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New England Mutual Life Insurance Company vs. Isa B. Wing

Massachusetts Supreme Judicial Court1906-03-06
191 Mass. 192

Summary

Holding. The judgment for the plaintiff was affirmed; the company's title was perfected through ratification of the unauthorized foreclosure deed, and evidence of misconduct or inadequate sale price was properly excluded from a summary process action to recover possession, which remedy treats the purchaser's legal title as complete when foreclosure follows a breach of the mortgage's conditions.

New England Mutual Life Insurance Company brought a summary process action to recover possession of mortgaged property after conducting a foreclosure sale. The defendant Wing challenged the validity of the foreclosure, arguing both that the company's president lacked proper authority to execute the foreclosure deed and that the sale was conducted improperly and in bad faith, with evidence that the property was worth nearly double what was paid at auction.

The court held that although the president's initial authority to foreclose was limited and required finance committee approval, the company ratified the unauthorized action by bringing the lawsuit itself. This ratification cured the title defect. The court further held that in a summary process action to recover possession, evidence of misconduct or inadequate sale price is not admissible; such challenges must be brought in equity through a bill to reopen the foreclosure. Because the foreclosure complied with the mortgage's power of sale terms and a condition (unpaid taxes and interest) had been breached, the company's legal title was valid for purposes of possession.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether an officer's unauthorized execution of a foreclosure deed can be ratified by the corporation's subsequent actions
  • Whether evidence of bad faith, misconduct, or inadequate sale price is admissible in a summary process action to recover possession following a foreclosure
  • Whether the mortgagee has legal title sufficient to maintain a summary process action when conditions of the mortgage have been breached

Procedural posture

The case was brought as a summary process action for recovery of possession following a mortgage foreclosure sale, with the defendant raising challenges to both the authority of the foreclosure and the propriety of the sale.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Braley, J.

The purchaser at the foreclosure sale of the demanded premises was the plaintiff’s agent, who after taking a conveyance of the property, as a part of the transaction deeded it to the plaintiff, which for the purposes of this action may be deemed the actual purchaser, and if the title is invalid because the mortgage was not foreclosed regularly this action cannot be maintained. North Brookfield Savings Bank v. Flanders, 161 Mass. 335. Lowe v. Moore, 134 Mass. 259. The deed given to the purchaser at the foreclosure sale was executed by the plaintiff’s president in the name of the plaintiff as mortgagee. By the terms of the vote passed by the plaintiff’s board of directors the president was authorized to foreclose mortgages, and if foreclosed by sale to execute in the company’s name the necessary deed or deeds required, but the authority thus conferred was made subject to the approval of a member of the finance committee, which was not given until after the deed under the power of sale had been delivered and recorded. To avoid this infirmity it is now contended that as the company had no officer known as a treasurer, the president was clothed with the implied powers of such an official in the collection of its debts, and where they were secured by mortgage to realize on the security by a sale. Bristol County Savings Bank v. Heavy, 128 Mass. 298. Holden v. Upton, 134 Mass. 177. Smith Charities v. Connolly, 157 Mass. 272. But there is no statement in the report upon which this argument can rest, and the office of president of itself did not confer original authority to foreclose the mortgage, or to execute the deed. England v. Dearborn, 141 Mass. 590. If, however, originally an unrestricted power was not delegated, the act of the president could be ratified. The bringing of the action is found to have been the act of the corporation, and having been so instituted the action may be treated as an acceptance of the deed, thus ratifying his unauthorized action; and such ratification has all the force of an original sanction. Lowe v. Moore, ubi supra. Henderson v. Raymond Syndicate, 183 Mass. 443. It therefore does not become necessary to decide whether the indorsement of a member of the finance committee approving the sale, which was affixed not only after the instrument was recorded, but some time after the first trial of the case, and while it was pending in the Superior Court on appeal, was sufficient as a ratifying act. See Hutchins v. Byrnes, 9 Gray, 367, 370; Sherman v. Fitch, 98 Mass. 59, 64.

If the title of the plaintiff upon its face was thereby perfected, the defendant further contends that the sale was neither made in good faith, nor properly conducted, and that the exclu sion of evidence by which she offered to show this was wrong. In an action under summary process by the purchaser at a mortgagee’s sale, the legal title may be put in issue, and it therefore became incumbent upon the plaintiff to establish its right of possession to the land demanded. Page v. Dwight, 170 Mass. 29, 40. Williams v. McGaffigan, 132 Mass. 122, 123. Harris v. Carmody, 131 Mass. 51. It indeed has been decided as the defendant contends, that if there has been no default in the performance of the conditions of the mortgage the mortgagee cannot sell the mortgaged premises so as to convey any title whatever to the purchaser. Rogers v. Barnes, 169 Mass. 179, 184. This, however, is a different question from that raised by the report, as there was ample evidence that the taxes had not been paid by the mortgagor, or by her, and that the interest was in arrears. A failure to pay either was a breach of the conditions of the mortgage entitling the mortgagee to foreclose.

If the plaintiff had been guilty of misconduct by which the interests of the defendant had been deliberately sacrificed, or the sale had been conducted for the purpose of permitting the plaintiff to acquire title to the property at less than its fair valuation, a court of equity, upon a bill for that purpose, would reopen the foreclosure if fraud was found, and set the sale aside. Upon such an issue the evidence excluded would have been relevant. Montague v. Dawes, 14 Allen, 369. Clark v. Simmons, 150 Mass. 357, 359. But this evidence was inadmissible in the present suit as the remedy to recover possession, conferred upon the plaintiff by B. L. c. 181, § 1, treats the title of the purchaser as complete for this purpose when, after condition broken, the foreclosure which follows is shown to have taken place strictly according to the terms of the power of sale. Learned v. Foster, 117 Mass. 365, 369. Lewis v. Jackson, 165 Mass. 481, 487. R. L. c. 187, §§ 14, 15. While the answer is not governed by the requirements of R. L. c. 173, §§ 27, 35, which refer only to actions of contract, tort or replevin, and the defendant may show under.a general denial that the deed under which possession of the premises is demanded is invalid, yet as the right to possession follows the legal title when it is established, if the owner of the equitable title at the time of sale has sufficient grounds upon which to reopen and set aside the foreclosure he must resort to a court of equity for affirmative relief. Harris v. Carmody, ubi supra. Smith v. Johns, 3 Gray, 517, 519.

In accordance with the terms of the report there must be,

Judgment for the plaintiff on the finding.

The price at which the agent of the plaintiff purchased at the foreclosure sale was $8,000. The defendant offered to show that the fair market value of the mortgaged property in 1904 was $15,000. The judge, upon the objection of the plaintiff, excluded this testimony, stating “ that it was not competent in this kind of a case to attack the sale upon grounds such as that the price realized was inadequate, no tender of the amount due the plaintiff having been shown.”