Source: http://masscases.com/cases/sjc/311/311mass377.html
Timestamp: 2019-04-21 10:29:35+00:00

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HOWARD CLARK DAVIS vs. NEWBURYPORT FIVE CENTS SAVINGS BANK & others.
In a suit in equity by a mortgagor of real estate against a bank mortgagee and three individuals, based on averments that the bank, acting in bad faith and in conspiracy with the individuals to deprive the plaintiff of his property, took possession thereof under the mortgage, later "went through the form of" a foreclosure sale at which it purchased the property at an inadequate price previously agreed upon by the defendants and subsequently conveyed it to the individual defendants at a much higher price, and praying that the sale by the bank to the individual defendants be declared the "actual foreclosure sale" and for an accounting on the basis that the bank had "retained a surplus," upon warranted findings on reported evidence in substance that the bank acted throughout in good faith and with due diligence and that there was no conspiracy, the plaintiff had no right except to an accounting between himself and the bank as to conduct of the property during the period after the bank took possession and until the foreclosure sale, as to taxes paid by the bank previous to the foreclosure and as to any amount remaining due on the note after the foreclosure, treating the sum bid by the bank at the foreclosure sale as the purchase price; and an account should be stated even though it resulted in a balance in the bank's favor.
BILL IN EQUITY, filed in the Superior Court on October 6, 1937, and afterwards amended, against Newburyport Five Cents Savings Bank, hereinafter called the bank, Frederick J. Mahony and Stanley Ward, both individually and as trustees of the Ward Realty Trust, and William H. Dyer.
"for $130,000 or more and took back a mortgage for $130,000."
The last three paragraphs of the stating part of the amended bill were as follows: "8. The defendants acted in bad faith toward the plaintiff and to the plaintiff's damage in entering to foreclose, in their conduct while the bank was in possession as mortgagee, in exercising the power of sale contained in the mortgage, in the conduct of the foreclosure sale, and in the sale to Ward and Mahony. 9. Ward, Mahony, and Dyer have converted funds, the property of the plaintiff, in amounts unknown to the plaintiff; and the bank has retained a surplus, the property of the plaintiff, amounting to $40,000 or more, the exact amount whereof is unknown to the plaintiff. 10. The bank has brought an action at law in the Superior Court . . . against the plaintiff to recover an alleged deficiency arising out of the foreclosure sale."
The prayers of the bill were that the bank be enjoined from prosecuting the action at law against the plaintiff "and that the rights of the parties be finally adjudicated and determined by this proceeding in equity"; that the sale of the property in question by the bank to Ward and Mahony be declared "the actual foreclosure sale"; that "an accounting be ordered between all the defendants and the plaintiff; and that a decree be entered establishing the amount or amounts which may be found by the accounting to be due to the plaintiff, and ordering the several defendants to pay the same."
The suit was heard by Collins, J., and by his order a final decree was entered dismissing the bill. The plaintiff appealed. The evidence was reported. The judge at the plaintiff's request made a report of material facts found by him.
W. Powers, for the plaintiff.
J. W. Sullivan, (P. I. Lawton with him,) for Newburyport Five Cents Savings Bank.
W. Hartstone & H. N. Hartstone, for the defendants Mahony and others, submitted a brief.
Newburyport Five Cents Savings Bank, in 1926, which was secured by a mortgage upon two apartment houses, on Newbury Street, in Boston. He paid $10,000 on the principal in 1929, and the bank extended the term of the mortgage to July 15, 1932. The interest was paid regularly up to January 2, 1932. In August, 1932, Davis paid $100 on account of the mortgage. He made no other payments. The bank began to press him for payments and to insist upon more security. The receipts from the property were far from sufficient to pay the carrying charges. Davis had offered, in 1932, to convey the property to the bank but the latter did not desire to take over the property. In July, 1933, the defendant Dyer, who was associated with the defendants Ward and Mahony in a corporation engaged in the management of apartment properties, made, at the request of the bank, a survey of these premises. The bank made an entry on August 17, 1933, to foreclose its mortgage and on August 21, 1933, wrote Davis to that effect. It made extensive repairs on the premises, about one half of which were completed on October 27, 1933, when the foreclosure sale was held and the property sold to it upon its bid of $50,000. The property was conveyed to the bank on November 14, 1933. It conveyed the premises to the Ward Realty Trust, which was composed of the individual defendants, on January 10, 1934, taking the demand note of the trust for $130,000 secured by a mortgage upon the premises. The bank sued Davis for a deficiency upon his note, and he filed this bill in equity for an accounting and to enjoin the bank from prosecuting the action at law. The suit and action were tried together under a stipulation that the judge should make such an order as would effectually dispose of the entire matter. The judge made findings in the suit in equity and ordered the bill dismissed. He also found that, if the decree in equity "ultimately prevails," the bank was entitled to a judgment of $40,658.15 with interest at the rate of six per cent per annum from August 25, 1932. The plaintiff appealed from a final decree dismissing the bill.
price at which the property was sold or ought to have been sold at the foreclosure sale. The bill, however, was brought not to set aside the sale or to redeem the property but to recover for any surplus in the hands of the bank from the foreclosure sale. Clark v. Simmons, 150 Mass. 357. Bon v. Graves, 216 Mass. 440. Russell v. Bon, 221 Mass. 370. The plaintiff by bringing this bill affirms the sale and by this bill seeks an accounting of the alleged surplus arising from the sale. The validity of the sale is not open to attack upon such a bill. O'Connell v. Kelly, 114 Mass. 97. Alden v. Wilkins, 117 Mass. 216. Cook v. Basley, 123 Mass. 396. Goldman v. Damon, 272 Mass. 302. Chute v. Cronin, 273 Mass. 471. Brooks v. Bennett, 277 Mass. 8. Barry v. Dudley, 282 Mass. 258. The bill in equity was tried together with the action at law to recover the balance due upon the mortgage note, and Davis in his answer alleged that the bank acted in bad faith and improperly conducted the foreclosure sale and had received therefrom an amount in excess of the amount of the note. The good faith and diligence of the bank in the foreclosure proceedings taken by it were thus presented for decision. Vahey v. Bigelow, 208 Mass. 89. Johnston v. Cassidy, 279 Mass. 593. Cambridge Savings Bank v. Cronin, 289 Mass. 379. Chartrand v. Newton Trust Co. 296 Mass. 317. Ross v. Vadeboncoeur, 298 Mass. 523. Atlas Mortgage Co. v. Tebaldi, 304 Mass. 554.
The account could be stated and adjudicated in the bill in equity, and a decree could be entered ordering the party found to be indebted to the other to pay the amount of such indebtedness or, if the balance was found in favor of the bank, judgment could be entered in the action at law for such balance, and a decree could then be entered dismissing the bill with costs. The plaintiff, of course, could not be credited in both the suit and the action with the items for which the bank was found to be indebted to him. Hebert v. Dewey, 191 Mass. 403. Raymond Syndicate, Inc. v. American Radio & Research Corp. 263 Mass. 147. Poorvu v. Weisberg, 286 Mass. 526.
matters to his report. We do not know what was contained in these suggestions, but a judge cannot be compelled to include in the report matters that he did not consider material in reaching a decision. The report according to the statement of the trial judge contained all the material facts found by him. There is nothing in this respect for a judicial review. Plumer v. Houghton & Dutton Co. 277 Mass. 209. Merrill v. Everett, 293 Mass. 327. The appeal is before us with not only a report of the material facts but also a full report of the evidence. The plaintiff has argued that the findings of fact are obscure unless explained by the exhibits or testimony and are incomplete as not containing facts that he submits are essential. The appeal with a full report of the evidence brings before this court not only all questions of law but all questions of fact, and this court will examine the evidence and decide the case according to its own judgment, giving due weight to the findings of the trial judge, which are not to be reversed unless plainly wrong. The evidence has been studied in the light of these familiar principles. It need not be fully summarized. A careful examination of the testimony furnishes no reason for doubting the soundness of these findings apart from the finding as to the amount due on the note which will be hereafter discussed. These findings, with the single exception just referred to, must be adopted as true.
The plaintiff admits that there was a literal compliance with the terms of the mortgage in making the foreclosure sale, but he alleges that the bank was not acting in good faith; that, having an opportunity to sell the property for $130,000, it should not have bid it in for $50,000; and that it entered into a conspiracy with the remaining defendants to sell them the property at the larger amount after the bank had become the owner. Of course, mere formal compliance with the provisions of the mortgage would not be a defence if the bank did not act in good faith or with reasonable diligence to protect the rights of the plaintiff. White v. Macarelli, 267 Mass. 596. Krassin v. Moskowitz, 275 Mass. 80. Sandler v. Silk, 292 Mass. 493.
unconscionable; that the real value of the property when conveyed to the trust on January 10, 1934, scarcely exceeded two thirds of $130,000; that there was no ready market for this property in 1933; that if there had been other advertising of the foreclosure sale in addition to the usual foreclosure notices it would not have produced an available customer; that an accurate statement as to the fair market value of the property at the time of entry and sale could not be made on account of the depressed condition of the real estate market, not only in the vicinity of the locus but throughout Boston; and that the bank was desirous of protecting its security but had no intention of depriving Davis of any rights he may have wished to exercise as mortgagor. These findings establish that the bank was acting in good faith with due diligence in foreclosing the mortgage and in becoming the owner of the property. Johnston v. Cassidy, 279 Mass. 593. Cambridge Savings Bank v. Cronin, 289 Mass. 379. Chartrand v. Newton Trust Co. 296 Mass. 317. Ross v. Vadeboncoeur, 298 Mass. 523. Atlas Mortgage Co. v. Tebaldi, 304 Mass. 554.
premises, which he did in conjunction with the other two defendants. Two of these defendants were witnesses to the entry made by the bank, and on that day the bank hired the corporation to supervise the repairs and improvements and to manage the property. It was necessary to start the repairs at once in order to have the property tenantable before the renting season closed. None of these individual defendants made any bid although some of them attended the sale. They were not prevented by the bank from bidding. While they may at the time of the sale have hoped that the bank would eventually transfer the property to the trust, yet the bank at that time had not indicated that it would do so and had made no arrangement whatever with them concerning any subsequent action that it might take in regard to the disposition of the property. They never intended to purchase the property at the foreclosure sale. They did not acquire titles by foreclosure sales but dealt with the banks themselves in reference to such properties as the banks might be willing to convey to the trust. See Skolnick v. East Boston Savings Bank, 307 Mass. 1. The judge found that there was no available market for this property at the time of the foreclosure sale or during the subsequent months; that prior to December, 1933, the bank was under no legal or moral obligation to transfer the property to the individual defendants or to the trust; that on December 22, 1933, or shortly thereafter, an agreement was made by the bank to convey the property to the trust; that the officers of the bank and the trust, despite official votes, reports and records, considered $130,000 as a fictitious value; and that the real value "scarcely exceeded two thirds of this sum." He also found that the plaintiff had failed to show that the bank had acted in bad faith in taking possession or while in possession or in conducting the foreclosure sale or in the sale to the trust. He further found that no conspiracy had been shown between the officers or agents of the bank and any of the other defendants. None of these findings can be said to be plainly wrong. They negative the material allegations in the bill and similar averments in the answer in the action at law.
The bank is not shown to have violated any duty that it owed the plaintiff in the proceedings taken to foreclose its mortgage and the subsequent sale of the mortgaged property to the trust. They dispose of the plaintiff's contention that he was entitled to charge the defendants with $130,000 as the price that the bank received or ought to have received at the foreclosure sale. Antoine v. Commonwealth Trust Co. 266 Mass. 202. Cambridge Savings Bank v. Cronin, 289 Mass. 379. Gordon v. Harris, 290 Mass. 482. DesLauries v. Shea, 300 Mass. 30. Fleming v. Dane, 304 Mass. 46.
It follows from what has been said that the interest that the plaintiff had in the property passed to the bank when it became owner of the property. The bank was not required to hold the property. It was authorized by G. L. (Ter. Ed.) c. 168, Section 54, Twelfth, to convey the property and to take back a mortgage for the full purchase price. Even if the conveyance to the trust ought not to have been based upon a valuation that was fifty per cent in excess of the true value of the property, yet no harm therefrom resulted to the plaintiff. No rights accrued to him from the manner in which the bank dealt with its own property. McCarthy v. Simon, 247 Mass. 514. Steiner v. Schrank, 253 Mass. 551. Johnston v. Cassidy, 279 Mass. 593. Gordon v. Harris, 290 Mass. 482.
The bank, having entered and taken possession of the plaintiff's property and having sold it in foreclosure, became obligated to account for all moneys received and expenses incurred by it in dealing with the mortgaged premises. G. L. (Ter. Ed.) c. 244, Section 20. Hood v. Adams, 124 Mass. 481. Dennett v. Perkins, 214 Mass. 449. Weiner v. Slovin, 270 Mass. 392. The parties were entitled to have the account stated and the balance due from one party to the other determined. Chopelas v. Chopelas, 294 Mass. 327. Dow v. Brookline Trust Co. 308 Mass. 90. Milbank v. J. C. Littlefield, Inc. 310 Mass. 55.
At the trial counsel agreed, apparently with the approval of the judge, that if the plaintiff is entitled to an accounting such an accounting will be had at some later stage of the proceeding when each item of the account may be considered.
the time of the entry, but not for plumbing, plastering or interior renovations such as painting or papering, or for outside repairs such as sand blasting or painting. The bank should be allowed for any other necessary expenses in the care and management of the property. It is also entitled to be credited for all amounts expended prior to the foreclosure sale for taxes and in discharging tax titles to the property for which it has not been reimbursed by the plaintiff. The balance found due to the bank is to bear interest from November 14, 1933. G. L. (Ter. Ed.) c. 244, Section 20. Woodward v. Phillips, 14 Gray 132. Bangs v. Fallon, 179 Mass. 77. Fletcher v. Bass River Savings Bank, 182 Mass. 5. O'Brien v. McNeil, 199 Mass. 164. Gilpin v. Brooks, 226 Mass. 322. Beal v. Attleborough Savings Bank, 248 Mass. 342. City Institution for Savings v. Kelil, 262 Mass. 302. Shanberg v. Automobile Ins. Co. 285 Mass. 316. Wiggin v. Lowell Five Cent Savings Bank, 299 Mass. 518. Altobelli v. Montesi, 300 Mass. 396. Natick Five Cents Savings Bank v. Bailey, 307 Mass. 500.
The final decree is reversed. The plaintiff has sought an accounting and further hearings must be had to settle the account. A decree is to be entered stating the account even though a balance may be found due to the bank. Chopelas v. Chopelas, 294 Mass. 327. On this appeal in the equity suit the action at law is not before us. Of course, the Superior Court will order such judgment in the action at law as will be consistent with the final decree in this suit.

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