Williams v. Resolution GGF OY

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: Before LIACOS; GREANEY; LIACOS
• Citation: Williams v. Resolution GGF OY, 417 Mass. 377, 630 N.E.2d 581 (Mass. 1994)
• Decision Date: 25 March 1994
• Parties: Commie WILLIAMS & another 1 v. RESOLUTION GGF OY.

Page 581

630 N.E.2d 581

417 Mass. 377

Commie WILLIAMS & another ¹ v. RESOLUTION GGF OY.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Dec. 9, 1993.

Decided March 25, 1994.

Thomas J. Walsh, Robert M. Mendillo, Boston, with him, for defendant.

Andrew M. Fischer, Boston, for plaintiffs.

Before LIACOS, C.J., and WILKINS, NOLAN, LYNCH and GREANEY, JJ.

GREANEY, Justice.

We granted an application for further appellate review to decide whether the defendant was liable for failing to act in good faith and reasonable diligence, thereby violating G.L. c. 93A, §§ 2(a ) and 9 (1992 ed.), in the foreclosure of a second mortgage on residential property owned by the plaintiffs, Commie and Ommie Williams. ² A judge of the Superior Court, after conducting a trial without a jury, concluded that the defendant had violated G.L. c. 93A (1992 ed.). The Appeals Court, in an unpublished memorandum of decision entered pursuant to its rule 1:28, 34 Mass.App.Ct. 1123, 614 N.E.2d 708 (1993), characterized the matter as presenting "a close case," but affirmed the Superior Court judgment (with a modification of the damages award), and the denial of the defendant's motion for relief from the judgment. We conclude that a violation of G.L. c. 93A has not been shown. Accordingly, we reverse the judgment and order the entry of a new judgment for the defendant.

The trial judge found the following facts.

(a) In 1986, the plaintiffs, twin brothers, owned residential property at 22 Bradlee Street, a predominantly minority community located in the Dorchester section of Boston. They lived there with their extended family, including their sister, Della Milsap Huggins (Huggins), who was in charge of the family finances. Growth Mortgage Co., Inc. (Growth), held a first mortgage on the property to secure an underlying debt in a principal amount of $55,000, plus charges. At that time the plaintiffs owed $69,000 on their mortgage.

(b) In October, 1986, the plaintiffs signed an installment sales contract with a siding company for the installation of vinyl siding on their home. They also gave the siding company a second mortgage to secure payment of $42,810, which consisted of $19,800 in principal and $23,010 in interest and finance charges. Both the contract and the mortgage were assigned by the siding company to the defendant. The plaintiffs, although chronically late, made monthly payments to the defendant through June, 1987.

(c) In August, 1987, a fire gutted the property, which was not insured against fire. All of the plaintiffs' financial records, along with most of their other possessions, were destroyed. The family was scattered. Because of the expense involved in relocating, the plaintiffs were unable to make payments on either the first or second mortgage.

(d) Once settled, Huggins called a loan service manager for the defendant to inform him of the family's new addresses and to discuss their financial situation. The manager told her that the defendant intended to foreclose because its mortgage was in default, and that notification of the sale would be published. Although the defendant complied with the publication requirements of G.L. c. 244, § 14 (1992 ed.), it did not provide written notice to the plaintiffs as required by that statute.

(e) Prior to the foreclosure, the defendant's attorney also sent a notice of intent to foreclose pursuant to G.L. c. 140, § 90B (1992 ed.). That notice, however, was sent to 22 Bradlee Street, not to the new addresses provided to the defendant by Huggins. Furthermore, the notice misstated the principal due and owing to the defendant as $41,031.25, more than double the amount actually financed. Through their attorney, the plaintiffs asked the defendant repeatedly for an accounting, but the above misstatement of the debt was the only figure provided.

(f) Both Huggins and the plaintiffs' attorney informed the defendant before the foreclosure sale that they had potential buyers for the property, Winston and Joyce Sutherland. In an assessment done for the defendant's attorney following the fire, the property was found to have value only in the land. That value was placed at about $20,000. ³ Although the gutted house was deemed worthless, the Sutherlands were in a unique position to find value in it. They already lived in the neighborhood, and Winston Sutherland was a skilled carpenter.

(g) The defendant conceded that its staff and attorneys were negotiating a deal with the Sutherlands concerning the discharge of the plaintiffs' obligations to the defendant. Growth had also indicated its willingness to negotiate with the Sutherlands, as shown by the suspension of its foreclosure proceedings. The plaintiffs, through their attorney, asked a paralegal ⁴ in the law office representing the defendant whether the defendant would accept $12,000 to discharge its claim. After talking to the defendant's loan manager, the paralegal rejected the offer. The paralegal then refused to deal any further with the plaintiffs' attorney, stating that the attorney had a conflict of interest in representing both the plaintiffs and the Sutherlands. The defendant's loan manager also was aware that there was acrimony between the paralegal and the plaintiffs' attorney prior to the sale. Huggins indicated that she asked (through the plaintiffs' attorney) that the foreclosure sale be delayed so that the deal with the Sutherlands could be accomplished. The defendant refused. On July 14, 1988, the defendant was the only bidder at the foreclosure sale and purchased the property for the amount owed on the second mortgage.

(h) Following the foreclosure sale, attempts to negotiate with the Sutherlands continued. There was confusion among the parties as to the identity of the seller. ⁵ The defendant did agree, however, to accept $21,000 for its interest. Growth had agreed to take $25,000 plus attorneys' fees to discharge its interest. The Sutherlands would pay a total of $55,000, leaving the plaintiffs, after paying outstanding tax and water bills, with a small profit. The Sutherlands sent, through a new attorney, a $500 good faith deposit requested by the defendant. A series of closing dates were scheduled, and then postponed, by the paralegal acting for the defendant. Ultimately, Growth foreclosed, and the Sutherlands bought the property at auction for $11,000.

Based on these findings of fact, the judge ultimately concluded that the defendant had failed to demonstrate the good faith and reasonable diligence required of a foreclosing mortgagee. He reached this decision on the basis of four general conclusions, stating that the defendant had: (1) failed to bid adequately on the property at its own foreclosure; (2) failed to negotiate with the Sutherlands in a timely fashion; (3) failed to provide the plaintiffs with an accurate accounting of debt; and (4) misstated the amount due on its mortgage note, in its notice of intent to foreclose, in an attempt to accelerate future interest. The judge then concluded that these deficiencies constituted, collectively, a violation of G.L. c. 93A, §§ 2(a ) and 9, under the standards set forth in PMP Assocs., Inc. v. Globe Newspaper Co., 366 Mass. 593, 596, 321 N.E.2d 915 (1975).

"In reviewing this case, we accept the judge's findings of fact as true unless they are clearly erroneous. Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974). Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 465, 583 N.E.2d 806 (1991). Secretary of Envtl. Affairs v. Massachusetts Port Auth., 366 Mass. 755, 774, 323 N.E.2d 329 (1975) (in nonjury cases findings of fact are not set aside unless clearly erroneous). 'A finding is "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' J.A. Sullivan Corp. v. Commonwealth, 397 Mass. 789, 792 [494 N.E.2d 374] (1986), quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 [68 S.Ct. 525, 542, 92 L.Ed. 746] (1948). On the other hand, to ensure that the ultimate findings and conclusions are consistent with the law, we scrutinize without deference the legal standard which the judge applied to the facts. Marlow v. New Bedford, 369 Mass. 501, 508 [340 N.E.2d 494] (1976). Secretary of Envtl. Affairs v. Massachusetts Port Auth., supra [366 Mass.] at 773 [323 N.E.2d 329]. Thus, the 'clearly erroneous' standard of appellate review does not protect findings of fact or conclusions based on incorrect legal standards. See Marlow, supra." Kendall v. Selvaggio, 413 Mass. 619, 620-621, 602 N.E.2d 206 (1992). The judge's four general conclusions set forth above constitute legal conclusions rather than factual findings, and we review them without deference. ⁶

1. The judge's first two conclusions--that the defendant had acted in bad faith because it did not bid adequately on the property and failed to negotiate with the Sutherlands--were based on the factual findings that the defendant was aware of the Sutherlands' interest in the property, and that the Sutherlands "might be willing, with more negotiation, to pay more than what [the defendant] bid at the sale." See factual findings (f) and (g), supra. The evidence, however, does not support findings or conclusions that the defendant acted improperly in either rejecting the Sutherlands' initial offer or in declining to postpone the sale to negotiate further with them.

The law governing a mortgagee's responsibility to the mortgagor in the exercise of a power of sale is relatively straightforward. The mortgagee "must act in good faith and must use reasonable diligence to protect the interests of the mortgagor." Seppala & Aho Constr. Co. v. Petersen, 373 Mass. 316, 320, 367 N.E.2d 613 (1977), quoting West Roxbury Co-op. Bank v. Bowser, 324 Mass. 489, 492, 87 N.E.2d 113 (1949); Cambridge Sav. Bank v. Cronin, 289 Mass. 379, 382, 194 N.E. 289 (1935). The mortgagee's duty is more exacting...