Hadley Bros.-Uhl Co. v. Scott

• Decision Date: 08 November 1932
• Citation: 53 S.W.2d 1070,227 Mo.App. 354
• Parties: HADLEY BROS.-UHL COMPANY, A CORPORATION, AND HARMON L. HADLEY, RESPONDENTS, v. OREON E. SCOTT AND OREON E. SCOTT, TRUSTEE, APPELLANTS
• Court: Missouri Court of Appeals

53 S.W.2d 1070

227 Mo.App. 354

HADLEY BROS.-UHL COMPANY, A CORPORATION, AND HARMON L. HADLEY, RESPONDENTS, v. OREON E. SCOTT AND OREON E. SCOTT, TRUSTEE, APPELLANTS

Court of Appeals of Missouri, St. Louis

November 8, 1932

Rehearing denied November 23, 1932.

Appeal from the Circuit Court of City of St. Louis.--Hon. Claude O Pearcy, Judge.

Reversed and remanded.

Grant & Grant for appellants.

(1) The powers given in a deed of trust to the trustee are powers coupled with an interest, the legal title to the property being in the trustee, and even the death of the grantor will not revoke such powers. White v. Stevens, 77 Mo 452; Beatie v. Butler, 21 Mo. 313. (2) The trustee in a deed of trust may have a personal interest in the property, but this will not incapacitate him from acting, even as a mortgagee may sell. Cassady v. Wallace, 102 Mo. 575, 580; 3 Jones on Mortgages, p. 801, sec. 2294; Thornton v. Goodman, 216 S.W. 147; Kinard v. Kaelin, 22 Cal.App. 379, 134 P. 3701.

Holland, Lashly & Donnell and George F. Wise for respondents.

(a) Respondents, as a matter of fact, effected insurance upon the mortgaged property for the benefit of the holders of the notes, in the amounts specified in the deed of trust, and made tender of the policies to the appellant. (b) Where the policy is payable, as interest appears, to the trustee, he is entitled to the proceeds of the policy to the extent of the mortgaged debt. 26 C. J. 438, sec. 588; Westchester Fire Ins. Co. v. Norfolk Bldg. & Loan Ass'n, 14 F.2d 524 (C. C. A. 8th); Rent-A-Car Co. v. Globe & Rutgers Fire Ins. Co. (Md.), 148 A. 252; Norwich Union Fire Ins. Co. v. Citizens' Bldg. & Loan Ass'n (Tex.), 7 S.W.2d 144. (2) (a) In order for a power to be so coupled with an interest as to be irrevocable, the interest must exist at the time of the attempted revocation, and an interest arising subsequent thereto is insufficient to prevent the revocation. Meyer v. Publishing Co., 156 Mo.App. 170 (St. L. Ct. App.). (b) A trustee in a deed of trust is the agent for both the debtor and the creditor. Vannoy v. Duvall Trust Co. (Mo. Sup.), 29 S.W.2d 692; Hurst v. Trust Co. (Mo. Sup.), 216 S.W. 954; Long v. Long, 79 Mo. 644; 3 Jones on Mortgages, sec. 2292, p. 798. (c) A trustee in a deed of trust should have no personal interest in, or derive any personal benefit from, the execution of the trust, other than his compensation for services as trustee. Long v. Long, 79 Mo. 644; 3 Jones on Mortgages, sec. 2292, p. 798; Mutual Reserve Ass'n v. Zeran (Wash.), 277 P. 984, 988. (d) Trustees, in deeds of trust, are subject to the same rules that govern all trustees. Moyer v. Norristown-Penn. Trust Co., 145 A. 682, 683, 296 Pa. 626; 2 Perry on Trusts & Trustees (7 Ed.), p. 1032. (e) A trustee is not permitted to derive a personal profit in the execution of the trust, and any such profit made by the trustee must be paid to the beneficiary for whom the trustee is acting. 39 Cyc. 296; White v. Sherman, 148 N.E. 128, 168 Ill. 589; Grumley v. Webb, 44 Mo. 444; Newman v. Newman, 152 Mo. 398; Cornet v. Cornet, 190 S.W. 333, 269 Mo. 298; 1 Perry on Trusts & Trustees, p. 710, sec. 427; p. 717, sec. 430. (f) An interest in the subject of a power so as to make the power irrevocable must be an interest in the thing itself, or the debt, a mere interest in the result or the proceeds of the execution of the authority, as by way of commissions on sales or commissions on insurance premiums, being insufficient. Meyer v. Publishing Co., 156 Mo.App. 170 (St. L. Ct. App.); Green v. Cole, 103 Mo. 70. (g) A power not coupled with an interest is revocable. Kilpatrich v. Wiley, 197 Mo. 123; Green v. Cole, 103 Mo. 70; Barnard v. Gardner Inv. Corp., 106 S.E. 346, 129 Va. 346; Sjogren v. Clark, 184 N.W. 159, 106 Neb. 600. (3) (a) The deed of trust not only fails to provide any special protection for the noteholders, but does not even provide the ordinary protection of the standard deed of trust, and some of the provisions of this deed of trust are void because against public policy. (b) A deed of trust cannot exempt the trustee from liability for his acts of gross negligence, because such a contract is against public policy and void. Browning v. Fidelity Trust Co., 250 F. 321 (C. C. A. 3rd Cir.). (c) A deed of trust cannot exempt the trustee from liability for failure to file the instrument for record, because such a contract is against public policy and void. 205 N.Y.S. 835 (Sup. Ct.). (4) Point IV of appellant's argument is admitted. (5) A trustee in a deed of trust cannot foreclose the deed for the sole benefit of himself as trustee. Long v. Long, 79 Mo. 644, and other cases cited under Points II and VI. (6) In duplicating insurance coverage already upon respondents' property the trustee was not exercising his discretionary power fairly and impartially for the benefit of the debtor, as he was obligated to do. Hurst Automatic Switch & Signal Co. v. Trust Co. (Mo. Sup), 216 S.W. 954; Tatum v. Holliday, 59 Mo. 422; Vannoy v. Duvall Trust Co. (Mo. Sup.), 29 S.W.2d 692; McCalley v. Otey (Ala.), 8 So. 157; 2 Perry on Trusts & Trustees (7 Ed.), p. 1034; Pomeroy, Equity Jurisprudence (3 Ed.), sec. 995. (7) A mortgagee only has an insurable interest in the mortgaged property to the extent of the mortgage debt, and, under no theory, could the trustee place insurance on the property in excess of the debt without the consent of the mortgagor. 1 Jones on Mortgages, p. 669; 1 Cooley's Briefs on Insurance, p. 254; 2 Couch on Insurance, p. 1183, sec. 407; Dick v. Franklin Fire Ins. Co., 10 Mo.App. 376, 81 Mo. 108; McDowell v. Morath, 64 Mo.App. 290; Parks v. Hartford Ins. Co., 100 Mo. 373.

BENNICK, C. Haid, P. J., and Becker, J., concur; Daues, J., not sitting.

OPINION

BENNICK, C.--

This is a suit for an injunction to restrain defendant, as trustee, from selling certain real estate at public sale under a power given by the deed of trust upon the property.

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 against fire loss and $ 30,000 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 eight 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 six per cent per annum. The reason for the issuance of the series of notes in moderate denominations was that the several units of the loan were to be sold by defendant to the public generally, the principal notes being in effect the equivalent of bonds.

The instrument was drawn in consideration of the debt and the trust thereinafter mentioned and created, and it described the property contained and the indebtedness secured. Other portions of the deed of trust, material to the controversy at hand, were as follows:

"And for the purpose of further securing the notes and coupons above described, it is agreed by and between the party of the first part (plaintiffs), . . . and said party of the second part (defendant), . . ., 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) Dollars, and also against windstorms, tornadoes and cyclones in the sum of Forty Thousand ($ 40,000) Dollars; also against boiler explosions in the sum of Twenty Thousand ($ 20,000) Dollars and liability insurance in the sum of Ten Thousand ($ 10,000) Dollars and Twenty Thousand ($ 20,000) Dollars limits. Said policies to be assigned to the said Oreon E. Scott, his successor or successors, who shall have full power and authority to collect and receive any and all moneys payable thereunder and to apply the same toward the debt secured hereby, unless same shall be otherwise discharged or the Trustee may at his option apply the same toward the repair or restoration of the property so damaged in such manner as the Trustee may elect. And in the event said proceeds of said insurance policies should be appropriated...