Farmers Exchange Bank v. Thompson , 309 Mo. 669 ( 1925 )

This is an appeal from a judgment of the Circuit Court of Grundy County approving and confirming sales of land made by a trustee and awarding two writs of assistance: one to put the vendee in possession of the lands sold; the other to put the trustee in possession of the lands not sold and constituting the remainder of the trust estate.

On September 7, 1921, defendant Thompson owed approximately $150,000 to unsecured creditors who were demanding payment and proceeding to put their claims in judgment. He owned several thousand acres of land. Some of it was located in the states of Colorado and Kansas; the remainder in Grundy, Harrison and Livingston counties, Missouri. Practically all of it was heavily encumbered and foreclosure sales were pending. Being unable on account of financial embarrassment to prevent sacrifices of his property through execution and foreclosure sales, Thompson effected an arrangement with his unsecured creditors, the plaintiffs in the suit of which the present proceeding is the aftermath, whereby by they were to advance sufficient funds to prevent forced sales and he was to convey all of his property upon certain trusts. Pursuant to such arrangement they advanced in all $34,000 and he conveyed his lands, by general warranty deeds, to defendant A.G. Knight, who contemporaneously therewith made and executed a writ ten declaration of trust. Subsequently a controversy arose between plaintiffs and defendants as to the extent of the trustee's authority to make sales of the land so conveyed to him and as to who was entitled to the possession and the rents and profits pending such sales. Thereupon the plaintiffs filed their bill in equity praying the court to construe and enforce the trust. Defendants, Thompson and Knight, filed no counter-pleading, but appeared in court and consented that a decree be entered. The decree so entered, in so far as it has any bearing on the present controversy, was as follows:

"The court doth consider and find that by the terms of said trust the trustee therein named, A.G. Knight, has full and complete power and authority as trustee to sell and convey all of the real estate so conveyed by C.D. Thompson to A.G. Knight as trustee remaining in the hands of said trustee. That said real estate may be sold by the trustee in whole or in parts; that said real estate may be sold all at one and the same time, or it may be sold in parcels and at different times. That all of the sales of said real estate or any part thereof by the trustee under this trust shall be at public auction upon notice thereof; that said real estate may also be sold by the trustee as a whole or in parts at private sale upon the consent of the defendant C.D. Thompson; that the notices of the sale of any of said real estate or any part thereof shall be published in some newspaper printed and published in the county in which the land is situate, and such publication shall be for a period of not less than four weeks prior to the day of sale, and said publication shall describe the land to be sold, giving the time, date and place of sale; that all sales made by the trustee under the trust herein shall be at the court house in the county in which such lands are situated.

"C.D. Thompson shall have the right to rent and manage said real estate, but the trustee, A.G. Knight, is entitled to have the rents and profits paid him by C.D. Thompson, and same shall be paid the trustee by C.D. Thompson to be applied as other proceeds coming into his hands, said rents and profits to be paid or transferred not later than March 1, 1923. That the possession of all of said real estate to be delivered to A.G. Knight by C.D. Thompson on March 1, 1923, provided that if any real estate is sold under this trust by the trustee, then possession of such real estate so sold is to be delivered by C.D. Thompson to the purchaser February 28, 1923. . . .

"The court doth further consider and find that the trustee herein be authorized to borrow money with which to pay the interest, taxes or other necessary charges and expense that may be necessary to save and preserve such part or parts of said real estate as may be deemed necessary by the trustee from being sold under any mortgage, deed of trust, judgment execution or lien, or for taxes, or on any execution sale, and all sums so expended by the trustee shall be a prior claim and be first paid out of the funds coming into the hands of the trustee from the sale of said real estate, or from any rents or profits or from any other source whatever; it is further adjudged by the court that the trustee in this trust shall prevent as far as reasonably possible the lands from being sacrificed or dissipated by reason of existing mortgages and deeds of trust, until March 1, 1923. . . .

"The court doth further consider and find that the trustee herein be required to make sale or sales of the real estate, or so much of said real estate as remains in the hands of the trustee, and execute proper conveyances therefor to the purchaser or purchasers of the real estate so sold and conveyed, which said real estate so to be sold by the trustee is described as follows: [Here follow descriptions.]

"The court doth further consider and find that when sufficient of said real estate has been sold to pay all of the claims, matters and things required to be done in the next succeeding paragraphs, such sales are to cease.

"That out of the proceeds of all sales of land under this trust by the trustee, and out of all moneys coming into the hands of the trustee from the rents and profits and from any and all other sources, if any, the trustee shall pay:

"First: . . . all charges and other expenditures of whatever kind and character necessary in the administration of the trust herein set out.

"Second: All claims for money advanced by the trustee or by the plaintiffs . . . necessary to conserve or preserve said property to the creditors and C. D. Thompson, and prevent the same from being sold, dissipated, sacrificed or lost.

"Third: To the payment in full of the judgment of the Trenton Trust Company, . . .

"Fourth: To the payment of the indebtedness of each and all of the plaintiffs, as set forth in this decree, as follows: . . .

"Fifth: That the remainder of all moneys and all land left in the hands of the trustee be conveyed, transferred and assigned to C.D. Thompson, his heirs, assigns, or personal representatives, as the case may be."

Under the caption, "Description of Lands," eight separate tracts are described, the concluding parts of the several descriptions, respectively, being as follows: (1) "Subject to a mortgage given thereon by grantors conveying to Herschel Bartlett in trust to secure the payment of a note and coupons in said deed of trust particularly described, dated January 25, 1918, and recorded January 30, 1918, in the office of the Recorder of Deeds of Grundy County, Missouri, in Book 145 at page 56, the foregoing lands lying in Grundy County, Missouri;" (2) "Subject to a deed of trust given by Henry J. Hughes, etc., the foregoing lands lying in Grundy County, Missouri;" (3) "All of said property conveyed subject to all encumbrances of record; the foregoing land lying in Grundy County, Missouri;" (4) "Subject to a mortgage given thereon by grantors conveying to Herschel Bartlett, etc., the foregoing lands lying in Livingston County, Missouri;" (5) "(Subject to present encumbrances) the foregoing lands lying in Livingston County, Missouri;" (6) "Subject to a deed of trust given thereon by grantors conveying to Herschel Bartlett in trust to secure, etc., the foregoing lands lying in Harrison County, Missouri;" (7) "The foregoing lands lying in Cheyenne County, Colorado;" and (8) "(except all encumbrances, including taxes), the foregoing lands lying in Kiowa County, Colorado."

At the time of the conveyance to Knight there was an outstanding deed of trust or mortgage, theretofore given by defendant Thompson to one Herschel Bartlett to secure the payment of $150,000 with five per cent annual interest thereon, covering 4375 acres of the land, of which 3291 acres lay in Grundy County (being the land first described in the decree under the heading "Description of Lands") and the remainder in Harrison and Livingston counties. On February 19, 1923, the trustee, pursuant to notice given in accordance with the provisions of the consent decree, sold at public sale the 3291 acres lying in Grundy County. He sold the land in parcels, all to be cleared of encumbrance. On February 20, 1923, pursuant to like notice he sold four other tracts of land in Grundy County aggregating 1216 acres. Three of these were encumbered, each carrying a mortgage independent of the others. These were sold subject to encumbrance. The fourth was clear. The Grundy Land Company, a corporation organized by Thompson's unsecured creditors (the plaintiffs herein) and to whom they had assigned their respective claims, was the purchaser at each of these sales. In his report to the court, filed March 8, 1923, the trustee stated that he had sold the 3291 acres covered by the Bartlett deed of trust for the aggregate sum of $208,200; and that from this was to be deducted the indebtedness secured by the deed of trust and the back taxes on the land which together amounted to $161,465.35, leaving $46,734.65 as the net balance to be realized from the sale. His report further disclosed that the equities in the three tracts sold subject to encumbrance and the remaining tract sold clear together brought the sum of $23,500; and that there remained of the trust estate about 1000 acres of land in Harrison and Livingston counties and approximately 10,000 acres in the State of Colorado, all of which the trustee purposed to sell at the next term of court.

Defendant filed exceptions to the trustee's report of sales. All of the exceptions were based on the contention that the consent decree did not authorize the trustee to sell the lands covered by the Bartlett deed of trust free of that encumbrance, but on the contrary required him to sell subject to it. On that hypothesis defendant insisted; that the trustee, notwithstanding the statement in his report that he had sold the land clear of encumbrance, in fact sold only the equity of redemption; that as the plaintiffs, who purchased under the name of Grundy Land Company, were fully cognizant of the terms of the decree and were bound thereby, the sale should be confirmed as a sale of the equity of redemption, and that as $208,200, the proceeds of such sale, was more than enough to pay the costs incurred in the administration of the trust, reimburse the plaintiffs for advancements made and satisfy their claims, the other sales should be not confirmed.

At the hearing on the exceptions it developed that in the published notices of sale it was stated that the land covered by the Bartlett deed of trust would be sold clear of encumbrance; that an announcement to the same effect was made by the trustee when the land was put up for sale; and that defendant was present at the sale and, though fully advised as to both the published and oral announcements and of the trustee's purpose pursuant thereto to sell free of encumbrance, offered no objection thereto. It was further shown that the land was sold subject to encumbrance at a public sale by the trustee in the preceding November and the sale subsequently set aside by the court on exceptions filed by defendant; and that at the last sale, when sold to be cleared of encumbrance, it brought $7,000 more than at the preceding one when sold subject to encumbrance.

The court approved and confirmed the sales as made, specifically finding, among other things, that the sale of the land encumbered by the Bartlett deed of trust was made in compliance in all respects with the consent decree, and that the manner in which the sale was made "was the most advantageous way in which to sell said lands, and resulted in benefit to the said C.D. Thompson, in that said lands would and did bring a greater price so sold than they would have brought to have sold the equity therein, the purchaser taking the lands subject to such mortgage and liens; that such manner of sale was the most practical and most advantageous to the said C.D. Thompson." It appearing further that the defendant had never surrendered possession of any of the lands conveyed by him to the trustee, and was refusing to do so, a writ of assistance was awarded the Grundy Land Company to put it in possession of the lands purchased by it, and a like writ to the trustee to enable him to obtain possession of the lands not sold and constituting the remainder of the trust estate. From the judgment and orders just mentioned defendant Thompson prosecutes this appeal.

I. Appellant in support of his contention, that the trustee was without authority to sell the land covered by the Bartlett deed of trust clear of encumbrance and apply the proceeds first to the discharge of that lien and then to the objects of the trust, advances these propositions: (1) the decree specifically directs that the land be sold subject to said deed of trust; (2) it specifically directs how the proceeds of the sale shall be applied, and the application of any part of them to the discharge of the prior deed of trust is not included in such direction; and (3) even if the declaration of trust and the decree had been silent as to how the lands should be sold and the proceeds of the sales applied, no part of such proceeds could be used in the discharge of the prior lien. The three present such closely related matters that they will be considered together.

The assertion that the decree expressly provides that the land should be sold subject to the deed of trust is based on this language: "Subject to a mortgage given thereon by grantors conveying to Herschel Bartlett in trust to secure the payment of a note and coupons in said deed of trust particularly described, dated January 25, 1918, and recorded, etc., the foregoing lands lying in Grundy County, Missouri." But, as appellant concedes, this was but a part of the description of the land; and the decree on its face shows that the land descriptions therein as a whole are simply transcripts of the descriptions as contained in the deeds from the defendant to the trustee. The clause just quoted and similar ones, which have been heretofore set out, do not purport to be directions as to how sales shall be made by the trustee, they are merely constituent parts of the descriptions, respectively, of the assets conveyed.

There was no specific direction in the decree as to how the trustee should sell the land encumbered by the Bartlett deed of trust with reference to that encumbrance. However, only the equity of redemption was conveyed to him; and consequently that interest in the land was all that it was incumbent upon him to sell and account for. The question that confronted him was how to sell in order to realize the greatest return. Here was a tract of land containing more than three thousand acres encumbered by a single mortgage of $150,000. There would be few, if any, buyers for such a large body of land; to sell in parcels subject to the mortgage covering the whole would be difficult if not wholly impracticable. The declaration of trust and the decree gave him wide powers. They enjoined upon him as a duty to "prevent as far as reasonably possible the lands from being sacrificed or dissipated by reason of the existing mortgages and deeds of trust." He had first sold subject to the mortgage and the sale had been set aside by the court as inadequate. He then sold in parcels, to be clear of encumbrance; from the aggregate amounts bid he deducted the mortgage debt and reported the balance as the clear proceeds of the equity of redemption. That procedure was but a method of selling the equity of redemption, and it was fully authorized under the broad powers conferred by the trust. Authorities cited by appellant, to the effect that a trustee holding the naked title cannot on a sale of the property use part of the purchase money to satisfy prior encumbrances, unless expressly empowered thereto in the instrument creating the trust, are not in point.

The learned chancellor nisi found that the method employed by the trustee in making sale of the equity of redemption was the most practicable and the most advantageous that could have been adopted. We fully concur in that finding and approve his action in confirming the sale.

II. Appellant insists that the other sales reported by the trustee should not have been confirmed on the ground that the equity of redemption in the land encumbered by the Bartlett mortgage sold, according to his theory, for $208,200;Other enough to fully satisfy all the purposes of the trust.Lands. But as only $46,734.65 was realized, a sum wholly insufficient for those purposes, this contention fails.

III. The court had complete jurisdiction of the res and of the parties. It had theretofore adjudged "that the possession of all of said real estate be delivered to A.G. Knight by C.D. Thompson on March 1, 1923, provided that if anyJurisdiction: real estate is sold under this trust by theWrits of trustee, then possession of such real estate soAssistance. sold is to be delivered by C.D. Thompson to the purchaser February 28, 1923." No new right or title in defendant had intervened since the rendition of the decree. The writs of assistance were necessary to the carrying out of the judgments and orders of the court in administering the trust. They were properly awarded. [State ex rel. v. Evans,176 Mo. 310, 325.]

The judgment and orders appealed from are affirmed. All concur.