Community Title Co. v. Roosevelt Federal Sav. & Loan Ass'n

• Decision Date: 20 March 1984
• Docket Number: Nos. 46578,46640,s. 46578
• Citation: 670 S.W.2d 895
• Court: Missouri Court of Appeals
• Parties: COMMUNITY TITLE CO., et al., Plaintiffs-Appellants, v. ROOSEVELT FEDERAL SAVINGS & LOAN ASSOCIATION, Defendant-Respondent.

Page 895

670 S.W.2d 895

COMMUNITY TITLE CO., et al., Plaintiffs-Appellants, v. ROOSEVELT FEDERAL SAVINGS & LOAN ASSOCIATION, Defendant-Respondent.

Nos. 46578, 46640.

Missouri Court of Appeals,

Eastern District,

Division Eight.

March 20, 1984.

Motion for Rehearing and/or Transfer to

Supreme Court Denied April 27, 1984.

Application to Transfer Denied

June 19, 1984.

Mark G. Arnold, St. Louis, for plaintiffs-appellants.

David G. Millar, St. Louis, for defendant-respondent.

KAROHL, Judge.

Plaintiffs Community Title Company and Chicago Title Insurance Agency brought this action for injunctive relief from defendant Roosevelt Federal Savings and Loan Association's tortious interference with plaintiffs' business relations. Roosevelt counterclaimed, asking for injunctive relief from Community and Chicago's tortious interference with its contracts. After a trial without a jury, the trial court denied each claim and both sides appeal. We affirm the judgment of the trial court denying the requests for injunctions.

Plaintiff Community Title Company performs closing and escrow services in connection with the sale or transfer of real property, in addition to researching titles and writing title insurance policies on behalf of a title insurance company. Plaintiff Chicago Title Insurance Agency, a wholly owned subsidiary of Community, performs similar services on behalf of another title insurance company. Defendant Roosevelt is a savings and loan association chartered by the United States pursuant to the Home Owners Loan Act of 1933, 12 U.S.C. § 1461 et seq. (Supp.1981).

Roosevelt's principal business is that of making loans for the purchase of residential real estate. Most of Roosevelt's loans, represented by notes secured by deeds of trust, contained repayment terms of thirty years at a fixed rate of interest. The parties stipulated that at the time of trial, the average yield of the portfolio of outstanding loans was 9.595%, and the average remaining time to maturity was approximately twenty-five years. Most of Roosevelt's borrowers sell or convey their homes prior to maturity. The prevailing market rate of interest at the time of the suit was 16 to 19%.

The vast majority of the deeds of trust held by Roosevelt contained "due-on-sale" clauses. Most contained the following provision:

If all or any part of the Property or an interest therein is sold or transferred by Borrower without Lender's prior written consent, excluding (a) the creation of a lien or encumbrance subordinate to this Deed of Trust, (b) the creation of a purchase money security interest for household appliances, (c) a transfer by devise, descent or by operation of law upon the death of a joint tenant, or (d) the grant of any leasehold interest three years or less not containing an option to purchase, lender may, at lender's option, declare all the sums secured by this Deed of Trust to be immediately due and payable.

As a condition of granting a loan, Roosevelt required borrowers to purchase a policy of title insurance insuring at least the lender's deed of trust. Until the events leading to this litigation, Roosevelt had always accepted both owner's and mortgagee's title insurance policies issued by Community and Chicago.

In late 1979, interest rates on home loans increased dramatically. Roosevelt, like other savings and loans, found itself with a portfolio of low yielding loans. The prevailing high interest rates adversely depressed real estate sales. Thus, title insurance agencies and companies and real estate companies lost a significant source of revenue with declining home sales. Real estate agents were unable to close sales and earn their commissions. As a result, plaintiffs were not researching titles and selling title insurance policies or closing transactions. Title insurance is normally ordered after a sale and paid for when the transaction is closed, and the premium is related to the sale price. There was testimony at the trial that real estate agents referred almost all of plaintiffs' business.

The problem that the agents and title companies faced was that with the due-on-sale clauses, borrowers would have to pay off the balance of their low interest mortgages when they sold the property, and the new buyer would have to obtain financing at a higher rate of interest. With mortgage interest rates hovering between thirteen and sixteen per cent, however, the added cost became an obstacle to sales. Roosevelt's dilemma, on the other hand was that interest paid out on deposits in addition to the cost of doing business exceeded interest taken in on most of its older, low interest mortgages. The due-on-sale clause was a way of eliminating these low yielding loans as soon as the property was sold, so that it could re-loan the money at current higher rates or negotiate a higher rate in the event the purchaser assumed the existing loan. In either event Roosevelt could also charge additional loan fees.

Faced with the problem of declining sales, a number of realtors requested Community's advice and assistance in the use of the "contract for deed" method of alternative financing and selling homes. A contract for deed is an installment sale, under which the buyer agrees to make payments at a specified rate of interest in installments to the seller. The seller agrees to convey to the buyer a general warranty deed upon completion of the payments. The buyer normally takes possession of the property at the time the contract is made. The purpose of the contract for deed is for the buyer to get the benefit of the seller's existing low interest rate on his mortgage. The only way to complete a successful contract for deed transaction is to conceal it from the mortgage holder, to prevent acceleration of the loan under the due-on-sale clause.

In response to the real estate agents' request, Community decided early in 1980 to design a program of documents and services for contract for deed sales. Community designed model contract for deed forms and related documents, which were made available to area real estate agents and brokers. Community also gave presentations and seminars to agents and brokers concerning their contract for deed program, and then actually prepared many individual contracts for deed, charging a fee for closing the sales. After the sale was closed, Community would not inform the existing lender of the transaction.

We note, however, that Chicago never closed any contract for deed transactions, nor does Roosevelt maintain that it did. In Roosevelt's brief, it states, "Community Title is the only title company which has participated in such fashion in sales by contract for deed ...."

In late 1981, Roosevelt became aware that Community had written contracts for deed for some of its borrowers. Roosevelt sent a letter to Community and other title companies, requesting each to provide Roosevelt with information about contracts for deed where Roosevelt held an existing loan. Some title companies, including Community, refused, claiming that the information was confidential.

Roosevelt then wrote to the Federal Home Loan Bank Board, the governing agency of federal savings and loan associations, describing Community's activities and requested advice as to whether Roosevelt could refuse to accept title policies from title companies engaged in contract for deed activities. ¹

The Federal Home Loan Bank Board gave its approval and Roosevelt informed Community that it would no longer accept mortgagee's title binders or policies from Community, until Community ceased its contract for deed activities. Community then had Chicago issue title binders to Roosevelt in place of those rejected by Roosevelt. Roosevelt also rejected the title binders issued by Chicago.

Plaintiffs filed a petition for an injunction alleging tortious interference with their business expectancies. Defendant asserted a counterclaim for an injunction, claiming wrongful interference with its loan contracts. The trial court denied both prayers for injunctions.

On appeal, plaintiffs argue: (1) the trial court improperly applied the law to the facts and improperly declared the law in finding that Roosevelt is privileged to do business with whomever it chooses, that Roosevelt's actions were not intentional, and that Roosevelt was privileged to interfere with contracts to protect its legitimate business interests; (2) the trial court erred in finding that injunctive relief was inappropriate; and (3) the trial court's finding that damages were speculative and conjectural was contrary to the evidence. Defendant presented an assortment of defenses, including the affirmative defense of plaintiffs' unclean hands, and that the relief sought was inappropriate. Because we find that the trial court was correct in finding that injunctive relief was inappropriate, we need not address plaintiffs' other points. An appellate court opinion should be limited to those questions essential to proper disposition of the appeal. State ex rel. Ellsworth Freight Lines, Inc. v. State Tax Commission, 651 S.W.2d 130, 133 (Mo. banc 1983). In other words, even if plaintiffs proved that Roosevelt tortiously interfered with plaintiffs' business relations by rejecting their title policies, (which we do not decide) the injunctive relief requested was totally inappropriate.

Initially, we note that the judgment of the trial court must be affirmed on appeal unless it is unsupported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). The judgment may be set aside only with caution and with a firm belief that the decree or judgment is wrong. Snyder v. Hendrix, 648 S.W.2d 894, 895 (Mo.App.1983).

As a general proposition, injunctive relief is discretionary and does not issue as a matter of right. Hudson v. School District of Kansas City, 578 S.W.2d 301, 311 (Mo.App.1979). Injunction is a harsh remedy, to...