Jones v. Curtiss

• Decision Date: 14 April 1944
• Docket Number: 29070.
• Citation: 20 Wn.2d 470,147 P.2d 912
• Parties: En Banc. v. CURTISS JONES
• Court: Washington Supreme Court

147 P.2d 912

20 Wn.2d 470

En Banc. JONES v. CURTISS

No. 29070.

Supreme Court of Washington

April 14, 1944

Appeal from Superior Court, King County; Howard M. Findley, Judge.

Action by L. M. Jones and Lizzie Jones, his wife, against L. W Curtiss and Mrs. L. W. Curtiss and Neil Currie and wife, to recover upon a note and for foreclosure of a mortgage. From a judgment dismissing the action with prejudice, the plaintiffs appeal.

BEALS, J., SIMPSON, C.J., and JEFFERS and STEINERT, JJ., dissenting.

Affirmed.

Frank M. Allyn, of Bellingham, for appellants.

Walter C. Hinman, of Seattle, for respondents.

GRADY Justice.

This action was instituted by L. M. and Lizzie Jones, who sought recovery upon a promissory note for four hundred dollars signed July 5, 1935, by the defendant Neil Currie, plaintiffs also asking for the foreclosure of a mortgage, executed by Mr. Currie to secure the note, covering a tract of real estate in King county. L. W. Curtiss and wife were named as parties defendant, they being at that time the owners of the real estate covered by the mortgage. The action was tried to the court, and resulted in a judgment dismissing the action with prejudice, from which plaintiffs have appealed.

We shall refer to the various parties in the following manner L. M. Jones and wife, the owners and holders of the note sued upon and the second mortgage securing it, as appellants; and L. W. Curtiss and wife, successors in interest of Neil Currie to the real estate covered by the second mortgage, as respondents.

The following situation is disclosed by the record in the case at bar: For sometime prior to July 1, 1935, Neil Currie, a single man, was the owner of a rectangular tract of land 330 feet by 110 feet in size, located in the southeast quarter of the northwest quarter of section 27, township 24, north range 4 east, King county, Washington, the property being subject to a mortgage in the principal sum of eight hundred dollars and some accrued interest, in favor of appellants.

Mr. Currie procured a Home Owners' Loan Corporation loan upon this property, upon what showing we do not know. The appellants, June 26, 1935, in connection with Mr. Currie's loan referred to above, signed and placed with a title insurance company escrow instructions, and together therewith the mortgage above referred to and the note securing the same, a satisfaction of this mortgage, and certain other documents with which we are not concerned. By these documents, appellants authorized the escrow holder to deliver the file to the HOLC upon receipt for appellants' account of HOLC bonds and a small amount of cash, aggregating $565.86. On or about August 12th following, appellants signed and delivered a receipt in the following form:

'Received of Home Owners' Loan Corporation the following:

Authorization No. 1635002 for delivery
of Home Owners' Loan Corporation
Bonds, par value .......................	$550.00
Accrued interest from August,
1935, to August 12th, 1935, date
of closing above loan ......................	.45
Check No. 119903 ..........................	15.41
-------
Amount accepted in full settlement
of the claim of the undersigned
against the home property of
above named applicant ..................	$565.86 "
(Italics ours.)

August 14th, the satisfaction of mortgage which appellants had placed in escrow was filed for record, and October 7, 1935, there was filed for record a mortgage dated July 5, 1935, from Neil Currie to appellants, covering the property referred to above, which secured a note for four hundred dollars, payable to the order of appellant L. M. Jones in monthly instalments of not less than five dollars each, and bearing interest at the rate of five per cent per annum. The note contained an acceleration clause. November 9, 1938, Currie, for an express consideration of twenty-five dollars, quitclaimed the property to respondents. Apparently up to sometime in June, 1935, Currie had made no payments on the principal of the note, and it was about that time application was made by Currie to the HOLC for a loan to be secured by a first mortgage on the property.

January 13, 1942, appellants filed their complaint, asking for foreclosure of the four-hundred-dollar mortgage. Neither Currie nor any person representing him appeared in the action. Respondents filed their answer, denying that Currie had executed the note and mortgage sued upon, further alleging that the same, if executed, was without consideration, and asking that the action be dismissed.

The trial court held that appellants' eight-hundred-dollar note referred to above was, under the facts and the law, paid by the delivery to appellants of HOLC bonds in the sum of five hundred fifty dollars, together with cash in the sum of $15.86; that the note sued upon in this action, representing the unpaid balance due from Currie to appellants upon the eight-hundred-dollar note, was without consideration; and that this action, based upon that note, should be dismissed.

The evidence is brief, only three witnesses having testified--appellant L. M. Jones, respondent L. W. Curtiss, and a representative of the title insurance company. No agent or representative of the HOLC testified, and no witness testified concerning the proceedings leading up to the HOLC loan. A considerable portion of the statement of facts is taken up by testimony and discussion between the court and counsel, concerning matters not relevant to this appeal. The representative of the title trust company testified only to facts concerning the carrying out of the escrow, in so far as appellants were concerned. The witness was not interrogated concerning any preliminary negotiations between Currie and the HOLC, and the amount at which that corporation appraised the property, as preliminary to making the loan to Currie, nowhere appears in the record.

The HOLC was established by act of Congress passed June 13, 1933, chapter 64,§ 1 et seq., 48 Stat. 128, found in 12 U.S.C.A. § 1461 et seq. In § 1463 of the last-given citation, the creation of the HOLC was authorized, the section providing that it should be an instrumentality of the United States and should be under the direction of, and operated by, the Federal Home Loan Bank Board 'under such bylaws, rules, and regulations as it may prescribe for the accomplishment of the purposes and intent of this section.' The corporation was created, and rules and regulations were adopted. Thereafter for several years the board continued to make loans as authorized by the statute, including the loan here in question.

Reference to the rules of the HOLC discloses the following:

'The corporation may take up second mortgages or other inferior liens, provided the same is done along with the first mortgage and the total is within the Act. The corporation has no means of preventing the home owner from undertaking to pay any indebtedness he may owe over and above that refunded by the corporation and has no means of preventing his giving a second mortgage or other security for any such indebtedness. However, state managers are directed, as a matter of policy in dealing with home owners, to decline to conclude a refunding of a portion of the indebtedness against the home where the home owner is proposing to give a second mortgage for any excess indebtedness he may owe unless such second mortgage financing is so arranged that the home owner will have a reasonable probability of being able to carry his first mortgage to the corporation and the second mortgage indebtedness.' (The foregoing was adopted September 8, 1933.)

'In the case of bond exchange loans, if the home owner owes more than 80 percent of the value of his premises he may remain indebted for that portion that the corporation cannot refund, provided the corporation secures a first lien, and he may secure the excess indebtedness with a second lien. However, such refunding will not be carried through unless such excess indebtedness is placed on a payment basis so that the home owner will have a reasonable opportunity to pay the same and meet his obligations to this corporation. The corporation will not proceed to refund indebtedness for mortgagees who insist upon more in face value of bonds or who insist upon any other consideration (such as second mortgage, cash or other consideration) than the net amount owing to such mortgagee, together with accrued interest to date of exchange. The corporation will not participate in any refunding where, by any means, the indebtedness of the home owner is increased or the home owner is being called upon to pay more than his debt with interest.' (The foregoing was adopted November 3, 1933.)

'(5) The corporation will refund indebtedness in eligible cases where the total amount it refunds is less than the total indebtedness and permit the mortgagor to remain indebted to the mortgagee for the remainder of his honest debt and permit the mortgagor to secure such excess indebtedness by a second mortgage or otherwise, but such refunding will not be consummated unless such excess indebtedness is placed on such terms that the mortgagor will have a reasonable opportunity to pay the same, together with his obligation to the corporation.' (The foregoing was adopted November 4, 1933.)

'(1) If the home owners income is so reduced that he is unable to meet full amortization payments from the beginning on his obligation to the corporation, the second mortgage shall not require any principal payments prior to June 13, 1936, and payments thereafter shall be on a schedule which the home owner may reasonably be able to meet.

'(2) In all cases where the home owner is able to meet his full amortization payments to...