Butler Building and Investment Company v. Dunsworth

• Court: Missouri Supreme Court
• Writing for the Court: Gantt, P. J.
• Citation: Butler Building and Investment Company v. Dunsworth, 48 S.W. 449, 146 Mo. 361 (Mo. 1898)
• Decision Date: 06 December 1898
• Parties: Butler Building and Investment Company, Appellant, v. Dunsworth et al

48 S.W. 449

146 Mo. 361

Butler Building and Investment Company, Appellant, v. Dunsworth et al

Supreme Court of Missouri, Second Division

December 6, 1898 ^[*]

Appeal from Bates Circuit Court. -- Hon. James H. Lay, Judge.

Reversed (with directions).

Thomas J. Smith for appellant.

(1) By his deed of trust Barnett conveyed the legal title to Perkins, but which he should convey, even without following the strict terms of the deed, and in the event of his refusal to act, the then sheriff Hartsock had the same power. Schanewerk v. Hoberecht, 117 Mo. 22; Lanier v McIntosh, 117 Mo. 518; Kennedy v. Siemers, 120 Mo. 86; Springfield E. & T. Co. v. Donovan, 120 Mo 127; Snyder v. Railroad, 131 Mo. 580. (2) Every condition precedent to a right in the sheriff to make the sale was apparent, and appeared in the notice of sale and were recited in the deed of conveyance, and the purchaser therefore had no constructive notice of there being any irregularity in the proceedings. Under these circumstances both legal and equitable title passed by the first sale and conveyance to the purchaser. Schanewerk v Hoberecht, 117 Mo. 22; Wade on Notice, sec. 62; 1 Parsons, Notes & Bills, p. 261; 16 Am. and Eng. Ency. Law, 841. (3) The sheriff as acting trustee under the deed of trust was the agent of the holder of the paper secured by the trust deed, and therefore his acts are binding on defendant, Loomis. 2 Jones on Mortg., sec. 1771; Sherwood v. Saxton, 63 Mo. 78; Hill v. Pace, 61 Mo.App. 117. (4) Under the provisions of the deed of trust upon default by the maker, Barnett, in the payment of any of the coupons, the trustee, or in case of his refusal to act, the sheriff, had a perfect right to make the sale without a request from Loomis, since such is not required in this deed of trust as a condition precedent to the sale by the sheriff, the only condition being default in payment, refusal of Perkins and requisite notice, all of which conditions existed. Wood v. Augustine, 61 Mo. 46.

T. W. Silvers for respondents.

(1) It can not be successfully maintained, that, Hartsock, the sheriff had power to sell the land in controversy, under the deed of trust until default was made in the payment of the indebtedness, or some part of it. The trustee's power is conditional. Until the conditions are broken he could not sell. His authority is limited by the trust deed. The record of which is notice to all buyers. If he sell in direct violation of his trust, as he attempted to do under the paid coupons, in this case, a deed from him would probably not convey the legal title; and would certainly not convey the equitable title. The first deed made by the sheriff trustee was void both at law and in equity. Hume v. Hopkins, 140 Mo. 74; Thornburg v. Jones, 36 Mo. 514; Eitlegeorge v. Bldg. Ass'n, 69 Mo. 55; Koehring v. Muemminghoff, 61 Mo. 408; Goff v. Roberts, 72 Mo. 570; Ohnsburg v. Turner, 87 Mo. 127; Scheidt v. Crecelius, 94 Mo. 327; Long v. Long, 79 Mo. 651; Ins. Co. v. Jackson, 83 Ill. 302; Redmond v. Packingham, 66 Ill. 434. (2) The mere fact that the coupons were indorsed back to the company did not carry with such indorsement the lien on the land, as is the ordinary rule in the transfer of negotiable paper. An indorsement as between interested parties with notice is subject to explanation. The transfer of the lien on the land to have been effectual must have been intentional. It should have been understood by both parties to the transfer. When Loomis parted with his coupons, he supposed they were being paid. He had no idea when he "indorsed these coupons and deposited them for collection that he was parting with his security for the principal debt. And for the guarantor to set up a claim to the security on payment of the coupons, was a breach of common honesty, as well as a violation of the understanding, and contract under which it got possession of the paper. The payment by the guarantor extinguished the lien so far as the coupons were concerned. As to the contract of guaranty see 9 Am. and Eng. Ency. Law, 67; Shurtleff v. Francis, 118 Mass. 154; Johnson v. Lewis, 13 Minn. 364; 15 Am. and Eng. Ency. Law, 843, n. 7; Nelson v. Brown, 140 Mo. 589. (3) Canterbury can not be considered an innocent purchaser without notice. He bought it in market overt. He who buys at a trustee's sale at auction under a deed of trust, buys at his peril. The rule caveat emptor obtains. Schanewerk v. Hoberecht, 117 Mo. 28; Stephens v. Clay, 17 Colo. 489; 26 Am. and Eng. Ency. Law, 934; Hamilton v. Lubukee, 51 Ill. 415; Thompson v. Haywood, 129 Mass. 401; Pierce v. Gromley, 77 Mich. 273; Fleming v. Holt, 12 W.Va. 143; Schradski v. Albright, 93 Mo. 42; Mann v. Best, 61 Mo. 490.

Gantt, P. J. Sherwood and Burgess, JJ., concur.

OPINION

Gantt, P. J.

The facts in this case are that Barnett, the owner of a farm, in Bates county, borrowed $ 1,250 of the Western Farm Mortgage Trust Company, of Lawrence, Kansas, and gave his bond for that amount and coupon interest notes payable semiannually. The mortgage company sold and assigned the bond and guaranteed the principal and interest to one Loomis of New York. Interest coupons numbered 2, 3, 4 and 5 became due and Loomis indorsed them for collection and deposited them in his bank, the Manufacturer's National Bank of Brooklyn, and the interest was paid by the Western Farm Mortgage Company. Whether the mortgage company paid it on its guaranty out of its own funds or collected it from Barnett does not clearly appear. After the interest coupon No. 5 had become due, the mortgage company sent a list of its borrowers in Bates county who had defaulted in payment of interest, to George M. Canterbury, who was its local agent, and from that list it appeared Barnett was in default. Later on the company's attorney, Mr. George J. Barker, sent the refusal of the original trustee to act, and a notice of sale for the sheriff to give, as a substituted trustee under the terms of the trust deed. Canterbury handed these papers to the sheriff. This notice recited that these coupons 2, 3, 4 and 5 were in default and the sale would be made to collect the same. The sheriff sold the land and Canterbury bought it without any knowledge that the coupons had been paid, if indeed they had been, by Barnett. Canterbury afterwards conveyed the land by warranty deed to Kipp. Kipp quitclaimed to Emery and Emery to the Butler Building and Investment Company, the plaintiff in this action. Subsequently Loomis who testifies he was ignorant of the default of Barnett and of the sale to Canterbury, caused the land to be sold under the same deed of trust to satisfy the principal debt, and bought it in. He insists there were no unpaid coupons, and that the first sale was without authority from him, and that he is entitled to have the first deed declared void and a cloud on his title. The circuit court found that there was no default in interest and no power to sell, but that Canterbury and those who obtained the title were innocent purchasers, and neither knew, or had reason to suspect that the interest had been paid but thought it was defaulted. Upon these facts the contentions of counsel are predicated. For defendant it is insisted that the first sale or foreclosure was void, because the right to foreclose had never vested in the sheriff as the interest had been regularly paid, and the trial court so held. Plaintiff insists that the legal title passed by the sale and exhausted the power and that it is a bona fide purchaser for value and without notice. Neither party called Barnett, the maker, to prove his actual default. The truth as to this point might have assisted us somewhat in reaching a conclusion. We agree with the learned circuit court that the evidence tends most strongly to prove that Canterbury and those purchasing from him were innocent purchasers for value and without notice that the interest was paid. The ordinary reasonable deduction to be drawn by Canterbury from the facts occurring prior to and down to the first sale was that Barnett was in default. The sale was being made for interest notes which the record disclosed were past due if not paid. The agency having the collection of this interest in charge reported it unpaid, and the papers were prepared and sent to him to hand to the sheriff for sale. He testified that when he bought he supposed the interest was in default, and is of opinion that he himself notified Barnett of the default. Mr. Loomis testifies he indorsed the coupons for collection and they were paid by the Western Farm Mortgage Trust Company. It thus very clearly appears that this mortgage company held the securities which it declared were in default, and directed the sheriff as substituted trustee to sell. If in fact Barnett was in default the trustee was authorized to sell, notwithstanding the mortgage company had made good the interest under its guaranty. Its payment did not release Barnett. It was Barnett's default, not the mortgage company's, which authorized a sale. Barnett's failure remained, although the mortgage company had protected its guaranty. By reindorsing the coupons to the mortgage company that company became the apparent legal owner thereof, and if it paid the interest out of its own funds the full equitable owner also of said coupons, and the deed of trust stood as a security for their payment. In either case, however, as the ostensible owner or agent in charge of the coupons, the mortgage company as to third persons was clothed with the indicia of authority to declare a forfeiture, and it is a significant fact that Barnett,...