Nesbitt v. Home Federal Sav. & Loan Ass'n
| Decision Date | 05 March 1968 |
| Docket Number | No. 41430,41430 |
| Parties | Stuart S. NESBITT and Anita L. Nesbitt, Plaintiffs in Error, v. HOME FEDERAL SAVINGS & LOAN ASSOCIATION, a corporation, Myrtle Janice Rooney, formerly Harris, Tulsa Rental & Investment Corporation, a corporation, and Newcomb Cleveland, Defendants in Error. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court
1. Gist of 'fraudulent misrepresentation' is the producing of a false impression in mind of another, and manner of accomplishing is immaterial, if actually accomplished.
2. Evidence which disclosed cross-petitioning defendants were advised during all negotiations prior to conveyance, that purchaser would not accept personal liability for mortgage indebtedness and would take title in name of corporation to avoid liability, showed absence of essential element to support claim of fraud.
Appeal from District Court of Tulsa County; W. Lee Johnson, Judge.
Mortgage foreclosure action wherein trial court decreed foreclosure, ordered deficiency judgment against named defendants, and denied relief to cross-petitioning defendants who sought personal judgment against corporate officer who effected purchase of mortgaged property without personal assumption of mortgage indebtedness. Affirmed.
McGee & Dowd, by Richard K. McGee, Tulsa, for plaintiffs in error.
Thomas R. Brett, Tulsa, for defendants in error, Tulsa Rental & Investment Corporation and Newcomb Cleveland.
Questions presented by this appeal evolve from a mortgage foreclosure action brought by plaintiff, Home Federal Savings & Loan Association, against all other parties as defendants in the trial court. Of primary concern is the effect of a loan transfer and assumption agreement executed by defendants Nesbitt and the corporate defendant, Tulsa Rental & Investment Corporation, acting by and through its president and principal stockholder, defendant Cleveland, at the time of conveyance. The dispositive issue involves the correctness of the trial court's judgment denying defendants Rooney and Nesbitt, et ux. personal judgment against defendant Cleveland under their respective cross-petitions.
The property involved (Lots 4--5--6, Block 9, Elm Park Addition to Tulsa Oklahoma) contained two six unit apartment buildings with a twelve car garage, and a frame dwelling and detached garage on Lot 6. In October, 1962, Myrtle Rooney, formerly Harris, conveyed the entire property to defendants Nesbitt, who executed their note for $50,000.00, secured by a first mortgage in favor of plaintiff. To effect the transaction Rooney was required to collateralize the transaction by assignment of a $17,500.00 savings certificate to plaintiff as additional security, thus becoming surety for Nesbitts' obligation. Defendant Rooney will be designated as the surety.
In March, 1963, defendants Nesbitt, hereafter referred to as defendants or grantors, advertised the property for sale, and defendant Cleveland, a member of the Bar but not a practicing attorney, appeared as a prospective purchaser. An option contract was executed, but the transaction was not consummated because of misunderstanding as to the consideration. However, the negotiations were kept open at Cleveland's written request. On March 28th Cleveland advised grantors by letter of assignment of his interest in the option to Tulsa Rental & Investment Corporation. This corporation, wholly owned and managed by Cleveland, admittedly had been formed for the purpose of acquiring title to real property without extending the defendant's personal credit or liability to such transactions. Defendants made written acknowledgment of this assignment and the corporation's election to exercise the option to purchase. The letter relating the assignment also called defendants' attention to necessity for securing an assumption statement from plaintiff.
After considerable discussion and some debate relative to condition of the properties, rental income, prospective repairs and the actual consideration, these parties met and closed the transaction on April 27, 1963. As the agreement was renegotiated, the corporation agreed to pay grantors $500.00 down payment and the amount of the prepaid insurance. Cleveland prepared and notarized a warranty deed conveying the apartment thouse to the corporation. Purportedly for convenience in handling a possible sale of the dwelling (Lot 6), a separate deed was executed conveying this property to Cleveland individually. Contemporaneously grantors executed a Loan Transfer form furnished by plaintiff, which also contained a provision for grantee's assumption of the mortgage. Defendants (grantors) testified, and the trial court found, Cleveland had stricken the loan assumption provisions from the transfer statement after execution by defendants. The loan transfer and assumption agreement was not filed with plaintiff.
Cleveland went into possession and operated the properties in the corporation name, without filing the assumption agreement with plaintiff, but defaulted the required monthly payment on July 1, 1963. Plaintiff then applied for and secured appointment of a receiver for the property and thereafter filed this foreclosure action on October 4, 1963. Apparently the parties indulged some discussion after July relative to defendant surrendering the property to the Nesbitts, or their attempting to find another buyer. Defendants made written declination of these offers, denied ownership of any interest in the property, and asserted the matter to be the sole responsibility of the corporate defendant.
Plaintiff's foreclosure action asked perfecting of its title, foreclosure of the lien, and sale of the property, with deficiency judgment over against defendants (Nesbitts) in the event foreclosure sale failed to satisfy the mortgage debt. The plaintiff also sought foreclosure of the defendant surety's collateralization agreement.
Defendant surety answered admitting collateralization of defendants' mortgage debt, denied having consented to the sale, and alleged negotiation and completion of sale to the corporation jeopardized the collateral security so that her agreement in behalf of the defendants should be voided and, in event of foreclosure of the collateral account, she was entitled to judgment over against defendants Nesbitt. By cross-petition the surety alleged the collateral agreement constituted her a surety of defendants (Nesbitt) which entitled her to maintain a cross-action for relief against the principals. The surety asked denial of foreclosure and release of collateral security, and for judgment over against these defendants in event the security was foreclosed.
Defendants (Nesbitt) answered admitting superiority of plaintiff's claim, but denied other allegations of the petition, and the surety's cross-petition, alleging all obligations and responsibility for the property were assumed by Cleveland and corporate defendant. By cross-petition these defendants alleged they contracted with Cleveland individually wherein he agreed to assume and pay the plaintiff's mortgage loan; defendant represented himself to be an attorney, and in reliance upon his representations executed the prepared contract under which the property was transferred to defendant corporation; defendant further represented the obligation had been assumed and that he would take over management of the property, and defendant did assume full responsibility for the obligation. Prior to trial defendants' amended their answer praying, in event any judgment or deficiency judgment was rendered against them, for judgment over against Cleveland and the corporation by reason of acts committed by those parties against defendants Nesbitt.
Cleveland and the corporate defendant answered admitting plaintiff's allegations, but asserted that Cleveland acted at all times in behalf of the corporation. Separate replies and responses filed by the parties did not enlarge the issues and need not be detailed.
Upon trial the parties stipulated plaintiff's mortgage and the collateralization agreement could be foreclosed and judgment rendered for the amounts shown to be due. The pleadings and opening statements of the parties confined the issues to matters involving the responsibilities and obligations of Cleveland and the corporation to the defendants Nesbitt and the surety.
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