Title: Trapp v. Tidwell
Citation: 418 So. 2d 786
Docket Number: 53333
State: Mississippi
Issuer: Mississippi Supreme Court
Date: August 11, 1982

418 So. 2d 786 (1982) Wendell H. TRAPP, Jr., Substituted Trustee, FOR the USE AND BENEFIT of First Mississippi Bank of Commerce, and First Mississippi Bank of Commerce v. B.E. TIDWELL and Elizabeth Tidwell. No. 53333. Supreme Court of Mississippi. August 11, 1982. Rehearing Denied September 8, 1982. *787 Smith, Downs, Ross, Trapp &amp; Coleman, Wendell H. Trapp, Jr., Corinth, for appellants. Price, Krohn &amp; McLemore, Robert G. Krohn, Corinth, for appellees. Before PATTERSON, C.J., and BOWLING and DAN M. LEE, JJ. DAN M. LEE, Justice, for the Court: This is an appeal from the Chancery Court of Alcorn County wherein B.E. Tidwell and Elizabeth Tidwell, defendants/appellees, obtained a temporary injunction enjoining First Mississippi Bank of Commerce (FMBC) from conducting a foreclosure sale on a certain piece of property securing a promissory note executed by B.E. Tidwell while he was employed as an officer of FMBC. FMBC filed an answer, crossbill and motion to dissolve the injunction, seeking to foreclose on the above-mentioned property. Although the note executed by B.E. Tidwell was current, FMBC sought to foreclose on its deed of trust under a dragnet clause due to several fraudulent transactions consummated by B.E. Tidwell while Tidwell served as an officer of the bank. Following a lengthy hearing, the chancellor found the dragnet clause applied only to those sums which were contracted for by Tidwell (Tidwell's promissory note and Tidwell's bank overdraft). Aggrieved of the chancellor's findings, FMBC appeals. We affirm. B.E. Tidwell began working for FMBC in July 1974. During his employ at FMBC, Tidwell served as vice-president, senior vice-president and director. In July 1976 Tidwell left the bank. On January 23, 1976, B.E. Tidwell executed a promissory note in the amount of $33,000 in favor of FMBC. This note was secured by a deed of trust on certain property known as the Cross Town Package Store. The deed of trust contained the following provision: The note was current when the present controversy arose. The property that was secured by this deed of trust was later conveyed to Frankie Tidwell (B.E. Tidwell's wife) and then to Elizabeth Tidwell (B.E. Tidwell's mother). FMBC subsequently instituted foreclosure proceedings against the property based on losses suffered by the bank as a result of Tidwell's actions while he was an officer of the bank. The bank alleged the following amounts were due by Tidwell and were encompassed within the coverage of the aforementioned dragnet clause: B.E. Tidwell was subsequently indicted in federal court for various counts of false pretense, embezzlement and misappropriation of bank funds. At the conclusion of the lengthy hearing, encompassing voluminous exhibits and testimony, the learned chancellor, construing the dragnet clause most strongly against the drawer (FMBC), found that only those debts which arose by way of contract were encompassed within the dragnet clause, and stated in part as follows: The chancellor, in considering each of the claims independently, then made the following specific findings: *792 The dragnet clause contained in FMBC's deed of trust provided as follows: There is no question that dragnet clauses are enforceable if properly executed and stated in clear and unambiguous language. Newton County Bank, Louin Branch Office v. Jones, 299 So. 2d 215 (Miss. 1974). Newton County Bank, Louin Branch Office v. Jones, supra, involved the attempted foreclosure of homestead property owned in fee simple by Mrs. Myrtis Jones. On November 4, 1968, Mrs. Jones and her husband executed a deed of trust on their homestead which deed of trust contained a dragnet clause to secure all future loans and advances made to the grantors, or any one of them. Subsequently the husband, who only had a homestead interest in the property, received additional advances from the bank secured by cattle allegedly owned by him. When default was made, the bank sought to foreclose its deed of trust against the land, but the lower court enjoined the foreclosure proceedings. In reversing the lower court, this Court held the advances made to the husband alone were within the purview of the dragnet clause entitling the bank to proceed against the homestead property upon default of the indebtedness by the husband. The case sub judice is clearly distinguishable from Newton County Bank, Louin Branch Office v. Jones, supra. In the present case FMBC sought to foreclose on its deed of trust securing B.E. Tidwell's original promissory note for indebtedness to the bank which arose because of the tortious or fraudulent action of Tidwell and did not involve an innocent third party. Tidwell was not a party to the contracts whereby the indebtedness was created, but was merely instrumental in approving the extension of indebtedness to various individuals. The deed of trust having been drafted by FMBC must be most strongly construed against FMBC. Williams v. Life Insurance Company of Georgia, 367 So. 2d 922 (Miss. 1979). In Amos v. Lance, 355 So. 2d 84 (Miss. 1978), we held the failure to reduce an alleged deficiency to a liquidated claim or judgment could not be the sole basis for foreclosure of a deed of trust containing a dragnet clause. The chancellor found and we agree that there was no intention, either express or implied, that the dragnet clause attach to an unliquidated claim or tort. The amount of indebtedness allegedly owed by Tidwell as a result of his tortious and fraudulent actions was never reduced to a liquidated amount. In fact, throughout the trial the bank remained unsure as to the exact indebtedness of Tidwell to the bank. The chancellor as the finder of fact specifically found the claims sought to be included under the dragnet clause were acts of Tidwell and others, in the amount of $2,500,000.00, were unliquidated or tort claims and we are unable to say his findings as such were manifestly wrong. Moreover, prior to purchasing the aforementioned property, Mrs. Tidwell met with Ed Caviness, Chairman of the Board and President of FMBC pertaining to the assumption of the Tidwell note secured by the deed of trust containing the dragnet clause. With FMBC's permission, Mrs. Tidwell, who is admittedly a bona fide purchaser in an arm's length transaction, having assumed approximately $120,000 in mortgages on this property, which was its full value, was allowed by FMBC to assume the $32,000 loan. Mrs. Tidwell was never advised of the bank's intentions to include the other claims of indebtedness against her son before she assumed the deed of trust nor was she advised of a different amount due on the deed of trust, including everything the bank now claims under the dragnet *793 clause. The bank having failed to do so, is now estopped from asserting a larger amount secured by the deed of trust. To allow the bank to grant Mrs. Tidwell permission to assume a loan with a balance of approximately $32,000 and then later, to her detriment, accelerate that balance to approximately $103,000 by virtue of an obscure dragnet clause, would offend any concept of justice. Based on our review of the record, extensive briefs, and detailed findings of the chancellor as to both the facts and the law, we are unable to say he was manifestly wrong in his findings of fact or conclusions of law. One of the claims (Claim E) alleged by FMBC to be covered by its dragnet clause was a promissory note in the total amount of $12,755 dated February 7, 1975, and executed by B.E. and Frankie Tidwell. This note was secured by a 1974 MGB automobile and a deed of trust on one and one-half acres of land. When the Tidwells defaulted on the note, the bank foreclosed on the property, purchasing the same for $10,347.98. FMBC also sought to replevy the automobile securing the loan. However, no answer was filed by the Tidwells and a default judgment in the amount of $3400 was entered against the Tidwells. FMBC contends the chancellor erred in allowing B.E. Tidwell to testify in a manner which constituted a collateral attack on the judgment and resulted in a ruling by the lower court that the judgment was invalid. In our opinion, the chancellor properly allowed testimony as to the $3400 judgment in an effort to determine (1) if it was an obligation that would be included under the dragnet clause whether it be by default judgment, contract, note or whatever; (2) further, that if it was a contract debt, was any amount still due thereon; and (3) whether the amount due on the loan involved in this transaction ($12,755) was in fact paid by Tidwell or satisfied by virtue of the foreclosure sale of the real estate which secured the note together with the 1974 MGB automobile. Moreover, this further establishes that the unliquidated claims against Tidwell were not ascertainable when the bank attempted to foreclose upon the real estate and pay the amount of the loan ($9,074.58) plus trustee's fees and advertising costs of the trustee's sale. The purchase of the real estate by the bank was sufficient to liquidate the entire loan secured by the one and one-half acres of real estate and the MGB automobile. However, the bank examiner ordered the bank to reduce the amount received at the trustee's sale from $10,347.98 to $1,215.91, being the value of the real estate as determined by the bank examiner, thereby creating a $7,858.67 deficiency on the note which the bank attempted to encompass within the provisions of the dragnet clause. We are unable to say the chancellor was manifestly wrong as to his findings on Claim E or that he erred in allowing testimony concerning the $3400 judgment. The chancellor must be complimented upon his handling of this detailed and complicated trial, requiring many days of trial, and five volumes of exhibits and testimony. His detailed findings of fact upon each separate claim and his interpretation of whether the amount was liquidated or unliquidated and would come within the dragnet clause, have been of great benefit to this Court. After extensive study of the record, the briefs and applicable law, we are unable to say the chancellor was manifestly wrong in any of his findings of fact or conclusion of law. It therefore follows that this cause is affirmed. AFFIRMED. PATTERSON, C.J., SUGG and WALKER, P. JJ., and BROOM, ROY NOBLE LEE, BOWLING, HAWKINS and PRATHER, JJ., concur.