G. A. Nichols Bldg. Co. v. Fowler , 197 Okla. 476 ( 1946 )

This action was brought by plaintiff, G. A. Nichols Building Company, a corporation, against defendant, George L. Fowler, to cancel a contract for the sale of real estate, and a deed issued by plaintiff to defendant, and for an accounting. In the alternative the plaintiff sought recovery of $33784, the balance due it on the purchase price of said property. The case was tried to the court, both parties waiving a jury, and the trial court sustained defendant's demurrer to plaintiff's evidence, and dismissed the action. Plaintiff appeals.

The essential facts are undisputed. On November 27, 1942, defendant, pursuant to negotiations had with one Henshaw, a salesman for plaintiff, signed the following application:

"Application to Purchase "Copy 'Exhibit A'

"To G. A. Nichols, Inc.:

"I hereby make application to purchase the following described real estate situated in Oklahoma County, State of Oklahoma, to-wit:

"7306 Surrey

at and for the price of $4560 and hand you herewith the sum of $250 to apply on purchase price of same, and in case this application is accepted I agree to pay for said property as follows:

"Purchaser to place $4100 loan on above property expense to be borne by seller. Seller to place house in first class condition, grade and plan yard and lawn, fix Driveway,

"All deferred payments shall bear interest at _____ per cent per annum, payable __________.

"This application is made subject to the restrictions covering __________.

"In case this application is not accepted by G. A. Nichols, Inc., the initial payment herein mentioned will be returned to the applicant. This application shall be binding on G. A. Nichols, Inc., only when same is accepted by the Company and official receipt issued for initial payment.

"Make All Checks Payable to G. A. Nichols, Inc.

"Dated Oklahoma City, Okla. this 27 day of November, 1942.

"Accepted and Initial Payment Acknowledged.

"George L. Fowler Purchaser

"G. A. Nichols, Inc.

"By ____________________

1445 N.W. 32 address "Chas. E. Henshaw Salesman."

Thereafter defendant procured a loan of $4,100 secured by a mortgage on the property insured by the Federal Housing Administration under the provisions of 12 U.S.C.A. § 1709. Defendant moved into the property in December, 1942, and a deed was issued and delivered to him on January 14, 1943. The date of the mortgage is not shown, but apparently it was closed up and the money received on March 3, 1943. At the time the application to purchase was signed, defendant paid plaintiff $250. He made no other payment to plaintiff.

12 U.S.C.A. § 1709(b) provides as follows:

". . . Provided, That with respect to mortgages insured under this paragraph the mortgagor shall be the owner and occupant of the property at the time of the insurance and shall have paid on account of the property at least 10 per-centum of the appraised value in cash or its equivalent. . . ."

The appraised value of the property is not shown by the record, but the parties tacitly agree that it was $4,560, and that a further payment by defendant of $210 was required to make his cash payment equal to 10 per cent of the appraised value of the property so as to bring the mortgage within the class acceptable to the Federal Housing Administration under the proviso above quoted.

The evidence showed that defendant orally agreed with plaintiff's salesman, Henshaw, that he would borrow this $210 at the bank on an assignment of his wages as security and turn the money over to plaintiff, but this was never done. On the strength of this promise by defendant, plaintiff, joined by defendant, made a written statement to the Federal Housing Administration that defendant had paid $460 in cash on the purchase price of the property, and apparently the mortgage was approved by the Federal Housing Administration in reliance upon that statement. Plaintiff prepared a note and assignment of wages for $337.84, being the $210 above referred to and expenses in making the loan, including insurance premium required to be paid, mortgage insurance to be paid to the Federal Housing Administration, taxes and some other items which were by the mortgagee deducted from the amount of the loan when it was paid to plaintiff. The note and assignment were dated January 10, 1943, but were never executed by defendant. In May, 1943, plaintiff prepared another assignment of wages and a note for $317, but these were never executed by defendant. At the close of the evidence it was stipulated that Henshaw, if recalled by plaintiff, would testify that when the application to purchase was signed he told defendant that the expenses above referred to and deducted from the loan would have to be paid by him.

Plaintiff here contends that in attempting to force defendant to pay the $210 due on the purchase price of the property it is endeavoring to enforce the provisions of the Federal Housing Administration act, and that to defeat its effort is to defeat that act. It asserts that the public interest will be better promoted by granting it relief than by denying it, citing Local Federal Sav. Loan Ass'n v. Sheets,191 Okla. 439, 130 P.2d 825, and Falkenberg v. Allen,18 Okla. 210, 90 P. 415. The case last cited is so different factually that it is inapplicable. In Local Federal Sav. Loan Ass'n v. Sheets, supra, we upheld a judgment canceling a second mortgage taken by the loan company in violation of the HOLC Law, for the reason that to leave the parties where we found them would reward the loan company, and assist in defeating the national policy which forbade such second mortgage. We held that the facts in that case excepted it from the general rule, in that public policy demanded the granting of relief to the mortgagor.

No such reason obtains in the instant case. Here the plaintiff participated in procuring the mortgage to be insured by the Federal Housing Administration, at least to the extent of making a written representation that 10 per cent of the purchase price had been paid when it knew that such statement was false. Plaintiff concedes that the procuring of the mortgage insurance, when the 10 per cent of the appraised value had not been paid, was a violation of the federal act, and the proof that it participated in such violation is undisputed. Certainly it would not effectuate the purpose of the Federal Housing Act, and the public policy pursuant to which it was enacted, to encourage the making of transactions similar to the one involved in this case by permitting the owner of property, after making such representation to the Federal Housing Administration, to recover the unpaid balance of such 10 per cent. Clearly in such case public policy does not demand the granting of such relief, and we think public policy demands that the parties be left where we found them.

In Miller v. Walters, 34 N.Y. Supp.2d 341, cited by defendant, and which appears to be the only reported case dealing with the question involved in the instant case, a note was given for the balance of the 10 per cent payment required by the federal act, and the court refused to enforce collection thereof. The court said:

"To give validity to the note sued upon would be to sanction a violation of the purpose and spirit of the rules and regulations adopted pursuant to statute and would invite others to adopt a similar plan."

As to the $127.84 expenses in connection with the loan, the trial court admitted parol evidence offered by the plaintiff to show that advance mortgage insurance, war damage insurance, fire insurance, future taxes and similar expenses, going to make up the amount of $127.84, were not included within the term "expenses to be borne by the seller," as used in the contract. Since the contract was in this respect ambiguous, such evidence was properly admitted. Hawkins v. Mattes,171 Okla. 186, 41 P.2d 880. Witnesses for the plaintiff testified that the defendant was told that the expenses making up this $127.84 would have to be paid by him and that he repeatedly agreed to pay them but never did. The testimony of these witnesses was positive, uncontradicted and unimpeached, but in sustaining the demurrer to plaintiff's evidence the trial court disregarded it. In so doing the court erred. It is true that where a case is tried to the court without the intervention of a jury, the court treats the demurrer to the evidence as a motion for judgment, weighs the evidence and passes upon the credibility of the witnesses. Universal Life Insurance Co. v. Berry, 177 Okla. 92, 57 P.2d 879. But even in such case the court may not disregard the positive testimony of witnesses which is uncontradicted and unimpeached. Taggart v. Snipes,174 Okla. 449, 50 P.2d 640. As to this item, the court should have overruled the demurrer to the evidence, and permitted the defendant, if he desired, to offer testimony as to the understanding, if any, about such expenses, and at the conclusion of all the evidence upon such point should have rendered such judgment as the evidence justified.

Affirmed in part and reversed in part, and remanded with directions to proceed in conformity with the views herein expressed.

HURST, V.C.J., and BAYLESS, CORN, and DAVISON, JJ., concur. RILEY and WELCH, JJ., dissent.