CHARLES L. SMITH, TRUSTEE OF FORTY-SIX TROWBRIDGE REALTY TRUST vs. THE DIME SAVINGS BANK OF NEW YORK, FSB and GARDEN MANAGEMENT CO., INC.

Charles L.Smith, Trustee of Forty-Six Trowbridge Realty Trust and an architect seeks in this complaint to set aside the foreclosure by entry and sale of a mortgage given by him to The Dime Real Estate Services-Massachusetts, Inc. dated December 30, 1988, filed in the Middlesex County Registry District of the Land Court as Document No. 790911 and noted on Certificate of Title No. U7181, Book U36, Page 181 and assigned by the mortgagee to The Dime Savings Bank of New York, FSB ("Dime"). The gravamen of the plaintiff's dispute with Dime centers on the price at which it bid in the property at the mortgage foreclosure sale, but the mortgagor also complains a) that the legal advertisements were published in the Boston Herald, rather than in the Cambridge Chronicle used by the Land Court in the proceedings pursuant to the Soldiers' and Sailors' Civil Relief Act, b) that the additional promotional advertising appeared in the Boston Globe with properties in other communities of a lesser financial worth than locus and c) that the foreclosure sale was held prior to the actual completion by the Land Court of the paper work pursuant to the Soldiers' and Sailors' Civil Relief Act. The complaint also alleges lack of notice to the mortgagor. [Note 1] Dime for its part has amended its answer to include a counterclaim for possession. I have concluded that the sale complied with the provisions of Massachusetts law and that the complaint will be dismissed. I find no jurisdiction in the court, however, to award possession of the premises to the defendant and leave it to its remedies pursuant to the provisions of G.L.c. 239, §1.

A trial was held at the Land Court on November 12 and November 13, 1991 at which a stenographer was appointed to record and transcribe the proceedings. The plaintiff called as witnesses Charles L. Smith, his wife Susan Smith and Ann Mechling, an assistant assessor for the City of Cambridge. Witnesses for the defendant were Donna Stillwell, an employee of the law firm representing Dime in the foreclosure, Stephen Dean, a licensed auctioneer who conducted the mortgage foreclosure sale, Jack S. Smolokoff, counsel for Dime, and Karen Harmon, a real estate salesperson. A total of twenty-four exhibits were introduced into evidence, all of which are incorporated herein for the purpose of any appeal.

On all the evidence I find and rule as follows:

1. Charles L. Smith, Trustee of the Trowbridge Terrace Realty Trust under a declaration of trust dated December 11, 1984 and registered with the Middlesex South Registry District of the Land Court as Document No. 672744 was the declarant of the Trowbridge Terrace Condominium, the Master Deed of which is dated September 1, 1987 and registered as Document No. 754666. Unit C in the Trowbridge Terrace Condominium at 46 Trowbridge Street in said Cambridge was conveyed to the plaintiff by the declarant and is evidenced by Transfer Certificate of Unit Ownership No. U718l.

2. The plaintiff's title to the unit was subject to the mortgage to Dime as well as to an attachment made by Cambridgeport Savings Bank and a tax title held by the City of Cambridge.

3. In September of 1989 the plaintiff was delinquent in his payments to Dime but was able to bring the mortgage current by payment at that time of $37,731.21 (Exhibit No. 8A) together with an additional sum of $3,244.25 (Exhibit No. 8B).

4. After the plaintiff learned of the complaint filed by Dime in the Land Court for authority to foreclose the mortgage pursuant to the provisions of the Soldiers' and Sailors' Civil Relief Act, the plaintiff called the office of Messrs. Teicholz and Kronick, attorneys for Dime, to request that he be given notice prior to any advertising of the sale. At that time he was questioned on the telephone as to whether he wished to enter into a forbearance agreement with the bank, but he replied that he needed an opportunity to raise the funds to cure the default. He did not again approach representatives of Dime nor was he given notice by them other than as required by statute. The law firm's representative made no commitment to give telephone notice but may have overestimated the time before a sale would be scheduled.

5. There is no question that the mortgage was in default both as to the payments due thereunder on the note secured thereby and as to payment of the real estate taxes owed the City of Cambridge.

6. The mortgagee having filed its complaint to foreclose on April 26, 1991 the provisions of St. 1990, Chapter 496 were applicable to it. This legislation eliminated the necessity for a court approval after the sale pursuant to a power in a mortgage and limited court proceedings to authorization of a foreclosure by entry and sale. The statutory procedure is followed to eliminate any possibility of an interest held by a third party who is or may be in the military service, not a factor here.

7. The volume of mortgage foreclosures in the Land Court in 1990 and 1991 produced a serious backlog, and the Court was unable to issue its judgments seasonably as they were entered, a condition which continues. However, it is possible to compute the likely date of the judgment in relationship to the return day, and mortgagees may then arrange the statutory advertising required by the provisions of G.L. c. 244, §14 to foreclose a mortgage and thereafter hold a sale at auction prior to having the Court's judgment in hand.

8. In the present case Dime's attorneys estimated that the judgment would be entered in early July, the return day being July 1, 1991 (and in fact the actual date of the judgment is July 10) and scheduled the foreclosure sale for August 29, 1991, the Thursday prior to Labor Day.

9. The legal advertising required by the statute appeared in the Boston Herald on August 3, 10 and 17, which complied with the Statute, G.L. c. 244, §14 (Exhibit No. 15). The promotional advertisements appeared in the Boston Globe on August 25 and August 28, 1991 (Exhibit Nos. 11A and 11B). The latter advertisements in addition to referring to locus also mentioned properties on Highland Street, Roxbury, Monson Street, Mattapan, two condominiums on Cottage Street in East Boston and a condominium on Symphony Road in Boston. It would have been unusual for the promotion to catch the eyes of someone interested in Cambridge real estate since the other properties were not comparable. However, the caption did refer to Cambridge. The Land Court citation required publication pursuant to the Soldiers' and Sailors' Civil Relief Act in the Cambridge Chronicle, but this newspaper is a weekly, and the mortgagee was free to choose a daily newspaper for the legal advertisement if it so elected.

10. The legal advertisement and the promotional advertising each called for a deposit of $5,000 to qualify as a bidder at the sale of Unit C. The single family homes in the promotional advertisements had a deposit of $10,000 as a requirement, the condominium units the lesser figure.

11. The plaintiff alleged that he did not receive the statutory notice of the sale of the property and that he first knew that it was taking place when his wife saw strangers outside the gate and they sought admission. The plaintiff was advised of the sale by certified mail addressed to him at the correct address, but he neglected to claim his mail. He cannot now be heard to complain that he did not know of the sale. He similarly failed to accept the mailings pursuant to the Land Court proceeding, and in the latter instance he was served by deputy sheriff.

12. The mortgagee scheduled a sale for a date by which it assumed the Land Court would have issued its judgment in accordance with the provisions of Statute 1990, Chapter 496. The judgment in fact is dated July 10, 1991 and now has been registered with said registry district. However, the backlog in the Court is such that the actual judgment in fact was not issued until after the sale although it is dated prior thereto.

13. The plaintiff also attacks the price at which the property was sold. The assessed value of the premises for the most recent assessment in 1991 was $598,101 (prior to application of the residential exemption). An assistant assessor in the revaluation department of the City of Cambridge testified the value as of January 1 to be $580,000. The plaintiff's opinion of its worth was $585,000 to $595,000, or even higher, and the real estate salesperson appraised it for the mortgagee at $330,000 to $350,000 with a drive-by appraisal that was not a learned study. Dime's appraisal before the loan was made was substantially greater. I discount testimony that the economy has not impacted the Cambridge market. Of course, a forced sale traditionally does not realize a price negotiated by a willing seller and buyer. With all these factors considered I place the fair market value at approximately $425,000 to $450,000 at the time of the auction, but that does not imply that an auction sale would realize this amount.

14. At the sale those attending were refused entrance to Unit C. The auctioneer's flag was placed on the front of the security gate, and at some stage it was pulled down by parties unknown. The auctioneer handed out copies of the legal notice and the certificate of municipal liens. After the entry was made the attendees moved to a driveway to the right of the building as it was dangerous to stand in the street, and there were too many attendees to fit on the sidewalk. Approximately twenty-four persons were present. The auctioneer read the legal notice, a supplemental memorandum and the information on the certificate of municipal liens; he also answered several questions. Four persons qualified to bid at the sale at which about twenty-four persons were present.

15. The attorney for Dime opened the bids at $200,000, and one Siegel, an outsider, bid $201,000. Dime's attorney then bid $220,000 and there being no further bids, he raised his bid to $239,997.70 in accordance with his client's instructions. This figure represented seventy percent of the value of the premises as estimated by the mortgagee.

16. The required deposit to qualify as a bidder at the sale was $5,000 which does not violate the law even though the plaintiff contends it was too low and denigrated the property. This mortgagee has set a standard practice of requiring a deposit of $5,000 for a condominium unit and $10,000 for a single family residence. In the latter instance there are many properties at the sale of which a deposit of that size might be considered chilling the sale. The plaintiff's argument is unique. There is no legal principle which requires a larger deposit to suggest to the public a higher value for the property to be foreclosed, and usually the judiciary is concerned that a large deposit has chilled the sale.

The rule on mortgage foreclosures is well settled in this Commonwealth. As was said in Sher v. South Shore National Bank, 360 Mass. 400 (1971) "a mortgagee in executing a power of sale contained in a mortgage is bound to exercise good faith and put forth reasonable diligence" (citations omitted). The court went on to say that the mere inadequacy of the price alone does not necessarily show bad faith or lack of due diligence which the plaintiffs concede is the rule in the Sher case. The plaintiff argues, however, that inadequacy of price might be considered with other elements to show bad faith. Seppala & Aho Construction Co. v. Petersen, 373 Mass. 316 (1973) again reiterated the normal rule and considered whether delay in commencing foreclosure imposed liability on the mortgagee, a question which was answered in the negative. It is possible of course that the purchase price may be so grossly inadequate as to invalidate a sale. Fairhaven Savings Bank v. Callahan, 391 Mass. 1011 (1984). The plaintiff relies heavily on Kavolsky v. Kaufman, 273 Mass. 418 (1930), a deficiency case, but the facts in the older case are far different from those before me. I find and rule that the mortgagee acted reasonably and exercised sound discretion.

The issues are discussed also in Howell v. Attleboro Savings Bank, 25 Mass. App. Ct. 960 (1988) where a decision on summary judgment was in question. There the court found a genuine issue as to compliance with Chapter 244, §14 which required a trial, but in passing it said "had the bank shown on its motion that it did mail the requisite notice, the plaintiff's averment of nonreceipt would have been irrelevant to the issue whether the bank had satisfied its obligation in accordance with the statute". In the present case the bank introduced into evidence the envelope in which notice was sent, not claimed by the plaintiff and as returned by the post office with a certified mail receipt attached to it. The plaintiff cannot neglect to claim his certified mail and then argue he did not get notice.

The plaintiff relies heavily on the bankruptcy court's decision in In Re Ruebeck, 55 B.R. 163 (Bankr. D. Mass. 1985) which mortgagees now carefully follow in Massachusetts.

I doubt that Ruebeck actually states the law of this Commonwealth, but I need not reach that question. The mortgagee did all required of it by statute and more with promotional advertising added to the required legal advertising. The present economy is such that few sales are being made, forced or otherwise, and this was even more true in August of 1991. Dime raised its own bid before the property was struck down. While the sale price was less than seventy percent of the value of the premises as I have fixed it, it was a reasonable price under the circumstances. The mortgagee did not need to do more.

On all the evidence therefore I find and rule that the sale of the premises was in accordance with G.L. c. 244, §14 and the applicable Massachusetts case law, that the sale prior to the actual receipt in hand of the Land Court judgment did not violate the statute, that the Land Court proceedings are only to assure that no one is in the military service and such a claim was not made here and that in fact the sale could have been held prior to such proceedings although the Court would not have issued a new certificate of title until the question of military service had been determined.

I have not ruled individually on each of the plaintiff's requests for findings of fact and rulings of law since I have written extensively about the critical events and the applicable law.

The plaintiff also now argues that Dime is barred from pursuing a deficiency action since this should have been part of its compulsory counterclaim. I find and rule otherwise on the facts of this action.

The bank contends that it is entitled to immediate possession of the premises. I find nothing in Dime's argument which is premised on the fact that legal title was in it in any event and that the foreclosure merely terminated the plaintiff's right of redemption and of possession, which gives this Court jurisdiction to award possession to Dime. Rather Dime should seek relief pursuant to the provisions of G.L. c. 239. See also G.L. c. 184, §18.

Judgment accordingly.