Tipton v. Holt

• Decision Date: 02 March 1981
• Docket Number: No. WD,WD
• Citation: 610 S.W.2d 659
• Parties: Orvis E. TIPTON and Bonnie L. Tipton, Appellants, v. William C. HOLT and Henry E. Chandler and Carolyn A. Chandler, Respondents, and Ronald E. Landess and Sondra J. Landess, Appellants, and Daniel Floyd and Joyce Floyd, Intervenors-Respondents. 31302.
• Court: Missouri Court of Appeals

Page 659

610 S.W.2d 659

Orvis E. TIPTON and Bonnie L. Tipton, Appellants, v. William C. HOLT and Henry E. Chandler and Carolyn A.

Chandler, Respondents,

and

Ronald E. Landess and Sondra J. Landess, Appellants,

and

Daniel Floyd and Joyce Floyd, Intervenors-Respondents.

No. WD 31302.

Missouri Court of Appeals, Western District.

March 2, 1981.

Motion for Rehearing and/or Transfer to Supreme Court Denied

March 30, 1981.

Application to Transfer Denied May 11, 1981.

Alden S. Lance, Savannah, for Tiptons.

James H. Counts, St. Joseph, for Landesses.

Raymond O. Sears, Savannah, for Holt.

Dan Hale, St. Joseph, for Chandlers.

Larry L. Zahnd, Maryville, for Floyds.

Before WASSERSTROM, C. J., and SHANGLER and MANFORD, JJ.

SHANGLER, Judge.

The plaintiffs Tipton, obligors on a note and grantors (mortgagors) of real estate under a deed of trust to secure the money obligations on the note, sought to enjoin the trustee from delivery of a deed to the purchasers at the foreclosure sale. The plaintiffs Tipton contend that they satisfied the full debt under the note then in default by lawful tender to the trustee before foreclosure, and so are entitled to a certificate of redemption from the trustee under § 443.400, RSMo 1978, as evidence of the discharge of obligation. The foreclosure purchasers, the defendants Floyd, contend that one of the obligations on the promissory note was to pay the holder a reasonable attorney fee in the event collection was by foreclosure, and that the tender even if otherwise sufficient did not include that payment. The court found that a valid statutory redemption before foreclosure was not made by the grantors Tipton, refused injunction, and ordered the trustee to deliver his deed to the purchasers Floyd. The grantors (mortgagors) Tipton appeal.

The note was given by the Tiptons to secure the balance of the purchase price of a farm property from the Chandlers. The note was secured by a deed of trust conveyed to Holt as trustee. The payments were due in installments and came into default on December 15, 1978. The Chandlers notified the Tiptons that they elected to exercise the option to declare the entire amount on the note, with interest, immediately due and payable. The foreclosure of the deed of trust was commenced by attorney Hale by a legal notice and publication of the sale of the property by trustee Holt on March 12, 1979. The promissory note provided:

If this note is collected by suit or foreclosure of any mortgage or trust deed securing the same, the maker, and endorsers hereof agree to pay reasonable expenses of collection including attorney fee.

On March 5, 1979, the Tiptons served on trustee Holt and cestui que trusts Chandler a notice of intention to redeem the mortgaged real estate. Then, on March 9, 1979, attorney Lance for the Tiptons delivered to trustee Holt a check for $36,320.93, as payment of principal and interest to March 9, 1979, inclusively, fee for the trustee and cost of foreclosure publication. The attorney also left with trustee Holt a certificate of redemption for execution and a statement of the constituent items of the payment. The check was drawn on the trust account of attorney Lance and indicated on the face that the payment was for "redemption of Orvis Tipton deed of trust and note." ¹ The trustee Holt refused tender on information from attorney Hale for the grantees Chandler that an additional $3590 (an amount equal to ten percent of the principal and interest) was due as an attorney fee by the terms of the note, in addition to the accelerated payment and other expenses.

The foreclosure was conducted on March 12, 1979, despite the declaration of attorney Lance that the property had already been redeemed by grantors Tipton. In attendance were grantors-mortgagors Tipton with attorney Lance, grantees-mortgagees Chandler with attorney Hale, Landess (purchaser of the land under a contract with the Tiptons), Floyd, successful bidder at the foreclosure sale, and trustee Holt. The bids were between attorney Hale for the grantees-mortgagees Chandler and the Floyds who purchased for $42,000. The next day the Tiptons sued to enjoin the trustee Holt as defendant from delivery of the deed to the Floyds and to direct the execution of a certificate of redemption to the Tiptons. The mortgagees Chandler were joined as defendants. The Landesses intervened by a third-party petition against the Tiptons for specific performance of the contract to sell the land and, alternatively, for damages for the breach. The Landesses also cross-claimed against trustee Holt and mortgagees Chandler to enjoin the sale to the Floyds. The Floyds also intervened by third-party petition against Trustee Holt, the mortgagees Chandler, and the putative contract purchasers Landess for declaratory judgment that the foreclosure sale was valid and to direct the trustee to deliver a deed. The defendants-mortgagees Chandler moved for summary judgment. The court sustained the contention of foreclosure sale purchasers Floyd, ordered trustee Holt to deliver his deed to the real estate to the Floyds, enjoined the Landesses from interference with that title and possession, ordered the trustee to make distribution from the money on hand from the sale, and denied relief to the plaintiffs Tipton except that the trustee pay over to them any surplus from the foreclosure sale funds.

In a deed of trust transaction, the grantor conveys a lien upon the land to the trustee to secure repayment of a debt. Coleman v. Crescent Insulated Wire & Cable Co., 350 Mo. 781, 168 S.W.2d 1060, 1065(4, 5) (1943). The deed of trust, in effect, merely pledges the land for the mortgage debt. Jackson v. Johnson, 248 Mo. 680, 154 S.W. 759, 764(6) (1913). The grantor of the deed of trust continues as owner of the land until entry for breach of condition, and then foreclosure under power of sale. R. L. Sweet Lumber Co. v. E. L. Lane, Inc., 513 S.W.2d 365, 368(1-2) (Mo.banc 1974). Performance of the conditions, or tender of the performance before sale however, will defeat the power of sale in a deed of trust. "Such performance or tender extinguishes the power, and a sale afterwards under the power, even to an innocent purchaser, will be void." Benton Land Company v. Zeitler, 182 Mo. 251, 81 S.W. 193, 199 (1904). The conditions of performance are according to the integral terms of the note and deed of trust. Canton Trust Co. v. Durrett, 320 Mo. 1208, 9 S.W.2d 925, 927(1-5) (1928). The note describes the debt and repayment (and hence the conditions of default); the deed of trust creates a lien to secure the terms of repayment to which (as in this case) it refers. Therefore, the note is the basic contract to which the deed of trust is collateral. Thielecke v. Davis, 260 S.W.2d 510, 511(1, 2) (Mo.1953); Brown v. Kennedy, 309 Mo. 335, 274 S.W. 357, 358(2) (1925). Whatever discharges the debt, discharges the collateral. The performance, or tender of performance due on the note even after default therefore, releases the collateral lien and defeats the power of sale in the deed of trust. Blades v. Ossenfort, 481 S.W.2d 531, 535(3-5) (Mo.App.1972); McClung v. Missouri Trust Co., 137 Mo. 106, 38 S.W. 578, 582 (1897); Benton Land Co. v. Zeitler, supra, l. c. 199; § 443.400.

The contention is not as to these principles but whether, conformably to them, the tender by the grantors Tipton to the trustee amounted to the performance then due on the note. The tender included the accelerated principal plus interest, the expense of publication and the statutory fee for the trustee. ² The note (as already cited) provided that if this note is collected by suit or foreclosure of any trust deed securing the same, then the maker agrees to pay a reasonable attorney fee. The contentions do not involve the validity of that term of performance (Thielecke v. Davis and Brown v. Kennedy, supra), but when that obligation accrues. That depends upon the sense of that provision as a term of the integral basic contract and deed of trust.

The payment of an attorney fee by the very terms becomes an obligation of the maker only if the note is collected by suit or foreclosure. The holders Chandler brought no suit to collect the debt on the note, nor could the note be collected by foreclosure, other than by sale. The foreclosure of the lien without a sale of the land collects no proceeds and pays no attorney fee. The promissory note term for the payment of an attorney fee "if this note is collected by suit or foreclosure" describes, also, the nature of the legal services subject to compensation. The payment of an attorney fee, therefore, was not a condition of tender for redemption of the property after foreclosure but before sale. (See, by close analogy, Pine Lawn Bank and Trust Company v. Urbahns, 417 S.W.2d 113, 119(12, 13) (Mo.App.1967)). The court gave that exact effect to the term of the basic contract by an order which adjudicated to the Chandler attorney an allocation of fee from the proceeds of the sale of the land.

Another consideration prompts our determination: to construe the note to impose a reasonable attorney fee otherwise unspecified as to sum or percentile as an incident of redemption before sale is to impair the exercise of the equity of redemption § 443.400 confers upon a grantor-mortgagor. That procedure requires that redemption before sale be made by payment to the...