Matthews v. Whitney Bank

• Court: Court of Appeals of Mississippi
• Citation: 282 So.3d 786
• Docket Number: NO. 2018-CA-00447-COA,2018-CA-00447-COA
• Parties: F. Michael MATTHEWS, Appellant v. WHITNEY BANK a Mississippi State Chartered Bank f/k/a Hancock Bank, Joy Lambert Phillips as Trustee, and James Kaigler, Appellees
• Decision Date: 27 August 2019

282 So.3d 786

F. Michael MATTHEWS, Appellant
v.
WHITNEY BANK a Mississippi State Chartered Bank f/k/a Hancock Bank, Joy Lambert Phillips as Trustee, and James Kaigler, Appellees

NO. 2018-CA-00447-COA

Court of Appeals of Mississippi.

August 27, 2019

ATTORNEY FOR APPELLANT: GEORGE W. HEALY IV, Gulfport

ATTORNEYS FOR APPELLEES: BENJAMIN HARTE HARRIS III, Mobile, JEFFREY R. BARBER, Jackson, ELIZABETH JONES FUTRELL, New Orleans, MICHAEL ANTHONY SHAW, GENE D. BERRY

BEFORE J. WILSON, P.J., GREENLEE AND McCARTY, JJ.

J. WILSON, P.J., FOR THE COURT:

¶1. Michael Matthews and his wife, Beth, owned A&M Petroleum, a petroleum jobber. To address cash flow issues in A&M's business, the Matthewses obtained two successive home equity lines of credit from Whitney Bank,¹ which were secured by two successive deeds of trust on the Matthewses' home. The second deed of trust, executed in 2008, also secured a smaller loan and loan guarantee. However, Michael alleges that his signatures on the deeds of trust and loan documents are all forgeries and that he did not know about the deeds of trust, lines of credit, loan, and loan guarantee until May 2014. In June and July 2014, the Matthewses defaulted on all of their obligations to Whitney Bank. The bank subsequently filed a complaint for a declaratory judgment that the 2008 deed of trust was valid, properly executed by Michael and Beth, and subject to foreclosure by the bank. Michael and Beth filed separate answers, and Beth eventually settled and consented to the entry of a judgment against her. But Michael maintained that the deed of trust and other

282 So.3d 789

documents were forged and void, and the case eventually proceeded to trial.

¶2. After the trial, the chancellor found that Michael's signature on the deed was not forged. The chancellor further found that the 2008 deed of trust was valid and subject to foreclosure and that Michael owed in excess of $400,000 on the debts secured by the deed of trust. On appeal, Michael argues that the chancellor erred (1) by applying the presumption of validity that attaches to a properly acknowledged document and (2) by finding that Michael failed to meet his burden of proving forgery. However, we find no reversible error and affirm the judgment of the chancery court.

FACTS AND PROCEDURAL HISTORY

¶3. In the 1970s, Michael joined his father's business, A&M Petroleum. A&M was a petroleum jobber, meaning that it bought fuel wholesale from refiners and sold it to gas stations. In 1985, Michael married Beth, and they later took over the business. Beth testified that she eventually assumed full responsibility for A&M's finances, bookkeeping, and taxes. She testified that Michael had no involvement in those aspects of the business. Michael was responsible for operations, sales, and customer relations.

¶4. After Hurricane Katrina, A&M began to experience cash flow problems. A&M's suppliers required A&M to pay cash on delivery, but A&M allowed its customers thirty days or more to make payment. To address the cash flow problems that this "timing gap" created, the Matthewses secured several loans from Whitney Bank between 2007 and 2013.

¶5. In July 2007, the Matthewses obtained a home equity line of credit (HELOC) from Whitney Bank. The Matthewses executed a deed of trust covering their home to secure the HELOC. Beth testified that she met with Whitney Bank employees James Kaigler and John Hall to discuss the HELOC. On the advice of counsel, Beth asserted her Fifth Amendment privilege against self-incrimination and refused to say whether she showed Michael the deed of trust or whether he signed it.

¶6. Sidney Rice, an employee of Whitney Bank, notarized the 2007 deed of trust. Rice testified that if he knew a customer well enough to recognize his or her voice on the phone, if the customer told him by phone that he or she had signed a document, and if he had no doubt that the customer had in fact signed the document, then he would notarize the document even if the customer was not present. Rice testified that Beth took the 2007 deed of trust home for Michael to sign and later returned to the bank with the signed document. Rice testified that he called Michael, and Michael confirmed his signature by phone.² Rice then notarized the deed of trust, but he did not record the event in his notarial register.³ Michael denied that

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he ever signed the deed of trust or credit agreement or confirmed his signature by phone.

¶7. In February 2008, the Matthewses obtained a new $326,000 HELOC from Whitney Bank. The Matthewses executed a new deed of trust covering their home. The deed of trust secured not only the HELOC but also all other existing and future debts and liabilities owed by the Matthewses to Whitney Bank.

¶8. The Matthewses used the new HELOC to pay off the prior HELOC. The Matthewses defaulted on the HELOC in July 2014. As of October 2017, they owed $326,186.98 on the HELOC. At trial, Beth asserted her Fifth Amendment privilege against self-incrimination and refused to say whether Michael signed the new credit agreement or 2008 deed of trust. Michael denied that he ever saw or signed the credit agreement or deed of trust.

¶9. Deborah Estes notarized the 2008 deed of trust. Estes was a friend of the Matthewses, and her husband, an attorney, had done legal work for the Matthewses in the past. Beth testified that Estes notarized the deed of trust even though she (Beth) signed it outside of Estes's presence. However, Estes testified that she will not notarize a document unless the principal is physically present. Indeed, Estes testified that she could not recall a single time when she had notarized a document when the principal was not present. Estes could not specifically recall notarizing the 2008 deed of trust. However, she had no reason to believe that she would have departed from her normal practice. In other words, she had no reason to believe that Michael was not present when she notarized the deed of trust with his signature. On cross-examination, Estes admitted that on rare occasions she would notarize a document that had already been signed. However, she testified that she would only do so when the principal personally presented the document to her. Even then, she usually had the signatory sign the document again in her presence so that she could witness the signature. Estes admitted that she did not record her notarization of the 2008 deed of trust in her notarial register.

¶10. In May 2013, Beth signed a promissory note in favor of Whitney Bank for the principal amount of $49,500. Beth signed the note on behalf of Sow and Son LLC.⁴ Michael and Beth each signed a commercial guaranty of the note. Michael alleges that his signature was forged. Sow and Son failed to make payments due under the promissory note, and in June 2014 the Matthewses failed to make payment as guarantors of the note. As of October 2017, they owed $47,941.38 as guarantors of the Sow and Son note.

¶11. On October 30, 2013, Michael signed a promissory note in favor of Whitney Bank in the principal amount of $30,000. The loan was guaranteed by Beth. In June 2014, Michael defaulted on the promissory note. As of October 2017, he owed $28,276.51 on the note. He alleges that his signature on the note is a forgery.

¶12. Thus, in June and July 2014, the Matthewses defaulted on the HELOC, the Sow and Son guarantees, and the October 30, 2013 promissory note—all of which were secured by the 2008 deed of trust. Whitney Bank subsequently filed suit against the Matthewses. Whitney Bank's complaint sought, among other forms of relief, a declaratory judgment that the 2008 deed of trust was valid and binding as to both Michael and Beth and that the bank was entitled to foreclose under the deed of trust.

282 So.3d 791

¶13. Michael answered and filed counterclaims against Whitney Bank.⁵ Michael alleged that Beth was responsible for all of the "financial aspects" of A&M. He claimed that on May 28, 2014, their son, Luke, found a notice from the Mississippi Department of Revenue (MDOR) that stated that A&M had not remitted sales taxes from January 2013 through March 2014 and owed a total of $463,107.93 to the State, including penalties and interest. Michael alleged that he had no prior knowledge of A&M's tax delinquency. He alleged that he later found a note from Beth apologizing for her mishandling of A&M's finances. Michael claimed that he subsequently discovered that his signature had been forged on the 2008 deed of trust and other loan documents at issue in this litigation.

¶14. Beth filed a separate answer and counterclaims against Whitney Bank. Beth alleged that she "reasonably believed that she had the authority, approval and consent of [Michael] to sign his name on documents, when necessary, to manage the business and the personal affairs of their family." Specifically, Beth alleged that she "reasonably believed" that she had the authority to sign Michael's name to the deeds of trust and other documents at issue in this case. Beth also alleged, "[u]pon information and belief," that James Kaigler of Whitney Bank "was in regular communication with ... Michael ... during all pertinent times." Finally, Beth alleged that "[a]ll of the funds received...