Morse v. Mutual Federal S. & L. Ass'n of Whitman

• Decision Date: 08 April 1982
• Docket Number: Civ. A. No. 79-1966-A.
• Citation: 536 F. Supp. 1271
• Court: U.S. District Court — District of Massachusetts
• Parties: Cynthia A. MORSE and Allen E. Morse, Plaintiffs, v. MUTUAL FEDERAL SAVINGS & LOAN ASSOCIATION OF WHITMAN, Defendant.

536 F. Supp. 1271

Cynthia A. MORSE and Allen E. Morse, Plaintiffs, v. MUTUAL FEDERAL SAVINGS & LOAN ASSOCIATION OF WHITMAN, Defendant.

Civ. A. No. 79-1966-A.

United States District Court, D. Massachusetts.

April 8, 1982.

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Paul S. Samson, Riemer & Braunstein, Boston, Mass., for plaintiffs.

Terry O'Malley, Mark L. Sullivan, Spencer & Stone, Boston, Mass., for defendant.

REVISED OPINION

BAILEY^* ALDRICH, Senior Circuit Judge.

In 1978 plaintiffs Allen and Cynthia Morse owned a house in Halifax, Massachusetts. It was jointly mortgaged to defendant, Mutual Federal Savings and Loan Association of Whitman. Plaintiffs also had a joint Now checking account with defendant. In 1979 a friendly relationship between the parties developed into deep trouble because of carelessness, in a degree not here determined, on the part of Allen, in turn matched by over-reaction on the part of defendant. Suit was brought in this court by the Morses, alleging two federal claims, and a large number of dependent state claims. Although the basic federal claims were of no account, unfortunately a predecessor on this court denied defendant's motion for summary judgment and elected to retain pendent jurisdiction as to the balance although there were principally involved difficult questions of Massachusetts law which should better have been decided by the Massachusetts court. By the time the case was assigned to me for trial it seemed late to make the change, and I did not do so. To isolate these questions, with the parties' approval I put thirteen special questions to the jury on liability, and thereafter a number on damages. While the latter raise some problems, to the jury's credit its answers on liability were, in my opinion, both consistent and reasonable. Based on these answers, and the undisputed facts, I recite the following.

Allen, since 1973, had leased an Amoco filling station and garage from Buckley Heating Company, from whom he also bought his gasoline, oil and supplies. He ran it mostly single-handed, with help from Cynthia, but not as a joint enterprise. Although in one sense he was doing well, he increasingly had difficulties meeting his weekly, and later more frequent, payments due Buckley. Buckley insisted upon receiving cash, or a cashier's check, measured by the gallons sold as shown on the pumps' meters, current to the very day before. Allen had a checking account with the Rockland Trust Company, but it was more convenient to get his last-minute cashier's check from defendant. His practice was to give defendant a personal check on the Rockland bank, for which, quite apparently as a favor to a customer (whether there was a charge does not appear), defendant would give him a cashier's check, which he would give Buckley. The extent of this favor is quite apparent, because between February 1 and 4, 1979, defendant, at its branch office, so issued some $8,600 in cashier's checks, in effect unsecured loans totalling almost the size of the mortgage, and roughly four times the amount of the Now account. Earlier during January, Allen had been overdrawing his Rockland account. All four checks he gave defendant for the $8,600 were returned unpaid.

Allen responded to a telephone call and came to defendant's main office on February 12, where he had a conversation with a Mr. Leetch, vice president and treasurer. He told Leetch that he believed that Rockland had erred, and that he wanted to investigate. Leetch agreed. In response to a question of what was defendant's procedure in the case of bad checks, Leetch said that it took various forms, including the institution of criminal proceedings if there was believed to have been fraud. Leetch testified that, in fact, he believed there was no fraud here, but he did not tell this to Allen. The jury found that while Allen reasonably construed the conversation as a threat of possible criminal proceedings, Leetch's conduct was not knowingly or wilfully unfair. It further found that it caused neither plaintiff any damages.

Allen, before leaving, gave Leetch $1,950 in cash to reduce the bad check indebtedness. Leetch testified he told Allen he would add the rest ($6,650) to the mortgage. This was done, on the records, on February 13. While Leetch testified that Allen agreed to this, the jury found he did not. Nor was there evidence that Cynthia agreed. Accordingly, defendant had no conceivable right to attach the mortgage security to this debt, even with the somewhat limited, and secondary, effect that it maintains was its purpose.¹ This impropriety was not cured by defendant's persuading Allen to sign a note for $6,650 on February 23, payable March 15, to which, later, Cynthia added her signature. The given purpose was to relieve the immediacy of the bad check indebtedness; defendant concedes, as it must, that it did not establish an enforceable lien on the Morses' home. Since the note was a substitute for a presently due debt of Allen only (the jury having found that Cynthia was not a joint venturer), Cynthia is to be regarded as a surety or guarantor. Consistent with its finding of no damages from the believed threat, the jury found that both Allen and Cynthia would have signed the note regardless of Leetch's remarks about criminal proceedings. The note, consequently, was valid as to both, Mass.G.L. c. 106 § 3-408; cf. Mohan v. Woburn Nat'l Bank, 1943, 313 Mass. 306, 47 N.E.2d 289, Cynthia's consideration being the perceived benefit to Allen of her signing.

In point of fact, the Rockland bank was not in error with respect to Allen's balance. He was in such financial difficulties that when the note fell due on March 15 plaintiffs were unable to or, at least, failed to, pay it off. Defendant thereupon "froze" or "attached" their joint Now account without notifying plaintiffs of its action. As a result, eight checks drawn on the account by Allen were dishonored. Defendant now seeks to justify the freezing, and the dishonor of the checks, as a "set off." It did not, however, actually set off the proceeds of the account, some $2,020, until June 5. It argues that this was a mere technicality, but this is not so. Until June defendant charged plaintiffs 9.5 per cent interest on the entire bad check indebtedness, including the amount that there should have been set off in March, while, at the same time, it deprived them of the use of their Now account.² The claimed set off was improper. Mass.G.L. c. 106 § 4-303; Raymer v. Bay State Nat'l Bank, ___ Mass. ___, ___-___, 1981 Mass.Adv.Sh. 1870, 1875-76, 424 N.E.2d 515, and the checks were wrongfully dishonored. Id. Even had it been proper, it was inexcusable for defendant not to have advised plaintiffs immediately of its action.

Monthly payments of $200 were due on the mortgage, with an acceleration clause in the case of 60 days' default. The February 1, 1979 payment had not been made. On March 17 plaintiffs sent their 18-year old daughter to defendant's branch office with $200 in cash. Pursuant to some standing instructions, it was not accepted, and she was told to go to the main office. However, the branch office did not give her back the mortgage book. Plaintiffs did nothing further. After April 1, the February payment being, in defendant's view, 60 days overdue, defendant's committee voted to initiate foreclosure proceedings, and this was done. A foreclosure sale was then advertised in a local paper.

Plaintiffs received no notice that defendant did not consider their daughter's bringing the $200 to the branch office on March 17 a proper tender. As matter of law, defendant was wrong. Plaintiffs regularly dealt with the branch office, they did not have to make a second tender at the main office, or face what, in view of the refusal, they feared they might meet there. Accordingly, the mortgage was not 60 days in default, and defendant had no right to foreclose or to publish a notice of foreclosure. Moreover, the jury warrantably found that defendant acted in bad faith, in that it brought the foreclosure proceedings for the ulterior purpose of collecting the back check indebtedness. While plaintiffs' theory that this was an abuse of process must fail because foreclosure by statutory power of sale does not involve sufficient "legal process," Jones v. Brockton Public Markets, Inc., 1975, 369 Mass. 387, 340 N.E.2d 484; see Beaton v. Land Court, 1975, 367 Mass. 385, 326 N.E.2d 302, appeal dismissed, 423 U.S. 806, 96 S.Ct. 16, 46 L.Ed.2d 27, they have made out an action in tort for wrongful foreclosure. See, e.g., Sandler v. Green, 1934, 287 Mass. 404, 407, 192 N.E. 39, Siegel v. Knott, 1944, 316 Mass. 526, 55 N.E.2d 889. However unhappy defendant may justifiably have felt about the general situation, this action for that purpose was inexcusable.

Defendant was charged by the jury with further improprieties. Faced with foreclosure, plaintiffs hired a lawyer and obtained a postponement of the sale, seeking to refinance the mortgage and obtain a larger one for the purpose of making repairs and improvements. The National Bank of Wareham expressed willingness to an agreed larger sum, which left the necessary excess after paying all believed debts to defendant. Defendant, however, refused a discharge except upon the payment of a greater amount, which included the 1972 note, attorneys' fees, an escrow debit, and the 1979 note, all, apparently, with 9.5 per cent compound interest, and another sum for which I cannot account. While there might be a dispute as to just how much larger, the amount demanded was substantially more than what was legally due. Because this was more than the Wareham bank had figured on, the new financing fell through. The jury warrantably found that defendant was wilfully or knowingly unfair in causing this to happen. Shortly thereafter, this suit was filed, and the foreclosure sale was put off pending its outcome.

One final matter. Plaintiffs sought an auto loan to finance a...