Piea Realty Co. v. Papuzynski

• Decision Date: 14 March 1961
• Citation: 342 Mass. 240,172 N.E.2d 841
• Parties: PIEA REALTY CO., Inc. v. Walter J. PAPUZYNSKI et al. PIEA REALTY CO., Inc. v. Leonard L. BRUNELLE et al. Anthony S. MUNIAK v. PIEA REALTY CO., Inc.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 841

172 N.E.2d 841

342 Mass. 240

PIEA REALTY CO., Inc. v. Walter J. PAPUZYNSKI et al.

PIEA REALTY CO., Inc. v. Leonard L. BRUNELLE et al.

Anthony S. MUNIAK v. PIEA REALTY CO., Inc.

Supreme Judicial Court of Massachusetts, Hampden.

Argued Sept. 29, 1960, Jan. 17, 1961.

Decided March 14, 1961.

Emerson S. Searle & Socrates Geanacopoulos, Springfield, for Piea Realty Co., Inc.

Harry M. Ehrlich and J. Leo Dowd, Springfield, for Muniak.

Before WILKINS, C. J., and SPALDING, WHITTEMORE, and CUTTER, JJ.

CUTTER, Justice.

In two of these cases Piea Realty Co., Inc. (Realty), pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, 50 U.S.C.A.Appendix, § 501 et seq., seeks authority to foreclose mortgages held by it. See St. 1943, c. 57, § 1, as amended by St.1945, c. 120. Cf. St.1959, c. 105. ¹ One mortgage covered property, owned in 1957 by Papuzynski, on Fort Pleasant Avenue, Springfield. The other covered property on Oak Street, Springfield, owned in 1957 by Muniak. The third case is a bill by Muniak to remove as a cloud on his title to the Oak Street property a 1954 second mortgage held by Realty. By final decrees each of Realty's bills was dismissed. In the case brought by Muniak, the final decree enjoined Realty from transferring, and ordered it to discharge, the 1954 second mortgage on the Oak Street property. In each case Realty has appealed. The evidence is reported. The trial judge made a report of material facts, on the basis of which the following facts are stated.

On June 2, 1954, Realty conveyed to Leonard L. Brunelle and his wife the Fort Pleasant Avenue property subject to a first mortgage. On the same day, the Brunelles gave to Realty a demand note for $5,472.80 with interest payable monthly at the rate of five per cent per annum. The note was secured by a second mortgage. The deed and mortgage were recorded on June 3, 1954. On July 17, 1957, the Brunelles conveyed the premises to Papuzynski by a deed (on which, the original exhibit shows, there were a one dollar Massachusetts revenue stamp and a fifty-five cent Federal revenue stamp affixed) recorded September 4, 1957. The deed recited that the conveyance was subject to the first mortgage and also to the 1954 second mortgage to Realty. No interest payments have been made since April 1, 1957. No principal payments have been made at any time. The transactions with respect to the Oak Street property were substantially similar and are described in detail in the margin. ²

On July 13, 1956, Realty's directors and stockholders voted that Realty exchange the 1954 notes 'for new notes payable on or before January 2, 1959, with interest to be paid monthly at the rate of five * * * per cent per annum' and 'discharge the mortgages securing * * * [the] notes and receive an [sic] exchange thereof new mortgages on the * * * properties to secure the [new] notes.' Realty's clerk, a Mr. Reedy, was 'authorized to execute all documents necessary to accomplish the desired results on behalf of the [c]orporation.' The Brunelles executed and delivered to Mr. Reedy two new mortgages dated July 20, 1956, and two new notes of the same date, one payable on or before June 2, 1959 (despite the vote described above), and the other on or before January 2, 1959, with interest at five per cent per annum payable monthly, and in the same amounts as the 1954 notes, respectively. At the same time, Mr. Winniman, an attorney for Realty, delivered to the Brunelles (or their attorney) 'the two old [1954] notes with the notation * * * 'Paid' written across their face by him and over his signature.' After delivery of the new mortgages and new notes, Mr. Reedy 'failed to record the new mortgages * * * and * * * discharges of the old mortgages.' The judge also found that 'the reason given for failing to record these instruments was that on or about July 30, 1958 * * * Brunelle filed a petition in [b]ankruptcy and * * * [Mr.] Reedy was fearful that the new mortgages would be considered as * * * a preference * * * to * * * Realty.' Brunelle listed Realty in the bankruptcy proceedings as a secured creditor in the principal amounts of the notes as 'possible deficiencies.' At the time of the trial, each of the new 1956 notes contained a marginal notation that it was secured by a 'mortgage * * * recorded in * * * [the] registry of deeds.' The words 'to be' before the word 'recorded' in each marginal notation had been inked out after 'their delivery by someone other than the * * * Brunelles.'

Upon the subsidiary findings noted above and his 'observations of the exhibits,' the trial judge 'rule[d]' (A) that 'there was a complete delivery of the new mortgages for the old mortgages to * * * Realty'; (B) that 'the old notes * * * were paid'; (C) that 'the old mortgages were extinguished by the giving of the new mortgages and new notes'; and (D) that 'the old mortgages constitute a cloud on the titles to * * * [the] properties.' Except in minor, immaterial respects, the trial judge's subsidiary findings were justified by the evidence, much of which was documentary. With respect to what took place from July 13 to 20, 1956, the slight additional evidence, beyond that reflected in the subsidiary findings and the documents, is summarized below.

In July, 1956, proceedings by Realty to foreclose the 1954 mortgages were pending in the Superior Court. The Brunelles contended that the rate of interest on one or both of the original 1954 notes had been altered without their consent. The presiding judge in these 1956 proceedings either suggested or approved, and Realty and the Brunelles agreed to, an adjustment of the interest controversy.

Mr. Winniman then prepared drafts of corporate minutes for Realty, new notes and mortgages, and papers for the settlement of an action which had been brought by the Brunelles against Realty. When the Brunelles' signatures to various documents had been obtained, Mr. Winniman handed the new notes and mortgages to Mr. Reedy. To obtain the new notes, Mr. Winniman was required by Mr. Burns, the Brunelles' attorney, to surrender to him the old notes marked 'paid.' Mr. Burns, however, did not 'make it a condition of delivering * * * the new notes that * * * [Mr. Winniman] deliver to him discharges of the old mortgages.'

Realty's answer to Muniak's present bill to remove the 1954 mortgage on the Oak Street property as a cloud on title stated, 'At the time of the substitution of the * * * [new] note it was agreed * * * that the new note should take the place of the old note and that the [old] mortgage should remain as security for the payment of the new note.' Mr. Reedy, however, did not testify that any such agreement was made. When asked on cross-examination whether he had testified earlier that there was such an agreement, he replied, 'I didn't say anything about it at all; yes or no.'

The corporate minutes, drafted by Mr. Winniman, recited 'that it was to the best interest of * * * [Realty] that the mortgage[s] securing * * * [the 1954] notes be destroyed and new mortgages be given to' Realty and that Realty 'discharge the [1954] mortgages.' Mr. Reedy explained his failure to execute the mortgage discharges by saying that Mr. Winniman 'was to hold all those things [apparently the 1956 papers] until I finished checking up on the financial status of the mortgagor,' and testified that he did not record the new mortgages '[b]ecause of the information * * * [he] had as to * * * [Brunelle's] financial condition.'

Comparison of the 1954 and the 1956 mortgages, covering the Oak Street property, shows no material difference in their provisions other than the dates and the references to the notes secured by them respectively. The 1956 mortgage of the Fort Pleasant Avenue property was not introduced in evidence because it could not be found at the time of trial. There is no contention that it varied in any significant respect from the 1954 mortgage. Each 1956 note was in the same principal amount as the corresponding 1954 note and varied from the earlier note chiefly in the subsidiary respects noted in the margin. ³ The documents give little, if any, indication that any party intended to do more than to effect the minor changes called for by the adjustment of interest and maturity dates. Any suggestion that more was intended or effected arises either (a) from Realty's corporate minutes and the form of exchange transaction in fact adopted, or (b) from the possibility that there was anxiety on the part of Realty to obtain destruction of the old notes and mortgages because of the circumstances relating to the insertion of the interest rate in one or both of the old notes.

The ambiguity of the transaction raises substantial doubt as to its effect. We must consider whether, upon the subsidiary facts found, the trial judge erred in ruling that 'the old notes * * * were paid' and that 'the old mortgages were extinguished.' Since the evidence is reported, the scope of our review is, in any event, that stated in Lowell Bar Ass'n v. Loeb, 315 Mass. 176, 178, 52 N.E.2d 27. See Skil Corp. v. Barnet, 337 Mass. 485, 488, 150 N.E.2d 551. Cf. Linse v. O'Meara, 338 Mass. 338, 345, 155 N.E.2d 448.

There was no recital in the new notes or new mortgages that they were continuations of the security represented by the old mortgages, or that the latter were being held as additional security for the new notes. See Kendall v. Bolster, 239 Mass. 152, 155, 157, 131 N.E. 319. Cf. Macomber v. Bremer, 198 Mass. 20, 24-25, 84 N.E. 328. Indeed, the form of the transaction would indicate that the old mortgages were to be discharged. We assume that there was no affirmative oral or written agreement that the old second mortgages would remain as security for the new notes. Mr. Reedy's failure to testify that there was such an express agreement, when cross-examined on the point, is some indication that there was no such agreement.

The Brunelles' attorney testified, 'at the time when the notes...