Vinson v. McCarty, 53178
| Decision Date | 19 May 1982 |
| Docket Number | No. 53178,53178 |
| Citation | 413 So.2d 1026 |
| Parties | Fred C. VINSON v. M. L. (Mac) McCARTY. |
| Court | Mississippi Supreme Court |
Carter & Davidson, Dudley H. Carter, Columbus, for appellant.
Gholson, Hicks & Nichols, Aubrey E. Nichols, Columbus, for appellee.
Before WALKER, BOWLING and HAWKINS, JJ.
Fred C. Vinson has appealed from a final decree of the Chancery Court of Lowndes County which dismissed his bill of complaint filed against M. L. (Mac) McCarty for payment of unpaid interest on a promissory note executed by McCarty to Vinson, and attorney fees.
The only issue we address on this appeal is whether payment by McCarty of the remaining balance due on a note from Vinson to the Merchants & Farmers Bank of Starkville extinguished or discharged the McCarty promissory note which had been assigned to the bank as collateral security for the Vinson note. We hold that it did not and reverse.
In 1977, Vinson, a resident of Oktibbeha County and an employee of Mississippi State University, enrolled in a real estate course being taught by McCarty, a Lowndes County resident and a licensed realtor, at the Golden Triangle Vo-Tech Center. During class, McCarty commented he could retire in five years by investing $30,000 in real estate. Intrigued, Vinson questioned McCarty following class, and was informed by McCarty that he had some property in mind if Vinson would put up the equity capital.
According to Vinson the agreement was that he would be repaid his investment plus interest, after which the two would divide the profits. McCarty testified they also agreed to split the losses, if any were sustained.
On October 10, 1977, Vinson invested $7,000 in a house and lot on Springdale Drive in Columbus. This property was sold January 23, 1978, which, after paying all costs (including a realtor's commission to McCarty and interest at 9 1/2% to Vinson), resulted in a net profit of $2,441.20 to their joint venture. McCarty duly paid Vinson his share of the profit in this transaction.
On October 19, 1977, McCarty executed a promissory note to Vinson in the principal sum of $11,500 at 9 1/2% interest, due four (4) months from date. The note provided for attorney fees in the event of default. To obtain the $11,500 it was necessary for Vinson to borrow it from the Merchants & Farmers Bank, which made a loan of $11,500 to Vinson on October 20, 1977, evidenced by Vinson's promissory note to the bank in this amount due February 20, 1978, and bearing interest initially at 9 1/2%. To secure his note, Vinson assigned and delivered the McCarty note to the bank as collateral. 1
Vinson wrote a check to McCarty or his realty firm for $11,500. McCarty then purchased a house and a lot in the Eastwood Hills subdivision in Lowndes County using the $11,500 to pay part or all of the equity of the sellers, and assumed a first deed of trust due First Federal Savings & Loan Association of Columbus against the property.
McCarty had not sold the property by February 20, 1978, and it was necessary for Vinson to extend his note to the bank. The bank extended the due date of the note to August 14, 1978, and increased the interest to 10%. The sagacious bank loan officer then advised Vinson to get some security for his note from McCarty. At Vinson's request, McCarty executed a second deed of trust in favor of Vinson on the house and lot on February 16, 1978, and on March 28, 1978, Vinson assigned the deed of trust to the bank.
McCarty had not sold the property by August 14, 1978, and the bank extended the due date to October 14, 1978. On August 25, 1978, McCarty sent a memo to the bank attaching a copy of the sales contract of the property and notifying the bank the prospective purchaser had made application for a loan at First Federal Savings & Loan Association, which was then being processed. The memo stated: "Mr. Fred Vinson is holding a second mortgage on property."
No sale had been consummated by October 14, 1978, and the bank again extended the due date of the Vinson note to December 14, 1978.
On November 8, 1978, Mr. James E. Brown, Vinson's attorney, wrote McCarty requesting payment on the note. McCarty returned Brown's letter to him by mail with the following written notation on the bottom:
1. Thanks to you for your letter of consideration. My original intent was that Fred would only hold note for security in case of death. The money would not be due until the "Partnership" house was sold. (Just like we have done previously.)
2. I am making arrangements on this & will advise you shortly.
On November 17, 1978, McCarty again sent a "speed message" handwritten memorandum to Mr. Brown stating the following:
Subject: Fred C. Vinson
Ed, I am making arrangements through the bank to go ahead and secure a loan to pay off the note.
I will keep you posted. I don't need any additional expense on this transaction.
The same day, McCarty sent a handwritten memorandum to Mr. Jim Cook of the bank stating:
Mr. Cook,
Re: Vinson Loan
I'm sorry for any inconvenience on this note. I would appreciate your bearing with us a few more days.
I am making arrangements to pay you the note.
Thanks,
M. L. McCarty
On November 28, 1978 and again on December 6, 1978, McCarty wrote Mr. Brown stating that the loan was in progress and the application should be "finalized soon."
The bank was not paid by December 14, 1978, and extended the due date to January 22, 1979.
McCarty learned that the bank had been assigned the second deed of trust from him to Vinson, and sometime in the latter part of December, or first part of January, 1979, requested of the bank the current debt, including interest, due the bank. 2 He then paid the bank all outstanding balance due it, and the bank cancelled and satisfied the deed of trust of public record in the chancery clerk's office in Lowndes County. The deed of trust was cancelled of public record on January 12, 1979. Upon payment by McCarty of the current balance, the bank reassigned the McCarty note to Vinson.
The sale of the property did not result in a profit, however, but a loss, contended by McCarty to be in the amount of $7,709.44.
On October 1, 1980, Vinson filed a bill of complaint against McCarty in the chancery court of Lowndes County charging that McCarty had paid the principal sum due on the note but no interest, and that McCarty owed $1,334.38 in interest. He also prayed for a decree for all interest due him under the note plus reasonable attorney's fees as provided in the note.
McCarty filed an answer denying any indebtedness was owed to Vinson, and asserted affirmatively that Vinson had no interest or standing to sue, having previously assigned his note to the bank, and that the indebtedness had been discharged when the bank satisfied the deed of trust of public record.
McCarty also filed a cross-bill with his answer, alleging that the parties had engaged in a joint venture resulting in a loss of $7,709.44, and sought contribution from Vinson. The cross-bill alleges each party's share in the loss was $3,854.72, and that crediting Vinson's share of the loss with $1,301.49, the interest due on his note to the date of the sale, there remained due McCarty from Vinson the sum of $2,553.23. The cross-bill prayed for a monetary judgment from Vinson in this amount.
At the hearing before the chancellor, when the complainant Vinson had rested, McCarty made a motion to dismiss the bill of complaint which was sustained. The chancellor made the following statement:
Gentlemen, the motion will be sustained. When the assignment was given to M & F Bank, for whatever purpose, it became the property of M & F Bank; and when that note held by M & F Bank was satisfied, then the debt was extinguished as evidenced by the note.
The chancellor then heard the cross-bill, at which time McCarty and his bookkeeper testified. Following their testimony the court rendered an opinion that the parties had been engaged in a joint venture, but that there had been insufficient proof for him to make an adjudication.
On January 29, 1981, the court rendered a final decree dismissing the bill of complaint for the reason Vinson "has no interest in the subject matter of the suit which was filed by him." The chancellor further found the cross-complainant McCarty was not entitled to any relief, "for the reasons set forth in the court's opinion," and likewise dismissed the cross-bill.
Vinson appealed; McCarty filed no cross-appeal.
At the threshold, we do not believe the chancellor was manifestly wrong in holding the parties were engaged in a joint venture. We do not have before us, however, any cross-appeal resulting from the chancellor's denial of relief under the cross-bill.
The only question before us is whether the chancellor erred in holding that McCarty extinguished the debt or note due Vinson by paying the bank the outstanding balance due it. In this holding the chancellor was mistaken.
There are three evidences of debt in this case:
(1) McCarty's promissory note to Vinson dated October 19, 1977, for $11,500 at 9 1/2% interest, and due four months from date;
(2) Vinson's promissory note to the Merchants & Farmers Bank dated October 20, 1977, for $11,500 at 9 1/2% interest, and due February 20, 1978; and
(3) Second deed of trust from McCarty in favor of Vinson on Eastwood Hills lot dated February 16, 1978, to secure McCarty promissory note to Vinson.
When Vinson secured his loan from the bank he assigned McCarty's note to him to the bank. It was not a simple endorsement of a negotiable instrument, but an assignment on the reverse side in the following language:
I, Fred C. Vinson, for value received do hereby assign any and all interests in promissory note dated October 19, 1977 to Merchants & Farmers Bank, Starkville, Mississippi.
(signed) Fred C. Vinson
When the bank was paid, it also on the reverse side of this same note assigned its interest to Vinson in the following language:
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