Krikorian v. Grafton Co-Op. Bank

• Decision Date: 28 October 1942
• Citation: 312 Mass. 272,44 N.E.2d 665
• Parties: KRIKORIAN v. GRAFTON CO-OP. BANK.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

312 Mass. 272

44 N.E.2d 665

KRIKORIAN

v.GRAFTON CO-OP. BANK.

Supreme Judicial Court of Massachusetts, Worcester.

Oct. 28, 1942.

Exceptions from Superior Court, Worcester County; Leary, Judge.

Action by Ohan Krikorian against Grafton Co-operative Bank to recover, as secone mortgagee, a surplus in hands of defendant after sale of mortgaged property on foreclosure of defendant's first mortgage. Defendant interposed a declaration in set-off. To review a judgment for plaintiff, defendant brings exceptions.

Exceptions overruled.

Before FIELD, C. J., and DONAHUE, DOLAN, COX, and RONAN, JJ.

Aram Garabedian, of Worcester, for plaintiff.

D. D. Swain, of Worcester, for defendant.

COX, Justice.

The great hurricane of September 21, 1938, (see Hoosac Tunnel & Wilmington Railroad Co. v. New England Power Co., 311 Mass. 667, 42 N.E.2d 832), practically destroyed the roof of a house on premises that were subject to a second mortgage that had been assigned to the plaintiff and to a first cooperative bank mortgage to the defendant. The defendant foreclosed its mortgage on February 24, 1939, and the plaintiff seeks to recover an alleged surplus in the hands of the defendant resulting from the foreclosure sale. The case was referred to an auditor, whose findings of fact were to be final. The defendant raises no question as to the right of the plaintiff to recover in this form of action. Knowles v. Sullivan, 182 Mass. 318, 65 N.E. 389;Cole v. Bates, 186 Mass. 584, 586, 72 N.E. 333;Nelson v. Piper, 213 Mass. 531, 533, 100 N.E. 749. See Wiggin v. Lowell Five Cent Savings Bank, 299 Mass. 518, 13 N.E.2d 433. In fact, it admits liability to the plaintiff in the amount of $105.50.

The auditor found that the whole house, exposed to the elements, was damaged to the extent that it became uninhabitable, and that all of the ‘tenants except * * * [the mortgagors, husband and wife]’ removed for a few weeks. Within a few days after the hurricane, it appeared that the mortgagors were unable to pay for the repairs needed at once, ‘so the bank agreed to undertake them,’ and made contracts for ‘various sorts of work on the property.’ About this time, the plaintiff asked the defendant's treasurer for a loan of $1,000 for the purpose of making the repairs himself as second mortgagee, but the defendant refused to make it. A temporary roof was ordered by the defendant on which work began on September 26, 1938, and was completed on October 18. During the month of October, other work in the nature of painting, papering and repairing was done at the instance of the defendant. Work on a permanent roof was substantially completed on November 12, 1938. On September 21, 1938, there had been no default or breach of condition of either the first or second mortgage. Thereafter, the mortgagors made no payments on the defendant's mortgage, and on November 15, 1938, the defendant made a peaceable entry on the premises for the purpose of foreclosing its mortgage, which was foreclosed by sale on February 24, 1939.

The defendant reasonably and in good faith expended $970.76 in the above described work prior to the date of its entry, for the purpose of preserving the rights of all parties ‘who had a financial interest in the property.’ The auditor found that, if the defendant was legally entitled to charge against its mortgage the sum expended or incurred before its entry to foreclose, the plaintiff is entitled to recover $105.50, but that if the defendant is not so entitled, the plaintiff is entitled to recover the amount so expended, together with $105.50 which the defendant now concedes is due. The trial judge, in effect, allowed the plaintiff's motion for judgment by finding for him for both sums. Pittsley v. Allen, 297 Mass. 83, 85, 7 N.E.2d 442. See Lewis v. Conrad & Co., Inc., 311 Mass. 541, 544, 42 N.E.2d 732. The defendant excepted. The judge also found for the plaintiff on the defendant's declaration in set-off, but the defendant has not questioned this finding.

A mortgage of real estate in this Commonwealth, as between the mortgagor and mortgagee, is regarded as a conveyance in fee in order to give the mortgagee effectual security for his debt or the performance of some other obligation due to him. It is a conveyance of real estate, or of some interest therein, defeasible upon the performance of a stated condition. The mortgagee is the holder of the paramount title. Harlow Realty Co. v. Cotter, 284 Mass. 68, 69, 187 N.E. 118, and cases cited. General Laws (Ter.Ed.) c. 183, § 26, provides that until default in the performance or observance of the condition of a mortgage of real estate, the mortgagor and his heirs and assigns may hold and enjoy the mortgaged premises and receive the rents and profits thereof, unless otherwise stated in the mortgage. Chamberlain v. James, 294 Mass. 1, 8, 200 N.E. 361.

The defendant's mortgage is in the usual form of a coöperative bank mortgage and is upon the statutory coöperative bank mortgage condition, for any breach of which the mortgagee shall have the statutory coöperative bank power of sale. This statutory condition, G.L.(Ter.Ed.) c. 183, § 23, is, so far as material, that if the mortgagor shall pay the monthly dues and charges until the shares pledged (see G.L.(Ter.Ed.) c. 170, § 26) shall reach their matured value, or, if the loan otherwise shall be sooner paid, shall pay all taxes and assessments, shall keep the buildings insured against fire, or in default thereof, shall ‘on demand pay to the said mortgagee * * * all such sums as it shall reasonably pay for such taxes, assessments and insurance, with interest, and shall not commit or suffer any strip or waste of the mortgaged premises, or any breach of any covenant herein contained * * * then the mortgage deed, as also the mortgage note, shall be void.’ The cooperative bank power of sale, G.L.(Ter.Ed.) c. 183, § 24, in substance permits a sale of the mortgaged premises in case of nonpayment of monthly dues, interest or fines and premiums for more than four months after any payment shall be due, or upon any other default in the performance or observance of the conditions of the mortgage, first complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale. See G.L.(Ter.Ed.) c. 244, §§ 11-17.

When the building was damaged by the hurricane, there had been no default or breach of condition of either mortgage. The defendant made no entry for the purpose of foreclosing until November 15, 1938. From the fact that the mortgagors paid nothing after the hurricane, it would seem that there was a breach of the condition of the mortgage before the date of entry in their failure to pay monthly dues.

The defendant contends that the items of expense incurred before the date of entry were for the purpose of obviating waste. It has been said that a mortgagor in possession is not bound to rebuild structures destroyed by fire, Reid v. Bank of Tennessee, 1 Sneed, Tenn., 262, 274, or to repair the premises when they have been injured without his default. Campbell v. Macomb, 4 Johns, ch., N.Y., 534, 542; 2 Jones on Mortgages, 8th Ed., § 1432. Of course, a mortgagor, by agreement, could make himself so liable. We are of opinion that the mortgagors did not commit waste. It does not appear that it was humanly possible for them to prevent the damage to the mortgaged property. It is not inconceivable that many owners of property in the path of the hurricane also were in the same predicament as the mortgagors in that they were unable to pay for the needed repairs at once. There was no negligence on the part of the mortgagors. The widespread damage left in the wake of the hurricane fell upon the rich and the...