Opinion
No. 33589.
February 20, 1939.
1. MORTGAGES.
A foreclosure of deed of trust was invalid as respects junior encumbrancer not made a party to the bill.
2. MORTGAGES.
Junior encumbrancers must be made parties defendant to a suit to foreclose senior encumbrance, since they have right to appear and pay off the senior encumbrance, and to see to the correct taking of the account.
3. VENDOR AND PURCHASER.
A vendor's lien is waived when vendor carves out his own security, which is inconsistent under the circumstances with retention of vendor's lien, particularly when third party has acted upon the faith of the waiver.
4. VENDOR AND PURCHASER.
Where lessee had option to purchase and lessor conveyed leased premises to a trustee, pursuant to an agreement contemplating lessee's financial rehabilitation, which gave a first lien on all of lessee's property to bank that held mortgage on lessee's personalty and a second lien to lessor, lessor waived its vendor's lien and bank could enforce its first lien after lessee's failure, as against contention that status quo should be restored because the agreement did not take into account the possibility of lessee's failure.
APPEAL from the chancery court of Pike county; HON. R.W. CUTRER, Chancellor.
Price McLain, of McComb, and Price, Price Phillips, of Magnolia, for appellants.
In Atkinson Bacot Co. v. Varnado, 91 Miss. 825, 47 So. 113, the court speaking through that great Justice WHITFIELD said: "A man may execute a mortgage, good at law or in equity, on what he now actually owns. A man may execute a mortgage, good at law or in equity, on what he does not now own actually, but what he potentially owns. It is equally elementary that a man may execute a mortgage, not valid at law, but valid in equity, on property that he does not then own, either actually or potentially, but which he may afterwards acquire. In all such cases the principle is that such an instrument is treated as a contract to convey the after-acquired property, when the acquisition takes place in the future."
41 C.J. 478, sec. 395.
Kramer Service, Inc., is estopped by its acts and the record from asserting that its junior deed of trust is prior to the bank's senior deed of trust and is estopped from challenging the validity or priority of the bank's deed of trust and is estopped from asserting any claim whatsoever as against the priority of the bank's lien for the reason that the junior deed of trust executed by the Windles to Kramer Service, Inc., recites on its face that it is subordinate to the Mechanics State Bank's deed of trust. Both of these deeds of trust were executed pursuant to and in execution of the written memorandum of agreement. Kramer Service, Inc., is therefore estopped first, by its written contract, to-wit: the memorandum of agreement, and, second, by its junior deed of trust which contains the recital as aforesaid.
Robbins v. McMillan, 26 Miss. 434.
Secondly, Kramer Service, Inc., is estopped by virtue of its continued recognition of the contract, that is to say, it recognized the contract until it became pinched thereby and attempted to rue back.
Fitzgerald v. Flannagan, 106 U.S. 648, 27 L.Ed. 211.
Thirdly, of course, Kramer Service, Inc., is equitably estopped and this proposition needs no discussion nor citation of authorities.
Fourthly, Kramer Service, Inc., is estopped because of its waiver in favor of the Mechanics State Bank having a first and senior lien on all the property real, personal and mixed contained both in the written memorandum of agreement and plainly recited on the face of its deed of trust.
H. C. Newman, Inc., v. Delta Grocery Cotton Co., 144 Miss. 877, 110 So. 686.
Fifthly, Kramer Service, Inc., is estopped from challenging the priority of the Mechanics State Bank's senior deed of trust against the land and personal property for the reason that the bank relied on the written memorandum of agreement (the sole agreement in evidence) and the various instruments executed pursuant thereto and this reliance caused the bank to forego the benefits that had accrued to it under its foreclosure sale had on the very date of the execution of the written memorandum of agreement.
It is well settled in this state that, when parties deliberately put their agreement in writing, it will be presumed that the whole contract was embodied in such writing, and that parol testimony to change the terms of such written instrument is inadmissible.
Wren v. Hoffman, 41 Miss. 616; Herndon v. Henderson, 41 Miss. 584; Neal v. McLeod, 28 So. 23; Bank of Lena v. Slay, 176 Miss. 825, 170 So. 635; McInnis v. Manning, 95 So. 250, 131 Miss. 119; Red Snapper Sauce Co. v. Bolling, 50 So. 401, 95 Miss. 752; Ederington v. Stevens, 114 So. 387, 148 Miss. 583.
A contract which is fully executed cannot be rescinded, a party who has received all to which he is entitled under a contract has no right to rescind.
13 C.J., pages 609 and 610, secs. 648 and 649.
We respectfully submit that the decree of the Chancery Court of Pike County, Mississippi, in this cause should be reversed and this cause remanded to that court for appropriate foreclosure proceedings by the Mechanics State Bank of its first, prior and paramount deed of trust.
Green, Green Jackson, of Jackson, Jas. A. Wiltshire, of Magnolia, G.L. Martin, of Prentiss, and R.B. Reeves, of McComb, for appellees.
In appellants' brief, they say: "We now concede that the foreclosure proceedings had in the chancery court under the receivership of its deed of trust is not binding on Kramer Service, Inc., for the reason that Kramer Service, Inc., was not summoned into court prior thereto and prior to the sale, and execution and delivery of the receiver's and commissioner's deeds of conveyance to the Mechanics State Bank covering and describing the property sold. . . ." This confession of error in their position in the court below, for which they so gallantly fought, is refreshing and heightens our already high esteem of these able counsel. This feature then, to-wit, the validity vel non of the sale of the land under the foreclosure proceedings and vesting title in the Mechanics State Bank of the land, passes out of the case.
May we remind counsel that they brought this matter into a court of equity and "he who seeks equity, must do equity." We feel that this is a matter that must be decided upon equitable principles and that the learned court below solved the equity on all of the evidence and the reasonable inferences that may be drawn therefrom and his decree is just and fair to all parties and since he passed upon all the conflicting facts, his decree will not be disturbed unless manifestly wrong and we submit it is just and fair and comports with equity.
Cole v. Standard Life Ins. Co., 154 So. 353.
We submit that the real consideration of a contract or agreement may always be shown by parol.
Cocke v. Blackbourn, 57 Miss. 689; Raleigh Bank v. Williams, 150 Miss. 766, 117 So. 365; Brennecke v. Heald, 77 N.W. 1063.
There is a difference between a contract in writing and a memorandum of a parol evidence.
2 Williston on Contracts, sec. 567.
The purchaser of an equity takes it, subject to all equity.
7 Cranch. 34; Meade v. Thompson, Walker's Rep. (1 Miss.) 450; Tucker v. Hadley, 52 Miss. 414; Walton v. Hargrove, 42 Miss. 18; Davis v. Pearson, 44 Miss. 508.
A corporation cannot give away its property no matter how worthy its officers intentions may be or the purpose for which donated.
14A C.J., page 528, sec. 2440; Deason v. Taylor, 53 Miss. 697.
In the case at bar, we are content to rest our case with the finding of the Chancellor on the facts.
Burroughs v. Gilliland, 90 Miss. 127, 43 So. 301; Davis v. Butler, 128 Miss. 847, 91 So. 279, 91 So. 709; Lissa v. Posey, 64 Miss. 352, 1 So. 500.
Kramers were not liable for the $1300 further advances made without notice after bank had advanced the $1500 in the agreement.
Barrier v. Kelly, 82 Miss. 233, 33 So. 974.
Argued orally by O.W. Phillips, for appellant, and by Forrest B. Jackson, for appellee.
Stripped of unessential details, and laying aside the awkward state of the pleadings as to which no real point has been made in the argument before us, the controlling facts are that prior to the date next mentioned a partnership had been conducting a large poultry business known as the Pike Poultry Plant, and had become indebted to appellant bank in a sum of approximately seven thousand dollars, secured by a deed of trust on all the personal property of the plant. This plant was located on land belonging to appellee, Kramer Service, Inc., to which the partnership held a lease with option to purchase. The partnership had become indebted to the Kramers to an amount of about three thousand dollars, which was unsecured.
There had been some internal dissensions among the partners, and the bank determined to foreclose in pais under its deed of trust, and advertised the sale for June 18, 1932. It had become doubtful whether, if the personal property were sold apart from the land, it would bring the full amount of the bank's debt; and likewise it was apprehended by the Kramers, that if all said personal property were so sold, they would lose their unsecured open account. Upon consideration of this situation it was the conclusion of the two creditors to pool their securities and assets, relative to this business, so that it could be preserved as a going concern, and that by a harmonious management it could be enabled eventually to pay out all owed to both said creditor parties. In short, that the assets so pooled would be worth more than the total sums due both the creditors, but when separated or disrupted, there would not be enough to pay either or both of them.
Therefore, on the date aforesaid, the parties, together with R.D. Brock, entered into the following agreement:
"It is agreed between Mechanics-State Bank, Kramer Service, Inc., and R.D. Brock, that Brock will bid up to the amount of the Bank's indebtedness at sale of property of Pike Poultry Plant this date, and, if successful, bidder, hold the same as Trustee to carry out the provisions of this agreement.
"Kramer Service, Inc., agrees to convey the land on which the Pike Poultry Plant is located, as described in existing option, and that all the property, real and personal, be sold, and the said Bank have a first lien on all of said property, including the land, for its debt, amounting to approximately $7,000 plus expenses of handling transaction, and plus approximately $1,500 to be advanced by said Bank for operating capital of the Poultry Plant, the $1500 to be due and payable in six months, remainder to be made due in one year, with understanding that if the interest be paid thereon and reductions made as later agreed, it will carry same over a period of five years.
"Kramer Service, Inc., shall have a second lien on all of said property, including all property on which the Bank now has a claim for approximately $9,000 interest on same to be paid semi-annually and the principal to be paid after the principal of the Bank's debt shall have been paid in full, all interest to be 8%."
In accordance with this agreement, Kramer Service, Inc., the owner of the land, conveyed it to G.E. Windle, one of the former partners, the recited consideration being $8,725, for which Windle gave a note, and which was the purchase price of the land plus the previously mentioned unsecured account of the old partnership; and to secure this sum the Kramer Service, Inc., took a deed of trust from Windle, this trust deed covering not only the land but all the personal property of the plant, and it was recited therein that the security was subject to the deed of trust to the bank, the latter instrument having been executed to the bank five days previously. The deed of trust to the bank covered not only the personal property but also the land.
This arrangement was entered into by these two creditors, as is evident, not only in a spirit of mutual helpfulness to each other, and perhaps also to keep going a helpful business in the community, but in a mood of a remarkable optimism — remarkable when the general situation prevailing throughout the country at that time is taken into account. It is undisputed in the evidence that between the persons who made the agreement not a word was said which took into contemplation a failure of the new set-up. But it did fail and rapidly went from bad to worse; not a cent either of interest or principal was paid by the mortgagor to either or any of the parties hereto; so that on November 19, 1934, the bank filed its bill to foreclose its deed of trust and for the appointment of a receiver, which appointment was made. The bank, in the meantime, had advanced not only the $1,500 mentioned in the above-quoted agreement, but about $1,300 besides. At the time this bill was filed and the receiver was appointed, or soon thereafter, a complete inventory and appraisal was had of all the property, real and personal, and it showed a value of only $6,815.74. At the foreclosure sale subsequently ordered, the bank bought in all the property, real and personal, for $6,050.
The foreclosure was invalid in so far as the Kramer Service, Inc., was concerned, because it was not made a party to the foreclosure bill. It is an invariable rule that junior encumbrances must be made parties defendant to a suit to foreclose a senior encumbrance, as they have the right to appear and pay off the senior encumbrance and per consequence to see to the taking of the account and that it be correctly taken. Miss. Chancery Prac., sec. 116, p. 121. The chancellor so held and appellants concede that the decree was correct in this respect.
But even so, it is evident that both these creditors are in for a heavy loss. In this unfortunate situation the Kramers insist that since the parties did not specifically take into account in their agreement of June 18, 1932, what would be the result in case of a failure of the further operations of the poultry plant, the status quo as of that date should be restored and that the Kramers should be adjudged to have a vendor's lien for the purchase price of the land, superior to the bank's deed of trust, conditioned upon the payment by the Kramers to the bank of the $1,500 which the bank advanced under the agreement; and the chancellor upheld that contention.
Whatever any one of us might think of this proposition in point of natural equity, we, as members of this Court, must follow the law of the land, and the law is that a vendor's lien may be waived, and is waived when the vendor carves out his own security, and that security is inconsistent, under the circumstances, with the retention of the vendor's lien, particularly when a third party has acted upon the faith of that waiver. 66 C.J., sec. 1157, pp. 1259-1231, and the cases cited in the notes. Here there was an express agreement that the bank should have a first lien on all the property, including the real estate, and this was carried out by the subsequent formal deeds of trust, as already mentioned. The retention of a vendor's lien would be wholly inconsistent with that agreement, when on the faith thereof the bank in effect postponed its first proposed foreclosure and advanced the said $1,500 additional money.
There is nothing that the court can do here other than to leave the parties in the situation in which their stated contracts, as made, have now placed them; and upon the whole record, we are obliged to say that the bank is entitled to foreclose its deed of trust as a first lien, the junior encumbrancer having now come in as a party, and for the amount due on June 18, 1932, plus the $1,500 advanced under the agreement of that date, plus interest, etc.
Affirmed in part, and in part reversed and remanded.