88 S.W.2d 183 | Mo. | 1935
Lead Opinion
This is an action in equity brought by Saline County (in which the members of the county court joined as plaintiffs) to cancel a quitclaim deed to Saline County, to set aside the entry of satisfaction of two county school fund mortgages, to set aside the cancellation of the bonds secured thereby, and to restore lien of said mortgages. Defendants' pleading was denominated a demurrer, and *1143 sought the dismissal of plaintiffs' bill on the ground that it did not state sufficient facts to show that plaintiffs were entitled to the relief prayed for. This was overruled by the court and, upon defendants' refusal to plead further, a decree was entered granting the relief asked by plaintiffs. Defendants have appealed from this decree.
The following facts are stated in the petition. On the 24th day of February, 1919, the county loaned defendant Thorp four thousand dollars of public school fund money. Thorp executed his bond to the county therefor and secured same by a mortgage on 120 acres of land in Saline County, which was on the same day filed for record. On the 4th day of January, 1926, the county made a further loan to defendant Thorp of three thousand dollars of public school money, for which he executed his bond to the county therefor and secured same by a mortgage on the same land, which was on the same day filed for record. On the 4th day of January, 1926, defendant Thorp executed a note for one thousand dollars to defendant Althouse, and secured same by a deed of trust, whereby the same land was conveyed to defendant Parsons, as trustee, which was on the 29th day of March, 1930, filed for record. Thorp failed to pay interest on the four thousand dollar note in 1927 and failed to pay interest on the three thousand dollar note in 1930. The county informed defendant Thorp that foreclosure would be had unless the past due interest was paid. Thorp then offered to execute and deliver a deed conveying all of his right, title and interest in said real estate to the county in consideration of the premises. On the 15th day of March, 1933, Thorp did execute and deliver a quitclaim deed, conveying all his interest in said real estate to plaintiff county, which was on that day filed for record. At the time said conveyance was made, the county court believed that said real estate was free of all liens and incumbrances except the two mortgages to the county, and that said deed was accepted by them under that belief. A marginal release on the record of each mortgage in the recorder's office was thereupon entered by the county clerk, showing satisfaction of said mortgages; and at said time the bond for four thousand dollars and the bond for three thousand dollars were presented to the recorder of deeds of said county, and by her stamped canceled. At that time, the deed of trust executed by Thorp to Parsons trustee, to secure said one thousand dollar note, was an unsatisfied lien on said real estate, of which fact plaintiffs were ignorant.
It was also stated that if plaintiffs had known that said deed of trust was a lien upon said real estate, plaintiff would not have accepted said deed from Thorp, nor would plaintiffs have caused the marginal entry of satisfaction of said two mortgages to have been entered on the record; that the county court is prohibited by statute from investing any school funds on encumbered real estate security; and that the county court had no authority to accept a deed from *1144 Thorp in satisfaction of said indebtedness, while said real estate was encumbered. There was a further allegation that defendant Althouse had assigned and transferred said one thousand dollar note to defendant Wise.
[1] Appellants point out that no fraud, on the part of defendants or any of them, was alleged; that the petition shows no mutual mistake of fact; that the $1000 trust deed was a matter of record; that the members of the county court could only fail to discover it because of gross negligence; and say that equity will grant no one relief, from the consequences of his own neglect, due to failure to avail himself of means of knowledge at hand. Perhaps, if this was a case between individuals, the allegations of this petition would not show clearly enough the right to equitable relief. [See Scott v. Hill,
[2] It appears here (although it is not so clearly stated as it could have been) that the proposition of the court was to release the bonds and mortgages for a conveyance of the land with no other encumbrances. We could hardly conceive of reasonable men making a proposition to take 120 acres farm land in satisfaction of a first lien of this size subject to other encumbrances, and we do not think that this petition is susceptible of such an interpretation. Thorp had actual knowledge of the other encumbrance (since he made it) and the county court did not. If the county court agreed to accept clear title to the land in satisfaction of the school fund mortgages, Thorp could not be entitled to a release without conveying the land free from that encumbrance. In view of the decline in value of farm *1145
lands, since the county loaned this money (which is not alleged but which has been a matter of such public concern that no court could fail to take knowledge of it), it is not reasonable to suppose that Thorp would not so understand the court's proposition. Thorp, therefore, never complied with the court's offer, never became entitled to a release, and having obtained it without being entitled to it has no standing to prevent setting it aside. What standing has the holder of the subsequent encumbrance to prevent it, upon the facts here stated, when to grant this relief to the county would still leave him with just what he had and all that he is entitled to have? It would only prevent him from making profit, at the expense of the public school fund, because of mistake of public officers from which he lost nothing. It is well settled that equity will not declare a merger under such circumstances so as to give the holder of an intervening encumbrance a greater lien and priority than he had. [Scott v. Hill,
[3] Appellants further say that it is not alleged that the land is worth less than the amount of all three mortgages and delinquent interest, but, if it does not directly state it, we think that inference is a reasonable inference from the facts stated. Appellants also say that there is no allegation that Thorp was insolvent. Such an allegation would not be necessary here for, if he was solvent, the court certainly would have no authority to release him from his obligation to the county to repay what he borrowed from the school funds. It must be remembered that this is a case where public officers were acting for a governmental subdivision of the state, a county, in relation to funds held in trust for the public for school purposes. Nothing is better settled that that, under such circumstances, such officers are not acting as they would as individuals with their own property but as special trustees with every limited authority, and that everyone dealing with them must take notice of those limitations. [Montgomery County v. Auchley,
[4] Sections 9243-56, Revised Statutes 1929, say what a county court can do with reference to the investment, collection and reinvestment of public school funds. These statutes require that county courts "diligently collect, preserve and securely invest . . . on unincumbered real estate security, worth at all times at least double the sum loaned . . . the county school fund;" and that these funds "shall belong to and be securely invested and sacredly preserved in the several counties as a county public school fund, the income of which fund shall be collected annually and faithfully appropriated for establishing and maintaining free public schools." [Sec. 9243.] It is also provided by this section that the county court "may, in its discretion require personal security in addition thereto." The county treasurer is required to collect all school money, give receipts therefor, *1146 and file duplicate receipts with the county clerk. The county clerk is authorized to satisfy a school fund mortgage "when the amount of said receipts is in full of all interest and principal of said bond and mortgage." [Sec. 9246.] School fund loans are required "to be secured by a mortgage in fee on real estate within the county, free from all liens and encumbrances, of the value of double the amount of the loan, with a bond," and also with additional personal security if deemed necessary. [Sec. 9251.] The mortgage is required to recite the bond and contain a condition for sale by the sheriff upon 20 days' notice. [Sec. 9252.] Even after a loan has been made, the county court is given power to require additional security on the bond "when they in their judgment deem it necessary for the better preservation of the fund," and to enforce payment of the principal if it is not given. [Sec. 9253.] Provision for sale by the sheriff, on order of the court, is made by Section 9254, and authority for the county to purchase and manage mortgaged land is given by Section 9256.
The purpose of requiring a bond and personal security is, of course, to make it possible to collect the debt even if the land, securing the loan, decreases in value. The county court has no authority to give any right of the county to collect either principal or interest due (Veal v. County Court,
The decree is affirmed. Ferguson and Bradley, CC., concur.
Addendum
The foregoing opinion by HYDE, C., is adopted as the opinion of the court. All the judges concur.