Opinion
September 3, 1932.
1. STATUTES OF FRAUDS: Trusts. An oral promise by the mortgagee to buy the mortgaged land at a foreclosure sale and hold same as trustee for the mortgagor until the income from the property is sufficient to discharge the debt, then reconveys to the mortgagee, is void because not in writing. [Secs. 2967 and 3104, R.S. 1929.]
2. STATUTES OF FRAUDS: Trusts: Actions. In an action in such by the mortgagor to enforce such an agreement, with no showing of fraud or such performance of the oral promise as would remove it from the operation of the statute, the plaintiff cannot recover.
3. TRUSTS: Personal Property. Section 3104, Revised Statutes 1929, requiring an express trust in real estate to be evidenced by writing does not apply to personal property; a trust in personal property may be established by parol.
4. TRUSTS: Personal Property: Consideration. An agreement by the mortgagee that he would buy in the personal property covered by a chattel mortgage and return the same to the mortgagor when the debt secured by the mortgage should be paid was a naked promise to do something in the future not supported by consideration and is not enforceable.
5. TRUSTS: Chattel Mortgages: Parol Evidence. Parol evidence to establish such an agreement would contradict the terms of the mortgage and for that reason was incompetent.
6. TRUSTS: Parol Evidence: Consideration. While parol evidence is competent to prove the consideration of a written instrument, a party will not be permitted under the guise of proving a consideration to destroy the legal effect of the instrument.
Appeal from Circuit Court of City of St. Louis. — Hon. Victor H. Falkenhainer, Judge.
REVERSED.
Salkey Jones for Gates Hotel Company; Benjamin C. Klene of counsel.
(1) Defendant and the Royal Company converted the furniture and furnishings to their use, at the market value of same at the time of said alleged foreclosure and became liable therefor in the sum of $8,000 and interest damages thereon at the rate of six per cent per annum as authorized by Section 4222, R.S. 1919. Lack v. Brecht, 166 Mo. 242; Darling v. Potts, 118 Mo. 506; 39 Cyc. 478; Harbough v. Roofing Co. 281 S.W. 686; Asadorian v. Sayman, 233 S.W. 475; Elliott v. Machine Co., 236 Mo. 546; Reilly v. Cullen 101 Mo. App. 32; Turner v. Johnson, 95 Mo. 431; Witte v. Storm, 236 Mo. 470. (2) The invalidity of the sale by Ailworth, Trustee, to the Royal Company appears in the value of the property at the date of sale, as shown by undisputed evidence, as $8,000 mortgaged for $4,240.45, and sold, for the unconscionable price of $200. The sale was void and was a conversion of the property by defendant and Royal, and the court erred in not so finding. Meek v. Hurst, 223 Mo. 698; McNew v. Booth, 42 Mo. 192. (3) The chattel deed of trust given as security for the note for $4,240.45 is and was void because it provided therein for the sale of the property described therein upon default by printing a five day notice, whereas the statutes applicable to personal property foreclosures provide for publication in certain instances as well as by foreclosure under order of court. R.S. 1919, secs. 2219, 2233, 2234; Nichols Shepard Co. v. Stokes, 196 S.W. 1075. (4) Plaintiff should be credited with $913.17 in cash overpaid in excessive interest on the second deed of trust. Vandergrift v. Swinner, 158 Mo. 531. (5) Plaintiff is not chargeable with fees and charges of defendant's real estate agents and attorneys, absent notice thereof or any demand of payment therefor. R.S. 1919, sec. 6491. (6) The court did not err in admitting the testimony of Lee F. Gates and Taylor R. Young as to conversations with W.H. Carroll. (a) Where one party to a contract was represented at the making thereof by two persons, the other contracting party is not disqualified because one of such representatives is dead at the time of the trial. Birdsall v. Coon, 157 Mo. App. 448; Short v. Thomas, 178 Mo. App. 413; Vandergrif v. Swinney, 158 Mo. 533; Hill-Dodge Banking Co. v. Loom's, 140 Mo. App. 74; Williams v. Perkins, 83 Mo. 385; Wahl v. Cunningham, 6 S.W.2d 586; McConnon v. Kuhlmann, 220 Mo. App. 824 (b) The statute is a qualifying, and not a disqualifying statute. Rauch v. Metz, 212 S.W. 360. (c) An agent may testify for his principal as to a transaction had by him as such agent with one who is dead at the time he offers to testify. Clark v. Thias, 173 Mo. 628; Wagner v. Binder, 187 S.W. 1151; Bates v. Forcht, 89 Mo. 127; Orthwein v. Nolker, 234 S.W. 789, 290 Mo. 284; Spithover v. Bldg. Loan Assn., 225 Mo. 660; Dawson v. Wombles, 104 Mo. App. 272; Darby v. Northwestern Mut. Life Ins. Co., 239 S.W. 68. (d) Incompetency of a witness is waived by extensive cross-examination. Tierney v. Hannon's Exr., 81 Mo. App. 488; Edwards v. Latimer, 183 Mo. 610, 82 S.W. 109; Pierce Loan Co. v. Killian, 153 Mo. App. 106, 132 S.W. 280; Ables v. Ackley, 126 Mo. App. 84, 103 S.W. 974; Stuyvaert v. Arnold, 122 Mo. App. 421, 99 S.W. 529.
Claud D. Hall and C.P. Berry for Federal Investment Company.
(1) The court erred in admitting the testimony of the plaintiff's president, Lee F. Gates, and of plaintiff's attorney, Taylor R. Young, as to their conversations and transactions with W.H. Carroll, vice-president of defendant, and with whom plaintiff claims to have entered into the alleged agreement to the effect that after the foreclosure the property would be held in trust by the defendant and when the indebtedness represented by the second deed of trust as paid out of rents and income from the property, defendant would reconvey the property to the plaintiff. Charles Green Real Estate Co. v. Building Co., 196 Mo. 358; Sanford v. Van Pelt, 282 S.W. 1022, 314 Mo. 175; Edmonds v. Scharff, 279 Mo. 78; Curd v. Brown, 148 Mo. 82; Taylor v. George, 176 Mo. App. 223. (a) The rule excluding such testimony is applicable where the agent who carried on the negotiation for the corporation is dead. Carroll v. United Rys. Co., 157 Mo. App. 288; Banking House v. Rood, 132 Mo. 264; Charles Green Real Estate Co. v. Building Co., 196 Mo. 358. (b) The object and purpose of the statute, Sec. 5410, R.S. 1919, is to insure the equality of the parties to the action. Lieber v. Lieber, 239 Mo. 14; Waltemar v. Schnick's Estate, 102 Mo. App. 133; Elsea v. Smith, 273 Mo. 396; Rector v. Goodloe, 298 Mo. 261; Davis v. Robb, 10 S.W.2d 680. (c) The rule applies even though the conversations of the deceased party were overheard by a third person. Jones on Evidence (2 Ed.) sec. 790, p. 993; Brunk v. Ry. Co., 198 Mo. App. 243. (d) The rule is that whenever an objection is once made and overruled, further objection to each question is unnecessary. Shoemaker v. Adair Coal Co., 255 S.W. 352; State v. Hicks, 3 S.W.2d 230. (2) Since the plaintiff's petition was based upon an express contract, it was necessary to prove the alleged contract to have been in writing, as required by the Statute of Frauds, Sections 2169 and 2263 of the Revised Statutes of Missouri, 1919. Curd v. Brown, 148 Mo. 92; Ferguson v. Robinson, 258 Mo. 132; Rogers v. Ramey, 137 Mo. 598; Miltenberger v. Morrison, 39 Mo. 71; Shelton v. Cooksey, 138 Mo. App. 389; Allen v. Richard, 83 Mo. 55; Mansur v. Willard, 57 Mo. 347; Taylor v. Von Schracder, 107 Mo. 206; Ebert v. Myers, 9 S.W.2d 1066; Bender v. Bender, 281 Mo. 478. (3) There was no evidence upon which the court could find a resulting trust as to said real property, against the defendant and in favor of the plaintiff. Davis v. Holloway, 295 S.W. 105, 317 Mo. 246; Jacks v. Link, 291 Mo. 282; 22 C.J. 1074; Tracy v. Union Iron Works, 104 Mo. 193; Bender v. Bender, 281 Mo. 478; Heil v. Heil, 184 Mo. 676; Gammage v. Latham, 222 S.W. 469. (a) There was no evidence of a consideration paid by plaintiff. Martin v. Martin, 250 Mo. 546. (b) There was no confidential relationship between plaintiff and defendant. Chapin v. Cherry, 243 Mo. 401. (4) There was no evidence that the minds of the parties ever met, or that plaintiff's propositions were accepted by the defendant. Stone v. Union Trust Co., 150 Mo. App. 345; Strange v. Crowley, 91 Mo. 295; County of Cole v. Trust Co., 302 Mo. 235; State ex rel. Equitable Life v. Robertson (Mo.), 191 S.W. 989; Chapin v. Cherry, 243 Mo. 401; Davis v. Holloway, 317 Mo. 246; Kansas City Stock Yards v. Fed. Grain, 279 S.W. 771. (5) The rule in its shortest form is that parol testimony cannot be received to contradict, vary, add to or subtract from the terms of a valid written instrument. 3 Jones on Evidence, p. 145; 22 C.J. 1070; E.R. Darlington Lumber Co. v. Railway Co., 243 Mo. 224; McPherson v. Kissee, 239 Mo. 664, 144 S.W. 410; Miller v. Municipal Elec. 133 Mo. 205, 34 S.W. 585; Boyd v. Paul, 125 Mo. 9, 28 S.W. 171.
This is an action in equity by plaintiff, Gates Hotel Company, to enforce an alleged trust in certain real and personal property located in the city of St. Louis. The decree below was in favor of plaintiff and both parties appealed.
It appears from plaintiff's petition that plaintiff was the owner of a certain hotel building known as the D'Arle Hotel, together with the furniture and fixtures therein; that said building was encumbered by a first deed of trust in the sum of $30,000, and by a second deed of trust securing fifty-five notes of $500 each; that the furniture and fixtures in said hotel was encumbered by a chattel mortgage given to secure the payment of a note for the principal sum of $4,240.45; that said chattel mortgage was foreclosed and the Royal Investment Company purchased said furniture and fixtures at such foreclosure sale and sold and delivered same to defendant, Federal Investment Company; that on March 8, 1913, the second deed of trust on the hotel building was foreclosed and defendant Federal Investment Company bought the property at such foreclosure sale for $9,500.
The petition further alleges that defendant agreed to purchase said hotel at the foreclosure sale as trustee for plaintiff. The specific allegations respecting this alleged agreement read as follows:
"Plaintiff says that said sale was made as a part of a plan of the defendant to defraud plaintiff of its hotel property.
"That at the time of and prior to said sale under said deed of trust, it was expressly understood and agreed between plaintiff and the defendant in consideration of the mutual promises herein set forth between plaintiff and defendant as well as in further consideration of a chattel mortgage then executed and delivered by plaintiff for the use and benefit of a corporation known as the Royal Investment Company, then owned, operated and officered by the persons hereinbefore named, in which chattel mortgage was described and pledged as security for a loan of $4,240.45, all of plaintiff's furniture, effects and personal property and hotel furnishings, then owned by it and by it used in operating the said D'Arle Hotel; that although a sale of said property was to be made, that the same was only to be colorable, and that the relation of mortgagor and mortgagee, as between plaintiff and defendant, should continue unaffected by said sale, and that in purchasing said property at said sale, the defendant was purchasing the same as trustee for plaintiff, and that it would continue to hold the same as trustee for plaintiff until such time as the rental and income therefrom would pay the said balance of said second deed of trust, and agreed that it would collect the same and apply the same for that purpose, and that upon the full payment of said second deed of trust, and interest, it would re-convey the title of said property to plaintiff, and release and satisfy said second deed of trust; that defendant thereafter for a period of about seven years continued to recognize plaintiff as owner of said property, during all of which time it collected and retained the income from the said property, but never accounted for same to plaintiff, under the agreement aforesaid, and for the first time repudiated said relationship in or about the month of June, 1920, and has continued to refuse to so recognize plaintiff since that time.
"Plaintiff says that said agreement, that plaintiff would continue to be the owner of said property, despite the sale under the deed of trust, was on its part made in good faith, but was made by defendant, as plaintiff has since learned, for the purpose of carrying out its plan to cheat and defraud plaintiff of its said property."
It is also alleged in the petition that on June 15, 1920, defendant sold said hotel property to the Young Women's Christian Association for the sum of $50,000, and that said association bought such property without knowledge of plaintiff's rights therein.
As to the foreclosure of the chattel mortgage on the furniture and fixtures in the hotel building, the petition alleges that the following agreement was made with respect thereto:
"Plaintiff further says that at and prior to February 27, 1913, the date of said chattel mortgage deed of trust, and as a part of the transactions under which it was made, as well as that of the sale of the real estate of the D'Arle Hotel, hereinbefore mentioned, both of which were a part of the same transaction, and in consideration of the execution and delivery of said chattel mortgage deed of trust and note, it was expressly and distinctly agreed and understood between plaintiff and said Royal Investment Company, represented by its aforesaid officers, that a sale was to be made under the terms of said chattel mortgage deed of trust, and that such a sale would in no wise change or alter plaintiff's rights and interest therein; and that plaintiff's rights and interest in same would be unaffected by such a sale, and that said personal property would be returned to plaintiff when the amount and interest of said note was repaid; that said note was repaid long ago.
"Plaintiff further says that defendant knew of said agreement between plaintiff and said Royal Investment Company at the time said chattel mortgage deed of trust was executed and delivered, as well as when it acquired such title as it did by virtue of the transfer to it of said personal property by said Royal Investment as aforesaid."
The prayer of the petition reads as follows:
"Wherefore, plaintiff prays that the court may order the defendant to make and state an account between plaintiff and defendant, with reference to the matters herein set forth; that the court may ascertain on an accounting the sum or sums due it, and give it judgment therefor; plaintiff offers to do equity in the premises and to pay such sums as the court may find are equitably due defendant, if any. Plaintiff further asks for such other relief as the court, on a hearing, may find just and equitable, and for costs."
Defendant's answer (1) denies generally the allegations of the petition, and (2) pleads specific facts as a defense to plaintiff's alleged cause of action.
At a preliminary hearing the chancellor found the facts as alleged in plaintiff's petition and made the following order of reference:
"And the court doth order, adjudge and decree that the cause be referred to Forest G. Ferris, as referee, to take and state an account between plaintiff and defendant on the basis of the findings herein above set out and of all transactions in relation thereto, including the sale price of Fifty-four Thousand ($54,000) Dollars at which said hotel property was sold in June, 1920, and charging the defendant with the same, allowing plaintiff six per cent annual interest from the date of sale to the date of report, and said referee in the taking of said account is to make unto the parties all just allowances, and report same to this court, and also report to this court what balance shall appear to be due from either party to the other. And all other matters are reserved until the report of said referee shall be made herein."
The referee heard the evidence, stated an account between the parties and filed his report with the court. Exceptions were filed to the referee's report, some of which were sustained and others overruled. The final decree in the case adjudged that plaintiff recover judgment against the defendant in the sum of $67,008.43, with six per cent annual interest thereon from date and for costs.
[1, 2] As to the real estate involved in this suit, the pleadings and evidence with respect thereto, for practical purposes, are identical with the pleadings and evidence in the case of Gates Hotel Company v. C.R.H. Davis Real Estate Company, 52 S.W.2d 1011, 331 Mo. 94. We held in that case that defendant's alleged oral promise to buy the land at foreclosure sale, hold same as trustee for plaintiff until the income therefrom was sufficient to discharge the debt, then reconvey to plaintiff, was a void promise because not in writing. [Secs. 2967 and 3104, Revised Statutes 1929.] We denied a recovery in that case on the ground there was no showing of fraud or such performance of the oral promise as would remove it from the operation of the statute. For the reasons stated in that case, to which we refer the reader without repeating them here, we hold in this case that plaintiff has no interest in the real estate involved in this action, and therefore, deny a recovery on this branch of the case.
[3, 4] We will next take the claim of plaintiff relative to the foreclosure of the chattel mortgage on the personal property. The petition alleges that it was expressly and distinctly agreed between plaintiff and Royal Investment Company that a sale of the personal property under the chattel mortgage would not alter plaintiff's interest therein, and that such property would be returned to plaintiff when the note secured by the chattel mortgage was paid in full.
Section 3104, Revised Statutes 1929, which requires express trusts in real estate to be evidenced by a writing has no application to personal property. A trust in personal property may be established by parol. [Harris Banking Co. v. Miller, 190 Mo. 640, 666, 89 S.W. 629.] It is settled law that a completely executed voluntary trust will be enforced. [Frank v. Heimann, 302 Mo. 334, 345, 258 S.W. 1000.] But it is equally well settled that a mere voluntary executory agreement for a trust, such as we have in this case, cannot be enforced. [Harding v. Trust Company, 276 Mo. 136, 207 S.W. 68.] [5, 6] The substance of the agreement relied upon by plaintiff to establish a trust in the personal property covered by the chattel mortgage is that defendant promised to bid in the property at the foreclosure sale under the chattel mortgage, hold same as trustee until the debt secured by the chattel mortgage was paid, then return the property to plaintiff. This is a naked promise to do something in the future, not supported by a consideration and, therefore, not enforceable. While the petition alleges that the oral promise of defendant to bid the property in and hold same for plaintiff was made in consideration of the execution of the chattel mortgage, to permit plaintiff to so show would contradict the terms of the chattel mortgage. It is a well-settled rule that parol evidence is competent to prove the true consideration of a written instrument, but such evidence is not competent when it is inconsistent with or contradicts the very terms of the instrument itself. In other words, a party will not be permitted, under the guise of proving the consideration, to destroy the legal effect of the instrument. [Betts v. Harvey, 297 S.W. 995.]
By the terms of the chattel mortgage, it was the mandatory duty of the trustee named therein, in case of default in the payment of the note and at the request of the holder thereof, to sell the property at public auction to the highest bidder for cash in hand and apply the proceeds as directed in the chattel mortgage. The trustee would not be permitted to perform the duties enjoined upon him by the terms of the mortgage, if effect be given to the parol agreement relied upon by plaintiff. The law will not permit the terms of the chattel mortgage to be rendered nugatory by a parol agreement which is wholly voluntary and executory. Plaintiff lost his equity, if any, in the personal property by foreclosure of the chattel mortgage.
The conclusion we have reached as to both the real and personal property, leaves no basis for an accounting between the parties. This result determines both appeals.
The decree below should be reversed. It is so ordered. All concur.