Great Southern Nat. Bank v. McCullough Environmental Services, Inc., 89-CA-0161
| Decision Date | 08 January 1992 |
| Docket Number | No. 89-CA-0161,89-CA-0161 |
| Citation | 595 So.2d 1282 |
| Parties | GREAT SOUTHERN NATIONAL BANK v. McCULLOUGH ENVIRONMENTAL SERVICES, INC. |
| Court | Mississippi Supreme Court |
Kenneth Harmon, Gerald & Brand, Jackson, for appellant.
Erwin C. Ward, Stennett Wilkinson & Ward, James R. Mozingo, Edmonson Biggs Mozingo & Jelliffe, Jackson, for appellee.
Before HAWKINS, P.J., and PRATHER and SULLIVAN, JJ.
I. INTRODUCTION
In this case, plaintiff-appellant Great Southern National Bank ("Bank") seeks recovery of the sum of $21,298 from defendant-appellee McCullough Environmental Services ("McCullough"). According to the Bank, McCullough had erroneously paid the sum to Clyde A. Trammell, president of Trammell Construction Company ("TCC") and Trammell-Pitts Construction Company ("TPC"), for services rendered under a construction contract. The Bank contends that McCullough's error derives from the fact that Trammell had assigned to the Bank--as security for a loan--the right to receive the proceeds of the contract. Thus, the Bank considers itself to be an assignee; Trammell, or TCC, the assignor; and McCullough the obligor or account-debtor.
The Bank adds that McCullough had notice of this assignment; yet, McCullough disregarded the assignment and paid Trammell the sum to which the Bank feels it was entitled as assignee. Therefore, the Bank concludes, McCullough should be deemed liable for knowingly violating the terms of the assignment.
To enforce its right as assignee, the Bank filed suit in the Hinds County Circuit Court. Upon conclusion of some discovery, the Bank and McCullough filed motions for summary judgment. McCullough's motion was based, in part, on such affirmative defenses as fraud and misrepresentation. 1 Judge James D. Bell found that triable issues of material fact existed and, thus, denied both motions and set the date for trial.
About a year later, the Bank and McCullough re-filed their motions for summary judgment; they based their motions on virtually the same evidence and arguments on which they based their earlier motions. This time, however, another judge considered the motions--Judge Charles Barber. Judge Barber granted summary judgment--in favor of McCullough. Judge Barber's one-page "ORDER" contains virtually no explanation for his decision; however, he seems to have accepted McCullough's allegation of fraud and misrepresentation. 2
The Bank appealed and presented two issues for this Court's disposition:
1. Whether the consent of McCullough was a prerequisite to a valid assignment by TCC to the Bank of monies due to TCC under contract?
2. Whether the assignment was based on fraud or misrepresentation?
In view of the evidence and relevant law, these two issues are consolidated. The issue which this Court addresses is whether summary judgment was an appropriate vehicle for disposition of this case. This issue is resolved in the negative, and the case is reversed and remanded for a trial on the merits.
II. ANALYSIS: Whether Summary Judgment Was Appropriate?
A. Background and Parties' Contentions
On September 29, 1986, Clyde A. Trammell and TCC (Trammel Construction Co.) borrowed $19,404.95 from the Bank--as evidenced by a "Renewal Note" signed by Trammell as "President" of TCC. On October 27, 1986, TPC (Trammel Pitts Construction Co.) borrowed $12,000 from the Bank--as evidenced by a "New Note" signed by Trammell as "President" and Horace L. Pitts as "Vice President/General Manager" of TPC. The "New Note" includes the following express provision of collateral: "Assignment of contract between McCullough Environmental Services, Inc. and Trammell Construction Company, Inc." (hereinafter "M-T Contract"). This assignment is further evidenced by an "Hypothecation Agreement"--signed by Trammell as "President" of TCC. The Bank informed McCullough of the assignment by mailing McCullough a cover letter and a copy of the document. McCullough admits that it received this mailing and subsequently discussed the assignment with the Bank's former commercial loan officer, Lester L. Bellah, "a couple of times" via telephone. But McCullough disregarded the assignment and, on December 4, 1986, issued a $21,298 check under the M-T Contract to Trammell. The Bank contends that McCullough's decision to issue the check violated the terms of the assignment. That is, the Bank (as assignee) assumed the rights of TCC (as assignor) and, therefore, the Bank (not TCC) was solely entitled to receive payment of proceeds from McCullough (account-debtor or obligor) under the M-T Contract. 3 McCullough's alleged violation of the Bank's alleged right is the focus of this suit.
As noted, McCullough admits that it received notice of TCC's assignment of the M-T Contract; McCullough additionally admits that it issued the check for $21,298 to Trammell. Vol. II, at 355-57. However, McCullough asserts that recovery is barred because contractual rights may not be enforced "where the instrument contains fraudulent and material misrepresentations and the party seeking relief [i.e., the Bank] ... is guilty of either actual or legal fraud." McCullough explains that fraud or misrepresentation is evidenced by documentation and the "undisputed testimony" of Bellah. This documentation and testimony allegedly reveal that:
On or just prior to October 27, 1986, Mr. Bellah, the [Bank's] loan officer, Mr. Horace L. Pitts and Mr. Clyde A. Trammell discussed the new proposed $12,000 loan by appellant Bank. It was explicitly understood [among] all three of these individuals at this meeting that the $12,000 loan could not be set up in the name of TCC, [a legitimate and licensed] Mississippi corporation, because that corporation was then known to be in serious financial trouble with pending lawsuits filed against it and with at least one judgment having already been enrolled against it. The record verifies that this was, in fact, the situation at that time.
Mr. Bellah was aware on October 27, 1986, that Horace L. Pitts had no connection with, nor any authority to act for or on behalf of TCC, the legitimate corporation.
With [the Bank's] full knowledge of the true facts, Horace L. Pitts, along with Clyde A. Trammell, both acting as purported corporate officers of the maker, executed a purported corporate note in the amount of $12,000 on October 27, 1986. This note was set up by Mr. Bellah in the name of a totally fictitious and non-existent corporate entity styled "Trammell Pitts Construction Co., Inc." Trammell Pitts Construction Co., Inc. was not then, nor has it ever been, a corporate entity. Mr. Bellah was aware of the fact at all times relevant that Trammell Pitts Construction Co., Inc. was not a corporation.
....
With this background of information, the [Bank's] loan officer nevertheless deliberately and with full knowledge of the true facts set up the $12,000 note ... in the name of this fictitious corporate maker styled "Trammell Pitts Construction Co., Inc." for the unquestioned purpose of avoiding making the Bank's loan in the name of the existing financially troubled corporation [TCC].
To legitimize, on the surface at least, this newly conceived and intentionally fabricated corporate maker, the [Bank's] loan officer caused all of the [Bank's] loan documents to falsely represent this fabricated corporate entity to be a valid and legally existing Mississippi corporation. 4
Appellee's Brief at 4-10 (citations to Record omitted).
In addition to its contention that fraud and misrepresentation bars recovery, McCullough contends that the Bank is barred from recovery "because the alleged assignment of [the M-T Contract] by [TCC] is prohibited without the written consent of the defendant [McCullough] under the terms and conditions of that certain contract between the defendant ... and [TCC]." McCullough cites the following provision for support of its contention:
[M-T] CONTRACT
Standard Form of Agreement Between Contractor and Subcontractor
....
11.1.2 The Subcontractor [TCC] shall not assign this [C]ontract without the written consent of the Contractor [McCullough], ...
First, the Bank emphatically denies McCullough's contention that it committed a fraudulent act by providing a documented loan to a fictitious corporation (TPC). The Bank explains that, even though "there is neither a Mississippi corporation nor a foreign corporation qualified in Mississippi with that name [TPC]," TPC is simply "a trade name which TCC sometimes used in conducting its business":
This fact is reflected in the TCC bankruptcy proceedings, being U.S. Bankruptcy Court Case No. 87-00647, which is styled "In Re Trammell Construction Company, Inc. A/K/A Trammell Pitts Construction " (emphasis added). In the Statement of Financial Affairs for Debtor, which was signed under penalty of perjury by Clyde A. Trammell, he answered Question No. 1(a) as follows:
Q: 1. Nature, location, and name of business
a. Under what name and where do you carry on your business?
The answer to Question No. 7 concerning the financial accounts of the corporation lists one bank account at Great Southern National Bank under the name "Trammell Construction Company, Inc." and account under the name "Trammell-Pitts Construction." Furthermore, these bankruptcy proceedings repeatedly and consistently identify Trammell Construction Company as doing business under the trade name "Trammell-Pitts Construction."
Therefore, contrary to Defendant's assertion, TCC and TPC are not separate and distinct legal entities. TPC, in fact, is not a legal entity at all, but is merely a trade name under which TCC occasionally conducted its business. There was one and only one legal entity, and that was the corporation, [TCC]. At times, TCC borrowed money from Great Southern National Bank...
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