Opinion ID: 1769581
Heading Depth: 1
Heading Rank: 2

Heading: ANALYSIS: Whether Summary Judgment Was Appropriate?

Text: On September 29, 1986, Clyde A. Trammell and TCC (Trammel Construction Co.) borrowed $19,404.95 from the Bank  as evidenced by a Renewal Note signed by Trammell as President of TCC. On October 27, 1986, TPC (Trammel Pitts Construction Co.) borrowed $12,000 from the Bank  as evidenced by a New Note signed by Trammell as President and Horace L. Pitts as Vice President/General Manager of TPC. The New Note includes the following express provision of collateral:  Assignment of contract between McCullough Environmental Services, Inc. and Trammell Construction Company, Inc. (hereinafter M-T Contract). This assignment is further evidenced by an Hypothecation Agreement  signed by Trammell as President of TCC. The Bank informed McCullough of the assignment by mailing McCullough a cover letter and a copy of the document. McCullough admits that it received this mailing and subsequently discussed the assignment with the Bank's former commercial loan officer, Lester L. Bellah, a couple of times via telephone. But McCullough disregarded the assignment and, on December 4, 1986, issued a $21,298 check under the M-T Contract to Trammell. The Bank contends that McCullough's decision to issue the check violated the terms of the assignment. That is, the Bank (as assignee) assumed the rights of TCC (as assignor) and, therefore, the Bank (not TCC) was solely entitled to receive payment of proceeds from McCullough (account-debtor or obligor) under the M-T Contract. [3] McCullough's alleged violation of the Bank's alleged right is the focus of this suit.
As noted, McCullough admits that it received notice of TCC's assignment of the M-T Contract; McCullough additionally admits that it issued the check for $21,298 to Trammell. Vol. II, at 355-57. However, McCullough asserts that recovery is barred because contractual rights may not be enforced where the instrument contains fraudulent and material misrepresentations and the party seeking relief [ i.e., the Bank] ... is guilty of either actual or legal fraud. McCullough explains that fraud or misrepresentation is evidenced by documentation and the undisputed testimony of Bellah. This documentation and testimony allegedly reveal that: On or just prior to October 27, 1986, Mr. Bellah, the [Bank's] loan officer, Mr. Horace L. Pitts and Mr. Clyde A. Trammell discussed the new proposed $12,000 loan by appellant Bank. It was explicitly understood [among] all three of these individuals at this meeting that the $12,000 loan could not be set up in the name of TCC, [a legitimate and licensed] Mississippi corporation, because that corporation was then known to be in serious financial trouble with pending lawsuits filed against it and with at least one judgment having already been enrolled against it. The record verifies that this was, in fact, the situation at that time. Mr. Bellah was aware on October 27, 1986, that Horace L. Pitts had no connection with, nor any authority to act for or on behalf of TCC, the legitimate corporation. With [the Bank's] full knowledge of the true facts, Horace L. Pitts, along with Clyde A. Trammell, both acting as purported corporate officers of the maker, executed a purported corporate note in the amount of $12,000 on October 27, 1986. This note was set up by Mr. Bellah in the name of a totally fictitious and non-existent corporate entity styled Trammell Pitts Construction Co., Inc. Trammell Pitts Construction Co., Inc. was not then, nor has it ever been, a corporate entity. Mr. Bellah was aware of the fact at all times relevant that Trammell Pitts Construction Co., Inc. was not a corporation. ... . With this background of information, the [Bank's] loan officer nevertheless deliberately and with full knowledge of the true facts set up the $12,000 note .. . in the name of this fictitious corporate maker styled Trammell Pitts Construction Co., Inc. for the unquestioned purpose of avoiding making the Bank's loan in the name of the existing financially troubled corporation [TCC]. To legitimize, on the surface at least, this newly conceived and intentionally fabricated corporate maker, the [Bank's] loan officer caused all of the [Bank's] loan documents to falsely represent this fabricated corporate entity to be a valid and legally existing Mississippi corporation. [4] Appellee's Brief at 4-10 (citations to Record omitted). In addition to its contention that fraud and misrepresentation bars recovery, McCullough contends that the Bank is barred from recovery because the alleged assignment of [the M-T Contract] by [TCC] is prohibited without the written consent of the defendant [McCullough] under the terms and conditions of that certain contract between the defendant ... and [TCC]. McCullough cites the following provision for support of its contention: [M-T] CONTRACT