American Mortg. Inv. Co. v. Hardin-Stockton Corp.

• Court: Missouri Court of Appeals
• Writing for the Court: MANFORD
• Citation: American Mortg. Inv. Co. v. Hardin-Stockton Corp., 671 S.W.2d 283 (Mo. App. 1984)
• Decision Date: 27 March 1984
• Docket Number: No. WD,HARDIN-STOCKTON,WD
• Parties: AMERICAN MORTGAGE INVESTMENT CO., Plaintiff-Appellant, v.CORPORATION, Defendant-Respondent, and Charles C. Wimes, Mid-Central Mortgage and Investment Company, Inc., and Charles C. Wimes, Statutory Trustee, Defendants-Appellants, and Charles C. Wimes, an individual, Defendant-Respondent-Cross-Appellant. 33294.

Page 283

671 S.W.2d 283

AMERICAN MORTGAGE INVESTMENT CO., Plaintiff-Appellant, v. HARDIN-STOCKTON CORPORATION, Defendant-Respondent and Charles C. Wimes, Mid-Central Mortgage and Investment Company, Inc., and Charles C. Wimes, Statutory Trustee, Defendants-Appellants and Charles C. Wimes, an individual, Defendant-Respondent-Cross-Appellant.

No. WD 33294.

Missouri Court of Appeals Western District.

March 27, 1984.

As Modified May 23, 1984.

Jerome D. Riffell and Brian B. Myers of Campbell, Erickson, Cottingham, Morgan & Gibson, Kansas City, for American Mortgage Ins. Co.

Martin Anderson, Kansas City, for Chas. Wimes, Individual, Mid-Central Mortgage and Inv. Co., Inc.

Charles Wimes, Statutory Trustee.

James H. Horn and James Bandy of Blackwell, Sanders, Matheny, Weary, & Lombardi, Kansas City, for Hardin-Stockton Corp.

Before PRITCHARD, P.J., and MANFORD and NUGENT, JJ.

MANFORD, Judge.

This is a civil action seeking recovery of the proceeds from two sales of real properties, plus punitive damages. The judgment is affirmed in part and reversed in part and the cause is remanded.

Before proceeding further and for purposes of clarity, the parties are identified and reference is made to certain procedural developments preceding presentment of this case on appeal.

Appellant, American Mortgage Company (hereinafter American), was the original plaintiff. Respondent, Hardin-Stockton Corporation (hereinafter H.S.C.), was an original defendant. Patricia Apollo, an individual, was an original defendant and cross-claimant. John and Virginia Austin, individuals, were original defendants and cross-claimants. Mid-Central Mortgage and Investment Company-Charles C. Wimes, Statutory Trustee (hereinafter Mid-Central), was an original defendant. Respondent-Cross Appellant, Charles C. Wimes, as an individual, was an original defendant.

This appeal involves American as appellant, H.S.C. as respondent, Mid-Central-Charles C. Wimes, Statutory Trustee, as respondent, and Charles C. Wimes, an individual, as respondent and cross-appellant. Neither Apollo nor the Austins are participants on this appeal. Subsequent to the filing of this appeal, the cross-appeal of Charles C. Wimes, as an individual, was dismissed by this court under Rules 81.12(J) and 84.04(d).

This action was initiated under an eleven-count petition. The parties entered into a stipulation by which a portion of the alleged counts were dismissed. The following allegations remained for disposition at trial: (a) breach of contract, (b) general negligence, (c) breach of fiduciary duty, (d) negligence per se, (e) fraud, and (f) conversion. Concerning those remaining six counts, four of them, i.e., (a) breach of contract, (b) general negligence, (c) breach of fiduciary duty, and (d) negligence per se were against H.S.C. The remaining counts of fraud and conversion were against Mid-Central and Charles Wimes.

At the close of American's case, the trial court directed a verdict for H.S.C. on the general negligence count and the negligence per se count. The trial court overruled the motions for directed verdict by Mid-American and Charles Wimes on the fraud and conversion counts. Thus, the case was submitted to the jury on the breach of contract and breach of fiduciary duty counts as against H.S.C. and for fraud and conversion as to Mid-Central and Charles Wimes.

Concerning the remaining parties and issues, the jury, in summary, returned the following verdict:

A: For American and against Mid-Central, actual damages--$54,531.34, punitive damages--$20,000.00.

B: For American and against Charles Wimes, an individual, actual damages--$54,531.34, punitive damages--$50,000.00.

C: For H.S.C. and against American on the latter's claim against H.S.C.

D: For cross-claimants and against Charles Wimes as an individual, actual damages--$10,000.00, punitive damages--$10,000.00.

The trial was presided over by the Honorable James Stubbs, assigned as a special judge. Judgment was entered by the trial court in accordance with the jury verdict. This appeal followed the overruling of timely-filed post-trial motions.

In summary, the following pertinent facts are found upon the record.

American is a North Carolina corporation engaged primarily in the business of insuring mortgages upon residential properties. American insures a percentage of a mortgage to the benefit of a lender upon default by a borrower. When default occurs, the lender normally institutes foreclosure. Under its insuring agreement, American holds the option to pay the lender a sum equal to the percentage of loss insured, or alternatively to pay the remaining balance of the mortgage to the lender, take title to the property, and offer it for resale. The record reveals that in approximately 40% to 45% of default cases, American pays off the mortgage balance, takes title, and offers the properties for resale. ¹

In the instant case, two residential properties (9010 N.W. Hamilton and 9014 N.W. Hamilton) located in Parkville, Platte County, Missouri were subject to mortgages held by the Sentinel Federal Savings and Loan Association. The borrowers (buyers) defaulted. American exercised its option to pay off the mortgage balance on both properties and take title to the properties. American then contacted H.S.C., an area real estate broker, requesting H.S.C. to list the properties for sale and to solicit purchasers. American and H.S.C. had previous dealings relative to the latter's handling of property sales. American was represented by one James Pope who traveled to Parkville, Missouri; and on February 25, 1976, on behalf of American, Pope entered into two "Exclusive Rights to Sell Agreements" pertaining to the above two properties with H.S.C. In addition to the property description and the sale listing price, these agreements granted to H.S.C. the exclusive right (for a 90-day period) to solicit buyers. Further, the agreements provided that upon the successful sales of the property, H.S.C. was "to handle the customary details involved in closing the sale of said property."

Within the 90-day period, H.S.C. secured offers from Apollo and the Austins as prospective buyers. These offers were tendered to and accepted by American. In March, 1976, Apollo and the Austins entered into a sales/purchase contract with American for the two properties. The agreed-to price for the Austin property was $29,900. The agreed-to price for the Apollo property was also $29,900. Upon the execution of the sale/purchase agreements, H.S.C., through its closing department, commenced preparation of American's closing documents. The closing procedures, supervised by one Lois Laudon, an employee of H.S.C., included preparation of corporate warranty deeds (to be executed by American). These deeds, along with other pertinent closing documents, were forwarded to Pope. H.S.C. had been directed by Pope to prepare the warranty deeds, but no other specific instructions were given H.S.C. by Pope in regard to the closing. After a review of the warranty deeds and the execution of same by American, they were returned to H.S.C. along with other closing documents.

Pope testified that American, at the time, had had no established procedure regarding closings and assumed that H.S.C. would process all documents and other matters relative to the closing in accordance with the normal closing procedures of H.S.C.

Neither Pope nor anyone else representing American testified to having ever attended a closing in the greater Kansas City area. Neither Pope nor any other representative of American could testify to area closing practices.

One Patrick Randolph, a professor of law at the School of Law--University of Missouri--Kansas City, testified on behalf of American. Randolph's testimony revealed that he was not even in the greater Kansas City area in 1976. In addition, Randolph admitted to never attending a residential real estate closing except the one dealing with the purchase of his own residence. However, he testified that he was experienced in realty transactions involving commercial and residential properties in California and Oregon. In addition, he testified to having read materials and having conducted inquiries from local realtors concerning local customs and practices. In summary, he concluded that it was the responsibility of the real estate broker (in this case, H.S.C.) to handle the closing.

As the account of pertinent facts continues, it will be noted that the conclusion of Randolph differed markedly from not only the procedure employed in the closing herein, but also with that of testimony from other witnesses.

The record shows that Apollo and the Austins were having difficulty securing financing. Mid-Central was chosen as the lender. H.S.C. received the executed warranty deeds and other closing documents from American. Laudon, with H.S.C., in turn forwarded a preliminary closing statement along with the American closing documents and the deeds to Mid-Central. Mid-Central closed the transactions with both Apollo and the Austins. The closings were in mid-April, 1976. H.S.C. received notice of the closings, along with payment to H.S.C. of its sales commissions and a statement of how Mid-Central purportedly distributed other funds (title insurance premiums, appraisers fees, and the net sales proceeds to American).

In October, 1976, Pope, on behalf of American, asked H.S.C. why the monies representing the net sales sum (total of $57,395.10) due American had not been forwarded. H.S.C. made immediate inquiry of Charles Wimes. H.S.C. was assured by Wimes that the payment would be forthcoming. American made inquiry of Wimes and received a like assurance. A short while later, both H.S.C. and American attempted further inquiry, only to learn that Mid-Central was out of business. The record shows that for some four months following the April, 1976 closing on the properties, Mid-Central was paying only those creditors of Mid-Central who "pressured"...