O'Day v. Annex Realty Co.

• Decision Date: 20 December 1916
• Docket Number: No. 18177.,18177.
• Citation: 191 S.W. 41
• Parties: O'DAY et al. v. ANNEX REALTY CO. et al.
• Court: Missouri Supreme Court

191 S.W. 41

O'DAY et al. v. ANNEX REALTY CO. et al.

No. 18177.

Supreme Court of Missouri, Division No. 1.

December 20, 1916.

Rehearing Denied January 2, 1917.

Appeal from St. Louis Circuit Court; Eugene McQuillin, Judge.

Suit by Mrs. William J. O'Day against the Annex Realty Company and another. Mrs. O'Day died pendente lite, and the cause was revived in the names of her administrator, William J. O'Day, and her heirs at law. From judgment for defendants, plaintiffs appeal. Reversed and remanded.

Mrs. Catherine O'Day, on September 11, 1907, instituted, in the circuit court aforesaid, a proceeding in equity to enforce a constructive trust in her favor as to nine parcels of real estate situate in St. Louis, Mo., described in the petition; to compel the defendant, Annex Realty Company, to render an accounting as to the proceeds of seven pieces of said property sold by it, and to divest said defendant of the title to the two remaining pieces, and to vest the same in plaintiff. The petition concludes with a prayer "for such further orders, decrees, and judgments as may be just and equitable in view of the premises." Mrs. O'Day was 75 years of age when the case was tried, and died during the pendency of this litigation. Her death was suggested, and the cause revived in the names of her administrator and heirs at law. The amended petition, on which the case was tried, alleges, in substance, that said Catherine O'Day, on July 1, 1890, was indebted to the defendant Annex Realty Company in the sum of $18,000, and about said date delivered to Will J. Howard her note for $26,000 and ten interest notes for $780 each, all secured by deed of trust of same date on six of the parcels of land aforesaid; that Howard was in the employ of the Annex Realty Company, and immediately indorsed and delivered the notes to it; that M. B. O'Reilly was the trustee named in said deed of trust, as well as president and shareholder in each of the defendant corporations; that M. B. O'Reilly and the defendants were, at all the times mentioned in petition, the agents of plaintiff; that pursuant to the terms of said deed of trust, the trustee aforesaid advertised the real estate described therein for sale on May 27, 1898; that on May 25, 1898, plaintiff and defendant Annex Realty Company entered into an agreement, whereby plaintiff was to execute a quitclaim deed to said defendant, conveying the real estate described in said deed of trust, and also certain other real estate in the city of St. Louis aforesaid, and it was agreed that the defendant Annex Realty Company should hold said real estate for the benefit of plaintiff and as her agent and trustee; that said defendant did, at the trustee's sale, accept a conveyance of the real estate advertised for sale as plaintiff's agent and trustee; that plaintiff executed a quitclaim deed, as agreed, and the defendant Annex Realty Company bid in the real estate at the sale on May 27, 1898; that said defendant, for a reasonable compensation to be paid by plaintiff, agreed with the latter to hold all of the real estate aforesaid, as agent and trustee, for the benefit of plaintiff, to collect the rents thereof, and as soon as possible, secure a purchaser therefor, sell the same, and apply the proceeds and rent to the indebtedness of $18,000, and to the payment of such other old matters of credit in favor of the defendant Annex Realty Company that might be just and reasonable, and the balance to be turned over to plaintiff; that, relying on said agreement, plaintiff made no effort to protect her interests at said sale, but allowed the real estate to be bought by the Annex Realty Company colorably, but not actually, for $3,700; that the Annex Realty Company, since May 26, 1898, sold a part of said real estate for $28,750; that in pursuance of said agreement, defendant has paid off plaintiff's indebtedness of $18,000, but has failed to account for the balance; that on or about September 1, 1902, the Annex Realty Company executed and delivered to the M. B. O'Reilly Realty & Investment Company a deed to said lots in city block 1843; that said conveyance was colorable only, but not for value, and was made for the purpose of cheating and defrauding plaintiff; that defendant Annex Realty Company has been, and is now, collecting rents for said lots in said city block 1843, and in city block 206 south, conveyed in the quitclaim deed aforesaid, but not since sold by the defendant. The petition prays for an accounting, that the quitclaim deed of May 25, 1898, be set aside as to lots in city block 1843, and city block 206 south, that defendants be divested of the title thereto, and that the same be vested in the plaintiff. The answers were general denials. Hon. Henry W. Allen was appointed referee, and made the following announcement:

"There are two issues raised by the petition, and with consent of counsel I have decided to limit the testimony preliminarily to the issue of whether or not a trust exists in the present cause. When all the evidence on that issue is in, I will render a decision on that point, and if the finding is that a trust exists, we will then proceed with the evidence of an accounting. If the finding is that no trust exists, I will report that to the court, and that report, of course, will be subject to the revision by the court on that issue. If that is satisfactory, we will proceed with the case in that way."

The respective counsel agreed to above suggestion of the referee.

Evidence before Referee. It appears from the evidence taken before the referee that Mrs. Catherine O'Day owned nine separate parcels of real estate in St. Louis, Mo., described in the amended petition. On July 1, 1890, she executed a deed of trust on six pieces of above real estate to M. B. O'Reilly, as trustee, to secure the alleged consideration of $26,000, due in 5 years from above date, and drawing interest after maturity at the rate of 10 per cent. per annum, payable semiannually; also to secure ten interest notes of $780 each, of same date, due in 6, 12, 18, 24, 30, 36, 42, 48, 54, and 60 months, respectively, after the date aforesaid, and each of said interest notes of $780 to draw interest from their maturity at 10 per cent. per annum, payable semiannually. The payee in said principal note, and in each of the interest notes aforesaid, is Will J. Howard, who was a clerk in the office of M. B. O'Reilly, and a mere figurehead. He immediately assigned the notes to O'Reilly. It appears from the record, therefore, that M. B. O'Reilly was both the beneficiary and trustee in the above deed of trust.

Defendants, upon the cross-examination of William J. O'Day, had him testify that his mother, Catherine O'Day, claimed she only owed about $18,000 on the deed of trust. As the interest notes were $780, for every 6 months, or $1,560 per annum, it would indicate that the interest was calculated for the 5 years at 6 per cent. per annum, payable semiannually.

It appears from the undisputed testimony that M. B. O'Reilly had been having business transactions with Catherine O'Day for many years before 1898, and at intervals since 1866; that he loaned her money; collected her rents, and transacted other business with her; that she paid him in money, from 1893 to 1897, as shown by receipts introduced in evidence, some 15 different amounts, aggregating $3,623.25. The evidence tends to show that Catherine O'Day had implicit confidence in M. B. O'Reilly, and depended on the latter to keep a correct statement of their business transactions, as there is nothing to indicate that she kept any record of same, except as shown by the promiscuous receipts found by her son with her papers, and which indicated the above payments by her to M. B. O'Reilly. The evidence further shows that the Annex Realty Company had also been acting as the agent of Mrs. O'Day in the collection of rents, etc.

It appears from the record that M. B. O'Reilly, who died in 1907, was the president of the M. B. O'Reilly Realty & Investment Company in 1898, and that he and two of his sons were the stockholders of said company. The incorporators of the Annex Realty Company were Eugene D. O'Reilly, who had 245 shares, Gerald B. O'Reilly, 4 shares, and James H. Scholten, 1 share. Its capital stock was 250 shares of the par value of $100 each. The capital stock was paid for by M. B. O'Reilly in real estate, and given by him to his sons above named. In 1898, and prior thereto, both defendants and M. B. O'Reilly had an office together at 723 Chestnut street, St. Louis, Mo.

M. B. O'Reilly, while the owner of above deed of trust and the notes described therein, advertised, as trustee of said deed of trust, the property of Catherine O'Day for sale, on May 27, 1898. On May 26, 1898, Catherine O'Day, her son, Wm. J. O'Day and J. O. Ingalls, went to the office of M. B. O'Reilly, and a conversation took place at that time in reference to the sale of the O'Day property under said deed of trust. Ingalls was absent from the state at the time of trial, and did not testify in the case. Mrs. O'Day was asked to state what the conversation was between herself and O'Reilly on above occasion, but as M. B. O'Reilly was then dead, the referee refused to permit her to testify in relation to that matter. Complaint is made in this court in regard to above ruling of referee. Wm. J. O'Day, testified as to what occurred in his presence between M. B. O'Reilly, his mother and himself, on May 26, 1898, as follows:

"A. He asked me if I knew the property was going to be sold as advertised the next day; I told him I was aware of that, and he says, `I have a quitclaim deed here that I wish your mother to sign.' He handed over the deed to me, and asked me to read it; I went on and read it, and after I had completed it, I told him that there was several pieces of property in that quitclaim deed that were not advertised. 'Oh, well' he said, `if I permit that property — if you permit that property to be sold...