Loeb v. Dowling

• Decision Date: 17 June 1942
• Docket Number: 37991
• Citation: 162 S.W.2d 875,349 Mo. 674
• Parties: Emanuel M. Loeb, Appellant, v. John J. Dowling, Millard F. Smith, Genevieve Smith, His Wife, and Walter E. Dempsey
• Court: Missouri Supreme Court

162 S.W.2d 875

349 Mo. 674

Emanuel M. Loeb, Appellant, v. John J. Dowling, Millard F. Smith, Genevieve Smith, His Wife, and Walter E. Dempsey

No. 37991

Supreme Court of Missouri

June 17, 1942

Appeal from Circuit Court of St. Louis County; Hon. John J Wolfe, Judge.

Affirmed.

Louis Yaffe and Sylvan Agatstein for appellant.

(1) Agents and servants of a principal charged with fraud are equally liable in tort when the fraudulent acts are perpetrated by them or with their knowledge and consent to the same extent as is the principal. Lee v. Allen, 120 S.W.2d 172; Guthrie v. Albert Wenzlick R. E Co., 54 S.W.2d 801; Buis v. Cook, 60 Mo. 391; Sheffler v. Mudd, 71 Mo.App. 78; Thompson v Irwin, 96 Mo.App. 418. (2) The trustee in a deed of trust occupies a fiduciary relationship to both the owner of the property and the holder of a debt and if the trustee becomes the holder of the debt in its individual capacity and acquires the property at foreclosure it is guilty of fraud. Cassady v. Wallace, 102 Mo. 580, 581; Axman v. Smith, 156 Mo. 286, 57 S.W. 105; Hurst Automatic Switch & Signal Company v. Trust Company, 216 S.W. 954; Vorth v. Proctor, 219 S.W. 72; West v. Axtell, 322 Mo. 401, 17 S.W.2d 328; Guels v. Mississippi Valley Trust Co., 49 S.W.2d 60; Stone v. Hammons, 146 S.W.2d 606; Sherwood v. Saxton, 63 Mo. 78; 1 Scott on Trusts, sec. 9, pp. 68, 69; Long v. Long, 79 Mo. 644; Thatcher v. Tracy, 8 Mo.App. 359; Thornton v. Irwin, 43 Mo. 163, 164, 165; Northcutt v. Fine, 44 S.W.2d 125; Duncan v. Home Cooperative Co., 221 Mo. 315, 120 S.W. 733; Stark v. Love, 128 Mo.App. 24, 106 S.W. 87; Whichloch v. Lawrence, 3 Ves. Jr. 740; White v. Storm, 236 Mo. 470, 139 S.W. 384; Grumley v. Webb, 44 Mo. 444; Goode v. Comfort, 39 Mo. 313; Pueblo Real Estate Loan & Investment Co. v. Johnson, 119 S.W. 274; 65 C. J., 768. (3) When a trustee fraudulently acquires trust property which is the subject matter of a deed of trust and exercises dominion over it as its own, or said property has, through the trustee's actions, passed into the hands of an innocent purchaser, the former owner of the property may hold the trustee accountable for damages. 2 Scott on Trusts, pp. 860, 861, sec. 170.2; 65 C. J., 771; Holman v. Ryan, 56 F.2d 307; 41 C. J., 1035, 1036; Stansberry v. McDowell, 186 S.W. 757; Sherwood v. Saxton, 63 Mo. 78; Missouri Real Estate Syndicate v. Simms, 179 Mo. 679; Peterson v. Kansas City Life Ins. Co., 98 S.W.2d 770; 49 C. J. 1008, sec. 267.

George F. Heege for John J. Dowling and Walter E. Dempsey.

(1) The petition fails to state a cause of action because it appears upon its face that any action plaintiff may have had was barred by the five-year Statute of Limitations. Sec. 1014, R. S. 1939; Womack v. Callaway County, 159 S.W.2d 630. (2) The petition does not state a cause of action because in it plaintiff admitted that prior to the foreclosure he had defaulted in the payment of the principal of the indebtedness as well as of the accrued interest. The right to foreclose, therefore, was absolute. The complaints set forth in the petition, at most, were but improprieties in the exercise of that right, and might have constituted grounds for the setting aside of the sale, but not for an action for damages. Peterson v. Kansas Life Ins. Co., 339 Mo. 706, 708, 98 S.W.2d 773, 775, 108 A. L. R. 583; Adams v. Carpenter, 187 Mo. 634; Stephenson v. Kilpatrick, 166 Mo. 262, 65 S.W. 773; Drannek Realty Co. v. Nathan Frank, Inc., 139 S.W.2d 928; Field v. Natl. City Bank, 121 S.W.2d 774. At such a sale, no matter how irregular, the legal title passes subject to redemption. Purchaser at such a sale may either buy out the right of redemption, by deed from the former owner, or he can sue him to foreclose the right. The court might require a new sale, but the trustee could not sell again, as he has exhausted his power. Adams v. Carpenter, 187 Mo. 613. (a) In foreclosing the deed of trust after the default, and in paying off the holders of the notes (which the bank, having sold, was at least under moral obligation to repurchase, when plaintiff failed to pay), the bank, and those acting for it, did what it had a legal right to do, and therefore cannot be made the basis of fraud. Nations v. Pulse, 175 Mo. 86, 94, 74 S.W. 1012, 1014; Field v. Natl. City Bank, 121 S.W.2d 774. The court will not inquire into the motives of a person for doing a lawful act. State ex rel. Orr v. Buder, 308 Mo. 552.

William Kohn for Millard F. and Genevieve Smith.

The petition does not state a cause of action, because it shows upon its face that plaintiff lost his equity of redemption, not because of any wrongful act of the defendants, or any of them, but because of plaintiff's own default and failure to pay his indebtedness when it matured. Peterson v. Kansas City Life Ins. Co., 339 Mo. 706, 708, 98 S.W.2d 773, 775, 108 A. L. R. 583.

OPINION

Tipton, P. J.

This is an action filed in the circuit court of St. Louis County for damages for the wrongful foreclosure of real estate in St. Louis County, Missouri. After the appellant had started the examination of his first witness, an objection was made to the introduction of any evidence for the reason the petition failed to state facts sufficient to constitute a cause of action. This objection was sustained by the trial court and the appellant took an involuntary nonsuit with leave to set the same aside. The trial court refused to set aside the involuntary nonsuit, and the appellant has duly appealed.

The appellant's statement of facts is as follows:

"The petition alleges that respondent John J. Dowling was the president, stockholder, and general manager of the Savings Trust Company of St. Louis, a Missouri banking and trust company, which became defunct, and was under the administration of the Finance Commission of the State of Missouri prior to the beginning of this action. The petition further states that this corporation loaned to appellant in June, 1929, the sum of $ 9,500.00, secured by a deed of trust upon the real estate described therein, which consisted of a two-family-flat building of the reasonable market value at the times stated in the petition of the sum of $ 17,500.00. The principal debt was reduced to $ 9,000.00 one year after its date through the payment of $ 500.00 by appellant, but in June, 1932, the balance of the principal, together with interest in the sum of $ 270.00, became delinquent, and foreclosure of the property was advertised under a power of sale in the deed of trust. It is this transaction of which appellant complains.

"It further appears from the petition that the Savings Trust Company was designated in the deed of trust as trustee, and acted as such during all the times mentioned. It further appears that the notes secured by the deed of trust were held by various customers of the bank, who purchased them at the time the loan was made; that shortly prior to maturity, the Savings Trust Company, through defendant John J. Dowling, notified the noteholders to present their notes to the Savings Trust Company, upon which presentation the Savings Trust Company purchased the notes and became the legal holder of all of them. At this time, and by this action, the aforesaid Savings Trust Company achieved the dual capacity of both trustee in the deed of trust and cestui que trust.

"Not knowing of such situation, efforts were made by the appellant to procure the renewal of the loan by the bank, but respondent Dowling refused to cause said renewal to be made, and proceeded to advertise foreclosure of the property under the power of sale in the deed of trust. The petition alleges further that respondent Dowling was personally in charge of this transaction, and that he concealed from appellant the fact that his company had become the holder and owner of the loan, and by reason thereof said respondent was guilty of fraud. It is then stated that pursuant to this notice, respondent Dempsey, an employee and agent of the Savings Trust Company, appeared at the designated place upon the 12th day of July, 1932, the date for which said sale had been advertised, and then merely read aloud the advertisement, did not call for bids, received none and announced none.

"Upon the 8th of August, 1932, twenty-seven days after the purported trustee's sale, there was recorded by respondent Dowling, acting for the Savings Trust Company, a trustee's deed of the said Savings Trust Company to one Kieth White, an alleged 'straw' party, for the purported consideration of fifty dollars. On the same day he likewise recorded a quitclaim deed to respondents Smith, alleged also to be 'straw' parties, from Kieth White, and a new deed of trust upon the property in question executed by the Smiths to secure twenty-one certain promissory notes payable to the legal holders thereof in the total principal sum of $ 10,500.00, in which deed of trust the Savings Trust Company was trustee. All of these conveyances are declared to have been made and recorded pursuant to the connivance, preconception and fraud of the respondents with the express purpose of defrauding appellant and depriving him of his property, to the respondents' benefit.

"It is further alleged that title to the property was conveyed into the hands of certain named innocent holders for value in July of 1933 by respondents Smith. Of the new $ 10,500.00 loan, it is charged that respondent Dowling personally received the sum of $ 195.77, and respondents Smith personally received the sum of $ 734.37.

"The petition further alleges that by reason of the hereinabove stated facts, appellant was deprived of his equity in said property of the reasonable value of $ 8,230.00, and, because of the willful nature of the respondents' acts, further prayer is made for $ 10,000.00 punitive damages."

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