Local Federal Sav. & Loan Ass'n of Oklahoma City v. Harris

• Decision Date: 03 December 1940
• Docket Number: 29104.
• Citation: 107 P.2d 1012,188 Okla. 214,1940 OK 476
• Parties: LOCAL FEDERAL SAVINGS & LOAN ASS'N OF OKLAHOMA CITY v. HARRIS et ux.
• Court: Oklahoma Supreme Court

107 P.2d 1012

188 Okla. 214, 1940 OK 476

LOCAL FEDERAL SAVINGS & LOAN ASS'N OF OKLAHOMA CITY v. HARRIS et ux.

No. 29104.

Supreme Court of Oklahoma

December 3, 1940

Syllabus by the Court.

Where the Home Owners' Loan Corporation refunded mortgage indebtedness without knowledge that the creditor was taking from the debtor a second mortgage for the difference between the proceeds of the loan and the amount of the debt refunded such second mortgage is invalid and unenforceable.

Appeal from District Court, Pontotoc County; Tal Crawford, Judge.

Action to foreclose mortgage by the Home Owners' Loan Corporation against G. C. Harris and Effie J. Harris, his wife, and the Local Federal Savings & Loan Association of Oklahoma City, Okl. The last-named defendant filed a cross-petition for foreclosure of a second mortgage. From the judgment, the Local Federal Savings & Loan Association appeals.

Affirmed.

Everest McKenzie & Gibbens, of Oklahoma City, for plaintiff in error.

Thompson & Braly, of Ada, for defendants in error.

CORN Justice.

This appeal involves the validity of a second mortgage taken by a building and loan association for the difference between a Home Owners' Loan Corporation loan and the full amount of the mortgage indebtedness in the refinancing of a mortgage on the home of a distressed home owner under the provisions of the federal statutes creating the Home Owners' Loan Corporation and defining its powers.

The action originated in the district court of Pontotoc county as an action by the Home Owners' Loan Corporation hereinafter referred to as the HOLC, against G. C. Harris and Effie J. Harris, his wife, hereinafter referred to as defendants. The Local Building and Loan Association (now the Local Federal Savings and Loan Association) was made a party defendant. The HOLC sought foreclosure of a mortgage upon certain real property located in the City of Ada, Oklahoma which mortgage was given to secure a promissory note in the sum of $2,200. The Local Federal Savings and Loan Association filed its answer and cross-petition wherein it sought to foreclose a second mortgage upon the same property given to secure a note of $260.94. Thereafter the HOLC dismissed its petition leaving for adjudication only the issues between the Local Federal Savings and Loan Association, hereinafter referred to as plaintiff, as against G. C. Harris and Effie J. Harris.

It appears that prior to May 15, 1934, defendants were indebted to plaintiff upon a promissory note secured by a mortgage upon the property herein involved. Defendants sought to obtain a loan from the HOLC for the purpose of paying off and discharging the indebtedness to plaintiff. The property was appraised at $2,750, and under the regulations governing HOLC loans the maximum amount that could be loaned on said property was $2,200. The total amount of indebtedness due plaintiff was $2,460.94. It appears that the plaintiff agreed to take a second mortgage from defendants for $260.94, the difference between the indebtedness and the amount to be procured from the HOLC loan, upon the real property herein involved, and notified the officials of the HOLC that arrangements had been made with Mr. Harris for payment of the difference between the proceeds of the loan and the amount due the plaintiff company. Said company signed and delivered to HOLC its agreement to take bonds, which instrument is, in part, as follows:

"Mortgagee's Consent to Take Bonds

To Home Owners' Loan Corporation:

The undersigned is the holder of a first mortgage or other obligation, which constitutes a lien or claim on the title to the home of G. C. Harris located at 943 E. 7th St., Ada, Oklahoma, in the sum of $1,800.00.

Being informed that said owner has made application to Home Owners' Loan Corporation to refund his said indebtedness, the undersigned has considered the method of refunding mortgages provided in Home Owners' Loan Act of 1933, as passed by Congress and approved by the President, and the undersigned hereby consents, if said refunding can be consummated, to accept in full settlement of the claim of the undersigned the sum of $1,993.52, face value of the bonds of Home Owners' Loan Corporation, to be adjusted with not exceeding $50. cash as provided in said act, and thereupon to release all claim of the undersigned against said property."

Thereafter the loan was closed and the bonds were delivered to plaintiff company. As heretofore stated, the sole question presented is whether or not the second mortgage is valid and enforceable. It is plaintiff's contention that the case of Finley & Lollar v. Dean, 184 Okl. 456, 88 P.2d 366, which involves a state of facts similar to the facts involved herein, is determinative and decisive of the question here presented. An examination of that case discloses, however, that the only question decided by the court was whether or not the agreement to accept the amount received from the loan procured from the HOLC in settlement of the full amount of the pre-existing indebtedness, which was a larger sum, constituted an accord and satisfaction of the entire indebtedness. It was therein pointed out that the question of accord and satisfaction was not involved for the reason that there was a promise to pay the entire indebtedness. In the instant case the question briefed and presented is whether or not the second mortgage herein involved is invalid and unenforceable as being in contravention of the policy and spirit of the federal statutes creating the HOLC and defining its powers and duties. 48 Stat. 128, 12 U.S.C.A. § 1461 et seq.

Although the question is new in this jurisdiction, there is no lack of authority on this point. In 110 A.L.R. 250, appears the following note: "Agreements between a mortgagor and mortgagee looking to a reimbursement of the latter for any loss suffered by reason of a refinancing of an indebtedness under the Home Owners' Loan Act are held invalid as a...