Harris v. Bailey Avenue Park, 36529.

• Court: United States State Supreme Court of Mississippi
• Citation: 32 So.2d 689,202 Miss. 776
• Docket Number: 36529.
• Decision Date: 10 November 1947
• Parties: HARRIS v. BAILEY AVENUE PARK, Inc., et al.

32 So.2d 689

202 Miss. 776

HARRIS v. BAILEY AVENUE PARK, Inc., et al.

No. 36529.

Supreme Court of Mississippi

November 10, 1947

Wm. Harold Cox, of Jackson, for appellant.

L. F. Easterling, J. E. Skinner and Ernest L Shelton, all of Jackson, for appellees.

McGEHEE, Justice.

This suit was brought in Chancery on October 24, 1944, by M. B Brown and others as stockholders of the appellee, The Bailey Avenue Park and Negro State Fair Grounds of the Colored Men's Business Association of America, Inc., and they seek to have cancelled the claim of ownership asserted by the appellant Henry M. Harris under and by virtue of his purchase at a foreclosure sale, held on May 4, 1934, under a deed of trust given in his favor by the said corporation on November 3, 1930, of approximately twenty acres of land, located about a half mile north of the City of Jackson, and now shown to be worth two and a half to three times its then value.

The principal ground relied upon for the cancellation of the title claimed by the appellant is that he acquired the property at the foreclosure sale as a constructive trustee for the use and benefit of the said corporation, of which he was then a director and an alleged vice-president, although the deed of trust was legally authorized and validly executed by the said corporation in his favor for a cash loan, originally made to the corporation in 1928, for the sum of $3,800, but which was thereafter renewed from year to year, the last renewal thereof being on said November 3, 1930, for the sum of $4,000.

The bill of complaint also prayed for an accounting as to the revenues derived by the appellant from the operation of the Mississippi Negro State Fair on the said land during his possession of the same in order that the appellee corporation might be credited therewith against any indebtedness that may be found to be due and owing to the appellant; and the bill further prays that he be required to convey the legal title of the land to the said corporation upon payment to him of any indebtedness found to be due under such an accounting.

In the original bill the corporate appellee was also named as a defendant along with the appellant Harris, and the Mississippi Negro Agricultural Exhibit Corporation, and others, none of whom, except the said appellee former owner and the appellant, were claiming any sort of title or connection with the property involved.

Thereafter on May 5, 1945, the erstwhile former owner and defendant, the appellee Bailey Avenue Park and Negro State Fair Grounds of the Colored Men's Business Association of America, Inc. became a complainant along with the said M. B. Brown and others in an amended bill and joined in the prayer thereof for relief. And the appellees contend that by agreement with a former attorney of all the defendants to the original bill the trial court was authorized to deal with the amended bill as if the same had been filed at the time of the filing of the original on October 24, 1944, and which date it will be observed was nevertheless more than ten years after the foreclosure of the deed of trust in question.

The trial court held that the appellant acquired the property as a constructive trustee for the use and benfit of the mortgagor; that the statute of limitations was not applicable in favor of such trustee; and awarded the immediate possession of the same to the appellee corporation. Thereupon, this interlocutory appeal was granted to settle the controlling principles of law involved and so as to avoid the expense of having the accounting which was asked for until and unless the interlocutory decree should be affirmed on appeal and the cause remanded for that purpose.

We think that the situation presented a proper case for the allowance of this interlocutory appeal.

The proof disclosed that the appellant, while serving as a director in the appellee corporation during the year 1928 borrowed the said sum of $3,800 from a local bank in Jackson on his own private property and loaned the same to the corporation on its note and deed of trust on the twenty acres of land here involved, which instruments were duly executed as aforesaid, and by the complainants M. B. Brown, as president, and S. A. Adams, as secretary, of the appellee corporation, after the said officials had been duly authorized to execute the same. This was likewise true as to the renewals, the last of which were foreclosed on the said 4th day of May, 1934.

That at the time the appellant made this loan the said corporation was in serious financial difficulties and owed, among other debts, an indebtedness in favor of one L. A. Cato which was secured by a deed of trust on a part of the twenty acres of land, and another one in favor of L. L. Posey and his wife Mrs. Mattie R. Posey secured by a deed of trust on the remainder of said land. That there were no second mortgage loans obtainable on real estate from any local bank or elsewhere at that time. That upon failure to pay any of said loans, and at the instance of one of the creditors, L. L. Posey, who was the attorney for all of the parties in interest, the Mississippi Negro Agricultural Exhibit Corporation was organized in 1933 for the purpose of raising funds with which to take care of these pressing obligations and liens upon the real estate of the said appellee corporation, but which plan proved to be a failure for the reason that only the sum of $602 was ever paid in for the capital stock of this new corporation, and no stock therein was ever issued.

It is further shown without dispute that the appellant had prior to the foreclosure sale made repeated requests to the appellee corporation for the repayment of his loan, but that no attention was given to the same; that the said debtor, being wholly without funds, ceased to function as a going concern after the Negro State Fair was held in 1932, and there was no meeting of its directors from that time until 1944 after this suit had been filed; and that in 1933 the Fair was operated by appellant at the instance of the prior lienors.

That the deed of trust in favor of the appellant contained an unusual provision to the effect that upon default in the payment of the indebtedness therein mentioned the trustee L. L. Posey, Jr., should, 'at the request of L. L. Posey or Mrs. Mattie R. Posey, or either of them', sell all the property described in appellant's deed of trust by publishing a notice in a local newspaper for three consecutive weeks immediately preceding the sale and by posting a notice thereof at the courthouse. And it is shown without dispute that the foreclosure of the property in question was not had at the instance of appellant, and that he did not know that it was being foreclosed until some one called his attention to the newspaper notice thereof. That he did not know that the property had been bought in for him by the said L. L. Posey until sometime after the sale, since he had merely depended upon his said attorney to act for the best interest of all parties concerned in the matter. However, he took charge of the property following the foreclosure sale and the trustee's deed in his favor was duly filed for record on January 21, 1935. In other words, the proof failed to disclose that appellant was guilty of any actual or concealed fraud in connection with said purchase of the property.

That at the time of the foreclosure sale there was due and owing on the prior deeds of trust held by L. A. Cato and Mr. and Mrs. Posey the total sum of $11,508, and the sum of $4,000 in favor of the appellant, plus one year's interest on the entire indebtedness and two years' taxes on the property. That the amount of the bid made for appellant by the attorney L. L. Posey was the sum of $1,000; that the purchase was of course subject to the prior liens; and there was no deficiency judgment ever taken or deemed worthwhile against the appellee corporation for any balance due; that such balance had prior to the filing of this suit become barred by the statute of limitations; and that, therefore, the cost of the property to the purchaser at said sale was the approximate sum of $16,000, and as he no doubt then realized.

That prior to the foreclosure sale, and during the year 1933, when the appellant in October of that year operated the Mississippi Negro State Fair at the instance of the said L. L. Posey, who represented the prior lienors, he accounted to the latter each day for the revenues thereform, the said M. B. Brown having 'retired' as president of the appellee corporation at the close of the Fair in October of the preceding year and without having applied the revenues of that year's operation to the payment of any part of the indebtedness due under the prior deeds of trust and there being no successor to him or other person elected to operate the same.

That since the appellee corporation did not function as a going concern after the year 1932, and to all intents and purposes was a defunct corporation with the title of the Fair Ground site vested in appellant after May 4, 1934, it was further shown that beginning with the Fair held in October of that year and continuously thereafter the appellant has permitted some of the stockholders and officers of the Mississippi Negro Agricultural Exhibit Corporation, some of whom were also stockholders in the appellee corporation, to assist him in the operation of the Fair, but that he has received and used for his own account and disbursed in his own name the revenues derived from such operation from year to year, and has continued to pay the taxes on the property. That he has reduced the prior indebtednesses, to which his purchase at the foreclosure sale was subject, and now owes to the said Mrs. Mattie R. Posey as an innocent encumbrancer for...