Lunsford v. Davis

• Decision Date: 21 September 1923
• Docket Number: No. 23579.,No. 23578.,23578.,23579.
• Citation: 300 Mo. 508,254 S.W. 878
• Parties: LUNSFORD et al. v. DAVIS et al.
• Court: Missouri Supreme Court

254 S.W. 878

300 Mo. 508

LUNSFORD et al. v. DAVIS et al.

No. 23578.

No. 23579.

Supreme Court of Missouri, Division No. 1.

September 21, 1923.

Appeal from Circuit Court, Jackson County; Allen C. Southern, Judge.

Suit by Nora L. S. Lunsford and another against William II. Davis and another. From the judgment, both parties appeal. Modified and affirmed.

Scarritt, Jones, Seddon & North, of Kansas City, for respondents and appellants Nora L. S. Lunsford and William G. Lunsford.

Stone, Gamble, McDermott & Webb and Gamble, Trusty & Pugh, all of Kansas City, for defendants-appellants Davis and Cobb.

LINDSAY, C.

The plaintiffs, Nora L. S. Lunsford and William G. Lunsford, her husband, brought suit against defendants Davis and Cobb, and their wives, and against one John M. Shook to annul a certain deed made to Davis and Cobb by Shook as trustee under a deed of trust covering the Coates House hotel property in Kansas City, Mo. Plaintiff Nora Lunsford acquired title to said property by warranty deed from defendant Davis, about October 1, 1918, in a trade, under the terms of which the plaintiffs concurrently paid to Davis $35,000 in money, conveyed to Davis 7,000 acres of land in Alabama, and executed to him their note in the sum of $115,000, secured by a second deed of trust upon the hotel property. The deed sought to be annulled is the deed made by Shook as trustee under this second deed of trust. In the consummation of the trade mentioned, the plaintiffs also, about October 1, 1918, executed a first deed of trust upon the property to secure the sum of $75,000 borrowed by them from Groves Bros. Real Estate & Mortgage Company. Upon this loan the sum of $5,000 was payable at the end of each of the first, second and third and fourth years from its date, and the remainder at the end of five years. The note secured by the second deed of trust is dated October, 1918, and due five years after date, bears interest at 5 per cent. and the semiannual interest coupons were due April 1st and October 1st in each year. The note and coupons are to bear 8 per cent. after their maturity.

The deed of trust securing this note contains certain agreements as to payments and maturity not expressed in the note itself. After describing the terms of the note the deed continues:

"Privilege given to pay one thousand dollars ($1,000) or any multiple thereof on any interest paying date by giving 60 days' written notice."

And the deed also contains the further important provision or privilege:

"If the maker of this note owns the property securing same this note when due may be extended for five years provided fifteen thousand dollars ($15,000) of the principal sum has been paid at that time."

Shortly after the execution of this note the sum of $10,000 was paid and credited upon it, reducing the principal to $105,000. Davis retained this note for a time, and sold it to one Reitzel, who later sold and transferred it to defendant Shook, and he in turn sold and transferred it to defendants Davis and Cobb, who were the holders of the note at the time of the sale of the property under the second deed of trust, which occurred on February 21, 1921. On March 9, 1921, the Coates Hotel Company, the tenant, filed its petition setting up the fact of the sale under the second deed of trust, the conflicting claims of plaintiffs and defendants to the property and the rentals thereof, asked that the controversy be determined, and that meanwhile a receiver be appointed. A receiver was appointed in that proceeding.

On the 22d day of April, 1921, the plaintiff filed the petition upon which this cause was heard. In its general tenor it is a charge made with much detail that defendants Davis and Cobb, and Shook, the trsutee, conspired together to acquire the valuable equity of plaintiffs fraudulently without right, in violation of the terms of the deed of trust, and. in violation of the duty of Shook as trustee, and pursuant thereto did procure and effect a sale of the property at an unusual time, and under circumstances whereby Davis and Cobb were the only bidders and were enabled to purchase plaintiff's equity in the property at the bid and amount of their note, plus the costs of making the sale.

The plaintiffs prayed that the sale be set aside, the deed so made thereunder he declared of no effect, and that the second deed of trust be declared a subsisting obligation and be reinstated, as such, and also that defendant Shook be removed as trustee therein, and a suitable person be appointed in his stead. The trial court so decreed, and appointed C. S. Jobes as the successor trustee. At the time of the sale under the deed of trust there was not any unpaid matured interest on the note, but there were taxes due against the property in the sum of $3,969.22. Upon the fact of nonpayment of this tax, in its relation to the terms of the second deed of trust, rests the claim of right of defendants Davis and Cobb to cause the sale to be made. Upon a denial that the existence of this unpaid tax constituted a breach of the terms of the deed of trust, authorizing its foreclosure, and upon the other circumstances preceding and attending the sale, above indicated, the plaintiffs found their case. Immediately after the sale through Shook, defendants Davis and Cobb, as claiming ownership of the property, paid this tax. Plaintiffs in their petition expressed their willingness, if it should appear equitable and just, to pay any part of the expenses of the sale, and to refund the amount of said tax, but, as asking that the deed of trust be reinstated and continued, the plaintiffs did not otherwise than to the extent just indicated ask to be permitted to redeem the property. The court by its decree ordered defendants Davis and Cobb and their respective wives to execute a deed to plaintiffs conveying the property as subject to the deed of trust, and included a provision permitting the plaintiffs to pay, without prejudice, the interest coupons which had matured pending the suit. And the court decreed that plaintiffs, upon delivery to them by Davis and Cobb of a deed to the property, should refund to Davis and Cobb the said sum of $3,960.22. The court also made provision through the successor trustee for a retransfer of the policies of insurance appropriate to the disposal made of the property. The defendants tiled a motion asking for a modification of the decree, and the plaintiffs also filed a motion for its modification.

The defendants, in their motion expressly objecting to any decree which set aside the sale and trustee's deed, insisted that if the sale and trustee's deed be set aside it should be done only on the condition that plaintiffs be required to pay the debt and interest with expenses of sale, and refund the said sum of $3,969.22 tax money to defendants, but further insisted that if these be not required, the plaintiffs yet should be required to refund said sum of $3,969.22 with interest. The court overruled this motion, whereupor defendants filed their motion for a new trial, and thereafter took their appeal. The plaintiffs' motion asked the court so to modify the decree that they would not thereby be required to refund to defendants said sum of $3,969.22. Their motion was also overruled. Plaintiffs filed no other motion, but applied for and were allowed an appeal.

The plaintiffs' case proceeds upon the theory that the alleged sale and the deed made thereunder were ineffective to change the status of the title, or the relation and obligations created by the deed of trust between plaintiffs, and defendants Davis and Cobb. This is founded upon the claims, first, that there was no such breach of the covenants of the deed of trust as authorized a foreclosure, and second, that in the purpose to foreclose, and in the manner of proceeding to do so, the beneficiaries and the trustee designedly misled and deceived the plaintiffs, and conducted the sale in disregard of plaintiffs' rights, intending thereby to deprive plaintiffs wholly of their valuable interest in the property, and secure the same for themselves. The plaintiffs' case, in respect of the form of relief asked, proceeds also upon the theory and basis that the plaintiffs have been at all times and now are able, as well as willing, to perform all of the obligations imposed by the deed of trust. It is not necessary to set out the petition, since the nature of the specific allegations therein will sufficiently appear in referring to the evidence.

The answer of defendant admitted the allegations of the petition concerning the provisions contained in the first and second deeds of trust and in the notes secured thereby; that the second deed of trust contained the recital that it is subject to the first deed of trust; and that plaintiffs had paid the first installment note of $5,000 secured by the first deed of trust. It appears that by agreement between plaintiffs and the holders of the notes secured by the first deed of trust that payment of the second installment note of $5,000 due October 1, 1920, had been deferred. Defendants admitted payment of $10,000 upon the note secured by the second deed of trust, and admitted that after plaintiffs had paid part of the taxes on the property, in the early part of December, 1920, plaintiffs learned there were further taxes to the amount of about $3.700, which remained unpaid; that plaintiffs were able to pay said taxes, and could and would have done so had they made the necessary investigation and attended to the making of the necessary remittance. The answer averred that these taxes were overdue, and constituted a lien upon the property prior to other liens, which plaintiffs knew or might have known; and admits the beginning, on January 28, 1921, of publication of notice of sale to take place on February, 21, 1921; avers that plaintiffs had knowledge of the publication, and permitted it to continue, admits that prior to January 28, 1921, plaintiffs had engaged a member...