Stark v. Love

• Decision Date: 19 November 1907
• Citation: 128 Mo. App. 24,106 S.W. 87
• Parties: STARK v. LOVE et al.
• Court: Missouri Court of Appeals

106 S.W. 87

128 Mo. A. 24

STARK v. LOVE et al.

St. Louis Court of Appeals. Missouri.

November 19, 1907.

Rehearing Denied December 17, 1907.

1. MORTGAGE—FORECLOSURE—APPLICATION OF SURPLUS TO PRIOR INCUMBRANCE.

Where there are three deeds of trust on property, the trustee of the intermediate deed upon making a sale thereunder cannot apply the surplus to satisfy, or as a credit on, the prior deed of trust in the absence of an agreement with the purchaser and parties in interest that such application should be made, but it should be applied to the junior incumbrance.

2. SAME.

Where the trustee of an intermediate trust deed purchases a prior incumbrance, and buys in the property at his sale under the intermediate trust deed, he being seller, purchaser, and principal party in interest cannot make an agreement with himself to apply the surplus as a credit on the prior incumbrance.

3. SAME—SALE—PURCHASE BY TRUSTEE— FRAUD.

A trustee of mortgaged property cannot become a purchaser of the premises at his own sale directly or indirectly unless the purchase is authorized or consented to by the parties in interest, and such an unauthorized sale is fraudulent and may be set aside, although the trustee acted in good faith.

4. SAME—RIGHT OF TRUSTEE TO COMMISSION FOR SALE.

Where a trustee of mortgaged property under an intermediate trust deed purchases a prior incumbrance, and buys in the property for himself at his sale under the intermediate trust deed, he is not entitled to a commission as trustee for making the sale.

5. SAME—RIGHTS OF JUNIOR INCUMBRANCER.

Where a junior incumbrancer was not a party to a sale of the mortgaged premises by a trustee of a prior trust deed, which sale was illegal because the trustee purchased the property himself, he may treat the sale as valid and demand the surplus which the trustee had improperly applied as a credit on a prior incumbrance.

Appeal from St. Louis Circuit Court; Moses N. Sale and Matt Reynolds, Judges.

Action by Charles B. Stark against John

E. Love and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

Chas. B. Stark and Chester H. Krum, for appellant. T. J. Rowe and C. H. Fauntleron, for respondents.

BLAND, P. J.

There were three deeds of trust on a lot of ground in block No. 3,741, city of St. Louis. The senior deed was to secure a note of $1,000 and seven interest notes. The intermediate one was to secure a note of $3,200 and six interest notes. The junior one was to secure a note of $1,800 and four interest notes. Defendant John E. Love was trustee in the intermediate deed of trust, and as such trustee advertised and sold the lot at public auction, at which sale one Elizabeth Raebel became the highest and best bidder for the property. Out of the proceeds Love paid the debt and interest, amounting to $3,333.55, and applied the surplus, after paying the expenses of the sale, as a credit on the note of $1,000 secured by the senior deed of trust. Plaintiff, by assignment, held the junior deed of trust prior to and at the time of the sale, and as such assignee demanded the surplus, which Love refused to pay. The suit is for an accounting and to recover the surplus alleged in the petition to be $666.45.

At defendants' request, the trial court found the facts as follows:

"On October 25, 1901, by deed dated on that date, and acknowledged and recorded on November 5, 1901, in consideration of the sum of $1,500—the receipt of which the grantor, defendant Love, acknowledges in said deed to have been paid to him—John E. Love, the defendant, conveyed to Ignatz Heet a lot of ground in block 3741, in the city of St. Louis, Mo., containing a front of 30 feet on the north line of Cook avenue, by a depth north of 160 feet, to an alley 20 feet wide, and being known as the west 30 feet of lot No. 52 of Beardslee's subdivision of the Chancellier tract in said block, per the recorded plat thereof. This property will hereafter be referred to as the `property in controversy.' The deed expressly recites that the conveyance is subject to a deed of trust to G. F. Dudley, trustee, dated February 23, 1901, for $1,000.

"I find that the entire consideration for this conveyance was $1,500, and the sale, subject to the deed of trust for $1,000 to G. F. Dudley, trustee, dated February 23, 1901, was a part of the consideration of $1,500; in other words, that the grantee in said deed paid, or agreed to pay, only the sum of $500 in cash. As a matter of fact Heet testified that he never had any interest in the property, and at no time was the real owner thereof. This fact, however, is utterly immaterial in my view of the law. Heet accepted and ratified the deed made to him on the 25th day of October, 1901, by deed dated on that date, and acknowledged and recorded on the 5th day of November, 1901. Heet signed and delivered a deed of trust, conveying the property in controversy, `together with the building now being erected thereon, and known as 4005 Cook avenue, and also other buildings now on said lot, or that may hereafter be erected on said lot,' to defendant Love, to secure one E. W. Hall the payment of one principal note, due three years after date, for $3,200, and six interest notes, each for $96, all of even date, with the deed of trust, to wit: October 25, 1901, the principal note being payable three years after date and maturing October 25-28, 1904, and the interest notes being payable in 6, 12, 18, 24, 30, and 36 months after date, respectively. This last-mentioned deed of trust provided that when one of said notes—whether of interest or principal—becomes due and payable and remains unpaid, then all of said notes become due and payable at once, whether due on their face or not. It is further provided in said deed, `and said party of the first part hereby guarantees to said party of the third part that said property herein described is free and clear of mechanics' liens; said party of the first part agrees that in case any liens should hereafter be filed against said property, after the execution of this trust, and in that case, said liens so filed shall have the same force and effect as if any one of said notes, hereinbefore described, shall have become due and payable, and all the covenants and agreements herein provided shall be in full force and effect and carried out as if said notes were actually due and payable. And in the event said party of the third part, or his assigns or legal representatives, or the party of the second part, or his successors in trust, shall expend any money to protect the title or possession of said premises, or for such insurance, as aforesaid, then any such money, so expended, shall be a new and additional principal sum of money, secured by this instrument, and shall be payable on demand, and may be collected with interest thereon at the rate of 8 per cent. per annum from the time of so expending the same.'

"In the event of default in the payment of any of the notes, above mentioned, at maturity, or if default be made in the due fulfillment of any of the covenants and agreements, the trustee is authorized to sell the property at public sale at the east front door of the courthouse, in the city of St. Louis, to the highest bidder for cash, and is authorized to receive the proceeds from such sale; `out of which he shall pay, first, the cost and expense of executing this trust, including lawful compensation of said trustee, and next he shall repay to any person or persons, who may or shall, under the covenants hereinbefore set forth, have advanced or paid any money for taxes, mechanics' liens, or insurance, as above provided; all sums so, by him or them advanced, and not already repaid, together with interest thereon at the rate of 8 per cent. per annum, from date of such advances till date of payment; and next, the amount unpaid on said notes, together with the interest accrued thereon, and the remainder, if any, shall be paid to the party of the first part, or his legal representatives.'

"On November 5, 1901, by deed of that date, acknowledged on the same day and recorded on May 29, 1902, Heet conveyed the property in controversy to one Boughen, by a technical quitclaim deed.

"On the 15th day of May, 1902, Boughen and wife conveyed the property in controversy to defendant, Western Realty & Investment Company, a corporation, said deed was acknowledged on May 19, 1902, and duly recorded on the 29th day of May, 1902, the deed being a technical quitclaim deed, conveying to the defendant corporation whatever right of title Boughen had to the property.

"On May 14, 1902, by deed of that date, acknowledged on May 19, 1902, and recorded on May 29, 1902, Boughen and wife conveyed the property in controversy, `subject to incumbrances, as shown by the records,' to one Amlar as trustee, to secure to E. S. Albright the payment of five negotiable promissory notes of even date with said deed, to wit, May 14, 1902, one principal note being for the sum of $1,800, due two years after date, and four interest notes, each for $54, due 6, 12, 18, and 24 months after date; all notes to bear interest from maturity at the rate of 8 per cent. per annum. This deed of trust, executed by Boughen, as to...