Stewart v. Merchants Nat. Bank
| Decision Date | 29 May 1997 |
| Docket Number | 90-CA-00410-SCT,Nos. 94-CT-00231-SC,s. 94-CT-00231-SC |
| Citation | 700 So.2d 255 |
| Parties | Harry A. STEWART, Sr. and Betty D. Stewart v. MERCHANTS NATIONAL BANK, Vicksburg, Mississippi. MERCHANTS NATIONAL BANK, Vicksburg, Mississippi v. Harry A. STEWART, Sr. and Betty D. Stewart. |
| Court | Mississippi Supreme Court |
John W. Christopher, Ridgeland, for appellant.
John C. Wheeless, Jr., Kenneth B. Rector, Wheeless Beanland Shappley & Bailess, Vicksburg, Donald A. McGraw, Jr., Montgomery Smith-Vaniz & McGraw, Canton, for appellee.
En Banc.
SMITH, Justice, for the Court:
This matter comes before the Court, sitting en banc, after having granted Merchants National Banks's (Merchants) petition for writ of certiorari. The Chancery Court of Madison County, sitting without a jury, entered an order of dismissal for Merchants at the conclusion of Harry A. Stewart, Sr., and Betty D. Stewart's (Stewarts) case in chief. On appeal, the Court of Appeals applied the standard of review applicable to a directed verdict and viewed the evidence in the light most favorable to the plaintiffs, giving the plaintiff the benefit of all reasonable favorable inferences, and reversed the chancellor's order of dismissal. We find that the Court of Appeals erred in reversing the judgment of the chancellor. Accordingly, we reverse and reinstate the judgment of the chancellor.
STATEMENT OF THE CASE:
This case began when Harry Stewart and Betty Stewart, owners and farmers of approximately 900 acres of land in Madison County, Mississippi, experienced several bad crop years and mounting debt and Merchants National Bank, their primary financier, notified them that it could no longer carry their debt. The Stewarts and Merchants agreed that the farm should be sold. Thereafter the Stewarts divided the farm in half and initiated the process of selling it to their son and son-in-law, Stewart, Jr., and Ellis, respectively. As part of the agreement between Merchants and the Stewarts, Merchant assisted Stewart, Jr., and Ellis in securing a ninety percent guaranteed Farmers Home Administration Loan for the purchase of the farm and farm equipment. 1
On May 23, 1983, the Stewarts sold the farm to Stewart, Jr., and Ellis, who each executed promissory notes in the amount of $ 170,000 in favor of the Stewarts, as the balance of the purchase price. Each note was secured by a first deed of trust and lien against each purchaser's half of the farm. Additionally, Stewart, Jr. and Ellis each borrowed the sum of $ 500,000 from Merchants to pay the balance of the purchase price of the farm and farming equipment. This debt for each buyer, was evidenced by a note in the amount of $200,000 and one in the sum of $300,000. These notes were secured by a second deed of trust in favor of Merchants. Also, pursuant to the lender's agreements, the repayment of these notes totaling one million dollars was ninety percent guaranteed by the FmHA. Additionally, on the same date, Stewart, Jr. and Ellis each executed $ 170,000 unsecured promissory notes to the bank as security for crop production and equipment loans. The Stewarts agreed to guarantee, through the execution of Hypothecation Agreements, the repayment of this indebtedness to the bank. As collateral, they assigned their first deeds of trust from Stewart, Jr. and Ellis, each in the amount of $ 170,000 to Merchants.
After the 1983 crop season, all of the loans were in a state of default and Merchants made a demand on Stewart, Jr., and Ellis for the payment of the loans. After the demands for payment were not made, the bank began the process of foreclosing on the real property and repossessing the equipment.
After two attempts at foreclosure, the first initiated by the Stewarts and the second by Merchants, the parties entered into an Agreed Order of Dismissal, on July 27, 1984. As part of the agreed order, the court ordered that the Stewarts be given $34,200 upon the entry of the order as an advancement of their equitable interest in the first deeds of trust; that Merchants advance an additional $34,200 to the Stewarts on the day of the subsequent foreclosure sale; that the Stewarts reserved the right to litigate over a remaining amount of equity of $152,000 in the deeds of trust; and that Merchants foreclose on the first deeds of trust executed by Stewart, Jr., and Ellis to the Stewarts and assigned by Stewarts to Merchants.
In the Spring of 1985, Merchants foreclosed on the second deeds of trust on the property. The successful foreclosure bid by Merchants was $780,000. The Stewarts received the second installment of the equity advance ordered by the court. After that foreclosure, the Stewarts filed a complaint indicating that Merchants had not complied with the "Agreed Order of Dismissal."
The chancery court held Merchants in contempt for failing to foreclose on the first deeds of trust owned by the Stewarts pursuant to the agreed court order and Merchants was assessed a $100 per day penalty for future noncompliance. Merchants appealed to this Court.
As indicated above, the first appeal was initiated by Merchants after the Chancery Court of Madison County found Merchants in contempt for failing to abide by the agreed court order. This case decided by the Court on March 16, 1988, is cited as Merchants National Bank v. Stewart, 523 So.2d 961 (Miss.1988). We affirmed the judgment of the Chancery Court of Madison County in all but one respect. We found that Merchants would only be liable for the $100 per day penalty if it failed to commence foreclosure proceedings on or before the tenth day following issuance of the mandate.
After this Court's decision was rendered on March 16, 1988, the Stewarts' deeds of trust were foreclosed and the $610,000 proceeds from the foreclosure sale were interpleaded.
In his November 8, 1988, Order Granting Interpleader, the chancellor ordered the parties to file their respective claims, counterclaims, defenses, offsets, credits, or other appropriate pleading within thirty days of the date of the entry of the order setting forth their respective alleged rights, claims, and counterclaims.
On January 25, 1989, the Stewarts filed their Answer and Claims of Harry A. Stewart and Betty Stewart to Complaint for Interpleader. The Stewarts requested ten million dollars in actual damages and thirty million dollars in punitive damages, along with attorneys' fees and rental fees. On August 15, 1989, the Stewarts filed a Motion for Bifurcated Trial wherein they asked the court to hear separately those matters pertaining to the rights, duties and liabilities of the respective parties and to subsequently hear those matters pertaining to actual damages and punitive damages. On August 15, 1989, the chancellor entered an Agreed Order for Bifurcated Trial.
After the parties presented their respective evidence on those matters pertaining to the rights, duties and liabilities of the parties, the chancery court rendered its opinion, wherein it held that the Stewarts were entitled to all proceeds of the July 15, 1988, foreclosure sale, less the costs of the foreclosure sale. The Stewarts were awarded $603,000.
Aggrieved by the chancellor's decision to award the Stewarts all of the proceeds from the foreclosure sale, Merchants filed its Notice of Appeal with this Court on April 11, 1990.
The second decision rendered by this Court was entered on April 1, 1992, as modified on denial of rehearing November 19, 1992, and is cited as Merchants National Bank v. Stewart, 608 So.2d 1120 (Miss.1992). In that case, the Court reversed the judgment of the Chancery Court of Madison County's findings that the Stewarts were entitled to all of the proceeds of the foreclosure sale. The Court concluded that Merchants was entitled to $362,927.31, and that the Stewarts were entitled to the balance. Additionally, the Court ordered that the interest accrued on the proceeds be divided, on a pro rata basis, between the Stewarts and Merchants. On remand, the chancery court was ordered to disburse the proceeds and accrued interests.
On January 25, 1993, the chancellor entered a Judgment for Distribution of Foreclosure Proceeds and Accrued Interest. The Stewarts received $281,103.33, which constituted their pro rata share plus accrued interest on the foreclosure proceeds.
An Agreed Order for Bifurcated Trial was entered on August 15, 1989. The chancellor set November 29, 1993, as the trial date for the damages portion of the trial. On November 18, 1993, Merchants filed its Answer and Response of Merchants National Bank to Answer and Claims of Harry A. Stewart and Betty Stewart to Complaint for Interpleader. Merchants asserted that the relief to which the Stewarts were entitled had already been granted; that all of the issues were litigated and decided in the court's final judgment of January 27, 1986, and that all other matters, which could properly have been raised and determined therein, had been. Merchants affirmatively pled the defense of res judicata.
The trial on damages commenced on November 29, 1993. During their case-in-chief, the Stewarts alleged that Merchants' failure to foreclose on the first deed of trust, and its subsequent citation for contempt evidenced that Merchants acted in bad faith. At the conclusion of the Stewarts' case, the chancellor sustained Merchants' Motion to Dismiss.
Aggrieved that the lower court sustained the motion to dismiss, the Stewarts filed an appeal to this Court and the case was assigned to the Court of Appeals. The majority of the Court of Appeals determined that based on the standard of review for a directed verdict, the evidence could have supported a verdict for the Stewarts' damages claim, and that the directed verdict should not have been granted. The Court of Appeals reversed the judgment of the chancery court and ordered a new trial. It is from that decision that we granted Merchants' petition for a writ of certiorari.
Analysis
A.
Standard of Review
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