United States Mortgage Co. v. Matthews

Background

In 1925 Warner gave a mortgage to a mortgage company to secure a $3,000 loan. The mortgage said the mortgagor agreed that the property could be sold by a court decree “in accordance with” specified Baltimore statutes, "or any amendments or additions thereto." In 1932 part of the mortgage debt was assigned to Mary and John Matthews. In 1933 Maryland added Section 720A requiring at least 25% of the unpaid mortgage debt to consent before such a decree could be entered. The Matthews asked a Baltimore circuit court for a sale decree. The State law’s validity was then challenged in court.

Reasoning

The central question was whether the mortgage’s agreement to sales “in accordance with” the named statutes included future amendments like the 1933 law. The Supreme Court examined the mortgage language and concluded those words reasonably embraced later statutory changes. Because the mortgage assent covered amendments made after the loan was made, the Court found the 1933 law did not impair the contractual obligation between the parties. The Supreme Court reversed the Maryland Court of Appeals’ ruling that the law invalidated the mortgage agreement and sent the case back for further proceedings consistent with this view.

Real world impact

The decision preserves the ability of mortgage holders with fractional interests to rely on sale procedures written into their mortgages, despite a later state law requiring larger-holder concurrence. It affects mortgage creditors, property owners, and sale procedures in Baltimore City and limits the State’s power to disrupt existing mortgage agreements.