Kells v. Missouri Mountain Properties, Inc.

• Court: Missouri Court of Appeals
• Writing for the Court: Don E. Burrell
• Citation: Kells v. Missouri Mountain Properties, Inc., 247 S.W.3d 79 (Mo. App. 2008)
• Decision Date: 10 March 2008
• Docket Number: No. 28364.,28364.
• Parties: Thomas M. KELLS, Appellant, v. MISSOURI MOUNTAIN PROPERTIES, INC., Charles Aultman, Citizens National Bank, and Leland L. Gannaway, Respondents.

247 S.W.3d 79

Thomas M. KELLS, Appellant, v. MISSOURI MOUNTAIN PROPERTIES, INC., Charles Aultman, Citizens National Bank, and Leland L. Gannaway, Respondents.

No. 28364.

Missouri Court of Appeals, Southern District, Division Two.

March 10, 2008.

Thomas M. Kells, Pro Se.

Lee J. Viorel, for Respondents Citizens National Bank and Leland L. Gannaway.

Paul G. White, Springfield, for Missouri Mountain Properties Inc, Charles Aultman.

DON E. BURRELL, Judge.

This action arises from a breach of contract claim brought by Thomas M. Kells (Kells) against Missouri Mountain Properties, Inc., Charles Aultman (Aultman), Citizens National Bank (Citizens Bank), and Leland L. Gannaway (Gannaway) (collectively Citizens). Kells alleged that Citizens Bank and Gannaway had not properly disbursed the proceeds of a foreclosure sale as required by certain deeds of trust and a subsequent written agreement. The trial court denied Kells' claim and he now appeals.

Standard of Review

This case was tried to the court without a jury. The standard of review in a court-tried case is set forth in Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). This court will affirm the trial court's judgment unless it is against the weight of the evidence, there is insufficient evidence to support it, or it erroneously declares or applies the law. Id. at 32. The judgment of the trial court is presumed to be correct and the burden is upon the appellant to demonstrate that it is erroneous. Robertson v. Robertson, 15 S.W.3d 407, 411 (Mo. App. S.D.2000). "We accept as true the evidence and reasonable inferences therefrom in favor of the prevailing party and disregard the contrary evidence." Harrison v. DeHeus, 230 S.W.3d 68, 74 (Mo.App. S.D.2007). Viewed in that light, the relevant facts are as follows:

Facts

In April of 1997, Citizens Bank lent $1,250,000 to Butcher Holler, Inc. (Butcher). Ken and Nevon Lowe (the Lowes) were the sole shareholders of Butcher and they executed personal guarantee agreements on all debts owed by Butcher to Citizens Bank. The loan was also secured by three deeds of trust on three different parcels of property identified as Tract I, Tract II, and Tract III. Each of the three tracts was owned by either Butcher or the Lowes.

In August of 1998, Butcher borrowed an additional $202,967 from Citizens Bank and the Lowes again personally guaranteed the loan. The new loan was also secured by deeds of trust on Tracts I and II. In October of 1998, Citizens Bank loaned Butcher another $50,000 secured by yet another deed of trust on Tract I. Leland Gannaway, an attorney who represented Citizens Bank at the time the three loans were made, served as the trustee on the three deeds of trust. By July of 1999, Butcher and the Lowes were having problems making their loan payments. In November of 1999, the Lowes and Butcher received a notice of foreclosure as to Tracts I and II.

A foreclosure sale on Tracts I and II occurred on December 8, 1999. At that sale, the two tracts were sold as a whole to Charles Aultman for $1,550,000. The $50,000 deed of trust was not included in the foreclosure. On December 16, 1999 — eight days after the foreclosure sale—a written agreement was entered into between Butcher, Citizens Bank, and Missouri Mountain Properties¹ (Missouri Mountain), a corporation formed by Aultman, as to how the proceeds of the foreclosure sale would be distributed. Two written documents were actually prepared in an attempt to memorialize the terms of the parties' agreement. The first document was entitled "Agreement," was dated on its first page as having been entered into on December 13, 1999, and was signed on that same date by Charles Aultman on behalf of Missouri Mountain and by Ken Lowe on behalf of Butcher (Agreement #1). Agreement # 1 also included a signature block for Citizens Bank but no representative of the bank ever signed Agreement # 1. The second document, also entitled "Agreement," was dated on its first page as having been entered into on December 14, 1999 (Agreement #2). Agreement #2 was signed on December 14, 1999 by Frank Hilton on behalf of Citizens Bank. Two days later, December 16, 1999, Agreement #2 was signed by Charles Aultman on behalf of Missouri Mountain and by Ken Lowe on behalf of Butcher. Agreement # 2 made no mention of Agreement # 1 and had no language either referring to or revoking any other written or oral agreements of the parties.

The typewritten language of Agreement # 1 and Agreement # 2 was identical, but a different handwritten change had been made on each document. In paragraph 2.D(iv) located on the second page of Agreement # 1, the digit "8" in the section reading "[t]he 1998 real estate taxes due on or before December 31, 1999" had a handwritten slash through it and a "9" had been handwritten just above and to the right of it. This change was not initialed or dated and no one testified that they were the person who had made the change. On Agreement #2, the word "bankruptcy"² was marked out and the word "foreclosure" was handwritten immediately above it. No date was marked by this change, but the initials "K.L." appear beside it. This change was located on the first page of the document in paragraph 1. Gannaway testified that the parties also gave him oral instructions on how to distribute the foreclosure proceeds which differed from those set forth in the two written agreements. Specifically, Gannaway testified that the 1998 taxes had already been paid and that it was Lowe who wanted the 1999 taxes paid off so it would be easier for him to get the financing necessary to carry out his plan to buy the property back from Aultman.³

Under the terms of both Agreement # 1 and Agreement # 2, Gannaway was to distribute the proceeds of the foreclosure sale in the following manner: 1) pay to Citizens Bank the outstanding principal balance, unpaid interest and late charges on the $1,250,000 and $202,967 loans; 2) pay all trustee's fees and expenses; 3) pay to Citizens Bank $500 representing its fee on the $50,000 deed of trust; 4) pay several other junior liens on the properties; and 5) purchase a $50,000 certificate of deposit from Citizens Bank in the name of Missouri Mountain.⁴

$1,466,165.91 of the $1,550,000 payment was paid to Citizens Bank for the money due on the two deeds of trust. An additional $50,000 was paid to Citizens Bank for the certificate of deposit, $7,808.84 was paid to Gannaway for trustee's fees, and $4,098.58 was paid to the county collector to cover what Gannaway thought was the total amount of the 1999 real estate taxes on the two tracts. Several months later, an additional $21,926.67 was paid to the county collector toward the 1999 property taxes owed on the two tracts. No protest to this distribution was ever made by Butcher or the Lowes.

In early 2000, in exchange for $10 and "other good and valuable consideration," Butcher assigned to Kells any and all claims it might have arising from the trustee's sale of Tracts I and II.

An assignment serves to transfer all or part of one's interests or rights. Ford Motor Credit Co. v. Allstate Ins. Co., 2 S.W.3d 810, 812 (Mo.App. W.D.1999). As such, Kells gained whatever rights or interests Butcher had. Kells claims that the $50,000 paid to Citizen's Bank and the $26,025.25 paid to the county collector (a total of $76,025.25) constituted excess, surplus proceeds from the foreclosure sale and, pursuant to the terms of the applicable deeds of trust, should have been paid to Butcher. As the assignee of Butcher, Kells brought the action below asserting that he, by way of assignment from Butcher, is entitled to receive those proceeds.

The $1,250,000 deed of trust provided that, in the event of a foreclosure sale, any excess or surplus proceeds shall be paid "to the person or persons legally entitled thereto." The $202,967 deed of trust directed the trustee, in the event of a foreclosure sale, to pay "the surplus, if any, to Grantor." Butcher is defined as the "Grantor" within the deeds.

After a bench trial on Kells' claim, the trial court entered a judgment in favor of Citizens. The judgment found that the excess proceeds from the foreclosure sale had been distributed by Gannaway in accordance with the written and oral directives given by Ken Lowe and that Lowe had accepted the benefits of that distribution without objection prior to his assignment to Kells of any rights he might have.⁵ Kells appeals from that judgment and raises three points of alleged error.

Point I

Kells initially argues that the trial court erred in its judgment for Citizens because he had established his prima facie case that surplus funds existed after the trustee's sale. Kells claims that he presented evidence of the surplus proceeds and that, under the language of the deeds of trusts, Butcher was entitled to receive any excess proceeds from the sale. Citing to Hautly Cheese Co. v. Wine Brokers, Inc., 706 S.W.2d 920 (Mo.App. W.D.1986), Kells asserts that once he made a prima facie case, the burden shifted to Citizens to prove any affirmative defenses.

In making this argument, Kells ignores the actual judgment of the trial court. The trial court did not find that Kells had failed to make his prima facie case, rather it found that Citizens and Butcher had entered into a subsequent agreement that controlled the distribution of any excess proceeds from the sale and that the surplus had been disbursed according to the terms of that agreement. As Kells challenges a finding that the trial court did not make, this Court has nothing to review. Kells' first point is denied.

Point II

Kells asserts that the trial court erred in finding that Agreement # 2 was a valid agreement because Citizens failed to prove that it contained all of the elements necessary to constitute an enforceable contract.⁶ Kells admits that if a subsequent agreement on how to distribute the excess proceeds from the foreclosure sale was a valid contract, then that agreement, and not the...