Hopewell Enterprises, Inc. v. Trustmark Nat. Bank

• Decision Date: 12 September 1996
• Docket Number: No. 93-CA-00661-SCT,93-CA-00661-SCT
• Citation: 680 So.2d 812
• Parties: HOPEWELL ENTERPRISES, INC., Billy E. Hammons and Betty P. Hammons v. TRUSTMARK NATIONAL BANK.
• Court: Mississippi Supreme Court

Page 812

680 So.2d 812

HOPEWELL ENTERPRISES, INC., Billy E. Hammons and Betty P. Hammons v. TRUSTMARK NATIONAL BANK.

No. 93-CA-00661-SCT.

Supreme Court of Mississippi.

Sept. 12, 1996.

Paul A. Koerber, Jackson, for appellant.

Olen C. Bryant, Jr., Hazlehurst, for appellee.

Before SULLIVAN, P.J., and McRAE and SMITH, JJ.

SMITH, Justice, for the court:

Trustmark National Bank, hereinafter (bank), brought a judicial foreclosure action against Billy and Betty Hammons, hereinafter (Hammons), in the Chancery Court of Copiah County due to a default on a note and deed of trust involving property which contained the Hammons' residence and a 1.5 acre adjoining tract of property upon which was located an artesian water well. The water well became the primary subject of this dispute.

The Hammons filed a counterclaim for breach of fiduciary duties, interference with an advantageous relationship, wrongful utilization of the bank's superior bargaining position, and reckless disregard of their rights and for gross negligence.

The Chancellor found no actual damage by Trustmark, but awarded nominal damages of $100 and $25,000 punitive damages to the Hammons. He also awarded Trustmark a judgment of $41,512 for the principal and interest on the note and $18,252.79 attorneys fees and court costs on the judicial foreclosure of the deed of trust. Aggrieved, the Hammons appeal to this Court and Trustmark cross appeals with the following issues presented:

WHETHER A CONFIDENTIAL/FIDUCIARY RELATIONSHIP EXISTED BETWEEN THE BANK AND THE HAMMONS, SO AS TO HAVE BEEN VIOLATED BY CERTAIN DISCLOSURES MADE BY THE BANK?

WHETHER TRUSTMARK WRONGFULLY INTERFERED WITH ANY BUSINESS RELATIONSHIP OF HAMMONS?

WHETHER TRUSTMARK ENTERED INTO AN ORAL LOAN AGREEMENT WITH THE HAMMONS?

WHETHER TRUSTMARK HAD A DUTY TO FURNISH TO HAMMONS A COPY OF THE ALLEGED APPRAISAL OF THE WATER WELL?

WHETHER HAMMONS SUFFERED ANY ACTUAL DAMAGE DUE TO TRUSTMARK'S ALLEGED ACTIONS, AND IF NOT, WHETHER PUNITIVE DAMAGES MAY BE SUPPORTED BY AN AWARD OF NOMINAL DAMAGES?

STATEMENT OF FACTS

In 1986, Billy and Betty Hammons purchased a certain tract of land which is the subject of this dispute. In the course of building a dwelling, Billy successfully drilled a water well. Billy had the water analyzed, and it was determined that the water was pure and drinkable straight from the well, thus making it commercially marketable and valuable.

The Hammons then decided to market their new found treasure. However, lacking business sophistication, they enlisted the help of Charles King and Tom Allain who purportedly promised to put up the necessary funds to pursue the marketing of the artesian well. In January 1989, the Hammons, King and Allain established Hopewell Enterprises, Inc. as the mechanism for selling the bottled artesian water. The Hammons maintained a fifty-one percent ownership of the stock of the corporation, and King and Allain collectively owned forty-nine percent. The well site was surveyed into a 1.5 acre tract of land and was deeded to Hopewell. This was done with the intent to procure a $250,000 loan from the Georgetown, Mississippi branch of Trustmark Bank, in order to market the water.

On February 13, 1989, Hopewell obtained a loan of approximately $12,000 from the Bank, and secured the indebtedness with a deed of trust on the 5500 gallon tank purchased with its proceeds. This loan was payable in 365 days from the date of the loan origination.

On April 3, 1989, the Hammons mortgaged their remaining land (i.e. not the 1.5 acres upon which the well is situated) for a loan of approximately $24,000. This loan was payable in 35 installments of $288.00 a month, with a balloon payment on April 10, 1992.

During 1989 King and Allain failed to live up to their end of the bargain to market the water. Their inaction resulted in a lawsuit in 1990 between the partners.

In the meantime, the Hammons began negotiations with Darryl Stripling in early 1990. Stripling was interested in purchasing the artesian well. Stripling offered to purchase all of the water flowing from the well at a price of five (.05) cents per gallon. On May 17, 1990, Stripling paid a visit to the Hammons. According to the Hammons, Stripling was knowledgeable concerning the balance for the amounts of monies due and owing by them to Trustmark, including interest and late fees. The Hammons then contacted Robert Bounds, the President of the Hazelhurst branch of Trustmark National Bank, whom the Hammons claimed apologized to them for having disclosed that information. Bounds admits that he divulged information to Stripling about the approximate amount of both the Hopewell debt, which was in default, and the Hammons debt, which was not in default. However, Bounds did not believe that he had disclosed any confidential information as both debts were a matter of public record. The Hammons further testified that Bounds challenged Stripling as to "why buy the well from the Hammons, when he could buy it from the bank on the courthouse steps?" Bounds denied making this statement. Robert Windham, a Trustmark Officer, testified that it was bank policy not to discuss the business of its customers with third parties. In any event, the discussions between the Hammons and Stripling never resulted in a contract.

On May 2, 1990, Trustmark had already filed suit against Hopewell, King, Allain and the Hammons, on the $12,000 note which had matured in February 1990. A default judgment was taken against Hopewell, King and Allain. Trustmark claims that in order to stall the collection of the defaulted Hopewell note, Billy Hammons told the bank about his negations with Stripling. Thus, Bounds became aware of the Stripling offer, and gave the debt status to Stripling in an effort to consummate the deal between Stripling and the Hammons.

The Hammons sued King and Allain on March 13, 1990. The case between the Hammons, King, and Allain was not adjudicated until September 7, 1990, wherein it was agreed that King and Allain would transfer back their 49% interest to the Hammons in exchange for the amount of money they had invested into Hopewell. It was also agreed that the Hammons would assume the previously executed $12,000 note. The Hammons did not have sufficient funds to pay King and Allain and therefore, they paid $15,000 immediately, with $5,000 to be paid within one year of the judgment. King and Allain accepted the $15,000, and assigned the $5,000 amount to their attorney, Brent Bourland. To facilitate this September 7, 1990 judgment, Trustmark offered to restructure the loans. Trustmark claims that it did not resort to execution of the judgment on the Hopewell debt, because the bank had obtained partial satisfaction of the judgment through execution or garnishment issued against Allain and King.

A new loan which would pay off all amounts owed to King and Allain and consolidate any and all other indebtedness they had with Trustmark into one note was proposed. Trustmark secured this new indebtedness with deeds of trust on the tract of land containing the Hammons residence and upon the tract of land holding the artesian well.

On October 26, 1990, the Hammons executed a promissory note to Trustmark confirming a debt of $42,267.02, payable in 90 days. This note matured in January 1991. The Hammons subsequently paid the interest and the note was renewed with a May 1991 maturity date. After the note matured, the Hammons again paid the interest and the note was renewed for 116 days. On the September 1991 maturity date, the Hammons were unable to pay, and the note was in default.

While the Hammons continued to extend the maturity and payoff date of the note they sold the water on their own, while unsuccessfully attempting to strike deals with prospective buyers. In October 1991, Trustmark commenced foreclosure of the Hopewell and Hammons deeds of trust with sale scheduled for November 1991. However, foreclosure proceedings were interrupted by Hopewell filing Chapter 11 bankruptcy and the Hammons Chapter 13 bankruptcy.

While the bankruptcy was pending, Trustmark elected to have the well appraised. Darrell W. Schmitz, a geologist at Mississippi State University, conducted an investigation/appraisal, and approximated the value of the well at roughly $3.5 million dollars. However, the bank did not consider the appraisal reliable because it failed to consider development and marketing costs associated with the well. Bounds testified that the evaluation was made for foreclosure purposes only. The Hammons made several requests for a copy of the Schmitz evaluation, but Trustmark refused to produce a copy because it considered the report to be bank property. The bankruptcy petitions filed by Hopewell and the Hammons were dismissed in January 1992, and thus, Trustmark was able to file the present suit on January 24, 1992.

The Chancellor found the facts to be essentially the same as stated above. Specifically the Chancellor found that the Hopewell-Hammons note was in default, and awarded Trustmark $41,512 on the principal of the note, and $18,252.79 in attorneys fees. The trial court also found that Trustmark was also entitled to foreclose on the Hopewell-Hammons deed of trust. The lower court held that there was no fiduciary relationship, but did find that the bank breached its duty not to disclose confidential information. Moreover, the trial court held that Trustmark should have furnished a copy of the appraisal to the Hammons. The court found no actual damages by Trustmark, but

nevertheless, awarded $100.00 nominal damages and $25,000.00 punitive damages.

DISCUSSION OF LAW

A. Fiduciary Relationship

This Court has never held that the relationship between a mortgagor and mortgagee is a fiduciary one. First American National Bank of Iuka v. Mitchell, 359 So.2d 1376 (Miss.1978); First National Bank of Vicksburg v. Caruthers, 443 So.2d 861 (Miss.1983). At best, we have held that a mortgagor and mortgagee are in a relationship of trust...