Dayton Mortgage & Inv. Co. v. Theis

• Court: Ohio Court of Appeals
• Writing for the Court: BARNES
• Citation: 23 N.E.2d 511,62 Ohio App. 169
• Decision Date: 18 May 1939
• Parties: DAYTON MORTGAGE & INVESTMENT CO. v. THEIS et al.

62 Ohio App. 169
23 N.E.2d 511

DAYTON MORTGAGE & INVESTMENT CO.
v.
THEIS et al.

Court of Appeals of Ohio, Second District, Montgomery County.

May 18, 1939.

Action by the Dayton Mortgage & Investment Company against one Theis and another to recover from defendants the difference between the total amount due from defendants to the plaintiff on a mortgage and bonds of the Home Owners' Loan Corporation received by plaintiff in full settlement of the mortgage debt, on ground that defendants had promised to pay the difference. From a judgment of the Municipal Court in favor of the plaintiff, the defendants appealed to the Common Pleas Court. From a judgment of the Common Pleas Court in favor of the defendants, the plaintiff appeals.-[Editorial Statement.]

Judgment of the Common Pleas Court affirmed.

[23 N.E.2d 511]

Syllabus by the Court.

1. Where a mortgagee agrees to accept bonds of the Home Owners' Loan Corporation in part serrlement of the mortgage debt, and where full disclosures are made, and in the absence of fraud, secrecy, duress and collusion, the mortgagor may contract with the mortgagee to take care of the difference between the total amount due and the face value of the bonds, subject only to the limitations of the Home Owners' Loan Act, 12 U.S.C.A. § 1461 et seq.

2. Where the administrators of the Home Owners' Loan Corporation are not advised of such independent contract and the mortgagee has agreed to accept the bonds in full settlement of his claim, such contract is thereby rendered void as against public policy.

Estabrook, Finn & McKee, of Dayton, for appellant.

Dale Hodapp, of Dayton, for appellees.

BARNES, Judge.

The above-entitled cause is now being determined as an appeal on questions of law from the judgment of the Court of Common Pleas of Montgomery county, Ohio.

The cause originated in the Municipal Court of Dayton, Ohio, where judgment was rendered for the plaintiff for the full amount claimed.

Appeal was taken to the Common Pleas Court, where the judgment was reversed.

There is very little controversy on the questions of fact.

On May 1, 1926, the defendants entered into a contract with Norman and Jessie Keith for the purchase of property located at 1033 Huffman avenue, Dayton, Ohio.

On October 4, 1927, the Keiths assigned their interest in the land contract to plaintiff,

[23 N.E.2d 512]

The Dayton Mortgage & Investment Company. During the year 1933 the defendants, as a result of the economic depression, were unable to meet their obligations and became delinquent in their payments to the plaintiff. In order to refinance their obligation, defendants made application to the Home Owners' Loan Corporation on February 17, 1934, and thereafter the loan corporation determined that defendants were eligible to receive the benefit of the Home Owners' Loan Act.

It is the claim of The Dayton Mortgage & Investment Company, supported by testimony, that on or about April 4, 1934, it received some form of communication from the Home Owners' Loan Corporation which advised it that the bonds to be issued by the corporation at their face value would not be sufficient to pay off the balance, including interest, due from the Theises.

On this same day, April 4, 1934, the plaintiff caused to be mailed to the defendant, Clem Theis, a letter requesting that he call at its office for the purpose of discussing the matter of the loan with the Home Owners' Loan Corporation.

The plaintiff presented evidence that on April 7 following, Mrs. Theis called at the office and was then advised that the amount obtainable from the Home Owners' Loan Corporation would not be sufficient to pay plaintiff's claim in full. Upon inquiry, Mrs. Theis was advised that the exact amount was not then ascertainable, but whatever the amount was, they requested that she and her husband execute a note for such balance, the same to be paid in such installments as they could make. Plaintiff presented evidence that Mrs. Theis agreed to this proposition. She, however, when first called as a witness for cross-examination, denied making such promise, but said that she told the president of the company that he would have to see Mr. Theis. When called to the stand again in presentation of defendants' case, she substantially qualified her original denial. No claim is made by plaintiff that it contacted Mr. Theis before the transaction was closed.

Clem Theis was called as a witness, first for cross-examination by plaintiff and afterwards on his own behalf. He admitted that he was advised by Mrs. Theis that plaintiff was wanting payment of the difference between its total claim, including interest, and the face of the bonds which it was receiving from the Home Owners' Loan Corporation. He also testified that some months after the transaction was closed he went to the office of the plaintiff, in answer to a letter received from it, and at that time stated that if Mrs. Theis had promised to give a note, the same would be given.

At no time was the note given to plaintiff, and on November 19, 1936, statement of claim was filed in the Municipal Court of Dayton, Ohio, praying for judgment in the sum of $165.18, with interest.

Defendants filed answer admitting certain allegations of the complaint and denying all others. The allegations of the complaint relative to the agreement to execute a note are included in the denial.

The following paragraph of the answer presents the vital issue:

‘These defendants further say that at the time of said refinancing with the Home Owners' Loan Corporation, that the plaintiff herein, in accordance with the Home Owners' Loan Acts, entered into written agreement with the Home Owners' Loan Corporation, in which agreement it was provided that in consideration of the refunding and of the loaning to these defendants of a certain sum of money and/or bonds of the Home Owners' Loan Corporation, that the plaintiff herein would accept in full settlement of their [sic] claim against these defendants, a certain sum of cash and/or bonds the exact amount of which is unknown to these defendants at this time, but will be shown at the time this cause comes on for trial.

‘These answering defendants further say that in consideration of said agreement entered into between the plaintiff herein and the Home Owners' Loan Corporation, the Home Owners' Loan Corporation paid and delivered to the plaintiff herein, cash and bonds of the Home Owners' Loan Corporation, the sum and amounts provided in said agreement and the plaintiff herein, then and there, received to its full satisfaction, discharged of the sum in this action demanded.’

Defendants, in support of the above-quoted averments of their answer, presented exhibits B and C, which were admitted in evidence and made a part of the bill of exceptions. Both exhibits are photostatic copies and apparently are on forms provided by the Home Owners' Loan Corporation. Both are dated April 14, 1934. Exhibit B purports to be an itemized statement of balance due The Dayton Mortgage & Investment Company on its land contract.

[23 N.E.2d 513]

Under tabulation (a), principal balance, is given the figure $2,811.95. Under (b), interest to April 14, 1934, $57.49. Total $2869.44. Immediately following is the following:

‘We hereby agree to accept...