National Shawmut Bank v. Goldfine , 308 Mass. 184 ( 1941 )

Lummus, J.

This is an action upon a promise contained in a letter given by the defendant to the plaintiff on October 7, 1929, relating to a mortgage held by the plaintiff as collateral security. There was a finding for the plaintiff by a judge sitting without jury, with damages assessed at $39,691.25. The case is here on the defendant’s exceptions.

Uncontradicted testimony showed the following facts. On July 28, 1927, Homestead Motor Car Company gave to Charlestown Five Cents Savings Bank a first mortgage for $75,000 upon its garage property at 215 Humboldt Avenue in Roxbury. On July 16, 1928, Myer Goldblatt, then the owner of record, gave to Joseph A. Levin a second mortgage for $75,000 upon the same property, the principal being payable $500 monthly and the whole in one year from the date of the mortgage. The second mortgage note was indorsed, and the mortgage was assigned, by Levin to the plaintiff on July 16, 1928, and both were delivered to the plaintiff. On the next day, July 17, 1928, Homestead Motor Car Company gave a demand note to the plaintiff for $50,000, and the second mortgage note and mortgage were described as pledged as collateral security for the demand note.

On October 7, 1929, Homestead Motor Car Company owed the plaintiff $43,000 on "the demand note for $50,000, besides the whole principal of an earlier note for $15,000, dated July 29, 1927. On October 7, 1929, the defendant signed and delivered to the plaintiff a letter addressed to the plaintiff. The body of the letter read: “In the event that you are at any time compelled to foreclose the second mortgage given by Myer Goldblatt to Joseph A. Levin dated July 16, 1928 for $75,000 which mortgage covers the premises numbered 215 Humboldt Avenue, Roxbury, Massachusetts, which has been assigned to you as collateral security for two demand notes of the Homestead Motor Car Company, the first of said notes being dated August 21, 1927 [July 29, 1927?3 f°r $15,000 and the second of said notes being dated July 17, 1928, originally for $50,000 and now reduced to $43,000, I will see that you suffer no loss as a result thereof.” But we do not find elsewhere in the record any evidence that the second mortgage was pledged to secure the note for $15,000.

The first question is whether there is evidence of consideration for the promise 1 contained in the letter. No consideration was stated. The defendant was not financially interested in the property, the parties, or the transactions that had previously taken place. But Levin was his brother-in-law. The plaintiff advanced no money in reliance upon the promise, for all had been advanced long before. The occasion for the letter was that one Billman, an officer of the plaintiff, who had negotiated the loans in question, was under criticism from his superior, one Augustine, because of the loans. Billman, who was friendly with the defendant, told him that if he would give a letter of approval of the loans, the pressure upon Billman would be eased and the plaintiff would not compel Billman to require payment of the loans and get them out of the bank. A letter of approval was drawn, but it was not satisfactory to Augustine. After further importunity from Billman, the defendant gave him the letter of October 7, 1929.

If, as the defendant contends, Billman promised that the defendant would not be held liable according to the terms of the letter, such a promise was legally of no consequence. Quincy Trust Co. v. Woodbury, 299 Mass. 565, 567. Lamson & Co. (Inc.) v. Abrams, 305 Mass. 238, 243-244. The letter was given for the purpose, and had the intended effect, of inducing the plaintiff not to take steps to force Homestead Motor Car Company to repay the loan. Even though the motive of the defendant in inducing the plaintiff to forego such steps was to benefit Billman rather than Levin or Homestead Motor Car Company, a valuable consideration for the promise contained in the letter could be found. Of course the plaintiff did not undertake to wait forever or for any definite time. But that did not prevent a finding of consideration. Merchants Discount Co. v. Federal Street Corp. 300 Mass. 167, 169, and cases cited.

The next question is whether the promise contained in the letter was broken. The promise was conditioned upon a foreclosure by the plaintiff of the second mortgage of $75,000 upon the garage property. It was intended to assure the sufficiency of that mortgage as collateral security for the benefit of the plaintiff. What happened was that on March 3, 1933, Charlestown Five Cents Savings Bank held a foreclosure sale under the power of sale contained in its first mortgage for $75,000, bid the garage property in for $40,000, and later gave to itself a foreclosure deed accordingly on March 8, 1933. By that foreclosure the second mortgage held by the plaintiff as collateral security was made worthless and in fact extinguished. Was the plaintiff “compelled to foreclose the second mortgage" within the words of the promise contained in the letter? The foreclosure of the first mortgage constituted a compulsory liquidation of the garage property and incidentally of the second mortgage, and had all the effect that a foreclosure of the second mortgage could have. As the trial judge said, foreclosure of the second mortgage would have been “an empty gesture, of no value to the defendant." In our opinion the condition of the promise came to pass in substance. It is not questioned that in the liquidation the plaintiff suffered a loss to the amount of the finding for the plaintiff.

The defendant contends that without his consent monthly payments from Homestead Motor Car Company on its notes to the plaintiff were reduced from $500 to $250 in' May, 1931. The judge found that the defendant consented. Besides, by a letter from Homestead Motor Car Company to an officer of the plaintiff, dated May 12, 1931, it appears that by agreement with the plaintiff merely “the monthly charge against our bank balance will from now on be $250.00 instead of $500.00.” Both notes in question were due on demand, the second mortgage note was overdue, and there is no evidence of any binding extension. Nothing discharging the defendant from liability appears.

The defendant contends that his promise was to continue only a reasonable time in view of all the circumstances, and that unreasonable delay in collecting the notes or in realizing on the security would discharge the defendant. It may be assumed, without deciding, that this is so, although the promise was to take effect if the plaintiff should be compelled to foreclose “at any time.” Oxford Bank v. Haynes, 8 Pick. 423. Thomas v. Davis, 14 Pick. 353. Talbot v. Gay, 18 Pick. 534. Whiton v. Mears, 11 Met. 563. Parkman v. Brewster, 15 Gray, 271. Rotch v. French, 176 Mass. 1. Zeo v. Loomis, 246 Mass. 366, 368. Maksymiuk v. Puceta, 279 Mass. 346, 356. Agricultural National Bank of Pittsfield v. Brennan, 295 Mass. 325, 329. But it could not be ruled as matter of law that more than a reasonable time had elapsed after the promise, or that the plaintiff had delayed unreasonably.

What has been said covers many of the defendant’s requests for rulings of law. Some of them are disposed of by special findings of the judge. They require no further discussion. One of them raises the unimportant question whether the promise contained in the letter is properly classified as a guaranty. See Howell v. Commissioner of Internal Revenue, 69 Fed. (2d) 447, 450.

Exceptions overruled.