Lavery v. Rizza

• Decision Date: 06 December 1939
• Court: Connecticut Supreme Court
• Parties: LAVERY v. RIZZA et al.

9 A.2d 819

126 Conn. 132

LAVERY v. RIZZA et al.

Supreme Court of Errors of Connecticut.

December 6, 1939

Appeal from Superior Court, Fairfield County; Robert L. Munger Judge.

Action for the foreclosure of two mortgages by William J. Lavery against Giovanni Rizza and others, wherein defendants filed a counterclaim asking that the mortgages be declared null and void. At the trial, plaintiff sought recovery as to only one of the mortgages. Judgment for the plaintiff as to this mortgage on the complaint and counterclaim, after trial of issues to the court, and defendants appeal.

No error.

James C. Shannon, of Bridgeport, for appellants.

Milton L. Cohn, and Israel J. Cohn, both of Bridgeport, for appellee.

Gordon MacIntosh, of Washington, D. C., amicus curiae.

Argued Before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS JJ.

JENNINGS, Judge.

The plaintiff sought foreclosure of a second mortgage on property of the defendants. The plaintiff's assignor had signed a ‘ consent to take bonds' for the Home Owners' Loan Corporation, hereinafter called the HOLC, and the defendants claim that the second mortgage was without consideration, against public policy, and void.

The finding, which cannot be corrected in any respect material to this controversy, discloses the following facts: On August 16, 1934, the defendants were the owners of property in Bridgeport incumbered by two mortgages, on the second of which the owner, Antonio Mannino, had begun foreclosure. As a result of previous negotiations, the defendants, on that day gave a new first mortgage to the HOLC for $4,480 and a second mortgage to Mannino for $1,120. The amount of the latter represented the difference between the amount of the HOLC mortgage and its appraisal and was a part of the debt owed Mannino by the defendants Before the refinancing. At the same time Mannino signed a ‘ consent to take bonds' for the purpose of completing the closing file of the HOLC and its title search attorney. This recited among other things the amount of his debt, his willingness to take a lesser amount in bonds of the HOLC and ‘ thereupon to release all the claim of the undersigned against said property.’ The mortgage and note to the HOLC were prepared by the Kelsey Company acting for it and in its behalf and the mortgage and note to Mannino were also prepared in the office of the Kelsey Company. At the time the mortgage to the HOLC was executed, that to Mannino was delivered to him. The entire transaction was completed in the course of one day. The mortgage for $1,120 was assigned to Pavone and was by him assigned to the plaintiff as security for a loan of $1,000 which he made to Mannino. The plaintiff took the assignment in good faith and is the actual and bona fide holder of the note and mortgage. It is assumed, without deciding the point, that he had no greater rights than Mannino.

Among the regulations adopted by the HOLC was the following: ‘ Second mortgages-Where the full amount of the indebtedness against the property cannot be refunded by the Corporation, the mortgagee or other lien holder will be permitted to take a second mortgage or second deed of trust if the amount of such second mortgage or deed of trust does not exceed the difference between the Corporation's appraisal and the amount of the Corporation's first mortgage. In no case shall the second trust or second mortgage to such other mortgagee or lien holder be in terms which would cause the mortgagor's payments to the Corporation to be a hardship, or deprive the mortgagor of reasonable opportunity to pay such second mortgage or second trust.’ There was no finding that the mortgagor was deprived of reasonable opportunity to pay the mortgage in suit.

On these facts the court found that ‘ Nothing in the evidence shows the mortgage described in the first count of the complaint to be without consideration, illegal, or in conflict with any regulation of the Home Owners' Loan Corporation.’

The defendants' brief states the real issue to be whether the mortgage in suit was in contravention of public policy and therefore illegal and void. 12 U.S.C.A. § 1461 et seq. Many cases are cited where this conclusion was reached. Most of them can be distinguished from the present case on their facts or the legal issues involved. For instance in Meek v. Wilson, 283 Mich. 679, 278 N.W. 731, the existence of the agreement for the second mortgage was not known to the HOLC or its representative and the aggregate amount of the first and second mortgages exceeded the appraisal. In Cook v. Donner, 145 Kan. 674, 66 P.2d 587, 110 A.L.R. 244, the agreement was also secret and it does not appear that the second mortgage came within the exceptions contained in the regulations. Pye v. Grunert, 201 Minn. 191, 275 N.W. 615,276 N.W. 221, and Stager v Junker, 188 A. 440, 14 N.J.Misc. 913, involved an entirely different provision of the HOLC act. As far as the Federal Land Bank cases are concerned, it suffices to point out that the ‘ creditor's agreement’ signed in those cases contained provisions that (1) no separate agreement had been made to cover any balance of indebtedness (2) that the debt was extinguished and (3) that the creditor would neither attempt to collect nor even receive anything thereon. Federal Land Bank v. Koslofsky, 67 N.D. 322, 327, 271 N.W. 907, 909. This is a very different document than the ‘ consent’ signed in this case. For a careful...