Opinion
No. 84, Docket 21117.
December 29, 1948.
Appeal from the United States District Court for the Southern District of New York.
Action by Fleetwood Acres, Inc., against Federal Housing Administration and another to recover back part of adjusted premium charge made upon plaintiff exercising its option to pay off mortgage debt in advance of its maturity. From summary judgment for named defendant, the plaintiff appeals.
Affirmed.
Plaintiff is the mortgagor, and the defendant, Federal Housing Administration (F.H.A.) is the insurer of a mortgage securing a loan made by the defendant, National Life Insurance Company, to plaintiff.
The National Housing Act, 12 U.S.C. § 1701 et seq., required the morgagee, National, to pay defendant F.H.A. a premium-charge for the insurance, which premium, according to the statute, "shall be payable annually in advance." 12 U.S.C.A. § 1713(d). By the terms of the mortgage, plaintiff was required to pay the mortgagee, National, the amount of the premium in advance of the date when National had to pay the insurer, defendant F.H.A. An annual premium payment was due to defendant F.H.A. on June 1, 1945; plaintiff paid the required amount to the mortgagee, National, before that date, and on that date National paid the premium to defendant F.H.A.
On November 1, 1945, plaintiff exercised its option of paying off the mortgage debt in advance of its maturity. The mortgage gave plaintiff such an option, exercisable "without premium or penalty except that * * * the mortgagor shall pay an amount equal to the adjusted premium charge required to be paid under the Regulations of Federal Housing Administration in force on the date hereof." Such an adjusted premium charge was authorized by the statute, which provided: "In the event that the principal obligation of any mortgage accepted for insurance under this section is paid in full prior to the maturity date, the Administrator is authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Administrator determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured until such maturity date." 12 U.S.C. § 1713 (e). By regulation (Art. III, par. 2 of the Administrative Rules and Regulations under the National Housing Act), the Administrator exercised this discretion, providing that, if the principal is paid before maturity, the mortgagee shall collect from the mortgagor and pay to the Administrator "an adjusted premium charge of 1% of the original face amount of the prepaid mortgage." This amount was duly paid by plaintiff. At the time when plaintiff exercised the option and paid the adjusted premium charge, it demanded reimbursement of 7/12 of the annual premium which had been paid on June 1, 1945. When the Administrator refused to refund any amount, this action was commenced. The district court granted defendant F.H.A.'s motion for summary judgment.
Shanley McKegney, of New York City, (Walter E. Kelley, of New York City, of counsel), for plaintiff-appellant.
John F.X. McGohey, U.S. Atty., of New York City (Edmond McCarthy, of New York City, of counsel), for defendant-appellee.
Before L. HAND, Chief Judge, and CHASE and FRANK, Circuit Judges.
The plaintiff contends that, in effect, he has paid an insurance premium twice for the period from November 1, 1945 to May 31, 1946, i.e., that he paid a year's premium in advance on June 1, 1945, and that, on November 1, 1945, he paid the "adjusted" premium in settlement of all premiums for the period after the mortgage debt was paid.
There seems to be no dispute that, under the statute, defendant was authorized to collect an "adjusted" premium and that the Regulation providing for the adjusted premium was a proper exercise of the Administrator's discretion. The right of the defendant to keep the full premium paid in advance on June 1, 1945, for the year June 1, 1945 to May 31, 1946, is not so plain. That premium was not entirely earned, and plaintiff persuasively argues that fairness requires that defendant should not keep this unearned premium as well as the adjusted premium. But, as plaintiff apparently concedes, the ordinary rule is that an insured may not have any part of his premium returned once the risk attaches, even if it eventually turns out that the premium was in part unearned, unless there is an agreement to that effect. SilTurn Co. v. London Guararanty Accident Co., Ltd., 153 Misc. 805, 276 N.Y.S. 412, affirmed 242 App. Div. 829, 275 N YS. 980; Jones v. St. Paul Fire Marine Insurance Co., 5 Cir., 118 F.2d 237.
Public Law 901, 80th Cong., 2d Sess., approved August 10, 1948, 12 U.S.C.A. § 1701 et seq., made provision specifically for the type of refund plaintiff is here seeking, and on August 26, 1948, the Administrative Rules and Regulations under the National Housing Act, Art. III, § 3, were amended to provide that, in case of prepayment of a mortgage debt "on or after August 10, 1948, the Commissioner will refund to the mortgagee for the account of the mortgagor an amount equal to the pro-rata portion of the current annual mortgage insurance premium theretofore paid, which is applicable to the portion of the year subsequent to such repayment." These recent amendments, however, are inapplicable to this case.
Plaintiff attempts to make out an agreement by construing the word "adjusted," used in describing the final settlement premium, to mean that a pro rata calculation of earned premium should be made as of the time of prepayment. We think there is no such special significance intended by the use of that word. The premium is "adjusted," in that the Administrator accepts a lower premium than he might have received if the mortgage debt had not been prepaid, but we cannot find in that word any Congressional direction that unearned premium should be refunded. As there was no issue of fact involving a determination of credibility, summary judgment was proper.
Affirmed.