Axman v. Smith

• Decision Date: 15 May 1900
• Parties: AXMAN et al., Appellants, v. SMITH et al
• Court: Missouri Supreme Court

57 S.W. 105

156 Mo. 286

AXMAN et al., Appellants, v. SMITH et al

Supreme Court of Missouri, First Division

May 15, 1900

Appeal from Jackson Circuit Court. -- Hon. C. L. Dobson, Judge.

Reversed and remanded.

Leon Block for appellants.

(1) The trustee should have divided the property as requested by intending purchasers, and not having done so, the sale will be set aside. "The rule is firmly established that a trustee in selling land is trustee for both parties and is bound to adopt all reasonable modes of proceeding in order to render the sale most beneficial to the debtor. Where property is susceptible of division, and it will bring more by sale in separate parcels or lots, or where sale of a part will bring an amount sufficient to pay off the secured debt, he is bound to sell accordingly. If not, the sale will be held invalid on application of the party aggrieved." Tatum v Holliday, 59 Mo. 428; Chesley v. Chesley, 49 Mo. 540. (2) Nor will such relief be denied to the party aggrieved if the peculiar circumstances prevent his being able to redeem. In such a case a re-sale will be ordered without an offer upon the part of plaintiff to redeem. Meyer v. Ins. Co., 5 Mo.App. 245; Harper v Mansfield, 58 Mo. 21; Briggs v. Hall, 16 R. I 577; Fowler v. Taylor, 19 D. C. 456; Grapengether v. Fejervary, 9 Ia. 163; Boyd v. Ellis, 11 Ia. 98; White v. Watts, 18 Ia. 74; Bradford v. Lunpus, 13 Ia. 424; Lay v. Gibbons, 14 Ia. 377; Trip v. Cook, 26 Wendell 143; Denning v. Smith, 3 Johns. Ch. 331. In all the foregoing cases, a resale was ordered without an offer to redeem. Redemption would do away with the necessity of a re-sale, hence ordering a re-sale in itself negatives the theory that the mortgagor must redeem or offer to redeem. Where the mortgagee is the purchaser, the court will regard an application for a re-sale with more indulgence than when a stranger is the purchaser. Campbell v. Gardner, 11 N.J.Eq. 423.

R. J. Ingraham for respondents.

(1) The court held that the only right to which plaintiffs were entitled was to redeem, and as they did not ask that, and would not accept it when it was offered them, they stated and had no cause of action. There was no error in this rule. Lipscomb v. Ins. Co., 138 Mo. 17. The holder of the second deed of trust (for $ 10,000) and the holders of the judgment against appellants (aggregating over $ 25,000) do not seem to be aggrieved by the sale. They have not joined in this suit. From the face of the bill it thus appears that the real parties in interest are not in the case and do not complain. (2) Giving the bill its most favorable construction, it presents a case of: (a) Sale at an alleged inadequate price. (b) Refusal of the trustee to cut the property into parcels, different from the way it was platted and conveyed. (c) Alleged agency of the trustee in the transaction of other business of the respondents. These matters (especially in view of respondents' plain and positive offer to permit appellants to redeem upon most favorable terms) certainly do not warrant the interference of a court of equity upon such terms as appellants sought it. Hardwick v. Hamilton, 121 Mo. 465; Harlin v. Nation, 126 Mo. 97; Snyder v. Railroad, 131 Mo. 568.

OPINION

VALLIANT, J.

This is a suit in equity to set aside a trustee's sale on the ground that it was conducted unfairly and with partiality by him, and resulted in a sacrifice of the property.

The petition is in proper form, a brief summary of which is to the effect that plaintiffs were the owners of the real estate in question, and they conveyed it by deed to defendant Platt in trust, to secure a debt of $ 5,000 to defendant Smith with power of sale; that afterwards they borrowed $ 10,000 from the National Bank of Kansas City, and gave a second deed of trust on the same property, to secure it, and afterwards the same property was attached for a debt of $ 1,067, owing by plaintiff, and after that judgments to the amount of $ 25,000 were rendered against the plaintiffs, and they became and continued to be entirely insolvent, so that when the interest of $ 200 on the first mortgage became due, they were unable to pay it, and owing to their condition and the encumbered condition of the property, they were unable to borrow any money on it, and defendant Platt as trustee under the first deed of trust advertised the property for sale, and it was sold in a body to the defendant Smith, who was the holder of the note, for $ 4,500, when it was worth and would have brought at the sale, but for the misconduct of the trustee, $ 10,000.

The misconduct charged is that Platt, the trustee, who was the business agent of defendant Smith, in handling his real estate in Kansas City, which is quite extensive, for the purpose of enabling his client to buy in the property as cheaply as possible, offered it in the most unattractive form for sale. The property lies in a body at the corner of 15th street and Brooklyn avenue, having a frontage of 128 feet on 15th street, and 90 feet on Brooklyn avenue. Fifteenth street is a business thoroughfare 100 feet wide and one of the principal streets in the city, while Brooklyn avenue is a residence street and in that part is occupied by residences of very poor quality. The property was susceptible of being divided into lots fronting 15th street, and if so would have brought $ 80 a front foot. But instead of doing so the trustee for the purpose above mentioned offered it in lots fronting Brooklyn avenue, first offering lot one, then lot two, then the whole, when the business partner of the trustee, who was present representing defendant Smith, bid $ 4,500 for it and it was struck off to him for Smith, to whom the trustee made a deed, which was at once recorded. During the sale a would-be purchaser who was present offered the trustee $ 2,500 for 25 feet front to the corner fronting 15th street, but the trustee refused to entertain the bid, and would not offer the corner for sale otherwise than with the whole. When plaintiffs bought the property, they bought it per front foot on 15th street, and that was its recognized front.

The answer was a general denial, and at the time of the filing of the answer defendants filed a paper in which they offered to allow the plaintiffs to redeem the property on payment of the mortgage debt. On the same day the case came on for trial, and defendants objected to the admission of any evidence in support of the petition, on the ground that it did not state facts sufficient to constitute a cause of action, which objection the court sustained; then the court rendered judgment for defendant, from which the plaintiffs after due course, have appealed.

The only question presented by the record is, were the defendants entitled to a judgment on the facts stated in the petition? For the purposes of this question the defendants must be considered as confessing the truth of the statements of the petition. That is, they confess that the trustee for the purpose of enabling his client, the holder of the note secured by the deed of trust, to buy the land as cheaply as possible, so divided it and offered it for sale as to present it in its most unsalable form, and by that means did sell it in the whole to his client for less than half its value and half what it would have brought if he had acted fairly and in a faithful discharge of his duty as trustee.

If the trustee acted in that manner, he certainly behaved in flagrant violation of his duty and his act should not be suffered to stand. A trustee is not the mere agent or attorney for the holder of the note, but he is the trusted agent of both debtor and creditor. [Jones on Mort. (5 Ed.), sec. 1771.] In the sale of property under a deed like the one in question, he should use all reasonable effort and methods to make it bring as much as possible, and he should be fair and impartial as between debtor and creditor. [Chesley v. Chesley, 49 Mo. 540; Tatum v. Holliday, 59 Mo. 422; Dunn v. McCoy, 150 Mo. 548, 52 S.W. 21, l. c. 567; Jones on Mort. (5 Ed.), sec. 1859.]

The ruling of the circuit court was based upon the fact that there was no offer in the petition to redeem. As a general rule, a mortgagor seeking to set aside a foreclosure sale should offer in his bill to pay off the debt. This is on the principle on which is founded the maxim, "He who seeks equity must do equity." But whilst that maxim is never to be violated, yet it is not so encased in cast iron rules as to render it the means of injustice in its application. When a suitor comes into a court of equity for redress of his wrongs, the court will grant him relief upon such terms as the right and justice of his cause demands, and will require him to do equity before giving him what he seeks. But the court will not make an unreasonable requirement of him, and will adjust the matter according to the circumstances of the case. That is what the maxim means. [Pomeroy, Eq. Jur. (2 Ed.), sec. 385 and note 1.] And it is only in that sense that the end attained is equity.

The general rule above referred to requiring the mortgagor to offer to redeem as a condition to granting...