Opinion
No. 97-1888
December 21, 2001
MEMORANDUM OF DECISION AND ORDER FOR JUDGMENT BACKGROUND
Plaintiffs, Bankers Trust Company ("Bankers Trust"), have brought suit against defendants, Robert and Kathleen Herrick ("the Herricks"). The matter is a deficiency action in which Bankers Trust seeks recovery from the Herricks for the balance due on a promissory note after foreclosure of a mortgage secured by real property located at 35-37 Brigham Park, Fitchburg, Massachusetts. The Herricks were not the original makers of the promissory note, but assumed the liability of Joseph Abdo and Khalil Abdo pursuant to a written assumption agreement.
The parties agreed that the matter would be tried jury-waived and trial was held in the Worcester Superior Court on March 21, 2001. At trial, the case was submitted entirely on documentary evidence, which leads this Court to the following factual conclusions.
FINDINGS OF FACT
Banker's Trust is a California company with a usual place of business at 3 Park Plaza, Irvine, California.
Robert Herrick and Kathleen Herrick are individuals who reside at 75 Boucher Road, Lunenberg, Massachusetts.
On August 21, 1986, Joseph Abdo executed a promissory note in favor of Merchants National Bank of Leominster in the principal amount of $145,000.
The promissory note was secured by a mortgage dated August 21, 1986 on the property located at 35-37 Brigham Park ("the Property")in Fitchburg, Massachusetts.
Bankers Trust is the holder of the note and the mortgage.
On January 31, 1988, Joseph Abdo conveyed the property at 35-37 Brigham Park by quitclaim deed to Khalil Abdo.
The quitclaim deed to Khalil Abdo provided that Khalil would assume the mortgage to Merchants National Bank.
On January 17, 1989, Merchant's National Bank, Robert Herrick, Kathleen Herrick, Joseph Abdo and Khalil Abdo entered into a written Assumption Agreement ("Agreement") regarding the purchase of the 35-37 Brigham Park property by the Herricks.
The Agreement expressly provided that the Herricks would assume responsibility for payment of the balance due under the note and mortgage to Merchant's National Bank.
A deed to the Property was never executed, recorded or delivered to the Herricks by Khalil Abdo.
The Agreement also provided that neither Joseph Abdo nor Khalil Abdo would be released from their liability as mortgagors.
The Agreement was signed by all of the parties, notarized and recorded in the North Worcester Registry of Deeds on February 24, 1989.
The Herricks subsequently defaulted under the terms of the note and mortgage.
Banker's Trust began foreclosure proceedings on the mortgage pursuant to G.L. c. 244.
Merchant's National Bank was closed by the Federal Deposit Insurance Corporation ("FDIC"), which subsequently transferred its interest in this obligation to Banker's Trust.
Banker's Trust sent a letter by certified mail to each of the Herricks and each of the Abdos on April 17, 1996, notifying them of the default, its intent to foreclosure by power of sale, and the potential for a deficiency. The words "foreclosure" and "deficiency" were used in both the title and the body of the letter.
Banker's Trust sent a second letter to each of the Herricks and each of the Abdos by certified mail on November 8, 1996, again notifying them of the foreclosure sale of the Property and of the potential for a future deficiency suit. The words "foreclosure" and "deficiency" were used in both the title and the body of the letter.
On May 14, 1997, Bankers Trust caused the property to be sold at foreclosure sale, where the defendant, Robert Herrick, purchased the Property for the sum of $56,000.
DISCUSSION
In support of its deficiency suit, Banker's Trust relies on the written and notarized Assumption Agreement under which the Herricks assumed responsibility for payment of the balance due upon the note and mortgage secured by the Property. Banker's Trust concedes that, although parties expected that the Herricks would receive a deed to the property from Khalil Abdo under the terms of the Agreement, the deed was never executed and recorded. Banker's Trust nevertheless contends that the Herricks are bound by the Agreement, are in default under the terms of the note and mortgage and have been duly notified of the impending foreclosure proceedings. Banker's Trust further argues that, as of the date of the foreclosure sale, the Herricks owed $177,232.27 to Banker's Trust; Robert Herrick's successful bid of $56,000 at the foreclosure sale left the Herricks indebted, Banker's Trust maintains, for the deficiency balance of $121,232.27.
The Herricks, on the other hand, advance three grounds in support of their defense to Banker's Trust's claim for deficiency judgment. First, the Herricks contend that they are not liable under the note and mortgage because they did not receive consideration — to wit, the deed to the Property — required by the terms of the Agreement. Their second argument is that Banker's Trust failed to comply with the statutory notice requirements of G.L. c. 244, § 17B as a condition precedent to their pursuit of the deficiency action. Finally, the Herricks assert that Banker's Trust is estopped from pursuing the deficiency because of Banker's Trust's alleged representations concerning a compromise or workout agreement that would settle the matter, thus obviating the need for a foreclosure sale and deficiency demand upon the Herricks. For the reasons stated infra, Banker's Trust has the better of the dispute.
Consideration for the Assumption Agreement
To constitute consideration sufficient to establish an enforceable contract, there must be either a benefit to the promisor or a detriment to the promisee. Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 763 (1978); Marine Contractors Co. v. Hurley, 365 Mass. 280, 286 (1974). The court does not, except in extraordinary circumstances, assess the adequacy of the consideration; consideration that is of some value, however slight, is generally sufficient to support a contract.Barnet v. Rosen, 235 Mass. 244, 249 (1920).
Banker's Trust contends that the Agreement was supported by consideration sufficient to bind the Herricks to the contract. Its predecessor, Merchant's National Bank, was a party to the Agreement and permitted the Herricks and the Abdos to proceed with the transfer. That "permit" amounted to a benefit to the Herricks.
The Agreement expressly recited the consideration due the Herricks (Purchaser) from Merchant's (Mortgagee):
Whereas, in consideration of the execution of this agreement by mortagee, Purchaser is willing to assume the payment of the mortgage indebtedness due and owing from Mortgagor to Mortgagee . . .
[S]uch assumption having been agreed to by and between Mortgagor and Purchaser as part consideration for the conveyance as aforesaid of the mortgaged premises by Mortgagor to Purchaser; . . .
The term "Mortgagor" in the Agreement refers to Joseph Abdo and Khalil Abdo.
By the express language of the Agreement, therefore, the Herricks were to receive distinct consideration from each of the other parties to the contract. The Herricks argument of a failure of consideration might well operate in their favor were they engaged in a contest to enforce their contract with the Abdos, the original mortgagors, but is not compelling when brought to bear against the Mortgagee and its assignee, Banker's Trust. Because Merchant's granted its assent, allowing execution of the Agreement and permitting the Herricks to proceed with the purchase of the property, albeit unsuccessfully, consideration passed from Merchant's to the Herricks. Banker's Trust, current owner of the mortgage and note, is not disabled, by lack of consideration, from enforcing the terms of the Agreement as to the Herricks.
Notice of Deficiency
General Laws c. 244, § 17B has uniformly been recognized as providing protection for those who may be subject to liability for a deficiency after a foreclosure under a power of sale. If notified of possible liability, a party is afforded an opportunity to attempt to protect its interests at the foreclosure sale by stimulating bidding or by purchasing the property. See Palumbo v. Audette, 323 Mass. 559, 560-561 (1949);Seronick v. Levy, 26 Mass. App. Ct. 116, 117 (1996). Indeed, § 17B has been described as a "condition precedent" to c. 244, § 17C, which treats a foreclosure sale as a complete discharge of the mortgage debt and thwarts a post-foreclosure deficiency judgment, absent § 17B notice of intent to pursue a deficiency. See Guempel v. Great American Ins. Co., 11 Mass. App. Ct. 845, 850-852 (1981).
The Herricks dispute the sufficiency of the notice for the deficiency they received from Banker's Trust and rely on the Appeals Court's holding in Framingham Savings Bank v. Turk, 40 Mass. App. Ct. 384 (1996). The Appeals Court in Turk reversed the trial court's finding that actual, albeit oral, notice of a deficiency proceeding by the bank was sufficient to hold the parties liable.
The Turk facts are, however, distinguishable from those of the case at bar. In Turk, the mortgagors received only verbal notification of the deficiency proceedings from the mortgagee; there was no written notice of the bank's intention to pursue the deficiencies and, therefore, the bank's notice did not satisfy G.L. c. 244, § 17B. Turk, supra at 385. At bar, significantly different facts obtain. The Herricks concede, and the evidence shows, that they each received two written notices via certified mail from Banker's Trust informing them of the impending sale. Turk is, accordingly, inapposite and of no precedential value to the Herrick's cause.
The Herricks also argue that, because the letters from Banker's Trust were not precise in referring to the Assumption Agreement, the notice was invalid. That contention, too, is unconvincing.
G.L. c. 244, § 17B provides, in pertinent part, that:
No action for a deficiency shall be brought . . . by the holder of a mortgage note or other obligation secured by mortgage of real estate . . . unless a notice in writing of the mortgagee's intention to foreclose the mortgage has been mailed, postage prepaid, by registered mail with return receipt requested, to the defendant sought to be charged with the deficiency at his last address then known to the mortgagee, together with a warning of liability for the deficiency, in substantially the form below, not less than twenty-one days before the date of the sale under the power in the mortgage, and an affidavit has been signed and sworn to, within thirty days after the foreclosure sale, of the mailing of such notice. A notice mailed as aforesaid shall be a sufficient notice, and such an affidavit made within the time specified shall be prima facie evidence in such action of the mailing of such notice.
G.L. c. 244, § 17B continues as follows:
The notice and affidavit, respectively, shall be in substantially the following forms:
Notice of Intention to Foreclose and of Deficiency After Foreclosure of Mortgage.
To A.B. Street
You are hereby notified, in accordance with the statute, of my intention, on or after ___, to foreclose by sale under power of sale for breach of condition, the mortgage held by me on property on ___ Street in ___ in the County of ___ dated ___ and recorded with ___ deeds Book ___ page ___ to secure a note (or other obligation) signed by you, for the whole, or part, of which you may be liable to me in case of a deficiency in the proceeds of the foreclosure sale.
Yours very truly,
C.D. Holder of said mortgage.
Affidavit.
I hereby certify on oath that on the ___ day of (insert year) I mailed by registered mail, postage prepaid and return receipt requested, the notice, a copy of which appears below, directed to the persons or person at the addresses therein named which were the last addresses of such persons known to me at the time of mailing.
Signed and sworn to before me this ___ day of ___ (insert year)
The letters mailed to the defendants satisfied the statutory mandate. They were substantially in the same form as was set forth in example by the statute and were accompanied by the requisite affidavits. See G.L. c. 244, § 17B; Trial Exhibits 5-8. In particular, the November 8, 2001 letter, entitled "Notice of Intention to Foreclose Mortgage and of Deficiency After Foreclosure of Mortgage," included reference to a potential deficiency and a specific reference to the Assumption Agreement: "to foreclose . . . the mortgage dated January 17, 1989 . . . as affected by a mortgage assumption agreement dated January 17, 1989 and recorded with the Worcester County (Northern District) Registry of Deeds . . . for the whole or part of which you may be liable to Banker's Trust . . . in case of a deficiency in the proceeds of the foreclosure sale." See Trial Exhibits 7 8. The Herrick's contention that the notifications at bar failed to comport with G.L. c. 244, § 17B, founders on the facts.
In addition to statutory requisites, challenges to the adequacy of notice of foreclosure proceedings are viewed through the prisms of the mortgagee's obligations of good faith and diligence and the objective fairness in the disposition of the mortgaged property. See Pemstein v.Stimpson, 36 Mass. App. Ct. 283, 286-288 (1994). An analysis of those factors, in light of the evidence in the case at bar, shows that the Banker's Trust went to great lengths, in excess of its statutory duties, to notify the Herricks of the impending sale. The April and November notice letters to Robert and Kathleen Herrick were timely and contained references to a deficiency judgment; the November letters contained a specific reference to the Assumption Agreement. Based on the facts thus found, the Court concludes that Banker's Trust met its burden of proving that it complied with the condition precedent demanded by G.L. c. 244, § 17B, and provided the Herricks with sufficient notice of both the foreclosure and the deficiency.
In the end, when neither party was able to contact Khalil Abdo to resolve the deed issue, Banker's Trust determined that a foreclosure with a deficiency was the only realistic mechanism for the clearing of title to the property and for obtaining its due under the note.
Estoppel
Finally, the Herricks argue that Banker's Trust should be estopped from pursuing its right to a deficiency because it allegedly represented that a compromise workout proposal had been approved. Contending that, prior to foreclosure, they had discussions with representatives of Banker's Trust, which lead to an agreement under which they were entitled to purchase the property for an amount in full settlement of the lender's claim, the Herricks assail the right of Banker's Trust to proceed against them in pursuit of the deficiency.
In response, Banker's Trust admits that it had several telephone conversations with Robert Herrick and his attorney considering the title issue in the course of determining how to resolve their competing interests. Banker's Trust contends, however, that, while negotiations may have taken place with the defendants, no final agreement was reached between the parties. The Herricks have produced no evidence of any writing memorializing the agreement they claim to have struck with Banker's Trust.
The Herricks, in order to succeed on the estoppel argument, must show that they reasonably relied, to their detriment, on an unambiguous promise by Banker's Trust. See Upton v. JWP Businessland, 425 Mass. 756 (1997); Loranger Construction Corp. v. E.F. Hauserman Co., 6 Mass. App. Ct. 152, 154 (1978); Restatement of Contracts, § 90. The words or conduct of the promisor must be such that a reasonable person would rely upon the promise. Ford v. Rogovin, 289 Mass. 549 (1935). The Herricks contend that they relied on the willingness of the representatives of Banker's Trust to negotiate a compromise agreement that would prevent the foreclosure sale, but no evidence of a such an agreement exists in any form. In its light most favorable to the Herricks, we are left with evidence only of a readiness to seek an agreement. No record of a workout agreement between the parties appears in the file notes of Banker's Trust. See Trial Exhibit 10. If such an agreement had been reached, it would have been mentioned in the notes. Indeed, in view of the parties' oral stipulation at trial — that no record of a workout agreement appears in Banker's Trust file notes (Trial Exhibit 10) and that, had such an agreement been joined, it would have been reflected by said notes this court is constrained to conclude that no agreement existed sufficient to entitle the Herricks to avoid, by estoppel, the obligations they incurred by reason of the January 17, 1989, "Assumption Agreement."
CONCLUSION
This Court determines, by a fair preponderance of the credible evidence, that Banker's Trust shall prevail upon its complaint.
ORDER
It is hereby ORDERED that judgment shall ENTER for the plaintiff, Banker's Trust, in the amount of $121,232.27 against the defendants, Robert Herrick and Kathleen Herrick, jointly and severally.
DATED :December ___, 2001 Daniel F. Toomey Justice of the Superior Court