Appendix — Clausen v. Northern Trust Co.

Supreme Court brief1971

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yan Rape Vege IER PRE MEER ROL MG CREO

PSD TREO PUREE LURE MRE Nite POE FY

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In the United States District Court for the

Mastern: District of Missouri

Eastern Division

The Northern Trust Company, as)

Trustee, ‘

Plaintiff,

vs,

j Cause No. 71C 76(3),

Robert I. Clausen, H, B. Surkamp,

R. G. Surkamp, Hadley P. Ston- 7

ner and Rolland J. Walters, os 7

Defendants. J’ |

COMPLAINT

(Filed Feb. 5, 1971)

Comes now The Norther; Trust Company, as ‘Trustee

_ and for-its-cause of action against defendants, states that:

I. Plaintiff is The Northern Trust Company, as Suecess

sor Trustee under Agreement dated as of October 1, 1932:

as amended with Teletype Corporation for the Teletype

Corporation Pension Fund. The Northern Trust Company .

is a corporation duly organized and existing under the.

laws of the State of Mlinois, with its principal place of

. btisiness in the State of Iinois, |

2 Defendants are residents of the State of Missouri:.

%. This Court has jurisdiction of this Cause under the

provisions, of Title 28, Section 1502(a) (1), US.CLA.

4. On April 2s, 1969, defendants executed and ‘delivered

their promissory. note payable to the order of The’ Chase

Manhattan sank -{ National Association) as*Timstee. A.

topy of said note is marked exhibit Ay. attached hereto

-and Incorporated herein by reference, en

3. On pee 28, 1969, defendants made and entered into

a deed of trust covering. property situated in Columbia,

“Missouri, to secure said note. A copy of said deed of

trust is marked Exhibit’ B, attached hereto and incorpo-

rated herein by reference:

6. On January, 1, 1970, said note was assigned, trans-

ferred and delivered to plaintiff. From and after said

date, plaintiff was and now is the owner and holder of

said note.

Defendants failed and refused to pay said note ae-

cording to its terms, and otherwise breached and violated

the terms and covenants of said deed of trust, and on No-

vember 10, 1970, plaintiff declared all unpaid indebtedness

ev ide need by said note immediate Ty due and payable..

8. On December 14, 1970, the property eovered by said

deed of trust was sold at publie sale, pursuant to the terms

thereot. a

After giving defendants all-eredits to which they are.

entitled, including the net proceeds received by plaintiff

from the sale of said property, there remains “due and

owing to plaintiff under said note and deed of. trust: the

prineipal sum of $73,402.40. : 5

WHEREFORE, plaintifY prays judgment against defend--

ants, and each-of them, in. the sune of $73,402.40, together

with interest thereon from and after December 14, 1970, at

the rate of 8% per annum, for its costs in collecting the

same including reasonable attorney's fees as provided by

sid note, and for such other and further relief as to the

Court may seem just and proper.

LEWIS, RICE, TUC KE R, ALLEN & CHUBB

By JAMES W. HERRON

; * 1555 Railway Exchange Building

611 Olive Street F

St. Louis. Missonri 63101

231-9833

_ Attorneys for Plaintiff

fae

a) es oe

In the United States District Court

For the Kastern District of Missouri

Kastern Division

(Caption Omitted.)

MOTION TO STAY PROCEEDINGS

Come now the defendants, Robert I..Clausen, H. B. Sur-

kamp and Hadley P. Stonner, and move. the Court to stay

all proceedings in this cause, to wit: No. 71 ' 76 (3) of

the United States Distriet Court for the Eastern Distriet

of: Missouri, Hastern Division, until cause No. 52930. of

“the Cireuit Court of Boone County, Missouri, is’ finally |

adjudicated,

A copy 6f Plaintiffs’ Seeond Amended Petition im said

cause, No. 92930 of the Cireuit Court of Boone County,

Missouri, wherein Harry B. Surkamp, Robert I. Clausen

and Hadley. P. Stonner are plaintiffs and the following

are defendants, namely: The Northern Trust Company,

a corporation, as trustee u/a with Teletype Corporation, .

John M. Drescher, Jr., Gene Schultz, Robert G. Surkamp

and Rolland J. Walters, is attached hereto as Exhibit 1 _

of the Defendants Clausen, H. B. Surkamp and: Stonner.

Cause: No. 71 C 76 (3) in this District - Court of the

Unifed States was brought by the Northern Trust (Co.

and seeks to assess a deficiency judgment against the

named. defendants based upon a purported sale on De-

cember 14, 1970, under a deed of trust on certain real

property in Boone County, Missouri, which real property

is owned by ‘Williamsburg Developments, a partnership

comprised, of Harry B. Surkamp, Robert I Clausen and

Hadley P. Stonner; however, the alrdity of that pur-

ported.sale, at which the Northern Trust Co. purportedly

bought ssaid real property, is presently being adjudicated

in said cause No. 52930 of the Cirenit Court of Boone |

County, Missouri, and it is appropriate aud proper that

* the validity of said purported sale be adjudicated in said

—A1—.

-eause’ in the. Cireuit. Court. of Boone County, Missouri,

sineé said cause involves title to real estate in Boone

County, Missouri, and involves, the foreelosure laws of

the State of Missouri, and the issues before said court of

the State ‘of Missouri do not involve the ¢ Constitution,

treaties or laws of the United States. F urther, following

said purported sale on December 14, 1970, the Northern

Trust Co: attempted to sell said property to Gene Sehultz

of Boone County, Missouri, ‘and, therefore, recourse to said °

state court Was immediately necessary to adjudicate title

to said real estate, before more purportes d transte rs of said

real estate were made.

Mra vokipe, the defendants, Robert T. Clausen, -H. B.

Surkamp and Hadley P. Stonner, pray for the relief men--

tioned above, to wit: that all proceedings 1m this cause, No.

71 © 76- (3) be stayed, until cause No. 52930 of the Cir

cuit. ‘ourt of Boone County, Missouri, Is finally. adjudi-

eated.. - |

+ s/ JAMES C. BUTCHER

‘ 9 North Kighth Street,

Columbia, Missourt Go201

449-4126

Attorney for Defendant, ‘actors L.-

‘ int Clausen

‘J. WARD DRISCOLL

29 South Bemiston

Clayton, Missourt 63105

863-3587

Attorney for poisodant, ‘Harry B.

Surkamp >

« CLARENCE W. TLAWIS

Fis ~ 601 North High Street .

California, Missouri 60018 |

796-2114

Attorney for Defendant, Hadley P.

. * . Stonner

- > ~

—_—

MAa-

—

Harry B. Surkamp, Robert Ty.

— A-d — ;

In the Cireuit Court of Boone County, Missouri

Clausen and Hadley P. Stonner,

Plaintiffs,

“*VS,

The Northern Trust ‘Company, a LCase: No. 59930

corporation, as trustee ua with

Teletype Corporation, John M.

Drescher, Jr.; Gene Schultz, :

Robert G. Surkamp and Rolland ‘}-

Walters,

Defendants, Sie

PLAINTIFF'S SECOND AMENDED PETITION

Come now the phiintiffs and for their cause of action

state to the Court cnet

‘The plaintiffs. are all dia parthers in W illiamsburg °

ce nee a partnership.

2. The defendant Gene Schultz is.a resident of Boone

County, Mo.; the defendant John M. Drescher r, Jr., is a

resident of: St. Louis County, Mo.; the defendant’ Rolland

J. Walters is a resident of Boone County, Mo.; the de:

fendant Robert G. Surkamp is a resident of St. Louis

County, Mo.: the defendant Northern Trust. Company is

an Illinois corporation engaged in the trust business and

is the holder of the hereafter referred to deed of. trust

on plaintiffs’ real estate as an investment under a trust

agreement “dated as of October 1, 1982, and later amended,

by and between Northern Trust ( ompany, as trustee, aiid

the . Teletype Corporation for the Teletype Corporation

Pension. Fund.

3. The eauses alleged in this petition involve a certain

piece of real estate, at all titnes mentioned herein owned

— A-6—

2 ‘i

by Williamsburg Developments, a partnership, and said

real estate is located in Boone. County, Mo., and ts more

particularly deseribed as tollows: |

A tract of land-in the NE 4, Qf Section 19, Township

Range 12 in Columbia, Missouri, ‘and more par-

* tieularly deseribed as follows: Beginning at the

Northeast corner of Tract No. 3 of Boone County

Survey No. ¢296; thence S33 degrees 17 minutes W

610 feet, thence N56 degrees 43 minutes W 120 feets

thence S BB degrees 17 minutes W 50 feet; thence Ne

a6 deerees 43 minutes W 70 feet: thenee N 33 degrees

17 minutes E50 feet; thenee N 56 degrees 433 minutes

W 210.0 feet s thenee N oz degrees 95 minutes I 474.0.

feet: thence X89 degrees IS minutes 291 feet to

the point of beginning and cont; lining 3.83 aeres,

4. On or about April 2 1969, thesplaintiffs, Harry B.

Surkamp. Robert 1. ¢ Cinucen and ‘ ‘Tladley P. Stonner, and

the defendinits Robert G,. Surkamp and Rolland J Wal-

ters, said de fendants -being’ at that time, but mot now,

“partne rs with plaintiffs in Williamsburg Developments, a

partnership, exeented ‘aecertain deed of trast as parties of

the first part therein and mortgagors in behalf of Wik,

liamsburg Developments, a partnership, on the above de-

seribed real estate, and said deed of trust, which ts re-

‘corded in Book 394 Page 288 of ‘the Boone County Re-.

| ore ofice, Was executed as seetrity for a certain note

dated April 28, 1969, for money borrowed, the principal

and interest ‘of said ‘note being. payable in amortized

monthly installments over a period of 50 years, beginning

May 1, T1960, and continuing until November 1, 1991.

5. On December 14; 1970, © the defendant John M:

‘Drescher, Jr. named as’ party of the second part and

trustee in aforesaid dee ‘a of trust held a purported trus-

tec’s sale ‘of the real estate deseribed in the deed of trust,

and at said sale on December 14,1970, purported to sell

said real estate to the defendant Northern Trust Co., as

trustee under. agreeme ont with Tele ‘type Cc orporation, and.

then on January 5, 1971, the de fendant John M. Drescher,:

Jr, executed a trustee’ x deed purportedly conveying said

real estate to the defendant Northern Trust .Co., as trustee

-under agreement with Te are Corporation.

Said) purported sale ik ‘void and invalid due to roe

cee erounds, caeh of Which. sround is sufficient in

and of og to redider said purported sale void’ and in-

valid: = E

.(1) The trustee failed to sell the prope rty to the high-

-est bidder for cash at said sale, whieh was -Land III,

Ltd, a Missoui. corporation, amd failed to allow Land

III, Ltd., a reasonable time to pay the amount of its

bid.

(2) The trustee did not gonduct said sale impartially

in that at all times, that he Was purporting to act as

trustee; he was in fact a member of the law firm,

Lewis, Rice, Tucker, Allen & Chubb, which was at all

times mentioned herein acting as the attorney for the

defendant Northern Trust Co., the holder of said deed

¢ Of trust, and said trustee re fused to sell to the highest

hidd& for cash at said sale and instead..purported to

sell said property to his law firm’s elient, Northern

Trust Co., and that in so doing and in the conduct of

said sale trustee Wwas yot Impartial and could not have

heen imp irtial under the circumstances in that at. the

same “time he was acting as trustee and-required to

perform said oflice inva manner ‘equivalent to a chan-

cellor in equity, he proceeded to make rulings Anvolv-

ing the: two ‘bidders at said. sale, namely, Land IIT,

Ltd. and Northern Trust Co., and made said rulines

in favor of his law firm's client and against Land TIT,

Ltd.

(3) The trustee did not. attempt to obtain the lest

price for said property and: did not attempt to hold

said sale in such,a manner that would be in the best

ace aoe

interests: of both mortgagors and moyteagee, but in-

a e . 4 . ) e ee

stead held said sale in such a manner ax Was in the

best interest of only the mortgagee and was not in

the best interest of the mortgayors.

(4) The deed. of trust purports to Le security for a

note in the principak amount of s925,000; whereas

hoth the defendant trustee and the dete ndant North-

erm Triist Co./khew said amount was false and knew

that not more than $475,000 had been loaned on -‘said

rote to mortgagors, but.said defendants took no ac-

tion to reform: “aid deed of trust and inste ad suid de-

fendants purported ‘to foreclose said deed of: trust

ewell Knowing that the principal amount of the note

as shown on said deed of trust was false, and that

aid course, of conduct was misleading to the public.

The purported trustee’s deed dated January 5, 1901,

- Tike WISe void, and invalid, as it is based on the void

a invalid trus Lee ~« sale on Déeember 14, 1970. .

. The ‘a dintitts have reason to believe th: it the -defend-

i Northern Trust Co. has attempted to sell said above

deseribed real estate to. the defendant Ge ne Sehultz, and

* the defendant Northern Trust 4%. does not-own, said real

estate and should be prohibited and énjoined from con-

~summiating or attempting io cons timimné ite any purported

sale of said property, to Gene Schultz or to any one e elxe.

9, Not only Was aac sale on Deciie r 14,

“4970, void and invalid on the aforesaid wounds, but de-

fondant John M. Drescher, Jr. and Northern Trust Co.

were not entitled to institute foreclosure -proceedings in

the -first place, for prior to the ins stitution ef any. such

“proceedings: pk aintiffs offered on sever alfoecasions to pay

to Northern. Trust. Co. “all mast, div inst allment= on said

loan, but defeydant: Northern Taint (Co. wrone fully re-

fused to agcept said payments, ;

eye ye

10. The plaintiffs have invested over $280,000° ja said

real estate ower and above the amount borrow ed on ae

said deed of ttust’ and over and above the amounts al-

ready repaid by plaintiffs on <aid deed of trust, and plain-

tiffs ane ready, willing and -able to pay any past due | in-

stallments. on said deed of tmust.

TH. Phe plaintiffs constructed on said real estate * SIN

separate “apartment buildings, containing ‘a total of 34

BPAP CDT units, ;

12. On or about December 1, 1970, and prior: to. the

aforesaid void and invalid trustees sale on December 14,

1970, the defendant Northern Trust Co. unlawfully seized

possession of aforesaid real estate and apartment build-

ings aud of the books and records’ of plaintiffs at said

‘location, and since said time the defendant Northern

Trust (Co. has unlawfully collected the rentals from said

property and has unlawfully Withheld possession of. said

real estate and apartment buildings and of said books,

records and rentals. Plaintiffs are entitled’to restoration

of the possession of said real estate and apartment build-

ings and of said books and records, and are entitled to

an accounting from: Northern Trust Co, of the rentals col-

lected: by. Northern Trust: @o., and are entitled to a eredit

for said ventals against any past due installments on said

deed of truste hers ;

Ih. Plaintiffs do not have an adequate “remedy at law.

. The defendants Rolland Jt. Walters and Robert G,.

Sur ae may have an interest In this proceeding and may

he atfected by the result, Since they signed the note, se-

cured hy said deed of-trust, and there ‘fore they have heen

made defendants in this procecding.

WHERERPORE, plaintiffs pray that the Court asliudee

‘the aforesaid trustee's sale on December 14. 1970, and the

a ae ae hes

aforesaid trustee’s deed dated January 9, 1971, to be void

and invalid, and that the Court order defendant Northern

Trust Co. to furnish to plaintiffs an accounting of all

rentals collected from said property by Northern Trust

Co. and to restore possession of said real estate and apart-

ment buildings and the books and records of palintitfs

to plaintiffs, and plaintiffs further pray for such other

and further relief as to the Court shall seem fit and proper

under the cireumstances and for their costs in this behalf

expended.

sx’ JAMES ©. BUTCHER

9 North Bighth Street, Columbia, Mo. 65201

449-4126 © |

Attorney for Plaintiff Robert J. Clausen

« J. WARD DRISCOLL |

“5 S. Bemiston, Clayton, Mo. 65100

$63-3387 ay a

Attorney for Plaintiff Harry B. Surkamp

_ s CLARENCE W. HAWK

601 North High Street, California, Mo. 65088

796-2114 sh

Attorney for Plaintiff Hadley P. Stonner

Pas Te | yea

In the United States Distriet Court

For the Eastern District of Missouri

Eastern Division

The Northern Trust Company, as)

Trustee, |

| Plaintiff,

Vs. | .

. : _ Cause No. 71 C 76 (3).

Robert I. Clausen, H. B. Surkamp,

R. G. Surkamp, Hadley P. Ston-

ner and Rolland J. Walters,

: Defendants. J

STATEMENT IN SUPPORT OF MOTION TO STAY

PROCEEDINGS AND REQUEST FOR

ORAL ARGUMENT

The following brief statenient is made by defendants,:

Clausen, H. B. Surkamp and Stonner, pursuant to local

rule VII ¢ (2) of said Court: “

T he policy of the federal courts in allowing:state courts

to adjudicate matters of state or local ae such as, in this |

instance, Whether the. purported trustee’s sale on Deeem-

ber 14, 19706, was in conformity with the foreclosure laws

of the State of Missouri, is expressed in England v. La.

State Board of Medical Examiners, 84 S.C t. 461 (1964), as

follaws: .

“Abstention is a judge-fashioned vehicle for ac:

cording: appropriate ‘deference to the ‘respeetive ecom-

petence of the state and federal eourt systems.’

“Its recognition of the role of state courts as the

final expositors of state law implies we disregard tor

the primaey of the federal judiciary in deciding ques.

tions of federal law.’

— A-l2—

Further, pursuant to local rule VIT ¢ (1) of said Court,

said defendants request that, there “be oral argument on

said Motion To Stay Pr oceedings.

- JAMES C, BUTC HE R

Attorney for Defendant Clausen

~/ J. WARD DRISCOLL

Attorney for Defendant H. B. Surkamp ~

x’ CLARENCE W. HAWK

! Attorney for Defendant Stonner

In the United States District Court

For. the Eastern District of Missouri

Eastern Division

‘(Caption Omitted)

|. PLAINTIFF’S STATEMENT IN OPPOSITION TO

MOTION TO STAY PROCEEDINGS

Comes iow plaintiff, The Northern Trust Company ‘as.

Trustee, and in opposition to defendants’ Motion to Stay

Proceedings states to the Court as follows:

1. This is not a prpper ease for the application of the

principle of abstention.

Moore, Federal Practice, Vol. 1, pages 2109-10 and

pages 2119-20; |

Miller v. Miller, 423 Fed. 2d 145 (10th Cir. 1970) ;

Aetna Life Insurance: Company of Hartford, Con-

necticut v. Martin, 108 Fed. 2d. 824 (Sth Cir: 1950).

2 This suit was filed in this Court and this Court ae--

quired jurisdiction over this: cause prior to the suit. re-

ferred to in defendants’ Motion to Stay.

—A-l3 —

3. This ( ourt has jurisdiction over this ¢ause and plain-

tiff should be entitled to proceed to judgment herein.

Respectfully submitted

LEW IS, RICE, TUCKE R, ALLEN

CHUBB |

By R. RICHARD STRAUB

1555 Railway Exchange Building

611 Ohive Street

St. Louis, Missouri 63101

231-5833 |

Attorneys for Plaintiff.

‘e

United States District Court

Eastern District of Missouri

I astern Division is

(Caption. Omitted)

ORDER

(Filed June 10, 1971)

This matter is before the court on motion of defendants,

Robert I. Clausen, H. B. Surkamp and Hadley P. Stonner

to stay all proceedings in this case pending adjudication.

of Cause No. 52930 in the Circuit Court of Boone County,

Missouri. 7

Plaintiff filed i its complaint in this district F ebruary il,

1971 in which it seeks to recover as assignee and holder

ofa certain promissory note alleged.to have been exeeuted

by defendants and secured by a certain deed of trust eov-

ering property situated’ in Columbia, Missouri. Subse-

quently, Harry B. Surkamp, Robert I. Clausen and Hadley

P. Stonner filed a’ petition in the Cireuit Court of Boone

—hcihen ** Ca a

‘County seeking to invalidate a purported trustee’s sale

on behalf of The Northern Trust: Company which took

place on Deeember 14, 1970 and in which The Northern

Trust Company purehased in the property. Movants now

contend that thi court should invoke the rule of absten-

tion until the validity of the foreclosure sale has beén de-

termined ip the state court. ;

At the hearing on the motion, counsel for plaintiff repre-

sented that the Second Amended Petition was filed in the

state court after the Cireuit Court had sustained its Mo-

tion to Dismiss the first Amended Petition. A hearing on

the Motion to’ Dismiss the: Second Amended Petition is_

pending in the Cireuit Court and Scheduled for hearing

June 15, 1971.

The suit in this court is on a promissory: note. The suit

in the state court, filed subsequent to this suit, does not

inelude all of .the parties in this action. In response to a

question by the court at the hearing, defense counsel

stated that there were no novel questions of Missouri law

to be adjudicated in the ‘state court proceeding anid. that’

there were tio issues in that case which could not be .ad-

judicated in a federal court under ‘pendant atepeseaam 7

Moore, Federal Praetice, Vol. 1A, pages 2109- 10 sets

forth the principal guidelines for abstention, namely:

“Thus a federal action will not be held in abeyance. and:

the parties remitted to a state forum for the adjudication

of the local issues where no state court. ruling on’ local

law could settle the federal questions that would neces-

sarily remain, where the state ‘law is fairly certain, * * *

‘and even where the federal issues. are‘of a non-constitu-

tional nature and Congress has plainly provided for fed-

eral jurisdiction federal courts will determine the entire

controversy including an underlying loc: al question. based

upon state law.”

OE ee |

. a oh 4

Based upon the pleadings and the representations of

counsel at the hearing, the court.is of the opinion* that

this is not a proper case for abstention and-that all of the-

issues both state -and federal ean be determined in this

court. should the defendants seek to incorporate their stafe

court claims and defenses in this action. Plaintiff does

not seck to enjoin the state proceeding, arid both state and

federal -cases may properly proceed together. Miller v.

Miller, -423 F.2d.145 (10th Cir. 1970); Aetna Life Insur-

ance Company of Hartford, Connecticut v. Martin, 10s

F.2d 824 (8th Cir. 1940). a

» . Accordingly, it is ORDERED that defendants’ motion

to stay proceedings be and hereby is denied. Defendants

are granted leave to amend their responsive’ pleading

Within ten.days so as to assert any counterclaims or de-

fenses presently asserted in the state court action’ which

they may wish to’assért in this case.

Dated: June 10, 1971

/S/ WILLIAM H. WEBSTER |

United States District Judge ~

In the United States District Court for the Eastern

District of Missouri, Eastern Division

(Caption Omitted)

MOTION FOR REHEARING OF MOTION

TO STAY PROCEEDINGS

Come now the defendants, Robert I. Clausen, HH. B. Sur--

kamp and Hadley P.

Stonner, and, for their Motion for

Rehearing of their Motion to Stay Proceedings, state to

the Court that: Rie

— A-16 —.

1. On June 10, 1971, the Court denied said defendants’

Motion to stay proceedings in this cause, pending adjudi-

cation of a state court action, and granted defendants

leave to amend their responsive pleadings’ within ten days,

so as to assert any counterelaims or defensés presently

asserted in the state court action, which they. may wish

to assert in this case.

2. Said defendants wish to assert herein all the counter-

claims and defenses presently asserted by them in Plain-

tiffs’ Segond Amended Petition in state court and, believe

their assertion is essential to a just adjudieation of. this

ease. Also, thé defendants believe that -the situation of

both- the federal and, state courts proceeding on the sub- -

ject is not inthe interests of justice and. it has serious

adverse effects on federal-state relations and is a_viola-

tion of defendants’ right& to due process of law, as guar-

anteed to them. by. ~~ Fifth Amendment to the U. S.

Constitution.

3. The SON SE that said order is in violation

of the Fifth Amendment to the U.S. Constitution is based

on the following: ) es

(1) Plaintiff’s petition seeks to impose on defendants’

a deficiency judgment based on a purported trustee's

sale on December T4, 1970, -and the validity of that

sale, and, therefore the basis of the federal court. ac-

tion, ix the matter being determined by the state

court. : ;

(2) The Court’s findings mention that, Plaintiff does

not seck. to stay the state court aetion and the Court’s:

findings recognize that the issue in the state court

involves state law and does not involve the Copsti-

tution, treaties or laws.of the United States.

(3) The U.S. Supreme Court in Enel land V. La. State

Board. of Medical Exanriners, 84 S.Ct. 461 (1964), has

—A-17—

stated that the doctrine of abstention is a ‘recognition

of the. state court’s particular competency in such

‘matters, to wit:

“Abstention is a judge-fashioned vehicle for

- accordmg deference to: the ‘respective competence

of the state and federal court systems.’

: “Its recognition of the role of state courts as

the final expositors of state law implies no disre-

gard for the primaey of the federal judiciary in

deciding questions of federal law.’’

(4) Therefore, to deny ahstention under the cireum-

stances is to impose on defendants a determination °

of that issue by a tribunal recognized as not the most

competent to decide that matter, and, therefore, is a

denial to defendants of the due process of law, guar,

anteed to them by the Fifth Amendment to the U.S

C onstitution.

4, Said defendants have previously ° filed” a Motion to

File Exhibits Pursuant to. loc: il rule VII (4). Said motion

was filed subsequent to the Court’s order of.June 10,

1971, but prior to defendants receiving actual notice of

said order. ‘Defendants ask that said Exhibits, attached

to said motion, and the material in said motion, be eon-

sidered as an aid to the Court in its determination of this

Motion for Re hearing.

Further, defendants ask that they be allowed appro-

priate additional time for amending their pleadings, as

set forth in 2. above, should this Court deny or overrule

this Motion for Rehearing.

WHEREFORE, defendants, Robert. [. Clausen, Ih B.

Surkamp and Tadley. PL Stonner pray the Court for re-

hearing of their Motion to Stay Proceedings in light of this

Court's findings and their relation to the due process pro-

> A-18 gta

« . .

visions of the Fifth Amendment to the U. S. Constitution,

and-for the relief inentioned in 4. and 5. above.

s/ J. WARD DRISCOLL |

Attorney for Defendant

H. B. Surkamp

"25 South. Bemiston

Clayton, Mo. 63105

863-3387

*- JAMES C. BUTCHER

By s/ J. WARD DRISCOLL

-Attorneys for

Robert I. Clausen

. 9 North Eighth Street

‘’. Columbia, Mo. 65201. -

449-4126

CLARENCE W. HAWK

By s/ J. WARD DRISCOLL -

Attorneys for Defendant

Hadley P. Stonner

601 North High Street

California, Mo.. 65018

796-2114 ©

’

United States District Court

‘Kastern District of Missouri

Eastern Division = sehen

(Caption Omitted)

ORDER

(Filed June 23, 1971)

This matter is before the court on Motion of defendants

Robert I. Clausen, H. B. Surkamp and Hadley P. Stonner ~

—A-1l)—

for Rehearing on their Motion to Stay Proceedings. On

June 10, 1971, this court entered its Order denying the

motion of said defendants to stay proceedings pending

adjudication of a certain state action in the Cireuit Court

of Boone Cowity, Missouri. Movants instituted the state

action after plaintiff had filed its complaint in this court.

The claims asserted in the state action could have been

. asserted as a counterclaim or defense in the instant case.

* No grounds: were asserted in support of the Motion for .

Rehearing of Motion to Stay Proceedings. which were

not considered, by the court in entering its Order of June

10, 1971, no was any brief filed in support of the motion

in aceordanee with ‘our rules.

The court bictun fully advised, it is ORDERED that

said defendants’ Motion for Rehearing of Motion to Stay

Prod seedings be and is hereby-denied. _The time previously

granted for defendants to amend their r responsive plead-

Ing so as to assert any counterclaims or defenses presently

asserted in the state court action which they may wish

to assert in this ease is extended to June 30, 1971.

Dated: June 23, 1971.

WILLEAM H. WEBS STER

United States District Judge

In the United States District Court for the Eastern

District of Missouri, Eastern Division

(Caption Omitted)

MEMORANDUM

The undersigned on behalf of the defendants, Robert G.

Surkamp «and Rolland J. Walters, states that. these. de-

fendants do not oppose the motion of the defendants,

pe oe

; “Robert L Clausen, H, B. Surkamp and Hadley, = Stonner

which sce ‘ks to stay these proceedings.

s* RICHARD C. THOMAS

BEAR, HINES and THOMAS

“p00 Guitar Building

Columbia, Missouri 6520] —

Attorney for Defendants, - Robert

» G.. Surkamp and Rolland J.

: Ww alters .

In thesCireuit Court of Boane County, Missouri

Harry B. Surkamp,’ Robert I. Clau- ) ee &

~sen and Hadley P. Stonner,

| Plaintitfs,

Vs.

The Nagthern | Trust Company, a“~ Case No, 52930.

Corporation, as .Trustee ua

2 th Teletype © orpor: ation, John

. Drescher, Jr. Robert G. Sur- |

ee andl Rolland J. Walters, |

Defemdants. |’

- ' PLAINTIFFS’ THIRD AMENDED PETITION

Come now the plaintiffs and, fer their cause of action,

state to the Court that

The-ydaintiffs are all the partners in) Williamsburg

Developments, a partnership.

The hereinafter mentioned Gene Schultz is a resident.

of Boone (‘oundy, Mo.: the defendant John M. Drescher,

Iris a hal of St. Louis County, Mo.: the defendant

Rolland, J. Walters isa resident of Boore County, Mo.;

— A-21 —

the defendant Robert G. Surkamp is a resident of St.

Louis County, Mo.; the defendant Northern Trust Com-

pany is’an I]linoix corporation engaged in the trust busi-

ness and is the holder of the hereafter referred to deed

of trust on plaintiffs’ real estate as an investment under °

a trust agreement dated ax of October 1, 1952, and later

amended, | wv and Between Northern Trust Company, as

“trustee, and the Teletype Corporation for the Teletype

Corporation Pension Fund,

3. The causes alleged in this petition involve a certain

piece of real estate, at all times mentioned herein ewned

by Wilhamsburg, Developments, a* partnership, and ‘said

real estate is located in Boone County, Mo.; and is more

particularly described ax follows: ise

A ‘tract of land in the NE Ly of Section 19, Township

48, Range 12 im Columbia, Missouri, and more par-

ticularly deseribed as follows: Beginning at the North-

‘east corner of Tract No. 2 of Boone County Survey

No. 7296; thenee S 33-degrees 17 minutes W 610 fect,

thence N 56 degrees 43 minutes W 120 feet: aa

S 35 degrees 17 minutes W 50 feet: thenee N 56 de-

grees 45 minutes’ W 70 feet;-thenee N 33 degrees -17

minutes f 50 feet: thenee N 46 degrees 43 minutes

W 210.9 feet: thence N 52 degrees 55 minutes: E 474.9

feet:, thence N89 degrees: Is minutes K 291 feet to

the point of beginning and containing 3.83 acres. —

4. On or about April 28, 1969; the plaintiffs, Harry B.

Surkamp,-Robert [. Clausen and Hadley P. Stoner, ‘atid

the defendanis Robert G. Surkamp and Rolland J» Walt-

ers, said defendants being at that time, but not now, part:

ners with plaintiffs in’ Williamsbure Developments, a

parine rshiqy executed a certain deed oF trust as parties of

the first part therein and mortgagors in behalf of Wil.

hiamsbure Developments, a oparthership, on the abeve

deseribed real estate, and said deed of trust, whieh is

‘

— ee

recdrded in Book 394, Page 288 of the. Boone County Re-

eorder’s office, was executed as security for a certain note

dated April 28, 1969, for money borrowed, the principal

and interest of said note being payable in amortized

monthly installments over a period? of 22%: years, be-

ginning May 1, 1969, and continuing until November 1,

1991.

5. On December.14, 1970, the defendant John M. Dres-

cher, Jr., named as party of the second part and trustee

in aforesaid deed of trust held-a’ purported trustee’s sale

of the real estate deseribed in the deed of trust, and at

~ said sale on December 14, 1970, purported to sell said real

estate to the defendant Northern Trust Co., as trustee

under agreement with Teletype Corporation, and then on

January 5, 1971, the defendant John M. Drescher, Jr.,

*: executed a trustee’s deed purportedly conveying ‘said real

estate to the defendant Northern Trust Co., as trustee

under agreement with Teletype Corporation. .

6. Said purported sale is void and invalid due to the

following grounds, each of which ground is sufficient in

and of. itself to render ‘said purported sale void and in-.

valid:

(1) The trustee . failed to sell the property to the

highest bidder for cash at said sale, which was Land

III, Ltd., a Missouri Corporation, and failed to allow

Land III, Ltd., a reasonable time to pay the amount

of its bid, which Was $440,000.

(2) The trustee did not conduct said sale impartially

in that at all times, that he was purporting to aet as

trustee, he was in fact a member of the law. firm,.

Leavis, Rice, Tucker, Allen & Chubb, whieh was at

alk times quentioned herein acting as the attorney for

the defendant Northern Trust Co. the holder of said

deed of trust, and said: trustee refused to sell to the

aii A-23 — . :

highest. bidder for cash at said sale, namely, “Land

III, Ltd., at $440,000, and instead purported to sell

said property to his law firm’s elient, Northern Trust

Co., wha ‘began by “bidding $250,000 and gradually

increased Ats bid to $456,000, and that in so doing

cand in the conduet of said sale trustee was not im-

partial and could not have been impartial under the

circumstances i that at the same time he was acting

as trustee’ and required to’ perform ‘said office in a

manner equivalent’to a chancellor in equity, he pro-

eeeded to make rulings involving the two bidders at

said sale, namely, Land Ill, Ltd., and Northern Trust

Co., and made said rulings in favor of his law firm’s

client and against Land III, Ltd.

(3) The trustee did not. attempt to obtain the best

price for: said property and did not attempt to hold

said sale in such a manner that would be in the best

interests of both mortgagors and mortgagee, but © in-

stead held said sale in such a manner as was in the

best interest of only the mortgagee and Was not in

the best interest of the mortgagors.

(4) The deed of trust purports to be security for a

note in the principal amount of $525,000: whereas

both the defendant’ trustee and the defendant North-

ern Trust Co. knew ‘said amount was fatee and knew

that not more than $475,000 had been loaned™m said

note to mortgagors, but said defendants took no ac. |

tion to reform said deed of trust and instead said.

defendants purported to foreclose said deed of. trust.

well knowing that ‘the principal amount of the nate

as shown on said deéd of trust Was false, and that .

said course of conduct was misleading to the public.

7. The purported trustee*s deed dated January 5, 1971,

is likewise void and invalid, as if is based on the void and

invalid trustee’s sale on December 14, 1970.

ek i

The plaintiffs discovered that subsequent to the’ pur- °

ported trustee's sale on December 14, 1970, the defendant

Northern’ ‘Trust Co. entered intoca contract to sell said

real property to Gene Sehultz of Columbia, Mo., and the

defendant Northern Trust Co. has acknowledged that it

entered into such a contract, but now states that the eon-

tract no longer exists. Upon learning of said eontract,

plaintiffs immediately instituted this aetion and made

Gene Sehultz a defendant herein: and Gene Sehultz sub-

sequently asked to be dismissed, alleging that he has no

contract with the defendant Northern 'Prust Co. .. and, there-

fore, plaintiffs consented to him being dismissed, Plain-

tits state, however, that the purported trustee’s sale of

December 14, 1970, conferred no ownership rights on said

defendant, and said defendant should not engage in trying

to sell said property, as said: property is owned by plain-

tifts and not by defendant.

9. Not only was said trustee’s sale on December 14, 1970,

voideand invalid on the aforesaid grounds,. but defendants

John M. Dreseher, Jr, and Northern Trust Co. were not

entitled to: institute foreclosure proceedings ‘in the first

place, for prior to the institution of any such proceedings

plaintiffs offered on several occasions to pay’ to Northern

Trust Co. all past due installments on said loan, but de-

fendant Northern Trust Co, wrongtully retused to accept

said payments.

10. The plaintiffs constructed: en Said real-estate six

separate apartment buildings, containing a total of 3

apartment units. Said construction commenced in- the

Spring of 1968 and was’ completed in the Spring of 1969,

at a total cost, for land and buildings, of over $775, 000.

The value of the property at this time is $1, 000,000. AIL

projections for said apartments included the’ information

that construction of a large Veterans Adniunistration Hos-

pital had been started at a distance of approximately one

— A335 — . arc ‘

“nile from said apartments, and said hospital was scheduled

for completion at approximately the same time the apart-

ments were scheduled for completion, and it was projected

by all fnterested therein that a substantial percentage of

the large professional staff that would he employed by the

hospital upon completion would be in the market for apart-

nents and that plaintiffs’ apartments would probably be

best suited to. fill that need. Due-to delays, the Veterans

Administration Pospital, instead of being completed ‘in

1969, is just now hearing completion, and this has affeeted

the rental market for the last year and a half. The plain-

tiffs have invested over $280,000 in said real estate over

and above the amount borrowed on aforesaid deed of trust

and over and above the amounts already re paid by plain-

tiffs on said deed of trust.

HW. Plaintiffs are ready, willing and able to pay any past.

due iistallments,on said deed of trust and hereby offer to

pay any past due installments: Plaintiffs beheve that said

offer is an offer to do equity under the circumstances, and

plaintiffs base that: belief on the following ‘statements. in

Missouri cases on the subject, to wit:

Kitzpatrick v. Federer, 515 S.W.2d 829- .. offer

to redeem: means in effeet they must offer to. de equity

in the circumstances, and that usually means, putting

the parties in the status quo,

Pueblo Real Hist. Loa & Inv. Co. v. Johnson, 119 S.W.

2d 274--"* Relief varies according tq the circumstances.

He, who’seeks equity, must do equity.’

and plaintiffs interpret those statements to mean that re-

storing the status quo means. reinstating the deed of trust

and having: the plaintiffs make current any past ave in-

stallments..

Ila. (ta. is an alternate paragraph to: 11. above) Plain-

tiffs-recognize that the Court*s interpretation of redeemiig

‘

— AyZ6 — , Y

or doing equity under the -¢ireumstances may differ from

plaintiffs’ interpretation in” 11. above. Plaintiffs believe

this ease to be one of *Sequitable redemption’” rather than

‘statutory redemption’? and that therefore the cases in

equity, rather than the statutes, would govern as to what

constitutes’ an offer, to redeem; however, plaintiffs also

‘recognize that Courts at times are guided in their rulings

in equity by comparable statutes on the subject. Plaintiffs

interpret the statutory proceedure for redemption (443.420

of Revised Statutes of Mo.) to bein essence the following:

1) bond for one year’s interest, plus past due interest, costs ,

of sale, taxes; 2) full principal belanee and: accrued in-

terest to be paid within one year or bond to be forfeited.

Plaintiffs are ready, willing and able to post such a bond

and-hereby offer to do so, Plaintiffs also call attention to

the situation prevailing in this case, to wit: the defendant

Northern ‘Trust Co., not the plaintiffs, is in control of the

premises and colleeting the rents, due to what plaintiffs

regard as an illegal seizure,as set forth in par. 12 below.

The rentals that defendant is collecting far exceed the in-

terest that would accrue in one year, ete., and, therefore, -

the Court might consider allowing defendant to colleet said

rentals,.in lieu of plaintiffs posting a bond for interest

and in lieu of plaintiffs being restored to possession for the

period of the year. ; . )

lib. ¢11b. is an alternate paragraph to 11. and Ta.

above) The plaintiffs seek in good faith to redeem or do

equity in the cireumstances, as the Court -might require

under the circumstances. In the event that the Court’s re-

quirement would be other than stated in 11. or Ta. above,

and should the Court requirement be that redemption or

doing equity means offering to pay the full amount of

principal and interest at this time, then plaintiffs state”

that they believe they could refinanee said deed of trust

Within a reasonable period of time. . Plaintiffs are. en-

deavoring to refinance said deed of trust at the present

aes Ae

time; however, the cireumstances-of defendant having pos-

session of the property and the uncertainties created by

the purported trustee’s sale on December 14, 1970. are not:

] ] b] 9

conducive to obtaining said refinancing. A Court order,

granting plaintiffs a reasonable. period of time to accom-

plish said refinancing, would do much to alleviate the dif-

ficulties of obtaining refinancing.

lle. (1te. is an alternate paragraph to 11, lla. and 11b. )

In the event that the Court’s requirements or interpreta-

tion of redeeming or doing equity under the circumstances

is other than as mentioned in 11., 11a., or 11b., then plain-

tiffs ask that the Court condition its setting aside of the’

purported trustee’s sale on plaintiffs complying with said

requirement.or interpretation, and plaintiffs will in good:

faith attempt to comply.

12. On or about December 1, 1970, and prior to the afore-

said void and invalid trustee’s sale on December .14, 1970,

the defendant Northern Trust Co. unlawfully seized pos-

session of aforesaid. real estate - and . apartment buildings

and-of the hooks and records of plaintiffs at said, loeation,

and sinee said time the defendant Northern Trust Co. has

unlawfully collected the rentals from said property and has

unlawfully. withheld possession of said real estate and

‘apartment buildings and of said books, records and rentals.

Plaintiffs are entitled to restoration of the possession of

said-real estate and apartinent buildings and of said books

and reeords, and are entitled. to “an accounting from

Northern Trust Co., of the rentals collected by Northern

Trust Co., and are entitled to a eredit for “said ‘rentals

against any: past due installments on said deed of trust.

The subject matter of this cause of action directly

fran title to real estate, which by its nature is unique,

and plaintiffs do not have an adequate remedy at’ law.

The ei cabinis Rolland. J. Walters and Robert CG.

ra may have an interest in this proceeding and may

; ed

me.

be affected by the result, sinee they signed:.the note, se-- -

cured by said deed of trust, and therefore they have been

made defendants in this proceeding.

WHERE FORK, plaintiffs pray ‘that ine ours adjudge

the aforesaid frustee’s sale on December 14, 1970, and the

aforesaid trustee’s deed dated January 5, 1971, to be void

and invalid, and that the Court order defendant Northern

Trust Co. to furnish to” plaintiffs an accounting of all

rentals collected from said property by Northern Trust Co.

and to restore possession of said real estate and apartment

buildings and the books and records of plaintiffs to plain-

tiffs, and plaintiffs further pray for such other and further

relief as to the Court shall seen fit and proper under the

circumstances and for their costs in this behalf expended. |

‘s/ J. WARD DRISCOLL

25 South Bemiston

Clayton, Missouri 63105

862-3387 |

| Attorney for Plaintiff

_ Harry B. Surkamp

‘/s/ JAMES C. BUTCHER

| -9 North Eighth Street

Columbia, Missouri 65201

449-4126

Attorney for. Plaintiff

Robert I. Clausen

/s/ CLARENCE W. HAWK <

- 601 North High Street

California, Missouri 65018

796-2114 a

Attorney for Plaintiff —

Hadley P. Stonner

— A-29'—

In the Circuit Court of Boone County, Misseuri |

Case No. 02,930

(Caption Onitted)

‘ - MOTION TO DISMISS»

Come now defendants, The Northern Trust Company:

and John M. Drescher, .Jr., as Frustee, and move this Court

that it make-ant citer its Order dismissing Plaintiffs”

Third Amended Petition and states as a-reason therefor .

~ that said Third Amended Petition fails eae a aim

upon which relief can be granted.

LEWIS, RICE, TUCKER, ALLEN: &

CHUBB |

611 Olive Street

St. Louis, Missouri 63101.

314/231-5833 ©

By Rh. RICHARD STRAUB

SAPP, WOODS, DANNOV and ORR

411° Guitar Building

Columbia, Missouri 65201

314/442-3195

Joe By SCOTT ORR

A 30 —

In the U nited Stat?s District Court fox the

Kastern District of Missouri, Kastern Divi ision

~The Northern Trust) Company, « as );

Trustees .

_ Plaintiff,

vs.

Robert 1. Clausen, [. B. Surkamp, E.G.

Surkamp, Hadley P. Stonner and

Rolland J. Walters, . *°

; , Defendants. 7)

NOTICE OF APPEAL

Cause

No. 71e 76-(; sy,

- Notiee is hereby given that defendants Robert [. Ckausen, .

di. B. Surkamp and Hadley P. Stonner hereby ap veal to

}

“the United States Court of “Appeals for the Kighth ¢

Cireuit

from the interlocutory order refusing to -stay proceedings

entered in this actlou on the 10th alay of June, 1071.

J. WARD DRISCOLL

25 South Bemiston *

863-5587

( ‘layton, Missouri 6 3105

Attorney for Un Robert I.

_ (Yausen, HH. B.

Surkamp and

Hadley P. Stonner in re appeal

to the U. S. Court of Appeals,

. KHighth Cireuit

Raye: Penge een

In the United States Distriet Court

lor the Eastern Distriet of Missouri

WMastern Division

i »* (Caption Omitted)

H . ,«

MOTION TO STAY WHILE APPEAL IS PENDING

Come \now the defendants, Robert I. Clausen, Hl. B.

Surkamp\ and Hadley P. Stonner, and, for their Motion’

to Stay While Appeal is Pending, state to the Court that:

1. On June 10, 1971, the Court denied said defendants’

motion to stay proceedings in this cause pending adjudica-

tion of a state court action, and granted defendants leave

to amend: their responsive pleadings: within ten days, so

as to assert any counterclaims or defenses presently as-

serted i the state court aetion, which they may wish .to’

assert in this case. Said time to amend was subsequently

ae by the Court to June 350, 1971. |

2. Said defendants wish to assert herein all the ecounter-

claims and defenses presently asserted by them im state

court and believe their assertion is.essential to a just

adjudication of this ease.. Also, the defendants -believe

that the situation of both the federal and state courts pro-

ceeding on the subject is not in-the interest of justice and

it has serious adverse effects on federal-state relations and

on the due process rights of defendants, as set forth in

- the Fifth Amendment to the U. S: Constitution, and, there-

fore, defendants have on the 25th day of June, 1971, filed

an appeal from said interlocutory ‘oy der of June 10, 1971,

to the U.S. Court of Appeals .of the E ighth- ‘Cireuit.

. Defendants have filed their amended pleadings, as

Ie set forth, togefher with the filing of this motion.

Defendants state, however, that to require them to pro-

ceed further in this case, prior to the: determination of

their appeal, would. have the effect. of > prejudging that

—— A-Jd2 —

| appeal and of depriving them of said appeal, without a

hearing of it on its merits by the U. S. Court of Appeals.

4. Inasmuch as said appeal has the potential of further

_ defining the proper roles of the state and federal court

systems at the earliest possible date, and since needless

friction with: state policy may be thereby avoided, defend-

ants state that it would ,be a loss to all concerhed with

the administration .of justice should this appeal be in

effect denied, due to further proceedings in this case, prior

to the determination of said appeal by the U. S. Court of -

- Appeals.

5. The Court’s order on June 10, 1971, quotes from

pages 2109-10 of Moore’s Federal Practice, Vol. tA, a

source suggested to the Court by plaintiff in a memo-

randum filed on the day of oral argument, and not. within

the time prescribed by the Court’s rules. Defendants

state that it was unfortunate that such a quotation was.

urged-on the Court at said time, because said. quotation

is not from any case, but merely represents that textbook

writer’s view, and said view is clearly in conflict with the

U. S. Supreme Court’s decision quoted on pps. 2107 and

2108 of said textbook, to wit:

l.e. 2107-2108—Chief Justice Vinson for the Court:

‘As adequate state court review of an adminis-

trative order based upon predominantly local fac-

tors is available to appellee, intervention of a

federal court is not necessary for the protection

of federal rights. Equitable relief may be granted

only when the District Court, in its sound dis-

-eretion exercised with, the ‘scrupulous regard for

the rightful independence of state governments

which should at all times actuate the federal

courts,’ ‘is convinced that the asserted federal

right cannot be preserved except by granting the

‘extraordinary relief of an injunction in the fed-

ae 6 a hE

eral courts.’ Considering that-‘few public in-

terests have a higher claim upon the discretion

. of a federal chancellor than the avoidance of

needless friction ‘with state policies,’ the usual

rule of ‘comity must govern the exércise of equi-

table jurisdiction by the District Court in this

case. Whatever rights appellee may have are to

be pursued through the state courts . . . }

‘‘As this Court held in Great Lakes Dredge &

Dock Co. v. Huffman: ‘This withholding of ex-

traordinary relief by, courts having authority to

give it is not a denial of the jurisdiction which

Congress has conferred on the federal courts * * *

On the contrary, it is but a recognition * * *

that a ‘federal court. of equity * * * should stay

its hand in the public interest when it reasonably

appears that private interests will not suffer.

“..'@ * *

‘It is in the public interest that federal courts

of equity should exercise their discretionary power

to grant,or withhold relief so as to avoid needless

obstruction of the domestic policy of the states.’ ’?

While the. Supreme Court i in said quotation is speaking

specifically of not enjoining the state court, the Supreme

Court is saying that if the federal court does not enjoin

the state court, then the federal court will not proceed,

but will stay itself and allow the state court to proceed.

The situation in this case is more serious, for,.as this

Court has found, plaintiff does not seek to stay the state

court proceeding, but this Court is nonetheless proceeding

on the same subject that the state court is proceeding on.

We respectfully state that this is not a very forthright

way . of dealing with the state courts. |

Defendants: believe the due process argument is one -of

first impression, and it is made in light of.the U. S. Su-

preme Court’s statements on abstention, as contained in

England v, La. Board of Medicad Examiners and quoted

pr eviously by defendants,

WHEREFORE, ee er Robert I. Clausen, LL. B.

Surkamp and Hadley -P. Stonner, pray the Court to stay

further proceedings in. this Court, until their appeal has _

been determined by the U. S. Court. of Appeals.

J. WARD DRISCOLL

25 South Bemiston —

Clayten, Missouri 63105 —

863-3387 ,

Attorney for Defendant

H. B.. Surkamp

JAMES C. BUTCHER

By J. WARD DRISCOLL

- 9 North Eighth Street

Columbia, Missouri 65201

_ 449-4126

Attorney for Defendant

Robert. I. Clausen

CLARENCE W. HAWK

° —. By J. WARD DRISCOLL

601 North High Street

California, Missouri 65018

796-2114

Attorney for Defendant

Hadley P. Stonner |

In the United States District Court for the

Eastern Distriet of Missouri

Eastern Division

The Northern Trust Company, as >

iy» ustec, tes |

| Plaintiff, tee.

vs, - | Gees No. 71 C 76 (3).

~ Robert I. Clausen, et_al.,

2 Hedendeate, J

REPLY BRIEF OF. PLAINTIFF TO DEFENDANTS’

MOTION TO STAY WHILE APPEAL .

; IS PENDING

The Northern Trust “Company, as Trastes, _ plaintiff —-

~-herein, opposes the Motion to Stay While Appeal i is Pend-

ing filed by defendants Robert I. Claussén, H. B. Surkamp |

and Hadley P. Stonner for the following reasons:

1. On June 10, 1971, this Court ‘overruled the Motion

of said defendants to stay. this cause pending adjudica-

. tion of an action filed by them in the Cireuit Court of

ae County, Missouri. : :

. On June 23, 1971, this Court overruled the Motion.

of wre defendants for rehearing of said Motion to Stay

Proceedings.

3. On June 25, 1971 said defendants filed a Notice’ of

Appeal from the cocina: Order of this Courtwntered

.on June 10, 1971:

‘4. Plaintiff believes that the Court of Appeals for the -

Kighth Cireuit.has no jurisdiction over this appeal.and has

filed a-Motion to Dismiss the Appeal with said. court. A

copy of said Motion to Dismiss is attached hereto and

incorporated by reference,

— A-36 —

0. 2 USC, § 1 292¢b) specifically provides that, the ap-

sarah for an appeal shall not stay proceedings inthe

District Court unless the District Court or the Court of Ap-

peals shall so order, war . -

6. Plaintiff hislbowes that this Motion is not filed ‘in *

good faith but only to thwart and intérfere with plaintiff's

right to have this entire cause disposed of on July 26, 1971.

Respectfully submitted

LEWIS, RICE, TUCKER, ALL KN & CHUBB

By R. RICHARD STRAUB

1555 Railway Exchange Building. —

611 Olive Street _—

St. Louis, Missouri 63101

931-5833 |

Attorneys for the Northern

- Trust Conipany

In the United States District one for the

Eastern District. of Missouri

Eastern Division

_ + (Caption Omitted)

REPLY BRIEF OF DEFENDANTS RE THEIR MOTION

TO STAY WHILE APPEAL IS PENDING

~ Conie now the defendants Robert I. Claussen, H. B. Sur-

kamp and Hadley P. Stonner, and, for their reply brief in

‘support of their Motion to Stay While —s is fos nanares

state to the Court that:

4 aperecntae ’s reply brief re said motion. ar rgues that the

U. S. Court of Appeals for the Kighth Cireuit does not

ee jurisdiction of defendants’ appeal. Such is not a

proper argument to be made to this Court, as the U. S.

as '

Court of ‘edi will be the judge of whether or not it

2. So-that this Cais be fully ran the ‘tink

ants state that their ‘appeal is pursuant to 28 U.S.C. 1902. +

- (a)(1). ail

3. The last case cited in the most recent supplementgto

| 28 US.G.A, 1292 (a) (1) note 121 is Standard Chlorine

of Delaware, Ine. v. Leonard, 384 F.2d 304 (1967) yand at

le, 307 and 308, the U. 8. Court of Appeals for the’ Second

Cireuit quotes the U. S. Supreme Court’s decision i in Balti-

more Contractors V. Bodinger, 6 S.Ct. 249, find concludes

- by saying: | é

' “And, we agree with the Fifth ‘Cireuit ae the ree

that has emerged from the many decisions is that ‘An

order staying or refusing to stay proceedings in the

District Court is appealable , ander .§1292 (a) (1) only .

if (A) the action in which’ the order was made is an

action which, before. the fusion of law and equity, was

by its nature.an action at law; and (B) the stay was

sought to permit the prior determination of some

equitable defense or. counterclaim.’ Jackson Brewing

Co. v. Clarke, 303 F.2d 844, 845 (5th Cir.), cert. denied

371 U.S. 891, 83 S.Ct. 190, 9 L.Ed2d 124 (1962) (em-

phasis in origial).”’

Defendafits’ appeal meets both those eine

_ +4. The U.S. Supreme Court in Baltimore Contractors v.

' Bodinger, supra, reviewed the legislative history on inter-

locutory appeals as follows, le. 252:

‘**The provision for interlocutory appeals was first

introduced in 1891, when the cireuit -courts of appeals _

~ were established as inter mediate appellate courts. 26

Stat. 826. Section 7 of that Act allowed appeals from

interlocutory orders in equity ‘granting or continu-

ABB

ing’ pation, but for those wd. Additions to. the

~. elass of appealable inter “locutory orders were made

from time to time until the enactment of $1292 i in its

- present form. :

‘*No discussion of the underlying reasons for modi-

' fying the rule of finality appears in the legislative

history, although the changes seem plainly to spring

from ‘a developing need to permit litigants to effec-

tively challenge. interlocutory orders of serious, per- -

haps irreparable consequences. ’” |

In connection ther éewith we recall Chief Justice Vinson’s |

_ ruling for the-@ourt* in Alabaina Public’ Service Co. v.

Southern Ry. Co., 71 S.Ct..726, quoted in defendants’ Mo-

tion: to Stay While Appeal is Pending, as to how serious

.and important the ‘Court arsine the avoidance of ““need- E

- less friction with the state courts’’

The developing law on contempt cases seems to recog-

nize that ‘it would be better. for a Court, other than the

Court: involved, to pass on serious matters in that area;

and we believe that the same holds trne in this case, that it

would be better for the U. S. Court of Appeals to pass on

the matter, when the course of action being taken by the

District Court does involve the serious matter of federal

and state court relations. .

"Respectfully submitted .

J. WARD DRISCOLL |

JAMES C. BUTCHER and

‘CLARENCE W. HAWK

| By J. WARD DRISCOLL

- Attorneys for . Defendants

es ae

| United States Court of Appeals

| for the Eighth Circuit

* ‘The Northern Trust. Company, as )

; Trustee, | |

Appellee, | . ait

| LN, 711366.

Robert I. Clausen, H. B. Sarkamp,

- and Hadley P. Stonner, ae

| | Appellants. }

Vs.

£4

MOTION TO DISMISS

Comes now The Northern Trust Company, as Trustee,

appellee herein, and moves this Court to dismiss this _

. Appéal for the reason that this Appeal is not within the

jurisdiction of this Court. In support whereof; appellee

respectfully states that: ==» oe

- 1. On June 10, 1971, the District Court entered an

interlocutory order overruling the motion of appellants

to stay all procéedings in said action.

2. .On or about June 25, 1971, appellants filed their No- es

. tice of- Appeal from said interlocutory order of the Dis-

"trict. Yourt. ~ ere an, | ene ye

_ 8. This Court-has no jurisdiction over this appeal under ~

the provisions of 28 U.S.C., § 1291 inasmuch as the appeal

is not-from a final decision. of a district court.

4. This Court has no. jurisdiction over this appeal under

the provisions of 28° U.S.C., §1292(a) inasmuch as the

interlocutory order appealed from is ‘hot the type of order

specified by Subsection’ (a) of 28 U.S.C., § 1299.

the provisions of 28 US.C., § 1292(b) inasmuch as the

—A 10 —

interlovutory order appealed from does not contain a state-

‘ment. preseribed by 28 U.S.C), § 1292(b)..

Respectfully submitted

LEWIS, RICK, TUCKER, ALLEN &

‘ CHUBB ;

| By R. RICHARD STRAUB

1555 Railway Kixchange Building

¥ . 611 Olive Street

St. Louis, Missouri 63101.

231-5833

Attorneys for The Norther Trust

Cc OMpANY

United States Court. of Appeals

(« ‘apt ion omit ted)

APPELLANTS’ RESPONSE TO MOTION TO DISMISS

Come now the appellants, Robert I. Clausen, H. B. Sur-

kamp and Hadley P. Stonner, and, for their. response in

opposition to appellee's Motion to Dismiss for lack of

jurisdiction in this Court, appellants state to the Court

- that: é

1. Their appeal from the interlocutory order of June

10,1971, of the District Court refusing to stay proceedings

in the District Court, until cause No. 52930 of the Circuit

Court of Boone County, Missouri, is finally adjudicated, |

is pursuant to 28 U.S.C. 1292 (a) (1).

>. The last case cited in the niost recent supplement to

28 Tv. S.C.A. 1292 (a) (1) note 121 ‘is Standard Chlorine of

Delaware, Inc. +. Leonard, 384 F.2d 304 (1967), and at

Le. 307 and 308, the U.S. Court of Appeals for the Second

omni pe

Cireuit quotes the U.S, Supreme Court’s decision in Balti-

_ more Contractors vy. Bodinger, 75 S.Ct. 249, and concludes

“by saying: . a

“And, we agree with the Fifth Cirenit that the rule

that. has emerged from the many decisions is ‘that ‘An .

order: staying or refusing to stay proceedings in the

Distriet Court is appealable under No. 1292 (a) (1).

only if (A) the aetion in which the order was made :

is an action which, before the fusion cif law and equity,

was by ifs nature an action at law: @nd (B) the stay

Was sought to permit the prior determination of some

equitable defense ‘or counterclaim.’ Jeckson Brewing

Co, v. Clarke, 303 F.2d 844, 845 (5th Cir.), cert. de-

nied 371 U.S. 894, 83 S.Ct. 190, 9 L.d.2d 124 (1962) ve

(emphasis in original).’?

Appellants’ appeal meets both those: requirements. The

suit in District Court seeks to assess a deficiency judgment

against the appellants based upon a purported sale on

December ‘14, 1970, by a-trusteée under a deed of trust on °

appellants’. real estate in Boone ( founty, Missouri, The |

- validity of that.purported sale, at which the appellee, who

is the holder of said. deed of trust, purportedly bought

said real estate, and at which the trustee conducting. said

sale was a member of the law firm representing appellee

then and now, is presently being adjudicated, in a pro-

ceeding in equity, brought by appellants against appellee,

a said cause being No. 52930 of the Circuit Court of Boone -

County, Missouri. A copy of Plaintiffs’ Third Amended’

. Petition, in said chse is attached-heréto and hereby made’

a part hereof. Plaintiffs’ Second ‘Amended Petition in| -

said ease is attached hereto as an: exhibit attached to ap-

pellants’ Motion to Stay Proceedings in the District Court.

| It is appropriate and’ proper that the validity of s&id

purported sale be adjudicated in said cause in the Circuit

Court of Boone County, Missouri, since ‘said. cause ‘in-

— A-42 omnes

volves title to real estate in Boone County, Missouri, and

involves the foreclosure laws of the State of. Missouri,

and the issues’ before said court of the State of Missouri

‘do not involve the Constitution, treaties or laws of the »

United States. Further, following said purported sale on

December 14, 1970, the appellee attempted to sell said

property to Gene Schultz of Boone County, Missouri, and,

_ therefore, recourse to, said state court was immediately

“snecessary to adjudicate title to said real estate, before

. more purported transfers of said real estate were made.

- The District Court has found that appellee does not seek to

stay the state court proceeding.

3. The U. S. Supreme Court in Baltimore Contractors-v.

Bodinger, supra, reviewed the legislative history on inter- _-

locutory appeals as follows, le. 252: a

“The provision for interlocutory appeals was first

introduced in 1891, when the circuit courts of appeals

were established as intermediate appellate courts. 26

Stat. 826. Section 7 of that Act allowed appeals from

- interlocutory orders in. equity ‘granting or continuing’

injunctions, but for those only. Additions to the class

of appealable interlocutory orders were made. from

time to time until the enactment of No. 1292 in its

present form. —

“No. discussion of the underlying reasons for modi-

fying the rule of finality appears in. the legislative

history, although the changes seem plainly to spring

from a developing. need to permit litigants to ef-

fectually challenge interlocutory orders of serious, per-

haps irreparable consequences. ”’

In Alabama Public Service Co- v. ~Southern- Ry. Co., 71

S.Ct. 762, Chief Justice Vinson, in his opinion for ie ;

Court, set forth how serious and important the Court re-

gards the avoidance of, ‘“needless seats with the state

courts’’:

oe —_

‘‘As adequate. state court review of an administra-

tive order based upon predominantly local factors is

available.to appellee, intervention of a federal court

is not necessary for the protection of federal rights.

‘Equitable relief’ may be granted only when the Dis-

‘trict Court, in its. sound discretion exereised with the

‘serupulous regard for the rightful independence of

siate governments which should at all times actuate

the federal courts,’ is convinced that’ the asserted

federal right cannot be preserved except by granting

'. the ‘extraordinary relief of. an injunction in the fed-

_- eral courts.’ Considering that ‘few public interests

- have a higher claim upon the discretion of a federal

chancellor ,than the. avoidance of needless friction

with. state policies,’ the usual rule of comity must gov-

ern the exercise of equitable jurisdiction by the Dis-

trict Court in this case. Whatever rights appellee

may have are to be pursued through the state courts

‘As this Court held in Great Lakes Dredge & Dock

Co. v. Huffman: ‘This withhokling of extraordinary

relief by courts having authority to give it is not a

denial of the jurisdiction which Congress has

conferred on the federat courts * * * On the contrary,

it is but a recognition * * * that a federal court of

est when it réasonably appears that private interests .

will not suffer. a ee 4 }

_ ‘Tt is in. the public interest that federal courts

of equity should exercise their discretionary power

to grant or withhold relief so as to avoid needless ob-

struction of the domestic policy of the states.’ ”’

~——While the Supreme Court in said. quotation is speaking —

specifically of not enjoining-the state_court, the Supreme

Court is saying that if the federal court does not enjoin’

”

0 may "ees

the state court, then the federal court will not proceed,

but will stay itself and allow the state court to proceed.

The situation in this case is more serious, for, as the Dis-

trict Court has found, appellee does not seek to stay the

‘state court proceeding, but the Distriet Court is nonethe-.

less proceeding on the same subject that the state court

is proceeding on.

- The developing law on contempt cases seems to recog-

nize that it would be better for a Conrt, other than the

Court involved, to’ pass on serious matters in that area;

and appellants believe that the same holds true in this

case, that it would be better for the U. S. Court of Appeals

to pass on the matter, when the course of action being

taken by the District Court. does involve the serious mat-

ter-of federal and state court relations.

4. The appellants have stated to the District ¢ ‘ourt, and

restate here, that they believe the situation of both the

federal and state courts proceeding on the subject is not -

in the interest of justice and it has serious adverse effects

on federal-state court relations and on the due process

rights of appellants, as set forth in the Fifth Amendment

to the U. S: Constitution. —

The appellants also stated to the District Court, and

restate here, that their ground for stating that said order

of June 10, 1971, is in violation of the Fifth Amendment

to the U.S. Constitution is based on the following:

(1) Appellee’s petition seeks to impose on appellants

a deficiency judgment based on a purported trustee’s

sale, and, therefore, the basis of the federal court ac-

tion, is the matter being determined by the state

court.

(2) The District Court’s findings mention that ap-

pellee does not seek to stay the state court action

— A-45 —

and the. Court’s findings recognize that the issue in

the state court involves state law and does not in-

volve the Constitution, treaties or laws of the United

- States. ; |

(3) The U.S. Supreme Court in England v. Louisi-

ana State Board of Medical Examiners, 84 S.Ct. 461

(1964), has stated that the doctrine of abstention is

a recognition of the:state court’s particular compe- *

tency in such matters, to wit:

‘‘Abstention is a judge-fashioned vehicle for.

according deference to the ‘respective competence — ——,

pect

of the state and federal court systems.’

“Its recognition of the role of state courts as

the final expositors of state law implies no dis-

regard for the primacy of the federal judiciary in

deciding questions of federal Jaw.’’

(4) Therefore, to’'deny abstention under the circum-

stances is to impose on appellants a deterniination of

that issue by a tribunal recognized as not the most

competent to decide that matter, and, therefore, is a

denial to appellants of the due process of law, guar-

anteed to them by the Fifth Amendment to the U.S.

Constitution.

0. Pending the printing of designated ‘portions of the

record, appellants have, for convenience sake, attached

hereto copies of the following pleadings and orders (in

the District Court, if not otherwise specified): (1) Appel-

lants’ Motion to Stay Proceedings with attached exhibit

(Plaintiffs’ Second Amended Petition in state court) and

Statement in Support; (2) Appellee’s statement in opposi-

tion; (3) District Court order of June 10, 1971; (4) Ap-

pellants’ Motion for Rehearing; (5) District Court order

of June 23, 1971, denying a rehearing; (6)-Memorandum

of defendants, other than appellants, stating that they do -

not oppose appellants’ Motion to Stay Proceedings; (7)

-A46 —

Appellee’ S sai (8) Plaintiffs’ Third Amended Pe-

tition in state court.

6. On July 15, 1971, appellants received in the mail

appellee’s Motion to Affirm, which was filed with this

_ Court on July 14, 1971. Said motion indicates that ap-

pellee has wbandoned its argument as to,lack of jurisdic-

tion and now seeks the Court to exercise its jurisdiction.

Appellants will file a separate Response’ to appellee’s

. latest motion.within the time proscribed by Rule-S-of the —

-U,S.-Court of Appeals for the Kighth Circuit.

WHI RE FORE, appellants: pray that — Motion

‘to Dismiss be denied.

J. WARD DRISCOLL

25 South Bemiston

Clayton, Missouri 63105 —

863-3387

"Attorney for Appellants, Rebert I.

Clausen, H. B. Surkamp and - -

Ae eis Hadley P. Stonner

of appellee to affirm be, and it is hereby, denied.

eel aes

United § States Court of peo

For the Eighth Circuit

rao

No, 71-1366 ‘September Term, 1970 ci

The - Northern Trust Company, as )

Tr ustee,

Appellee, ; ' 7

vs. . | Appeal from the.

| United States Dis-

Robert I. ‘Chad: H. B. Surkann, -, trict Court for the

: a .. astern District of

Missouri.

R. G. Surkamp,

- Hadley P. Stonner, Appellant and

Rolland J. Walters. F

JUDGMENT

On consideration of the motion of appellee to dismiss

- appeal in this cause’ and to affirm the interlocutory order

of the District Court and response of appellant,

It is now here ordered by this Court that the motion

And it is further ordered and adjudged by this Court |

that the motion of appellee: to dismiss appeal from the

United States District Court for the Eastern District of

Missouri be, and is hereby, granted and the appeal in this

‘cause is dismissed. Mandate to issue forthwith. |

July 23, 1971 (,

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.