Macon-Atlanta State Bank v. Gall, MACON-ATLANTA

• Decision Date: 14 February 1984
• Docket Number: No. WD34645,MACON-ATLANTA,WD34645
• Citation: 666 S.W.2d 934
• Parties: TheSTATE BANK, Plaintiff-Respondent, v. Raymond GALL and Jerry Gall, Defendants-Appellants, and Freddie D. Liebhart, Mary C. Liebhart, Zelta Gall, and James Gall, Defendants.
• Court: Missouri Court of Appeals

Page 934

666 S.W.2d 934

The MACON-ATLANTA STATE BANK, Plaintiff-Respondent, v. Raymond GALL and Jerry Gall, Defendants-Appellants and Freddie D. Liebhart, Mary C. Liebhart, Zelta Gall, and James Gall, Defendants.

No. WD34645.

Missouri Court of Appeals Western District.

Feb. 14, 1984.

Richard N. Brown, Brown & Casey, Brookfield, for defendants-appellants.

James P. Williams, Devoy & Williams, Brookfield, for defendants Freddie D. & Mary C. Liebhart.

Ellis & Meyer, Joseph M. Ellis, Macon, Oswald & Cottey, Louis F. Cottey, Kirksville, for plaintiff-respondent.

Before SHANGLER, P.J., and PRITCHARD and DIXON, JJ.

DIXON, Judge.

Defendants Raymond and Jerry Gall (father and son) appeal from a judgment in favor of the Macon-Atlanta State Bank declaring that a foreclosure sale, under which the Bank as mortgagee obtained title from the trustee, was proper and that good and marketable title was conveyed by the trustee.

Only one count of a six-count petition is involved in this appeal. The court tried separately the first count of the Bank's petition which sought declaratory relief that the foreclosure sale was valid and passed good title. After trial of that count, defendants Raymond and Jerry Gall filed an appeal. That appeal was dismissed for lack of a final judgment. Macon-Atlanta State Bank v. Gall, 647 S.W.2d 585 (Mo.App.1983). Upon remand, the trial court entered an order making the judgment final for the purposes of appeal, and this appeal ensued.

The present appeal presents issues concerning the validity of ordinary mail notice under Section 443.325(3), RSMo.1978, the propriety of a finding of laches and preclusion by estoppel from contesting the foreclosure sale, error in not finding the sale fraudulent, and the effect of the filing of a dissolution proceeding upon recorded deeds of trust executed before a dissolution occurs.

The factual background of the dispute is involved and convoluted.

On December 4, 1974, Zelta Gall and Raymond Gall filed a joint petition for dissolution of their marriage, together with a property settlement agreement. The agreement provided that Raymond would convey to Zelta his interest in approximately 668 acres of farm land the couple owned in Linn and Macon Counties, which includes the land involved in this case. In consideration for Raymond's interest in the property, Zelta agreed to pay Raymond $85,200.00 on or before February 1, 1975.

In late 1974, Zelta and her son James Gall applied to the Bank for a loan to pay off existing debts and to provide additional operating funds.

On January 31, 1975, while in the hospital, Raymond executed a one-year extension of payment of the amount due on the property settlement and a power of attorney to Zelta and James.

With assurances from Zelta and James that they had a power of attorney to act on Raymond's behalf, the Bank proceeded to process the loan. On May 5, 1975, Raymond, Zelta, and James Gall executed a negotiable promissory note payable to the Bank in the sum of $100,000, bearing annual interest at the rate of nine per cent. The note was secured by two deeds of trust conveying as security for payment of the note the Macon County and Linn County land here in dispute. At the time the Galls executed these documents, Raymond was again a patient in the hospital. Prior to the transaction, the Bank obtained a notarized letter from Raymond's attending physician attesting to Raymond's competency.

The note was not paid in accordance with its tenor. In the fall of 1976, Bank representatives visited Zelta and James in person and informed them that if the note remained delinquent, the Bank would foreclose on the secured property.

During this time Raymond and Zelta were engaged in contesting their divorce action. In January 1977 Raymond filed an answer alleging that Zelta agreed that if he would co-sign the $100,000 note and deeds of trust on the property securing the note, she would pay him the $80,000 due him under the property settlement agreement and then secure his release from obligation on the Bank's note. The Bank was threatening foreclosure and notified the attorneys for Raymond and Zelta that foreclosure would ensue in April.

On April 22, 1977, the Circuit Court of Linn County entered an amended judgment dissolving the marriage of Zelta and Raymond Gall. The decree found the property settlement agreement to be unconscionable and void and ordered the Galls' real and personal marital property to be sold. The court directed the sheriff to first apply the sale proceeds, after paying the expenses incident to the sale, to the principal and interest due on the Bank's note.

The court-ordered sale was to be held on October 3, 1977. Midway through the sale, the proceedings were halted and the gathering told that an agreement had been reached and the Galls' real estate would not be sold. This resulted from an order postponing the sale until further order entered by the Circuit Judge, apparently at the request of Raymond and Zelta.

The day after the aborted sale, the Bank's attorney again wrote to the attorneys representing Zelta and Raymond. He informed them that unless their clients made payment on the note, the Bank would commence foreclosure proceedings on October 20, 1977.

When the Galls failed to make payment, the Bank initiated foreclosure proceedings. The Bank's attorney prepared the notices of the trustee's sale of the real estate in Macon and Linn Counties to be held on November 14, 1977. The Bank mailed the notices by regular mail to newspapers in Linn and Macon Counties, to Zelta, Raymond, and James Gall, and to their attorneys. Beginning on October 20, 1977, the notices appeared for four consecutive weeks in the Linn and Macon Counties' newspapers.

At trial, Zelta, Raymond, and James denied receiving written notice of the foreclosure sales. However, Zelta testified she understood that foreclosure was imminent if she did not pay the note. Zelta's attorney testified he communicated with Zelta about the foreclosures within a week after he received the notices. Zelta also acknowledged that approximately two weeks prior to the sales, her daughter informed her about the upcoming sales. Thereafter, Zelta notified James of the sales by telephone.

The evidence further revealed that prior to the sale, Raymond also had actual knowledge that his real estate would be sold. His employer, defendant Freddie Dean Liebhart, saw notice of the sale of the Macon County property the day it first appeared in the Macon newspaper. The next day, he discussed with Raymond the impending sale. He and Raymond discussed the sales of the Linn and Macon County lands prior to the date of publication. Liebhart also testified that he was present with Raymond on several occasions when Raymond's attorney discussed the foreclosure sales.

The trustee held the foreclosure sale on the Linn and Macon County lands on November 14, 1977. Freddie Liebhart, Raymond, Zelta, and her attorney were present at the Linn County proceedings. Freddie Liebhart started to bid against the Bank on the Linn County property but stopped bidding at Zelta's request. She read to him a redemption notice and told Liebhart that if the Bank purchased the land, the Galls could redeem it. Raymond's attorney had prepared the notice of redemption, and Raymond, James, and Zelta Gall signed it on November 11, 1977. When Liebhart terminated his bidding, the Bank purchased the Linn County land for $123,000. Jerry Gall, Freddie Liebhart, Raymond, and Raymond's attorney attended the Macon County sale held later that day. Liebhart, the highest bidder, purchased the Macon County property for $51,000.

On December 28, 1977, the trustee executed and delivered the trustee's deeds to the Bank and to Freddie and Mary Liebhart upon receipt of their purchase prices. The Liebharts took possession of the Macon County property immediately thereafter and have remained in possession ever since.

The trustee cashed the checks received as payment for the properties purchased at the foreclosure sales and deposited them into an account from which the Bank made disbursement. The sales' proceeds were disbursed without objection from Zelta or her attorney and with Raymond's agreement given through his attorney.

The Bank first applied the proceeds to pay off its note and the expenses incident to the sales. Thereafter, it paid Raymond, through his attorney, the sum of $23,429.96. Raymond accepted the payment and never offered to return it to the bank. The Bank garnished Zelta's share of the proceeds in the amount of $23,429.96 for payment of a judgment rendered against Zelta on another note.

In April, 1978, Jerry and Raymond Gall and Freddie and Mary Liebhart contacted the Bank and informed it they wanted to purchase the Linn County land from the Bank. On April 18, 1978, these parties entered into a contract for sale of the Linn County real estate. The contract provided for a total purchase price of $145,000, with $29,000 payable in cash at the time of signing and the balance due upon delivery of the deed. The contract conferred upon the buyers the right to have the abstract of title certified to date and examined by an attorney of their choice. It further provided that defects noted by said examination would be corrected solely at the Buyer's expense, but that if a defect in title existed that could not be corrected, the contract would be null and void as to that part of the real estate. The agreement also provided that if the Bank performed its part of the contract or tendered performance, and the buyers failed to perform their part, the Bank would retain the $29,000 down payment as liquidated damages.

Jerry Gall retained an attorney to examine the abstract and to render an opinion thereon. The attorney questioned the marketability of the Bank's title obtained by virtue of the trustee's sale because the abstracting failed to show that the trustee complied with the requirements of Section 443.325, RSMo 19...