Federal Housing Administration v. Morris Plan Co. Of California

Appellant, Federal Housing Administration, hereafter F.H.A., pursuant to authority granted by § 2(a) of the National Housing Act of 1934, 12 U.S.C.A. § 1701 et seq., issued a contract of insurance insuring appellee, Morris Plan Company of California, against losses on property improvement loans made in conformity with the National Housing Act and regulations issued by F.H.A.

In 1948 appellee made F.H.A. Title One Property Improvement loans to a number of individuals who in turn contracted with Los Angeles Perma-Stone Company, hereafter Perma-Stone, to make certain specified improvements on the property belonging to borrowers. Perma-Stone became involved in financial difficulties and failed to complete improvements on several of the projects after having received payment therefor. Fifteen notes, executed by borrowers in favor of appellee, for money advanced for improvements to property were unpaid. Appellee filed a claim with appellant for reimbursement of losses incurred on the notes. The claim was denied and appel-lee, in a suit instituted by it in the District Court, recovered judgment.

In an appeal from that judgment appellant contends that appellee was not entitled to…