200 A. 721 | Pa. Super. Ct. | 1938
Argued April 13, 1938.
Anderson, the plaintiff, held a mortgage for $4,746 on a property owned in fee simple by the Horsts, the defendants, — husband and wife — as tenants by the entireties, and used by them as a home. They were in default and unable to carry or refund the mortgage *142
indebtedness. They applied to the Home Owners Loan Corporation, hereinafter called the Corporation, for relief. The Corporation after an investigation agreed to refund the mortgage debt by exchanging for it, with the consent of the mortgagee, $3,775 of Home Owners Loan Corporation bonds and paying $50 in cash for incidental expenses, pursuant to the provisions of the Act of Congress of June 13, 1933, c. 64, 48 Stat. 128,
However, it does appear that without the knowledge of the Corporation or its agents, Anderson, prior to the execution of the foregoing consent and release agreement, obtained from John Horst, one of the mortgagors, an agreement to give him, in case said refunding arrangement was consummated, a second mortgage for $450 payable in monthly instalments of $10, with interest at 6% payable semi-annually. And subsequently *143 after the refunding had been accomplished the Horsts executed and delivered to Anderson a bond and mortgage for $450 payable in monthly instalments of $10, with interest at 6% payable semi-annually. After paying $132.50 on said second mortgage, the Horsts made default in one of the $10 monthly instalments and Anderson entered judgment on the bond accompanying the mortgage and levied on the Horsts' personal property, which was advertised for sale by the sheriff.
The Horsts thereupon filed a petition setting forth the foregoing and that said second mortgage and bond were in violation of the provisions of the Home Owners Loan Corporation Act aforesaid, and obtained a rule to show cause why the levy and sale should not be set aside, and the mortgage recorded in Mortgage Book 2322, p. 124 and the bond accompanying the same ordered set aside, delivered up and cancelled. Anderson filed an answer admitting that the second mortgage and its accompanying bond arose out of a balance due on the indebtedness which had been refunded by the Corporation, and his execution of the agreement consenting to the refunding and his acceptance of $3,775 HOLC bonds in release and settlement of his claim on the mortgage for $4,746. The court discharged the rule and the Horsts appealed. The order will be reversed.
The Home Owners Loan Corporation Act was one of the emergency measures enacted by Congress for the relief of distressed citizens. It was designed for the relief of home owners who were unable to carry or refund their mortgage indebtedness. It provided for the exchange of HOLC bonds in an amount not exceeding 80% of the appraised value of the mortgaged property for the mortgage and bond or other obligation, the Corporation to credit the difference to the home owner and thus reduce the amount owed by the home owner to that extent. It also provided for amortization of the loan by monthly payments sufficient to retire the principal *144
and interest, (not exceeding 5%), within a period not to exceed fifteen years. The refunding could not be accomplished without the consent of the mortgagee. But if he consented — and his consent was entirely optional (Thorne v. Edwards,
Chapter 6, sec. 4-d(1) of the rules and regulations of the Corporation adopted under authority of section 4(k) of the Home Owners Loan Corporation Act,
We are of opinion, therefore, that an agreement between the mortgagee and the home owner, made without the approval of the Corporation, by which the home owner assumes or agrees to pay all or any part of the mortgage debt which had been settled and released by the refunding effected by the Corporation is void as against public policy and will not be allowed to be enforced by the mortgagee. We recognize that the appellants here were parties to the unlawful agreement no less than the mortgagee, and, because of that, we will not permit them to use our courts to recover back payments made by them pursuant to it; but neither will *146
we allow our courts to be used by the mortgagee as an instrument to enforce the illegal agreement, but will set it aside as contrary to public policy, when the help of the courts is sought to carry it into effect. See Restatement — Contracts, sec. 512;Miller v. Ammon,
This construction of the Act, and its effect upon subsequent agreements in conflict with or violaton of its terms, is in accord with the great majority of the cases where the question has arisen. See Jessewich v. Abbene,
We think the opinion of the Supreme Court of New Jersey inStager v. Junker, supra, expresses the principle very clearly: "The Home Owners' Loan Act (48 Stat. 128 [see
In United States v. Kreidler,
We give no weight or effect to the averment in Anderson's answer that if the supplemental agreement for the second mortgage for $450 "had been submitted by John Horst and Martha Horst, the applicants in the Home Owners Loan Corporation mortgage, the same could and would have been approved as many other loans of a like character were approved by the said Home Owners Loan Corporation." Such an averment is impossible of proof and cannot be considered in this proceeding.
The second, fourth, fifth, sixth and seventh assignments of error are sustained. The order is reversed and the record is remitted to the court below with directions to make the rule absolute. *148