State Realty Co. of Boston, Inc. v. MacNeil Bros. Co.

135 N.E.2d 291, 334 Mass. 294, 1956 Mass. LEXIS 665

• Court: Massachusetts Supreme Judicial Court
• Decided: June 8, 1956
• Status: Published

Opinion

Qua, C.J.

These are two suits in equity. The first is a suit by the original plaintiff, hereinafter called State Realty, against the plaintiff in the second suit, hereinafter called MacNeil Bros., and another for an order in accordance with the Federal soldiers’ and sailors’ civil relief act authorizing foreclosure of a mortgage given by MacNeil Bros, to Angus M. MacNeil, hereinafter called MacNeil, and subsequently assigned to State Realty, covering some twenty-one parcels of real estate containing about one hundred tenements in Somerville and Cambridge. The second suit is by MacNeil Bros, against State Realty for redemption from the same mortgage. The two suits were tried together, and the evidence is reported.

We deal first with certain preliminary matters.

At the outset we are confronted with a motion by State Realty to dismiss the appeals of MacNeil Bros, from the final decrees on the ground, among others, that MacNeil Bros, did not give the clerk an order for the preparation of the papers within ten days after the cases became ripe for final preparation and printing of the record, as required by G. L. (Ter. Ed.) c. 231, § 135, as amended by St. 1941, c. 187, § 1. Even where, as here, both parties appeal each must give the order in writing for preparation of the papers. Turgeon v. Turgeon, 330 Mass. 402. Compare Schaffer v. Leimberg, 318 Mass. 396, 406, where the failure related to the payment of the estimated cost, and the holding of this court was in effect that the cost need not be paid twice. The affidavit presented to us by State Realty, taken with the docket entries, shows that the cases became ripe for final preparation and printing of the present record on February 23, 1955, when the trial judge finally determined what matter should be printed. Rule 2 (F) of the Rules for the Regulation of Practice before the Full Court (1952), 328 Mass. 694. It is true that the docket entries appear to show that on May 6, 1955, one of the judges of the Superior Court made an order, purportedly under Rule 7, which might be construed as intended to extend the time for the filing of a designation by MacNeil Bros, until May 27, 1955, but this order was not made until after the time from February 23, 1955, allowed by G. L. (Ter. Ed.) c. 231, § 135, for ordering the preparation and printing of the record had expired. After the statutory period has once expired no order can be made having the effect of extending the statutory time. This is a matter of interpretation of § 135. Buchannan v. Meisner, 279 Mass. 457, 460-462. Stanwood v. Adams Garage Inc. 281 Mass. 452. Flood v. Grinnell, 286 Mass. 214. Royal Tool & Gauge Corp. v. Clerk of the Courts for the County of Hampden, 326 Mass. 390, 392. See Gifford v. Commissioner of Public Health, 328 Mass. 608, 618. There is nothing in Rule 7 that permits an order inconsistent with this statutory interpretation. MacNeil Bros, did not give its order for preparation of the papers within ten days after February 23, 1955. Its appeals must therefore be dismissed. However, this has no substantial effect upon the outcome of the case because the matters hereinafter dealt with are open on the appeals of State Realty and are not determined more favorably to MacNeil Bros, than in the court below. Turgeon v. Turgeon, 330 Mass. 402, 409.

There was no error in overruling the demurrer of State Realty in the second suit. The bill for redemption is somewhat inartificially drawn, but it sufficiently identifies the mortgage and the parties interested in it, alleges that the mortgage is upon property of the plaintiff, and offers to redeem. We do not see that anything more need appear upon the face of the bill. Moreover, the demurrer is to the whole bill and not to any part of it. Baker v. Paeff, 318 Mass. 366, 367-368. Collector of Taxes of Lowell v Slafsky, 332 Mass. 700, 704.

We think there was no error in the overruling of State Realty’s plea in the second suit. The. plea is double, but we pass that point, especially as only the first part has been argued. The contention there is that the matter contained in the second suit, that is, MacNeil Bros.’ claim for redemption from the mortgage, should have been set forth by way of counterclaim in State Realty’s suit for an order authorizing foreclosure of the mortgage and not by way of independent bill, because of the provisions of Rule 32 of the Superior Court (1954) requiring that the “answer, without cross bill, must set up any counterclaim . . . arising out of the transaction which is the subject matter of the suit, which might be the subject of an independent suit in equity, ” and that “No cross bill shall be filed.” The rule also contains a provision that the court “in its discretion may strike out any counterclaim if it appears that the matter cannot conveniently be determined in the suit.” State Realty’s suit was brought under St, 1943, c. 57, as amended in § 1 by St. 1945, c. 120, § 1. These statutes were passed in aid of the Federal soldiers’ and sailors’ civil relief act, U. S. C. (1952 ed.) Title 50, Appendix, § 532. The subject matter of State Realty’s suit was merely the obtaining of a court order required by the Federal law before resort could safely be had to the means of foreclosure by entry and sale under power commonly employed for generations in foreclosing mortgages in this Commonwealth. It was not the purpose of the State statutes or of the Federal statute or of Rule 32 to require the bringing of a plenary suit such as is regularly employed in many States for the foreclosure of mortgages, a method seldom employed here. Morse v. Stober, 233 Mass. 223, 226. John Hancock Mutual Life Ins. Co. v. Lester, 234 Mass. 559, 563. See Old Colony Trust Co. v. Great White Spirit Co. 178 Mass. 92; Hoffman v. Charlestown Five Cents Savings Bank, 231 Mass. 324, 329. We do not doubt the power and duty of equity courts in this Commonwealth to protect the serviceman to the full extent required by Federal law, but we think it was the purpose of the State statutes hereinbefore cited to provide means of furnishing that protection without the abandonment of the simple methods of foreclosure in common operation and the substitution of long drawn out and expensive procedures to which we were not accustomed. For these reasons we think that a claim by a mortgagor for redemption and accounting need not necessarily be pressed by way of counterclaim to a bill by a mortgagee for a simple court order under a statute permitting him to proceed to foreclose by local methods. If this is not so, many foreclosures can be turned into prolonged accountings while the property deteriorates. At least it seems there is no reversible error in overruling a plea which sets up the procedural defence of failure to file a counterclaim that might well be struck out under Rule 32 before the hearing of the case. If a mortgagor should tender every cent due to a mortgagee while the latter was advertising a proposed foreclosure sale but before actual foreclosure by sale would the mortgagor be barred from maintaining his suit for redemption because he had failed to set up a counterclaim in the mortgagee’s suit for authority to sell? We think not. We do not overlook the fact that a counterclaim was adjudicated in Lynn Institution for Savings v. Taff, 314 Mass. 380, but the question there was whether certain personal property was subject to the mortgage and the issue therefore related to the kind of order to be made by the court in permitting the sale. No questions of redemption and accounting were involved. See further Guleserian v. Pilgrim Trust Co. 331 Mass. 431, 432-434.

A fourth problem arises from an interlocutory decree made in the second case at an early stage in the litigation that the hearing on the merits proceed “without any claim for waste • • • [°r] damages to the plaintiff [MacNeil Bros.] arising out of the entry and possession of the premises ... by the defendant [State Realty] ... or any evidence pertaining to the alleged waste” and that the plaintiff (MacNeil Bros.) “reserves its right to press an action for waste or damages resulting from the entry and possession by the defendant ... in any other action or actions. ” State Realty appealed from this decree. It will be observed that this decree went beyond the mere order of presenting the evidence and purported to cut the matters of waste and damages entirely out of the case and to reserve those matters for determination in some future case or cases. It seems to us, however, that these matters were necessarily involved in and a part of the accounting in a suit for redemption, and that the course taken resulted in splitting the cause of action into parts and was beyond the power of the court. It deprived Mac-Neil Bros, of any credit for waste and damages in this case. Canning v. Shippee, 246 Mass. 338, and cases cited. Franklin v. North Weymouth Cooperative Bank, 283 Mass. 275, 279-280. Dearden v. Hey, 304 Mass. 659. Derderian v. Union Market National Bank, 326 Mass. 538. The hearing was conducted in accordance with the interlocutory decree, and the error is of course reflected in the final decree. We shall have occasion to deal with it in that connection.

Facts as found by the trial judge are these: Sometime prior to 1950 the law firm then consisting of Orlov, Cowin and Cohen and later of Orlov and Cowin, hereinafter called the firm, performed services for MacNeil as an individual, but being unable to agree with him as to the amount of its fees, threatened to attach real estate of two corporations controlled by him, and drew up a writ with an ad damnum of $25,000. MacNeil desired to avoid such an attachment. After further negotiation it was agreed that MacNeil would have MacNeil Bros., also a corporation controlled by him, give a mortgage to him on the properties in Somerville and Cambridge for $25,000, the ad damnum in the writ, and that he would assign the mortgage to the firm upon a so called security agreement to secure the firm for any amount that the firm might recover in the proposed action against MacNeil. This understanding was carried out. MacNeil Bros, gave a mortgage to MacNeil which he in effect assigned to the firm and the firm later assigned to State Realty, a corporation formed by the firm whose sole function has been to hold the mortgage and manage the properties. The security agreement contained provisions for realizing upon the note and mortgage therein pledged as security in the event of failure to pay any judgment that the firm might recover against MacNeil by sale at any broker’s board or at public or private sale and for purchase at any such sale by an assignee of the note and mortgage. There were many other provisions which we do not consider it necessary to set forth here.

On March 15, 1954, the firm did recover judgment against MacNeil in the sum of $10,079.12, and when the judgment was not paid within the time stipulated in the security agreement, after notice to MacNeil and MacNeil Bros., the firm caused the note and mortgage to be sold at a sale which seems to have amounted substantially to an auction held under the auspices of R. L. Day and Company at the office of the Boston Real Estate Board at 7 Water Street, Boston. MacNeil was a member of this board. The firm bought in the note and mortgage for $8,000 and credited that sum, less $40.60 expenses, on the judgment. After the organization of State Realty the firm, as stated above, caused the note and mortgage to be assigned to that corporation, which now claims the right as absolute owner of the note and mortgage to enforce them against the properties to the full amount of $25,000 and interest, regardless of the credit just mentioned and of the fact that the judgment recovered by the firm was for less than half the amount named in the note.

The trial judge found that the sale by the pledgees of the note and mortgage was invalid. We are unable to follow him in this finding. The facts fully appear in the evidence. The judge may have been influenced in his finding by evidence, some of it conflicting, that the sale was held in a back room reached through several doors on the second floor of a privately owned building. On the other hand there was much evidence that persons were going to and coming from this room, which was a large one. There had been general advertising of the time and place of sale. Other securities were sold at the same time and place. We cannot believe that any person of average intelligence would have had difficulty in finding a sale conducted under the auspices of R L. Day and Company at the offices of the Boston Real Estate Board at 7 Water Street in Boston. Sales of securities can hardly be conducted on the street like sales of real estate. See Winchester Rock & Brick Co. v. Murdough, 233 Mass. 50; DesLauries v. Shea, 300 Mass. 30, 34-36. We find nothing in G. L. (Ter. Ed.) c. 100, § 5, as amended by St. 1932, c. 156, § 1, and § 6, as appearing in St. 1949, c. 297, § 4, that renders a sale invalid because the person who acted as auctioneer was licensed only in another town. Neither do we find anything in G. L. (Ter. Ed.) c. 255, §§ 8-10, affecting the validity of a sale made in accordance with a power contained in the instrument of pledge.

Moreover, in any event it is difficult to see how the validity of a sale made by assignees of a mortgage to themselves purportedly under the terms of an assignment in the nature of a pledge and for the purpose of cutting off any interest of the mortgagee-pledgor is material in proceedings solely between the mortgagor and the successor of the assignees to which the original mortgagee-pledgor is not a party.

The judge, however, made certain other important findings which are supported by much evidence and cannot be pronounced plainly wrong. He found that the note and mortgage given by MacNeil Bros, to MacNeil and by him assigned to the firm and by them assigned to State Realty was given and delivered “for the special purpose, as security only, for and to the extent, of the satisfaction of any judgment which . . . [[the firm] might recover in the said action . . that Orlov (a member of the firm) knew this; that the note and mortgage were written for $25,000 because that was the ad damnum in the writ upon which the firm intended to make its attachment and because all parties understood that the liability would not exceed that amount. He found that State Realty is not a holder in due course. He ruled that the note is security for the amount of the judgment only. The ruling was right. In suits in equity for foreclosure of and redemption from mortgages the full facts can be shown as to what was intended to be secured. Holbrook v. Bliss, 9 Allen, 69. Freeland v. Freeland, 102 Mass. 475, 480. Hannan v. Hannan, 123 Mass. 441. Hampden Cotton Mills v. Payson, 130 Mass. 88. Donohue v. Chase, 139 Mass. 407, 409. Taft v. Stoddard, 142 Mass. 545. Saunders v. Dunn, 175 Mass. 164. Brouillard v, Stimpson, 201 Mass. 236. Page v. Franklin, 214 Mass. 552, 555. Glassman v. Ficksman, 238 Mass. 580, 586. Pearson v. Mulloney, 289 Mass. 508, 515. Kagan v. Levenson, ante, 100, 104. Tiffany on Real Property (3d ed.) § 1401. G. L. (Ter. Ed.) c. 244, § 27. This principle has been applied in cases where the amount actually intended to be secured was found to be less than the face amount of the mortgage note. See in addition to the cases cited above Hart v. Goldsmith, 1 Allen, 145, 148-149; Merchants’ & Farmers’ Bank v. Rainer, 213 Ala. 530; Trustees of Mutual Loan Association v. Tyre, 26 Del. 88, 97; Walker v. Carleton, 97 Ill. 582; Hicklin v. Marco, 56 Fed. 549. The real purpose for which it is found the $25,000 note was given distinguishes the case from Seder v. Gould, 274 Mass, 223.

We are not aware of any requirement that a plaintiff seeking to redeem must set forth in. his pleading the items of indebtedness which the mortgage was given to secure or other items of the accounting for which he asks.

State Realty contends that MacNeil Bros, is estopped to deny that the note and mortgage were given for some kind of debt owed by MacNeil Bros, to MacNeil and is estopped to claim that the real object was to secure a judgment which the firm might recover against MacNeil in its proposed action. A short answer to this contention is that the evidence makes clear that the firm and its creature, State Realty, had full knowledge at all times of the true purpose of the note and mortgage and were in no respect deceived or misled relative thereto. The evidence of any debt from MacNeil Bros, to MacNeil was most vague and unconvincing. In one place it was referred to as for services and in another as for money lent. No details appeared as to its amount or the time or circumstances of its supposed creation.

It is contended that there was error in admitting MacNeiPs testimony that the books of MacNeil Bros, did not show that the mortgage was given as payment of a debt or as payment for anything. If there was error in this, the evidence, in view of all the other evidence in the case, was too trifling to have affected the findings. See Commonwealth v. Best, 180 Mass. 492, 495-496.

We now turn to the accounting as embodied in the final decree appealed from in the second case.

In our opinion the sum of $2,000 received by or in behalf of the firm from one Dunn upon delivery by the firm of a partial release of one of the mortgaged parcels should not be allowed as a credit to MacNeil Bros. It appears from exhibit 20 that MacNeil Bros, agreed that the firm should not be obligated to allow this credit. See also exhibit 21.

Findings of the judge show that after State Realty took possession under the mortgage and began to collect the rents MacNeil attempted in various ways to prevent such collection. He "brought several law suits to embarrass, restrain and enjoin” State Realty. His activity "created confusion in the management of the properties, and has required greater effort and attention than might otherwise have been necessary.” The judge found that $2,000 would be the fair value of legal services to the mortgagee in defending these suits and in bringing other proceedings to establish and maintain its possession. However, he disallowed this item. It seems to us that it was a proper item of charge and should have been allowed. Bangs v. Fallon, 179 Mass. 77, 85. Haczela v. Krupa, 219 Mass. 261. City Institution for Savings v. Kelil, 262 Mass. 302, 307. Altobelli v. Montesi, 300 Mass. 396, 401. Davis v. Continental Realty Co. 320 Mass. 428, 431. Kacouris v. Loukas, 333 Mass. 44, 50. G. L. (Ter. Ed.) c. 244, § 20.

The judge found that liability insurance the premium for which was $1,187.68 was “reasonable for the protection of the mortgagee in possession.” The properties are found to have been in a “deplorable” condition. We think that in accord with recent suggestions this item should have been allowed. Am. Law of Property, § 16.103. Glenn on Mortgages, § 213. See Altobelli v. Montesi, 300 Mass. 396, 400. Compare, however, Saunders v. Frost, 5 Pick. 259, 270; Boston & Worcester Railroad v. Haven, 8 Allen, 359, 362.

Except as herein stated, we agree with the items in the account as found by the trial judge and stated in the decree appealed from in the second case.

It remains to deal with what we regard as the most difficult problem in these cases, and that is how this litigation is ever to be brought to an end. The claim of MacNeil Bros, for so called waste and damages in itself seems likely to involve issues as to what repairs were made or ought to have been made and at what cost and what rents ought to have been collected with respect to properties containing at the beginning about one hundred tenements for a period now approaching two years. If inquiry into this matter is to be conducted with the same insistence and pertinacity that have hitherto marked the conduct of this litigation no end is even in sight. We think MacNeil Bros, should be permitted to redeem, if it is able and sees fit, without waiting for a final decision in the matters of waste and damages, especially as it insists that State Realty is insolvent. Such a course cannot harm State Realty, since it will receive all that it could ever get, and the only issue left will be whether it owes something to MacNeil Bros, on account of waste and damages. That issue will eventually be determined in this same suit and not in some other suit or action hereafter to be brought.

Although we agree with much that is contained in the decree in the second suit (MacNeil Bros. v. State Realty for redemption) entered November 26, 1954, we do not agree in some particulars already mentioned, and in any event the accounting should be brought down to date. We think convenience will be served if that decree is wholly reversed and a new decree is entered as hereinafter provided.

Therefore: in the second suit (MacNeil Bros. v. State Realty for redemption) the interlocutory decree overruling State Realty’s plea and demurrer is affirmed; the interlocutory decree of October 20, 1954, that the trial should proceed without regard to waste or damages is reversed; State Realty’s appeal from an interlocutory decree entered December 17, 1954, as of December 16, 1954, relating to the payment of money into court, having become immaterial, is dismissed; the final decree of November 26, 1954, is reversed, and the case is to stand for further hearing to bring the accounting down to the latest practicable date substantially in the manner of the present decree with such changes in the figures as the passing of time has made necessary and with the changes indicated in this opinion. A new decree permitting redemption is then to be entered which shall be substantially similar to the decree of November 26, 1954, except as hereinbefore stated and except for necessary changes in amounts and except that: (1) The first paragraph of the present decree, wherein the sale of the mortgage and note under the security agreement is held void, shall be omitted, (2) The eleventh paragraph relating to waste is to be omitted, (3) The thirteenth paragraph is to be omitted, (4) Proper credit is to be given to MacNeil Bros, for the sum paid by it into court and the disposition of that sum in the event of redemption is to be provided for, (5) The part of the decree providing for immediate redemption is to be conditional upon MacNeil Bros, waiving, within such time and in such manner as the court may fix, its right to have waste and damages taken into account in ascertaining the amount it must pay to redeem, leaving the issue of waste and damages for later determination in this suit, and (6) The decree shall provide that if MacNeil Bros, does not waive its right to have waste and damages considered in fixing what it must pay to redeem or does not redeem in accordance with the decree now to be entered the case is to proceed for the determination of the issue of waste and damages, to be followed by a final decree for redemption in which any sum found due for waste and damages is to be taken into account with the other items.

In the first suit (State Realty v. MacNeil Bros, for authority to foreclose the mortgage) such modifications, some of which will be considerable, are to be made as are required by the directions herein given as to the second suit in order to produce a consistent result, and as so modified the decree is affirmed.

MacNeil Bros.’ appeals from the final decrees are dismissed.

No costs of any of these appeals shall be allowed.

So ordered.