Hadley Bros.-Uhl Co. v. Scott

• Decision Date: 07 April 1936
• Docket Number: No. 23665.,23665.
• Citation: 93 S.W.2d 276
• Parties: HADLEY BROS.-UHL CO. et al. v. SCOTT.
• Court: Missouri Court of Appeals

93 S.W.2d 276

HADLEY BROS.-UHL CO. et al. v. SCOTT.

No. 23665.

St. Louis Court of Appeals. Missouri.

April 7, 1936.

Rehearing Denied April 28, 1936.

Appeal from St. Louis Circuit Court, Division No. 2; O'Neill Ryan, Judge.

"Not to be published in State Reports."

Suit by Hadley Brothers-Uhl Company and another against Oreon E. Scott, individually and as trustee, wherein the defendant filed a counterclaim. Judgment for defendant, and plaintiffs appeal.

Affirmed.

Lashly, Lashly & Miller and Arthur V. Lashly, all of St. Louis, for appellants.

Lee W. Grant and Barton N. Grant, both of St. Louis, for respondent.

HOSTETTER, Presiding Judge.

This suit was instituted in the circuit court of the city of St. Louis on the 13th day of February, 1930. It is a suit in equity for an injunction to restrain defendant as trustee from selling certain real estate under power given by the deed of trust upon the property.

The controversy between plaintiffs and defendant trustee was as to whether the latter had the right under the terms of the deed of trust to procure insurance on the mortgaged property to further secure the payment of a $55,000 loan on same and add the amount of his outlays for insurance premiums to the mortgage debt and require plaintiffs to pay him therefor.

The defendant trustee had expended $992.60 in paying premiums to procure such insurance and advertised the property for sale because of plaintiffs' failure and refusal to pay him for such outlays.

A temporary restraining order was issued by the lower court, and, upon its refusal to dissolve it, defendant filed his answer setting out at some length the defenses against the requested injunction, and, in addition thereto, set up a counterclaim for said sum of $992.60 against plaintiffs, covering the amounts of premium which had been paid out by him to keep the insurance in force.

On the trial below, the court rendered its judgment on the 18th day of June, 1930, in favor of plaintiffs, adjudging that defendant be forever enjoined from foreclosing the rights of plaintiffs for any default under said deed of trust accruing prior to the institution of the suit and also against defendant on his counterclaim. On appeal by defendant to this court the judgment of the trial court was reversed and the cause was remanded for further proceedings not inconsistent with the views expressed in the opinion which was rendered on November 8, 1932. See Hadley Bros.-Uhl Co. v. Scott, 227 Mo.App. 354, 53 S.W.(2d) 1070, 1071.

We set out portions of said opinion, which will tend to clarify the issues on this appeal and constitute a statement of the facts, viz.:

"The plaintiffs, who are the grantors in the deed, are Hadley Bros.-Uhl Company, a corporation, and Harmon L. Hadley, one of the officers and principal owners of the company. Defendant, Oreon E. Scott, is engaged in the real estate and loan business, and is named in the suit in his individual as well as in his fiduciary capacity.

"Some months prior to March 31, 1924, plaintiffs had had negotiations with defendant relative to his placing of a loan of $55,000 on their real estate, and on the date mentioned formal application for the loan was made to defendant; the application containing, among other things, the following provision: `Will keep the building satisfactorily insured in the sum of $55,000.00 against fire loss and $30,000.00 against wind loss, with policies payable in case of loss to the Trustee named in said Deed of Trust, it being further agreed that you are to have the renewal of any policies expiring during the period of this loan.' We quote the above provision in the application relating to the right of the trustee to have the renewal of any insurance policies expiring during the period of the loan, since his right and power to have controlled the placing of insurance goes to the heart of the controversy between the parties in this proceeding. The application for the loan was eventually accepted, and on April 15, 1924, a deed of trust securing the same, and designating defendant as trustee, was duly executed by plaintiff Harmon L. Hadley on behalf of the company. The indebtedness was evidenced by 110 negotiable promissory notes, each for the sum of $500, maturing at stated intervals, and bearing interest from maturity at the rate of 8 per cent. per annum. Attached to each of said notes were semiannual interest coupons, serially numbered to correspond with the notes to which they were respectively attached, and designed to cover the interest on the principal of each note from its date until its maturity at the rate of 6 per cent. per annum."

The opinion quotes from the deed of trust as follows:

"Third: The said party of the second part herein is hereby authorized to place and keep up at the expense of the party of the first part, insurance against fire and lightning upon the building and improvements of said premises in one or more solvent insurance companies in the sum of Fifty-five Thousand ($55,000.00) Dollars, and also against windstorms, tornadoes and cyclones in the sum of Forty Thousand ($40,000.00) Dollars; also against boiler explosions in the sum of Twenty Thousand ($20,000.00) Dollars and liability insurance in the sum of Ten Thousand ($10,000.00) Dollars and Twenty Thousand ($20,000.00) Dollars limits. * * *

"Fifth: And it is further covenanted and agreed between the parties hereto that in the event any of the covenants and agreements herein set forth or any part or portion thereof shall not be fully kept or performed, then said Oreon E. Scott, or his successors may at his option pay the taxes in arrears or pay for any insurance or pay any judgment or advance any and all sums of money necessary to protect the title or possession of said premises and all such money so expended shall be a new and additional principal sum of money secured by this instrument, and shall be payable on demand and may be collected with interest thereon at the rate of eight per cent (8%) per annum, from the time of so expending same."

The opinion continues as follows:

"The policies secured by defendant were made payable to him as trustee, as his interest might appear, and upon their issuance he paid the premiums and then billed plaintiffs, who would reimburse him for the sums so expended. Eventually, at plaintiffs' request, he arranged the several forms of insurance so that all the policies expired on the same date. The testimony was that in placing the insurance it was the security of the indebtedness, and not the commissions, which defendant had in mind. * * *

"Not only did plaintiffs at all times refuse to reimburse defendant for the premiums advanced by him on policies secured after June 23, 1925, but in October, 1929, they fell into default in making the monthly deposits called for by the deed of trust, which were designed to make money available to the trustee to meet the semiannual payments on the principal indebtedness. Finally, on January 23, 1930, defendant, as trustee, under the power given him by the deed of trust, advertised the premises for sale on account of plaintiffs' default in their monthly deposit payments, and also on account of their failure to have reimbursed him for advancements made for insurance premiums, which, under the terms of the deed of trust as they have heretofore appeared, had become a part of the principal debt secured. Plaintiffs thereupon paid up the monthly deposits in arrears, but continued to refuse to reimburse defendant for the amount of the premiums advanced by him, and in due course instituted the present suit to enjoin defendant from selling the property under the deed of trust. * * *

"Here plaintiffs, in their application for the loan, agreed that defendant should have the renewal of any policies expiring during the period of the loan, and the identical provision was embodied in the deed of trust itself. Obviously, the chief concern of plaintiffs was the security of their property, and of defendant and the holders of the notes the security of the loan. All this was accomplished through the placing of the insurance by defendant; and there was nothing antagonistic between that power and the duties and responsibilities he owed to his principals, and no profits were thereby diverted from the beneficiaries. Conceding, therefore, that defendant, in placing the insurance, as a consequence of his status as a broker, was put in a position to make and retain certain commissions, the provision of the deed of trust so empowering him was not thereby rendered invalid, since everything that was done and contemplated was open and above board, upon a full disclosure of all the facts and circumstances, with a total absence of undue advantage accruing to defendant out of his fiduciary relationship. * * * The ultimate question, therefore, is whether the power so given, and otherwise valid, was a mere naked power, revocable at the will and pleasure of plaintiffs. We think not. It is said in 49 C.J. 1255, 1256, upon the authority of numerous cases, that, `where a power is coupled with an interest, or is given for a valuable consideration, or as security, it is irrevocable.' That is exactly the situation here, and so the parties themselves must have regarded the situation when the power in question was conferred."

It is well settled that where a case comes to a reviewing court on a second appeal, the ruling of the court on the former appeal is the "law of the case," which must be followed in the retrial in the lower court and observed as settled by the reviewing court on such second appeal. Cape Girardeau & T. B. T. R. Co. v. Southern Ill. & Mo. Bridge Co., 215 Mo. 286, 114 S.W. 1084; Guels v. Mississippi Valley Trust Co., 329 Mo. 1154, 49 S.W.(2d) 60; Denny v. Guyton, 331 Mo. 1115, 57 S.W.(2d) 415; Lewis v. Barnes (Mo.Sup.) 220 S.W. 487.

After the case reached the lower court for its second trial therein, the petition, and the answer and counterclaim of defendant, remained...