Wansley v. First Nat. Bank of Vicksburg, Vicksburg, Miss.

• Decision Date: 08 August 1990
• Docket Number: No. 07-58207,07-58207
• Citation: 566 So.2d 1218
• Parties: Julian E. WANSLEY and Wife, Mary Frances Wansley; Tom L. Wansley and Wife, Mary Ann Wansley v. FIRST NATIONAL BANK OF VICKSBURG, VICKSBURG, MISSISSIPPI.
• Court: Mississippi Supreme Court

Page 1218

566 So.2d 1218

Julian E. WANSLEY and Wife, Mary Frances Wansley; Tom L Wansley and Wife, Mary Ann Wansley v. FIRST NATIONAL BANK OF VICKSBURG, VICKSBURG, MISSISSIPPI.

No. 07-58207.

Supreme Court of Mississippi.

Aug. 8, 1990.

Wayne O. Lee, Greenville, for appellant.

John C. Wheeless, Jr., Wheeless, Beanland, Shappley & Bailess, Vicksburg, for appellee.

Robert S. Murphree, Walter S. Weems, William R. Clement, Jr., Perry Sansing, Brunini, Grantham, Grower & Hewes, Jackson, H.A. Moore, III, Hattiesburg, for amicus curiae.

En Banc.

ON PETITION FOR REHEARING

ROBERTSON, Justice, for the court:

I.

First National Bank of Vicksburg has petitioned that we reconsider our April 5, 1989, decision holding invalid two foreclosure sales and setting aside deficiency judgments the Bank had obtained in the lower court. In our original opinion we held that the Bank's failure to appoint a disinterested trustee rendered the sales voidable. Upon rehearing we consider other stratagems deeply embedded in our law more likely effective in protecting mortgage debtors from overreaching at foreclosure. Beyond that, we respect the force of an intervening legislative enactment on the disinterested trustee requirement.

We grant the petition for rehearing, withdraw our earlier opinion, and reinstate and affirm the judgment below.

II.

Tom D. Wansley and Julian E. Wansley are brothers and farmers. Heretofore, the Wansleys have held as co-tenants some 4,200 acres of farm land in rural Sharkey County, Mississippi. They divided their farming operations, each independently working half of the land.

For some fifteen years the Wansleys have obtained annual crop production loans through First National Bank of Vicksburg. In later years the Wansleys were unable to repay these loans in full and began renewing their unpaid debts with each new production loan. As their indebtedness mounted, the Bank required additional security--the Wansleys' land.

On February 25, 1982, Tom Wansley and his wife, Mary Ann Wansley, executed and delivered a deed of trust conveying their interest in the land to John C. Wheeless, Jr., as trustee. The instrument reflected a conveyance in trust to secure Tom's indebtedness to the Bank of $620,000.00. On April 22, 1983, Julian Wansley and his wife, Mary Frances Wansley, executed a like deed of trust, conveying their interest in the land to Wheeless, as trustee, to secure Julian's indebtedness to the Bank of $850,000.00. Each deed of trust secured future advances, and each stood as security for the Wansleys' farm-related financing through the 1984 crop year.

When their 1984 crops were harvested and sold, the Wansleys were unable to pay even a substantial portion of what each owed. The Bank declared their debts in default and directed Wheeless, as trustee, to foreclose. On March 29, 1985, Trustee Wheeless offered the Wansleys' lands at public auction. The Bank was the lone bidder, offering $500,000.00 for each brother's interest. Wheeless accepted these bids. On April 1, 1985, Wheeless executed trustee's deeds and delivered these to the Bank.

On March 8, 1986, the Wansleys filed a complaint in the Chancery Court of Sharkey County to cancel and set aside the trustee's deeds. The Bank counterclaimed, seeking to confirm its title in the foreclosed lands, plus entry of deficiency judgments against the Wansleys for the amounts of each of the indebtedness over and above $500,000.00.

At trial the Wansleys argued that the Court should void the foreclosure because Trustee Wheeless was personally financially interested in the Bank and hence was not an impartial and disinterested trustee. The proof developed that Wheeless was general counsel for the Bank and served on its board of directors. Although his stock ownership was not shown of record, Wheeless freely acknowledges that he was "one of the [Bank's] largest" shareholders.

Wheeless had also represented the Wansleys at various times over the years. He had represented Tom and Julian Wansley in regard to a corporation they had formed called "Dixie Ag". Also, Wheeless had represented the Wansleys' sons. Wheeless considered the Wansleys to be clients. He had closed loans for them and, in fact, assisted them on the deeds of trust currently in issue.

On October 17, 1986, the Chancery Court confirmed the Bank's fee simple title to the foreclosed lands as against the claims of the Wansleys. The Court dismissed the Wansleys' complaint, but found for the Bank on its counterclaim, entering deficiency judgments against Tom and Mary Ann Wansley for $493,294.00, plus interest, and against Julian and Mary Frances Wansley for $230,030.00, plus interest.

On December 31, 1987, the Bank sold the lands to L.G. Willis, Jr. and John T. Pitts. The sales price was substantially lower than $1,000,000.00, the aggregate amount credited the Wansleys upon foreclosure, creating a substantial loss for the Bank. The Bank made full warranty of title and agreed to hold the purchasers harmless from any claim of the Wansleys.

III.

A.

The field of secured credit transactions has generated some of our law's great triumphs. Sitting in his office, the lawyer as architect has created a variety of legal structures that have enabled both debtor and creditor to do much that each desires but, without law, may not do. These privately made structures have enriched our society beyond the realm of the economic. Mississippi's crop economy would have no existence without them.

The common law mortgage and its progeny may work their way only because we enforce them. As one leading authority has put it,

The law of mortgages today has been forged between the hammer of practice and the anvil of equity. The extent to which a creditor is willing to lend money upon security is determined in part upon the interest received and in part upon the ease with which the creditor can realize upon the security to satisfy a defaulted debt.

9 Thompson on Real Property Sec. 4650, at 2 (1958). We once thought a lawsuit necessary upon default that a creditor may realize upon his collateral. Attendant cost and inefficiency reduced the mortgage's utility. The deed of trust and the power of sale foreclosure were more perfect forms of real property secured transactions and our lawyers developed and their clients accepted these because they circumvented the trouble and expense of judicial foreclosure. See generally, G. Nelson & D. Whitman, Real Estate Finance Law 536 (2d Ed.1985).

Still we have learned better than to allow complete freedom of contract. Experience found the economic power of creditors concentrated in the hands of a few while that of debtors was diffuse. There has always been a problem of protection of debtors from unfairness and overreaching, and our efforts in that regard are found in a series of statutes, Miss.Code Ann. Secs. 89-1-43, et seq. (1972 and Supp.1989) and a century of reported judicial meanderings, often complicated by the facts of individual cases. Our pre-War predecessors held that a trustee's financial interest must be severed from the creditor beneficiary and, for that matter, the debtor's as well. See White v. Trotter, 14 Smedes & M. 30, 42-45, 53 Am.Dec. 112 (1850), invalidating a foreclosure sale in which the trustee and debtor were father and son. We sought to protect debtors by providing that a secured creditor could not purchase at foreclosure without the debtor's consent, see Houston v. National Mutual Building & Loan Association, 80 Miss. 31, 38, 31 So. 540, 541 (1902); Byrd v. Clark, 52 Miss. 623, 625 (1876), a protection which proved illusory as creditors experienced no difficulty in securing the requisite consent. Webb v. Biles, 192 Miss. 474, 487, 6 So.2d 117, 120 (1942) accepts freedom of contract but holds creditors may not act an inch outside its language's limits.

In time we shifted our protective focus toward the trustee's conduct and the sale itself, rather than the status or interest of the trustee. Smith v. Beard, 128 Miss. 1, 8, 90 So. 592, 593 (1922) confirmed a foreclosure sale although the creditor's husband served as trustee and conducted the foreclosure sale at which his wife was the high bidder/purchaser. Powers v. Interstate Trust & Banking Co., 163 Miss. 30, 37-38, 139 So. 318, 319-20 (1932) accepted that neither the trustee's appointment as agent for service of process nor his appearance as the bank's attorney "would per se disqualify [him] as a trustee...." In Hamilton v. Federal Land Bank, 184 Miss. 878, 882, 186 So. 832, 833 (1939), preliminary to foreclosure, the secured creditor appointed one of its own employees as substituted trustee. The debtors attacked the subsequent sale on grounds the substituted trustee, as an employee of the creditor bank, was disqualified to act. The Court rejected the challenge, albeit without extended discussion.

This Court relied on Hamilton in Federal Land Bank of New Orleans v. Miller, 199 Miss. 615, 25 So.2d 11 (1946) to reach a like result. Pursuant to power granted by the deed of trust, the bank had appointed W.S. Henley as substituted trustee, although Henley was the bank's agent and attorney. Henley conducted the foreclosure sale and the bank bid in the property. Debtors challenged the sale on grounds of Henley's interest. The Court dismissed the point, stating

As will appear from Hamilton v. Federal Land Bank, 184 Miss. 878, 186 So. 832, Henley's appointment as substituted trustee is in no way affected by the fact that he was the [bank's] agent and attorney.

199 Miss. at 623-24, 25 So.2d at 12-13. Our law seemingly swung back in the other direction in Lee v. Lee, 236 Miss. 260, 267-70, 109 So.2d 870, 873-874 (1959), which inexplicably neither discusses Hamilton nor Miller, nor even Smith v. Beard.

North Carolina has been through the same struggles. In our original opinion we cited and quoted at length from Mills v. Mutual Building & Loan Association, 216 N.C. 664, 6 S.E.2d 549, 551-553 (1940), a case which, in its...