Schwarz v. Kellogg

• Decision Date: 16 June 1922
• Docket Number: 22819
• Citation: 243 S.W. 179
• Parties: SCHWARZ et al. v. KELLOGG et al
• Court: Missouri Supreme Court

243 S.W. 179

SCHWARZ et al. v. KELLOGG et al

No. 22819

Supreme Court of Missouri

June 16, 1922

Appeal from Circuit Court, Jackson County; Clarence A. Burney and S A. Dew, Judges.

Affirmed.

SYLLABUS

Suit by John Schwarz and another against H. G. Kellogg and others. Judgment for defendants, and plaintiffs appeal. Affirmed.

David M. Proctor and E. M. Tipton, both of Kansas City, for appellants.

A. I. Beach, L. W. Thomason, P. E. Reeder, and Miller, Camack, Winger & Reeder, all of Kansas City, for respondents.

SMALL, C. RAGLAND, C., concurs. BROWN, C., absent. GRAVES, JAMES T. BLAIR, and ELDER, JJ., concur.

OPINION

SMALL, C. I.

Appeal from the circuit court of Jackson county. This is a suit in equity to set aside and redeem from a trustee's sale of certain real estate in Kansas City, the petition alleging that it was to be a friendly foreclosure and the property was sold by the trustee but not bid in for plaintiffs, the owners of the equity of redemption as previously agreed, through fraud or mistake on the part of the note holder and trustee that it was sold for an inadequate consideration to the defendants Kellogg and Smith, who bought knowledge of the agreement to have the property bid in for plaintiffs; that it was also sold without being subdivided by the trustee contrary to the law and duty of the trustee. The answer put the allegations of the petition in issue. The court rendered judgment for defendants, and plaintiffs duly appealed to this court.

The evidence showed that the property involved was a tract of land 125 feet wide north and south and 581 feet long east and west fronting on the east side of Broadway, between Seventy-Fourth and Seventy-Fifth streets in Kansas City, at the end of the Country Club car line. The other boundaries joined private property. On February 1, 1917, John and Jacob Schwarz, being the owners, executed a deed of trust on the property to defendant Bliss, as trustee, to secure to defendant Sumner Investment Company their note of that date for $ 3,000 due in five years from that date with interest payable semiannually, and, if principal or interest be not paid when due, the trustee could proceed to sell out the property to pay the debt and interest at public sale. Jacob Schwarz died on January 1, 1919, and Homer Reed was appointed and qualified as his administrator. Before the death of Jacob Schwarz, they contracted to sell or gave an option on the east half of the property with the dwelling house on it for $ 4,800 on certain terms and conditions to one Van Sant, who defaulted in his payments, left the country, and deserted his wife, leaving her in possession of the property. She refused to comply with the contract to purchase in any way. David M. Proctor had been attorney for both the Schwarzes. They owned some platted property adjoining the property in question on the south, a portion of which was sold, and Mr. Proctor was collecting the proceeds for the Schwarzes at end after the death of Jacob Schwarz. Reed, after his appointment as administrator, consulted Proctor as agent and attorney for John Schwarz with reference to clearing the property from the Van Sant claim. They endeavored to secure possession of the property and cancellation of the contract by negotiation, but were unable to do so. After the $ 3,000 note in question was made, it was purchased from the Sumner Investment Company by Mr. Frank Hagerman. The Sumner Investment Company was a subsidiary of the J. B. Welsh Real Estate Company, of which Mr. Haywood Hagerman, the son of Frank Hagerman, was vice president and one of the active managers. The trustee in the $ 3,000 deed of trust, Mr. Bliss, was treasurer and an employee of the Welsh Company and had his office next to that of Haywood Hagerman. Reed and Proctor in order to get rid of the Van Sant claim for the benefit of the Schwarzes concluded it could be done by having the property sold out by the trustee Bliss and bid in for the benefit of John Schwarz and the Jacob Schwarz estate, and to that end they approached Mr. Haywood Hagerman.

The substance of the Mr. Protor's testimony is that some time after the death of Jacob Schwarz, and prior to nine months thereafter, he told Mr. Haywood Hagerman the situation, and that the parties he represented wanted the property foreclosed in order to protect it, and therefore they would not pay the interest, but let it run for nine months after the death of Jacob Schwarz in order that there could be a foreclosure at the expiration of that time. He also notified Mr. Hagerman that if they got to the point where they, meaning Hagerman and the parties he represented, would have to foreclosure to let him know, and he would pay the interest and stop the sale. While this conversation was going on Mr. Bliss came in, but Mr. Proctor testified he could not say that Bliss understood or took part in the conversation.

Mr. Reed testified in substance that after he was appointed administrator and had talked with Proctor, he saw Haywood Flagerman and explained the condition of the property; that the interest and taxes were in default for two years, and that "we must have possession to protect our interests and his." Mr. Reed says, referring to Haywood Hagerman:

"He agreed that we might have the property conveyed to somebody as trustee who was satisfactory to him, who should make them back a deed of trust for $ 2,800 for one year at 8 per cent. *** He said he would go ahead with the foreclosure. *** I think he said he would have Mr. Wyler (in his office) tend to the note. *** Mr. Hagerman was to have $ 40, commissions for making the new loan outside of regular expenses. That was in September or October, 1919.

"Did you have any understanding with him as to who was to look after the buying of this property at the foreclosure? *** The conversation was based on the assumption of himself and myself that as a matter of course the beneficiaries of the note would buy in the property." (Objected to as a conclusion.) "Q. Now was the understanding to this effect, that if the Welsh Realty Company did bid in the property, they would convey it or take it? A. Yes, that wasn't talked in plain language exactly, but that was the understanding. Q. In other words, wasn't this the understanding, Mr. Reed, that if you or the interests that you represented succeeded in getting this property in the foreclosure sale, that then Mr. Hagerman would be willing to lend to make you a new loan of $ 2,800 on the property? A. Yes, in this way; the whole conversation was carried on the theory that the Welsh Realty Company as a matter of course, representing the holder of the note, would buy the property in to protect the mortgagee. *** Q. And neither of you at the time considered the possibility that some third person might come in and buy the property at the sale? A. Well, I didn't. That is, I had been to so many sales lately, and the property was outside, and I think I was lulled into unreasonable security, and I wasn't on my gaurd, and I got there and was taken off my feet. (Witness here referred to the time the bidding took place at the trustee's sale.) Q. You never talked with Mr. Bliss about the matter at all, did you? A. No, I didn't happen to know that he was trustee and never talked to him about it; the whole conversation was with Mr. Hagerman. *** Q. There was no understanding between you people and Mr. Hagerman, or any one representing the Welsh Realty & Loan Company, or the holder of the note, about withholding the payment of the interest? A. No, no; that was a sort of--just our own inclination in the matter. Q. At the time the interest for the six months' period became in arrears, you had no understanding with Mr. Hagerman at that time? A. No, sir. Q. And they never agreed that they would protect you in any way from outside bidders? A. Oh, no. Q. Or that they would see to it that the property wasn't sold to an outside bidder? A. No, sir."

The witness further said that no one was ever agreed on between him and Mr. Hagerman or the Welsh Company to hold the title that after his conversation with Haywood Hagerman the latter part of September or in October, 1919, not seeing any notice published of the foreclosure, he called up Mr. Wyler of the Welsh Company, and called his attention to the fact that the foreclosure had not been started, and Wyler said he would attend to it and shortly thereafter the publication appeared. While the publication was running and before the day of sale, he called at the Welsh office several times to ascertain if any outside bidders had made inquiry about the sale, and was informed that no one had made inquiry. Upon the day of sale, Mr. Reed was in attendance. Mr. Wyler, the trustee Bliss, and the defendant Smith, were also there. Did not remember whether there was any others. Mr. Wyler first bid $ 3,335 and some cents. "Mr. Smith immediately raised the bid to $ 3,400 of $ 3,500. I was a little taken off my feet, and I said 'Are you bidding for the heirs or anybody interested in the estate?' He said, 'No, I am bidding for myself.' Well, I had to think fast, and I knew I was powerless to stop the sale, and I bid $ 3,600. The next bid was $ 3,900. Of course, for money I was relying on Mr. Hagerman's proposition to loan $ 2,800 and Mr. Proctor's ability to scratch the balance out of Broadway Plaza, and it went to $ 4,000, and I didn't raise the bid, and it was struck off to him (defendant Smith) for $ 4,000." He knew that any outsider had a right to bid on the property. He did not go on bidding and outbid him (Smith) "just because I was a little stupid." Mr. Reed gave no notice at the trustee's sale to defendant Smith, or any one else; that the foreclosure was friendly and that the property was being sold and was to be bid in for the...