Townsley v. Thielecke

• Decision Date: 11 September 1961
• Docket Number: No. 48358,No. 2,48358,2
• Citation: 349 S.W.2d 902
• Parties: Rollo L. TOWNSLEY and Helen M. Townsley, Appellants, v. Erroll THIELECKE, Georgia Mailloux and Kenneth Yost, Respondents
• Court: Missouri Supreme Court

Page 902

349 S.W.2d 902

Rollo L. TOWNSLEY and Helen M. Townsley, Appellants, v. Erroll THIELECKE, Georgia Mailloux and Kenneth Yost, Respondents.

No. 48358.

Supreme Court of Missouri, Division No. 2.

Sept. 11, 1961.

Motion for Rehearing or for Transfer to Court en Banc Denied

Oct. 9, 1961.

H. Jackson Daniel, Martin Schiff, Jr., Husch, Eppenberger, Donohue, Elson & Jones, St. Louis, for appellants.

Jackson F. Adams, Clayton, for respondent.

BARRETT, Commissioner.

This action in four counts is said to be a suit 'in equity and at law to recover for plaintiffs the surplus funds of a foreclosure sale of real property formerly owned by them.' Or alternatively, 'Plaintiffs' suit is grounded in contract and in fraud, either to enforce what they claim was the true consideration for the quitclaim deed they executed, or to set the deed aside on alleged grounds of fraud and have a constructive trust or equitable lien declared in their favor.' The trial court found that plaintiffs were not entitled to either legal or equitable relief and the plaintiffs have appealed from the judgment in favor of the defendants.

In September 1954, the plaintiffs, Rollo and Helen Townsley, purchased the property in Bellefontaine Neighbors known as 9505-9517 Bellefontaine Road, they say for the price of $22,500. The improvements then on the two lots, one 60 x 152 feet and the other 133.44 x 152 feet, were described in the exchange contract as a four-room frame bungalow and a 'frame Tavern Building.' Their purchase of the property was accomplished in this manner: The Townsleys transferred their equity in property at 7061 Eichelberger to Jewell Reagan and Jewell transferred the Bellefontaine Road property to them, subject, however, to the ability of the Townsleys to obtain a new first deed of trust securing the principal sum of $10,500 and subject to a second deed of trust executed by the Townsleys to Jewell Reagan securing a note in the sum of $7,000. It may be noted in passing that these figures, $22,500 purchase price and two deeds of trust securing an indebtedness of $17,500, indicate a down payment or an equity of the value of $5,000. The Townsleys were successful in borrowing $10,500 from the Northwestern Savings & Loan Association and this indebtedness was secured by a first deed of trust providing for monthly payments of $102.47 beginning on October 1, 1954. The second deed of trust to Jewell Reagan, the $7,000 indebtedness, provided for monthly payments of $87.54 beginning on December 15, 1954.

In November 1954, the defendant, Erroll Thielecke, acquired the $7,000 note and the second deed of trust from Jewell Reagan by having transferred to her the equity in a piece of property on Copelin and Louisiana Avenues. The title to this transferred property was in Georgia Mailloux, Thielecke's mother, a woman in her eighties and said to be a resident of Michigan. She is the second party defendant in this action. According to Thielecke, his mother's financial interest in the $7,000 note was $4,800 and his personal interest was $2,200.

For a time the Townsleys lived in the small bungalow and for two months attempted to operate a restaurant in the larger frame building. They claim to have had offers from two oil companies to buy the property for $29,000 but these offers were contingent upon the property's being rezoned to commercial use and that was not possible. In 1956 the Townsleys rented the property to the City of Bellefontaine Neighbors as a city hall and on January 25, 1957, entered into a sales contract in which the city agreed to purchase the property for the sum of $24,950. This deal was not consummated, the Townsleys say because the then mayor refused to sign the check. The city forfeited the earnest money, $275, and the Townsleys sued the city for breach of contract. By February 20, 1957, the Townsleys moved out of the property. In any event, by May 1957 the Townsleys were in arrears in their payments on the note secured by the first deed of trust and, admittedly, had made no payments on the $7,000 note secured by the second deed of trust.

The Townsleys had become friendly with Thielecke and, according to them, he always said not to worry about the second deed of trust, the main thing was to take care of the payments on the first. Nevertheless, about the time the contract with the city 'fell through,' Townsley said, 'We did talk about foreclosure.' But on April 10, 1957, the Townsleys, at Thielecke's request, executed a quitclaim deed to the property for $20, paid by Thielecke from funds which he said belonged to his mother. The grantee in that deed was 'G. Mailloux,' Thielecke's mother--the plaintiffs thought she was a straw party. Contemporaneously they executed a receipt for $20 to 'E. Thielecke Agent.' The receipt recited that the $20 was in full consideration for the quitclaim deed conveying all their interest in the Bellefontaine property. The deed was recorded on April 12, 1957. Incidentally, defendants' counsel refer to these two documents, the deed and the receipt, as 'the written agreements' of the parties. The plaintiffs say that when they gave Thielecke the quitclaim deed he told them that he had money and was in a better position to handle the property, that he 'would in turn dispose of the property' and after the payment of the first and second deeds of trust (this is the language the parties use) he would 'see that we got our share,' or, 'the balance whatever it sold for would go to my wife and myself.' Or as Mrs. Townsley put it, Thielecke said that the quitclaim deed was a mere formality--'that it had to be--that he proved he was starting proceedings.' Then she says that Thielecke promised 'when he sold the property,' or, 'when the foreclosure was all over' and the first and second deeds of trust were 'cleared up, all the expenses, we would definitely get the surplus of the remainder of the money.'

Thielecke says that when he took the quitclaim deed from the Townsleys he had no intention of foreclosing the second deed of trust even though he had told them that if the deal with the city did not go through he would have to foreclose. He emphatically denies that he made any of the promises testified to by the Townsleys. His explanation of his taking the quitclaim deed was this: 'Well, they had been in possession of the property for about thirty-two or three months and there was approximately a thousand dollars worth of delinquent payments under his first deed of trust and he used up all of the slack that he could under his first mortgage and I had kept him afloat as long as I possibly could, and all things have to come to an end.' When asked whether he had told the Townsleys, or left the impression with them, that a quitclaim deed and a foreclosure were one and the same he said, 'Simplified way of same results,' or, 'It was a short way to get the troublesome piece of property behind us.' In addition, he knew from his experience as a professional dealer in real estate that the Townsleys would not share in any surplus upon foreclosure 'because they had already conveyed the property.' As indicated, however, when he took the quitclaim deed he did not then intend to foreclose the second deed of trust.

When he went to the courthouse to record the deed he discovered that there were judgments against the Townsleys, one for $558.99, one for $417.80, another for materials used in this property in the sum of $345.29, and a notice of federal tax liens in the sum of $171.16. It was then that he decided to foreclose the second deed of trust and on April 12, 1957, a day or two after receiving the quitclaim deed, caused the first notice of trustee's sale to be published. On May 6, 1957, the successor trustee Yost (the third defendant in this action) conducted the sale. At the sale there were three or four bidders and finally a person unknown to any of the parties bid $29,000. Thielecke bid $29,001. Yost took the note and deed of trust and had them canceled. Thielecke had caused the trustee's deed to be prepared and Yost executed it. The grantee in this instrument was William C. Uphoff, a straw party, an elderly man without a known place of abode. Thielecke paid the costs of the trustee's sale and the fees due the trustee but he did not pay over to the trustee any part of the $29,001 bid. Yost says that Thielecke had a large check 'made to this woman, but he also had a letter from her and then at that time a deed or something to show he was representing her,' and he explained that it was foolish to make the check to the woman when he was representing her and 'he was now the owner anyway of the whole interest that was involved at that time.' Subsequently, through a power of attorney from Uphoff, Thielecke negotiated a new lease of the property to the City of Bellefontaine Neighbors. On June 21, 1957, Thielecke took a quitclaim deed (the plaintiffs call it 'a pocket quitclaim') to the property from Uphoff to his mother, Georgia Mailloux, and this instrument was recorded on July 3, 1958. In 1959 the buildings on the property burned and the proceeds of the fire insurance, $6,750, were applied on the $7,711.94 indebtedness then due under the first deed of trust.

In these generally noted circumstances, on February 20, 1959, a year and eight months after the foreclosure, the Townsleys instituted this action. This summary of the theory of the action and the purpose of the four counts of the petition is taken from the plaintiffs' brief: 'Plaintiffs seek to enforce what they claim was the true consideration for the quitclaim deed they executed at Thielecke's instance, or in the alternative, to have the deed set aside as conceived in fraud and a constructive trust or an equitable lien declared in their favor. Count I is a suit on a contract, to enforce Thielecke's oral promise to plaintiff...