Court Opinion

ID: 9825839
Source: CourtListenerOpinion
Date Created: 2023-09-01 14:07:59.185149+00
Date Added: 2024-06-11T07:41:23.821541
License: Public Domain

‘Baker, J. (on rehearing). Since the opinion was handed down in this ease the Supreme Court of California has reversed the appellate court in the matter of the case of McAllister v. Drapeau, 92 P. 2d 911. The appellee has filed a petition for rehearirijg, calling our attention to that fact and insisting upon error in our conclusions, for the reason in the case of Sirman v. Sloss Realty Co., Inc., ante p. 534, we gave approval to the announcement made in the above cited McAllister case, now reversed by the Supreme Court of California, which court cited our recent case of Sirman v. Sloss with approval. It is urged that we should now distinguish this case upon rehearing from the ease of Sirman v. Sloss, supra, upon the sole ground that Sloss Bealty Company gave notice when it filed the consent to take bonds that it intended to take a second mortgage from Sirman. We agree with appellee in his contention that there is this distinguishing characteristic. The opinion of the Supreme Court of California is far from convincing. It seems, however, that the sole ground for that distinction was that no notice was given that the mortgagor intended to give a second mortgage, and it was insisted that the rules of the HOLC precluded the execution and acceptance of a second mortgage at the time that the consent to accept bonds was filed, and the release was treated as absolute, notwithstanding the fact that the parties had agreed upon their own settlement. Otherwise stated, the contracting parties clearly understood that the release would not pay or discharge the indebtedness, but that the intention was to enable the mortgagor to give the first lien to the HOLC. It is also stated, in the recent opinion under consideration that the second mortgage was executed under duress, that is to say, a threat to sue or foreclose unless the second was executed and that similarity with the case at bar may be noticed in passing. These announcements of the California Supreme Court have been duly considered and with the utmost respect to that high tribunal, and, without intention to be critical, we are compelled to express our disapproval of its conclusions. We have heretofore called attention to the fact that accord and satisfaction arises out of contract. It appears to us that if we should follow the conclusions of the California court it would be tantamount to a declaration that if one satisfies a first mortgage in order that he might take a second mortgage upon the same property, he will be met, upon an effort to foreclose this second mortgage, with a plea of satisfaction of the indebtedness by the release of the first mortgage, and, if he had at any time threatened to foreclose this first mortgage, he would then be confronted with the plea of duress in that the second mortgage was given to avoid foreclosure. .The mere statement of these conditions and holdings is a refutation of the soundness of the announcement. It was not the intention of Palmer to settle'his indebtedness when he executed the mortgage to the HOLC, nor did he mean at that time to insist that the bonds issued became a legal discharge of the amount of the indebtedness that he owed. He mortgaged the other property to secure the balance or remainder that he owed over and above the amount of bonds accepted by the creditor and the appellant now holds a first mortgage on all the properties except the home place and on that a “secret” second mortgage. We summarize our conclusions as follows: In accord and satisfaction there are certain elements that must usually or ordinarily be considered. First, there is a disputed amount involved. Second, there is a consent to accept less than the claimed amount in settlement of the whole. In this case there was no dispute. There was an actual agreement upon the amount that should be paid. 1 Am. Jur., Accord and Satisfaction, §§ 19 and 30. 1 C. J. S., Accord and Satisfaction, §§ 1, 2, and 3. 1 R. C. L., Accord and Satisfaction, § 3. The only allegation of fraud is that there was a second mortgage, that it was entered into secretly and that it should not be enforced. There is no evidence of this alleged fact. The execution and delivery of a second mortgage does not violate any sound policy of the law. This fact was recognized by the very rules of the HOLC by which Palmer now seeks to shelter himself. The following rule is copied from appellee’s brief: “(1) If the home owners’ income is so reduced that he is unable to meet full amortization, payments from the beginning* on his obligations to the corporation, the second mortgage shall not require any principal payments’ prior to June 13, 1936, and payments thereafter shall be on a schedule which the home owner may reasonably be able to meet. ’ ’ It is not alleged nor established by proof that Palmer comes within the protection of this rule. Certainly he does not, as his so-called “second mortgage” conveys several other pieces of property. Both these matters as alleged and insisted upon by appellee are supported by the holding of the Supreme Court of California in reversing the McAllister case, supra. That court insists in the opinion that in the execution of a second mortgage the mortgagee is clearly at fault and the mortgagor perhaps a little to be blamed because he executed the second mortgage under duress. The same duress is established in the present case, that is, that the mortgagor not only threatened to sue, but did actually file a suit to foreclose the lien of- the mortgage; that the mortgagee labored under the effects of this threat when he executed the second mortgage. We submit that in no other class of cases in American jurisprudence will a threat to foreclose to enforce acknowledged rights, even when partially executed by the filing of a suit, be held to constitute duress. Our own courts have defined duress. The writer of this opinion gathered together some of our own decisions upon that point in a recent case. Perkins Oil Co. v. Fitzgerald, 197 Ark. 14, 121 S. W. 2d 877. We think the unsoundness of the conclusions reached by the California court in the case of McAllister v. Drapeau, supra, is clearly demonstrated by pursuing that conclusion to an ultimate result. If. we regard as sound the assertion that the purpose of the Congress in enacting the HODC law was to provide a means of relief for distressed home owners, then we must regard that ultimate purpose as being beneficent, one that will not defeat itself in its enforcement. At the time this institution was formed and the corporation began lending money to home owners, all of them, of course, were in financial distress. If suits had not been actually instituted and foreclosures had not been consummated, there was, at least, no doubt, in many instances, the threat to foreclose. If that threat to foreclose constituted'duress, such as to make invalid a contract later entered into by the parties, then no creditor having knowledge that the law had been so declared would thereafter permit his debtor to enter into a new contract with him, to give sufficient time to meet his obligations, as all such new obligations made under such circumstances would be under the ban of judicial disapproval and subject to a decree of invalidity because executed under that kind of duress. Therefore, the creditor would necessarily force a foreclosure and sale of the property rather than accept the debtor’s new promise, and grant him sufficient time within which to pay his debt and save his property from sale. No such result was intended or contemplated by the law under which the HOLC was created. With the utmost respect for the highest judicial tribunal of a sister state, we are forced to disagree with the conclusions. The petition for rehearing is denied.