Ballard v. Commercial Bank of Dekalb, No. 2007-CA-01406-SCT.

• Decision Date: 09 October 2008
• Docket Number: No. 2007-CA-01406-SCT.
• Citation: 991 So.2d 1201
• Parties: Edward S. BALLARD v. COMMERCIAL BANK OF DeKALB.
• Court: Mississippi Supreme Court

991 So.2d 1201

Edward S. BALLARD v. COMMERCIAL BANK OF DeKALB.

No. 2007-CA-01406-SCT.

Supreme Court of Mississippi.

October 9, 2008.

Wes W. Peters, attorney for appellant.

Keith R. Raulston, Jackson, attorney for appellee.

EN BANC.

WALLER, Presiding Justice, for the Court.

¶ 1. Commercial Bank of DeKalb sought to foreclose on Edward Ballard's property in Chickasaw County, Mississippi, pursuant to two deeds of trust which Ballard had executed in its favor. Thereafter, Ballard filed suit against Commercial Bank, seeking cancellation of the two deeds of trust. On July 5, 2007, the chancellor entered his final judgment, authorizing Commercial Bank to proceed with foreclosure on Ballard's property based upon either or both of Ballard's deeds of trust. Because we find that the chancellor's findings were neither manifestly wrong nor clearly erroneous and were supported by substantial evidence, we affirm.

FACTS AND PROCEEDINGS

¶ 2. Ballard's first involvement with Commercial Bank ("the Bank") was in the spring of 2001, when he and his grandson, Kiley Moody, met with Greg McMahon, a loan officer at Commercial Bank. Moody was in the timber business and he had sought the Bank's assistance in financing the purchase of several tracts of real estate. The Bank required an "equity cushion," and on May 22, 2001, Ballard and his wife Ruby pledged 1,000 shares of Union Planters Bank stock for a $34,770 loan for Moody Land and Timber Company, a corporation owned by Moody. This stock pledge was apparently an interim measure to provide security until steps could be taken to pledge the Chickasaw County property to provide a twenty-percent cushion for Moody's ongoing timber needs.¹

¶ 3. On June 29, 2001, Ballard executed a deed of trust to the Bank. This deed of trust, which will be referred to as the first deed of trust, provided that Ballard's 226-acre parcel of land located in Chickasaw County, Mississippi, would stand as security for "[d]ebt incurred under the terms of all promissory note(s), contract(s), guaranty(s) or other evidence of debt described below and all their extensions, renewals, modifications, or substitutions." The allotted space to identify specific notes or other indebtedness, however, was left blank. The deed of trust included a provision which stated that "[t]he Secured Debt includes a revolving line of credit provision." The first deed of trust further provided that it secured "[a]ll future advances from Lender to Grantor or other future obligations of Grantor to Lender ..." and that the "total principal secured by this Security Agreement at any one time shall not exceed $750,000.00." This deed of trust was signed at the Bank's offices in DeKalb, Mississippi, and each page was initialed by Ballard.

¶ 4. The parties dispute the purpose of the first deed of trust. According to Ballard, the first deed of trust was to serve as security for a line of credit to be used at his discretion, and only with his approval. According to the Bank, however, the purpose of the deed of trust was to secure a $750,000 line of credit for Ballard's grandson, Kiley Moody, or Moody's business, Moody Land and Timber.

¶ 5. On November 28, 2003, Ballard executed a second deed of trust to the Bank. This deed of trust mirrored the first deed of trust, but identified a number of notes which the land secured. The notes represented loans which were made to Moody and/or Moody Land and Timber Company. The second deed of trust stated that it was "given and taken in renewal and extension of a deed of trust dated the 29 day of June, 2001 ... and [was] in no way intended to void the said deed of trust or impair the security thereof." Additionally, the second deed of trust added that "[t]his property described in Exhibit A is being pledged by Edward S. Ballard is [sic] collateral on all notes to Moody Land and Timber that originated since 8-29-01 and any further advances." This instrument was signed and each page initialed by Ballard at a bank in Alabama.

¶ 6. The purpose of this second deed of trust is likewise disputed. According to Ballard, the Bank, in November 2003, while preparing for an upcoming FDIC examination, discovered that its notes given to Moody were unsecured and had not been repaid. Ballard claims that the Bank listed these obligations on the second deed of trust and sent Moody to obtain Ballard's signature in order to protect itself. To the contrary, the Bank contends that outstanding notes that existed when the first deed of trust was signed were fully secured by other deeds of trust. In addition, the Bank asserts that it did not consider Moody to be in default when Ballard signed the second deed of trust.

¶ 7. The dispute between the parties began when Michael Dudley, President of Commercial Bank, called Ballard to advise him that he might lose the Chickasaw County property if Moody could not repay more than $600,000 in loans the Bank had extended to Moody.² After advising Dudley that he knew nothing about any outstanding debt or overdue loans of Moody, and that he had never agreed for his property to serve as collateral for such loans, Ballard contacted his son, Richard Ballard, an attorney. Richard called Dudley, who explained that the Bank had two deeds of trust which pledged the Chickasaw County property as collateral. After obtaining copies of the deeds of trust and reviewing the instruments, Richard again called Dudley, who advised that he could not discuss the deeds of trust or the notes, as they concerned private business between the bank and Moody.

¶ 8. On June 7, 2004, Ballard filed a complaint against Commercial Bank seeking cancellation of two deeds of trust, contending that they were void, invalid, and unenforceable because they were unconscionable, were not supported by any consideration, and were the product of fraud and Commercial Bank's conspiratorial efforts to intimidate, threaten, harass, mislead and defraud. The remaining counts of the complaint asserted misrepresentation and fraud, as well as negligent and intentional infliction of emotional distress.

¶ 9. On February 8, 2007, Ballard filed a Suggestion of Death and Motion for Substitution of Party Plaintiff, which stated that "Edward S. Ballard died on January 20, 2007 and that [his] son, Richard P. Ballard, has been appointed as executor of the estate." An agreed order filed on February 12, 2007, substituted the estate of Edward S. Ballard, by and through its executor Richard P. Ballard, as the plaintiff.

¶ 10. On July 5, 2007, the chancellor entered his final judgment, directing "that Mr. Ballard's Complaint ... be dismissed with prejudice," and authorized Commercial Bank "to proceed with foreclosure on either or both of Mr. Ballard's deeds of trust to it." The chancellor found that no one had coerced Ballard to sign the deeds of trust and that no one had prevented him from reading the documents. The chancellor acknowledged that Ballard's initials appeared on all pages of each deed of trust, and that the debt secured was clearly described in the second deed of trust. The chancellor determined that at the time Ballard signed the second deed of trust, Commercial Bank did not consider Moody's corporate debt to be in default, noting that on November 25, 2003, the Bank loaned Moody $11,534, and that Moody's 2003 credit report showed his credit to be good. The chancellor held that Ballard knew that the purpose of both deeds-of-trust was to secure loans made by Commercial Bank to Moody's timber business and that Ballard had no reasonable expectation that he would be contacted for prior approval of advances. According to the chancellor, the bottom line was that everything Ballard needed to know about Moody's debt to the Bank was contained in the second deed of trust, and that Ballard's failure to know the deed of trust terms was not Commercial Bank's fault-Ballard could have simply declined to sign the second deed of trust.

¶ 11. Ballard filed a notice of appeal on August 2, 2007, raising the following issues for review: (1) whether the trial court erred in overruling plaintiff's motion for summary judgment; (2) whether the trial court erred in failing to require that the Bank prove that it was entitled to reform the only deed of trust it had when the loans were being made; (3) whether the trial court misapplied the rules of construction and thereby erroneously shifted the burden to the plaintiff to correct the Bank's claimed error; (4) whether the November 28, 2003, deed of trust can stand on its own, and whether the trial court's findings with respect thereto are supported by the evidence; (5) whether equity requires that the deeds of trust be voided; (6) whether the trial court erred in dismissing the plaintiff's claim of fraud and misrepresentation; and (7) whether either the June 29, 2001, deed of trust or the November 28, 2003, deed of trust can be used to foreclose upon the plaintiff's farm for the debts of his grandson.

¶ 12. We find that the dispositive issue in this case is whether the November 28, 2003, deed of trust was a valid deed of trust under which Commercial Bank may prosecute foreclosure proceedings.³

STANDARD OF REVIEW

¶ 13. This Court has a limited standard of review in examining and considering the decisions of a chancellor. McNeil v. Hester, 753 So.2d 1057 (Miss. 2000). The court will not disturb the findings of the chancellor unless the chancellor was manifestly wrong, clearly erroneous, or applied an erroneous legal standard. Dew v. Langford, 666 So.2d 739, 742 (Miss. 1995) (citing Tinnin v. First United Bank of Mississippi, 570 So.2d 1193, 1194 (Miss. 1990)). Thus, where there is substantial evidence to support the chancellor's findings, this Court is without the authority to disturb his conclusions, although this Court might have found otherwise as an original matter. Id. (citing In re Estate of Harris, 539 So.2d 1040, 1043 (Miss.1989)).

DISCUSSION

¶ 14. Ballard raises four arguments as to why the second...