Speer v. Home Bank
| Decision Date | 11 November 1918 |
| Docket Number | No. 12790.,12790. |
| Citation | 200 Mo. App. 269,206 S.W. 405 |
| Parties | SPEER v. HOME BANK OF FOREST CITY et al. |
| Court | Missouri Court of Appeals |
Appeal from Circuit Court, Holt County; Arch B. Davis, Special Judge.
Action by John Speer against the Home Bank of Forest City and others. From decree rendered, plaintiff appeals. Reversed and remanded, with directions.
See, also, 199 S. W. 139.
Frank Petree, of Oregon, Mo., and Kennish & Smith, of Kansas City, for appellant. R. B. Bridgeman and S. F. O'Fallon, both of Oregon, Mo., for respondent Home Bank of Forest City, E. E. Richards, of Oregon, Mo., and H. B. Williams, of Craig, for respondents Graham.
Plaintiff and the defendant Home Bank of Forest City were each creditors of the defendant Martin Graham; their respective debts being secured by the same deed of trust on his real estate, plaintiff's lien, however, being the junior of the two. The bank, in addition to its lien, also held another security for its debt in the shape of a chattel mortgage on Graham's personalty. It was about to foreclose its lien on the real estate when plaintiff, to protect his junior lien, notified the bank of the situation and offered to purchase its note in full, and deposited in the bank sufficient money for that purpose, together with a check to pay everything due thereon. The cashier and president of the bank were willing to sell plaintiff the note, but when authority of the directors was sought, as the statute requires, they refused to sell the note to plaintiff unless he would agree to a release of the chattel mortgage, a condition to which he would not submit. He then served written notice upon the bank, renewing his offer to purchase the note in order to protect his junior and only security, and requesting the bank, in case it refused to sell him its note, to first foreclose its lien on the personalty. The bank refused to do either, and was about to foreclose the deed of trust when plaintiff brought this suit in equity to enjoin the bank from proceeding until it had first foreclosed the chattel mortgage, or to compel the bank to transfer its note to plaintiff upon payment of the amount thereof. Graham, his wife, who joined him in the execution of the notes and deed of trust, and Richards, the trustee therein, were also made parties defendant, the last two having no other interest in the suit.
The bank and Graham filed separate answers. Graham included in his a cross-bill, praying special and affirmative relief, which will be hereinafter mentioned. The chancellor found against Graham on his cross-bill, but on the issues raised by the petition, found that plaintiff was not entitled to relief and dismissed his bill. Plaintiff appealed from this decree, but Graham failed to perfect any appeal from the denial of the affirmative relief he sought in his cross-bill. Plaintiff's appeal was taken to the Supreme Court, but, as the title to real estate was not involved in the jurisdictional sense, that court transferred the case to this court. Speer v. Home Bank of Forest City, 199 S. W. 139, it being there entitled Speer v. Graham et al.
The controversy grew out of the following facts: February 21, 1913, Speer sold Graham 120 acres of land in Holt county, Mo., upon a consideration placed at $18,000. There was on the farm an incumbrance of $8,000 held by one Cook. Graham assumed and agreed to pay this as a part of the purchase price, and for the remainder thereof he executed to Speer three notes, one for $1,000 at 8 per cent., due in one year, and two for $2,400 each at 7 per cent, due in six and seven years, respectively, and also conveyed to Speer a tract of Texas land.
The above-mentioned three notes were secured by a second deed of trust on the Holt county land, and, in order that the $1,000 note should be the same as cash as originally agreed upon, Graham, as additional security for it, gave to Speer a chattel mortgage on certain personalty. The next day, Speer, in order to get cash as he had originally contracted for, assigned the $1,000 note to the defendant Home Bank without recourse. This made the bank and plaintiff creditors of Graham, as at the outset hereinabove stated; that is to say: The bank held as security for its $1,000 note a chattel mortgage and also a lien on the real estate, while plaintiff held as security for his two notes of $2,400 each merely a lien on the real estate, and that inferior to the bank's lien.
Graham went into possession, farmed the land for a season, and made certain improvements. Thereafter he, shortly before any of the three notes given to Speer were due, conveyed the land to one Simerly; who assumed and agreed to pay the entire indebtedness cm it, aggregating $13,800. Simerly, however, never took possession nor made any serious effort to do so.
Nothing was paid on any of the notes against the land. When the $1,000 note became due, the $8,000 note, with a year's interest at 7 per cent, the $1,000 note, with a year's interest at 8 per cent., the two notes for $2,400 each, with 6 per cent interest for a year, and the taxes for 913 were all due and unpaid.
Thereupon, in May, 1914, the bank advertised the land for sale under the deed of trust. On the day and at the place of sale the trustee, in publicly reading the notice, discovered an error in giving the page of the record wherein the trust deed was recorded. The effect of this upon the validity of the sale was publicly discussed before the assembled crowd, some holding the sale would be good and others that it would not. Finally the trustee went on with the sale, and Speer, the plaintiff, bid the land in at $1,200. By this time, however, tie trustee was doubtful of the validity of the sale, and, thinking that he should not proceed further under such circumstances, refused to make a deed. Speer was not called upon to pay, nor did he pay or offer to pay, his bid. Graham and Simerly were both present at the sale, and knew of the discussion over whether the error in the page would invalidate the sale. No objection or protest was made by any one at the time over the sale or the failure to complete the foreclosure.
Thereupon, the bank being about to again advertise the land under the deed of trust, Speer, who in the meantime had sought legal advice and had learned that the legal effect of such foreclosure would be to release the chattel mortgage, unavailingly sought to buy the note of the bank as heretofore stated; and then brought this suit.
It appears from the record, and beyond dispute that "Graham and Simerly are both insolvent. The answer of the bank also admits that the land is not sufficient to pay the liens against it.
There was evidence that, at the time plaintiff was trying to get the bank to sell its note to him, or to foreclose the chattel mortgage first, Graham was insisting that it should do neither, but that the trustee's sale to Speer on a bid of $1,200 was valid, and that said amount was due thereon from him to the bank, whereby the $1,000 note was paid and the chattel mortgage discharged. The bank made no protest over the abandonment of the first foreclosure proceedings, nor had it ever in any way treated or relied on it as valid. In its answer it averred that Graham was making such claim. Graham, in his cross bill, set up the validity of the sale as a foreclosure, and that by reason of the sale the $1,000 note was extinguished and the personalty discharged from the lien of the chattel mortgage; and he prayed that the trustee be required to make a deed to Speer, and that the latter be compelled to pay the amount of his bid, and that the lien of the chattel mortgage be removed from Graham's personalty.
As hereinbefore stated, however, the chancellor found against Graham, and, refusing the affirmative relief he sought, dismissed his cross-bill. As the latter did not perfect his right to have any alleged errors as to him reviewed, the feature of affirmative relief sought by him is no longer in the case.
If, however, such attempted foreclosure and the bid made thereunder be considered as a circumstance bearing upon whether plaintiff is, in equity, entitled to the relief he seeks, there is this to be said: As stated by the Supreme Court, the error in giving the record page "standing alone would not have affected the validity of the sale." But that is not all there was. In the midst of the preliminaries, and when the sale was ready to proceed, a question as to its validity was raised and discussed in the presence of those assembled, among whom perchance were buyers who otherwise might have bid all the land was worth. As it was, Speer, who held the other two notes, bid it in at a much-reduced price. This left not only Graham liable on the balance of the notes, but also Simerly liable on everything he had assumed. Now, no one treated the foreclosure as complete. All parties abandoned it and treated it as abortive, the trustee in good faith thinking he should not proceed further with that sale under those circumstances, and the purchaser acquiescing therein. It cannot be said the trustee was not strictly within his legal rights, since a trustee is in duty bound to exercise a just and fair discretion in supervising the sale and in protecting the rights of all concerned. Green Real Estate Co. v. St. Louis Mutual House Building Co. No. 3 et al., 196 Mo. 358, 93 S. W. 1111; Graham v. King, 50 Mo. 22, 24, 11...
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