Abrego v. United Peoples Federal Savings & Loan Ass'n

Darrell Hickman, Justice, dissenting. The majority has overruled a finding by the chancellor without reciting all of the evidence that would support the court’s finding. Instead, the evidence is presented in a light most favorable to the appellants, which is contrary to our decisions. See Taylor v. Terry, 279 Ark. 97 , 649 S.W.2d 392 (1983). We can overrule a finding if it is clearly erroneous. ARCP 52. In this case the chancellor found:

Plaintiff (United Peoples Federal Savings and Loan Association) in good faith believed that the conveyance impairs its security for the note of the defendant Abrego held by it and that its security is in jeopardy as a result of the sale of this property without Plaintiff’s consent and/or assumption of the note by the Defendant purchasers.

In 1974 Mrs. Abrego and her husband purchased this property, which consisted of an apartment complex, and financed it with a loan held by United Peoples. Her husband died in 1979. The property became a financial burden, was losing money, and she did not have the experience to maintain it. So, in January, 1981, she sold it to Larry and Brenda Gotten under a contract of sale. Neither party notified United Peoples that it had been sold. The Cottens would pay Mrs. Abrego, and she would make payments to United Peoples. In October, 1981, United Peoples discovered the sale through its insurance department and notified Mrs. Abrego that the loan should be paid off or assumed.

Mr. Gotten then talked to the officials of United Peoples about the assumption, but an agreement was never reached. There was testimony that the Cottens never formally requested permission to assume the loan. There seems to be no doubt that the Cottens were well-known to United Peoples and could have qualified for a loan. The Cottens sold the property on October 16, 1981, to Warner Holdings, Ltd., and Ruth Siger on a contract of sale. It seems Hymie Singer was the real buyer through Warner and his wife. Again the association was not notified. Both the contract of sale to the Cottens and Singer recognized that the association could call the loan due and payable in full, and both contracts provided full reimbursement to the party that might have to meet that demand. In other words, the Cottens agreed to reimburse Mrs. Abrego, and Warner and Mrs. Singer made the same agreement with the Cottens. The contract between Mrs. Abrego and the Cottens provided “that in the event United Peoples Federal Savings and Loan Association of Fort Smith, Arkansas, makes demand on the seller for payment in full of its first mortgage, the buyers shall have the option of paying such mortgage in full or entering into a modification agreement with said Savings and Loan Association . . . that the buyers shall hold the seller harmless from any liability or loss occasioned by the demands of the [association] and will bear any and all expenses in connection therewith.” Singer agreed with the Cottens that “[a]ll parties acknowledge the possibility that the first mortgage holder may declare its loan immediately due and payable or attempt to do so and the Vendees are willing to indemnify and hold the Vendors harmless from any loss arising therefrom. In the event of default in the payment of the aforesaid indebtedness as well as the $22,000.00 obligation still remaining due from the Vendees to the Vendors, the Vendees, jointly and severally, agree to pay all costs incurred by the Vendors in protecting their interest herein, including a reasonable attorney’s fee and other costs.”

In the latter part of 1981, Hymie Singer went to the association and talked to them about the loan. The vice president in charge testified that he did not actually know whether the borrower was to be the Cottens or Singer and he did not know anything about Hymie Singer. Evidently, Mr. Singer submitted to the association some documents on his and Warner Holdings’ financial condition. According to the association official, they were outdated, unsigned and unaudited, and none of the assets or liabilities of Singer could be verified. The official testified this was rental property and the association needed to know the reputation and capabilities of the manager. Mr. Singer testified he got angry after talking to the officials about a new loan and left. He said he agreed to pay 1414 percent interest plus $300 or $400 for the documents. He said he thought the information he supplied on his finances was adequate, but he conceded the information was not certified. He testified that he gave the officials the name of his bank in Canada. There was testimony that neither the Cottens nor Mr. Singer made a complete application to assume the loan.

This suit was filed in March 1983. The chancellor found that United Peoples acted in good faith in deeming its security in jeopardy, and I cannot say that finding was clearly erroneous. We still do not know from this record Mr. Singer’s financial condition. The majority emphasizes several times that Tucker v. Pulaski Federal Savings and Loan Assn., 252 Ark. 849 , 481 S.W.2d 725 (1972), has become a rule of property, and it abrogates the right of United Peoples to accelerate this loan. Even if it is a “rule of property,” Tucker does not require reversal of this case. There the savings and loan refused to approve a loan application of the buyer. The court held “there must be legitimate grounds for refusal to accept a transfer to a particular individual or concern.” Tucker did not hold that an institution could not renegotiate the interest and secure one more fair for the lending institution; it did not hold that when parties buy property knowing a lending agency may well accelerate payment, the agency can be prevented from doing so. I would not be so quick to hold that Tucker has become a rule of property and certainly not the rule the majority finds it to be. Tucker says a good deal more than the majority indicates. First of all, it was a case of unique facts. Frankly, the majority in Tucker felt that the lending agency had refused to approve a loan application from a buyer because of race. In this case, neither of the secretive buyers completed a loan application. In Tucker, the court left open considerations other than security for refusing to approve a new loan or assumption. The reputation one has for managing property can be a consideration. The lending agency in this case offered testimony that it did not know Mr. Singer and had no way to certify his large holdings. Singer conceded that he did not provide certified statements.

Perhaps more important, neither of the secretive buyers in this case is completely innocent. They wanted to keep the existing mortgage, which was beneficial to them, but knew the lending agency might call the loan in. To their credit, they agreed unequivocally to bear any costs if that was done. They were going to hold out for the best deal they could. This is not a case of a lending agency being arbitrary. In fact, Mrs. Abrego has no real complaint. She has recourse against Gotten, and Cotten has recourse against Singer. Singer said that if he could not keep the loan, he would pay it off. He should be given that opportunity.

What we have is a situation converse to Tucker. Here, there were surreptitious sales to prevent the lender from seeking a better return on its money. The reasons in Tucker for holding the clause invalid were because it could be used to defeat the right of one to sell property. In this case that is hardly in question since the property has been sold twice.

In Independence Federal Savings and Loan Assn. v. Davis, 278 Ark. 387 , 646 S.W.2d 336 (1983), we held that Tucker was preempted by federal legislation — in other words, overruled. I assume the loan in that case was made after the federal legislation was in effect, although our decision does not say so. I doubt seriously that Tucker granted vested rights that cannot be superseded by this federal legislation.

I do not agree with the majority’s characterization of the case of Fidelity Federal Sav. & Loan Assn. v. de la Cuesta, 458 U.S. 141 (1982). Actually, the majority is basing its decision on a footnote to the decision. But the decision itself is very strong evidence that it was the intention of congress to preempt state law in this field. The Court stated:

The preamble unequivocally expresses the Board’s determination to displace state law:

‘Finally, it was and is the Board’s intent to have . . . due-on-sale practices of Federal associations governed exclusively by Federal law. Therefore,. . . exercise of due-on-sale clauses by Federal associations shall be governed and controlled solely by [§ 545.8-3] and the Board’s new Statement of Policy. Federal associations shall not be bound by or subject to any conflicting State law which imposes different . . . due-on-sale requirements, nor shall Federal associations attempt to . . . avoid the limitations on the exercise of due-on-sale clauses delineated in [§ 545.8-3(g)] on the ground that such. . .avoidance of limitations is permissible under state law.’ 41 Fed. Reg. 18286 , 18287 (1976).

In addition, the Board recently has ‘confirm[ed]’ that the due-on-sale practices of federal savings and loans ‘shall be governed exclusively by the Board’s regulations in preemption of and without regard to any limitations imposed by state law on either their inclusion or exercise.’ 12 CFR§ 556.9(f)(2)(1982). Thus, we conclude that the Board’s due-on-sale regulation was meant to pre-empt conflicting state limitations on the due-on-sale practices of federal savings and loans, and that the California Supreme Court’s decision in Wellenkamp creates such a conflict.

The court essentially held that any state law that stood in the way of federal regulations had to yield.

To prevent the acceleration in this case denies United Peoples the right to receive a higher rate of interest. The federal regulation was adopted to permit federal associations to adjust their loan portfolios, and our decision denies them that right. Mrs. Abrego has been deprived of no right in this case.

Hays, J., joins in this dissent.