Egbert v. Freedom Federal Sav. and Loan Ass'n

• Decision Date: 27 October 1982
• Citation: 14 Mass.App.Ct. 383,440 N.E.2d 22
• Parties: Katherine A. EGBERT et al., 1 trustees, v. FREEDOM FEDERAL SAVINGS AND LOAN ASSOCIATION.
• Court: Appeals Court of Massachusetts

Page 22

440 N.E.2d 22

14 Mass.App.Ct. 383

Katherine A. EGBERT et al., ¹ trustees, v. FREEDOM FEDERAL SAVINGS AND LOAN ASSOCIATION.

Appeals Court of Massachusetts Suffolk.

Argued May 13, 1982.

Decided Sept. 10, 1982.

Further Appellate Review Denied Oct. 27, 1982.

William Guy Ferris, Boston, for defendant.

Edward J. Barshak, Boston (Stuart R. Johnson, Boston, with him), for plaintiffs.

Before PERRETTA, DREBEN and KASS, JJ.

PERRETTA, Justice.

When the defendant mortgagee Freedom Federal Savings and Loan Association (Freedom) discovered that the plaintiff mortgagor trustees had granted a second mortgage on the realty in issue to Citicorp Real Estate, Inc. (Citicorp), in violation of what Freedom believed its rights to be under the terms of its mortgage, it exercised its option to accelerate the debt. Upon receiving notice that Freedom was electing to accelerate, the trustees obtained a discharge of the second mortgage from Citicorp and tendered the usual monthly payment. ² Freedom declined to accept the payment and notified the trustees that it had commenced an action in the Land Court incident to foreclosure proceedings. The trustees then brought the present action in the Superior Court seeking injunctive relief against the foreclosure. The judge granted a preliminary injunction, restraining Freedom from exercising its rights as a mortgagee after default. Freedom appeals pursuant to G.L. c. 231, § 118, second par. We hold that, on the record before us, injunctive relief was not warranted.

1. The Facts.

We recite the undisputed facts as they appear in the complaint, the parties' exhibits, and an affidavit filed by Freedom's senior vice-president. In 1971, the trustees granted Freedom a mortgage securing a debt in the amount of $5,400,000. Interest was set at eight and one-half percent, per annum, until August 1, 1979, after which the interest became variable. ³ The proceeds of the loan were used to construct an apartment complex which presently has a fair market value "far in excess of the balance due on the first mortgage."

Paragraph 8 of the mortgage provides, in pertinent part:

"That in the event of any change in, or relinquishment of, the Mortgagor's present legal or equitable rights, title or interest in the mortgaged premises in any manner or to any extent whatsoever by its own act or by the acts of any other parties other than by eminent domain or other governmental action or by liens, attachments or other claims not reduced to final judgment, then and in any such event the Mortgagee, at any time thereafter, may at its option and without notice declare the entire debt due and payable on demand, however the failure to exercise such option in any one instance shall not constitute a waiver of the right to exercise the same in the event of a subsequent change or relinquishment...."

The mortgage was given upon the statutory condition and the mortgagee has the statutory power of sale. The mortgage makes no provision for notice of default or a right to cure a default so as to protect the borrower from acceleration of the mortgage note and foreclosure proceedings. See, e.g., Uniform Land Transactions Act, 13 U.L.A. § 3-512 (1977).

The trustees wrote to Freedom in 1974 concerning a proposed junior mortgage to the First National Bank of Boston and the "broadly worded" paragraph 8, stating: "In view of the breadth of this language we felt it would be sound judgment to obtain the consent of [Freedom] to the creation of the mortgage, albeit junior to the mortgage held by [Freedom]." Freedom assented to the mortgage in a document labelled "Waiver And Consent To Mortgage" which recited that Freedom "hereby WAIVES in this instance only the right to declare the mortgage debt due and payable on demand as provided in paragraph 8 of said Mortgage."

Five years later the trustees again decided to give a junior mortgage, and on December 12, 1979, they wrote to Freedom explaining that a line of credit was being obtained from Citicorp in exchange for a junior mortgage on the trust property in the amount of $1,000,000. This mortgage would also secure certain preexisting notes to Citicorp. In that connection Citicorp was requesting an estoppel certificate from Freedom acknowledging that "no defaults currently exist" and certifying that Freedom would notify Citicorp if a default should occur and give Citicorp the opportunity to cure. In their letter, the trustees made reference to a recent conversation with an employee in Freedom's mortgage department who was of the opinion that the proposed mortgage to Citicorp required Freedom's assent. The trustees wrote: "Without becoming embroiled in that issue and consistent with our desire to keep you informed and involved, we are respectively [sic ] requesting your assistance in the issuance of the estoppel certificate...." In furtherance of their request, the trustees pointed out that the mortgagor's equity in the property "remains substantial," that Citicorp would also be interested in their faithful performance of the obligations under the first mortgage, and that the 1974 junior mortgage had been discharged.

Freedom's swift written response of December 14, 1979, was an emphatic refusal to assent to the granting of the mortgage to Citicorp: "Our position is that we made a twenty-five year loan at 8 1/2% interest per year secured by a first mortgage which requires, among other things, our assent to the creation of any liens secondary to our interest. For business reasons, we do not intend to assent in this instance without consideration. Furthermore, assuming we could reach agreement with you concerning such consideration, we could not agree to execute an estoppel certificate similar to the one enclosed with your letter. It is not in our best interests, (a) to assume the additional liability of informing the second mortgagee of a default, and (b) to in essence preclude our option of accelerating the indebtedness and foreclosing in the event of a default...." ⁴

It was not until some fourteen months later that Freedom discovered that the trustees had granted the second mortgage to Citicorp on December 17, 1979. On March 28, 1981, Freedom wrote to the trustees stating that it "hereby exercises its option to declare the entire debt due and payable on demand." By letter dated March 31, 1981, the trustees informed Freedom that they were "astonished" by Freedom's position, that in their view the attempt to accelerate the loan was "without legal merit," and that "[t]he language in the mortgage ... neither prohibits the placement of a junior mortgage ... nor was it ever intended to have that effect." On April 13, 1981, the trustees advised Freedom that while they regarded its actions as "frivolous and entirely without merit," they had discharged the second mortgage in the "interest of good relations." Because Freedom would have no part of the trustees' conciliatory actions, the trustees sought protection by injunctive relief.

2. Availability of Money Damages as Precluding Injunctive Relief.

We need not repeat the standards for issuing preliminary injunctions. See Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 405 N.E.2d 106 (1980). It is our function "to decide whether the [trial] court applied proper legal standards and whether there was reasonable support for its evaluation of factual questions." Id. at ---, 405 N.E.2d 106, quoting from Hochstadt v. Worcester Foundation for Experimental Biology, 545 F.2d 222, 229 (1st Cir. 1976).

As an initial matter, Freedom argues that injunctive relief is unavailable here because the allegations of wrongdoing, if proved, can be remedied by monetary damages at the time of a final judgment. Packaging Indus. Group, Inc. v. Cheney, 380 Mass. at --- n. 11, Mass.Adv.Sh. (1980) at 1197 n. 11, 405 N.E.2d 106 ("In the context of a preliminary injunction the only rights which may be irreparably lost are those not capable of vindication by a final judgment, rendered either at law or in equity"). A mortgage foreclosure involves far more than the bare necessity to borrow money. In these circumstances, the availability of money damages is properly considered in evaluating "the irreparability of the harm." Westinghouse Bdcst. Co. v. New England Patriots Football Club, Inc., 10 Mass.App. 70, ---, Mass.App.Ct.Adv.Sh. (1980) 1165, 1167, 406 N.E.2d 399 (1980). Before undertaking that evaluation, "we must first 'appraise the likelihood that various views of the facts and the law will prevail at trial.' " Ibid., quoting from Leubsdorf, The Standard for Preliminary Injunctions, 91 Harv.L.Rev. 525, 541 (1978). No testimony was heard by the trial judge, and there are no competing affidavits from the parties. We draw our own conclusions from the documentary evidence. Packaging Indus. Group, Inc. v. Cheney, 380 Mass. at ---, Mass.Adv.Sh. (1980) at 1196, 405 N.E.2d 106. Edwin R. Sage Co. v. Foley, 12 Mass.App. ---, ---, --- Mass.App.Ct.Adv.Sh. (1981) 1062, 1068, 1070, 421 N.E.2d 460 (1981).

3. The Scope of Paragraph 8.

The trustees make no argument within the meaning of Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 919 (1975), that the junior mortgage to Citicorp was beyond the reach of the language of paragraph 8, and we suspect that this is because there is little, if any, support for that position. ⁵ They argue only that the clause does not "explicitly" refer to junior or second mortgages. While paragraph 8 makes no express mention of junior or second mortgages, we conclude that subsequent mortgages are within the contemplation of the broad language of that clause. Paragraph 8 provides that "any change in ... the [m]ortgagor's present legal ... title or interest" triggers the option to accelerate the loan. "A mortgage of real estate is a conveyance of the title or of some interest therein defeasible upon the payment of money or the performance of some other condition." Perry v. Miller, 330 Mass. 261, 263, 112 N.E.2d 805 (1953). See Murphy v....