Title: MERCHANTS & FARMERS BANK OF KOSCIUSKO v. State Ex Rel. Moore
Citation: 651 So. 2d 1060
Docket Number: 92-CA-00019-SCT
State: Mississippi
Issuer: Mississippi Supreme Court
Date: March 9, 1995

651 So. 2d 1060 (1995) MERCHANTS AND FARMERS BANK OF KOSCIUSKO, MISSISSIPPI v. STATE of Mississippi ex rel. Mike MOORE, Attorney General, and Pete Johnson, Auditor of Public Accounts, for the Use and Benefit of Rankin County, Mississippi. No. 92-CA-00019-SCT. Supreme Court of Mississippi. March 9, 1995. George Dorrill, Thornton Guyton Dorrill &amp; Pettit, Kosciusko, for appellant. Michael C. Moore, Atty. Gen., Larry E. Clark, Asst. Atty. Gen., Jackson, for appellee. Before DAN M. LEE, P.J., and SULLIVAN and BANKS, JJ. BANKS, Justice, for the Court: This is a dispute between the State of Mississippi and Merchants &amp; Farmer's Bank regarding the rental proceeds in the hands of the bank. The dispositive issue is whether the bank was required to give notice to the borrower before it could take possession of the rental property under the terms of the security agreements. We hold that no notice was required and that the proceeds are therefore not subject to the garnishment. Accordingly, we reverse and render. As collateral for a $2.1 million loan, Irl Dean Rhodes pledged Colonial Shopping Center in Jackson, Mississippi, and its rents, pursuant to the combination of a deed of trust and security agreement and an assignment of leases. The agreement provided for the collection of interest, the principal amount, escrow account, attorney fees, and all other reasonable expenses including, but not limited to, payment of insurance on the secured property. The security agreement also set forth the bank's and Rhodes' obligations and rights in the event of a default. The loan was subsequently renewed on several occasions, with the last time being in May of 1991. Some time after the May renewal of the loan, the bank learned that Rhodes was insolvent when he failed to pay the insurance on the shopping center, as required under the contract, and that his net worth was substantially less than when the loan was renewed. In October 1991, the Bank discovered that the State had a $100,000 judgment against Rhodes when it (the bank), as the holder of Rhodes' escrow funds and rental accounts, was served with writs of garnishment. The Bank also discovered that Georgia Federal Bank and Omni Bank of Mantee also had judgments against Rhodes in the amounts of $1,581,000 and $1,199,175.87 respectively. In light of these judgments against Rhodes, his insolvency and the writs of garnishment the Bank deemed itself insecure and on November 5, 1991, notified Rhodes telephonically and by letter that it was accelerating the debt and taking possession of the shopping center. The Bank then took possession of the shopping center, commenced foreclosure proceedings and notified the shopping center tenants of all the changes. The Bank also notified Wideman-LaFoe, the management company which collected the rents from the shopping center tenants, that it would be taking possession of the shopping center and that all rents collected thereafter should be turned over to the Bank instead of Rhodes. On November 7, 1991, the shopping center tenants were issued writs of garnishment by the State. The bank subsequently filed a motion to quash the writs of garnishments against it and the tenants of the shopping center in the Rankin County Chancery Court. The bank claimed that it had a lien against the rental income from the shopping center tenants by virtue of the terms of the Deed and Trust and the Assignment of Leases. In response, the State claimed that the bank did not have a lien or liens against the rents superior to lien of the State pursuant to its judgment against Rhodes. At trial, the Rankin County Chancery Court, overruling the motion to quash, found the bank guilty of laches and that the Deed of Trust required 30 days notice prior to taking possession. The court held that the State was entitled to the rents of the shopping center from the time the writs were served until the time of the Bank could legally take possession, which, as the court construed the deed of trust and assignment, was 30 days. The bank perfected an appeal to this court. The State's sole argument is that the trial court was correct in concluding that the bank could not take possession without first giving Rhodes 30 day notice. The Bank argues that the chancery court's holding is based upon an erroneous interpretation of the deed of trust and assignment. We agree with the bank. A court is obligated to enforce a contract executed by legally competent parties where the terms of the contract are clear and unambiguous. Humble Oil &amp; Refining Co. v. Standard Oil Co. (Ky.), 229 F. Supp. 586, (D.C.Miss. 1964) reversed 363 F.2d 945 (5th Cir.Miss. 1966), certiorari denied 385 U.S. 1007, 87 S. Ct. 714, 17 L. Ed. 2d 545 (1967). The pertinent terms of the contract in this case are as follows: The terms Deed of Trust clearly do not explicitly require notice except in the instance of an attempted transfer by the debtor of the secured property. Furthermore, the assignment of leases, at clause (b) under the section entitled "Terms and Conditions" states in pertinent part: Thus, in addition to the deed of trust not explicitly requiring notice of acceleration in the event of a default, the assignment of leases does explicitly state that notice is not required before the bank can take possession where there has been a default. Here, Rhodes defaulted on the loan when he became insolvent and when he failed to pay the insurance on the shopping center. Because of this default, the bank was entitled to accelerate the loan and take possession without notice as set forth by the terms of the deed of trust and security agreement and the assignment of leases. The State's argument that the clause in the deed of trust regarding notice, which appears as a part of paragraph 8, applies to all of the provisions of the document and is not a part of paragraph 8, but merely an unnumbered paragraph which happened to be placed in between paragraph 8 and 9 is without merit. Any rational reading of the instrument reveals that this clause is clearly part of paragraph 8 and merely expands upon the Bank's duties and rights in the event of a attempted transfer by the debtor. The introductory paragraph of the Deed of *1063 Trust unambiguously provides that in the event of default, the indebtedness to the Bank becomes payable at once without notice. Thus, the notice clause in paragraph 8 serves only to distinguish acceleration based on default from acceleration based on transfer. Paragraph 7, which speaks to the banks entitlement to take possession of the property in the event of default, does not contain a requirement of notice. As the bank correctly asserts, the chancery court's application of the doctrine of laches in this case is erroneous because there is no evidence in the record which indicates that a delay, if we assume that there was one, resulted in any injustice or disadvantage to the State. Before laches can be invoked to bar litigation, the following three independent criteria must be satisfied: (1) delay in asserting a right or claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the party against whom the claim is asserted. Allen v. Mayer, 587 So. 2d 255 (Miss. 1991). See Also Vanlandingham v. Meridian Creek Drainage Distr., 191 Miss. 345, 2 So. 2d 591 (1941). In the instant case, the chancery court reasoned that laches was applicable because the Bank, being fully aware of Rhodes' financial situation by virtue of the vast amount of publicity surrounding Rhodes' insolvency and his financial statements, waited until the State made diligent application of its rights before asserting its (the Bank) claim to the rents. Thus, the chancellor concluded, the Bank should have acted sooner than it did. This Court has held that time is only one element of laches and that there must be some other element of change in the conditions and relations of the parties, or intervention of the rights of third persons to the extent that it would be inequitable to permit the party to assert his rights. Smith v. Smith, 211 Miss. 481, 52 So. 2d 1 (1951). In other words, "[d]elay is not laches unless it results in hardship to another." Clement v. R.L. Burns Corp., 373 So. 2d 790, 797 (Miss. 1979). The State has not shown any harm resulting from the Bank's alleged delay. The fact that the bank acted two days, rather than two months or two years before the State's writs of garnishment is of no moment. Thus, we find that the chancery court erred in its application of the doctrine of laches. For the foregoing reasons the judgment of the chancery court is reversed and rendered. REVERSED AND RENDERED. HAWKINS, C.J., DAN M. LEE and PRATHER, P.JJ., and SULLIVAN, PITTMAN, McRAE, JAMES L. ROBERTS, Jr. and SMITH, JJ., concur.