Empire Mortgage & Investment Co. v. Bratton , 198 Ga. 865 ( 1945 )

A second mortgage, taken contemporaneously with the execution of a first mortgage made to the Home Owners' Loan Corporation, created under the act of Congress known as the home owners' loan act of 1933 (12 U.S.C.A., Ch. 12, §§ 1461 et seq.), and as a part of the same transaction, with the full knowledge and consent of the officials of said corporation who handled the particular loan, the amount of the two mortgages not exceeding the value of the property according to the corporation's appraisal thereof, is valid and enforceable.

No. 15059. JANUARY 6, 1945. REHEARING DENIED FEBRUARY 9, 1945. Mrs. Mary C. Bratton filed her equitable petition in Fulton superior court against Empire Mortgage Investment Company, alleged to be a Georgia corporation having an office in Atlanta, Georgia, in which she alleged that she was the owner of certain real estate in Fulton County, particularly described in an exhibit attached to the petition. The petition contained the following allegations: On September 29, 1934, she was indebted to the defendant in the approximate sum of $1571.97, being the balance due on a series of notes given for the original principal amount of $2134.66, secured by a loan deed conveying said property to Empire Trust Company, the predecessor of the defendant corporation. The loan deed and the unpaid 43 notes were not attached as exhibits for the alleged reason that they had not been returned to her after having been canceled by the defendant. On January 25, 1934, and continuing through September 29, 1934, the defendant importuned the petitioner to refinance her $1571.97 indebtedness to it by making application to Home Owners' Loan Corporation for a new loan, and as a result of such requests she made application to Home Owners' Loan Corporation, and the loan was consummated on September 29, 1934. As the proceeds of the new loan were not sufficient to pay off in full all of the then outstanding indebtedness against the petitioner's property, the defendant agreed with Home Owners' Loan Corporation, and with the petitioner, to accept $155.41 in bonds and cash in full settlement of its $1571.97 claim against her, the petitioner attaching a copy of said alleged consent and agreement by the defendant with Home Owners' Loan Corporation. On said date, September 29, 1934, the defendant canceled the petitioner's note and loan deed, and on October 9, 1934, caused an entry of satisfaction to be placed upon the record. Simultaneously with the agreement by the defendant to accept $155.41 in full satisfaction of the petitioner's indebtedness to it, and simultaneously with its cancellation of the outstanding note and loan deed, namely, on September 29, 1934, the defendant caused her to execute and deliver to it a new note in the amount of $893 principal, bearing interest, which was secured by a deed of that date, conveying said property, recorded November 15, 1934. This new loan deed by the petitioner to the defendant recited that it was made subject to the deed from the petitioner to Home Owners' Loan Corporation of the same date, September 29, 1934, and recorded October 3, 1934. A copy of the petitioner's last note given to the defendant was not attached to the petition for the alleged reason that the defendant refused to show it to the petitioner; but a copy of her loan deed to Home Owners' Loan Corporation was attached as an exhibit.

The petitioner further alleged that she received no consideration whatsoever from the defendant for the execution of said note and loan deed, and that the defendant paid no consideration for the same, either to her or to anyone for her benefit. She further alleged that at the time the defendant demanded from her the execution and delivery of the aforesaid note and loan deed, it was thoroughly familiar with the rule and provision of Home Owners' Loan Corporation, set out in its manual of rules and regulations, as follows: "The corporation will not refund any indebtedness where the mortgagor is required to pay more than he owes, through agreement either to pay future interest to the original mortgagee, or to absorb any loss of interest by the original mortgagee, or to guarantee any difference between the face value of the bonds plus accumulated interest thereon and the market value of the same, or to cover any assumed loss on account of acceptance of the bonds of the corporation by the mortgagee. The corporation will not become a party to any contract between a mortgagor and a mortgagee in reference to indebtedness refunded by the corporation." In the 9th paragraph of the petition it was averred that the defendant did not notify Home Owners' Loan Corporation that it intended to take a new note and loan deed from the petitioner to make up the whole or any part of the indebtedness which it voluntarily canceled and satisfied when it signed the aforesaid consent agreement and accepted payment thereunder, nor did it obtain the consent, permission, or approval of Home Owners' Loan Corporation to the taking of such papers, nor has that corporation even known of the execution and existence of such papers until immediately prior to the filing of the petitioner's action. She also alleged that the defendant demanded and received from her many payments of interest on her second note and loan deed; and that, although she has requested the cancellation and return to her of said note and loan deed, the request has been refused. She alleged that said note and loan deed are void and are a nudum pactum, and that the defendant is advertising a sale of her property, and attached to the petition a copy of the advertisement.

The prayers were: for process; that the defendant be required to render an accounting, under oath, of all moneys received from the petitioner on and since September 29, 1934; that she recover from the defendant all sums so paid by her, with interest; that the defendant be permanently enjoined from proceeding with the sale, and permanently enjoined from advertising and selling her said property; and for further relief.

At the interlocutory hearing evidence was introduced by both parties. That introduced by the petitioner (besides her verified petition) consisted of certain documents and resolutions of Home Owners' Loan Corporation. There was uncontradicted evidence, by way of an affidavit of a former officer of Atlanta Title Trust Company, that said title company was employed by and represented Home Owners' Loan Corporation in closing the loan from that company to the petitioner; that the affiant knew that Empire Mortgage Investment Company was taking a loan deed and a new note from the petitioner; and that Home Owners' Loan Corporation likewise knew and consented thereto.

After the hearing the trial judge entered the following judgment: "This case coming on for interlocutory trial and after hearing before me, it is ordered and decreed that interlocutory injunction is granted to petitioner as prayed, upon the condition that petitioner deposit and pay into the registry of this court on this date the sum of sixteen hundred ($1600.00) dollars, to be used to pay to the defendant the debt claimed by defendant together with interest to date of payment; twenty-four ($24.00) dollars advertising cost and all costs of court, in the event defendant finally prevails in this case, otherwise to be returned to petitioner upon termination of the case. In the event the petitioner fails to pay into the registry of the court today the sum hereinabove directed, the restraining order heretofore granted is dissolved and this interlocutory injunction is denied. This 2d day of October, 1944." To this judgment the defendant excepted. A considerable portion of the brief of counsel for the defendant in error is devoted to the maintenance of the proposition that the Georgia cases next hereinafter mentioned compel an affirmance, and that there is a great unanimity of decisions from other jurisdictions which declare "to be void, invalid, and unenforceable a second loan deed or mortgage taken after the execution of a consent agreement and the acceptance of HOLC bonds and cash thereunder." We are in disagreement with counsel as to the effect of the holding of these five cases. The question as to the validity of a second mortgage, taken contemporaneously with the execution of a Home Owners' Loan Corporation first mortgage, was not before the Court of Appeals of this State in Willcox v. Cobb, 58 Ga. App. 39 (197 S.E. 517). Therefore that case is not in point. The same observation applies to Jordan v. Robinson, 63 Ga. App. 745 (12 S.E.2d 121), and Kinard v. Bank of Lenox, 57 Ga. App. 819 (196 S.E. 920), which also had other distinguishing features. Among the latter is the fact that the first mortgage was given to the Federal Land Bank, and not to Home Owners' Loan Corporation. This is true also of Federal Land Bank of Columbia v. BlackshearBank, 182 Ga. 657 (186 S.E. 724), and Robinson v.Reynolds, 194 Ga. 324 (21 S.E.2d 214). An examination of the facts in each of the two last cited will reveal that in the "creditor's agreement," submitted to the land bank, it was expressly agreed that the creditors would not demand, accept, or receive any obligation, evidence of indebtedness, lien, or security for the difference, or any part thereof. The court in each instance made mention of this in the decision. The difference between the creditor's agreement in the Federal Land Bank cases and the one here involved has been pointed out by several of the courts of other jurisdictions, where second mortgages have been upheld against an attack that the home owners' loan corporation act forbade them, and that the taking of them was a violation of public policy.

This record does not present an instance where a second loan deed or mortgage was taken after the execution of a consent agreement and the acceptance of Home Owners' Loan Corporation bonds and cash thereunder, and therefore it matters not what the law may be covering such a situation. Here, the uncontradicted proof is that the second mortgage was taken contemporaneously with the consent agreement and the acceptance of the cash and bonds, and with the execution of the Home Owners' Loan Corporation first mortgage, all being a part of the same transaction.

All the cases cited in both briefs relating to the question have been examined, as have those in the notes in 110 A.L.R. 250, 121 A.L.R. 119, and 125 A.L.R. 809, as well as such of the supplemental decisions in the A.L.R. Blue Book as appear to be in point. It would be useless here to cause all these to pass in review, or even to cite them in this opinion. While there may be a minor discord here and there, there is a general harmony among them to the effect that, if the second mortgage was executed with the knowledge and consent of the attorney closing the transaction for Home Owners' Loan Corporation contemporaneously with the execution of the creditor's agreement, containing nothing more than the one in the instant case, the amount of the two mortgages not exceeding the value of the property according to the corporation's appraisal thereof, the second mortgage is valid and enforceable. Among the many authorities so holding are the following well-reasoned cases: Lavery v. Rizza, 126 Conn. 132 (9 A.2d 819); Neavitt v. Upp, 57 Ariz. 445 (114 P.2d 900); Meek v. Wilson, 283 Mich. 679 (278 N.W. 731); McVicarv. Peters, 12 Wn.2d 92 (120 P.2d 485); Krause v. Swanson, 141 Neb. 256 (3 N.W.2d 407).

All of the evidence construed together demanded a judgment denying the injunction. We do not overlook the fact that the petition was introduced in evidence. However, construing it as a whole most strongly against the petitioner, it discloses that she is not entitled to the relief sought.

Judgment reversed. All the Justices concur.