Opinion
No. 41525.
September 11, 1950.
APPEAL FROM CIRCUIT COURT OF WASHINGTON COUNTY, EDWARD T. EVERSOLE, J.
Robert M. Murray, Kansas City, Victor A. Wallace, St. Louis, for appellant.
Earl E. Roberts, Steelville, Samuel Richeson, Potosi, for respondent.
Action to quiet and determine title to "50 acres, more or less," of described real estate in Crawford County. The cause went on change of venue to Washington County, where judgment was entered for plaintiff. Defendant has appealed.
The petition, in conventional form, stated a cause of action under Sec. 1684, R.S. 1939, Mo.R.S.A., and further charged that defendant claimed under certain designated conveyances which were alleged to be fraudulent and void because made for the purpose of hindering and delaying plaintiff in the collection of an indebtedness due from one John T. Verlin. No facts were stated to invoke the jurisdiction of a court of equity and no affirmative equitable relief was asked to set aside the alleged fraudulent conveyances. Defendant's amended answer admitted that she claimed the title. She denied that plaintiff was the owner of the premises, or that the conveyances to her were fraudulent. She alleged that the property had been conveyed to plaintiff by a trustee's deed upon the foreclosure of a deed of trust executed by one Houser and wife. The deed of trust was prior to the conveyances under which she claimed. She alleged that she was unaware of the existence of the deed of trust and of the note secured thereby, until June 21, 1947, and she charged that the foreclosure sale and the trustee's deed thereunder to plaintiff were fraudulent, null and void and conveyed no title to plaintiff (1) because the note secured by the deed of trust had been "paid," the debt extinguished and the note "barred by the statute of limitations" prior to the foreclosure sale; (2) because the foreclosure sale was intentionally and fraudulently concealed from her and she had no notice of the sale or opportunity to protect her interest; and (3) because the sheriff (substitute trustee) knowingly and intentionally sold the property of a known value of $10,000 for $200, a wholly inadequate sum. She tendered to plaintiff the sum of $200 "on condition that he release and waive any claim of title to said property adverse to defendant" and she asked to be discharged with her costs. No affirmative equitable relief was prayed, either to cancel the trustee's deed or to redeem the property from the foreclosure sale. Plaintiff sought only a determination of the existing title, the pleadings presented only issues at law and the action was not in equity, but at law. St. Joseph Lead Co. v. Fuhrmeister, 353 Mo. 232, 182 S.W.2d 273, 277; Becht v. Johnson, 333 Mo. 420, 62 S.W.2d 847, 849; Jacobs v. Waldron, 317 Mo. 1133, 298 S.W. 773, 774.
The cause was tried to the court without the aid of a jury. After plaintiff offered the deeds in his chain of title, he rested and defendant assumed the burden of establishing her affirmative defenses of fraud, inadequate consideration and that the foreclosure was barred by the statutes of limitations. It was stipulated that one Houser and wife were former owners of the property and the common source of title. The evidence tended to show that on June 12, 1934, the Housers executed a $200 note to the People's Bank of Cuba, Missouri, and secured it by a deed of trust on the described land. In 1938 the Housers conveyed the property to John T. Verlin and Agnes O. Verlin, his wife. In 1939 a lumber company of which plaintiff was a part owner sold some $2600 worth of materials for the construction of a dam on the described premises. The materials were not paid for and the lumber company filed a mechanic's lien, obtained judgment against Verlin and wife and the lien was being foreclosed when the Verlins employed defendant's husband as their attorney. The sale was stopped, the judgment was set aside, and on retrial plaintiff's company, on August 14, 1942, obtained a judgment against John T. Verlin alone for $3,097.36. On November 1, 1941, the Verlins had conveyed a one-half interest in the property to defendant and, thereafter, on December 14, 1942, the remaining one-half interest in the property was conveyed to her. Defendant with her husband resided in Johnson County, Kansas. There was evidence that the consideration for these conveyances was legal services and expenses of defendant's husband in the lien litigation; and that the litigation involved other lands as well as the described premises. There was also evidence that John T. Verlin was "demented," had "lost his mind," before these conveyances were made; and that plaintiff kept the lien of the judgment revived against him. This judgment was not a lien against the described property. Otto F. Stifel's Union Brewing Co. v. Saxy, 273 Mo. 159, 201 S.W. 67, 71, L.R.A. 1918C, 1009.
On August 6, 1946, plaintiff, at the request of Houser, purchased the $200 Houser note and deed of trust from A. J. Barnett, the president of the People's Bank of Cuba, to whom they had been transferred. Subsequently, plaintiff demanded payment of Houser but he was not paid. The trustee named in the deed of trust being a nonresident of the state and having further refused to act, the plaintiff, following the terms of the deed of trust, had the sheriff of Crawford County advertise and sell the property therein described on January 3, 1947. Plaintiff bid the property in at the foreclosure sale for $200 and received and recorded a trustee's deed conveying the property to him. The present action to quiet title was instituted April 17, 1948.
As stated, plaintiff offered in evidence the Houser note and deed of trust and the substitute trustee's deed conveying the property to him. The original affidavit as to publication of the notice of trustee's sale had been attached to the trustee's deed, but it was lost. Plaintiff offered the record of it from the recorder's office. The record showed certain defects, which we shall refer to when ruling the specific issues presented on this appeal. Defendant's evidence in support of her pleaded defenses and plaintiff's evidence in rebuttal took a wide range. We shall first state the evidence with reference to the condition and value of the property.
Defendant's husband, an attorney, testified in person on behalf of his wife. His testimony tends to show that the property in question consists of 55 acres located in resort territory, near popular summer resort places, houses and lodges. The top part of the tract, some 20 to 25 acres, is level and tillable except for a growth of scrub oak. A concrete dam 265 feet long and 35 feet deep in the center (with a 3 foot walk over the top) provides a lake, which when full covers 2 1/2 acres. The lake has been stocked with fish. The dam has always leaked and in dry seasons the water gets down to 5 or 6 feet below the top of the dam, sometimes the lake is full and running over. The leaks in the dam are worse when the lake is full and less when the water is low. There are steep hills on the property covered with timber. The lake is fed by four large springs with a good flow of water, enough to keep the lake full, if there weren't a leak in the dam. It would cost $500 to fix the dam and then the property could be sold for $5,000. It might be sold to a man who was "a fool about fishing" for $7,500. About a year and a half or two years before the trial, defendant was offered $7,500 for the property by "a fishing fan" who had the money to buy it. Defendant paid the subsequent taxes, which amounted to $8.22 in 1946 and $10.02 in 1947.
Defendant further offered in evidence the depositions of A. J. Barnett, Rollen L. Giles, T. H. Roberts (plaintiff), Edward C. Meyers and Charles C. Kehner. These depositions had been taken and filed in other litigation between the parties.
A. J. Barnett testified that he was president of the People's Bank of Cuba, Missouri; that he had resided at Cuba for 50 years; that the land in question was rough wild land without river frontage and was located some 4 or 5 miles from his bank; that such land "sells somewhere around ten dollars an acre"; that he had walked over the 25 foot high dam and looked at it, but didn't know whether "it would help the value of it (the land) or not"; that the lake had a little water in it; that "it (apparently the lake or dam) was kind of holey and run through"; that there was perhaps 4 or 5 feet of water up towards the dam; and that he was acquainted with land values in the vicinity of this property. He testified: "I tell you, really, the land in this section, there is really no value to it, it is just about what you can get for it, that is a fact now. * * * Well, I said I thought it was worth about ten dollars an acre, don't you see. * * * I think I said it was probably five to ten dollars an acre, didn't I? That land in this vicinity sells for that, don't you see. * * * No — I have been down there to look at it, but I mean that land in this section sells for five to ten dollars an acre, wild land."
Rollen L. Giles testified that he was sheriff of Crawford County and acted as substitute trustee in foreclosing the deed of trust. He knew the property, but "a long time ago." He could not say that he knew the property was worth more than the $200 bid. He thought the bid was "getting up close to the reasonable value of it." He lived 8 miles from the land and said he was sufficiently acquainted with it to testify as to its value; that he knew the property "pretty well" and had been over it a couple of times, 3 or 4 years before the sale.
T. H. Roberts (plaintiff) testified (in the deposition offered by defendant) that he had sold $2661.76 worth of building materials to John T. Verlin for the construction of the dam; and that he had refused to take a deed to the property in settlement of his claim. He obtained a judgment against Verlin alone for $3,097.36. He said the dam was "leaking and really leaking."
Edward C. Meyers testified that he was in the real estate business at Cuba and had visited the property the day he testified. He fixed the reasonable value of the property at $1100. He saw no recent improvements. The dam was leaking, the water running out under the dam. He said: "It is just a small lake, well, I imagine about half an acre, and you can take a bulldozer and go out here anywhere in a couple of days and build as big a lake as that is." For bulldozers, "well, they charge ten dollars an hour."
Charles C. Kehner testified that he was the County Collector; that the property had been assessed for taxes at a value of $600 for the years 1946 and 1947; that lands were assessed at 25% to 60% of their actual value, since often the assessor did not learn of improvements until long after they were made; and that it would be fair to say that, if the property were assessed at $600, its actual value did not exceed $1,000 to $1,100. He expressed no opinion as to the value of this tract from any personal examination of it.
Defendant further offered, as an alleged admission of plaintiff, an allegation from a prior pleading in other litigation that plaintiff had been damaged to the extent of his $3,079.96 judgment by the transfers from the Verlins to the defendant. It was further agreed that if one Rex Dyer were present he would testify that he offered $7,500 for the property two and one-half years prior to the trial of the cause.
In rebuttal, plaintiff offered the deposition of Edward Houser, who had been in the real estate business near Cuba for 25 years. His testimony tended to show that he sold the land in question to John T. Verlin in 1938 for $1,250. Verlin paid $1,000 and took it subject to a note and deed of trust against the property. As to the tillable land he said: "If you cut the sprouts off of it you could cultivate about two or three acres on the entire tract." He had been over the property many times. The dam was located about 100 yards from the Meramec river and the property extended to within 75 yards of the river. One large and two or three smaller springs flow into the lake. Water runs through and under the dam and into the river. The water level of the lake lowers sometimes 10 to 15 feet. The only improvement other than the dam is "a little tool house." Mr. and Mrs. Verlin told him they offered to deed the property to the lumber company on the lien claim and it was refused. The dam cost over $12,000 for labor and materials in 1939 and it took 6 months to build it. The water runs out under the dam due to the fact that they set off 8 to 10 shots at a time and must have cracked the shale rock, a kind of rotten rock. The water running through and under the dam opens up bigger places. You can see the water boil out. Prior attempts to stop the leaks have failed. After the level of the lake drops 10 or 15 feet, it does not leak so bad. The lower it is the less the pressure and the less the leaks. The evidence on other issues will be stated in the course of the opinion.
The trial court found that there was nothing in the record to indicate a bona fide sale of the property from the Verlins to defendant. The court said: "It seems hardly likely that a client would transfer the entire corpus of a lawsuit to his attorney's wife, in payment of his attorney's fees, without having retained some interest." The court did not expressly rule as to whether the $200 note was barred by limitations, but said that it was "quite likely too late to bring suit on the note." The court held that the foreclosure sale under the deed of trust was not barred and that the foreclosure was valid. The sale price was held to be adequate, but the court said "the question as to whether $200 was adequate consideration for the property was a close one." The court also pointed out that the affidavit of proof of publication showed what the court deemed to be "a mere clerical error," but the court held the last publication was made on the day before the sale. The issue of fraud and unfairness was ruled against defendant. The court, deeming the action to be one in equity, entered a judgment quieting title in plaintiff, but with this provision, "unless, however, the defendant pays to the plaintiff the sale price of $200.00 plus the material cost in slight excess of $2,900.00 and interest on such amounts to date and pay to the Clerk of the Court the costs herein. Upon which payments the judgment herein will be set aside and a different judgment entered."
Appellant contends that the court erred (1) in holding that the foreclosure sale was not barred by the statutes of limitation; (2) in holding the foreclosure sale was valid; and (3) in considering respondent's judgment against Verlin on the issue of consideration paid at the trustee's sale.
Under Sec. 114(d) of the Code of Civil Procedure, Laws 1943, p. 388, Mo. R.S.A. § 847.114(d), we will review the case upon the law and evidence as in suits of an equitable nature, but the judgment may not be set aside unless clearly erroneous, and due regard must be given to the opportunity of the trial court to judge of the credibility of the witnesses.
Was the foreclosure sale barred by the applicable statutes of limitation? The note and deed of trust were dated June 12, 1934. The note and its endorsements were offered and received in evidence without objection. The note was payable to the People's Bank, Cuba, Missouri, and was due 30 days after date. In addition to the endorsement of the bank, the following appears: "7/28/44 Interest Paid to 6/12/44; 8/10/45 Interest Paid to 6/12/45." The note was further credited with the net proceeds of the foreclosure sale, $182.15.
Edward Houser, one of the makers of the note, testified by deposition (offered by plaintiff) that he paid the interest on this note up until plaintiff acquired it. Other evidence showed this date to be August 6, 1946. He further said that on July 28, 1944 he paid the interest to June 12, 1944 and that the other interest payment was later. He also gave some conflicting testimony indicating that he paid interest every 3 to 6 months, but had so many notes at the bank that he just paid interest as it came along.
A. J. Barnett, president of the Bank of Cuba, testified by deposition (offered by defendant) that he bought the Houser $200 note from the bank and held it from 1938 until August 6, 1946 when he delivered the note, endorsed without recourse, to some one, he thought it was to T. H. Roberts (that was his best recollection) on payment of $214. His records showed "Paid," but he said that that meant paid to him; that the note was not marked paid; and that his records would show no difference between paid and sold. He said that 10 years interest to June 12, 1944 was actually paid on July 28, 1944, "or I wouldn't have marked it that way."
The first publication of notice of the foreclosure proceedings under the power of sale in the sale in the deed of trust appeared on December 12, 1946. See Friel v. Alewel, 318 Mo. 1, 298 S.W. 762, 765. Was foreclosure barred when this notice appeared to toll the statute?
In support of her contention that action on the note was barred and the right to foreclose the deed of trust was also barred, appellant cites Secs. 1012, 1013 and 1017, R.S. 1939, Mo.R.S.A.; Coleman v. Trueblood, 351 Mo. 188, 172 S.W.2d 863; Hubbard v. Dahlke, 277 Mo. 516, 210 S.W. 652. Appellant further insists that "the interest payment endorsed on the note after the statute of limitations had run did not revive it in the entire absence of any evidence other than the endorsement itself," citing Donnell v. England, 345 Mo. 726, 137 S.W.2d 471; Sugent v. Arnold's Estate, 340 Mo. 603, 101 S.W.2d 715.
The essential fact issue presented is whether or not one liable for the payment of the note, in this case one of the makers, intentionally made a payment on the note after the lapse of 10 years from the due date of the note. The ultimate fact to be proven was the payment made on the note. Clark v. Powell's Estate, Mo.Sup., 208 S.W. 31, 35; Dewein v. Hooss, 237 Mo. 23, 38, 139 S.W. 195; Caneer v. Kent, 342 Mo. 878, 119 S.W.2d 214, 218.
While the evidence is subject to certain conflicts and uncertainties, it is entirely sufficient to justify a finding that a maker of the note voluntarily and intentionally on July 28, 1944 paid the interest on the note to June 12, 1944, and we so find. We further hold that the endorsement on the note showing the payment on July 28, 1944, of interest to June 12, 1944, was made with the knowledge and consent of a maker of the note; that he recognized the indebtedness; and that the note was revived and the bar of the statute of limitation was removed prior to the time of the foreclosure sale. Caneer v. Kent, supra. The sale having been held within 20 years from the due date of the note secured by the deed of trust, no affidavit, as provided in Sec. 1017, supra, was required to be filed. Sec. 1017, supra. See, also, Carwood Realty Co. v. Gangol, Mo.Sup., 232 S.W.2d 399, not yet reported in the State Reports.
Was the foreclosure valid? Appellant has abandoned (except in argument) the charge of fraud as made in her amended answer, to wit, "that plaintiff and said trustee purposely and intentionally * * * defrauded defendant by concealing from defendant the existence of said note and deed of trust and of the fact that the same was being foreclosed and the property sold." Respondent and his attorney, who handled the matter of the foreclosure, appeared personally before the court and testified in this cause. Appellant, as mentioned supra, offered the deposition of the sheriff of Crawford County, the substitute trustee who conducted the sale. Their testimony on the issue of fraud tends to show that the parties acted in good faith, without any intent to cheat or defraud, and the trial court so found. We approve that finding.
Appellant has now shifted her position from one, wherein she charged that the foreclosure proceedings and the trustee's deed thereunder were fraudulent and void and conveyed no title to respondent, to one wherein she contends the foreclosure proceedings and the trustee's deed thereunder are only avoidable and not void and she now seeks to avoid them in equity. Many cases involving direct proceedings in equity are cited. Appellant now contends the foreclosure sale and the trustee's conveyance to respondent were invalid (1) because the publication of notice of the intended foreclosure sale was not in accordance with Sec. 3464, R.S. 1939, Mo.R.S.A.; (2) because the sale price was inadequate; (3) because the trustee did not inform himself as to the value of the property and adjourn the sale when the property was about to be sacrificed; and (4) because the evidence shows unfairness in making the sale. Appellant urges matters which are cognizable only in a court of equity. Since the trial court in deciding the case referred to it as one in equity, we will review these assignments.
Appellant's contention that the publication of notice did not comply with Sec. 3464, R.S. 1939, Mo.R.S.A., was not raised by the pleadings. It rests upon the fact that the record of the affidavit of publication is defective in that it shows the dates of publication of the notice of foreclosure as December 12, 19, 26, 1946, and January 3, 1947. On the record, immediately before a copy of the notice of sale is set out, there appear the words and figures "Thursday, Jan. 2, 1947" (apparently the copy of the notice was from that issue of the paper), this is followed by the notice of "Trustee's Sale under Sheriff" for Jan. 3, 1947, then the defective affidavit appears. If the record of the affidavit had shown the last publication as January 2, 1947, it would have been regular, except for the further fact that the affidavit appears to have been sworn to on January 1, 1947. Appellant contends the affidavit of proof shows the last publication was on the day of the sale and so did not comply with Sec. 3464, supra. See Hoffman v. Bigham, 324 Mo. 516, 24 S.W.2d 125, 130. The sheriff testified that he had had the notice published four times in "The Bourbon Standard." The affidavit shows it to be a weekly newspaper and there was testimony that it was a proper legal publication to carry the notice. The trial court held that the record of the affidavit showed a clerical error, since the other publication dates were on Thursdays, and that the fourth publication was on Thursday, January 2, of which he took judicial notice.
If the foreclosure proceedings were defective and irregular in that Sec. 3464 was not complied with, nevertheless the substitute trustee's deed was sufficient to convey the legal title to respondent. Appellant could take advantage of such an irregularity only by a proper action in equity to redeem the property from such sale. Hoffman v. Bigham, supra, 24 S.W.2d 125, 132. No such action has been instituted. Appellant has made no offer to discharge the indebtedness or redeem the property. She has asked for no affirmative relief in equity. Her tender of $200 was upon special conditions. Respondent asked a determination of the existing title. Appellant admitted the existence of conveyances by which the legal title was transferred to respondent, but she pleaded affirmative defenses and asked to be discharged with her costs. On the record presented, we must hold that the legal title was vested in respondent. Absent a proper proceeding to redeem and a proper offer to do equity in the premises, appellant is in no position to take advantage of the alleged defects in the affidavit as to proof of publication of notice.
Was the sale price inadequate? Appellant insists that, since much of the evidence was offered in the form of depositions, we should not defer to the trial court's finding that the sale price was adequate. The only witness, who fixed a high value upon the property, appeared personally and testified before the court. The court did not accept his estimate of value. The other evidence does not indicate that the sale price was grossly inadequate. We defer to the trial court's finding that it was adequate. Further, mere inadequacy of price is not sufficient to set aside a sale under a power contained in a deed of trust (absent fraud and unfair dealing) unless so gross as to raise the inference of fraud or imposition. Trotter v. Carter, 353 Mo. 708, 183 S.W.2d 898, 902; Cockrell v. Taylor, 347 Mo. 1, 145 S.W.2d 416, 422; Drannek Realty Co. v. Nathan Frank, Inc., 346 Mo. 187, 139 S.W.2d 926, 928; Judah v. Pitts, 333 Mo. 301, 62 S.W.2d 715, 720. Since the sale price was not inadequate, it follows that the sheriff violated no duty to appellant in not adjourning or postponing the sale.
Appellant further says that "although the trustee may have literally complied with the terms of the deed of trust, such literal compliance will not support the sale under the evidence in the record showing unfairness in making it." Again appellant cites cases where affirmative relief was sought in equity. Some of the alleged unfairness arises from the fact that appellant was a nonresident of the state; that she had not obtained an abstract of title to the property; that her husband knew nothing of the existence of the note and deed of trust; and that publication was had at Bourbon, while the sale was at Steelville. The sheriff knew that title stood in defendant's name, but said he didn't know her address. Nor did respondent's attorney know her address. Respondent knew of the transfers to appellant, but considered them fraudulent as to him and that the Verlins still owned the property. Appellant was not called upon by anyone to pay the note prior to the sale and no one sent her a personal demand for payment, nor any notice of the proposed foreclosure sale. Her husband testified that they would have paid off the note if they had known of its existence. No personal notice to appellant of the foreclosure proceeding was required. Homan v. Connett, 348 Mo. 224, 152 S.W.2d 1053, 1055; Harlin v. Nations, 126 Mo. 97, 103, 27 S.W. 330. On the record presented in this case the facts are insufficient to invalidate the foreclosure sale, particularly so, where no affirmative equitable relief was sought and there has been no offer to redeem the property and pay the indebtedness secured by the deed of trust. See Trotter v. Carter, supra, 183 S.W.2d 898, 902.
Finally, appellant complains of the judgment and the court's order that, if defendant would pay plaintiff the sale price of $200 plus the cost of the materials furnished by plaintiff's company for the dam, the judgment quieting title in plaintiff would be set aside and a new judgment would be entered. We agree that the form of the judgment is erroneous; and that it should be modified, but appellant was not prejudiced by the privilege extended to her. She did not offer to do equity or seek to redeem the property. She stood upon her affirmative defenses as pleaded. The court ruled these defenses against her and we have affirmed his findings. The form of the judgment should be modified and that part of it beginning with the word "unless" should be stricken. As modified the judgment should be affirmed. It is so ordered.
CONKLING, P. J., and HYDE, J., concur.
HOLLINGSWORTH, J., not voting because not a member of the court when the cause was submitted.