Opinion ID: 1719022
Heading Depth: 2
Heading Rank: 2

Heading: Whether the McInnises Were Entitled to a Deficiency Judgment.

Text: ¶ 34. The dispute concerning the McInnises' entitlement to a deficiency judgment is essentially a question of whether the McInnises have standing to bring suit with regard to the cessation of payments on the Ronson note. ¶ 35. The McInnises contend that they have standing as third-party beneficiaries under Burns v. Washington Savings & Great Southern Savings & Loan Association, 251 Miss. 789, 171 So.2d 322 (1965). However, the third-party beneficiary concept, as laid out in Burns, does not apply to this case. The McInnises are not third-party beneficiaries with respect to the Agreement or the assignment. Burns explains the concept of a third-party beneficiary, stating that  [a] third person may sue on a contract made for his benefit between others to the consideration of which he is a stranger.  Burns, 251 Miss. at 795, 171 So.2d 322 (emphasis added). The concept of gaining enforcement rights by way of third-party beneficiary status does not apply to the McInnises when they were parties, signatories, to the Agreement as well as the assignment. Thus, this argument is without merit. ¶ 36. The McInnises also contend that they have standing as parties to the Agreement in which BancorpSouth provides the conditions and terms of the sale, including that the McInnises would assign the Ronson note and deed of trust and that BancorpSouth would credit excess from Ronson's payments to the McInnises. Hartman asserts that since the McInnises assigned the promissory note and the deed of trust, they do not own them and thus may not sue under them. Hartman relies on EB, Inc. v. Allen, 722 So.2d 555, 564 (Miss.1998), and McKinley v. Lamar Bank, 919 So.2d 918, 928 (Miss.2005), for the premise that an unconditional assignment of a debt transfers all rights to receive debts due or becoming due under the contract to the assignor. ¶ 37. EB, Inc. v. Allen and McKinley v. Lamar Bank are pertinent. They each state: Generally, the intention of the parties ascertained from the entire transaction, including conduct, determines whether the assignment is absolute or intended only as a collateral security. . . . . [A] valid assignment of a debt or contract conveys the entire interest of the assignor to the assignee, and thereafter the assignor has no interest therein. . . . . As a general rule, a valid and unqualified assignment operates to transfer to the assignee all the right, title, or interest of the assignor in the thing assigned, but not to confer upon the assignee any greater right or interest than that possessed by the assignor. McKinley v. Lamar Bank, 919 So.2d at 928 (quoting International Harvester Co. v. Peoples Bank & Trust Co., 402 So.2d 856, 861 (Miss.1981)); EB, Inc. v. Allen, 722 So.2d at 564 (quoting International Harvester Co. v. Peoples Bank & Trust Co., 402 So.2d 856, 861 (Miss.1981) (emphasis added)). ¶ 38. Looking to the entire transaction, we will examine the assignment and then the Agreement. In International Harvester Co. v. Peoples Bank and Trust Co., this Court addressed whether, in assigning a debt as collateral, an assignor assigned all of its rights to collect on that debt to the assignee. Peoples Bank, 402 So.2d 856. This Court stated [i]t has long been held that a valid assignment of a debt or contract conveys the entire interest of the assignor to the assignee, and thereafter the assignor has no interest therein. In this State this has been held true, even when the debtor might not have notice of the assignment. Id. at 861. Upon discovery that the assignment terms were unconditional, lacking any indication of either a conditional or collateral assignment, this Court found the parties intended to assign all rights. Id. at 860-62. ¶ 39. The assignment in the case at bar, titled ASSIGNMENT OF PROMISSORY NOTE AND DEED OF TRUST, states: FOR AND IN CONSIDERATION of BancorpSouth Bank's agreement not to exercise its option to accelerate the entire indebtedness due and owing it on property serving as collateral security for loans made by BancorpSouth Bank to the undersigned, the receipt and sufficiency of which is hereby fully acknowledged, we, the undersigned NED G. MCINNIS, JR., and wife, MARY DEANNE[DEANE] MCINNIS, do hereby assign, transfer and grant unto BANCORPSOUTH BANK, a Mississippi state banking corporation, all of our interest and right and title in and to that certain Promissory Note dated November 14, 2003, executed by Ronson Construction Systems, Inc., in favor of Ned G. McInnis, Jr., and wife, Mary Deane McInnis, in the original principal amount of $664,683.90, and for the same consideration, the undersigned does also hereby grant, bargain, sell, transfer and assign over unto BancorpSouth Bank all right, title and interest in and to that certain Deed of Trust dated November 14, 2003, executed by Ronson Construction Systems, Inc., in favor of Ned G. McInnis, Jr., and wife, Mary Deane McInnis, which serves as security for the above referenced Promissory Note being assigned hereunder and which Deed of Trust has been filed of record in the office of the Chancery Clerk of Forrest County, Mississippi and Land Deed of Trust Book ____ at Page ____. (Emphasis added). ¶ 40. The language in this assignment is strongly evident of the intent of the parties to assign all of the McInnises' rights to the Ronson note and deed of trust. However, as the intention of the parties [is] ascertained from the entire transaction, this case is distinguished from McKinley v. Lamar Bank ; EB, Inc. v. Allen ; and International Harvester Co. v. Peoples Bank & Trust Co . In those cases, the intent of the parties was primarily determined by the assignment. Here, in addition to the assignment, there is an Agreement, which provides the terms for Ronson's payments as well as for the McInnises' assignment in issue to BancorpSouth. ¶ 41. The Agreement is telling as to whether the parties intended to create an assignment which was absolute or intended only as collateral security. The Agreement, which was executed on the same day as the assignment, required that in consideration for BancorpSouth's agreement to refrain from exercising its option to accelerate the remaining balance due by the McInnises on the properties, the Contract for Sale between the McInnises, Hartman, and Ronson would be carried out in accordance with certain terms and conditions. One such condition was that at closing, the McInnises would assign the Ronson note and deed of trust. Further, Ronson would make monthly payments to BancorpSouth, and BancorpSouth would tender any residue to the McInnises. Likewise, upon final payment or pre-payment of the promissory note, BancorpSouth would pay off loans due and owing BancorpSouth from the McInnises for which the Ronson properties served as collateral, releasing all outstanding deeds of trust on the collateralized property. The language of the Agreement, which calls for creation of the assignment and provides for the tender of excess funds from payments to the McInnises and release to the McInnises of the assigned note and deed upon satisfaction of the Ronson note, suggests that BancorpSouth and the McInnises intended the assignment to serve only as collateral security. ¶ 42. Concerning the collection of an unsatisfied debt assigned as collateral security, this Court stated in Peoples Bank that the creditor assignee has priority over the assignor in collecting on the debt obligation. [A]n assignment of a deed of trust due by a debtor to the assignor as collateral security for an indebtedness due by the assignor to the assignee vest[s] the assignee with full legal title to the deed of trust. Peoples Bank, 402 So.2d at 862. However, this title is limited, as the assignor has an equity of redemption. Id. at 863. An assignment that is made as collateral security for a debt gives the assignee only a qualified interest in the assigned chose, commensurate with the debt or liability secured. . . . Id. at 862. With regard to rights between the assignor and assignee to collect on the debt, [b]efore the debt secured is paid, the assignee is, to the extent of his interest, the owner of the collateral as against the assignor and creditors or others claiming under him. . . . Id. Thus, BancorpSouth, has priority over the assignor, the McInnises, in collecting on the unsatisfied debt of the Ronson note, which was assigned as collateral security the creditor assignee. ¶ 43. Hartman's argument that the McInnises assigned away all their rights regarding the Ronson note is without merit. In consideration of the entire transaction, the assignment of the note was intended only as collateral security. As such, the McInnises do have standing to sue for collection of payments on the Ronson note. However, as the note was tendered to BancorpSouth as collateral security, BancorpSouth had an interest in the Ronson note to the extent of the amount of the loan which the note secured. Further, BancorpSouth's interest was superior to the McInnises' interest. Accordingly, BancorpSouth is entitled to collect first the amount of the secured debt owed to it, and upon satisfaction of that debt, the McInnises are entitled to collect any remainder due on the note. The trial court erred in awarding the McInnises any monies due on the note before the debt to BancorpSouth which the note secured was satisfied.