Godwin v. Gerling

• Decision Date: 09 April 1951
• Docket Number: No. 42023,42023
• Citation: 362 Mo. 19,239 S.W.2d 352
• Parties: , 40 A.L.R.2d 1250 GODWIN v. GERLING et al
• Court: Missouri Supreme Court

Page 352

239 S.W.2d 352

362 Mo. 19, 40 A.L.R.2d 1250

GODWIN v. GERLING et al.

No. 42023.

April 9, 1951.

Motion to Transfer to Court en Banc Denied May 14, 1951.

Sluggett & Sluggett and John T. Sluggett, all of St. Louis, for appellant.

Edwards, Metcalfe & Strong and Thomas M. Meyersieck, all of St. Louis, for Roosevelt Federal Savings & Loan Ass'n. of St. Louis and Jules Q. Strong, Trustee.

Earl G. Smith, St. Louis, for St. Louis County Federal Savings & Loan Ass'n. and C. J. Gerling, Trustee.

Robert A. Hamilton, St. Louis, for Equitable Life Assur. Society of the United States and Edward W. Lake, Trustee.

Philip Gallop, St. Louis, for State Bank & Trust Co. of Wellston and Fred L. Wuest, Trustee.

Igoe, Carroll & Keefe and Wm. H. Ferrell, all of St. Louis, for Citizens National Bank of Maplewood and L. E. Evans, Trustee.

Arthur U. Simmons, Clayton, for respondents Cody and others.

LOZIER, Commissioner.

This is a suit to set aside a trustee's deed executed pursuant to a foreclosure under power of sale in a deed of trust upon lots in a subdivision in Ferguson. Certain allegations of the petition are hereinafter set out. Plaintiff sought no money judgment. His prayer was that the sale and deed be declared null, void and of no effect, that the defendants be held to have no right, title or interest in the lots, and that the fee simple title be vested in plaintiff, subject to the provisions of the foreclosed deed of trust.

Among the defendants were: the makers of the notes and the securing deed of trust foreclosed; the assignee of the notes and deed of trust and purchaser at the sale; and the two grantees of such purchaser. (The trustee, originally a defendant, died and his executors were substituted. Their motion for judgment upon the pleadings was sustained.) The numerous other defendants were either subsequent purchasers for valuable considerations under recorded deeds from the two grantees of the purchaser at the sale, or were the holders, of negotiable notes secured by recorded deeds of trust executed by such subsequent purchasers. Also joined were the unknown owners of negotiable notes secured by other recorded deeds of trust upon some of the lots.

The purchasers-defendants and their mortgagees-defendants filed counterclaims and cross-petitions. The trial judge found for defendants and dismissed both the petition and the counterclaims and cross-claims. Plaintiff appealed.

The primary issue involves construction of the Soldiers' and Sailors' Civil Relief Act of 1940, 54 Stat. 1178, as amended in 1942, 56 Stat. 769, 50 U.S.C.A.Appendix, Sec. 510 et seq. Subsection 3 of Sec. 532 makes invalid foreclosure under power of sale except by agreement or under court order. The provisions of Sec. 532 are limited to obligations secured by mortgage, trust deed or other security in the nature of a mortgage upon property 'owned by a person in military service at the commencement of the period of the military service and still so owned by him which obligations originated prior to such person's period of military service.' It was and is plaintiff's-appellant's position that, under Subsection 1, he 'owned' the real estate when he entered military service; that he 'still so owned' it when he filed his suit; and that the foreclosure without agreement or court order was void.

Plaintiff testified that for many years he had 'handled preparation and recording of deeds' and 'engaged in the loan business' in connection with his real estate activities; that, while not licensed to practice law, in handling his real estate business he had studied real estate law for 20 or 25 years and was 'acquainted with some of the things that pertain to real estate'; that for several years he had been chief underwriter for the district FHA. As such, he 'passed upon' real estate loans.

Prior to February, 1937, plaintiff had been in the real estate business 15 or 20 years, and Gertrude E. Baehr had been his secretary and bookkeeper for 10 or 12 years. Prior to that date, plaintiff had contracted to exchange real estate personally owned by him for the lots involved. 'For his convenience,' plaintiff caused the title to be taken in Miss Baehr's name. These deeds were recorded. In one, some of the lots were made subject to a recorded $3700 first deed of trust. Miss Baehr married Gilbert F. Cox in 1938. Mrs. Cox and plaintiff both testified that she paid no part of the consideration, at no time claimed any interest in the lots and 'was the record holder only.'

In November, 1941, plaintiff secured a $10,000 loan on the lots from John H. Armbruster & Co., a corporation engaged in the real estate business in St. Louis. John H. Armbruster was president, William LaBagge was vice president and sales manager and Walter F. Faerber was secretary. Armbruster and LaBagge went with plaintiff to look over the lots. There is a conflict in the evidence as to whether plaintiff told Armbruster and LaBagge that, while the record owner was Mrs. Cox, the lots were 'really plaintiff's.' The minutes of the Armbruster board meeting showed approval of a loan to 'Grover Godwin on vacant lots.' The loan was handled by Armbruster and, apparently, neither LaBagge nor Faerber had any knowledge that plaintiff personally had any interest in the lots. Armbruster did not recall that plaintiff represented himself as the owner. Armbruster testified that he told the other members of the company's board that 'Godwin had brought in an application for a loan of $10,000 and that I thought the loan was a good loan; * * * we told Mr. Godwin the loan was granted and asked him how he wanted the papers prepared, and he said that the property was in the name of Cox and his wife, ans so we prepared the papers accordingly and sent them to him to get signed by his client. * * * We made up the papers on the representation that Cox was the owner of the property.'

Plaintiff delivered to the company a $10,000 note due in 3 years, and 6 interest notes for $300 each, due in 6, 12, 18, 24, 30 and 36 months, respectively, all dated December 1, 1941, and payable at the office of the company. The notes and the deed of trust securing them were signed by Gilbert F. Cox and 'Gertrude E. Cox, formerly Gertrude E. Baehr.' The deed of trust contained a note 'acceleration' clause. LaBagge was trustee and Faerber was the payee of the notes and beneficiary. After recording the deed of trust, the company paid the $10,000, less commission, either to plaintiff directly or, at plaintiff's direction, to others. Some such payments were of special tax bills and of city and county taxes; others were in liquidation and release of the outstanding encumbrance against some of the lots. Neither Mrs. Cox nor her husband received any of the proceeds of the loan.

These payments by plaintiff's instructions were, according to Armbruster, the usual practice in the real estate business. He testified that he did not look to the Coxes for directions; 'in all our dealings, when a Realtor brings in the deed of trust, we go by his wishes because the owner must have faith in him to give him their signed deed of trust; a deed of trust is a negotiable paper and as long as we have it in our possession we pay out the proceeds to whomever delivers the loan deed of trust papers to us.'

The notes and deed of trust were negotiated by the company to a Lillian Timmerman who in turn negotiated them to a Henry Muntze, a real estate broker, in February or March, 1943. Muntze sold them, in April, 1943, either to Gerling individually, or to the Gerling Realty and Building Company, a corporation of which Gerling was president, for $4500. Gerling was not associated in business with the Armbruster Company nor with any of its officers. Plaintiff testified that, sometime in 1939 or 1940, he showed the lots to Gerling and told him they were his (plaintiff's). This Gerling denied.

Plaintiff paid the $300 interest note due June 1, 1942. It does not appear when the notes were negotiated by the company or whether the company accepted this payment as the holder of the notes or as agent for the holder. Apparently, the company wrote plaintiff in December, 1942, regarding the December 1, 1942, $300 interest note, and plaintiff replied, stating he was in the army and asked waiver of 'this and subsequent payments for the duration of the war.' Plaintiff also wrote the local tax officials requesting 'moratorium on the taxes without penalty.' When he entered service, September 24, 1942, none of the other notes were in default. Nor were there, at that time, any taxes due and payable. Gerling paid the taxes for the years 1942-1945, inclusive.

In August, 1942, plaintiff 'anticipated being called into service' and asked Mrs. Cox and her husband to deed the lots to him. The Coxes, as 'Gertrude B. Cox, formerly Gertrude E. Baehr, and Gilbert F. Cox, her husband,' conveyed to plaintiff by warranty deed, 'subject to a first deed of trust.' This warranty deed was never acknowledged and, of course, was not recorded. Plaintiff 'intended to have a notary acknowledgment put on it, but during the rush of things and getting ready to get into the army, I just didn't to it.' Mrs. Cox did not recall why it was not notarized 'unless it was just neglected.'

Around July 1, 1944, Gerling, as owner of the notes and deed of trust, requested LaBagge, the trustee, to sell the lots, under the power of sale in the deed of trust, because of default in the payment of interest notes. After publication of notice of sale, LaBagge sold the lots at public sale for $4800. Gerling was the purchaser. By trustee's deed dated July 19, 1944, LaBagge conveyed the lots to Gerling and his wife. The trustee's deed referred to the deed of trust executed by 'Gertrude E. Cox (also known as Gertrude B. Cox, formerly known as Gertrude E. Baehr) and Gilbert F. Cox, her husband, dated December 1, 1941, and recorded in the Recorder's office of the County of St. Louis and State of Missouri, in Book...