Davis v. Newburyport Five Cents Sav. Bank

• Decision Date: 02 April 1942
• Citation: 311 Mass. 377,41 N.E.2d 188
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: HOWARD CLARK DAVIS v. NEWBURYPORT FIVE CENTS SAVINGS BANK & others.

311 Mass. 377

41 N.E.2d 188

HOWARD CLARK DAVIS v. NEWBURYPORT FIVE CENTS SAVINGS BANK & others.

Supreme Judicial Court of Massachusetts, Essex.

April 2, 1942

March 2, 1942.

Present: FIELD, C.

J., DONAHUE, QUA & RONAN, JJ.

Mortgage, Of real estate: foreclosure, accounting after foreclosure, accounting by mortgagee in possession. Equity Jurisdiction, Accounting.

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.

Averments of the amended bill were in substance that in 1926 the plaintiff gave the bank his note for $100,000 secured by a mortgage on real estate numbered 376-386 Newbury Street in Boston; that he paid $10,000 to the bank on account of principal in July 1929, and paid all interest until January, 1932; that during a period approximately from August to October, 1933, "and for some time thereafter," he was seriously ill, incapable of attending to any business matters or of studying legal advertising notices; that on or before August 17, 1933, "the defendants or some of them conspired among themselves to take advantage of" "his illness and to do the things hereinafter alleged"; that on that date the bank entered into possession under the mortgage in the presence of Mahony and Dyer; that Ward, Mahony and Dyer thereafter with the assent and knowledge of the bank took possession and charge of the property, received income therefrom, and converted to their own use some or all of such income; that prior to October 27, 1933, "Ward, Mahony and Dyer agreed with the bank and with one another that they or some of them would buy the property for $130,000 or more and that the bank would lend them the funds wherewith to make the purchase"; that the defendants thereupon planned to prevent the plaintiff "from receiving any profit from such purchase; to manipulate the proposed transaction in such manner that the bank should obtain the profit that would rightfully belong to" the plaintiff, and that "the bank should even threaten to sue" the plaintiff "for an alleged deficiency"; that on October 27, 1933, "the defendants went through the form of foreclosing the mortgage by a purported sale"; that they all knew on that date that a fair value of the property was not less than $130,000 and that Ward, Mahony and Dyer were on that date willing to pay that amount for it; that these three or some of them were present at the foreclosure sale but by pre-arrangement with the bank refrained from making any bid in excess of $50,000; that the bank bid $50,000 and was declared the purchaser; that the plaintiff "did not receive, either from the bank or from any other source, actual notice that the foreclosure was to take place, and did not know until substantially later that it had taken place"; that thereafter the bank "pursuant to its prior agreement with" the individual defendants "lent to Ward and Mahony $130,000 or more, sold the property" to them

"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.

RONAN, J. Davis obtained a loan of $100,000 from the

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.

The plaintiff contends that he is entitled to an accounting in which he should be credited with $130,000 as the 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...