Bank of Mo. v. S. Creek Props., LLC
| Decision Date | 10 April 2014 |
| Docket Number | Nos. SD 32374,SD 32543.,s. SD 32374 |
| Citation | 455 S.W.3d 47 |
| Court | Missouri Court of Appeals |
| Parties | The BANK OF MISSOURI, Plaintiff–Respondent, v. SOUTH CREEK PROPERTIES, LLC, Hammer Collections, LLC, Michael and Charlotte Dawley, Defendants–Appellants, and Treadwell Enterprises, Inc., Third–Party Defendant–Respondent. |
Mark C. Fels, Springfield, MO, for Appellant.
William L. Sauerwein, Clayton, MO, Grant J. Mabie, Crestwood, MO, for Respondent Treadwell Enterprises.
Raymond I. Plaster, Springfield, MO, for Respondent The Bank of Missouri.
This case involves an appeal from a judgment in an action to recover the balance due on a promissory note. After a foreclosure sale of certain commercial real estate (“the property”) in Greene County, Missouri, Bank of Missouri (“Bank”) sued the defendants-South Creek Properties, LLC (“South Creek”), Hammer Collections, LLC (“Hammer”), Michael Dawley and Charlotte Dawley1 —seeking a deficiency judgment. South Creek filed a cross petition seeking quiet title and damages for wrongful foreclosure and added Treadwell Enterprises, Inc. (“Treadwell”), the subsequent purchaser of the property, as an additional defendant. All parties sought summary judgment. The trial court granted summary judgment in favor of Treadwell on the basis of Treadwell's claim that it was a bona fide purchaser for value. The case then proceeded to trial, and the trial court granted judgment in favor of Bank. Defendants appeal. The trial court's judgment is affirmed.
Michael and Charlotte moved from Louisiana to Springfield, Missouri, with plans to start a commercial collection business. They created Hammer and began business in April 2006. For the first three years, Hammer operated out of leased office space in Springfield, Missouri. Meanwhile, also in 2006, Michael and Charlotte bought the property at issue in this case. They formed South Creek to own and manage the property.
In 2008, South Creek and Hammer entered into a Small Business Administration loan agreement (“the SBA loan”) with Bank for the purpose of constructing an office building on the property. The loan was in the amount of $1,050,000, and was secured by a deed of trust on the property. Michael and Charlotte executed an unconditional guarantee of the loan.
The building on the property was completed in July 2009. Sometime thereafter, Michael and Charlotte decided to move the collection portion of Hammer's operations to Louisiana due to lack of revenue. Hammer began making preparations for the transition in October 2009, and in early November Hammer began moving equipment out of the building.
On November 3, 2009, Michael wrote himself an $11,500 check from Hammer's account with Bank. Michael characterized the check as an owner draw, explaining that was how he was paid for his services to Hammer. A second check was written on November 5, 2009. The proceeds of this second check were placed in a new account with another bank. Bank's Assistant Vice President of Commercial Lending, Michelle Louden (“Vice President”), considered these checks to be “suspicious activity on the account[.]”
On November 10, 2009, Vice President and one of Bank's commercial loan officers, Charles Vandivert (“Loan Officer”), went to see Michael at his home. Michael was in the process of packing to move to Louisiana. The Bank officers indicated they were concerned about the loan. Michael told them he “was committed to the note,” but the next payment on the loan, due on November 16, would be late because of the move. Although he did not say how late the payment would be, Michael explained it would take approximately 90 days to get the company back to “full speed operating capacity.” Vice President and Loan Officer indicated a late payment was not acceptable and Hammer was in “default” on the loan. Bank froze Hammer's accounts sometime around November 11, 2009.
Hammer did not make the November 16 payment as scheduled. On November 20, 2009, Bank executed a written document appointing Raymond I. Plaster (“Trustee”) to serve as successor trustee under the deed of trust. That same day Trustee sent a letter to Defendants' business address declaring the loan in default. The letter also advised that Bank had decided to exercise its power of sale under the deed of trust and enclosed the notice of trustee's sale which was set for December 16, 2009. Publication began on November 24, 2009. The appointment of successor trustee was recorded in the Greene County Recorder's Office on December 1, 2009.
On December 7, 2009, Charlotte e-mailed Vice President a forwarding address for Defendants. Vice President replied by e-mail that the property was set for foreclosure on December 16, 2009. She also informed Charlotte that to stop the sale, Hammer would need to bring the note current by paying $7,371.37. Michael testified he had the money available but did not make the payment. Instead, Michael returned to Missouri, retrieved the November 20 letter and removed the remainder of Hammer's belongings from the property.
The foreclosure sale took place as scheduled, and Bank purchased the property, resulting in a deficiency due on the SBA loan of $389,277.13. Michael did not attend the foreclosure sale. Treadwell subsequently purchased the property from Bank. Hammer ceased its Missouri operations entirely in February 2010.
On February 11, 2010, Bank filed suit seeking to recover the deficiency due on the SBA loan plus interest. After trial, the court granted judgment in favor of Bank. This appeal followed.
In their first point, Defendants argue the trial court misapplied the law when it entered judgment in favor of Bank because the foreclosure sale was void as Trustee had not been appointed in accordance with the terms of the deed of trust which required the appointment must be recorded. This argument is without merit.
As this point involves review of a court-tried civil matter, we “will sustain the judgment of the trial court ‘unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law.’ ” Manard v. Williams, 952 S.W.2d 387, 389 (Mo.App.S.D.1997) (quoting Gauzy Excav. & Grading Co. v. Kersten Homes, Inc., 934 S.W.2d 303, 304 (Mo. banc 1996) ). “The trial court's judgment is presumed valid and the burden is on the appellant to demonstrate its incorrectness.” Pepsi Midamerica v. Harris, 232 S.W.3d 648, 653 (Mo.App.S.D.2007) (quoting Schaefer v. Rivers, 965 S.W.2d 954, 956 (Mo.App.S.D.1998) ). Furthermore, “[t]his Court does not defer to the trial court's determinations of law.” Id.
“[T]he exercise of a power of sale contained in a deed of trust is ‘a matter of contract between the mortgagor and mortgagee.’ ” Winters v. Winters, 820 S.W.2d 694, 697 (Mo.App.S.D.1991) (quoting Graham v. Oliver, 659 S.W.2d 601, 603 (Mo.App.S.D.1983) ). Generally speaking, failure to follow fundamental procedural requirements will render a foreclosure sale void. Manard, 952 S.W.2d at 391. However, “[a]n irregularity in the execution of a foreclosure sale must be substantial or result in a probable unfairness to suffice as a reason for setting aside a voidable trustee's deed.” Id. (quoting Kennon v. Camp, 353 S.W.2d 693, 695 (Mo.1962) ).
In this case the irregularity in the sale was not substantial because at the time of the sale, the appointment of successor trustee had been recorded as required by the deed of trust. The deed of trust contained a provision allowing appointment of a successor trustee which stated that “Lender, at Lender's option, may from time to time appoint a successor Trustee to any Trustee appointed under this Deed of Trust by an Instrument executed and acknowledged by Lender and recorded in the office of the recorder of GREENE County, State of Missouri.” On November 20, 2009, Bank executed its appointment of successor trustee appointing Trustee in place of Kim R. Moore, the original trustee named in the deed of trust. Publication of the notice of the trustee's sale began on November 24, 2009. The appointment of successor trustee was filed with the Greene County Recorder of Deeds on December 1, 2009. The trustee's sale of the property was conducted by Trustee as scheduled on December 16, 2009, and the real estate sold for $674,820. The trustee's sale was valid.
This Court's decision in Winters does not require a different conclusion. In Winters, as in the present case, the deed of trust required a successor trustee to be appointed by a written instrument recorded with the recorder of deeds. 820 S.W.2d at 694–95. The successor trustee was appointed in writing, but that writing had not been recorded when the successor trustee proceeded to publish notice of the sale and to actually conduct the sale. Id. at 695–96. Only after both publication and the foreclosure sale had been completed was the written appointment of the successor trustee recorded. Id. at 696. This Court upheld the trial court's determination that the foreclosure sale was void. Id. at 698–99. Here, in contrast, the appointment of successor trustee was recorded prior to the sale. Thus, in this case the terms of the deed of trust had been met at the time of the sale.
In that respect this case is more like Smith v. Equitable Life Assur. Soc. of U.S., 448 S.W.2d 588 (Mo.1970). In that case, the original trustee published the notice of the foreclosure sale. Id. at 591. Subsequently, a successor trustee was appointed, and the foreclosure sale was conducted by the successor trustee. Id. The mortgagors sought to have the trustee's deed set aside, and one of their arguments on appeal was that the successor trustee could not conduct the foreclosure sale based on the original trustee's notice. Id. at 592. The Supreme Court of Missouri...
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