Mills v. 1st Nat. Bank of Mexico, 45836

• Decision Date: 18 October 1983
• Docket Number: No. 45836,45836
• Parties: Bruce L. MILLS, Appellant, v. 1ST NATIONAL BANK OF MEXICO and Brad Brett, Respondents. Louis NORDEN, et al., v. Bruce L. MILLS, Appellant.
• Court: Missouri Court of Appeals

Page 808

661 S.W.2d 808

Bruce L. MILLS, Appellant, v. 1ST NATIONAL BANK OF MEXICO and Brad Brett, Respondents.

Louis NORDEN, et al., v. Bruce L. MILLS, Appellant.

No. 45836.

Missouri Court of Appeals,

Eastern District,

Division Five.

Oct. 18, 1983.

Motion for Rehearing or Transfer

Denied Dec. 20, 1983.

Application to Transfer Denied

Jan. 17, 1984.

Joseph Delong, Jefferson City, for appellant.

Bradford A. Brett, Mexico, for respondents.

STEWART, Presiding Judge.

This appeal involves two separate suits that were consolidated and tried together at the trial court level. The first suit was brought by Bruce L. Mills (Mills) against First National Bank of Mexico (Bank), and Bradford Brett, trustee, to set aside a foreclosure sale of real estate owned by Mills and his former wife. A second count sought damages including damages for loss of farm profits by reason of deprivation of Mills' right to possession of the farm. The second suit was one brought by Louis Norden and Helen M. Norden (Nordens), who We review the facts keeping in mind the principles that the credibility of witnesses and the weight to be given their testimony is for the trial court. Central Missouri Foods, Inc. v. General Grocer Co., 538 S.W.2d 63, 64 (Mo.App.1976).

purchased the Mills' property at the foreclosure sale, to recover rent and possession of the property pursuant to the terms of a rental agreement with Mills. The judgment in this court tried case upheld the foreclosure sale and found that the Nordens were entitled to possession of the premises and to rent at the rate of $150.00 per month from March 28, 1981.

The property which is the subject matter of this appeal consists of a 49 acre farm located in Monroe County, Missouri, purchased by appellant in 1973 and improved in 1974 by the construction of a log house. To finance the home, appellant and his wife, Anna C. Mills, obtained a loan from respondent Bank in the approximate amount of $32,000, and executed a note with interest at the rate of 8% per annum providing for annual payments of $3,738.55, payable on December 20th of each subsequent year. The note was to run for 15 years. They also executed a deed of trust to secure the note.

The promissory note contained no forfeiture or acceleration clause and set forth no procedures for foreclosure and made no reference to a deed of trust. The deed of trust securing the $32,000 promissory note provided for acceleration of the note for default in the annual payment. The deed of trust also provided for forfeiture for failure to pay taxes on the property, or upon failure to pay expenses for insurance on the premises. Mills made his annual payments from 1975 through 1978. Bank permitted some of these payments to be made after the December 20th date pursuant to extension agreements executed by Mills and Bank.

In December 1979 Mills attempted to tender his annual payment, but Bank refused to accept it because appellant was $600 in arrears. On January 7, 1980, Mills signed a second promissory note to Bank which consolidated other loans he had with Bank and secured said note by a second deed of trust on his real estate. After several months of negotiations, Bank finally accepted Mills' December 1979 payment along with the $600 owed on October 11, 1980.

In October 1980, Mills and his wife began dissolution of marriage proceedings and Mrs. Mills vacated the premises. Mills' attorney in the dissolution proceeding advised appellant not to make his December 20, 1980, payment to Bank and Mills followed that advice. ¹ On or about January 5 or January 9, 1981, Bank turned over both of appellant's notes to the trustee in the deed of trust to begin collection and foreclosure proceedings. An attorney associated with the trustee's law firm sent demand letters dated January 9, 1981, to Anna C. Mills and to Mills. The letter to Mills was sent by certified mail. It was returned by the post office unclaimed, after the post office had sent three notices of the presence of the letter to Mills. Mills learned of respondent's intention to initiate foreclosure proceedings on January 26, 1981, when Anna C. Mills informed him of the contents of the demand letter which she had received. The letter advised Mills and his wife that they were delinquent on both of their notes and that the property would be sold at a foreclosure sale unless the full unpaid principal and interest was paid.

On January 27, 1981, Mills presented his personal check in the sum of $3,738.55 to Mr. Gardner, an employee of Bank. Mr. Gardner informed Mills that the bank had incurred expenses in excess of $500 as a result of the collection proceedings; that real estate taxes were two years past due; that he was not tendering the proper amount of interest and for those reasons he would not accept the tender. At trial Mr. Gardner explained that he considered the amount of interest due to be approximately $200. This sum was the amount of interest on the unpaid principal of the loan. Mills' In early February Mills tendered a cashier's check in the same amount as previously tendered. This tender was refused by Mr. Gardner and by the trustee.

insurance on the property had also lapsed, although the bank apparently was not aware of that at the time. No objection was made to the fact that tender was made in the form of a personal check. After Mills left Gardner he went to the trustee and made the same tender. The trustee informed Mills that he would not accept the tender if Bank would not accept the tender. The trustee did not tell him the exact amount that would be necessary to effect redemption before foreclosure.

The foreclosure sale was held on February 23, 1981. The Nordens purchased the property for the sum of $47,600.

The purchase price of the property was in excess of the amount appellant owed on the promissory notes, and the trustee divided the excess amount after taxes and expenses were paid between appellant and Anna C. Mills. Mrs. Mills signed a release of her right to sue to set aside the foreclosure sale and was not made a party to Mills' lawsuit. Mills' portion of the proceeds from the sale was in the form of a check made payable to Mills and his former attorney. Mills testified that he was willing to return the uncashed check to respondent Bank.

In upholding the foreclosure sale, the trial court issued findings of fact as to the controlling issues in the case. The court suggested that the promissory note should be read together with the acceleration clause contained in the deed of trust, but it indicated this finding was unnecessary to the question of whether the bank wrongfully refused the plaintiff's tender. It was found that the defendant would have accepted a tender of the total deficiencies even though it had a legal right to demand payment in full.

Mills contends that because the note did not contain an acceleration clause, Bank could not opt to accelerate the note on the basis of the acceleration clause in the deed of trust. Therefore Bank in demanding full payment of the note in order to stop the foreclosure waived tender. Alternatively Mills contends that if Bank would have accepted less than the full amount of the note it waived tender by demanding payment of an amount in excess of that necessary to preclude foreclosure.

Bank takes the firm position that "the acceleration clause in the deed of trust had been exercised prior to [Mills'] partial tender."

The general principles applicable to this case have recently been deftly reiterated. A deed of trust pledges land to secure a debt. The conditions of performance are according to the integral terms of the note and of the deed of trust. We look to the note for the description of the debt and repayment or the conditions of default. The deed of trust creates a lien to secure repayment in accordance with the terms of the note. The note is the basic contract; the deed of trust is collateral to the basic contract. Tipton v. Holt, 610 S.W.2d 659, 662 (Mo.App.1981).

In keeping with the concept that the note sets the terms for repayment of the loan, it has been held that where a deed of trust contains an acceleration clause making the whole indebtedness due upon the failure to pay an installment of a note, but the note does not provide for acceleration upon default of a payment, the provisions of the note as to payment control. Leone v. Bear, 241 S.W.2d 1008, 1013 (Mo.1951). The rationale being that "the deed of trust is collateral to the debt affecting only the security, and the payment of what is due does not endanger or lessen the security." Id. at 1014.

We feel that the terms of the note control for yet another reason. The deed of trust is required to set out the terms of the obligation that it secures. In this case the printed form adds the acceleration clause to the note. In doing so it does not truly set out the terms of the note. Because it misstates the terms of the note, we ignore the extraneous terms of the deed of trust.

In this case the note did not provide for acceleration for failure to make timely payment of installments. When the note was turned over for payment the attorney for Bank wrote Mills and his wife. The letter made the demand that they "immediately pay, in full, the unpaid principal...