Chimento v. Fuller

Decision Date27 September 2007
Docket NumberNo. 2001-IA-00057-SCT.,No. 2006-CA-01494-SCT.,2006-CA-01494-SCT.,2001-IA-00057-SCT.
PartiesAlbert John CHIMENTO, Sr. v. Robert Albert FULLER and Gerald D. Mills, Sr.
CourtMississippi Supreme Court

James L. Farrior, III, attorney for appellant.

Byron J. Stockstill, Richard C. Fitzpatrick, Poplarville, attorneys for appellees.

Before WALLER, P.J., EASLEY and GRAVES, JJ.

EASLEY, Justice, for the Court.

¶ 1. This case involves the distribution of proceeds from a court-ordered sale of 31.3 acres of land located in Pearl River County, Mississippi, and whether the statute of limitations applies to a loan creditor. Gerald D. Mills, Sr., seeks the proceeds from a judicial foreclosure sale. Mills, however, never filed a foreclosure action on his $35,000 promissory note to preserve his interest in the real estate as collateral. In addition, Mills never filed suit on the note to preserve his monetary interest of $35,000. We find that this case should be reversed and rendered.

PROCEDURAL HISTORY

¶ 2. In July 1990, Robert Albert Fuller and Albert John Chimento, Sr., purchased 31.3-acres of property for $130,000. Fuller and Chimento signed two promissory notes and deeds of trust in the amount of $95,000 to Chimento Home Builders, Inc., (CHB) and $35,000 to Mills. The CHB loan had first priority over Mills's loan. CHB also assigned its interest to Mohammed Esmail on July 19, 1990.

¶ 3. After Fuller and Chimento failed to pay the $95,000 loan, Esmail began foreclosure proceedings. Fuller filed a complaint seeking injunctive relief on the foreclosure action. Esmail, Chimento, and Mills were named defendants in the suit. However, Mills was never served with process. In 1993, the chancellor enjoined the foreclosure of the property. In 1997, the chancellor entered another order granting a temporary injunction and leave for Fuller to amend his complaint. On June 10, 1997, the trial court entered an order finding that the 1993 order which enjoined foreclosure tolled the statute of limitations on the $95,000 Chimento note.

¶ 4. In 1998, Mills notified Chimento and Fuller that he had retained counsel. In 1999, the chancellor presided over a two-day trial. The chancellor, in a corrected order, ruled in part that the land was to be partitioned by a judicial sale. Fuller filed a motion to reconsider, which the chancellor denied.

¶ 5. Fuller filed an interlocutory appeal with this Court on the issue of the partition of the land only. Fuller wanted the land to be partitioned in kind instead of by a judicial sale. This Court in Fuller v. Chimento, 824 So.2d 599, 603 (Miss.2002), affirmed the chancellor's ruling which required a partition by sale and remanded the case for further proceedings.

¶ 6. Following this Court's ruling in Fuller, the 31.3 acres were sold in August 2003 and the proceeds, less the costs of sale and taxes, in the amount of $199,358.21 were deposited with the chancery court for disbursement. On August 1, 2006, the chancellor entered his judgment concerning the distribution of the sale proceeds. The chancellor found that the statute of limitations had been tolled in favor of Mills, and he should receive all the proceeds from the sale. Following this ruling, Chimento timely filed a notice of appeal with this Court.

FACTS

¶ 7. In July 1990, Fuller and Chimento purchased 31.3 acres of property for $130,000 in Pearl River County, Mississippi. Chimento and Fuller signed a deed of trust to CHB on July 19, 1990, in the amount of $95,000 with a promissory note. The terms of the promissory note called for seven monthly installments of $1,187 plus $395.83 for points payable on August 19, 1990, like installments due on the nineteenth day of each succeeding month, and principal and balance due on or before February 19, 1991.

¶ 8. Chimento and Fuller also signed a deed of trust to Mills on July 19, 1990, in the amount of $35,000 with a promissory note. The terms of the payment were for six monthly installments in the amount of $437.50 payable on August 19, 1990, like installments due on the nineteenth day of each succeeding month, and principal and balance due on or before January 19, 1991. The deed also stated on its face that "[t]his deed of trust is second and inferior to that certain deed of trust of even date herewith to Chimento Home Builders, Inc., in the principal sum of $95,000.00."

¶ 9. On July 19, 1990, CHB assigned its loan to Esmail. In 1993, Esmail tried to foreclose on the property when Chimento and Fuller failed to make payments on the $95,000 loan. Fuller filed a complaint in 1993 to enjoin Esmail from foreclosing on the property. Chimento and Mills were made party to Fuller's action, however, Mills was never served with a complaint.

¶ 10. On March 18, 1993, the chancellor enjoined the foreclosure of the property. Thereafter, in 1994, Esmail assigned the $95,000 deed of trust to Chimento. On April 20, 1994, Esmail's substituted trustee, Sam P. Cooper, Jr., filed a motion to dissolve the injunction. In response, Fuller filed a motion to enforce the injunction on March 26, 1997.1

¶ 11. On April 18, 1997, the chancellor entered an order for a temporary injunction and granted Fuller leave to amend his complaint. Fuller filed an amended complaint, and Chimento answered and filed a counterclaim. On June 10, 1997, the trial court entered an order finding that the 1993 order which enjoined foreclosure tolled the statute of limitations on the $95,000 Chimento note.

¶ 12. In 1998, Mills notified Chimento and Fuller that he had retained counsel. Prior to this notification, Mills had not participated in the 1993 complaint filed by Fuller to enjoin the foreclosure action commenced by Esmail for Fuller and Chimento's failure to pay Esmail on his $95,000 note. Importantly, Mills never took any action on his $35,000 note whatsoever. Mills never sought foreclosure or collection from Fuller and Chimento for their failure to pay Mills's $35,000 note.

¶ 13. In 1999, the chancellor presided over a two-day trial. In a corrected order, the chancellor ruled, in part, that: (1) Chimento and Fuller were tenants in common; (2) Esmail's assignment of the deed of trust and note to Chimento merged the secured interest into one of the owners and extinguished the security interest created by the deed of trust to CHB and subsequently assigned to Esmail and Chimento, respectively; (3) Mills's appearance through counsel was notice of his claims to the other parties; (4) Chimento reserved and raised affirmative defenses at trial and in the post-trial filings; (5) Mills was the first lien holder of the property "subject to a determination of whether the statute of limitations has run as to its enforcement; or, whether the injunction of 1993 applied to Mills' secured interest"; and (6) the land was to be partitioned by a judicial sale. Fuller filed a motion to reconsider, which the chancellor denied.

¶ 14. As stated earlier, Fuller filed an interlocutory appeal with this Court on the issue of the partition of the land only. This Court in Fuller, 824 So.2d at 603, affirmed the chancellor's ruling which required a partition by sale and remanded for further proceedings.

¶ 15. Following this Court's ruling in Fuller, the 31.3 acres were sold in August 2003 and the proceeds, less the costs of sale and taxes, were deposited in the amount of $199,358.21 with the chancery court for disbursement. On August 1, 2006, the chancellor entered his judgment concerning the distribution of the sale proceeds. The chancellor addressed two issues: (1) whether the statute of limitations was tolled by the 1993 and 1997 injunctions for Mills's alleged claim on the sale proceeds, and (2) the amount of proceeds that each party was entitled to recover from the sale.

¶ 16. As to the issue of the statute of limitations, the chancellor found:

The statute of limitations issues [revolve] around the timing, procedural necessity to plead or raise an affirmative defense, and whether the statute of limitations may be waived. The three year statute of limitations would run from January, 1991, the date the last installment payment to Mills was due, and would therefore limit any legal enforcement action on his part in January of 1994. He did not enter the fray until 1998 when his attorney made an appearance for him without filing any pleadings. No foreclosure or demand action was initiated in the interim. His involvement of record was simply that he was named in the initial injunctive action as a party, although he was not served with process. His attorney participated from 1998 on, and was fully involved in the trial of the matter by preparing and filing a pretrial finding of fact and conclusions of law as directed by the Court on all issues to be heard. The statute of limitations issue was not raised until the day of the hearing in 1999 when Chimento's counsel reserved the right to raise all defenses to Mills' claim, stating that no response on his part was necessary to a claim where no formal pleadings were filed and the claim was dealt with only through claimant's counsel in the pretrial filings and at the hearing, which Mills asserts complies with MRCP 8(a). Fuller does not object to Mills' claims at this point since the deed of trust on which his claim is based was known to every party. Mills was made a party to the initial injunctive request to stop foreclosure of Chimento's deed of trust, but he was never served with process, raising the question of whether the injunction against foreclosure was applicable to him. In the Corrected Judgment the Court found Mills' (sic) has a first lien on the sale proceeds subject to a determination of the applicability of the statute of limitations and the injunction of 1993.

The Court continues to ponder the effect of Mills' lack of pleading but recognizes that the salient facts of his position were adequately presented through the pretrial findings by his counsel and the public record of his deed of trust as known to each party and...

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