Obernay v. Chamberlin

• Decision Date: 11 March 1974
• Docket Number: No. 55812,55812
• Citation: 506 S.W.2d 446
• Parties: Ernest A. OBERNAY and Wilma W. Obernay, his wife, Respondents, v. L. M. CHAMBERLIN, Defendant, and John B. Dale and Mortgage Syndicate, Inc., a corporation, Appellants.
• Court: Missouri Supreme Court

Page 446

506 S.W.2d 446

Ernest A. OBERNAY and Wilma W. Obernay, his wife, Respondents, v. L. M. CHAMBERLIN, Defendant, and John B. Dale and Mortgage Syndicate, Inc., a corporation, Appellants.

No. 55812.

Supreme Court of Missouri, En Banc.

March 11, 1974.

Harold G. Johnson, St. Ann, for respondents.

Barksdale, Abbott, Adams & Chorlins, Jackson F. Adams, St. Louis, for defendant-appellants.

CONLEY, Special Judge.

This is an appeal from a decree granting a permanent injunction enjoining appellants from initiating foreclosure proceedings, declaring appellants' mortgage void, cancelling respondents' bond, and assessing costs against appellants.

The title to real estate being directly involved in this controversy, and this appeal pending in this court prior to January 1, 1972, the effective date of new Article V of the Constitution, we retain jurisdiction to make final disposition of the case pursuant to then Article 5, Section 3 of the Missouri Constitution.

The real estate which is the subject of this controversy is Lot 27 of Lynwood, identified as 132 St. John Avenue, Webster Groves, Missouri. This property was purchased by James W. and W. Lorraine Krewson by warranty deed dated April 9, 1954. In December of 1956, the Krewsons, upon learning that James W. Krewson was being transferred by his employer to New Jersey, 'sold' this property to Mrs. Krewson's mother and father, Ernest A. Obernay and his wife, the respondents. The Obernays paid $3,500 outright and agreed to assume a mortgage of $9,000. This mortgage was paid in full by the Obernays sometime prior to January, 1965. They took possession of the property, kept the house in good repair, paid the property taxes, and held the insurance on the property in their own names. There was no warranty deed executed or other written instrument conveying title to the real estate. The tax bills as late as 1964, still listed the property in the name of James W. Krewson and W. Lorraine Krewson.

The defendant-appellant, John B. Dale, in 1964 and 1965, was Executive Vice-President of defendant-appellant, Mortgage Syndicate, Inc., and in August of 1964, Dale, acting on behalf of Mortgage Syndicate, Inc., made a loan to James W. Krewson and his wife and to a Fred Chapman and his wife, secured by a deed of trust on property not involved in this controversy. That loan was paid in accordance with its terms and was, in fact, paid in advance. No representations were made to Dale or Mortgage Syndicate, Inc., by Mr. or Mrs. Krewson in connection with that loan which proved to be untrue. A financial statement was provided at that time which showed as an asset of the Krewsons rental property identified as 132 St. John Avenue. In January, 1965, James W. Krewson came to Dale and Mortgage Syndicate, Inc., seeking a loan for which he offered the property located at 132 St. John Avenue as security. Krewson supplied a certificate from Title Insurance Corporation, dated April 15, 1954, showing title to said property in Krewson and his wife subject to a deed of trust dated April 9, 1954, and produced a note which had been cancelled, and a deed of trust for release. Thereafter, Krewson and his wife executed a note for $8,700, secured by a deed of trust on the property in question and dated January 14, 1965, to John B. Dale, Trustee, for L. M. Chamberlin, who endorsed the note and delivered it to Mortgage Syndicate, Inc. Payments were made on this note up to January, 1966, when the note became due; and it was at that time extended for a period of one year to January 15, 1967. The payments were then made on the extended note to January 19, 1967, thereafter no further payments were made. In May of 1967, foreclosure proceedings were commenced by John Dale as Trustee.

This suit was filed May 19, 1967, and trial was held and a decree entered on May 3, 1970, permanently enjoining the defendants, and each of them, from initiating foreclosure proceedings, declaring defendant's, Mortgage Syndicate, Inc., deed of trust void, cancelling plaintiffs' bond, and assessing costs against the defendants.

Although repeated requests were made by the Obernays for a warranty deed from their son-in-law and daughter, no such warranty deed was forthcoming until October 14, 1965, when the Krewsons executed a warranty deed which was recorded on October 18, 1965, some nine months after the Krewsons had executed a deed of trust on the property.

The Obernays' daughter, who was divorced from James W. Krewson in January, 1968, identified her signature and that of her former husband on the note and deed of trust dated January 14, 1965, and testified that 'she signed a lot of papers for her husband, but wasn't familiar with what she signed,' and didn't know until August of 1966 that she had executed a deed of trust on this property. Mrs. Obernay testified that she and her husband had lived on the property since January, 1957, that they had carried insurance on the property, as well as making the payments on the 1954 deed of trust, and paying the taxes. She, likewise, testified that both she and her husband were employed during January, 1965, and were not present on the premises during the normal daytime hours. Mrs. Obernay also testified that although she had repeatedly requested a deed from her son-in-law and daughter, all to no avail, she had, in fact, turned over the cancelled note and deed of trust to her son-in-law and that this occurred sometime prior to January, 1965.

John B. Dale testified that in January of 1965, at the time application for the loan was made and the Certificate of Title Insurance was produced by Krewson, as well as the cancelled note and deed of trust, he had made the customary inquiry of Krewson as to what use the property was being put. He testified that Krewson informed him that the house was occupied by his wife's parents as tenants and that they were retired or semi-retired, and that they paid a nominal rental for the property. Dale testified that he made a casual inspection of the property by viewing same from the outside, but that no attempt was made to confer with the Obernays at the time of the inspection, which occurred during working hours in January, 1965.

The appellants appeal to this court contending that the trial court erred because:

1. The Obernays failed to comply with the recording statutes,

2. That the Obernays failed to prove that appellants had notice of respondents' unrecorded deed,

3. That respondents failed to prove any facts or circumstances which would cause appellants to look beyond the record title,

4. That the trial court decree found that the appellant, Dale, was advised by Krewson that respondents were residing on the property and had done so for a number of years,

5. That the decree found that the appellants had the duty to determine what interest respondents had in the property,

6. That the decree of the trial court found the case of Woodbury v. Connecticut Mutual Life Insurance Co. et al., 350 Mo. 527, 166 S.W.2d 552 (1942) not to be in point,

7. Appellants also claim that there was further error in the respondents being guilty of laches and in respondents' delay in obtaining and recording the deed combined with delivery of the cancelled $9,000 note and deed of trust which enabled Krewson to commit fraud,

8. Finally, that in equity the appellate court will defer to the trial court's findings where there is conflicting oral testimony regarding credibility of witnesses, but that the appellate court will determine de novo and weigh competent evidence introduced upon factual issues.

From a review of the facts set forth above, there is no conflicting oral testimony involving determination of the credibility of the witnesses, but we will determine the cause de novo, weigh the competent evidence introduced upon the factual issues, and reach conclusions based upon that evidence. Rutherford v. Rutherford, 444 S.W.2d 439 (Mo.1969).

There are three common recording acts throughout the United States. These statutes may be distinguished as follows:

1. Those giving priority to the bona fide purchaser or mortgagee of realty who first records his deed, or the race type statute,

2. Those giving priority to a subsequent bona fide purchaser unless he has notice of a prior unrecorded instrument, and

3. Those protecting a subsequent bona fide purchaser unless he has actual notice of a prior unrecorded instrument.

It is the third type statute which is present in Missouri, which requires that the subsequent purchaser have no actual notice of the prior unrecorded instrument for such purchaser to take free of the prior instrument. In the instant case there is no prior unrecorded instrument, since the note and deed of trust in question were executed in January, 1965, and the warranty deed from the Krewsons to the Obernays was not executed until October, 1965, some seven months later. Here then we are not confronted with an unrecorded instrument, but in fact, no instrument at all except the verbal agreement between the Krewsons and the Obernays in 1956, that in exchange for the payment of $3,500 and assumption of an earlier mortgage that the property would be conveyed to the Obernays.

Under these facts and circumstances, we are called upon to construe the Missouri Recording Statute, Section 442.400, RSMo 1969, and to determine, as urged by appellants, whether the Obernays failed to comply with the recording statute and whether they have in fact proven that appellants had notice of the Obernays not only unrecorded deed, but their interest, if any, in the property in question, and whether under the evidence the trial court could properly find that the Obernays proved facts or circumstances which would cause the appellants to look beyond the record title.

Section 442.380, RSMo 1969, V.A.M.S., provides that instruments in writing affecting real estate shall be recorded. Section 442.400, RSMo 1969, V.A.M.S., provides for a penalty...