Bell v. First Columbus Nat. Bank

• Decision Date: 27 August 1986
• Docket Number: No. 56750,56750
• Court: Mississippi Supreme Court
• Parties: John H. BELL, Sr. & Sharon B. Bell v. FIRST COLUMBUS NATIONAL BANK.

Page 964

493 So.2d 964

John H. BELL, Sr. & Sharon B. Bell v. FIRST COLUMBUS NATIONAL BANK.

No. 56750.

Supreme Court of Mississippi.

Aug. 27, 1986.

Charles D. Easley, Jr., Columbus, for appellants.

W.H. Jolly, Jr., Threadgill, Smith, Sanders & Jolly, Columbus, for appellee.

Before WALKER, C.J., and ROBERTSON and ANDERSON, JJ.

ROBERTSON, Justice, for the Court:

I.

This action arises upon two homeowners' covenant to their mortgagee that they would keep their mortgaged home in reasonable repair and commit no waste thereon. No doubt because of evidence that five days pre-foreclosure, homeowners stripped the home, a jury found for the mortgagee and assessed modest punitive damages as well.

On appeal, homeowners suggest various errors in the proceedings below but none we find persuasive. For the reasons presently to be articulated, we affirm.

II.

A.

In the year 1973 John H. Bell, Sr. and Sharon B. Bell, husband and wife, owned a residence in Columbus, Mississippi, known as Lot No. 54, Pleasant Ridge Estate, Third Extension, Lowndes County, Mississippi. The Bells were the Defendants below and are the Appellants here. On May 11, 1973, the Bells executed a deed of trust conveying the above described lot and all improvements thereon to W.H. Jolly, Jr., Trustee, for the use and benefit of First Federal Savings & Loan Association of Columbus. This deed of trust was properly lodged of record in the office of the Chancery Clerk of Lowndes County.

Thereafter, the Bells engaged in several business ventures and maintained a banking relationship with the First Columbus National Bank, Plaintiff below and Appellee here. As security for various loans made by the bank, the Bells, on May 24, 1974, July 1, 1980, and June 7, 1981, executed and delivered to the bank second deeds of trust covering their residence. As a result of business failures, the indebtednesses owing both to First Federal and the bank fell into arrears.

On July 7, 1983, the Bells filed their voluntary petition in bankruptcy in the United States Bankruptcy Court for the Northern District of Mississippi, No. 83-10270. On November 3, 1983, the Bankruptcy Court entered its order granting the Bells their discharge in bankruptcy. During the course of the bankruptcy proceedings, of course, no effort was made by the bankruptcy trustee to take possession of the Bells' residence. As property subject to a perfected security interest held both by First Federal and the bank, the residence never became a part of the bankruptcy estate.

In due course thereafter, First Federal Savings & Loan commenced foreclosure proceedings with respect to its 1973 deed of trust. On February 12, 1984, five days before the scheduled foreclosure sale, the Bells held a garage sale. An advertisement published in the want ad columns of the Columbus newspaper read as follows:

Sunday, Feb. 12--12:00 Noon to 6:00 p.m. Indoors. Custom Drapes, linens, housewares, adult and children's clothes and shoes, carpet scrapes, light fixture & much, much more. 703 19th Avenue North.

A neighbor, Ann Fussell, attended the sale with her daughter and observed carpet rolled up in one room and the padding. Sharon Bell told Fussell that the carpet was for sale and made the statement, "We're selling just about everything--anything you want to buy." Fussell took some shutter doors for the kitchen or bath down to her house, but when she determined they would not fit, she brought them back. She observed one light fixture being taken down and sold in the dining area; she also observed someone purchase a roll of carpet.

The foreclosure sale occurred on February 17, 1984, at which time the bank purchased the property which, of course, necessitated the bank paying off the indebtedness owed to First Federal. Several days later Robert E. Lamar, a vice president at the bank, inspected the premises and found that the carpet, electrical fixtures and ceiling fans had been removed, wall covering in every room, with the exception of two bathrooms, had been torn and damaged, and in two bedrooms, the closet doors and jams had been removed. In the kitchen, built in appliances and several cabinet units had been removed, base and wall cabinets had been removed which housed an oven, cook top and vent-a-hood, and a dishwasher had been removed from a cabinet next to the sink. Also the intercom system and speakers had been removed from the wall. The removal of these fixtures as well as other damage to the house reduced its fair market value, necessitated repairs and replacements, and has led to this lawsuit.

B.

On April 17, 1984, First Columbus National Bank filed its complaint in the Circuit Court of Lowndes County, Mississippi, naming John H. Bell, Sr. and Sharon B. Bell as defendants. The bank asserted their deeds of trust and specifically claimed reliance upon a covenant in each such deed of trust to the effect that the Bells bound themselves

to keep the improvements thereon [upon the property conveyed in trust] in reasonable repair and not permit waste of said property; ....

The bank alleged that it was forced to repair the house and replace the missing fixtures before it could be sold and that it incurred repair and replacement expenses in the amount of $5,350.00 for which amount it sought recovery from the Bells. The bank further alleged that the Bells had damaged the property wilfully and wantonly and demanded $5,000.00 in punitive damages.

On May 14, 1985, this matter came on for trial before the Circuit Court of Lowndes County sitting with a jury, and on that same day the jury returned a verdict in favor of the bank and against the Bells in the amount of $5,350.00 in actual damages and $1,500.00 in punitive damages. Based upon the jury's verdict, the Circuit Court entered judgment on May 20, 1985, in favor of the bank and against the Bells in the total amount of $6,850.00. Following denial of their post-trial motions for judgment notwithstanding the verdict or, in the alternative, for a new trial, the Bells perfected their appeal to this Court where the matter is now ripe for review.

III.

A.

The Bells' initial assignment of error is that, as a matter of law, the bank in its complaint failed to state a claim upon which relief could be given. The contours for consideration of such a point normally emanate from Rule 8(a) and (e) and 12(b)(6), Miss.R.Civ.P. See Luckett v. Mississippi Wood, Inc., 481 So.2d 288, 290 (Miss.1985); Stanton & Associates, Inc. v. Bryant Construction Company, Inc., 464 So.2d 499, 504-06 (Miss.1985). Because this case has been fully tried, a final judgment entered and motion for judgment notwithstanding the verdict denied, we view the question whether the bank may recover from the vantage point of the last procedural effort of the Bells to test the legal sufficiency of the bank's case, to-wit: the motion for judgment notwithstanding the verdict. See Clements v. Young, 481 So.2d 263, 268-69 (Miss.1985).

The Bells make two points here. First, they argue that the bank's claim has been discharged in bankruptcy. Second, they argue that, because the bank bought the property upon foreclosure of the first deed of trust, any rights the bank may have had under their second mortgages (such as the covenant for repair and not to commit waste) were extinguished. Neither point may afford them appellate relief.

B.

To be sure, a bankruptcy adjudication bars a secured creditor's suit on the underlying debt. The right of the secured creditor to foreclosure upon its collateral, however, remains unimpaired. See e.g., Federal Deposit Insurance Corp. v. Davis, 733 F.2d 1083, 1085 (4th Cir.1984); First State Bank v. Zoss, 312 N.W.2d 127 (S.D.1981); Lincoln Savings & Loan Association v. Anderson, 115 Neb. 199, 212 N.W. 210, 212 (1927); Roach v. Bennett, 24 Miss. 98, 103 (1852). These general statements do not carry us far, because here we confront a claim of post-bankruptcy violation of a pre-bankruptcy contractual obligation. That is, on May 24, 1974, July 1, 1980, and June 7, 1981, the Bells obligated themselves to keep the property in reasonable repair and not permit waste. As indicated above, the discharge in bankruptcy was granted on November 3, 1983. The Bells are said to have violated the covenant just over three months later--on February 12, 1984.

The point must be disposed of on procedural grounds. Before a party defendant to a civil action may avail himself of the benefits of a bankruptcy discharge, he must speak up. Rule 8(c), Miss.R.Civ.P., designates discharge in bankruptcy an affirmative defense and directs that a party defendant "shall set [it] forth affirmatively". Failure to assert the defense may constitute a waiver. See Personal Industrial Loan Corp. v. Forgay, 240 F.2d 18, 19 (10th Cir.1956); In Re Carwell, 323 F.Supp. 590, 593 (E.D.La.1971). Cf. Allied Chemical Corporation v. Mackay, 695 F.2d 854, 855-56 (5th Cir.1983) (construing similarly worded Rule 8(c), F.R.Civ.P. in context of another affirmative defense).

We have examined the answer the Bells filed May 7, 1984, and find it silent on the bankruptcy matter. The Bells made no effort to assert the defense prior to the May 14, 1985 trial and in fact the bankruptcy discharge is first mentioned in the record when Sharon Bell attempts to interject the subject at trial, at which point the bank's objection was sustained by the Circuit Court. The bank has in no way acquiesced in the point being considered at trial, see Johnson v. Franklin, 481 So.2d 812, 815 (Miss.1985); and appears to have made timely objection (although Sharon Bell's would be testimony was hardly a formal assertion of the affirmative defense of discharge in bankruptcy).

The record reflects that on May 20, 1985, following the jury's verdict final judgment was entered in favor of the bank and against the Bells. Three days later the Bells filed their motion for judgment notwithstanding the verdict and, for the first time, formally asserted the bankruptcy discharge as a defense to...