Federal Nat. Mortg. Ass'n v. Howlett

• Citation: 521 S.W.2d 428
• Decision Date: 10 March 1975
• Docket Number: No. 58499,58499
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION, Respondent, v. Katie Mae HOWLETT, Appellant.
• Court: Missouri Supreme Court

Page 428

521 S.W.2d 428

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Respondent, v. Katie Mae HOWLETT, Appellant.

No. 58499.

Supreme Court of Missouri, En Banc.

March 10, 1975.

Rehearing Denied April 14, 1975.

Charles F. Crews, Alan E. South, Crews & Milliard, Kansas City, for respondent.

James L. Muller, The Legal Aid and Defender Society of Greater Kansas City, Inc., Kansas City, for appellant.

FINCH, Judge.

The issue presented by this appeal is whether various statutory provisions relating to the foreclosure of mortgages and deeds of trust under power of sale (§§ 443.290, 443.310, 443.320, 443.380, and 443.410) ¹ are unconstitutional on the basis that they violate the due process clause of the fourteenth amendment to the United States Constitution and Art. I, § 10 of the Missouri Constitution, V.A.M.S. ² The trial court declined to hold these statutory provisions unconstitutional. Instead its judgment awarded possession to respondent in its unlawful detainer action and denied relief to appellant on her counterclaim for declaratory judgment relief under §§ 527.010 et seq. and 527.150 et seq. We affirm.

On August 3, 1970, appellant purchased and received a warranty deed to a house and lot in Kansas City. She made a down payment of $200 and gave an installment note for $13,400 for the balance of the purchase price. That note was secured by a deed of trust executed on a standard FHA form as required for FHA insurance, a prerequisite of the loan. The note was payable in monthly installments of $98.36 of which appellant was to pay $81.48, the remainder being paid by the government under a subsidy program. Immediately following execution, the note and deed of trust were assigned by the payee therein to respondent, a government sponsored private corporation organized under the National Housing Act to purchase and otherwise deal in federal insured home mortgages and deeds of trust.

Beginning in February, 1972, appellant fell behind in her monthly payments on the note held by respondent. On May 9, 1972, the successor trustee (named pursuant to provisions of the deed of trust) mailed to appellant by ordinary mail a notice of default and of intention to commence foreclosure proceedings. Appellant testified that she never received the trustee's letter of May 9, 1972, but did receive a subsequent letter dated May 23, 1972, from an assistant collection manager for respondent. That letter mentioned that he foreclosure sale would be held June 15, 1972, and that appellant would be expected to vacate the premises if she did not bring the loan to a current status by June 15, 1972.

The deed of trust given by appellant contained a power of sale clause which provided in part as follows:

'NOW, THEREFORE, * * * if default be made in the payment of said note herein provided, * * * then the whole of said note and interest thereon to date of foreclosure shall become due and payable and this deed shall remain in force; and said trustee or his successor as hereinafter provided for, at the request of the legal holder of the aforesaid note, may proceed to sell the property hereinbefore conveyed, or any part thereof, at public vendue at the north front door of the Jackson County Circuit Court House in the City of Kansas City in the County of Jackson, and State of Missouri, to the highest bidder for cash, first giving twenty days public notice of the time, terms, and place of sale and of the property to be sold by advertisement in some newspaper published in said Jackson County, Missouri, and upon such sale shall execute a deed conveying the property so sold to the purchaser thereof.'

Pursuant to the foregoing provision, publication of notice of a proposed trustee's sale was commenced May 21, 1972. That notice, which advised that the sale would be held June 15, 1972, was published in the Daily Record, a daily newspaper published in Kansas City, and appeared in 21 consecutive issues of the paper.

Appellant did not pay up the delinquent installments on her loan, and on June 15, 1972, the foreclosure sale was held as advertised. ³ The property was purchased by respondent for $13,856.49, and a trustee's deed to respondent was executed by the trustee. Thereafter, on August 16, 1972, respondent filed an unlawful detainer action in magistrate court. Appellant filed an answer plus a counterclaim (under the declaratory judgment law) which asserted that the published notice of sale, the actual foreclosure sale and the trustee's deed were pursuant to and in compliance with Missouri statutes relating to foreclosure of mortgages and deeds of trust, under color of which the sale and trustee's deed purported to be valid and binding. The statutes in question were claimed to operate to deprive a person of property without legally sufficient notice or a meaningful opportunity for a hearing prior to foreclosure, thereby violating the due process clauses of the federal and state constitutions. The court was requested to declare the statutes unconstitutional and the trustee's deed void. These questions were not within the jurisdiction of the magistrate court and the case was certified to the circuit court for trial.

The threshold question we must determine is whether the foreclosure of the deed of trust on appellant's property involved significant state action. This is so because the due process clause of the fourteenth amendment establishes a limitation on the states, not on individuals. Hence, whether the amendment is applicable in a given situation depends on whether sufficient state action is involved. In order to decide that question in this case, we must examine both the legislative and judicial history in Missouri of foreclosure under power of sale clauses contained in mortgages and deeds of trust.

Extrajudicial foreclosure developed during the early part of Missouri's statehood. In Carson v. Blakey, 6 Mo. 273 (1840), the Supreme Court dealt with the foreclosure of a mortgage which had been carried out by the trustee pursuant to a power of sale in the mortgage. The court recognized that Missouri's statutes at that time provided for and authorized only judicial foreclosure ⁴ but concluded that the law did not prohibit property owners from contracting for alienation of their property by means of sale under a power of sale inserted in the mortgage. The court sustained such a foreclosure under power of sale. The validity of foreclosure under such a contractual power of sale again was recognized in Stine v. Wilkson, 10 Mo. 75 (1846), and Destrehan v. Scudder, 11 Mo. 484 (1848).

The first Missouri statute pertaining to extrajudicial foreclosure came in 1855 with the enactment of Chapter 113, RSMo 1855. Section 20 of that act (presently § 443.290) provided that such power of sale and sales made pursuant thereto would be valid and binding. The Missouri General Assembly thereby gave legislative recognition to what judicial decisions such as Carson, Stine and Destrehan already had established, namely, that parties could authorize extrajudicial foreclosure by including a power of sale in their mortgages and that foreclosures pursuant thereto were valid.

The earliest statute which actually under took to regulate sales of real estate under powers of sale in mortgages and deeds of trust was enacted in 1885. Laws, 1885, p. 208. This act (presently §§ 443.310 and 443.320) provided that sales of real estate under powers of sale in mortgages or deeds of trust should be made in the county where the land was situated, that notices of such sales should contain certain information and that the notices should be published in the manner and for the number of times specified, giving at least twenty days notice of the sale.

Citing and relying on the foregoing statutes, appellant contends in her brief that state action was present in the foreclosure of the deed of trust on her property because 'the trustee's power to sell the rpoperty and to execute a valid trustee's deed is made legally possible only by the authority with which the state has clothed him under the foreclosure statute.'

The fact is that the power of sale exercised by the trustee was not derived from the statute nor granted by the state. It is a contractual right established by the power of sale provision in the deed of trust. That instrument, a contract executed by the parties, specifically provided for extrajudicial foreclosure. The contractual nature of such power of sale has been recognized repeatedly in decisions in this state. Abrams v. Lakewood Park Cemetery Ass'n, 355 Mo. 313, 196 S.W.2d 278 (1946); Adams v. Boyd, 332 Mo. 484, 58 S.W.2d 704 (1933); Kelsay v. Farmers' & Traders' Bank, 166 Mo. 157, 65 S.W. 1007 (1901); Spires v. Lawless, 493 S.W.2d 65 (Mo.App.1973). See also Logan v. Short, 342 F.Supp. 1349 (E.D.Mo.1972).

Analysis of the language of the statutory sections cited by appellant confirms the correctness of this view. Section 443.290 neither compels the inclusion of a power of sale in a mortgage or deed of trust nor has the effect of inserting such a clause when not put therein by the parties. It simply recognizes the validity of such provisions. Sections 443.310 and 443.320 merely regulate such foreclosures by requiring the sale to be held in the county where the land is located and specifying when and how the notice is to be published and what it shall contain. Section 443.380 makes recitals in the trustee's deed prima facie evidence and § 443.410 places deeds of trust on an equivalent status with mortgages insofar as foreclosure pursuant to power of sale is concerned and provides a method of and time for redemption from an extrajudicial foreclosure sale. None of these sections provide the legal basis for the foreclosure which occurred herein. They merely give recognition to foreclosures accomplished pursuant to a contractual right and establish minimum standards which must be met if there is to be foreclosure pursuant to a contractual power of sale.

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