Spragins v. Sunburst Bank, 89-CA-1217

• Decision Date: 05 August 1992
• Docket Number: No. 89-CA-1217,89-CA-1217
• Citation: 605 So.2d 777
• Parties: C. Allen SPRAGINS, Jr. v. SUNBURST BANK, formerly Grenada Bank d/b/a First Greenville Bank.
• Court: Mississippi Supreme Court

Page 777

605 So.2d 777

C. Allen SPRAGINS, Jr. v. SUNBURST BANK, formerly Grenada Bank d/b/a First Greenville Bank.

No. 89-CA-1217.

Supreme Court of Mississippi.

Aug. 5, 1992.

Rehearing Denied Oct. 8, 1992.

Charles M. Merkel, Jr., John H. Cocke, Merkel & Cocke, Clarksdale, for appellant.

Jack F. Dunbar, Guy T. Gillespie III, Janet G. Arnold, Holcomb Dunbar Connell Chaffin & Willard, Oxford, for appellee.

Before DAN M. LEE, P.J., and PITTMAN and BANKS, JJ.

PITTMAN, Justice, for the court:

I.

C. Allen Spragins filed this suit against Sunburst Bank alleging damages due to misrepresentations. Sunburst Bank's Motion For Summary Judgment was granted. Spragins appeals the summary judgment claiming that: (1) the lower court erred in granting a summary judgment in favor of Sunburst Bank on the claim of negligent misrepresentation; and (2) the lower court erred in granting a summary judgment in favor of Sunburst Bank on the claim of intentional misrepresentation. Finding no error in the summary judgment granted below, we affirm.

II.

C. Allen Spragins, Jr. managed a family farm known as Refuge Plantation in Washington County for many years. Spragins did not own stock in Refuge Plantation and had no ownership interest in the property. In the summer of 1983, a deed of trust was executed in favor of Sunburst Bank due to overdue interest on a delinquent principal note on the farm. The note was secured by a towboat known as the Shenandoah, a boat in which Spragins had an ownership interest. Stock in Refuge Plantation was pledged as additional security. Spragins was a guarantor on the note. In the latter part of 1983, the towboat burned, and the insurer denied coverage. The boat was also subject to a substantial amount of debt with Sunburst.

In December, 1984, the Refuge Plantation debt was restructured by Refuge Plantation, Inc.'s execution of another note and deed of trust on the Refuge farmland. Meanwhile, a lawsuit was pending in federal court due to the denied coverage of the boat loss. Sunburst continued to provide financing and crop production loans to Refuge Plantation. In 1985 and 1986, the crop production loans to Refuge Plantation went unpaid and interest on the loans continued to accrue. Additionally, farmland values in the area were declining.

Spragins received judgment against the insurer of the Shenandoah towboat in federal district court for $1,000,000.00 and $250,000.00 in interest. Debt value on the boat was in excess of $1,700,000.00. Additionally, the judgment was appealed to the Fifth Circuit Court of Appeals, delaying any collection.

In early 1986, Sunburst Bank requested an updated appraisal from Refuge Plantation. Spragins retained the services of MAI appraisers. They appraised the 1,975 acres of Refuge Plantation at $2,630,000.00.

Spragins and Milton Taylor, president of Sunburst Bank in Greenville, agreed that Refuge Plantation should be placed on the market. Spragins recognized that an open market sale would yield more proceeds than a forced foreclosure sale. In June, 1986, a successful investment broker from Memphis, Duncan Williams, viewed the property and visited with Spragins. Williams decided that Spragins was asking too much for the land, and no agreement was reached for a sale. Philip Terney, one of Spragins' attorneys, testified that Spragins was not really interested in selling Refuge Plantation at any price.

Spragins filed personal bankruptcy in August, 1986. He ceased being a guarantor on the Refuge Plantation note. The crop production loans for 1985 and 1986 had remained unpaid. As of October, 1986, the total amount of principal debt and accrued interest owed to Sunburst and secured by the Refuge Plantation deed of trust had reached approximately $2,800,000.00. Additionally, the notes had been placed on nonaccrual since April, 1986, and several hundred thousand dollars in additional nonaccrued interest was overdue as well. The parties agreed that foreclosure had become necessary.

Foreclosure proceedings as to the Refuge Plantation were instituted in January, 1987. The foreclosure sale date was set for February 23, 1987.

Frank Thackston, an attorney for Spragins, suggested to Sunburst Bank that Spragins be given a right of first refusal. Sunburst Bank negotiated with Spragins' attorneys two agreements regarding post-sale operation and disposition of Refuge Plantation if Sunburst Bank was the high bidder at the foreclosure sale. One agreement was a Prospective Right of First Refusal which stated in pertinent part that the agreement was applicable "in the event of Bank's being the successful bidder at the foreclosure." The other agreement was a contingent lease between Sunburst Bank and Spragins Farms. The lease provided enforcement "subject to Lessor's [Sunburst Bank] acquiring title to Property at the foreclosure on February 23, 1987" and stated that the lease was void "[s]hould Lessor for any reason not acquire title to Property".

Refuge Plantation was viewed prior to the foreclosure sale by a Mr. and Mrs. Huber. Additionally, Duncan Williams again made inquiries about the plantation and attempted to contact Spragins on several occasions. Spragins and Frank Thackston, an attorney for Spragins, talked to the Sunburst Bank trustee, Claude Stuart, about the possibility of someone other than Sunburst Bank buying the plantation at the foreclosure sale. Stuart and Thackston testified that Stuart informed Spragins that other people show up at foreclosure sales but that they rarely bid. Stuart and Thackston testified that Stuart added, "but you never know."

Duncan Williams made arrangements to borrow over two million dollars from Sunburst Bank if he needed the money.

Two of Spragins' attorneys, Terney and C.W. Walker, testified that they explained to Spragins that someone else could be the successful bidder. Spragins admitted that he was told someone else could be the successful bidder.

At the sale, Duncan Williams outbid Sunburst Bank (his bid exceeded Sunburst Bank's by only $3,000). Spragins subsequently filed this action against Sunburst Bank, claiming that Sunburst Bank made the following misrepresentations to him:

(1) that Sunburst Bank did not know of any other serious bidders, and

(2) that Sunburst Bank thought it would be the successful bidder at the foreclosure sale.

III.

The lower court did not err in granting summary judgment in favor of Sunburst Bank on the claims of negligent and fraudulent misrepresentation.

Negligent misrepresentation has been explained by this Court on few occasions. The basis for damages resulting from negligent misrepresentation is the lack of care. Bank of Shaw v. Posey, 573 So.2d 1355, 1360 (Miss.1990) quoting First Money, Inc. v. Frisby, 369 So.2d 746, 750 (Miss.1979). [Frisby was the first instance in which this Court implicitly sanctioned the action of negligent misrepresentation.]

In order to recover in a cause of action based on negligent misrepresentation, Spragins must prove by a preponderance of the evidence:

(1) a misrepresentation or omission of a fact; (2) that the representation or omission is material or significant; (3) that the person charged with the negligence failed to exercise that degree of diligence and expertise the public is entitled to expect of such persons; (4) that they reasonably relied upon the bank officer's misrepresentation or omission; (5) that they suffered damages as a direct and proximate result of such reasonable reliance.

Bank of Shaw, 573 So.2d at 1360; Shogyo International Corp. v. First National Bank of...