Stenger v. Great Southern Sav. and Loan Ass'n

Decision Date27 August 1984
Docket NumberNo. 13121,13121
PartiesNeil K. STENGER, Beverly Stenger, Ronald K. Stenger, Lezah Stenger, and Ralph W. Stenger, Plaintiffs-Appellants, v. GREAT SOUTHERN SAVINGS AND LOAN ASSOCIATION and Great Southern Financial Corporation, Defendants-Respondents.
CourtMissouri Court of Appeals

James D. Tucker, Harrison, Tucker & Geisler, Springfield, for plaintiffs-appellants.

Patrick T. Fish, Springfield, for defendants-respondents.

GREENE, Judge.

Plaintiffs, Neil K. Stenger, Beverly Stenger, Ronald K. Stenger, Lezah Stenger and Ralph W. Stenger (the Stengers), filed an action in three counts seeking to enjoin foreclosure on certain real estate under a deed of trust which secured a promissory note executed by the Stengers. Installment payments on the note had been accelerated by the secured party and demand made for the whole balance due. Defendants were Great Southern Savings and Loan Association (Great Southern) and the successor trustee for the deed of trust, Great Southern Financial Corporation.

The loan acceleration and threatened institution of foreclosure proceedings were claimed to be justified by Great Southern by reason of a "due-on-sale" clause 1 in the note, and the fact the Stengers had conveyed the property in question to another person without obtaining the written consent of Great Southern as required by the clause.

Plaintiffs and defendants filed motions for summary judgment. The trial court sustained defendants' motion as to Counts I and III of the Stengers' petition, and, after hearing the evidence offered by plaintiffs on Count II, sustained defendants' motion for judgment made at that stage of the case. The Stengers then appealed to this court.

There is no real dispute as to the basic facts of this case. On April 4, 1973, the Stengers executed a first mortgage note in the sum of $290,000 payable to Great Southern, and they executed a deed of trust whereby property known as Cheri Park Apartments, located in Greene County, Missouri, was made security for payment of the note. The note contained the following due-on-sale provision:

"[I]f makers convey any of the property described in the deed of trust securing this note without the written consent of the holder ... the holder of this note may, at the option of such holder, declare all unpaid indebtedness evidenced by this note ... immediately due and payable ...."

Prior to November, 1977, plaintiff Ronald K. Stenger, who is an attorney and is well-versed in real estate and lending transactions, and who was acting on behalf of all the Stengers, contacted Richard Huff, vice-president of Great Southern, to see what Great Southern's position would be if the mortgaged property was conveyed. The response was that Great Southern would consider a loan assumption agreement if the loan's interest rate was increased. In November of 1977, the Stengers conveyed the property by warranty deed to Vaughn C. Zimmerman without The purchase by Zimmerman was financed by a note and deed of trust to the Stengers which, incidentally, contained a stringent due-on-sale clause. The second mortgage created by these instruments was described as a "wraparound" whereby the obligation to the Stengers incorporated that of the Stengers to Great Southern, and at a rate of interest in excess of that being paid to Great Southern. Under this arrangement, Zimmerman made payments only to the Stengers, and the Stengers continued their payments as usual to Great Southern. Neither party informed Great Southern of the sale.

having obtained the written consent of Great Southern. At that time, the Stengers "knew that there was going to be some problems with Great Southern."

In March of 1981, after discovery of the sale to Zimmerman, Richard Huff advised Ronald Stenger in writing that because of the conveyance to Zimmerman without the written consent of Great Southern, the association elected to declare the unpaid indebtedness on the note it held immediately due and payable. The Stengers then filed their present suit to enjoin the initiation of foreclosure procedures.

Count I of plaintiffs' amended petition sought to enjoin enforcement of the due-on-sale clause on the grounds it was unconscionable, inequitable and in violation of public policy. Count II proceeded on a theory that Great Southern had effective knowledge of the conveyance to Zimmerman, yet waited for over three years to act, a delay they claimed gave rise to estoppel and laches. Count III alleged that "[i]n response to" the intention to foreclose, the Stengers and Zimmerman rescinded their earlier transaction by a deed from Zimmerman back to the Stengers, accompanied by a release of Zimmerman, so that Great Southern's acceleration right was thus negated and destroyed.

These pleaded theories define, in effect, the three attacks made by the Stengers in this appeal on the adverse judgment entered below.


The essence of plaintiffs' first point relied on is that Missouri policy favors due-on-sale clauses only to the extent that a conveyance demonstrably impairs the mortgagee's security. Thus, it is argued, the trial court erred in granting summary judgment for defendants in that a genuine issue of material fact was raised which could only have been resolved by a trial on the merits. Rule 74.04(c). 2

In their answer to plaintiffs' first count, defendants pleaded § 369.259 3 as an affirmative statutory declaration of their right to enforce the due-on-sale clause according to its plain tenor. That statute reads:

"In the event of a conveyance or transfer of any property upon which an association has a lien without the consent of the association, the association may proceed as provided in the note or security instrument."

It is apparently conceded that Great Southern is an "association" for purposes of the statute, being a savings and loan association chartered by the state of Missouri. § 369.014. In this appeal, plaintiffs present a vigorous and multipronged argument that § 369.259 is unconstitutional, but that, in any event, § 408.552 more accurately expresses our public policy. 4 That policy, it is further argued, is in line with the view of a number of courts which have considered due-on-sale clauses as being enforceable We first observe that the arguments which have been advanced in favor of no, or of only conditional, enforcement of due-on-sale clauses have largely dissipated in the face of affirmative federal preemption by rules of law which are quite favorable to the clauses. This began in 1976 with a regulation of the Federal Home Loan Bank Board which expressly permitted any federally-chartered savings and loan association to use due-on-sale clauses in mortgage instruments. 12 C.F.R. § 545.8-3(f). 6 The trend continued with the promulgation of 12 C.F.R. § 701.21-6(d) under which federal credit unions are required to use due-on-sale clauses in preemption of any state restrictions on enforcement. The most sweeping scope of federal preemption is now found in Section 341 of the Garn-St. Germain Depository Institutions Act of 1982, P.L. 97-320; 12 U.S.C. § 1701j-3. With certain complex exceptions regarding time, the statute generally provides that a lender (meaning any person or government agency making a real property loan, or any assignee or transferee thereof) may enforce a due-on-sale clause as written in spite of a contrary provision in the constitution, laws or judicial decisions of the state, in the event of a transfer of the mortgaged property occurring on or after October 15, 1982. 7

only if the lender's security is impaired by a conveyance. 5

We also must note that in those jurisdictions which have found it necessary to determine the enforceability of due-on-sale clauses, 8 a definite majority trend is apparent toward a general right to invoke the clauses without a showing of impairment of security. A partial list includes: Tierce v. APS Co., 382 So.2d 485 (Ala.1979); Olean v. Treglia, 190 Conn. 756, 463 A.2d 242 (1983); Lake v. Equitable Savings & Loan Ass'n., 105 Idaho 923, 674 P.2d 419 (1983); Martin v. Peoples Mutual Savings & Loan Ass'n., 319 N.W.2d 220 (Iowa 1982); First National Bank of Vicksburg v. Caruthers, 443 So.2d 861 (Miss.1983); Occidental Savings & Loan Ass'n. v. Venco Partnership, 206 Neb. 469, 293 N.W.2d 843 (1980); Mills v. Nashua Federal Savings & Loan Ass'n, 121 N.H. 722, 433 A.2d 1312 (1981); Lincoln Mortgage Investors v. Cook, 659 P.2d 925 (Okla.1982); Gunther v. White, 489 S.W.2d 529 (Tenn.1973); Sonny Arnold, Inc. v. Sentry Savings Ass'n., 633 S.W.2d 811 (Tex.1982); Redd v. Western Savings & Loan Co., 646 P.2d 761 (Utah 1982); Lipps v. First American Service Corp., 223 Va. 131, 286 S.E.2d 215 (1982).

Next, we observe that if we are required to undertake a determination of the questioned validity of § 369.259, it is clear we would have no jurisdiction of this appeal. Mo. Const. art. V, § 3. This is so Plaintiffs claim the statute, quoted above, is unconstitutionally vague and uncertain as to what kind of "conveyance or transfer" would allow an association to invoke a due-on-sale provision, and as to what manner of "consent" will relieve the possibility of acceleration, and as to what kinds of ways an association lawfully "may proceed as provided in the note ...." They also attack the statute as being special legislation in violation of article III, § 40(28) of the Missouri Constitution. The special legislation argument was not raised in the trial court. This failure waives the ground asserted as an attack on the validity of the statute. Bauldin v. Barton County Mutual Ins. Co., 666 S.W.2d 948, 951 (Mo.App.1984); State v. Tatum, 653 S.W.2d 241, 242-243[1, 2] (Mo.App.1983).

despite the fact the parties have agreed otherwise. Champlin Petroleum Co. v. Brashears, 592 S.W.2d 545, 547 (Mo.App.1979). However, a combination of principles convinces us that we must retain the case.

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