Bremen Bank and Trust Co. of St. Louis v. Muskopf
| Decision Date | 17 September 1991 |
| Docket Number | No. 58925,58925 |
| Citation | 817 S.W.2d 602 |
| Parties | 16 UCC Rep.Serv.2d 1097 BREMEN BANK AND TRUST COMPANY OF ST. LOUIS, Plaintiff-Appellant, v. John D. MUSKOPF, C. Dean Ferguson and Vickie L. Ferguson, Peter M. Donovan, Eugene I. Hoffmann and Joanne Hoffmann, Paul J. Faix and Janet Faix, Bank of Washington, Lloyd J. Wurdack, and Michael A. Campbell, Defendants-Respondents. |
| Court | Missouri Court of Appeals |
Edward E. Murphy, Jr., Clayton, Charles W. Niedner, St. Charles, for plaintiff-appellant.
Robert Edward Jones, Clayton, Albert E. Schoenbeck, St. Louis, for defendants-respondents Bank of Washington, Mary Jane Marquart, Trustee, Eugene I. Hoffmann, Joanne Hoffmann, Lloyd J. Wurdack, Trustee, for Paul J. Faix and Janet Faix.
Appellant, Bremen Bank and Trust Company of St. Louis ("Bremen"), appeals from the trial court's judgment and order which found that a foreclosure sale was valid. The facts, although complicated, are largely undisputed. The only witnesses before the trial court were: (1) Carl Fruend, a commercial loan officer of Bremen; and (2) Michael A. Campbell, the successor trustee who presided over the foreclosure sale. All documentary evidence was admitted pursuant to a stipulation of the parties.
Ordinarily in a court-tried case we are bound by the rule that the judgment of the trial court will be sustained unless there is no substantial evidence to support it, unless it is against the weight of the evidence, or unless it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Where the issue on appeal is not the sufficiency of the evidence, however, we are not bound by and need not defer to the trial court's conclusions regarding the legal effect of its findings of fact. Southgate Bank and Trust Co. v. May, 696 S.W.2d 515, 519 (Mo.App.1985). Moreover, where the findings of fact are derived from the pleadings, stipulations, exhibits and depositions, or where the evidence is not controverted, no deference is due the trial court's judgment. Id.
On November 30, 1984, O. Dean Ferguson and Vickie L. Ferguson executed and delivered to John D. Muskopf: (1) a promissory note in the principal amount of $230,000.00; and (2) their deed of trust on certain real property located in Gray Summit, Franklin County, Missouri, to secure payment of the note. The deed of trust named Peter M. Donovan as trustee and Muskopf as beneficiary. Both documents were recorded in the office of the Franklin County Recorder of Deeds on March 14, 1985. The note and deed of trust were on standard preprinted forms. The blanks were filled in and slightly modified with both typing and some handwriting. The deed of trust provided the following regarding the parties' rights in the event of default:
[s]aid party of the Second Part [trustee], or, in the case of his death, or disability, or his or its neglect or refusal to act, then acting Sheriff of Franklin County or as directed by holder as successor in trust, or in case of his inability, neglect or refusal to act, then a successor appointed by the Circuit Court, may, at the request of the legal holder of the note secured hereby, proceed to sell the property hereinbefore conveyed, or any part thereof, at public venue or out-cry (as to any part of said property situated in the City of Union) at the North Door of the Court House, being Civil Courts Building, County of Franklin and State of Missouri, to the highest bidder for cash, first giving notice required by the laws of Missouri in respect to exercising power of sale under mortgages and deeds of trust then in effect ... and upon such sale shall execute a deed in fee simple of the property sold, to purchaser or purchasers thereof and shall receive the proceeds of such sale....
The deed of trust also provided that "the covenants and agreements hereinabove shall bind and inure to the benefit of, respectively, the heirs, assigns, successors and legal representatives of said 'First Party,' [Fergusons] and any legally appointed successor of said 'Second Party,' [trustee] and the endorsees, assigns and legal representatives of said 'Third Party' [Muskopf]."
In December 1985, Muskopf applied and was approved for a loan with Bremen. On December 11, 1985, Muskopf executed and delivered a revolving credit note, payable to Bremen in the amount of $80,000.00, the full amount of which was drawn down by January 9, 1986. 1 As security for this loan, Muskopf gave his personal guaranty and a written assignment of the Ferguson note and deed of trust. Muskopf delivered the note and deed of trust to Bremen, and it has retained physical possession since that time. Muskopf did not endorse the back of the note. Moreover, Bremen did not record the assignment of the note and deed of trust until May 15, 1989. Bremen also did not file a statutory request for notice of foreclosure sale as it was permitted to do, pursuant to Section 443.325, RSMo 1986. 2
The Fergusons defaulted on the note in July 1987. Muskopf subsequently contacted a St. Louis law firm regarding foreclosure of the note and deed of trust. The matter was assigned to Michael Campbell, an associate with the firm. On October 7, 1987, the decision was made to proceed with foreclosure, but Bremen was not consulted.
Campbell was unable to contact the trustee, Peter Donovan, and was told by Muskopf that Donovan was unable to act. Campbell testified he had telephone conversations with Muskopf during which Muskopf stated that he was removing Donovan as trustee and appointing Campbell as the successor. In reliance on Muskopf's verbal instructions, Campbell prepared a document for Muskopf's signature, to remove Donovan as trustee and appoint Campbell successor trustee. The document was forwarded to Muskopf. Campbell then commenced foreclosure proceedings.
Campbell performed all the statutorily required steps in preparation of the foreclosure sale. He ordered and received a letter report on the title to the property. He prepared a notice of the sale and ordered publication of the notice in the Franklin County Tribune. The notice ran four times prior to the date of sale. He sent written notice directly to the Fergusons, by certified mail, because they were, at the time, the record owners of the property.
The letter report made no mention of Bremen's interest in the property as it was still unrecorded. Campbell also testified that he, personally, had no knowledge of Muskopf's assignment to Bremen. Consequently, no notice of the sale was sent directly to Bremen. Carl Fruend, Bremen's commercial loan officer, testified that Bremen had neither knowledge of the appointment of Campbell as successor trustee nor knowledge that a foreclosure sale had taken place until December 1988 or January 1989 when Muskopf filed for bankruptcy. The foreclosure sale was held on November 6, 1987. Muskopf was the highest bidder. At that time, Campbell was acting under the authority of an oral appointment as Muskopf had not signed the written appointment. Moreover, he did not have the original Ferguson note and deed of trust in his possession when he conducted the sale. The written appointment of Campbell as successor trustee was signed by Muskopf on November 16, 1987, ten days after the sale, and was recorded in Franklin County on April 21, 1988.
On November 15, 1987, Campbell prepared a trustee's deed (under foreclosure) in favor of Muskopf. The Fergusons were notified of the results of the foreclosure sale by letter dated November 25, 1987. Subsequently, on November 1, 1989, the Fergusons gave a quit claim deed to the property to one of the subsequent purchasers.
Under date of May 11, 1988, Muskopf and his wife conveyed the property to Eugene I. Hoffmann and Joanne Hoffmann by general warranty deed recorded in Franklin County on May 26, 1988. Under date of December 15, 1988, the Hoffmanns conveyed the property to Paul J. Faix by general warranty deed recorded in Franklin County on December 22, 1988. Under date of December 16, 1988, Paul J. Faix and Janet Faix executed a first deed of trust on the property to the Bank of Washington and a second deed of trust to the Hoffmanns, both recorded in Franklin County on December 22 and 29, 1988, respectively. The parties have stipulated that valuable consideration was given for those subsequent transfers and that the transferees had no knowledge of the facts alleged in Bremen's petition, other than constructive knowledge of the facts shown by public records.
Muskopf's second note to Bremen remains unpaid with a balance owing of $74,600.00. Muskopf filed for relief under Chapter 13 of the United States Bankruptcy Code in January 1989. A modification of the automatic stay in bankruptcy was granted by the bankruptcy court to allow Bremen to pursue this action. The Ferguson note and deed of trust were released of record at the Franklin County Recorder's Office in January 1990, when the trial court granted a motion, filed by the Hoffmans, for substitution of collateral.
Trial was held without a jury on April 30, 1990. The trial court made findings of fact and conclusions of law and entered judgment for the respondents. The trial court held that the foreclosure sale was void because the verbal appointment of the successor trustee was ineffective since the appointment of a trustee is a conveyance of an interest in the title to real estate. It further found, however, that, since no party objected, Bremen was not prejudiced by the failure to properly appoint the successor trustee. The subsequent written appointment, therefore, ratified the sale. The trial court also found that Bremen had no standing to object to the foreclosure sale because its interest was not publically recorded. From this judgment, Bremen appeals.
Bremen's first point is that the trial court erred in...
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