Court Opinion

ID: 6748370
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:03:10.660053+00
Date Added: 2024-06-11T16:02:10.218031
License: Public Domain

DISSENTING OPINION
By SKEEL, P. J.
This action is one seeking judgment on a negotiable note and foreclosure of the mortgage given to secure its payment which note was given to the plaintiff in connection with the refinancing of defendant’s mortgage debt to the plaintiff through the H. O. L. C. The defendants had been in default in their payments on their note and mortgage given to plaintiff in 1924 and negotiations were commenced to refinance through H. O. L. C. some time in 1933. On March 30, 1935, the balance due plaintiff was $3737.75. The property had been appraised by agents of H O. L. C. to be of the value of $4000.00 and therefore a loan secured by first mortgage of $3200.00 was offered. Of this amount it was estimated that about $250.00 would be expended for taxes and expenses, leaving $2957.89 available to liquidate plaintiff’s first mortgage. The expense and tax item was increased so that as the transaction was finally concluded $2784.21 was made available to the plaintiff.
The plaintiff before signing the H. O. L. C. consent to take bonds and cancel its mortgage, entered into a written contract with the defendants, agreeing to do so, and the defendants agreed that they would give plaintiff a $500.00 note secured by a second mortgage to repay plaintiff in part at least for the loss it would sustain. The contract further pro*500vided that the escrow agent should cash the bonds to be received from H. O. L. C. in, the sum of $2957.89 and purchase plaintiff’s pass books at the market price. It was further agreed that if pass books of the face value of $3737.75 could be bought for less than $2957.89, then whatever was not needed for that purpose should be credited upon the H. O. L. C. mortgage and the five hundred dollar second mortgage can-celled. But in the event that the face value of the pass books that could be bought with the available funds was not sufficient to equal the amount of defendant’s indebtedness to the plaintiff, then the amount of the deficiency should be “incorporated in the second mortgage” not to exceed, however, the sum of five hundred dollars. As the deal was closed, however, only $2784.21 was received with which to buy pass books, so the second mortgage was increased to $779.87. Also, it was found by the escrow agent *that pass books of the plaintiff were not available on the market, so books of the Lincoln Savings & Loan Company were purchased with the consent of the plaintiff. The face value of such pass books gave defendants a credit on the second mortgage of $292.68 thus reducing the amount due thereon to four hundred eighty-seven dollars and nineteen cents ($487.19) which credit was entered upon the note.
The plaintiff in the negotiation for this refunding transaction including the making of the contract just referred to, dealt entirely with the Home Owners Loan Corporation’s fee or closing attorney. After signing the H. O. L. C’s form styled “Mortgagees Consent to Take Bonds or Stock Certificates or Other Securities” which provided that defendant’s indebtedness to plaintiff was $3737.75 for which plaintiff would receive $2957.81 (subsequently changed by attorneys for H. O. L. C. with plaintiff’s consent to $2784.21) in bonds to be converted into savings account credits in full for said indebtedness, the plaintiff sent it to the H. O. L. C. attorneys, together with the second mortgage and note as provided for in the contract above referred to, with directions to see to its execution by the defendants and to deliver the mortgage and note,- when signed, to the escrow agent. There is some evidence to the effect that the H. O. L. C. fee or closing attorneys drew the second mortgage and note themselves.
The Home Owners’ Loan Corporation’s attorneys then forwarded to the Abstract Company designated as escrow agent its own mortgage, plaintiff’s first mortgage, with cancellation clause properly executed, together with “authorization” for H. O. L..C. bonds in the sum of $2750.00 and their check for *501$22.50 and also the plaintiff’s second mortgage to be filed "only in the event the bonds are insufficient.” The H. O. L. C. also forwarded check for taxes and recording costs and escrow instructions.
The escrow agent finally closed the escrow by recording both mortgages and purchasing deposit certificates of The Lincoln Savings & Loan Company, which entitled the defendants to a $292.65 credit on the second mortgage of plaintiff and recorded said mortgage under the H. O. L. C. instructions.
The .defense to plaintiff’s claims against the defendant is that the proper H. O. L. C. official did not consent to the plantiff’s second mortgage and therefore it was fraudulently procured and is unenforceable.
The rule of the H. O. L. C. is that under proper circumstances a creditor who consents to a refunding of his mortgage when the bonds received (which equal 80% of the appraised value) are not sufficient to pay the full debt of the mortgagor, the H. O. L. C. in the exercise of its sound discretion and if it does not create a hardship on the debtor, may permit the creditor to secure from the debtor a promise to pay such deficiency, either secured or not by a second lien on the property, but in no case shall such promise to make such payment of an additional amount exceed the difference between the face value of the H. O. L. C. mortgage and the appraised value of the property. In this case the amount of total indebtedness assumed by the defendant is well under the appraised value of the property, so that the only question is whether or not the H O. L. C. consented thereto.
That a secret attempt to compel the mortgagor to pay the mortgagee the loss resulting from refunding the indebtedness of the mortgagor through H. O. L. C. is against public policy and void has been clearly established by the cases.
In the case of Weber v Sternad, 140 Oh St 253, affirming the Cuyahoga County Court of Appeals (Weber v Sternad, 69 Oh Ap 258) the syllabus provides:
“A mortgagee who voluntarily and knowingly releases his mortgage lien and waives the unpaid balance of the Joan for the agreed purpose of enabling the mortgagor to refinance his property by obtaining a new mortgage loan from the Home Owners’ Loan Corporation, is estopped from asserting a claim based upon a new unsecured note thereafter secretly obtained from the mortgagor in known violation of the terms and conditions of the refinancing agreement.”
*502The facts in the Weber case, (supra) showed that the agreement to pay an additional amount over and above the amount represented by the bonds was carefully concealed from H. O. L. C. But in the case now under consideration, just the reverse was true. The plaintiff did not sign the consent to take bonds until the defendant had signed the agreement to execute a second mortgage, and such agreement was procured from the defendant by the attorney of H. O. L. C. Also, it is not disputed that the fee or closing attorney procured the execution of the second mortgage, and prepared the escrow instructions whereby the escrow agent was empowered to record such mortgage when the conditions provided therein had been met. Can it be said, with any force, that under these circumstances the- H. O. L. C. was without notice, and had not at least given its implied consent to the defendant’s assuming such additional obligation? Certainly the conduct of 'H. O. L. C. in negotiating and securing the second mortgage for the plaintiff should estop it from denying that consent was given.
In the case of H. O. L. C. v Baker, 73 Oh Ap 195, the court had for consideration the following: — The facts disclosed that refunding of the mortgagor’s loan would entail a loss of about $300.00 to the mortgagee. They refused to sign the consent to take bonds until the mortgagors agreed to pay the loss by second mortgage. This information was mailed to H. O. L. C. by letter addressed to the agency at its Canton office. Later the mortgagee’s attorney wrote a letter to the H O. L. C. fee attorney explaining, the delay in returning the “consent.” In reply counsel for H. O. L. C. in effect said the transaction could not be closed because of the mortgagee’s demand but notwithstanding this letter the transaction was closed. The court held as follows:
“A seasonable disclosure, to the Home Owners’ Loan Corporation, of the consummation of a collateral agreement, entered into without fraud, concealment or duress, between a home owner and an original mortgagee to secure the mortgagee in part against the loss that would otherwise be suffered, which agreement is within the corporation’s rules as to allowed total debt, makes such collateral agreement a part of the entire refinancing transaction, notwithstanding the formal language of the consent is to take bonds in full satisfaction of a larger debt; and a note and second mortgage given in pursuance of such collateral agreement, is *503based. on consideration, is not against public policy, and is valid.”
I therefore conclude that even though there is some evidence that .the fee attorney was without authority -to consent to the mortgagee’s requiring partial reimbursement for the loss that would be sustained in carrying out the refinancing of its mortgage by H. O. L. C. the conduct of H. O. L. C. in carrying on the negotiations for such additional payment through their own officers, constituted sufficient notice so that the closing of such transaction constituted at least implied consent that the mortgagor could assume the obligation of paying the second mortgage and it is therefore an enforceable obligation.