8 Mass. App. Ct. 892

August 24, 1979

In this action the plaintiffs seek to recover damages against Easthampton Savings Bank (bank) for breach of agreements to make mortgage money advances pursuant to construction loan agreements. Upon conclusion of the evidence introduced at a jury trial, a Housing Court judge on his own motion directed a verdict in favor of the bank. The judge was correct. The testimony and documents introduced in evidence showed that the plaintiffs had entered into construction loan agreements with the bank (evidenced by letters of commitment signed by the plaintiffs and by a bank official) secured by mortgages and notes to the bank for the purpose of financing the construction of five houses on lots owned by the plaintiffs. The proceeds of the loans were to be disbursed by the bank to the plaintiffs as construction progressed to pay bills for work done on or materials incorporated into the subject premises. After completion of one house the plaintiffs transferred the four remaining properties to A & R Builders, Inc. (A&R), wholly owned by the plaintiff Albert S. McLean, and A&R in turn transferred them to Meadowbrook Realty Corporation (Meadowbrook), owned by one Raymond F. Lucia. The bank notified the plaintiffs by letter that its board of investment had approved the plaintiffs' request to permit Meadowbrook to purchase the four properties subject to the mortgages. Guaranties of the mortgage notes were subsequently executed by Meadowbrook and Lucia. After the transfer of the properties by the plaintiffs, the bank ceased to advance construction monies to the plaintiffs and thereafter made the advances to Meadowbrook. The plaintiffs and A & R then brought an action against the bank and Meadowbrook. In the count against Meadowbrook (not relevant to this appeal except as it provides some context for understanding the circumstances leading to the action against the bank) A & R sought judgment against Meadowbrook based on its alleged failure to pay the agreed purchase price for the conveyance of the four properties to Meadowbrook. On appeal, the only matter before us is the count against the bank.

The plaintiffs contend that the transfers of title by them did not relieve the bank of its obligation to continue to advance the construction loan payments to the plaintiffs, absent a contemporaneous assignment of the plaintiffs' rights to receive the advances and a discharge of the plaintiffs' duties to the bank. They argue that they were not required by the letters of commitment personally to construct the houses or to retain title to the subject premises, that since the houses were substantially completed (albeit by a third party) the plaintiffs have complied with the terms of the letters of commitment, and thus that the further construction advances should have been made to them. We find these arguments untenable. It is clear from the documents in evidence (to be read together in order to interpret the parties' contract, Harding v. Broadway Natl. Bank, 294 Mass. 13, 19-20 [1936], and cases cited) that after transfer of title by the plaintiffs was effected,

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the bank was under no obligation to advance to the plaintiffs further instalments of the proceeds of the construction loans. The bank was free, under the terms of the original loan agreements with the plaintiffs and the terms of the mortgage, to elect to deal with any successors in interest with reference to the mortgages and the debts secured thereby in the same manner as with the plaintiffs. The evidence introduced at trial also included the bank's letter of assent to the transfer of the properties to Meadowbrook and copies of the assignments, signed by the plaintiffs, of "the tax escrow and other rights in connection with the mortgage loan[s]" to Meadowbrook. Further construction of the houses by Meadowbrook created no obligation on the part of the bank to advance the remainder of the loans to the plaintiffs. See Rothenberg v. Newton Mortgage Corp., 273 Mass. 399, 402 (1930); Williams v. Whitinsville Sav. Bank, 283 Mass. 297, 299-300 (1933). See also Evans Prod. Co. v. D.J. Dev. Corp., 6 Mass. App. Ct. 306, 308 n.2 (1978).

Judgment affirmed.


[Note 1] Rita M. McLean.