KATHLEEN A. HULL vs. NORTH ADAMS HOOSAC SAVINGS BANK

KASS, J. In the face of an imminent mortgage foreclosure sale on three properties, Kathleen A. Hull (Kathleen) brought an action against the mortgagee, North Adams Hoosac Savings Bank (bank). The complaint was filed on October 5, 1994, and the foreclosure sale took place November 16, 1994.

A copy of the complaint does not appear in Kathleen's record appendix, and we are left to infer that the theory of her action was that the bank had acted unlawfully in demanding payment of a mortgage note on which Kathleen was not a signatory [Note 1]. The case was tried to a jury, which returned a verdict for Kathleen of $300,000. The trial judge allowed a motion for judgment notwithstanding the verdict (judgment n.o.v.), and it was from

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the consequent judgment in favor of the bank that Kathleen now appeals [Note 2]. We conclude, as did the trial judge, that the bank exercised contract rights set out in the mortgage documents and did not deal unlawfully with Kathleen.

1. Facts. In reviewing action on a motion for judgment notwithstanding the verdict, Mass.R.Civ.P. 50(b), as amended, 428 Mass. 1402 (1998), we take the evidence in the light most favorable to the plaintiff. McAvoy v. Shufrin, 401 Mass. 593, 596 (1988). O'Shaughnessy v. Besse, 7 Mass. App. Ct. 727, 728-729 (1979). So viewed, the jury might have found the following salient facts.

Before his marriage to Kathleen on December 28, 1985, M. Harry Hull (Harry), who had a variety of modest real estate investments, acquired two additional properties that play a role in this case: (1) On September 16, 1985, he acquired 26-28 East Quincy Street, North Adams, with a first mortgage to the sellers; and (2) On December 12, 1985, he acquired 67 Millard Avenue, Clarksburg, with a first mortgage to the bank. Following their marriage, Harry, on September 8, 1986, conveyed those properties to himself and Kathleen, as tenants by the entirety, subject to the mortgage on the Millard Avenue property, which the grantees assumed and agreed to pay. That same day, Kathleen and Harry obtained an additional loan for both properties from the bank subject to the existing loan on Millard Avenue. On January 5, 1988, Harry acquired 17 Yale Street, North Adams, and obtained a further loan from the bank secured by a first mortgage on that property and a mortgage on Millard Avenue (a third mortgage). All three properties were investment properties, i.e., they contained rental units. The Hulls lived in a rental unit in the Millard Avenue property.

Two months later, in March, 1988, Harry decamped from the marriage and his obligations in connection with the three properties. As to those properties, things stood as follows:

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By June, 1988, payments on all three loans were in default. For some months, Harry's whereabouts were unknown, but, in July, 1988, Kathleen learned that he was holed up in Hoosac Falls, New York. In October, 1988, the bank threatened foreclosure if the loan payments were not made current. The bank did not point out to Kathleen that she was not a signatory on the Yale Street mortgage note and that she, therefore, had no individual liability to the bank as to that property [Note 3]. Kathleen borrowed $15,000 from her parents to bring current the payments on all the properties, including Yale Street.

In anticipation of divorce, for which he had filed, Harry, on May 31, 1989, conveyed to Kathleen his interest in the East Quincy Street property and the Yale Street property, subject to the mortgage on each, which Kathleen assumed and agreed to pay. A divorce judgment, entered March 4, 1991, ordered that Kathleen retain her interest in the three properties [Note 4]. Conveyance by Harry to Kathleen of his interest in the Millard Avenue property followed on May 5, 1991. For Kathleen these conveyances turned out to be less than an unalloyed blessing. She struggled with the properties, and her ability to service the mortgage debt was no better than sporadic. Through her lawyer, she tried to restructure the financing with the bank, including surrendering one property to the bank and hanging on to the other two. The bank, however, insisted that all three loans be made and kept current. Ultimately, as marked in the opening

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paragraph of this opinion, the bank completed foreclosure proceedings on November 16, 1994, and by that time Kathleen had initiated her action against the bank.

2. Discussion. We have laid out the facts in some detail and at some length to test the correctness of the grant of judgment n.o.v. Kathleen's primary contention is that the bank owed her a duty to explain that she was not liable on Yale Street. Failing to do so, she says, saddled her with operating and attempting to maintain mortgage service on all three properties, a burden that was her undoing. The jury found (by special verdict) that the bank's insistence on payment of mortgages on all three properties was a failure on the part of the bank to exercise good faith in the bank's dealings with Kathleen and that this inflicted $300,000 in damages on her.

The facts do not admit of the finding of failure by the bank to exercise good faith; the question of damages falls by the wayside with that conclusion. Although Kathleen was not on the Yale Street mortgage note in October, 1988, when the bank first asked her for payment on that property along with the other two loans, she had already acquired an undivided interest in the primary security for that note, i.e., the Yale Street property, by deed from Harry dated February 16, 1988. In addition, the Yale Street loan from the bank was cross-collateralized by a third mortgage loan on Millard Avenue. Consequently, a default on Yale Street triggered a default on Millard Avenue. In turn, a default on Millard Avenue caused a default on East Quincy Street because those two properties had been mortgaged to the bank together to secure the September 8, 1986, loan. On the basis of the loan documents between the bank and the Hulls, the bank was quite within its rights in asking that the loans involving all three properties be made current, on pain of foreclosure if they were not. See Mechanics Natl. Bank v. Killeen, 377 Mass. 100, 108 (1979).

Had there been any doubt about Kathleen's interest in Yale Street, that was resolved by her accepting sole title to it on May 31, 1989, with a proviso in the deed that the grantee, by accepting the deed, assumed and agreed to pay the mortgage to the bank. She then became personally liable on the Yale Street debt. McRae v. Pope, 311 Mass. 500, 505 (1942). Reidle v. Peterson, 29 Mass. App. Ct. 380, 381 (1990). She also acquired the title to the Millard Avenue and East Quincy Street properties.

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Between the time of Kathleen's acquisition of sole title to the three properties on May 31, 1989, more than five years went by before the bank foreclosed on the three loans in November, 1994. The forbearance of the bank did not work a waiver of its rights as a mortgagee under the loan documents nor was it inequitable for the bank to exercise its contractual rights under the governing documents. Sandler v. Green, 287 Mass. 404, 407-408 (1934). Petti v. Putigano, 8 Mass. App. Ct. 293, 296 (1979).

It follows that the judge correctly allowed the motion for judgment n.o.v.

Judgment affirmed.