decree for a specific performance. His interest in the premises, by virtue of the very contract which created that interest, was subject and subordinate to this claim of Mills. As by the act of 1845 the liens of the material men can only attach upon the interest of Milburn, they can only claim to the extent of his rights founded upon the agreement which gave them existence. If they had proceeded to sell the premises under their liens, and had become purchasers under the sale, they would have acquired just the same title which Milburn had obtained under the contract, and nothing more. The obligation to repay the advances being one of the conditions upon the performance of which the leases were to be given, we do not consider this a “mortgage, incumbrance or lien,” required by the act of 1845 to be recorded, for the purpose of giving a preference over liens for work and materials.

In this case we cannot assent to the proposition, that the material men stand in a position similar to a bona fide purchaser for value, without notice. For Milburn had only an equitable title. In fact he had no title upon record when the buildings were commenced. On the contrary, even Mills, under whom he claimed, had no title of record, but nothing more than an unrecorded equitable interest, as it appears from the contract of the 18th of August 1849, the ground therein described was part of the ground demised to Mills by the president and directors of the Franklin Bank of Baltimore, for a term of ninety-nine years, renewable forever, by an indenture or lease, dated the 17th of August 1849. This being the condition of Milburn’s title or interest in the premises, the law imposed upon the appellees now claiming liens, the necessity of making inquiry as to his title; and under the *325 circumstances they are to be considered as having construetive notice, at least, of the outstanding claim of Mills. Price & Bevans, vs. McDonald, et al. 1 Md. Rep., 403 , and the authorities there cited.

Believing the court erred in giving preference to the claims for materials furnished, the order overruling the exceptions of the appellant to the auditor’s report, and also the order ratifying that report, will be reversed, with costs to the appellant in both courts, and the cause will be remanded for further proceedings.

Orders reversed and cause remanded.