Freedman v. Peoples National Bank of Marlborough

• Decision Date: 25 June 1935
• Citation: 291 Mass. 168,196 N.E. 846
• Parties: FREEDMAN v. PEOPLES NATIONAL BANK OF MARLBOROUGH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

291 Mass. 168

196 N.E. 846

FREEDMAN v. PEOPLES NATIONAL BANK OF MARLBOROUGH.

Supreme Judicial Court of Massachusetts, Suffolk.

June 25, 1935

Exceptions from Superior Court, Suffolk County; Morton Judge.

Action of tort by Samuel J. Freedman, trustee in bankruptcy of the Tremblay Lumber Company, against the Peoples National Bank of Marlborough, verdict was ordered for defendant, and plaintiff brings exceptions.

Exceptions overruled.

R. C. Evarts and S. L. Kaplan, both of Boston, for plaintiff.

F. P Garland, W. Temple, and J. De Courcy, all of Boston, for defendant.

RUGG Chief Justice.

The plaintiff is the trustee in bankruptcy of Tremblay Lumber Company, a Massachusetts corporation. As such trustee he brought this action of tort against the defendant to recover damages alleged to have arisen from the foreclosure of a mortgage on real estate owned by the bankrupt at a time after the indebtedness intended to be secured by the mortgage had been paid. At the close of the evidence a verdict was directed for the defendant. The evidence therefore must be considered in its aspect most favorable to the plaintiff.

The evidence of the plaintiff tended to show these facts: The real estate in question prior to 1927 had been purchased by Eugene Tremblay. He improved it as a warehouse in connection with his lumber business. On May 23, 1927, he was indebted to the defendant as maker of nine promissory notes and as indorser of notes of other persons. He was also indebted to the defendant on a note signed by him and his wife jointly for $3000. There was conference between the president of the defendant and Tremblay about the latter furnishing additional security for his indebtedness to the bank by giving a mortgage on his warehouse property. His aggregate indebtedness to the defendant then was in the principal sum of $32,486. A note in that sum was given under date of May 23, 1927, secured by a second mortgage on his warehouse real estate. It was a promise to pay the principal sum and also to ‘ pay on demand such further sums of money as the said Peoples National Bank may advance to me on the security of this mortgage * * * or which may hereafter become owing by me to the said Peoples National Bank during the continuance of this mortgage, either for money loaned and advanced, or upon checks, promissory notes or renewals of such notes, or other forms of indebtedness, together with interest. * * *’ Substantially the same language was contained in the condition of the mortgage on the real estate securing such collateral note. This note and mortgage were given as collateral security for the indebtedness of Tremblay to the defendant. On June 15, 1927, Tremblay incorporated his business under the name Tremblay Lumber Company, the present bankrupt. Shortly thereafter he conveyed to the corporation the equity in the real estate subject to a first mortgage to a savings bank and to the second mortgage to the defendant already described, which the grantee assumed and agreed to pay. On June 23, 1927, Tremblay was indebted to the bank on sixteen promissory notes in the total amount of $25,085.78. On that day notes of the corporation for the same total amount indorsed by Tremblay were given to the defendant. The defendant stamped the sixteen individual notes of Tremblay ‘ Paid,’ returned them to the maker and marked them off on its books as paid. In addition, Tremblay was also indebted jointly with his wife on the note to the defendant for $3000. On September 4, 1928, the defendant foreclosed the mortgage. There were present at the sale Mr. and Mrs. Tremblay, an attorney representing them, two or three neighbors and several officers of the defendant in addition to the auctioneer. The attorney stated that the sale was illegal and improper. The property was bid in by an agent of the bank for $50, subject to the savings bank mortgage. There was evidence that the value of the real estate at that time was greatly in excess of the amount of the mortgages. The corporation was petitioned into bankruptcy in October, 1928. The defendant proved claims against the bankrupt in the bankruptcy proceeding amounting to $23,720.17 on direct obligations and to $994.62 on indirect obligations.

It is plain that the note for $32,486 and the mortgage by which it was secured were according to their terms collateral security for the direct indebtedness of Tremblay as maker on notes to the defendant, for his indebtedness as indorser...