Bennett v. Worcester County Nat. Bank
| Decision Date | 04 January 1966 |
| Citation | 213 N.E.2d 254,350 Mass. 64 |
| Parties | Joseph E. BENNETT et al., Trustees, v. WORCESTER COUNTY NATIONAL BANK. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Harold M. Linsky, Boston, for plaintiffs.
Henry C. Horner, Worcester, for defendant.
Before WILKINS, C. J., and SPALDING, WHITTEMORE, KIRK and SPIEGEL, JJ.
This is an action of contract in which the plaintiffs as second mortgagees seek to recover the sum of $12,600 out of the proceeds of a mortgage foreclosure sale by the defendant, the first mortgagee. The case was submitted on a statement of agreed facts and the judge ordered judgment for the defendant. The plaintiffs appealed.
The defendant (Worcester County National Bank, hereinafter called the bank) held a first mortgage on a fifteen acre lot in Spencer owned by the Azniv Realty Trust (Azniv). The mortgage was executed in February of 1962 to secure the payment on August 1, 1962, of a $155,000 note contemporaneously delivered to the bank by Azniv. The mortgage was 'also to secure the performance of all the terms and conditions of a certain Construction Loan Agreement of even date' between Azniv and the bank, any breach of the agreement to constitute a breach of the mortgage.
The construction loan agreement contained these provisions: Azniv was to construct a shopping plaza on the land described in the mortgage according to the plans submitted to the bank. Azniv agreed that the workmanship and materials were to be of the best quality and to the bank's satisfaction. 'In the event the contractor fails to complete the construction of the building within a reasonable time, Bank shall thereupon have the right but shall not be bound to take immediate possession of said premises and proceed to complete the building * * * and Bank is authorized to charge all money expended for said completion against any payments not already advanced.' A breach of any of the covenants or conditions of the agreement by Azniv would release the bank from its obligations. In this event the bank would be authorized to exercise the power of sale contained in the mortgage. The real estate involved was not to be further encumbered except with the written consent of the bank.
In May of 1962, Azniv gave a second mortgage on the property to the plaintiffs to secure a loan of $10,000; the mortgage, which was recorded, was explicitly made subject to the bank's mortgage. The bank's consent to this transaction was neither sought nor granted.
In July of 1962, Azniv became financially unable to complete the construction of the plaza. After making several demands for performance, the bank decided to foreclose, and filed a petition in court for this purpose on August 8, 1962. At this point, $133,608.93 had been advanced under the construction loan agreement.
The bank advertised the sale of the land and the uncompleted building, and the best offer it received was $95,000. Rejecting this offer, the bank completed the building itself at an expense of $60,643.51. The property was subsequently sold by foreclosure for $186,000. After deducting the amounts advanced to Azniv under the note, the completion expense, interest and other expenses, the bank had a net loss of $14,290.22. No part of the proceeds of the sale was...
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