Turner v. Terry, No. 1999-CA-00753-SCT

• Court: Mississippi Supreme Court
• Writing for the Court: Before PITTMAN, C.J., SMITH and DIAZ, JJ.
• Citation: 799 So.2d 25
• Parties: Cornelius TURNER v. Johnnie TERRY, Jr., Bobby T. Henderson, Melvin I. Evans and Raphael L. Williams.
• Docket Number: No. 1999-CA-00753-SCT, No. 1999-CA-01395-SCT.
• Decision Date: 22 February 2001

799 So.2d 25

Cornelius TURNER
v.
Johnnie TERRY, Jr., Bobby T. Henderson, Melvin I. Evans and Raphael L. Williams

Nos. 1999-CA-00753-SCT, 1999-CA-01395-SCT.

Supreme Court of Mississippi.

February 22, 2001.

799 So.2d 28

Gail Wright Lowery, Jackson and Dorian E. Turner, New Orleans, LA, Attorneys for Appellant

James L. Martin, Jackson, Attorney for Appellees.

Before PITTMAN, C.J., SMITH and DIAZ, JJ.

DIAZ, J., for the Court:

¶ 1. Cornelius Turner filed suit against Johnnie Terry, Jr., Bobby T. Henderson, Melvin I. Evans, and Raphael Williams to enforce promissory notes executed in his favor. The Hinds County Circuit Court refused to enforce the signed documents against Terry, Henderson, and Evans, finding that they were unaware that they were signing promissory notes. The trial court enforced the pledge and security agreements, along with the stock assignments, and ordered Terry, Henderson, and Evans to transfer their shares of First Commerce Bancorporation to Turner. However, the circuit court found the promissory note executed by Williams to be enforceable and entered a judgment against him for $66,666.68, plus interest. Turner does not appeal the judgment against Williams. On appeal, Turner raises the following issues:

I. WHETHER THE TRIAL COURT IMPROPERLY CREDITED PAROL EVIDENCE WHERE IT WAS FOUND AS A MATTER OF FACT THERE WAS NO FRAUD AND MISREPRESENTATION BY CORNELIUS TURNER

II. WHETHER THE TRIAL COURT COMMITTED ERROR AS A MATTER OF LAW IN FAILING TO AWARD ATTORNEYS' FEES PURSUANT TO THE TERMS OF THE PROMISSORY NOTE EXECUTED BY EACH DEFENDANT

III. WHETHER THE TRIAL COURT APPLIED AN INCORRECT LEGAL ANALYSIS TO CORNELIUS TURNER'S CLAIM FOR PAYMENT UNDER THE PROMISSORY NOTES

CROSS-APPEAL

I. WHETHER THE TRIAL COURT ERRED IN AWARDING THE STOCK TO TURNER

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FACTS

¶ 2. In May of 1990, Cornelius Turner, Johnnie Terry, Melvin Evans, Bobby Henderson, Joe Dockins, and Raphael Williams formed First Commerce Bancorporation (First Commerce), a Delaware corporation, for the express purpose of acquiring the assets and assuming the deposit liabilities of State Mutual Federal Savings and Loan Association. Each investor served on the First Commerce board of directors, of which Turner was chairman. Williams, the only investor possessing extensive banking experience, served as president and chief executive officer of First Commerce. The group's goal was to establish a minority-owned savings and loan association in Jackson, Mississippi.

¶ 3. Turner, Terry, Evans, Henderson, Williams and Dockins arranged to purchase State Mutual from the Resolution Trust Corporation, an agency created under federal law which acts as a receiver for failed savings banks under the direction of the Office of Thrift Supervision, an office of the U.S. Department of Treasury. The purchase was financed in part by the investors' initial contributions, which were as follows:

NUMBER AMOUNT NAME OF SHARES PAID Ralph Williams 560 $56,000 Bobby T. Henderson 250 $25,000 Johnnie Terry 250 $25,000 Cornelius Turner 150 $15,000 Joe T. Dockins 100 $10,000 Melvin I. Evans 100 $10,000

The Resolution Trust Corporation provided the remaining two-thirds of the purchase price and loaned First Commerce $200,000 under its minority financing program. Repayment was expected on or before February 11, 1991.

¶ 4. The investors were unable to raise the necessary capital to repay Resolution Trust Corporation and, therefore, met to discuss a solution. Terry, Henderson, Evans, Williams, and Dockins testified at trial that Turner agreed to loan First Commerce the funds to repay Resolution Trust if the other investors agreed to put their stock up as collateral. Each investor, with the exception of Dockins, agreed to this arrangement.

¶ 5. Williams, Henderson, Terry, and Evans executed promissory notes evidencing their indebtedness to Turner. They further executed pledge and security agreements, and stock assignments, pledging their stock in First Commerce as collateral securing the loan. According to the promissory notes, Turner loaned each investor the following amounts: Terry and Henderson, $29,761.90 each; Williams $66,666.68; and Evans $11,904.76. Checks in these amounts, drawn on the account of Major Associates, Inc., a corporation controlled by Turner, were deposited into the First Commerce account. The corporation used these funds to repay Resolution Trust. Moreover, additional stock was issued to each investor, with Williams receiving 660 shares, Henderson and Terry 297 shares each, Evans 119 shares, and Turner 120 shares. At trial, Terry, Henderson, and Evans claimed they were unaware that additional shares had been issued.

¶ 6. On July 25, 1991, Williams, president of First Commerce, issued an irrevocable line of credit on behalf of Major Associates for $59,000 to Midwest Indemnity Corporation. Major Associates defaulted, and Midwest demanded payment. Williams later paid Midwest $8,200 to satisfy outstanding debts covered by the letter of credit. The Office of Thrift Supervision conducted an investigation, resulting in the removal of Williams as president of

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First Commerce in 1992. The Office of Thrift Supervision further directed Turner to completely disassociate himself from First Commerce. Turner resigned as chairman of the board, effective April, 1992

¶ 7. On March 9, 1993, Turner brought suit in the Hinds County Circuit Court against Terry and Henderson seeking to recover the amounts due under the promissory notes. Terry and Henderson asserted a counterclaim against Turner, and also filed a third-party complaint against Williams which was later dismissed. On October 28, 1994, Turner filed a complaint against Williams and Evans in an effort to recover the amounts due under the promissory notes which they executed. Williams and Evans also filed a counterclaim against Turner. The two cases were later consolidated for purposes of judicial efficiency at trial.

¶ 8. On January 5 and 6, 1998, a bench trial was held before Hinds County Circuit Judge James E. Graves, Jr. Judge Graves issued his opinion and order on September 16, 1998, in which he found that the promissory notes were unenforceable, as there had been no "meeting of the minds" between Turner and Terry, Henderson, and Evans. Judge Graves did hold that the pledge and security agreements and stock assignments were enforceable and ordered Terry, Henderson, and Evans to transfer their First Commerce stock to Turner.¹ Moreover, the court found that Williams had breached a fiduciary duty to Turner. Accordingly, it found that the promissory note executed by Williams in favor of Turner was enforceable, and entered a judgment against Williams for $66,668.68, with interest at the rate of ten percent per annum less the $8,200 previously given Turner by Williams.

¶ 9. On June 28, 1999, the circuit court entered an order in which it found neither Terry, Henderson, nor Evans were liable to Turner for attorneys' fees because of the invalidity of the promissory notes. The circuit court did determine that Williams was liable for one-fourth of the attorneys' fees sought by Turner.

STANDARD OF REVIEW

¶ 10. This Court's standard of review of a judgment from a bench trial is well-settled. "A circuit court judge sitting without a jury is accorded the same deference with regard to his findings as a chancellor," and his findings are safe on appeal where they are supported by substantial, credible, and reasonable evidence. Puckett v. Stuckey, 633 So.2d 978, 982 (Miss. 1993). This Court will not disturb those findings unless they are manifestly wrong, clearly erroneous or an erroneous legal standard was applied. Bell v. City of Bay St. Louis, 467 So.2d 657, 661 (Miss.1985).

LEGAL ANALYSIS

I. WHETHER THE TRIAL COURT IMPROPERLY CREDITED PAROL EVIDENCE WHERE IT WAS FOUND AS A MATTER OF FACT THERE WAS NO FRAUD AND MISREPRESENTATION BY CORNELIUS TURNER

¶ 11. Turner alleges that the trial court erred in considering parol evidence. Specifically, he objects to consideration of testimony regarding the board members' prior discussions regarding the loans and the circumstances under which they were

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made. Turner maintains that the trial court erred in going beyond the "four corners" of the promissory notes and claims that any reliance upon prior discussions was improper

¶ 12. Though the amount of each loan varied, the promissory notes signed by Terry, Henderson, and Evans contained identical terms. The text of the promissory notes reads, in part, as follows:

FOR VALUE RECEIVED, _______, having an address at _______, ("Maker"), promises to pay to the order of Cornelius Turner ("Payee"), at his office at 207 W. Amite Street, No. 10, Jackson, Mississippi XXXXX-XXXX, or such other address as may hereafter be specified by Payee, the principal sum of ______, together with interest thereon at the rate of ten percent (10%) per annum on the outstanding principal balance, said principal and interest to be paid at the time and in the manner as hereinafter provided. The indebtedness evidenced by this Note represents a loan (the "Loan") being made by Payee to Maker on the date hereof.

The principal of and interest on this Note at the rate set forth above shall be paid in one (1) installment on or by November 1, 1991, which payment shall be in an amount equal to the outstanding principal balance of the Loan together with all accrued and unpaid interest thereon and any other sums due in connection therewith....

IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed on this 11th day of February, 1991.

¶ 13. At trial, defense counsel proposed to question Raphael Williams about the Board's discussions regarding repayment of the Resolution Trust loan. Turner's attorney objected, contending that such testimony constituted parol evidence. The trial court reserved ruling on the admissibility of the parol evidence, explaining:

[S]o it is clear for

...