Duff v. U.S. Trust Co.

• Decision Date: 09 February 1951
• Citation: 327 Mass. 17,97 N.E.2d 189
• Parties: DUFF et al. v. UNITED STATES TRUST CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 189

97 N.E.2d 189

327 Mass. 17

DUFF et al. v. UNITED STATES TRUST CO. et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Jan. 2, 1951.

Decided Feb. 9, 1951.

J. M. Bashaw, A. J. Slater, all of Boston, for plaintiff.

J. M. Graham, Boston, for defendant.

Before QUA, C. J., and LUMMUS, WILKINS, SPALDING and WILLIAMS, JJ.

LUMMUS, Justice.

The facts as reported by the master are substantially as follows. Shortly before August 21, 1947, Reidar L. Norstern and his wife, owning a tract of nearly thirteen acres in Wakefield, divided it into forty-seven house lots, on each of which they proposed to build a house. They negotiated with the defendant United States Trust Company, hereinafter called the bank. The bank agreed to lend the Norsterns $215,000, to be advanced as needed for the construction of the forty-seven houses. The bank orally agreed to release each lot as sold, if the buyer would place a new mortgage with the bank, insured with the Federal Housing Administration.

On August 21, 1947, the Norsterns mortgaged the entire tract to the bank for $100,000, and on October 15, 1947, they gave the bank another mortgage for $115,000, covering twenty-five of the forty-seven lots. The total of $215,000 proved insufficient to build the houses, and the bank had to make further loans to the Norsterns. On December 3, 1947, the bank lent $28,500 on a mortgage of five new lots. On December 8, 1947, it lent $30,000 on a chattel mortgage covering building materials located on the tract but not annexed to the realty. On May 17, 1948, it lent $65,000 on a mortgage covering the twenty-five lots and the five lots above mentioned. It also lent $19,200 as unsecured loans. All the notes accompanying the foregoing loans were payable on demand.

The total of the advances made before May, 1948, was $292,700. On May 17, 1948, the Norsterns and the bank entered into a written agreement, which recited that the Norsterns had given the bank four notes totalling $308,500 secured by mortgages on the tract, and the bank agreed to advance to the Norsterns a balance of $65,000 over the $243,500 already advanced, said balance to be advanced upon the approval of the bank's representative as needed.

On June 21, 1948, the Norsterns made an assignment for the benefit of their creditors to three assignees, and abandoned work on the houses. Under the agreement of May 17, 1948, the assignment made all the loans due and payable, and gave the bank the right to take possession and foreclose, and gave it title to all the building materials on or near the premises. On August 31, 1948, the bank and the assignees made an agreement, by which the bank agreed to advance not over $65,000 more to complete the houses, in accordance with the mortgage of May 17, 1948, and one Max Orlick was appointed agent of the assignees to complete the houses. The bank agreed to release any lot sold on receipt of the full purchase price. It was agreed that any advances in excess of $65,000 on the mortgage of May 17, 1948, should be added to that mortgage. Such excess advances amounted to $10,113.59.

Max Orlick finished the houses. On February 19, 1949, the bank foreclosed the $100,000 mortgage and bought in the tract at the foreclosure sale. On April 16, 1948, the United States Collector of Internal Revenue levied a lien on the property of the Norsterns for nearly $10,000 in taxes. On Jan. 21, 1949, a mechanic's lien for nearly $1,000 was recorded by F. Feldman & Sons Lumber Company. After the foreclosure the bank discharged attachments aggregating more than $40,000.

Nineteen lots were sold by the Norsterns, partial releases were given by the bank, and a new mortgage on the particular lot sold was taken by the bank. The bank has advanced all the money called for by the notes and mortgages and $10,113.59 more. It holds title to twenty-five houses under its foreclosure, which have cost it $266,271.09, and has mortgages covering five vacant lots outside the original project.

Norstern was not the bank's agent or straw in the project. The bank was only a money lender.

The plaintiff John M. Duff, on September 17, 1947, entered into a written agreement with the Norsterns to buy lot 28 for $7,700 of which $800 was paid as a deposit. The Federal Housing Administration agreed to insure a $6,900 mortgage on the house. The house was not completed, and the bank gained title by foreclosure. But on December 20, 1948, Duff without the knowledge or permission of the bank or Orlick moved in and holds the house. Similarly, the plaintiff Shute, who agreed to buy lot 13, for a like price, never got the house, and the bank gained title by foreclosure. About July 26, 1949, Shute moved into the house without the knowledge or consent of the bank, and still holds it.

The other individual plaintiffs contracted with the Norsterns to buy individual lots. They paid deposits, and were to give...