736 S.W.2d 62 | Mo. Ct. App. | 1987
Upon defendant American Family Mutual Insurance Company’s refusal to release the deeds of trust that encumbered plaintiffs’ St. Charles County home, plaintiffs, asserting the underlying indebtedness had been satisfied, sued to enforce the penalty authorized by § 443.130, RSMo 1978,
In May 1978, plaintiffs Robert and Linda McPheeters financed the purchase of a home in St. Charles County through defendant Community Federal Savings and Loan Association. The $59,000.00 purchase money debt, evidenced by plaintiffs’ promissory note, was secured by a deed of trust to the property. The deed of trust provided, insofar as is pertinent here, that “as additional security for the payment of the note and debt ..., Borrower will keep the improvements of the Property continuously insured ... against loss or damage by fire.” In January 1979, to secure a debt of $5,436.74, plaintiffs executed a second deed of trust to the property in favor of defendant Beneficial Mortgage Company of Missouri. The second deed of trust also required that plaintiffs keep the buildings on [the] premises insured against loss by fire.”
' Plaintiffs subsequently purchased a homeowners policy from defendant American Family Mutual Insurance Company. The policy provided the requisite fire loss coverage and listed Community Federal and Beneficial Mortgage as first and second mortgagees, respectively.
In August 1982, plaintiff’s home was badly damaged by fire. Plaintiffs executed a proof of loss, as the homeowners policy required. American Family, however, denied liability, asserting the fire was arson and that plaintiffs were the culprits. Plaintiffs subsequently filed suit against American Family in the Circuit Court of St. Charles County for what they characterized as American Family’s vexatious and unreasonable refusal to pay them for their loss. The action was removed to federal district court because of diversity of citizenship and was tried to a jury. American Family’s principal defense is reflected in the following instruction to the jury:
Your verdict must be for defendant on plaintiff’s claim ... for ... insurance policy proceeds if you believe:
First, either plaintiff or both plaintiffs, acting individually or together, set fire to the residence in question with the intention of burning the residence, or arranged to have someone set fire to the residence in question with the intention of burning the residence, and Second, defendant was thereby prejudiced.
The jury returned a verdict for American Family, and judgment was entered accordingly.
In the meantime, Community Federal and Beneficial Mortgage had asserted claims for loss under the policy’s mortgage clause, which provided:
*64 Loss or damage, if any, under this policy, shall be payable to the mortgagee (or trustee) named on the face of the declarations, as interest may appear, under all present or future mortgages upon the property therein described in which the aforesaid may have an interest as mortgagee (or trustee), in order of precedence of said mortgages, and this insurance as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property_(Emphasis added).
American Family duly settled the claims, taking back assignments of the deeds of trust and the notes they secured.
Whenever this company shall pay the mortgagee (or trustee) any sum for loss or damage under this policy, and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company ... may at its option pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage, with interest accrued, and shall thereupon receive a full assignment and transfer of the mortgage and of all other such securities....
Despite the district court’s determination that American Family was not liable to plaintiffs under the homeowners policy, plaintiffs apparently believed, for reasons that remain unclear, that American Family’s payments to Community Federal and Beneficial Mortgage had extinguished their (plaintiffs’) obligations on the notes. When they demanded American Family release the deeds of trust that encumbered the property, American Family understandably refused. Plaintiffs subsequently filed suit in the circuit court of St. Charles County seeking quiet title and a § 443.130 penalty for American Family’s allegedly wrongful refusal to release the deeds of trust. American Family denied plaintiffs had discharged their obligations on the notes and, asserting plaintiffs were in default, counterclaimed for judicial foreclosure and quiet title. The circuit court determined that the former adjudication doctrine of merger barred American Family’s counterclaims because American Family had failed to interpose them as compulsory counterclaims in the federal action. Accordingly, the circuit court quieted title in plaintiffs and assessed the prayed-for penalty and costs against defendants. On appeal American Family asserts the circuit court has erroneously applied the law. We agree.
Though it is certainly correct to say a party is barred from suing on a claim he should have interposed as a compulsory counterclaim in a prior action,
That is not to say res judicata principles do not dictate the outcome of this appeal. In the federal action, the jury re
Because the notes remain unpaid, the deeds of trust plaintiffs executed and delivered as security for payment remain valid encumbrances on their title. The circuit court’s order quieting title in plaintiffs was therefore error.
Both deeds of trust authorize American Family to seek judicial foreclosure upon plaintiffs’ failure to pay any installment of the underlying note when due. The parties stipulate plaintiffs have made no payment on either note since the fire. American Family is therefore entitled to judgment on its counterclaim for judicial foreclosure and to quiet title against plaintiffs.
Judgment for plaintiffs is reversed; the matter is remanded with directions to enter judgment for American Family on its counterclaims.
. § 443.130 provides that if a trustee or mortgagee receiving satisfaction, does not, "within thirty days after request and tender of costs, acknowledge satisfaction on the margin of the record, or deliver to the person making satisfaction a sufficient deed of release, he shall forfeit to the party aggrieved ten percent upon the amount of the mortgage or deed of trust money, absolutely, and any other damages he may be able to prove he has sustained, to be recovered in any court of competent jurisdiction.”
. Beneficial Mortgage assigned its note and deed of trust to American Family for $5,938.76. Community Federal assigned American Family its note and deed of trust for $66,847.64. The payments represented the principal and interest due on the notes.
. See Society for the Preservation of St. Louis Lodge #20, AF and AM v. Masonic Temple Association of St. Louis, 692 S.W.2d 837 (Mo.App. 1985).