Mills v. Nashua Federal Sav. and Loan Ass'n, 80-259
Decision Date | 10 August 1981 |
Docket Number | No. 80-259,80-259 |
Citation | 121 N.H. 722,433 A.2d 1312 |
Parties | Michael M. MILLS, Jr. et al. v. NASHUA FEDERAL SAVINGS AND LOAN ASSOCIATION. |
Court | New Hampshire Supreme Court |
William M. Ladd, Hollis, on the brief and orally, for plaintiffs.
Smith, Currier, Connor, Wilder & Lieberman, P. A., Nashua (Philip R. Currier Nashua, on the brief and orally), for defendant.
In this case of first impression we are asked to decide whether a due-on-sale clause contained in a mortgage instrument constitutes a per se unreasonable restraint on alienation or whether the manner in which it was applied amounted to an unreasonable restraint on alienation. In both instances we answer in the negative and, therefore, affirm the result below.
On February 18, 1977, the plaintiffs purchased certain property in Nashua from William L. and Theresa M. Dube, giving a first mortgage to the defendant bank in the amount of $32,800 at an interest rate of 103/4 percent per year. At that time the plaintiffs also executed a second mortgage to the sellers for $9,000.
The mortgage instrument to the defendant contained the following provision in paragraph 17:
On December 21, 1979, the plaintiffs conveyed this property to Antone and Elizabeth Holevas for $59,600, receiving an $8,950 down payment and a wrap-around mortgage of $50,650 at 12 percent annual interest. On that date, the defendant's mortgage had a balance of $31,211.29, and the Dube second mortgage had a balance of $9,000. The defendant was not notified of this transfer by the plaintiffs, but claimed that it became aware of the transaction in mid- or late February 1980.
On March 14, 1980, the defendant notified the plaintiffs that it intended to accelerate the balance due on the mortgage and to demand payment in full in accord with paragraph 17 of the mortgage instrument. The record also reveals that the defendant offered the Holevas' the opportunity to assume the mortgage at a rate of 143/4 percent, which was the effective interest rate at the time the plaintiffs conveyed the property to the Holevas'. On April 21, 1980, the defendant forwarded a notice of the mortgagee's sale to the plaintiffs, citing a general breach of condition.
On April 30, 1980, the plaintiffs filed a bill in equity in the form of a petition to enjoin the mortgagee's sale. In a decision dated May 22, 1980, the Master (Griffith, J.) recommended and the Court (Flynn, J.) approved the denial of the injunction against the foreclosure sale. The master, in pertinent part, ruled that "(t)he Master does not accept ... that clause 17 ... is ambiguous and does not permit an interpretation which would make the transfer plus the wrap-around mortgage a breach of condition 17...." The plaintiffs appeal the decision to this court, alleging that paragraph 17 of the mortgage instrument is unenforceable because it amounts to an unreasonable restraint on alienation, and, furthermore, that paragraph 17 would permit the sale of the subject premises as executed in these circumstances.
We first consider the plaintiffs' argument that paragraph 17 of the mortgage instrument is unenforceable because it amounts to a per se unreasonable restraint on alienation of property as defined by Section 404 of the Restatement of Property which provides, in part:
We do not conclude that due-on-sale clauses are per se invalid. See G. Osborne, G. Nelson & D. Whitman, Real Estate Finance Law § 5.23, at 303 (1979) (hereinafter "Real Estate Finance Law"). Although paragraph 17 of the mortgage instrument before us contained an acceleration clause, this, in itself, did not result in the forfeiture of the owner's title and did not preclude the mortgagor from conveying the property. Occidental Sav. & Loan Ass'n v. Venco, 206 Neb. 469, 293 N.W.2d 843, 845 (Neb.1980); see Williams v. First Federal Sav. & Loan Ass'n, 651 F.2d 910, 929 (4th Cir. 1981). Lacking any impingement on the owner's freedom to convey the property, paragraph 17 does not constitute a per se unreasonable restraint on alienation.
The plaintiffs next argue that paragraph 17, as applied to the circumstances of this case, constituted an unreasonable restraint on the alienation of the property. Much of the plaintiffs' reasoning in support of this contention is based on public policy considerations; they cite the various jurisdictions that have prohibited or restricted due-on-sale clauses. See e. g. Wellenkamp v. Bank of America, 21 Cal.3d 943, 148 Cal.Rptr. 379, 582 P.2d 970 (Cal.1978). Public policy arguments favoring a presumption of automatic enforcement of such clauses can also be made. See generally Real Estate Finance Law § 5.22. The plaintiffs also assert that the defendant bank, in derogation of public policy, "insisted on its absolute technical right to foreclose upon the security premises upon sale or transfer without its prior written consent." But see, Occidental Sav. & Loan Ass'n v. Venco, 293 N.W.2d at 849. We find no merit to these arguments.
We note that paragraph 17 is virtually identical to the one by which the Federal Home Loan Bank Board (FHLBB), whose regulations affect all federally chartered savings and loan associations, permits and regulates the use of due-on-sale clauses. See 12 C.F.R. § 545.8-3(f)-(g) (1980). The standard national mortgage form approved by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, both quasi-federal entities, require and use a due-on-sale clause that is virtually identical to that of the FHLBB. Real Estate Finance Law § 5.25, at 310. The federal savings and loan associations contend that the exercise...
To continue reading
Request your trial-
Olean v. Treglia
...843 (1980); First Commercial Title, Inc. v. Holmes, 92 Nev. 363, 365-66, 550 P.2d 1271 (1976); Mills v. Nashua Federal Savings & Loan Assn., 121 N.H. 722, 724-25, 433 A.2d 1312 (1981); Century Federal Savings & Loan Assn. v. Van Glahn, 144 N.J.Super. 48, 54-55, 364 A.2d 558 (1976); Matter o......
-
Lake v. Equitable Sav. and Loan Ass'n
...& Loan Ass'n., 651 F.2d 910 (4th Cir.1981); Martin v. Peoples Mutual Savings & Loan Ass'n., supra; Mills v. Nashua Federal Savings & Loan Ass'n., 121 N.H. 722, 433 A.2d 1312 (1981); see generally Enforcement of Due-on-Transfer Clauses, 13 Real Prop., Prob. and Tr.J. 891 (1978). "To label th......
-
Magney v. Lincoln Mut. Sav. Bank, 4929-III-9
...471 (Minn.1981); Occidental Sav. & Loan Ass'n v. Venco Partnership, 206 Neb. 469, 293 N.W.2d 843 (1980); Mills v. Nashua Fed. Sav. & Loan Ass'n, 121 N.H. 722, 433 A.2d 1312 (1981); Century Fed. Sav. & Loan Ass'n v. Van Glahn, 144 N.J.Super. 48, 364 A.2d 558 (1976); Crockett v. First Fed. Sa......
-
Martin v. Peoples Mut. Sav. and Loan Ass'n
...& Loan Association v. Venco Partnership, 206 Neb. 469, 472-73, 293 N.W.2d 843, 845-46 (1980); Mills v. Nashua Federal Savings & Loan Association, 121 N.H. 722, 724, 433 A.2d 1312, 1314 (1981). It is apparent the alleged restraining language does not affect the title or conveyance of the The......