Consumers Sav. Bank v. Coven

• Decision Date: 01 November 1979
• Parties: CONSUMERS SAVINGS BANK v. Irving J. COVEN et al. individually and as trustees; Gregory M. Bullock et al. 1 third party defendants.
• Court: Appeals Court of Massachusetts

Page 1331

395 N.E.2d 1331

8 Mass.App.Ct. 594

CONSUMERS SAVINGS BANK v. Irving J. COVEN et al. individually and as trustees;

Gregory M. Bullock et al. ¹ third party defendants.

Appeals Court of Massachusetts, Worcester.

Argued Sept. 12, 1979.

Decided Nov. 1, 1979.

Milton H. Raphaelson, Worcester, for Irving J. Coven and another.

John W. Connors, Worcester, pro se, intervener.

Kevin T. Byrne, Worcester, for William H. Matthews.

William W. Hays, Worcester, for plaintiff.

Robert Martin, Worcester, for Stanley S. Labovitz.

Before HALE, C. J., and GRANT and KASS, JJ.

KASS, Justice.

In order to follow the proceedings which have come up on appeal it is helpful first to rehearse those facts which the parties do not dispute.

On October 22, 1971, Irving J. Coven and Jean Coven, as trustees of Maynard Gates Realty Trust and individually (the Covens) borrowed $70,000 from Consumers Savings Bank (the bank). The note which evidenced this loan was secured by a mortgage of premises at 4-6 Gates Street, Worcester. On or about August 1, 1973, the Covens sold the property to Gregory M. Bullock and Patricia A. Bullock (the Bullocks), subject to the mortgage and with an agreement by the Bullocks to pay the same which they evidenced by executing a guaranty to the bank for the then unpaid principal balance of the mortgage note. The Bullocks soon fell into default, a circumstance of which the bank advised the Covens in July, 1975. The Covens asked one William H. Matthews, a real estate broker, for his help in the matter. On July 30, 1975, Matthews and his partner, Stanley S. Labovitz, accepted a deed of the Gates Street premises from the Bullocks. That deed, which was drawn in the office of Labovitz, who was also a lawyer, recited a consideration of less than $100, contained no reference to the mortgage to the bank, and no undertaking by the grantees that they assumed and agreed to pay the mortgage.

Matthews and Labovitz made a further transfer of the property three and one half months later to persons named Sattler and Simms by a deed which contained a recitation that the conveyance was "(s)ubject to mortgage to Consumers Savings Bank in the amount of.$61,500 which the grantees assume to pay." Defaults in the original mortgage note were not cured, and the bank made entry on the premises and began foreclosure proceedings on January 28, 1976.

The foreclosure sale resulted in a deficiency, and the bank brought an action against the Covens and the Bullocks, which resulted in the entry of a judgment against the Covens in the amount of $26,364.44. The Covens appealed from that judgment but, at the time of the argument of the appeal, filed a motion to dismiss the appeal, which has been allowed.

There remain appeals, however, arising out of certain third party actions. The Covens filed a third party complaint against the Bullocks and against Matthews and Labovitz, asserting that these parties undertook to pay the mortgage note to the bank. As to the Bullocks, the claim became academic because it was discharged in bankruptcy on April 8, 1977. On June 13, 1977, his motion to intervene having been allowed, the trustee in bankruptcy of the Bullocks filed a cross claim against Matthews and Labovitz. Motions for summary judgment were allowed in favor of Matthews and Labovitz on the claim of the Covens and on the claim of the trustee in bankruptcy.

What we have left before us is an appeal by the Covens from the judgment entered against them on their third party claim against Matthews and Labovitz, and an appeal by the trustee in bankruptcy from the judgment against him on his claim against Matthews and Labovitz.

1. The Covens' claim against Matthews and Labovitz. It will be recalled that the deed from the Bullocks to Matthews and Labovitz was entirely silent on the subject of assumption of the mortgage by the grantee. That deed, therefore, falls within application of the familiar rule that where land is conveyed subject to a mortgage, the grantee does not, by acceptance of the deed alone, undertake to be bound by or to pay the mortgage debt. There must be words importing that the grantee will pay the debt to make him personally liable. Shepherd v. May, 115 U.S. 505, 510, 6 S.Ct. 119, 29 L.Ed. 456 (1885). Fiske v. Tolman, 124 Mass. 254, 256 (1878). Phillips v. Vorenberg, 259 Mass. 46, 70, 156 N.E. 61 (1927). Indeed, an obligation by a grantee to assume and agree to pay a mortgage debt is not lightly to be implied where the deed contains no such recitation. Brockton Sav. Bank v. Shapiro, 311 Mass. 695, 699, 42 N.E.2d 826 (1942).

However, notwithstanding the absence of an assumption clause in the deed to Matthews and Labovitz, it was open to the Covens to overcome the force of the general rule through parol or other evidence tending to prove that Matthews and Labovitz had, in fact, assumed the mortgage debt which was secured by the property to which they had taken title. Drury v. Tremont Improvement Co., 13 Allen 168, 171 (1866). McRae v. Pope, 311 Mass. 500, 504-505, 42 N.E.2d 261 (1942). Osborne, Mortgages, 2d ed. § 256 (1970).

When the judge below allowed the motion for summary judgment by Matthews and Labovitz, he relied on Mellen v. Whipple, 1 Gray 317, 321 (1854); i. e., the Covens were third party beneficiaries ² of the alleged promise by Matthews and Labovitz to pay the mortgage debt to the bank, and, as such, had no right of action against the promisor. The case of Choate, Hall & Stewart v. SCA Serv., Inc., --- Mass. ---, --- - ---, 392 N.E.2d 1045 (1979), ^A which has since overruled much of what was left of Mellen v. Whipple, had not yet been decided. Under the principles announced in Choate, Hall & Stewart, the Covens, as creditor beneficiaries, could maintain a cause of action against Matthews and Labovitz.

Summary judgment was properly granted, however, for other reasons. We have examined the affidavits of Matthews and of Labovitz, their depositions, and the affidavit of Gregory Bullock. Matthews and Labovitz assert unwaveringly that, indeed, they did not assume or intend to assume the mortgage indebtedness on the property. Bullock in his affidavit says no more than that he was told by Matthews he would be taken "off the hook," that he did not have the services of a lawyer in connection with disposition of the property, and that he did not "know or dream" that...