Iuka Guar. Bank v. Beard

• Citation: 658 So.2d 1367
• Decision Date: 29 June 1995
• Docket Number: No. 91-CA-01272-SCT,91-CA-01272-SCT
• Parties: IUKA GUARANTY BANK v. Nancy BEARD.
• Court: United States State Supreme Court of Mississippi

Page 1367

658 So.2d 1367

IUKA GUARANTY BANK v. Nancy BEARD.

No. 91-CA-01272-SCT.

Supreme Court of Mississippi.

June 29, 1995.

Rehearing Denied Aug. 24, 1995.

Roger H. McMillin, Jr., Jackson, Lester F. Sumners, Hickman Sumners Goza & Gore, New Albany, for appellant.

Phil R. Hinton, Wilson & Hinton, Corinth, for appellee.

En Banc.

SULLIVAN, Justice, for the Court:

Nancy Beard filed suit in the Circuit Court of Tishomingo County against Iuka Guaranty Bank ("Iuka"), alleging an intentional breach of contract in their failure to cancel a deed of trust upon her August 23, 1985, satisfaction of the balance due on her loan from Iuka. The failure to cancel this instrument subsequently resulted in the foreclosure of Beard's property in January of 1990. In addition to requesting actual damages, Beard sought statutory damages pursuant to Miss.Code Ann. § 89-5-21, or in the alternative, punitive damages for the alleged intentional breach of contract. Iuka answered claiming that Beard, upon receiving proper notice, failed to satisfy all of her indebtedness to Iuka. After trial on the merits, the jury returned a verdict for Beard in the amount of $5,000 in actual damages, and $20,000 in statutory damages. Iuka filed a motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial. It is from the denial of this motion which Iuka appeals. Beard also sought to amend her complaint under M.R.C.P. Rule 15 to reflect the jury's award of actual damages which were not requested in the initial complaint. The trial court denied this motion, concluding that it lost jurisdiction to make a ruling once Iuka perfected its appeal.

FACTS

Nancy Beard was a licensed real estate broker with twenty years experience working for her husband at P.O. Beard Real Estate before returning to her former teaching career in 1984. Nancy and her husband, P.O., were the joint owners of Lot 7 and Lot 44, two sections of property in the same subdivision. The Beards' home was built on Lot 7, and Lot 44 remained undeveloped.

On November 23, 1982, the Beards obtained a loan and executed a note to Iuka Guaranty Bank for the principal sum of $46,512.31. Previous notes to Iuka in the sum of $1,300 and $15,000 were consolidated into the balance of this new note on the advice of Gene Jourdan, a banker at Iuka Guaranty since 1962, who noted that P.O. had been having difficulty making payments on previous loans. The Beards signed two deeds of trust as security for the 1982 loan. One deed of trust gave the bank a first mortgage on the vacant Lot 44, and the other, a second mortgage position on Lot 7. Iuka's interest in Lot 7 followed an outstanding $12,000 mortgage previously given to Nancy's mother. Both of these deeds of trust contained a "dragnet clause" asserting that the instruments secured not only the principal scheduled debt, but also any other separate or joint indebtedness owed to Iuka by either party.

Nancy maintained that P.O. was responsible for making all of the necessary loan payments. P.O. informed Nancy in August of 1985 that Iuka was anticipating foreclosure P.O. scheduled a meeting with Fidelity Federal Savings and Loan ("Fidelity Federal") in August of 1985 in hopes of refinancing the Iuka loan. Nancy testified that she received a $38,000 loan in her own name from Fidelity Federal to satisfy the entire Iuka debt. On August 23, 1985, Nancy and P.O. signed a deed of trust on Lot 7 to Fidelity Federal as security for the new loan. As part of the Fidelity Federal loan agreement, Nancy convinced her mother to subordinate her mortgage interest behind Fidelity Federal's interest.

due to his failure to make the necessary installments on the 1982 loan. Nancy had been unaware of this problem because Iuka had failed to provide her with notice, having addressed all of the correspondence to P.O. Gene Jourdan testified that the Beards were erratic with their payments on the 1982 loan beginning with their first payment. He claimed that the installments were 90 days past due as early as mid-1983.

Nancy and P.O. met with Gene Jourdan at Iuka on the same day and forwarded the entire outstanding balance of the 1982 Iuka loan using the $38,000 in proceeds obtained from Fidelity Federal. Nancy also expressed dissatisfaction about not having received personal notices from Iuka in the past. She testified that before they satisfied the loan, Jourdan assured them that he would immediately cancel the deeds of trust on Lot 7 and Lot 44 upon payment. She claimed that Jourdan repeated his guarantees that they had successfully fulfilled all of their obligations to Iuka necessary to release the two deeds of trust. She testified that Jourdan made no mention of any other debts preventing Iuka from releasing both deeds of trust. Though the Beards paid the entire balance of the loan on August 23, 1985, Jourdan testified that the bank would have been equally content had the Beards merely tendered their overdue payments. Jourdan said he canceled the Lot 7 deed of trust on the day following full payment of the 1982 loan. P.O., in fact, received another loan of $406 in order to fully cancel the loan. Jourdan testified that he did not specifically remember the conversations between the parties on this day.

Nancy and P.O. subsequently divorced. In January of 1990, some five years later, Nancy learned that the deed of trust on Lot 44 had not been released. She said that she received a letter from Iuka indicating that it was initiating foreclosure proceedings on Lot 44. Notice of the foreclosure appeared in the paper under Nancy and P.O.'s name. It also listed under P.O.'s name individually for his personal loans dating back to March 26, 1973. Jourdan produced records showing that P.O.'s individual notes had been properly renewed by the bank. Lot 44 had been registered as security for the loan afforded P.O. on March 26, 1973. P.O. had been renewing this debt throughout the 1980's by merely paying the interest due on the loans. Jourdan explained that P.O.'s previous debts had become commingled with the 1982 loan since P.O. had renewed his original note so many times. P.O. had even continued to borrow money after the 1982 loan was satisfied. Nancy had neither borrowed additional money from Iuka, nor signed any of the notes which were given or renewed by her husband. She was not aware of her husband's previous dealings with Iuka even though she had worked at his real estate office for twenty years. However, the deed of trust on Lot 44 remained properly recorded in the chancery court's office even after the Beards paid the balance owed on the 1982 loan.

Prior to foreclosure, Jourdan received a letter from Nancy requesting that the deed of trust on Lot 44 be released. Jourdan denied the request, ultimately purchasing Lot 44 on behalf of Iuka in the foreclosure sale for the sum of $3000. He estimated that the value of Lot 44 at foreclosure was approximately $3000. He said this value had not changed since P.O., offered it as security for his 1973 debt because of continued poor access to the property. He claimed that Iuka lost $10,189.98 in the foreclosure. Bruce Dillingham, a real estate appraiser for Fidelity Federal, appraised Lot 44 at a 1990 value of $10,500.

I.

DID THE DRAGNET CLAUSE OF THE DEED OF TRUST ON LOT 44 SECURE

THE SEPARATE DEBTS OF P.O. BEARD?

A properly executed and unambiguous dragnet clause in a deed of trust is enforceable according to its terms. Kelso v. McGowan, 604 So.2d 726, 729 (Miss.1992); Trapp ex rel. First Miss. Bank of Commerce v. Tidwell, 418 So.2d 786, 792 (Miss.1982). A dragnet clause is enforceable when both parties have agreed to the clause, and there was no fraud in the making of the contract. Walters v. Merchants & Manufacturers Bank, 218 Miss. 777, 785, 67 So.2d 714, 717-18 (1953). In the absence of allegations of fraud or ambiguities, the clause should be construed as written to cover subsequent debts created by one of the joint mortgagors individually. Id. at 784-85, 67 So.2d 714. There is no requirement that the co-tenants have knowledge of the existence of other debts, or each others' consent to the creation of debt and the attendant lien against the property, in order for the dragnet clause to be enforceable. Newton County Bank v. Jones, 299 So.2d 215, 219-20 (Miss.1974); Holland v. Bank of Lucedale, 204 So.2d 875, 877 (Miss.1967).

On November 23, 1982, Nancy and P.O. borrowed approximately $46,000 from Iuka and executed a deed of trust granting Lot 44 as security for the loan. The deed of trust contained a dragnet clause asserting that the instrument incorporated all past and future debts owed jointly or severally by Beard and her husband. The facts of this case demonstrate that the dragnet clause was mutually agreed upon through the loan process employed by Iuka. The clause was clearly written to encompass the debts which P.O. owed Iuka individually. As there are no allegations of fraud or ambiguities surrounding the contract, the dragnet clause in the deed of trust validly granted Lot 44 to Iuka as security for all past and future debts owed by the Beards jointly or individually. This effectively included the individual debts of P.O. which were outstanding even before the 1982 loan was extended. Nancy Beard concedes this issue; instead, she argues that the Lot 44 deed of trust containing the dragnet clause was modified by subsequent agreement.

II.

WAS THERE ANY PROOF PRESENTED UPON WHICH THE JURY COULD BASE

ITS FINDING THAT NANCY BEARD AND IUKA MUTUALLY

AGREED TO AMEND THE DEED OF TRUST ON LOT

44 NEGATING THE DRAGNET CLAUSE?

The jury concluded that the dragnet clause had been abrogated by a subsequent agreement between the Beards and Iuka whereby Iuka agreed to cancel the deed of trust notwithstanding any other joint or individual debts owed by the Beards in return for the Beard's full payment of the 1982 loan. Iuka contends that there was absolutely no evidence upon which a jury could find the existence...