Danca v. Taunton Sav. Bank

• Decision Date: 07 January 1982
• Citation: 429 N.E.2d 1129,385 Mass. 1
• Parties: Joseph DANCA et al. v. TAUNTON SAVINGS BANK et al. (and a companion case).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1129

429 N.E.2d 1129

385 Mass. 1

Joseph DANCA et al. v. TAUNTON SAVINGS BANK et al. (and a companion case).

Supreme Judicial Court of Massachusetts, Bristol.

Argued Sept. 16, 1981.

Decided Jan. 7, 1982.

Ben D. Lewis, Taunton, for plaintiffs.

Before HENNESSEY, C. J., and WILKINS, LIACOS, ABRAMS and LYNCH, JJ.

LYNCH, Justice.

This case involves two different actions. The first action was begun by Joseph and Janice Danca ¹ on April 17, 1976, against the Taunton Savings Bank and Joseph J. Crowninshield. ² In their amended complaint, the plaintiffs stated causes of action against the defendant bank based on negligence, fraud, and violations of G.L. c. 93A, § 2, arising from the defendant bank's handling of a mortgage loan on property belonging to the plaintiffs in Raynham. On September 29, 1978, after a jury-waived trial, the Superior Court judge entered judgment for the plaintiffs with accompanying findings of fact and conclusions of law. The judge concluded that the defendant bank had been negligent and had wilfully violated G.L. c. 93A. The plaintiffs were awarded damages in the amount of $21,841.26 under the treble damage provision of G.L. c. 93A, § 9(3), plus counsel fees under § 9(4).

The second action is a suit for a deficiency judgment after a foreclosure sale filed by the Taunton Savings Bank against Joseph Danca and Janice Danca Kutosh on February 4, 1978. This action was heard together with the Dancas' claims against the bank and a judgment was rendered, also on September 29, 1978, dismissing the action. ³ There were appeals from both judgments and the appeals were transferred to this court on our own motion. We remand the cases to the Superior Court for further proceedings not inconsistent with this opinion.

These actions arose from the plaintiffs' purchase of Lot 8 of Country Squire Estates on Leonard Street, Raynham (Lot 8). On or about July 28, 1973, Lot 8 was sold by its then owner, HOS Engineering Associates Inc., to one Robert Seemann. Robert Seemann operated a real estate partnership with his father, George Seemann, who was a member of the board of investment of the defendant bank. Among other duties, the members of this board inspected properties for which loan applications had been made and voted on whether to grant loans.

During July, 1973, an application for a permit to build a home on Lot 8 was submitted to the Raynham building department. The application was accompanied by a plan drawn by HOS Engineering Associates, Inc., showing the proposed location of the home. The plan indicated compliance with Raynham's zoning by-law.

On December 6, 1973, Robert Seemann sold Lot 8 to Joseph J. Crowninshield, d/b/a Shannon Builders, Inc. In 1974, Raymond Tedeschi, a real estate broker in the employ of Hutchinson Co., Inc., showed Lot 8 to the plaintiffs, Joseph and Janice Danca. The plaintiffs agreed to purchase Lot 8 and the house on it from the builder, Joseph J. Crowninshield, for $35,900.00. ⁴

On September 6, 1974, the plaintiffs filled out an application for a mortgage loan of $28,900.00 with the bank. They were told by the bank's mortgage officer and vice-president, Belcher W. Stanley, Jr., that the bank required a plot plan in order to verify that the location of the house on the lot complied with the town's zoning by-law. The plaintiffs were charged twenty-five dollars for this plan. The bank ordered the plan on September 20, 1974, from Hayward-Boynton & Williams Inc., registered engineers, and the plan was hand delivered to the bank ten days later.

At the closing on October 4, 1974, the plaintiffs asked Stanley for a copy of the plot plan to satisfy themselves that the house was correctly located on Lot 8. Stanley responded that the plan was not in the file but would be sent to the plaintiffs. When the plot plan was received by the plaintiffs on October 20, 1974, they discovered that it disclosed violations of Raynham's zoning by-law. The location of the house violated both the front and side yard set back requirements of the by-law. The trial judge found that the plaintiffs would not have purchased the property if they had had this information at the closing.

After discovering the defects disclosed by the plot plan, the plaintiffs went to see bank officials. Efforts to resolve the problem proved fruitless and the plaintiffs moved out of the house on December 20, 1975.

The plaintiffs attempted for two years to resolve their differences with the bank but no resolution was reached. Through their attorney the plaintiffs sent several written demands for relief to the bank, but the bank never made a tender of settlement under G.L. c. 93A, § 9(3). The judge found the bank negligent in failing to disclose to the plaintiffs at the closing the plot plan it had in its possession. He also found a wilful violation of G.L. c. 93A. The basic damages found by the judge, before trebling, consisted of: the cash down payment and amounts paid on the mortgage (including principal, interest and taxes) through December 16, 1975; costs associated with the closing; moving expenses; money expended in decorating, landscaping, and insuring the home; and the cost of installing telephones. From total basic damages of $9,980.42 the judge deducted $2,700.00 representing the value of the plaintiffs' occupancy of the house, for net actual damage of $7,280.42.

The bank made a peaceful entry onto Lot 8 in January of 1976, foreclosed, and sold the property at a foreclosure sale pursuant to a power of sale contained in the mortgage agreement. The bank purchased the property at the sale for $21,000.00. Thereafter the bank sought a zoning variance from the Raynham board of appeals in order to sell the house as it was located. When this variance was denied, the bank sold the property for $22,000.00 to a contractor who was able to relocate the house and thus make it saleable.

The plaintiffs paid the mortgage installments promptly until it was clear settlement was impossible. All through the foreclosure proceeding the bank knew that it had failed to disclose the improper location of the house to the plaintiffs and that the plaintiffs would be unable to protect themselves from loss by reselling the property.

1. Applicability of G.L. c. 93A. In Murphy v. Charlestown Sav. Bank, --- Mass. ---, Mass.Adv.Sh. (1980) 1323, 405 N.E.2d 954, this court held that a conventional home loan mortgagor was not within the class of plaintiffs entitled to pursue a civil remedy under the provisions of G.L. c. 93A, § 9, in effect prior to October 18, 1979. Under that statute only a person who "purchase(d) or lease(d) goods, services or property, real or personal primarily for personal, family or household purposes" could bring a private suit for violations of § 2 of c. 93 A. In Murphy the court rejected the plaintiffs' argument that a mortgagor is a "purchaser" of the use of money, noting that the plaintiffs failed to cite any authority for such a characterization. Id. at ---, at 1328-1330, 405 N.E.2d 954. Furthermore, upon a review of "(a)nalogous statutory material" (specifically, provisions of the Uniform Commercial Code, the Federal Consumer Protection Act, and its Massachusetts counterpart, G.L. c. 140C) the court found no support for the plaintiffs' contention. Id. at --- - ---, at 1331-1334, 405 N.E.2d 954. Rather, this review disclosed a widespread assumption that there was a distinction between a "loan" and a "sale" or "purchase." Under these circumstances, home loan mortgagors were not "purchasers of property" under c. 93A, § 9(1).

The plaintiffs here seek to distinguish the Murphy decision on the ground that the defendant Taunton Savings Bank also held the construction loan on the house purchased by the plaintiffs and thus arguably had a special interest in securing a buyer for the property so that the builder would be able to pay off the construction mortgage. This distinction is without legal significance. The holding in Murphy was that a home mortgage is not a "purchase of property." It is hard to see how this conclusion could be changed by the additional fact of the mortgagee bank's involvement as a construction lender. The plaintiffs also argue, however, that they qualify as "purchasers" of the plot plan because their cause of action under c. 93A is based upon bank misconduct in procuring the plot plan rather than misconduct in connection with the loan transaction itself or the subsequent foreclosure. The Murphy opinion did not foreclose this argument. Murphy, supra at --- - --- n.12, at 1330-1331 n.12, 405 N.E.2d 954.

At first glance, the purchase of a plot plan in connection with a mortgage transaction might be regarded as meeting the requirements of § 9. Upon reflection, however, we do not think that the essential character of the transaction is so changed that the loan of money secured by a real estate mortgage becomes subject to c. 93A simply because the mortgagee bank requires the mortgagor to produce a plot plan and arranges for the preparation and procurement of that plan at the mortgagor's expense but without profit to the bank. The plaintiffs concede that the plot plan purchase was inextricably interwoven with the mortgage loan but seek to characterize the purchase of the plot plan as a condition precedent to the completion of the mortgage loan. This argument ignores the role of the bank in the plot plan purchase. The bank neither prepared the plan nor profited from its sale to the plaintiffs. It required that a plan be furnished and took steps to ensure that the plan would be available at the time of closing, passing the twenty-five dollar charge on to its mortgagors. In these circumstances it would appear that the bank was acting as agent for its mortgagors in the purchase of the plot plan. The judge's findings made clear that the twenty-five dollar charge for the preparation of the plan would go to the engineers who prepared the plan and not to the bank. The purchaser and seller...