Court Opinion

ID: 7824243
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:03:13.998614+00
Date Added: 2024-06-11T16:30:49.030752
License: Public Domain

John I. Purtle, Justice, dissenting. The logic of the majority holding escapes me. I do not understand how the lender can be found negligent for collecting insurance premiums from the borrower and not obtaining the insurance, and not be held responsible for damages. The return of the premium on the three loans is small satisfaction indeed for the wrong the bank had inflicted on these borrowers. The opinion clearly demonstrates on its face why it is wrong. The appellants applied for and received loans on four different properties. They paid a premium for mortgage credit insurance on the four loans, which were all approved on the same day. The bank covered one of the loans with mortgage credit insurance, in accordance with the terms of the loan agreements. However, the appellee failed to procure insurance on the other three, although it continued to collect the premiums from the appellants. The failure to cover the three loans was negligent and it was so found by the trial court and the majority of this court. The appellants have been afforded no remedy at all; instead they are saddled with a deficiency judgment for more than $100,000. The mere fact that the balance of the loan which was properly insured was paid to the bank without foreclosure is proof of the damage to the appellants. The three uninsured loans were foreclosed and resulted in a deficiency judgment against the appellants. Whether the loan that was covered by the mortgage insurance will ever be revived against the appellants is questionable. Obviously if some action is commenced, the appellants will have the right to defend or settle. In any event, they will be free of a huge judgment during the time that no legal action is brought against them as a result of the loan which was insured. Not having clairvoyant power, I am unable to see that the FHA will ever foreclose or seek subrogation on the loan that was paid. The very purpose of the mortgage insurance is to build up a fund to pay the deficiencies to FHA when foreclosures are required. I will briefly consider the majority opinion’s discussion of estoppel. The majority relies on Padgett v. Haston, 279 Ark. 367, 651 S.W.2d 460 (1983), for the rejection of the claim of estoppel. The four elements in the doctrine of estoppel are set out in the majority opinion. The first element requires that the party to be estopped know the facts. Obviously, the appellee bank knew the facts. Certainly the second requirement is present because the bank knew the borrower had a right to believe and did in fact believe that FHA insurance had been procured on all four loans. The third element is met by the fact that the appellants did not know the truth, i.e., that the bank had not obtained the FHA insurance. The fourth element is surely met because the borrowers relied completely on the lender to purchase the insurance and as a result have obviously been injured. The extent of their injuries is not known. Perhaps their damages will be exactly the amount of the deficiency judgment. There is simply nothing in the record to indicate that the appellants either were not completely innocent or that they did not completely rely upon the bank to obtain the insurance required. Had they been told of the failure to obtain the insurance there is no doubt that they would have immediately made arrangements to acquire the coverage. Under the circumstances of this case, the bank is estopped.