Irene E. Yarde and Hilda A. Clara ("Plaintiffs") filed this action on September 2, 1987, seeking a declaration, pursuant to G.L. c. 231A, §1, that a $10,000.00 note, dated May 23, 1980, and a second mortgage on property owned by them, located at 50 Osceola Street in the Hyde Park District of Boston, securing such note, are null and void due to a lack of consideration. The Plaintiffs also assert a count against the Defendant; Irwin S. Brooks, a/k/a Irwin E. Cohen, for unfair and deceptive business practices, pursuant to G.L. c.93A. [Note 1] The matter was tried on August 28, 1989, at which time the proceedings were recorded and later transcribed by a court-appointed reporter. Three witnesses testified and fourteen exhibits, including a stipulation of agreed facts, were accepted into evidence. All of these exhibits are incorporated herein for purposes of any appeal. Neither the Plaintiffs nor the Defendant elected to submit post-trial briefs in this matter.
On all of the evidence, I find the following facts to be most pertinent hereto:
1. By deed from one Wilfred Phoenix (at times referred to herein as "Phoenix") dated May 23, 1980, recorded at Book 9448, Page 132 in the Suffolk County Registry of Deeds (Exhibit No. 3), Irene E. Yarde ("Yarde") and her mother, Hilda A. Clara (collectively referred to as "Plaintiffs"), acquired title to two parcels of land, with the buildings situated thereon, located at 50 Osceola Street in the Hyde Park District of Boston. The consideration for such conveyance set forth therein is $33,000.00. As part of this consideration, the conveyance was made "subject to an outstanding unpaid mortgage held by the Commonwealth Mortgage Company in the amount of $29,387.59, which the grantees assume and agree to pay". This mortgage is evidenced by an instrument recorded at Book 9376, Page 199 in the Suffolk County Registry of Deeds (Exhibit No. 7).
2. By four money orders, three of which are dated March 7, 1980 and the other of which is dated May 20, 1980, the Plaintiffs paid "to the order of Wilfred Phoenix" the sum of $1,750.00, which amount constituted the down payment on 50 Osceola Street (See Exhibit No. 12).
3. On May 23, 1980, the date of the closing on the 50 Osceola Street property, the Plaintiffs paid Wilfred Phoenix the additional sums of $2,350.00 (See Exhibit No. 12), and $600.00, said $600.00 payment being evidenced by a receipt, signed by Wilfred Phoenix, stating as follows:
Received of Irene E. Yerde [sic], the sum of SIX HUNDRED HUNDRED DOLLARS ($600.00) in cash re passing of 50 Osceola Street, Hyde Park, Massachusetts (See Exhibit No. 12).
4. At the closing held on May 23, 1980, the Plaintiffs also signed an instrument entitled "Direct Reduction Mortgage Note" ("$10,000.00 Note" or "Note") (Exhibit No. 10), whereby they, jointly and severally, promised to pay Phoenix or order the sum of $10,000.00. This $10,000.00 Note is secured by a second mortgage on the 50 Osceola Street property, which second mortgage is recorded at Book 9818, Page 37 in the Suffolk County Registry of Deeds (Exhibit No. 2). From June to July of 1980, the Plaintiffs made two payments on the Note, said payments totalling approximately $253.00. The consideration for the Note was certain work to be performed, and certain materials to be furnished, by Phoenix relative to the premises at 50 Osceola Street.
5. The Plaintiffs were not represented by counsel at the closing. At that time, neither counsel for Phoenix, nor any other party then present, adequately explained the Note, second mortgage or the consequences thereof to the Plaintiffs.
6. On August 29, 1980, Yarde and Phoenix signed a document entitled "Re: Financial Agreement Between Irene E. Yarde & Wilfred Phoenix" ("Agreement") (Exhibit No. 13), which document reads as follows:
Original agreement consists of $10,000 owed by the first party (Irene E. Yarde). First payment received June 23, 1980 for the amount of $239.00. Payments will be received by the second party (Wilfred Phoenix) monthly for said amount until completion of this agreement.
Second party must comply with the following agreement pertaining to location at 50 Osceola Street:
(1) Purchase and build of back stairs.
(2) Purchase and installation of hot water tank.
If the items mentioned above are not met, first party (Mrs. Irene E. Yarde) may deduct cost and labor for the same.
This Agreement appears to reflect only a portion of the agreed upon consideration for the $10,000.00 Note.
7. Inasmuch as the agreed upon renovations and related expenses were ultimately performed and paid for by the Plaintiffs or their agents, at a cost in excess of $10,000.00, and not by Phoenix, the $10,000.00 Note was not supported by consideration.
8. In a demand letter to Yarde, dated April 13, 1983 (Exhibit No. 4), the Defendant Cohen, then counsel to Wilfred Phoenix, with full knowledge of the Plaintiffs' defenses to the $10,000.00 Note, sought payment of the Note in full, alleging therein that such instrument was overdue.
9. By instrument dated December 13, 1983, recorded at Book 10689, Page 048 (Exhibit No. 8), Phoenix assigned the $10,000.00 Note to the Defendant Brooks, c/o the Defendant Cohen . At the time of this assignment, and at all times pertinent hereto, Cohen was, by his own admissions, the agent of Brooks. Further, at this time, Phoenix, Brooks and Cohen had full knowledge of the Plaintiffs defenses to the Note.
10. By letter to Yarde, dated January 11, 1984 (Exhibit No. 5), Cohen, as counsel for Brooks, further alleged that the $10,000.00 Note was in default.
11. By formal demand letter sent pursuant to G.L. c.93A, dated June 22, 1987 and addressed to Brooks, c/o Attorney Irwin E. Cohen (Exhibit No. 6), counsel for the Plaintiffs ordered Brooks to discharge the second mortgage and mark the $10,000.00 Note "paid in full".
The Plaintiffs herein contend that the $10,000.00 Note should be marked "paid" and the second mortgage on the 50 Osceola Street property should be discharged due to a failure of consideration for the Note. The Defendant Cohen, as agent for Brooks, asserts that Brooks is entitled to payment on the Note from the Plaintiffs, on the ground that he, Brooks, as a holder in due course of such instrument, holds the same free and clear of this defense. G.L. c.106, §3-302 defines a "holder in due course", as follows:
... a holder who takes the instrument (a) for value; and (b) in good faith; and (c) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.
Insofar as the foregoing facts indicate that Cohen was, at all times pertinent hereto, the agent of Brooks, both Cohen and Brooks were on notice of the Plaintiffs' defenses to the Note at the time of its assignment to Brooks on December 13, 1983. Accordingly, I decline to find that Brooks is a holder in due course of the $10,000.00 Note. As a mere "holder" of the Note, Brooks took such instrument "subject to ... the defenses of want or failure of consideration, nonperformance of any condition precedent, non-delivery, or delivery for a special purpose ... " G.L. c.106, §3- 306(c). Inasmuch as I have found herein that the Note was not supported by consideration, specifically Phoenix's performance of, and payment for, certain renovations on the 50 Osceola Street property, I find that Brooks took the $10,000.00 Note subject to this defense on the·part of the Plaintiffs and that, accordingly, said Note and second mortgage securing the same are null and void. The Defendant Brooks is hereby ordered forthwith to mark the Note "paid in full" and to discharge the second mortgage on the 50 Osceola Street property. Further, in consideration of the foregoing, the Plaintiffs are hereby awarded the sum of $1,000.00 as costs and attorneys' fees, said amount to be paid to the Plaintiffs by the Defendant within thirty (30) days of the entry of a final judgment herein, after all appeals have been resolved.
[Note 1] On December 31, 1987, Land Court Justice Robert V. Cauchon was designated as a Justice of the Superior Court for purposes of hearing this count of the Plaintiffs' complaint.