Massachusetts Home Mortg. Finance Agency v. New England Merchants Nat. Bank of Boston

• Decision Date: 17 November 1978
• Parties: MASSACHUSETTS HOME MORTGAGE FINANCE AGENCY v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1084

382 N.E.2d 1084

376 Mass. 669

MASSACHUSETTS HOME MORTGAGE FINANCE AGENCY v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 3, 1978.

Decided Nov. 17, 1978.

Arnold P. Messing, Boston (Margaret H. Marshall, Boston, with him), for plaintiff.

Robert H. Hale, Boston (George H. Butcher, III, Boston, with him), for defendant.

Jeffrey C. Bates, Boston, for Savings Banks Association of Massachusetts, amicus curiae, submitted a brief.

Mark A. Michelson, Boston, for Citizens Housing and Planning Association, Inc., amicus curiae, submitted a brief.

William A. Breitbart, Springfield, for Housing Allowance Project, Inc., amicus curiae, submitted a brief.

John J. Melican, Gardner, for Dept. of Public Health, amicus curiae, submitted a brief.

David A. White, Boston, for Jamaica Plain Banking and Mortgage Committee, Inc., amicus curiae, submitted a brief.

Harold Hestnes and Richard A. Johnston, Boston, for Massachusetts Mortgage Bankers Ass'n, amicus curiae, submitted a brief.

Before HENNESSEY, C. J., and QUIRICO, BRAUCHER, LIACOS and ABRAMS, JJ.

QUIRICO, Justice.

This is an action brought under G.L. c. 231A by the Massachusetts Home Mortgage Finance Agency (MHMFA) against the New England Merchants National Bank (bank) for the determination of an alleged controversy between the parties and a declaration of their rights under an agreement by which the MHMFA agreed to sell, and the bank to purchase, certain bond anticipation notes in the principal sum of $1,250,000 to be issued by the MHMFA. The principal issue before us is the constitutionality of the special statute which created the MHMFA. We conclude that the statute is constitutional and that the bank is obligated to purchase the notes in accordance with its agreement.

The case is before us on what is in effect a case stated. All the facts alleged by the MHMFA in its complaint have been admitted by the bank in its answer. The parties stipulated in writing "that the right(s) of the parties hereto shall be determined from the facts alleged in (the complaint) and the Exhibits appended thereto and admitted in the Defendant's Answer; that said facts and such further facts of which the Court may take judicial notice are all the material, ultimate facts from which the rights of the parties are to be determined, and that this Court . . . shall be at liberty to draw from the said facts any inferences of fact that might be drawn therefrom as if said pleadings constituted a case stated." The parties then filed a motion asking that the case be reserved and reported to the full court on the complaint and the exhibits appended thereto, the answer, and the stipulation. The motion was allowed by a single justice of this court.

The following is a brief summary of the facts alleged by the MHMFA and admitted by the bank. The MHMFA is a body politic and corporate established by St.1974, c. 846, as amended by St.1977, c. 561 (MHMFA statute), and the bank is a national banking association with its principal place of business in Boston. The MHMFA was created to promote the expansion of the supply of funds at low interest rates available for new residential mortgages for persons and families of low income and those of moderate income and thereby to help alleviate the shortage of adequate housing for such persons and families.

Sections 4(A ) and 5 of the MHMFA statute authorize the MHMFA to make loans to mortgage lenders under terms and conditions requiring the proceeds thereof to be used by the lenders for the making of new residential mortgage loans to low and moderate income persons and families (referred to as "Loans to Lenders Program"). Section 4(U ) authorizes the MHMFA to act as agent or principal for the purchase or sale of mortgage loans by lenders at such times as the availability of mortgage funds for homeowners in any area of the Commonwealth becomes constricted (referred to as the "Loan Participation Program"). Sections 4(T ) and 5 provide that cities and towns may propose, and the MHMFA may approve and designate, certain areas as "Neighborhood Preservation Areas," thus ensuring a concentration of funds available to homeowners and purchasers in such areas.

Section 4(P ) authorizes the MHMFA to "(m)ake and publish rules and regulations respecting the grant of loans under this act and the regulation of borrowers and any other regulations necessary to fulfill the purposes of this act." Pursuant thereto the MHMFA has promulgated certain rules and regulations to implement the Loans to Lenders Programs, the Loan Participation Programs and the Neighborhood Preservation Area Programs. The rules and regulations govern procedures for the submission of requests for participation in the programs, limitations and restrictions as to the characteristics of residences and individuals qualifying for mortgages and home improvement loans financed by MHMFA, and requirements and procedures for the administration and servicing of mortgages and home improvement loans financed by the MHMFA.

The MHMFA has entered into binding commitments with five banks to do the following:

(a) to loan $250,000 to the First American Bank for Savings, in Dorchester, under the Loans to Lenders Program, the proceeds to be used by said bank for making new residential mortgage loans to persons or families of low or moderate income;

(b) to loan $250,000 to the Freedom Federal Savings and Loan Association, in Worcester, under the Loans to Lenders Program in a Neighborhood Preservation Area, the proceeds to be used by said bank for the making of new residential mortgage loans in the Main South Columbus Park Neighborhood Preservation Area in Worcester;

(c) to fund, under the Loan Participation Program, the MHMFA's participation, in the sum of $250,000, in new residential mortgage loans to be made by the Jamaica Plain Co-operative Bank to persons and families of low or moderate income;

(d) to fund, under the Loan Participation Program, the MHMFA's participation, in the sum of $250,000, in new residential mortgage loans to be made by the Worcester County Institution for Savings, in Worcester, in the Main South Columbus Park Neighborhood Preservation Area in that city;

(e) to fund, under the Loan Participation Program, the MHMFA's participation, in the sum of $250,000, in new residential mortgage loans to be made by the Shawmut County Bank, in Cambridge, in the Cogswell Avenue Neighborhood Preservation Area in that city.

In order to raise the funds required for the five commitments described above, the parties entered into a written agreement on February 27, 1978, requiring the MHMFA to issue and sell, and the bank to purchase, bond anticipation notes of the MHMFA in the sum of $1,250,000. The agreement contained a provision which made the bank's acceptance of delivery of the notes conditional on the notes, when issued, being "valid obligations of the Agency (MHMFA), enforceable in accordance with their terms and the terms of the Resolution (dated February 27, 1978, authorizing issuance of the notes), and duly authorized by the Act (St.1974, c. 846, § 8, as amended) and the Constitution of the Commonwealth of Massachusetts." There were other conditions which are not now material to this case.

On March 1, 1978, the bank received an opinion from its counsel doubting the constitutionality of the special act and the validity of the notes of the MHMFA on the ground, among others, that the proceeds obtained from the notes would not be devoted exclusively to valid public purposes. On March 3, 1978, the MHMFA received a letter from the bank declining to accept delivery of the notes because of the opinion of the bank's counsel.

The concluding allegations made by the MHMFA and admitted by the bank are the following. An actual controversy exists between the parties. The MHMFA contends that the bank is bound by its agreement to purchase the notes, and that the issuance of the notes is constitutionally permissible. The bank contends that it is not bound to purchase the notes on the ground that the MHMFA statute is unconstitutional. A judgment by the court will terminate the uncertainty and controversy, permit MHMFA to proceed to implement its programs, and permit the bank to determine whether it is bound by its agreement to purchase the notes.

In the letter sent to the MHMFA on March 3, 1978, the bank stated: "We enclose a copy of a letter from (our counsel) dated March 2, 1978, in which they state that they are unable to give an opinion that certain of these conditions (in the contract of February 27, 1978, to purchase the MHMFA notes) are or can be met. Acting on their advice, we regret that we must hereby formally notify you that, if and when you should tender the Notes to us, we shall decline their purchase." The opinion by the bank's counsel raises two constitutional questions related solely to the condition contained in par. 4(a) of the contract and reproduced in full in the margin below. ¹ These questions are the following: (a) whether the purposes to be served by the MHMFA under the special statute are public purposes within the limitations of the Constitution of this Commonwealth, and (b) whether the MHMFA statute contains an unconstitutionally broad delegation of legislative authority to the MHMFA. Notwithstanding its sole reliance on the opinion of its counsel raising those two constitutional questions when it repudiated its contract, the bank by its brief raises some statutory questions which it contends justify its refusal to purchase the notes. These statutory questions were not raised in the opinion of the bank's counsel, nor were they advanced by the bank in its letter of March 3, 1978, as a basis for its refusal to purchase the notes. We therefore limit this opinion to the two constitutional questions originally relied on by the bank.

Before considering the constitutional questions, we turn to the question raised by an...