Opinion
No. 32794.
October 4, 1937.
1. MORTGAGES.
In proceedings to foreclose trust deed, consent decree, containing stipulations relating to sale beneficial to various parties to suit and adjusting their rights, was a "final decree" so far as rights of parties were concerned, and, being concurred in by chancellor, would be adhered to in distribution of proceeds after sale had been directed thereunder.
2. MORTGAGES.
In proceedings to foreclose mortgage, provision of consent decree, concurred in by chancellor under which sale was directed to be had, that commissioner should hold 15 per cent. of bid to be paid in cash which he should ratably distribute to holders of bonds secured by trust deed, who had not theretofore delivered their bonds to the bondholders' committee, holding 85 per cent. of bonds as disclosed by evidence, was a material consideration of the decree and should be binding in distribution of proceeds.
3. MORTGAGES.
In proceedings to foreclose trust deed, mere disparity between actual value of property in the opinion of witnesses and price it brought at public sale was not enough to warrant setting aside chancellor's decree approving sale, even if property would bring more than it did under normal conditions.
APPEAL from the chancery court of Coahoma county. HON. R.E. JACKSON, Chancellor.
J.M. Talbot, Brewer Montgomery, Maynard, Fitzgerald Venable, and Roberson, Cook Luckett, all of Clarksdale, for appellants.
The First National Bank of Saint Louis was without right or power to invoke the jurisdiction of the court to foreclose the deed of trust for the reason that it was not the corporate trustee named in the deed of trust, but was purporting to act as corporate trustee because of the fact of the consolidation with it of the Liberty Central Trust Company, the corporate trustee named in the deed of trust, and, therefore, under the pleadings, the court was without power to grant any relief in view of the fact that the party asking the relief, to-wit: The First National Bank of Saint Louis, was not the corporate trustee.
It is our contention that the deed of trust is a contract, and that, unless, by its terms, there was a right to substitute another corporate trustee in the place of the Liberty Central Trust Company, then the effort of the First National Bank to act as such corporate trustee would be without force and effect, and we further contend that in no event could the First National Bank act as corporate trustee unless the power and right so to do is found in the terms of the contract, to-wit: the deed of trust.
Guion v. Pickett, 42 Miss. 77; Clark v. Wilson, 53 Miss. 119; Bonner v. Lessley, 61 Miss. 392; Sharpley v. Plant, 79 Miss. 175; McNeill v. Lee, 79 Miss. 455; Hartley v. O'Brien, 70 Miss. 825; Shipp v. Building Loan Association, 81 Miss. 17; Allen v. Alliance Trust Co., 84 Miss. 319; Frank v. Mortgage Co., 86 Miss. 103; Cox v. Mortgage Co., 88 Miss. 88.
In the case of West v. Union Naval Stores Co., 117 Miss. 153, the court held that the power of appointing a substituted trustee is strictly construed and must be literally complied with.
Jones v. Salmon, 128 Miss. 508; Powers v. Interstate Trust Banking Co., 163 Miss. 30.
In view of the principle of law announced in the foregoing cases, the conclusion would seem to be inescapable that the First National Bank of Saint Louis was without power or right to either attempt to foreclose the deed of trust in pais or bring a lawsuit for the foreclosure thereof on behalf of the bondholders secured thereby, for the reason that there is no language in the deed of trust which, by any reasonable construction thereof, vests any power whatsoever in the First National Bank.
Section 2168, Code of 1930.
It is not even contended that there was any attempt on the part of the Liberty Central Trust Company or the First National Bank in Saint Louis to in any wise comply with Section 2168.
That the consolidation of the Liberty Central Trust Company with the First National Bank in Saint Louis did not vest in said First National Bank the powers of trustee created in the deed of trust in question is very forcibly stated by the Supreme Court of the United States in the case of Ex Parte Worcester County National Bank, 279 U.S. 347, 73 L.Ed. 733.
The decree of December 18, 1936, was erroneous in that it attempted to change the provisions of the decree of April 24, 1936, fixing and determining the rights of holders of undeposited bonds.
The proposition that upon final adjournment of the term at which a final decree is rendered, the court loses control of such decree and cannot thereafter modify, change or alter it, is so fundamental that we content ourselves with citation of authorities sustaining it.
10 R.C.L. 563; 21 C.J. 706; Corinth State Bank v. Nixon, 144 Miss. 674, 110 So. 430; Carter v. Kimbrough, 122 Miss. 543, 84 So. 251; Ex Parte Stanfield, 98 Miss. 214, 53 So. 538; LeBlanc v. I.C.R. Co., 73 Miss. 463, 19 So. 211; Lane Standley v. Wheeless Co., 46 Miss. 666; Wiggle v. Owen, 45 Miss. 691; Shirley v. Conway, 44 Miss. 434; Commercial Bank v. Lewis, 13 S. M. 226; Sagory v. Bayless, 13 S. M. 153; Griffith's Chancery Practice, par. 610; Humphreys v. Stafford, 71 Miss. 135, 13 So. 865; Blum v. Planters Bank Trust Co., 154 Miss. 800, 122 So. 784; Ledyard v. Henderson, Terry Co., 46 Miss. 260; Cromwell v. Craft, 47 Miss. 44.
The decree of April 24, 1936, was a final decree, the provisions of which could not be altered or changed by the lower court after the adjournment of the term at which it was rendered.
There was another reason why the court was without authority to change the provisions of its former decree, namely: the provisions thereof had been agreed to by the complainants, through their counsel. Such an agreement possesses the attributes of a contract and, when duly authenticated and especially after being filed, is binding on the consenting parties, if competent to contract, and cannot be set aside or reviewed, except on a clear showing that it was obtained by fraud, or the substantial equivalent thereof, or was based on mutual mistake.
Griffith's Chancery Practice, sec. 618; Middlesex Banking Co. v. Field, 84 Miss. 646, 37 So. 139; Pipkin v. Haun, Morris, Jenkins and Steele, Freeman's Chancery Reports 254.
Shands, Elmore, Hallam Causey, of Cleveland, for appellees.
When consolidation of state bank having trust powers is consummated with national bank, under Title 12, Section 34a, U.S. Code, the trust powers continue to exist in the national bank and state bank does not lose its identity.
First National Bank of Chattanooga v. Harry E. Chapman Co., et al., 22 S.W.2d 245; Casey v. Gilli, 94 U.S. 673, 23 L.Ed. 168; Colyar v. Taylor, 1 Cold. (Tenn.) 372; Miller v. Lancaster, 5 Cold. (Tenn.), 514; Memphis Water Co. v. Magens, 15 Lea (Tenn.), 37; Commonwealth v. First National Bank, 154 A. 379; Michigan Ins. Bank v. Eldred, 143 U.S. 293, 36 L.Ed. 162; Metropolitan Natl. Bank v. Claggett, 147 U.S. 520, 35 L.Ed. 841; Adams v. Atlantic National Bank, 155 So. 648; Ex parte Worcester County National Bank, 279 U.S. 347, 73 L.Ed. 733; Boyer v. Barnett, 15 P.2d 801.
Mississippi has no statute which prevents consolidation of state and national banks, and trust companies may exercise trust powers under Code, Section 3838.
The suit was properly brought by complainants as trustees and appellants cannot complain.
The trustees or either of them may foreclose deed of trust in pais. The trustees or either of them may file suit for foreclosure.
The suit was filed at request of holders of more than fifty per cent. in amount of bonds.
Section 2168 of Code 1930 only applies to sales in pais by substituted trustees and does not apply to sales under Chancery Court decrees.
The Chancery Court may disregard terms of deed of trust in ordering sale.
Smith v. Cleveland Steam Laundry, Inc., 131 Miss. 254, 95 So. 433; McDonald v. Vinson, 56 Miss. 497; Thompson v. Houze, 48 Miss. 444; Carey v. Fulmer, 74 Miss. 729, 21 So. 752; Pearson v. Kendrick, 21 So. 37.
The Chancery Court may name corporate trustee and having permitted First National Bank in St. Louis to sue as trustee, and expressly adjudicating that said bank is lawful trustee is recognition of said bank as corporate trustee, and equivalent to appointment.
Bull v. Degenhard, 55 Miss. 602; 26 R.C.L. 1341, sec. 205; O'Neill v. Henderson, 60 Am. Dec. 568.
The appointment of new trustee without notice is valid.
26 R.C.L. 1278, sec. 128; Dyer v. Leach, 27 P. 598; Dodge v. Dodge, 130 A.S.R. 523.
The decree of April 24, 1936, operated as an adjudication of the rights of appellants.
The exclusive right to bring suit vested in trustees, for equal benefit of all bondholders.
The bondholder cannot sue, unless trustees refuse to sue, or are guilty of fraud or negligence.
19 R.C.L. 521, sec. 321; Seibert v. Ry. Co., 53 N.W. 1134; Runsey v. Ry. Co., 55 S.W. 615; Ry. Co. v. Fosdick, 106 U.S. 77, 1 Sup. Ct. 10.
The trustees represent bondholders as a class in suit and bondholders are not necessary parties to suit.
A. V.R.R. Co. v. Thomas, 86 Miss. 27, 38 So. 770; In re: Farmers W.R. Co., 53 Fed. 183; Brickell v. Lightcap, 115 Miss. 417, 76 So. 489; Mitfords Pleadings, sec. 265-266; Wall v. Boisgerard, 11 S. M. 588.
Courts will not permit small interests to dominate suit to prejudice of large number of bondholders.
Monticello Bldg. Corp. v. Monticello Inv. Co., 52 S.W.2d 545.
Even where single bondholder files suit he must act for all bondholders.
19 R.C.L. 521, sec. 321; N.O., etc. v. Parker, 36 L.Ed. 66; The Nashville Co. v. Orr, 21 L.Ed. 810; Shaw v. Little Rock, etc., 25 L.Ed. 757.
The federal courts hold in diversity of citizenship cases that trustee is real party in interest.
Susquehanna v. Blatchford, 11 Wall. 172, 20 L.Ed. 179; Knapp v. Troy, 20 Wall. 117, 22 L.Ed. 328; Norris v. Callahan, 59 Miss. 140; Bowen v. Bailey, 42 Miss. 405.
The appellants have abandoned contention that property sold for an inadequate price.
There was no attempt in the decree of December 18th, 1936, to change the provisions of the decree of April 24, 1936, as to holders of undeposited bonds, and if there was, the attempt was proper and successful. Paragraph "M" of decree of April 24, 1936, does not undertake to fix the distributive portion of the proceeds of the sale to be credited on bonds, because number of bonds held by bondholders was unknown until December 18, 1936.
Interpretation of decree contended by appellants would give non-depositing bondholders an inequitable and unconscionable advantage.
The Chancery Court ordered distribution to bondholders under decree dated December 18, 1936, by consent of parties.
Where foreclosure sale is made to pay all bonds but if proceeds are not sufficient to pay all bonds, then proceeds from sale must be credited on bonds pro rata.
Pugh v. Holt, 27 Miss. 461; Trustees of Jefferson College v. Prentiss, 29 Miss. 46; Bank of England v. Tarlton, 23 Miss. 173; Davison v. Allen, 36 Miss. 419; Wooten v. Buchanan, 49 Miss. 386.
The deed of trust provides for a pro rata distribution of proceeds from sale.
16 R.C.L. 154.
The bondholders had right to purchase property and give credit on their bonds for purchase price.
Natchez Ins. Co. v. Helen, 13 S. M. 182; Pennington v. Purcell, 155 Miss. 554, 125 So. 79; Sammons v. Trust Co., 136 So. 442.
Argued orally by Semmes Luckett, for appellant, and by H.F. Causey, for appellee.
This is an appeal from decrees of the chancery court of Coahoma county. The suit was filed by the First National Bank of St. Louis, Mo., as corporate trustee, and H.J. Miller, also of St. Louis, as individual trustee.
The suit grew out of the issuance of certain bonds on the McWilliams Building in Clarksdale, Miss., secured by a deed of trust executed by R.N. McWilliams and his wife, Kate E. McWilliams. The bonds issued aggregated $275,000, and were in denominations ranging from $100 up to $1000, dated October 1, 1926, and maturing, beginning on October 1, 1927, through October 1, 1938. There was a provision for the acceleration of the maturity of the bonds should default be made in the payment when due. Default was made in the payment of the bonds due April 1, 1932, and the interest thereon. The original trustee was the Liberty Central Trust Company of St. Louis, Mo., which company was consolidated with the First National Bank of St. Louis, and said consolidation was approved by the Comptroller of Currency of the United States on March 23, 1929. The bill of complaint herein was filed on April 1, 1933, and sought, among other things, the foreclosure, not immediately, but ultimately, of said deed of trust and the sale of the property therein described, alleging that the sale at that time would not be advantageous, and that it was best to have a receiver appointed to collect rents and care for the building, until the court should fix a time for the sale of the property.
A number of issues were presented to the court for decision, but it is not necessary to set them forth. The issues before the court when its consent decree of April 24, 1936, was rendered, involved stipulations beneficial to various parties to the suit and adjusted their rights. In this decree are found that condition for acceleration of the debts existed and that provision had been complied with, and that some of the defendants in the prior decree in 1935 had been given thirty days' notice in which to pay said debts, but had failed to do so, and the court appointed P.B. Woollard of Cleveland, Miss., as special commissioner of the court for the purpose of making a sale of the property. It was provided in this decree, among other things, that: "The successful bidder shall pay, at the time of said sale the sum of $4600, out of which amount shall be paid the sum of $2500 to the solicitors for the complainants, and the sum of $1500 to the complainants as compensation for their service as trustees, and out of the balance of such sum shall be paid the expenses of said sale, the commission to the special commissioner, all cost incurred in this proceeding to be taxed, and the sum of $100 to H.J. Miller to cover his expenses incident to the trial of this cause; and said successful bidder shall also pay in cash, at the time of said sale, in addition to the aforesaid sum of $4600, fifteen per cent of the amount of his bid; the balance of the purchase price for said property may be paid by said successful bidder, in cash, or by the use of said bonds, and such of the interest coupons as shall have matured on the date of the confirmation of said sale, or by the use of any part, or interest in, said bonds, or such then matured interest coupons, which are secured by said deed of trust, when and if said sale shall be confirmed; and for the purpose of using said bonds and interest coupons, as a part of the purchase price for said property by any bidder, the said bonds shall be deemed to have the value which appears on their face, and such of the interest coupons which have matured prior to the date of this decree shall have the value which appears on their face." It was also provided in this decree: "That in the event said property shall sell for less than the said indebtedness herein fixed as secured by the said deed of trust, and for the collection of which the sale of said property has been herein decreed, it is hereby ordered, adjudged and decreed, by the consent of the parties, the court concurring, that a deficiency judgment shall not and cannot be rendered against the defendants herein, R.N. McWilliams, Kate E. McWilliams, E.L. Anderson, Edgar Lee Anderson, Jr., William King Anderson, or Chauncey Smith." It was also provided in paragraph M of said decree that: "The fifteen per cent required to be paid in cash by the purchaser at the sale ordered herein shall be held by said special commissioner, and ratably distributed by him to the holders of bonds secured by said deed of trust who have not heretofore delivered their bonds to the Bondholders' Committees located at Nashville, Tennessee, and New Orleans, Louisiana, and holding approximately 85 per cent of said bonds as disclosed by the evidence in this cause."
The court directed the sale to be made under the decree and a report thereof made to the court, which was done. But objections were filed to the sale of the property, and the court, at that time, could not dispose thereof.
On December 18, 1936, the chancellor entered a decree confirming the sale and directing certain payments, among which were payments to the bondholders' committees of Nashville, Tenn., and New Orleans, La. The property sold for $84,000 and was bought in by parties interested in the bond holdings.
From these decrees appeal is here prosecuted. One error assigned and argued is as to the power of the First National Bank of St. Louis, and H.J. Miller, also of St. Louis, trustees, to maintain the suit. Since this argument, a motion has been made to withdraw the assignment of error in that regard, which motion was sustained.
We are of the opinion that the decree dated April 24, 1936, is a final decree so far as the rights of the parties are concerned. In other words, this was a consent decree fixing certain rights and granting certain privileges which were important, and in consideration of which the stipulations therein should be held to be final and binding. It will be noted that in this decree, parts of which are quoted above, there was to be no deficiency judgment rendered against R.N. McWilliams, Kate E. McWilliams, E.L. Anderson, Edgar Lee Anderson, Jr., William King Anderson, and Chancery Smith, and that the bidders could use the bonds as cash at face value in payment of the bid, and the interest coupons which had matured up to their face value, as to 85 per cent. of the bondholders who had deposited their bonds with these bondholding committees. This, of course, was an important right to bondholders holding a large number of bonds, and gave them a privilege which, otherwise, they would not have had. The stipulations mentioned in that decree are such that would likely influence interested parties in their bidding. Being a consent decree, and concurred in by the chancellor, it should have been adhered to in the distribution of the proceeds. It is clearly stated in this decree that the commissioner should hold 15 per cent. of the bid to be paid in cash, which he should ratably distribute to the holders of bonds secured by the deed of trust who have not heretofore delivered their bonds to the bondholders' committees at Nashville and New Orleans, holding 85 per cent. of the bonds as disclosed by the evidence. This being a material consideration of the decree, it should be held sacred and binding.
We have carefully examined the objections to the report of the sale and to the insufficiency of the price the property brought, and we think it was within the discretion and power of the chancellor to approve the sale of the property at $84,000, although, under normal conditions, it might have brought much more. There was testimony to show that it was worth $200,000, but the parties having an opportunity to bid, and who had bid on the property a number of times, had instructed their bidders not to bid higher than $84,000, and we see nothing in this record from which we could safely hold that property of this magnitude being sold then would bring any considerable amount in excess of $84,000, under the conditions then existing. Mere disparity between actual value of property, in the opinion of witnesses, and the price it brings at an open and public sale, is not enough to warrant us in setting aside the chancellor's decree upon this proposition.
That part of the decrees confirming the sale of the property is affirmed, but that part of the decrees which is inconsistent with the stipulations set forth in the decree of April 24, 1936, is reversed in order that the chancellor may fully comply with the views herein expressed. The decrees for distribution are set aside, and the cause remanded for proper decree in accordance with the views herein expressed.
Reversed and remanded.