Union Mkt. Nat. Bank of Watertown v. Derderian

• Citation: 318 Mass. 578,62 N.E.2d 661
• Parties: UNION MARKET NAT. BANK OF WATERTOWN v. DERDERIAN et al.
• Decision Date: 14 September 1945
• Court: United States State Supreme Judicial Court of Massachusetts

318 Mass. 578

62 N.E.2d 661

UNION MARKET NAT. BANK OF WATERTOWN

v.DERDERIAN et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Sept. 14, 1945.

Report from Superior Court, Middlesex County; Greenhalge, Judge.

Bill in equity by the Union Market National Bank of Watertown against Missak Derderian and others to establish amount of deficiency upon mortgage note following foreclosure, and to reach and apply shares of stock and other property. On report of the correctness of the denial of plaintiff's motion for directed verdict, and of denial of plaintiff's requests for instructions.

Verdict to stand.

Before FIELD, C. J., and LUMMUS, QUA, RONAN, and WILKINS, JJ.

R. D. Swaim, of Boston, for plaintiff.

G. A. McLaughlin, of Boston, for defendants.

WILKINS, Justice.

This is a bill in equity to establish the amount of a deficiency upon a mortgage note following a foreclosure sale and to reach and apply certain shares of capital stock and other property. G.L.(Ter.Ed.) c. 214, § 3(7). The defendant Missak Derderian (hereinafter called the defendant) set up in his answer that the foreclosure sale was improperly conducted, and claimed a trial by jury. Stockbridge v. Mixer, 215 Mass. 415, 102 N.E. 646. To the question, ‘Has the plaintiff established its debt against the defendant in the amount of $2,107.72?’ the jury answered, ‘No.’ The case is here on report of the correctness of the denial of the plaintiff's motion for a directed verdict and of the denial of the plaintiff's requests for instructions. G.L.(Ter.Ed.) c. 231, § 111.

On November 2, 1928, the defendant for a loan executed a promissory note in the amount of $18,000 payable in one year to the plaintiff and secured by a mortgage of real estate in Watertown.

The mortgage was in the usual statutory power of sale form. G.L.(Ter.Ed.) c. 183, §§ 8, 18, 21, and Appendix. The mortgage being in default, the plaintiff duly advertised the property for foreclosure sale on the premises ‘at 9:00 o'clock in the morning, War Time,’ on June 26, 1943. At the time of the sale the mortgage covered the real estate at 208 Common Street (which was but one of the lots originally covered), and the balance due on the note was $9,808.81. It was agreed at the trial that if the sale was properly conducted, the deficiency thereafter was $1,957.94 and if the plaintiff was entitled to recover, it would be entitled to that sum with interest at six per cent from the date of the sale.

The evidence most favorable to the defendant was as follows: Those present at the sale were the auctioneer; two vicepresidents of the plaintiff; Virgil Brink, Esquire, attorney for the plaintiff; the defendant; his attorney, David S. Kunian, Esquire; his brother, Setrak Derderian; Setrak's attorney, Walter H. McLaughlin, Esquire; and an unknown stranger, who stood on the sidewalk and took no part in the proceedings. The auctioneer and the representatives of the plaintiff arrived at 9:07, and the sale started at 9:10. Mr. Kunian protested the delay of ten minutes. No one left the premises between 9 and 9:10. The auctioneer first read the published notice of the sale, which was in part: ‘Five Hundred Dollars ($500.00) to be paid in cash by the purchaser at the time and place of the sale and the balance in twenty (20) days thereafter. Other terms to be announced at the sale.’ The auctioneer then announced the ‘other terms,’ which were to the effect that anyone desiring to bid should deposit $500 in cash with the auctioneer before he could bid, and that if he should be an unsuccessful bidder, this sum would be returned to him at the conclusion of the sale. Mr. Kunian on behalf of the defendant made a deposit of $500. Neither the plaintiff nor Setrak made any deposit. Mr. McLaughlin on behalf of Setrak constantly protested both the requirement of a deposit as a condition of bidding and the failure of the auctioneer, acting under the advice of Mr. Brink, to cause the plaintiff to comply with this requirement. The first bid was $2,500 made by Mr. McLaughlin. It was refused by the auctioneer upon the advice of Mr. Brink. Mr. Kunian bid $2,600. Mr. Brink on behalf of the plaintiff bid $6,500. Mr. McLaughlin made a bid of $10,073.68, which was refused. Mr. Kunian and Mr. Brink alternated in bidding until Mr. Kunian bid $8,400. Mr. Brink then bid $8,500. Mr. McLaughlin again protested the refusal to accept his bid, and when Mr. Brink told the auctioneer to proceed, the latter ‘knocked the property down’ to the plaintiff for $8,500. Setrak, who was worth $360,000, had $1,000 with him, but acting upon the advice of his attorney, which he approved, as a matter of principle refused to deposit money for the right to bid since the plaintiff did not do so. At one time the auctioneer offered to delay the sale long enough to permit Setrak to go to the plaintiff bank, where he had ample funds, to obtain money. Setrak declined to go. The plaintiff knew that Setrak was worth $10,073.68. Within two months of the sale the plaintiff sold the property for $12,500 after spending $1,083.51 in repairs, $279.17 for taxes, and $19.87 for insurance. The foreclosure expenses were $230 and there was additional interest of $148.41. The property had been independently appraised for the plaintiff a year before at $13,000.

A mortgagee in exercising a power of sale in a mortgage must act in good faith and use reasonable diligence to protect the interests of the mortgagor. Clark v. Simmons, 150 Mass. 357, 359, 23 N.E. 108;Sandler v. Silk, 292 Mass. 493, 496,198 N.E. 747;Chartrand v. Newton Trust Co., 296 Mass. 317, 320, 5 N.E.2d 421. The mere fact of some inadequacy in the selling price does not show lack of either. Cambridge Savings Bank v. Cronin, 289 Mass. 379, 383, 194 N.E. 289;Atlas Mortgage Co. v. Tebaldi, 304 Mass. 554, 557, 558, 24 N.E.2d 554;Lexington Trust Co. v. McCabe, 313 Mass. 733, 735, 49 N.E.2d 435. But such fact may be considered with other evidence to support a finding of fraud or lack of reasonable diligence. Kavolsky v. Kaufman, 273 Mass. 418, 423, 173 N.E. 499;Dexter v. Aronson, 282 Mass. 124, 128, 184 N.E. 455;Sandler v. Silk, 292 Mass. 493, 497, 198 N.E. 749. This is especially true where the mortgagee is the buyer. ‘When a party who is intrusted with a power to sell attempts also to become the purchaser, he will be held to the strictest good faith and the utmost diligence for the protection of the rights of his principal.’ Montague v. Dawes, 14...