Sabine v. Leonard

• Decision Date: 09 March 1959
• Docket Number: No. 46654,46654
• Citation: 322 S.W.2d 831
• Parties: Margaret V. SABINE, Respondent, v. O. W. LEONARD et al., Appellants.
• Court: Missouri Supreme Court

Page 831

322 S.W.2d 831

Margaret V. SABINE, Respondent, v. O. W. LEONARD et al., Appellants.

No. 46654.

Supreme Court of Missouri, En Banc.

March 9, 1959.

Walter R. James, Harry Howard, James S. Simrall, Jr., North Kansas City, for appellants.

Lucian Lane, Woodruff & Lane, Kansas City, for respondent.

HOLMAN, Commissioner.

In this action plaintiff sought a judgment on a promissory note signed by defendants O. W. Leonard and Lena Leonard, husband and wife, and a decree of foreclosure of a deed of trust given to secure said note. Also made defendants are certain subsequent purchasers and mortgagees of portions of the land described in the deed of trust securing plaintiff's note. A trial resulted in a judgment against the Leonards upon the note in the sum of $7,617.98 and a decree to the effect that the deed of trust securing said note is a first and valid lien on all of the premises therein described, and ordering foreclosure of said deed of trust. All of the defendants have appealed. Since the Leonards contend that the amount of the judgment should have been only $52.50, it is apparent that the amount in dispute exceeds the sum of $7,500 and hence we have appellate jurisdiction. Article V, Section 3, Constitution of Missouri 1945, V.A.M.S.

On February 5, 1925, O. W. and Lena Leonard bought a 4-acre tract of land described as the 'South Half of Lot 25, and all of Lot 26, in Midland Heights Annex, a subdivision in Clay County, Missouri.' The Leonards, on February 24, 1925, executed a note payable to Harry colvin for $3,000 which was secured by a deed of trust on the west half of the described land. On March 1, 1925, the Leonards executed their promissory note payable to Henry P. Bowman for $2,627.50, secured by a purchase money deed of trust on the whole tract heretofore described. This is the note and deed of trust upon which plaintiff bases her claim for relief herein. The deed of trust recites that 'This deed of trust is second and subject to a first deed of trust for $3,000 on the West Half of above described property.' The note to Bowman thereafter became an asset of a trust estate and subsequently was assigned to plaintiff, the beneficiary of the trust. The Leonards built a house upon the west half of the land in question, but the east half has never been improved.

The note sued upon bore 6% interest and was payable in installments of $20 per month except for the months of March and September of each year. The note shows that on October 3, 1925, a payment of $120 was made which was credited upon interest, but no other payments have been made thereon.

The first deed of trust was foreclosed and the property sold thereunder on April 3, 1936, and was purchased by Mary B. and Charles L. Cookson for $1,500. Notwithstanding the foreclosure, the Leonards continued to occupy the premises as their home and, in fact, have occupied it without interruption from the time the house was constructed until the time of trial herein.

On July 12, 1937, Mrs. Cookson (the widow of Charles L. Cookson) conveyed the property she had acquired at the foreclosure sale to Alexander F. and Genevieve Himmelberg who were the son-in-law and daughter of the Leonards. The Himmelbergs paid nothing to Mrs. Cookson but gave a note for $3,500, secured by deed of trust upon said premises. Before taking title, Mr. Himmelberg made arrangements with Mr. Leonard whereby Leonard was to continue to occupy the premises and pay rent in the sum of $35 per month, directly to Mrs. Cookson, upon the Himmelberg note. The Himmelbergs made no payments on the note and had no knowledge of the number of payments the Leonards made thereon. However, on June 18, 1941, Mrs. Cookson brought suit to foreclose the Himmelberg deed of trust and on December 9, 1941, obtained a judgment of foreclosure.

Mr. Everett Meyer, who was Mrs. Cookson's attorney, was also Mr. Leonard's attorney. On January 19, 1942, he represented Mr. Leonard in filing a petition in bankruptcy and a few days thereafter Mr. Leonard was adjudged a bankrupt. The note herein sued upon, however, was not scheduled in the bankruptcy proceedings and therefore is not affected thereby. On February 11, 1942, Mr. Meyer obtained a deed from the Himmelbergs conveying the property in question to Mr. Leonard. On the following May 15, the Leonards executed a new note and deed of trust to Mrs. Cookson for $3,000, and also a note and deed of trust to Everett Meyer for $700. These deeds of trust were recorded and the judgment of foreclosure against the Himmelbergs was satisfied of record without any payment ever having been made thereon by the Himmelbergs. As noted, the deed from the Himmelbergs was to Mr. Leonard alone. In September 1945, he and his wife made a deed to Bessie Utz who immediately reconveyed the property to Leonard and his wife so that they thereafter held title as tenants by the entireties. At about that same time the Leonards borowed $2,000 from the Sentinel Federal Savings & Loan Association upon the security of said land, and the deeds of trust to Mrs. Cookson and to Mr. Meyer were released of record. Thereafter, the Leonards made various conveyances to portions of said tract and most of the purchasers thereof constructed improvements thereon and borrowed substantial sums, upon the security of said land, from the Sentinel Federal Savings & Loan Association, or the Metropolitan Savings & Loan Association.

The facts heretofore stated appear in certain findings of fact given by the trial court. The court also filed certain conclusions of law which included the following: 'Notwithstanding the foreclosure on April 3, 1936 of the first deed of trust dated February 25, 1925 by the trustee herein because of nonpayment by defendants Leonard of their promissory note secured thereby and of the sale of the property covered thereby * * * to Mary B. Cookson and Charles L. Cookson the subsequent acquisition of fee simple title to said real estate by defendant O. W. Leonard on February 11, 1942, inured to the benefit of owner of the promissory note sued on herein and re-established the lien of the deed of trust securing it. Under the Missouri law and particularly under the provisions of RSMo 1949, Section 442.430 [V.A.M.S.], the title so acquired by the makers of the note and mortgage sued on passed to and inured to the benefit of the owner of the note and deed of trust sued on herein without regard to whether the subsequent acquisition of title to the land by the maker of the note and deed of trust is deemed to be fraudulent.' The court further found and declared that the Leonards, in reacquiring the property, used the Himmelbergs 'as straw parties or conduits of title * * * because the financial condition of defendant O. W. Leonard, as shown by his bankruptcy, would not permit him to acquire title in his own name, for the purpose of attempting to avoid or defeat or destroy the security of the deed of trust sued on herein and to reacquire the land free of the lien thereof and under the evidence herein the defendants Leonard in so doing were guilty of fraud and because thereof, in equity, the title so acquired inured to the benefit of the deed of trust sued on herein and re-established the lien thereof.'

As appears from the facts stated the deed of trust sued on has been a first lien upon the unimproved land constituting the east half of the land originally purchased by the Leonards since the dates of its execution. Upon this appeal the primary issue for our determination relates to the lien thereof upon the west half of said land upon which there was a prior deed of trust. Defendants contend that there was no evidence of fraud in the foreclosure of the first deed of trust, and, since the second deed of trust expressly recited that it was subject to the first, the foreclosure of the first deed of trust extinguished the lien of the second, and it was not reinstated when the property was later conveyed to the mortgagors. Plaintiff, however, contends that the lien of her second deed of trust was revived and reinstated when the mortgagors, who had personally executed both the first and second deeds of trust (and the notes they secured), reacquired the title after the foreclosure of the first deed of trust; that said after-acquired title inured to the benefit of the second mortgagee even if no fraud had been shown.

No Missouri case has been cited in which this precise factual situation was presented. Defendants rely upon Plum v. Studebaker Bros. Mfg. Co., 89 Mo. 162, 1 S.W. 217, and Greene v. Spitzer, 343 Mo. 751, 123 S.W.2d 57. In each of those cases it was held that the lien of the second deed of trust was not reinstated when the mortgagor reacquired the property after foreclosure of the first trust deed. However, it would seem that those cases may perhaps be distinguished from the instant one because the second mortgagors therein were not under any obligation to pay the first mortgage debt. Note the following from the Plum case: 'Here Amanda Bettes [mortgagor] did not undertake to pay the debts secured by either of the deeds of trust. * * * She being a married woman, and the property being her general estate, she was not liable on any covenants contained in the second deed of trust with respect to the title to the property. * * * Atherton [purchaser at foreclosure of first deed of trust] got a perfect title as against the defendants, and it was entirely competent for Amanda Bettes to acquire that title, for she owed no duty inconsistent therewith.' 1 S.W. loc. cit. 219. And, in the Greene case, the following appears: 'We think the facts in the case at bar come within the rule announced in the case of Plum v. Studebaker Bros. Mfg. Co., supra. In the case at bar, the real estate was deeded to the appellant, subject to the first deed of trust; in fact, the agreed statement of facts shows that the 'grantees [the appellant] do not assume or agree to pay said encumbrance.' Thus, we see the debt secured...