THE BANK OF MISSOURI, )

) Plaintiff-Respondent, ) ) vs. ) Nos. SD32374 & SD32543 ) Consolidated ) SOUTH CREEK PROPERTIES, LLC, ) Filed: April 10, 2014 ) HAMMER COLLECTIONS, LLC, ) ) MICHAEL and CHARLOTTE DAWLEY, ) ) Defendants-Appellants, ) ) and ) ) TREADWELL ENTERPRISES, INC., ) ) Third-Party Defendant- ) Respondent. )
APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY Honorable Jason R. Brown, Associate Circuit Judge
AFFIRMED This case involves an appeal from a judgment in an action to recover the balance due on a promissory note. After a foreclos ure sale of certain commercial real estate ("the property") in Greene County, Miss ouri, Bank of Missouri ("Bank") sued the defendants—South Creek Properties, LLC ("South Creek"),2

Hammer Collections, LLC ("Hammer"), Michael Dawley and Charlotte Dawley 1

— seeking a deficiency judgment. South Creek filed a cross petition seeking quiet title and damages for wrongful foreclosure and adde d Treadwell Enterprises, Inc. ("Treadwell"), the subsequent purchaser of the prop erty, as an additional defendant. All parties sought summary judgment. T he trial court granted summary judgment in favor of Treadwell on the basis of Treadwell's claim that it was a bona fide purchaser for value. The case then proceeded to trial, and the trial court granted judgment in favor of Bank. Def endants appeal. The trial court's judgment is affirmed.

Factual and Procedural Background Michael and Charlotte moved from Louisiana to Sprin gfield, Missouri, with plans to start a commercial collection busines s. They created Hammer and began business in April 2006. For the first three years, Hammer operated out of leased office space in Springfield, Missouri. Mean while, also in 2006, Michael and Charlotte bought the property at issue in this case. They formed South Creek to own and manage the property. In 2008, South Creek and Hammer entered into a Small Business Administration loan agreement ("the SBA loan") with Bank for the purpose of constructing an office building on the property. T he loan was in the amount of $1,050,000, and was secured by a deed of trust on t he property. Michael and Charlotte executed an unconditional guarantee of th e loan.

1 The term "Defendants" will be used to refer to So uth Creek, Hammer, Michael Dawley, and Charlotte Dawley collectively. Because they share the same last name, Michael Dawley and Charlotte Dawley will be identified as Michael and Charlotte when referred to in their individual capacities. No disrespect is intended.3

The building on the property was completed in July 2009. Sometime thereafter, Michael and Charlotte decided to move t he collection portion of Hammer's operations to Louisiana due to lack of rev enue. Hammer began making preparations for the transition in October 2 009, and in early November Hammer began moving equipment out of the building. On November 3, 2009, Michael wrote himself an $11, 500 check from Hammer's account with Bank. Michael characterized the check as an owner draw, explaining that was how he was paid for his s ervices to Hammer. A second check was written on November 5, 2009. The proceed s of this second check were placed in a new account with another bank. Bank's Assistant Vice President of Commercial Lending, Michelle Louden ("Vice Presiden t"), considered these checks to be "suspicious activity on the account[.] " On November 10, 2009, Vice President and one of Ba nk's commercial loan officers, Charles Vandivert ("Loan Officer"), went to see Michael at his home. Michael was in the process of packing to move to Lo uisiana. The Bank officers indicated they were concerned about the loan. Mich ael told them he "was committed to the note," but the next payment on the loan, due on November 16, would be late because of the move. Although he did not say how late the payment would be, Michael explained it would take approxima tely 90 days to get the company back to "full speed operating capacity." V ice President and Loan Officer indicated a late payment was not acceptable and Ham mer was in "default" on the loan. Bank froze Hammer's accounts sometime around November 11, 2009. Hammer did not make the November 16 payment as sch eduled. On November 20, 2009, Bank executed a written document appointing Raymond I.4

Plaster ("Trustee") to serve as successor trustee u nder the deed of trust. That same day Trustee sent a letter to Defendants' busin ess address declaring the loan in default. The letter also advised that Bank had decided to exercise its power of sale under the deed of trust and enclosed the notic e of trustee's sale which was set for December 16, 2009. Publication began on Novemb er 24, 2009. The appointment of successor trustee was recorded in th e Greene County Recorder's Office on December 1, 2009. On December 7, 2009, Charlotte e-mailed Vice Presi dent a forwarding address for Defendants. Vice President replied by e-mail that the property was set for foreclosure on December 16, 2009. She also informed Charlotte that to stop the sale, Hammer would need to bring the note current by paying $7,371.37. Michael testified he had the money available but di d not make the payment. Instead, Michael returned to Missouri, retrieved th e November 20 letter and removed the remainder of Hammer's belongings from t he property. The foreclosure sale took place as scheduled, and Bank purchased the property, resulting in a deficiency due on the SBA l oan of $389,277.13. Michael did not attend the foreclosure sale. Treadwell sub sequently purchased the property from Bank. Hammer ceased its Missouri ope rations entirely in February 2010. On February 11, 2010, Bank filed suit seeking to r ecover the deficiency due on the SBA loan plus interest. After trial, the cou rt granted judgment in favor of Bank. This appeal followed.5 Point I: Successor Trustee In their first point, Defendants argue the trial c ourt misapplied the law when it entered judgment in favor of Bank because t he foreclosure sale was void as Trustee had not been appointed in accordance wit h the terms of the deed of trust which required the appointment must be record ed. This argument is without merit. As this point involves review of a court-tried civ il matter, we "will sustain the judgment of the trial court 'unless there is no substantial evidence to support it, unless it is against the weight of the evidence , unless it erroneously declares the law, or unless it erroneously applies the law.' " Manard v. Williams , 952 S.W.2d 387, 389 (Mo. App. S.D. 1997) (quoting Gauzy Excav. & Grading Co. v. Kersten Homes, Inc. , 934 S.W.2d 303, 304 (Mo. banc 1996)). "The trial court's judgment is presumed valid and the burden i s on the appellant to demonstrate its incorrectness." Pepsi Midamerica v. Harris , 232 S.W.3d 648, 653 (Mo. App. S.D. 2007) (quoting Schaefer v. Rivers , 965 S.W.2d 954, 956 (Mo. App. S.D. 1998)). Furthermore, "[t]his Cou rt does not defer to the trial court's determinations of law." Id. "[T]he exercise of a power of sale contained in a deed of trust is 'a matter of contract between the mortgagor and mortgagee.'" Winters v. Winters , 820 S.W.2d 694, 697 (Mo. App. S.D. 1991) (quoting Graham v. Oliver , 659 S.W.2d 601, 603 (Mo. App. S.D. 1983)). Generally speaking, failure to follow fundamental procedural requirements will render a f oreclosure sale void. Manard , 952 S.W.2d at 391. However, "[a]n irregularity in the execution of a foreclosure sale must be substantial or result in a probable unfairness to suffice6

as a reason for setting aside a voidable trustee's deed." Id. (quoting Kennon v. Camp , 353 S.W.2d 693, 695 (Mo. 1962)). In this case the irregularity in the sale was not substantial because at the time of the sale, the appointment of successor trus tee had been recorded as required by the deed of trust. The deed of trust c ontained a provision allowing appointment of a successor trustee which stated tha t "Lender, at Lender's option, may from time to time appoint a successor Trustee t o any Trustee appointed under this Deed of Trust by an Instrument executed and acknowledged by Lender and recorded in the office of the recorder of GREEN E County, State of Missouri." On November 20, 2009, Bank executed its appointment of successor trustee appointing Trustee in place of Kim R. Moore, the or iginal trustee named in the deed of trust. Publication of the notice of the tr ustee's sale began on November 24, 2009. The appointment of successor trustee was filed with the Greene County Recorder of Deeds on December 1, 2009. The trustee's sale of the property was conducted by Trustee as scheduled on D ecember 16, 2009, and the real estate sold for $674,820. The trustee's sale was valid. This Court's decision in Winters does not require a different conclusion.
In Winters , as in the present case, the deed of trust require d a successor trustee to be appointed by a written instrument recorded wi th the recorder of deeds. 820 S.W.2d at 694-95. The successor trustee was appoint ed in writing, but that writing had not been recorded when the successor tr ustee proceeded to publish notice of the sale and to actually conduct the sale

. Id. at 695-96. Only after both publication and the foreclosure sale had been compl eted was the written appointment of the successor trustee recorded. Id. at 696. This Court upheld7

the trial court's determination that the foreclosur e sale was void. Id. at 698-99. Here, in contrast, the appointment of successor tru stee was recorded prior to the sale. Thus, in this case the terms of the deed of trust had been met at the time of the sale. In that respect this case is more like Smith v. Equitable Life Assur. Soc. of U.S. , 448 S.W.2d 588 (Mo. 1970). In that case, the orig inal trustee published the notice of the foreclosure sale. Id. at 591. Subsequently, a successor trustee was appointed, and the foreclosur e sale was conducted by the

successor trustee. Id. The mortgagors sought to have the trustee's deed set aside, and one of their arguments on appeal was tha t the successor trustee could not conduct the foreclosure sale based on the origi nal trustee's notice. Id. at 592. The Supreme Court of Missouri disagreed, holding "th at a successor trustee may sell under a notice published by his predecessor." Id. at 592-93. The Court reached this result in part because, despite the ir regularity in the publication of the notice, "the purpose to be served by the public ation of a notice of trustee's sale [was] accomplished." Id. at 593. Here, too, the notice served its purpose, and Trustee was properly appointed at the time of t he sale. This conclusion is further supported by Petring v. Kuhs , 171 S.W.2d 635 (Mo. 1943). In that case, the mortgagors challenge d the foreclosure sale because the notice had been signed and published by the att orney for the trustee rather than by the trustee himself. Id. at 638. The Court held the failure of the trustee himself to sign and post the notice did not invalid ate the sale where the trustee himself conducted the sale. Id. Here, similarly, the notice was signed and posted by one who arguably did not have authority to do so , i.e. , Trustee prior to his8

appointment in accordance with the terms of the dee d of trust. However, Defendants had actual notice of the sale and Truste e had been properly appointed when he conducted the foreclosure sale. Consequently, the foreclosure sale was valid. The foreclosure sale was not invalid based on the fact that Trustee's appointment had not been recorded at the time the i nitial notice of sale was published and mailed to Defendants. Defendants' fi rst point is denied.

Point II: Notice of Right to Cure In their second point, Defendants argue the trial court's finding that Bank was not required to provide a notice of right to cu re prior to the foreclosure is against the weight of the evidence. In support, De fendants point to a notice of right to cure provision in the deed of trust and to other facts suggesting the foreclosure was based on defaults other than a paym ent default. This argument ignores the standard of review. As stated above, "[i]n a court-tried case, such as this, the appellate court will sustain the judgment of the trial court 'unles s there is no substantial evidence to support it, unless it is against the weight of t he evidence, unless it erroneously declares the law, or unless it erroneously applies the law.'" Manard , 952 S.W.2d at 389 (quoting Gauzy , 934 S.W.2d at 304). "The trial court's judgment i s presumed valid and the burden is on the appellant t o demonstrate its incorrectness." Harris , 232 S.W.3d at 653 (quoting Schaefer , 965 S.W.2d at 956). "Due regard is given to the opportunity of t he trial court to have judged the credibility of witnesses." Manard , 952 S.W.2d at 389.9

The following additional facts are pertinent to th e resolution of this claim. In the event of a default, the SBA loan permitted Ba nk to exercise its remedial rights without providing notice or demand. In cont rast, the deed of trust contained the following provision: Right to Cure. If any default, other than a default in payment is curable and if Grantor has not been given a notice of a breach of the same provision of this Deed of Trust within the pre ceding one (1) month, it may be cured if Grantor, after receiving written notice from Lender demanding cure of such default: (1) cu res the default within fifteen (15) days; or (2) if the cure requir es more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure t he default and thereafter continues and completes all reasonable a nd necessary steps sufficient to produce compliance as soon as r easonably practical. (Emphasis added). The trial court found there was a default in payment and no notice of the right to cure was required. In fact, Defendants do not contend the above provision required notice of right to cure in a case involving a default in payment. Consequently, the only issue presented by this point is whether the trial court's finding that there was a default in p ayment was against the weight of the evidence. Analysis of this question must begin with the prop osition that "[t]he trial court's judgment is presumed valid and the burden i s on the appellant to demonstrate its incorrectness." Houston v. Crider , 317 S.W.3d 178, 186 (Mo. App. S.D. 2010) (quoting Bowles v. All Counties Inv. Corp. , 46 S.W.3d 636, 638 (Mo. App. S.D. 2001)). "[W]eight of the evidenc e refers to weight in probative value, not quantity or the amount of evid ence." Id. (quoting Gifford v. Geosling , 951 S.W.2d 641, 643 (Mo. App. W.D. 1997)). "Altho ugh consideration of probative value necessarily involv es some consideration of10

evidence contrary to the judgment, we nevertheless 'defer to the trial court as the finder of fact in our determination as to whether . . . that judgment is against the weight of the evidence." Id. (quoting Wildflower Cmty. Ass'n, Inc. v. Rinderknecht , 25 S.W.3d 530, 536 (Mo. App. W.D. 2000)). "A court will set aside a judgment as 'against the weight of the evid ence' only when it has a 'firm belief that the judgment is wrong.'" Id. (quoting Gifford , 951 S.W.2d at 643). Furthermore, an against-the-weight-of-the-evidence challenge req uires completion of four sequential steps: (1) identify a challenged factual proposition, the existence of which is necessary to sustain the judgment; (2) identify all of the favorable evidence in the r ecord supporting the existence of that proposition; (3) identify the evidence in the record contrary to the belief of that proposition, resolving all conflicts in testim ony in accordance with the trial court's credibility deter minations, whether explicit or implicit; and, (4) demonstrate why the favorable evidence, along w ith the reasonable inferences drawn from that evidence, is so lacking in probative value, when considered in the context of the totality of the evidence, that it fails to indu ce belief in that proposition. Id. Here, the trial court made a finding of a default in payment. That finding was not against the weight of the evidence. Michae l testified that Defendants never made the November 16, 2009 payment. Both the deed of trust and the SBA loan provide Defendants would be in default if they failed to make a payment when due. Defendants do not point to any contrary evidence showing the11

November 16 payment was made. As there is no evide nce contrary to the trial court's finding, the trial court's finding is not a gainst the weight of the evidence. Defendants implicitly recognize this, so their arg ument under this point primarily involves attempting to change the facts f ound by the trial court. Defendants begin their argument under this point by stating facts contrary to the judgment which would support a finding that Bank de clared a default on some other basis other than a payment default. From the ir facts, Defendants suggest the trial court's finding of a payment default was incorrect. Then, based on the conclusion that the default prompting the foreclosu re was a default other than a default in payment, they argue the trial court misa pplied the law because the defaults, other than the payment default, required notice of right to cure under the terms of the deed of trust. That is, the argum ent depends on the faulty premise that the trial court based the default on s omething other than a default in payment, which is incorrect. The trial court did find a default in payment, and there is no evidence showing the November 16 payment was ever made. The trial court's finding that no notice of right to cure was required was not aga inst the weight of the evidence. Defendants' second point is denied.

Point III: Alleged Grace Period In their third point, Defendants argue the trial c ourt misapplied the law in that a subsequent modification to the original loan agreement created a ten-day grace period for payments. The trial court did not agree, nor do we. This argument ignores the plain language of the relevant documents.12

The following additional facts are necessary to an alyze this point. The parties agreed that the payments were due on the si xteenth of each month. Additionally, the note provided that a default occu rred "if Borrower does not make a payment when due under this Note[.]" The no te contained no provisions regarding a grace period for payments. On July 16, 2008, Bank entered into a Loan Modification Agreement with Hammer and South Cr eek. That agreement provided that "Section 3, PAYMENT TERMS, Subsection 2 , Repayment Terms, is hereby amended to provide as follows: If a payment on this Note is more than 10 days late, Lender may charge Borrowers a late fee of up to 5.00% of the unpaid portion of the regularly scheduled payment." (Empha sis added). Defendants contend this provision created a grace period. The issue presented in this point, then, is whether a contractual provision in a loan document stating a lender may charge a late fee if periodic payments are tendered after their due date creates a grace period in which the lender is prevented from declaring a default. This issue requires interpretation of the parties' contracts. "Construction of a contract is generally a question of law." Harris , 232 S.W.3d at 654. "This Court does not defer to the trial court's determina tions of law." Id. at 653. "Where the terms of the contract are clear, this Co urt does not supply additional terms, but applies the agreement as written." Brewer v. Devore , 960 S.W.2d 519, 522 (Mo. App. S.D. 1998) (quoting Wintermute v. Delgado , 919 S.W.2d 248, 250 (Mo. App. S.D. 1996)). "It is not within t he province of the court to alter a contract by construction, or to make a new contra ct for the parties." Harris , 232 S.W.3d at 654-55 (quoting Textor Const., Inc. v. Forsyth R-III School Dist. , 60 S.W.3d 692, 697 (Mo. App. S.D. 2001)). "The ter ms of a contract are13

read as a whole to determine the intention of the p arties and are given their plain, ordinary, and usual meaning." Id. at 655. In the present case, there is nothing ambiguous ab out the terms of repayment. Payments were due on the sixteenth of t he month. A default occurred when payments were not tendered when due. Nothing in the plain language of the modification altered the conditions constituting default. The modification simply allowed Bank the latitude to ch arge a late fee if it decided to accept a late payment but was not required to do so . To imply a grace period from the language of the loan modification agreemen t would be to make a new contract for the parties. The trial court did not err in determining the loa n modification agreement did not create a grace period. Point III is denied

.

Point IV: Wrongful Foreclosure In their fourth point, Defendants contend the tria l court erred in denying South Creek's cross claim for wrongful foreclosure. This argument is without merit because South Creek failed to prove it was not in default on the note. As above, we review the trial court's decision to determine whether the trial court misapplied the law or whether the trial court's decision is not supported by substantial evidence or whether the tr ial court's decision is against the weight of the evidence. Manard , 952 S.W.2d at 389. "An action in wrongful foreclosure for damages lies only where the mortgag ee does not have the right to foreclose at the time the foreclosure proceedings w ere commenced." Reliance Bank v. Musselman , 403 S.W.3d 147, 149 (Mo. App. E.D. 2013). Thus, t o obtain relief a party seeking damages for wrongful foreclosure must plead and14

prove it was not in default at the time the foreclo sure proceedings were commenced. Id. In the present case, the SBA loan and the deed of t rust both provided a default occurred if any payment was not made when d ue. The November 16, 2009 payment was not timely made and, in fact, was never made. The foreclosure proceedings began on November 20, 2009. South Creek failed to prove that at the time the foreclosure proceedings began it was not in default. Consequently, the trial court did not err in denyin g the claim for wrongful foreclosure. In support of their conclusion to the contrary, De fendants incorporate the arguments made in Point II (Defendants were entitle d to notice of the right to cure) and Point III (the creation of a grace period ). As discussed above, these arguments are without merit. The trial court did not err in denying South Creek' s counter claim for wrongful foreclosure. Defendants' fourth point is denied.

Point V: Bona Fide Purchaser for Value In their final point, Defendants contend the trial court's entry of summary judgment in favor of Treadwell was erroneous becaus e Treadwell was not a bona fide purchaser for value. In support, Defendants n ote that all the documents supporting their arguments in Point I were part of the recorded chain of title and thus Treadwell was deemed to have constructive noti ce of the fact that the foreclosure sale was void. This Court need not rea ch the merits of the claim. As the foreclosure sale was valid, Treadwell's purchas e from Bank was valid, and any15

issue as to whether Treadwell is a bona fide purcha ser is moot. Defendants' fifth point is denied. Decision The trial court's judgment is affirmed. MARY W. SHEFFIELD, J. - OPINION AUTHOR JEFFREY W. BATES, P.J. - CONCURS GARY W. LYNCH, J. - CONCURS