Hochrein v. Balthasar

• Decision Date: 16 October 1962
• Docket Number: No. 31042,31042
• Citation: 361 S.W.2d 315
• Parties: Andrew HOCHREIN and Ernestine Hochrein, Plaintiffs-Respondents, v. Marian BALTHASAR and Dorothy Dennison, Defendants-Appellants.
• Court: Missouri Court of Appeals

Page 315

361 S.W.2d 315

Andrew HOCHREIN and Ernestine Hochrein, Plaintiffs-Respondents, v. Marian BALTHASAR and Dorothy Dennison, Defendants-Appellants.

No. 31042.

St. Louis Court of Appeals, Missouri.

Oct. 16, 1962.

Richard Wolff, Kappel & Neill, St. Louis, for defendants-appellants.

Albert J. Haller, Clayton, for plaintiffs-respondents.

DOERNER, Commissioner.

This is an action to enjoin the threatened foreclosure of a deed of trust and to compel the crediting of certain payments on a principal note thereby secured. The chancellor granted the relief prayed and defendants appealed.

The cause was submitted on an agreed statement of facts, together with the testimony of the parties concerned. In May, 1958, plaintiffs, who are husband and wife, purchased property at 3630 Iowa Avenue in the City of St. Louis from the Hasse Real Estate Company. In order to finance the purchase they borrowed the sum of $9,500 from F. A. Sander, the president of F. A. Sander Real Estate and Investment Co., Inc. The loan was evidenced by twenty negotiable promissory notes executed by plaintiffs, all dated May 17, 1959, payable to Mildred H. Sander, the wife of F. A. Sander. Ten of said notes were principal notes, of which those marked A, B, C, D, E, F, G, H and I were for $400 each, the first being due and payable six months after date and the succeeding eight due, in order, at six months intervals thereafter. The tenth principal note, marked J, was for $5,900 and was due sixty months after date. The remaining ten notes were interest notes for the interest to be earned on the principal at the rate of 6% per annum and were numbered 1 to 10 inclusive. Note No. 1 was for $285, due six months after date, and each succeeding note was for the sum of $12 less than the one preceding it, and they were likewise due, in order, at six months intervals. As security for the notes plaintiffs at the same time executed a first deed of trust upon their property, in which Sander was named trustee and Mrs. Sander the third party beneficiary. All of the notes were made payable at the office of the Sander Real Estate and Investment Co., Inc., and the deed of trust provided that the third party, for herself and her successors in interest, would deposit all notes, whether for principal or interest, with the Sander Company for collection as they matured, for which the Company was to receive a fee of 1/2% of 1% per annum of the principal sum remaining unpaid. It was also stipulated in the deed of trust that the privilege was granted to the makers of the notes to pay the sum of $100 or any multiple thereof on account of '* * * said principal note * * *' on any payment date, provided that thirty days advance notice in writing was given the trustee, and that such prepayment would reduce the interest and principal proportionately.

On November 8, 1958, shortly before the first principal and interest notes fell due, plaintiffs went to the office of the Sander Company and paid $1,285 to Sander in payment of Interest Note No. 1 and Principal Note A, in the amounts of $285 and $400, respectively, and as a prepayment of $600 on account of principal. At that time Sander gave plaintiffs a receipt for $600 as '* * * Pay Off on Deed of Trust 3630 Iowa' signed 'F. A. Sander Real Estate and Investment Co., Inc., By F. A. Sander.' About a week later they received through the mail the interest and principal notes, marked paid. On May 15, 1959, plaintiffs in the same fashion paid the sum of $955 in payment of Principal Note B for $400 and Interest Note No. 2 reduced proportionately to $255, and as a further prepayment of principal of $300. They received a similar receipt of the Sander Company signed by Sander, for the $300 prepayment, and later received the cancelled principal and interest notes by mail.

About September 12, 1959, defendants purchased from the Sander Company all of the plaintiffs' remaining unpaid principal and interest notes, together with the deed of trust, for $7,937.50, which figure included Principal Note J, reduced from $5,900 to $5,000 by credits for the two prepayments theretofore made by plaintiffs; Principal Notes C through I for $400 each; and accrued interest of $137.05. The notes were all endorsed by Mildred H. Sander, without recourse. There was no dispute in the evidence that plaintiffs were not then advised of the purchase of their loan by defendants.

Thereafter, on November 7, 1959, plaintiffs gave Sander at the office of the Sander Company the sum of $1,234 in payment of Principal Note C for $400 and Interest Note No. 3 reduced to $234, and for a prepayment on account of principal of $600. They were given the customary receipt of the Sander Company, signed by Sander, for the latter sum, and later received through the mail the principal and interest notes, marked paid. The Sander Company sent defendant Balthasar a statement showing that it had collected the principal note for $400 and the interest of $234, accompanied with its check for $614.50, the amount it represented as having collected less its collection fee of $19.50. Mrs. Balthasar then sent Principal Note C and Interest Note No. 3 to the Sander Company.

Having made the prepayment of $600 on November 5, 1959, from plaintiffs' standpoint the principal remaining due was $6,800, on which the pro rata interest payable on May 17, 1960, was $204. Two days before that date plaintiffs paid the Sander Company the sum of $904, which to their view covered the interest due and Principal Note D for $400, as well as an additional prepayment on principal of $300. Pro rata interest on $7,400, the amount of principal due not taking into account the prepayment of $600, was $222. In an obvious effort to conceal its machinations, the Sander Company then sent Mrs. Balthasar a statement showing collection of interest of that amount, together with the principal currently due of $400, and enclosed its check for $603.50, the total stated collection less its fee of $19.50. Mrs. Balthasar then sent the company Principal Note D and Interest Note No. 4. In this instance Sander was not in the office when plaintiffs made their payment, and an employee named Weidhaas gave them a receipt of the Sander Company for the entire $904. Subsequently they received through the mail another receipt of that company, signed by Sander, for the prepayment of $300, together with Principal Note D and Interest Note No. 4, marked paid.

Sander died on July 17, 1960, and on the following September 23 the Sander Company filed a voluntary petition in bankruptcy. On or about October 23, 1960, defendants through their attorneys notified plaintiffs by letter that defendants were the holders of the notes and deed of trust, and that all payments should be made to defendants. This was the first information plaintiffs had that their notes and deed of trust had been sold to defendants, and they subsequently learned that defendants had not received the disputed prepayments of $600 and $300. On November 15, 1960, plaintiffs tendered to defendants $400 in payment of Principal Note E due two days thereafter, and $183 as the pro rata interest due on the alleged principal of $6,100. Defendants accepted the $400, but refused the $183 and demanded interest of $210, which they asserted was due on the principal balance of $7,000. Plaintiffs refused to pay the interest demanded, defendants threatened foreclosure, and this action followed.

In reply to a question on cross-examination, plaintiff Andrew Hochrein testified that he had asked Sander whether the prepayments were being recorded on Principal Note J, and was told that he would just get receipts until after the five years when the note came due. He admitted that he never saw any notes when he made the various payments to the Sander Company; conceded that he never saw any prepayments marked on the back of Principal Note J; and admitted that he never demanded that Sander produce the note so that he could see whether he was being given credit for the prepayments of principal. He further conceded that he did not know whether Sander had possession of the note when he made the prepayments, and stated that he thought Sander had it '* * * in the family,' presumably meaning Mrs. Sander.

Mrs. Balthasar, one of the defendants, testified that following the death of her husband Sander telephoned her and asked whether she would be interested in buying a deed of trust. He gave her the location of plaintiffs' property, which she examined, and she agreed to buy the loan. She paid the entire purchase price of $7,937.05 but made her daughter, defendant Dennison, the co-owner, as a gift to the latter. Mrs. Balthasar stated that at the time of her purchase Sander delivered all of the unpaid principal and interest notes to her, together with the deed of trust, and that thereafter she never relinquished possession of any of the notes except the $400 principal and interest notes collected. She testified that she had authorized the Sander Company to collect the $400 principal notes and the interest notes, for which it was to receive a fee, but stated on both direct and cross-examination that she had never authorized it to accept or collect prepayments of principal for her, and that she had forbidden him to do so. She testified that when she purchased the loan Sander told her, regarding prepayments, that she might have to wait, because plaintiffs had a son overseas and that when he returned he was going to pay off the loan. Sander also told her to let the principal run as long as it could run, because she would get more interest. In answer to a question by the court, Mrs. Balthasar stated that after she had received the first payment she asked Sander whether he had collected any more, and he replied that she should be glad they hadn't paid any more as she would get more interest.

Mrs. Balthasar testified that she had never had any prior dealings with Sander. The other defendant, Miss Dennison, stated that sh...