Smith v. First Federal Sav. & Loan Ass'n of Grenada

• Decision Date: 07 November 1984
• Docket Number: No. 55288,55288
• Parties: John Doyle SMITH v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF GRENADA, Mississippi.
• Court: Mississippi Supreme Court

Page 786

460 So.2d 786

John Doyle SMITH v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF GRENADA,

Mississippi.

No. 55288.

Supreme Court of Mississippi.

Nov. 7, 1984.

Clarence R. Scales, Scales & Scales, Jackson, for appellant.

A. Spencer Gilbert, III, Barry H. Powell, Gilbert & Powell, Jackson, for appellee.

Before PATTERSON, C.J., and DAN M. LEE and ROBERTSON, JJ.

ROBERTSON, Justice, for the Court:

I.

This appeal presents the question, whether a release agreement, executed by a secured lender and delivered to his debtor acquitting the debtor of all obligations arising out of certain business loans to corporations in which the debtor has an interest, affects the rights and duties of the parties arising out of three unrelated personal secured loans with respect to which the release agreement is silent.

We hold that, where there is no language in the release agreement which could fairly be construed to render it a general release, the unmentioned personal secured transactions remained viable after execution of the release and may be enforced by the secured according to their tenor.

Finding that there are presented in this record no genuine issues of material fact, the case was proper for disposition via summary judgment. Rule 56, Miss.R.Civ.P. For the reasons that will presently appear, we affirm the judgment entered summarily by the Circuit Court in favor of the secured lender and against the debtor.

II.

The material facts of this appeal are wholly uncontradicted.

On and prior to June 2, 1982, John Doyle Smith and another member of his family had outstanding secured loans with First Federal Savings & Loan Association of Grenada, Mississippi, as follows:

(a) As security for a note dated June 22, 1981, in the principal sum of $9,000.00 plus interest at 12.75% per annum, First Federal held a $10,000.00 certificate of deposit (C/D) owned by the Smiths and dated May 7, 1980;

(b) As security for a note dated October 8, 1981, in the principal sum of $9,000.00 plus interest at 12.75% per annum, First Federal held a $10,000.00 certificate of deposit (C/D) owned by the Smiths and dated May 7, 1980;

(c) As security for a note dated November 20, 1981, in the principal sum of $12,508.00 plus interest at 12.75% per annum, First Federal held a $8,000.00 certificate of deposit (C/D) owned by the Smiths and dated May 12, 1980.

Unrelated to these personal secured transactions, John Doyle Smith and two corporations in which he held a controlling interest, Times Square Realty, Inc., and Times Square Management Corporation, had been engaged in a secured transaction with Grenada Bank and First Federal whereunder Smith and his corporations had borrowed heavily from the Bank and First Federal to finance a shopping center project in Grenada known as Times Square. Smith and his corporations fell substantially into arrears on their payment obligations under the shopping center loans and the Bank, as prime lender, instituted judicial foreclosure proceedings. In due course all parties negotiated a settlement of the foreclosure suits and on June 2, 1982, an agreement entitled "General Release" was executed by John Doyle Smith, First Federal and by other interested parties.

It is important to keep in mind that on June 2, 1982, the three secured personal loans between First Federal and the Smiths were outstanding. The release that day executed contained the following pertinent paragraph:

3. FIRST FEDERAL SAVINGS AND LOAN OF GRENADA, its successors and assigns, hereby releases, remises and acquits ... John Doyle Smith ..., excepting one $4,000 certificate of deposit held by First Federal as security, from all claims, causes of action and liabilities of any kind arising from or connected in any way with that certain note dated October 27, 1981, in the principal amount of $54,050.00 by Times Square Realty, Inc., in favor of First Federal, and arising from or connected in any way with Grenada County Chancery Court actions Nos. 82-2-24 and 82-2-31, and that certain deed of trust securing the aforesaid note, ... First Federal further agrees to release, remise and acquit the officers, directors, agents and employees of Times Square corporations and the Smiths from all claims, causes of action and liabilities arising out of the transactions set forth in Grenada County Chancery Court Cause Nos. 82-2-24 and 82-2-31 .... [Emphasis Added]

Not only did Smith default on his business loans arising out of the Times Square shopping center project, none of the three personal loans was paid when due, as a result of which on December 1, 1982, First Federal appropriated and liquidated the three certificates of deposit held as collateral. As is apparent from the figures recited above, the C/Ds were sufficient to pay in full the June 22, 1981 and October 8, 1981 notes. A deficiency balance, however, was left on the November 20, 1981 note, about which more will be said later.

In the meanwhile, Smith determined to take the position that the June 2, 1982 release agreement not only released him from all his obligations arising out of the Times Square shopping center project but also covered the three secured personal loans described above. Accordingly, Smith demanded of First Federal that it return to him the three certificates of deposit. First Federal refused, taking the position that the release agreement discharged Smith only from his obligations arising out of the shopping center project.

B.

On November 24, 1982, John Doyle Smith commenced this civil action by filing in the Circuit Court of Grenada County, Mississippi, his complaint naming First Federal Savings & Loan Association of Grenada as defendant. In that complaint, Smith alleged the execution of a June 2, 1982 release agreement wherein Smith says First Federal released him from all claims and liabilities to First Federal, with the exception of one $4,000 certificate of deposit held by First Federal as security. A copy of the release agreement was attached to the complaint. Smith further alleged that, in spite of the release agreement, First Federal had refused Smith's demand that it return three certificates of deposit in the aggregate principal sum of $28,000, plus interest and had refused to cancel three outstanding secured personal notes said by Smith to have been covered by the release.

After some procedural maneuverings, on December 20, 1982, First Federal filed its answer and counterclaim, and on the same day First Federal filed a motion to dismiss, Rule 12(b)(6), Miss.R.Civ.P., or, in the alternative, for summary judgment, Rule 56, Miss.R.Civ.P. In its answer, First Federal admitted the release document which had been attached as an exhibit to the complaint. It took the position, however, that this document by its terms represented a release limited only to those obligations of Smith owing to First Federal arising out of or related to the Times Square shopping center project in Grenada and had no effect on any rights or duties of the parties arising out of the three personal secured loans or the three certificates of deposit totaling $28,000 in principal amount and held by First Federal as security.

In addition to its answer, First Federal simultaneously filed a counterclaim wherein it alleged that, in connection with the November 21, 1981 personal secured loan, Smith had executed and delivered a note to First Federal in the principal sum of $12,508.00 plus interest at 12.75% per annum. The counterclaim also alleged that an $8,000.00 certificate of deposit dated May 12, 1980, owned by Smith had been at that time pledged to First Federal as security; that First Federal had made demand for payment of the note when due; that Smith had failed and refused to respond, as a result of which, First Federal liquidated the certificate of deposit, applied the accrued balance and interest of $10,484.88 against the note leaving a balance due of $3,671.80 plus interest. The counterclaim sought judgment against Smith for this deficiency.

In support of its alternative motion for summary judgment, First Federal filed the affidavit of John A. Stevens, President and Treasurer of First Federal Savings & Loan Association. That affidavit explains that the first two personal loans had been liquidated in full by application of the certificates of deposit held as security and thereafter explained that, with respect to the November 20, 1981 loan, there remained, after liquidation of the security and application of its proceeds to the debt, a deficiency due and owing by John Doyle Smith to First Federal in the amount of $3,671.80, plus interest.

On January 24, 1983, Smith filed an answer to counterclaim which, in pertinent part, admitted the facts and figures alleged in the counterclaim but contended that First Federal had no rights in the certificate of deposit, specifically, no right to liquidate the C/D and apply it to the note. The basis of this legal position, as before, was Smith's construction of the June 2, 1982 release agreement.

On July 5, 1983, this matter was set for hearing in the Circuit Court on First Federal's alternative motions to dismiss or for summary judgment. That morning, Smith filed an affidavit which, in pertinent part, states as follows:

That on June 2, 1982, plaintiff [John Doyle Smith] along with his wife, Elaine A. Smith, Times Square Realty, Inc. and Times Square Management Corporation executed a release, which is attached to the Complaint in the above styled and numbered cause. That said release did not contain any mention of the accounts which are the subject of this suit. That there was no discussion about these accounts of deposits in First Federal Savings & Loan Association of Grenada, Mississippi at the time of the stipulated agreement in open court on May 25th, 1982 nor were there any discussions or references made concerning the funds on deposits by the Plaintiff, his wife or his mother. That the only discussions had at any time concerning accounts with ...