Lamson & Co. v. Abrams

• Citation: 305 Mass. 238,25 N.E.2d 374
• Court: United States State Supreme Judicial Court of Massachusetts
• Decision Date: 16 February 1940
• Parties: LAMSON & CO., (INCORPORATED) v. LOUIS B. ABRAMS.

305 Mass. 238

25 N.E.2d 374

LAMSON & CO., (INCORPORATED) v. LOUIS B. ABRAMS.

Supreme Judicial Court of Massachusetts, Suffolk.

February 16, 1940

November 8, 1939.

Present: FIELD, C.

J., DONAHUE LUMMUS, DOLAN, & RONAN, JJ.

Mortgage, Of real estate: assignment, foreclosure. Landlord and Tenant, Rent Termination of tenancy.

A second mortgagee of real estate in possession, to whom a tenant had attorned was entitled to rent of the mortgaged premises, and not one who had been the duly recorded assignee of a first mortgage thereon and as pledgor had assigned the first mortgage as security to the payee of a collateral security note and thereafter had purported to make an entry to foreclose the first mortgage, although the assignment to the pledgee was unrecorded, the collateral security note provided that the pledgor was required to "take all necessary steps to . . . realize upon all collateral," and the pledgee reassigned the first mortgage to the pledgor after such purported entry but before the period for which the second mortgagee claimed rent and before the tenant on the pledgor's demand had paid the pledgor part of such rent.

CONTRACT. Writ in the Municipal Court of the City of Boston dated August 16, 1938.

There was a finding for the defendant by Zottoli, J. A report to the Appellate Division was ordered dismissed. The plaintiff appealed.

C. A. Warren & N.

R. Voorhis, for the plaintiff, submitted a brief.

No argument nor brief for the defendant.

RONAN, J. This is an action of contract to recover rent for the two months ending September 14, 1938. The plaintiff, the holder of a second mortgage on the premises, a portion of which was occupied by the defendant, took possession for breach of the conditions of the mortgage on April 16, 1938; and the defendant, after notice from the plaintiff, attorned to and agreed to pay the rent thereafter, in advance, to the plaintiff and did make all such payments up to the month and including the month ending July 14, 1938. On June 28, 1938 the Exchange Mortgage Loan Company (hereinafter called the loan company), purporting to be the holder of a first mortgage, took possession of the said premises, and in compliance with a demand made upon him the defendant, on August 19, 1938, paid the rent for the month ending August 14, 1938, to this company. This first mortgage (hereinafter called the Brown mortgage) was given to the Exchange Trust Company, which duly assigned it on November 29, 1933, to the loan company. The assignment was properly recorded. The loan company borrowed a large sum of money from the Reconstruction Finance Corporation (hereinafter called the corporation), giving to the latter its promissory note, the payment of which was secured by certain mortgages including the Brown mortgage. These mortgages, together with their respective notes (each bearing the indorsement of the loan company) and an executed assignment for each mortgage, were delivered with the note to the corporation. The loan company took possession of the Brown premises on June 28, 1938. The corporation on July 14, 1938, assigned the Brown mortgage to the loan company and delivered the assignment and the mortgage note to the latter. The assignment of this mortgage to the corporation and that to the loan company were never recorded. The trial judge found for the defendant. The Appellate Division ordered the report dismissed and the plaintiff appealed.

The plaintiff contends that the loan company did not have the legal title to the Brown mortgage when it took possession of the premises on June 28, 1938, and that it could not exercise the rights of a mortgagee while the mortgage remained assigned and pledged to the corporation.

The judge by his treatment of the plaintiff's requests for rulings found, in substance and effect, that the loan company as holder of the first mortgage demanded the rent from the defendant, and that the defendant attorned to the loan company to which on August 19, 1938, he paid the rent for the month ending August 14, 1938. He further found that the Brown mortgage was not assigned to the corporation but that the transaction amounted to a pledge and that there was no breach of the conditions of the pledge. He refused to grant the plaintiff's request that, upon the admitted facts, the plaintiff was entitled to a finding.

The various written instruments defining the terms and condition under which a large sum of money was lent by one corporation to another, setting forth the receipt by the lender of a number of mortgages, together with the notes that they secured, which were to be held and applied in the manner and for the purpose designated in the note evidencing the loan, and conferring certain rights and imposing prescribed obligations in carrying out the arrangement into which they had entered, must be construed as parts of a single transaction. Skilton v. R. H. Long Cadillac La Salle Co. 265 Mass. 595. Baker v. James, 280 Mass. 43 . Union Market National Bank of Watertown v. Nonantum Investment Co. 291 Mass. 439 .

The promissory note given by the loan company to the corporation authorized the latter upon a default, of the former to sell, assign and deliver all or any of the collateral at public or private sale and to become the purchaser thereof. The loan company assigned the Brown mortgage to the corporation, together with the note and claim secured thereby, by an instrument under seal and in the statutory form. G.L. (Ter. Ed.) c. 183, Section 8. Such an instrument did not merely transfer a chose in action but conveyed a legal estate in the mortgaged premises. Gould v. Newman, 6 Mass. 239. Hills v. Eliot, 12 Mass. 26 .

Barnes v. Boardman, 149 Mass. 106 . Holmes v. Turner's Falls Co. 150 Mass. 535, 550. Mulcahy v. Fenwick, 161 Mass. 164 . Nathan Miller & Sons, Ltd. v. Blinn, 219 Mass. 266 . Kaufman v. Federal National Bank of Boston, 287 Mass. 97. The loan company then conveyed to the corporation all its interest in the note, the mortgage and the land described therein, excepting only the beneficial interest that remained after furnishing the mortgage as collateral security for the payment of its note. The corporation had the legal title and upon a breach of the mortgage it could enter and take possession of the mortgaged premises and foreclose the mortgage in accordance with G.L. (Ter. Ed.) c. 244, Section 1, Brown v. Tyler, 8 Gray, 135; Montague v. Boston & Albany Railroad, 124 Mass. 242 , 245; Stevens v. Dedham Institution for Savings, 129 Mass. 547 , or it could foreclose the mortgage by exercising the power of sale that it contained and become the purchaser of the premises. The equities of the loan company would be cut off by the sale and the purchaser would become the owner of the property. Jennings v. Wyzanski, 188 Mass. 285 . Seder v. Gould, 274 Mass. 223 . Richmond v. Charlestown Five Cents Savings Bank, 283 Mass. 380 .

With such an amplitude of power over the possession and disposition of the mortgaged realty, inherent in the holder of the mortgage by virtue of the assignment to it, it is difficult to see the existence of any such power remaining in the assignor. It was decided long ago in Gould v. Newman, 6 Mass. 239 that the assignor could not maintain foreclosure proceedings and obtain a conditional judgment. In United States Trust Co. v. Commonwealth, 245 Mass. 75 , 79, it was said that "The assignee of a mortgage by duly recorded assignment, who is also indorsee of the note secured thereby, holding them as collateral, has the same rights, interests and benefits as the original mortgagee as to all persons other than his assignor and pledgor. He is the holder of the record title. He may foreclose the mortgage and convey to the purchaser title to the land." The assignment from the loan company to the corporation was not recorded, and the mortgage continued to stand in the name of the loan company upon the record at the registry. But it has been decided in MacFarlane v. Thompson, 241 Mass. 486 , that a mortgagee who has assigned the mortgage as collateral security for the payment of a debt, which assignment was not recorded, could not acquire possession of the premises or foreclose the mortgage, but that the holder of the unrecorded assignment was entitled to take possession and to foreclose by sale. The corporation was the actual holder of the mortgage on June 28, 1938, when the loan company entered upon the premises and filed a certificate of entry. G.L. (Ter. Ed.) c. 244, Section 2. It is apparent that while the assignment was held by the corporation the loan company had no authority to take possession under the mortgage. It has frequently been held that possession taken by a mortgagee that is ineffectual for the purpose of foreclosure may be valid for the purpose of collecting the rent. Stone v. Patterson, 19 Pick. 476. Welch v. Adams, 1 Met. 494. Shepard v. Richards, 2 Gray, 424. Cook v. Johnson, 121 Mass. 326 . But those decisions do not help the defendant because in those cases the mortgagee had the title to the mortgage while in the case at bar the loan company had no title to the mortgage. Although the mortgage was reassigned prior to the period for which the rent is claimed, there was no evidence that the loan company made any entry subsequently to the reassignment or exercised any real possession over the land. The mortgagee, after a breach of the conditions of the mortgage, is not entitled to receive the rent without an entry under the mortgage and notice to the tenant to pay him the rent, Field v. Swan, 10 Met. 112, 114; Tilden v. Greenwood, 149 Mass. 567 , 569; Elmore v. Symonds, 183 Mass. 321 , 323, and the tenant does not become liable to the mortgagee unless in order to avoid an eviction he attorns to the mortgagee and agrees to pay...