Siwooganock Guar. Sav. Bank v. Cushman, 275a.

• Decision Date: 02 November 1937
• Docket Number: No. 275a.,275a.
• Citation: 195 A. 260
• Parties: SIWOOGANOCK GUARANTY SAV. BANK v. CUSHMAN et ux.
• Court: Vermont Supreme Court

195 A. 260

SIWOOGANOCK GUARANTY SAV. BANK

v. CUSHMAN et ux.

No. 275a.

Supreme Court of Vermont. Caledonia.

Nov. 2, 1937.

[Copyright material omitted.]

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Appeal in Chancery; Alfred L. Sherman, Chancellor.

Suit by the Siwooganock Guaranty Savings Bank against George W. Cushman and wife. From a decree for plaintiff, defendants appeal.

Decree affirmed, and cause remanded with instruction.

Argued before POWERS, C. J., and SLACK, MOULTON, SHERBURNE, and BUTTLES, JJ.

Conant & Parker, of St. Johnsbury, for appellants. Searles & Graves, of St. Johnsbury, for appellee.

SHERBURNE, Justice.

This is a bill to foreclose a mortgage upon land located in St. Johnsbury. The plaintiff is a New Hampshire savings bank located at Lancaster, in that state, and the bill alleges that the mortgage and note were delivered to the plaintiff at Lancaster, and that the contracts and agreements embodied in the note and mortgage were made at Lancaster. The defendants filed a motion to dismiss a demurrer, and a plea in bar, all of which were overruled subject to exception, and an answer. Facts were found to which exceptions were taken, and decree was entered for the plaintiff, from which the defendants have appealed.

The note and mortgage in suit are dated January 14, 1936. The note is insured by the Federal Housing Administration, and is for $4,600 with interest at 5 per cent., and is payable at the plaintiff bank in monthly installments of $30.43, commencing March 1, 1936, on the amortization plan, and contains a provision making the entire principal and accrued interest due upon default in a monthly payment for one month. The mortgage, in addition to being conditioned for the payment of the note, provided for the payment of monthly sums to cover cost of mortgage insurance, service charges, taxes, and fire insurance. The provisions relative to taxes and insurance read, in part, as follows:

"(c) An installment of the taxes and assessments levied or to be levied against the premises covered by this mortgage; and an installment of the premium or premiums that will become due and payable to renew the insurance on the premises covered hereby against loss by fire or such other hazard as may reasonably be required by the mortgagee in amounts, and in a company or companies, satisfactory to the mortgagee. These installments shall be equal respectively to the estimated premium or premiums for such insurance and taxes and assessments next due (as estimated by the mortgagee), less all installments already paid therefor, divided by the number of months that are to elapse before one month prior to the date when such premium or premiums and taxes and assessments will become due. The mortgagee shall hold the monthly payments in trust to pay such premium or premiums and taxes and assessments when due."

In October, 1935, the defendants borrowed $3,550 of the plaintiff evidenced by a promissory note insured in like manner and secured by a mortgage upon the same real estate, both dated October 24, 1935. Before this October loan was made and the mortgage executed, the parties had certain negotiations at Lancaster, N.H. At that time Mr. McCarten, treasurer of the plaintiff bank, stated to the defendants in substance that the bank didn't know anything about St. Johnsbury real estate values or conditions, and that the bank would have to have someone to look after its interests, or words to that effect; and upon Mr. Cushman's asking Mr. McCarten if he had in mind any particular person, Mr. McCarten mentioned the fact that he had had previous dealings with H. Stanwood Brooks, an attorney, in Federal Land Bank matters, that he thought very highly of him, and that he would want him; and Mr. McCarten asked the defendants if they would have Mr. Brooks make an appraisal. Later, on July 31, 1935, the plaintiff wrote Mr. Cushman as follows:

"In accordance with our talk over the telephone this noon, I am enclosing herewith the abstract and the application blanks for the insured loan of $4,000.00 on the Park Street property in the village of St. Johnsbury, Vt., which our trustees voted to take at a meeting last night.

"This vote was taken with the understanding that you would engage Mr. Brooks to see to making the appraisal, etc. of the property which is supposed to be made by the mortgagee. When your application is accepted by the Federal Housing Administration and the loan is accepted and insured by them, we will furnish the money as set forth in the administrative rules and regulations under Title II of the National Housing Act [sections 201-209, as amended, 12 U.S.C.A. §§ 1707-1715]."

Previous to the October loan, Brooks made an appraisal of the property and reported his findings to the plaintiff. He also made an abstract of title and delivered it to the plaintiff. The plaintiff accepted Brooks' appraisal in making the loan and relied upon his abstract of title. The October note was signed at St. Johnsbury and the mortgage was there executed, and both were there handed to Brooks, and Brooks handed the mortgage to the town clerk of St. Johnsbury for record. Brooks distributed the money from this loan, and in so doing obtained his pay for services and expenses, to which the defendants never made any objection.

Prior to the execution of the note and mortgage of January 14, 1936, defendant George W. Cushman had ascertained from the agents of the Federal Housing Administrator at Burlington, Vt., that the Administrator would be willing to insure the plaintiff on an additional mortgage loan on the property in question for the purpose of paying for repairs thereon. After he had ascertained that insurance could be obtained, he applied, either at plaintiff's bank in Lancaster or by telephone to McCarten then in the bank, for a new loan for $1,250, and was informed that the application would be granted providing he could procure the loan to be insured. Thereafter a representative of the Federal Housing Administrator called on the defendants at St. Johnsbury, and at his request the defendants signed the first page of a printed application for loan, in which were blanks to be filled out, and which the representative later did fill out without again showing the paper to the defendants. The loan when it came through was for the sum of $4,600, representing $1,050 in money and the cancellation of the prior mortgage for $3,550. The application when introduced as an exhibit contained the following:

"It is understood that such loan, secured by a first lien upon the property described in Exhibit D attached hereto, will be insured by you under the provisions of Title II of the National Housing Act and will be made upon the following terms and conditions:

"(1) Interest shall be paid and the principal amount of the loan shall be completely amortized by payment of 239 equal monthly installments cf $30.43

"(2) Together with and in addition to the monthly installments of principal and interest above set forth, the undersigned will pay the following:

"(a) One-twelfth (1/12) of the estimated amount of all charges payable or accruing annually against the property securing the loan for taxes and for ground rents and special assessments, if any (Estimated) 15.66

"(b) One-twelfth (1/12) of the aggregate amount of all premiums accruing annually with respect to such policies of fire and hazard insurance as may be required for the proper protection of such property (Estimated) 1.67

"(c) One-twelfth (1/12) of the amount of the service charge, if any, accruing annually, the monthly payment for the first year being 1.89

"(3) After the loan is insured and as long as such insurance remains in effect (except during the last year of the loan), the undersigned will also pay to you, concurrently with the monthly installment payments hereinabove set forth, one-twelfth (1/12) of the amount of the annual mortgage insurance premium payable by you for such insurance 1.91

Estimated total monthly payment $51.47"

This application was addressed to the plaintiff and was acted upon by it in making the loan. On its back directed to the plaintiff is an appraisal signed by Brooks, in which he therein states that he has made his examination at the request of the plaintiff bank and that he has no financial interest except as its representative.

On the back of the application, also, the plaintiff bank signed a printed application to the Federal Housing Administrator, Washington, D. C, for insurance upon the proposed loan, in which it entered into certain engagements relative to payments of fees in the event the insurance was granted.

Mr. Brooks attended to certain details about this loan. When defendant Cushman first conferred with Brooks, he told him that he would see that he got his pay when the loan was closed. In December, 1935, Brooks carried Mr. Cushman, at the latter's request, to Burlington in order that Mr. Cushman could see about getting his loan approved; in January, 1936, Brooks went to Lancaster to procure the plaintiff's signature to papers needed by the Federal Housing Administration in order to insure the loan; and on January 14, he again drove to Lancaster to have the insurance commitment signed so that it could be sent to Burlington. He prepared the note and mortgage on forms sent him by the Federal Housing Administrator at Burlington, and on January 14 he and his stenographer, Miss Dorothy Merrill, called upon the defendants at their home, where the defendants executed the note and mortgage and handed them to Brooks. He then handed the mortgage to the town clerk for record, and on January 15th went to Burlington and handed the note into the office of the Federal Housing Administrator, where, on January 17th, it was indorsed as accepted for insurance, and mailed to the plaintiff at Lancaster, where it was received on January 18th. On this last date Brooks carried the mortgage to the plaintiff at Lancaster, in order to obtain the proceeds of the new...