Opinion
No. 38656.
February 9, 1953.
1. Trusts — deeds of trust — foreclosure — demurrer.
Where a bill charged that the debtor of a bank in a specified amount gave a warranty deed to the bank of described lands and contemporaneously therewith the bank executed to the debtor a special warranty deed containing the provision that the bank was to have possession and control of the land and collect the rents until the debt was fully paid and that contemporaneously also the debtor gave the bank a deed of trust on the lands to secure the debt and that subsequently the debtor gave renewal deeds of trust each for an increased indebtedness and that the last renewal was foreclosed by the liquidators of the bank, all the said transaction should be construed together, and the allegation that the bank had collected enough rents and sold enough timber from the lands to pay the debt were not of themselves sufficient on demurrer to show that the foreclosure of the last renewal deed of trust for its increased amount of indebtedness was invalid.
Headnote as approved by McGehee, C.J.
APPEAL from the chancery court of Oktibbeha County; R.P. SUGG, Chancellor.
Robert E. Nason and Bennett E. Smith, for appellants.
Presented their principal points as follows:
When Bell conveyed the land to the Bank he paid all he owed the Bank, as well as the Bank assumed a deed of trust to the Federal Land Bank. It appears that Bell was getting old and in 1930 conditions were bad, so the Bank decided to deed the land back to him, and reserve everything about it except the fee title, and said Bank had a right to do this, it had the fee simple title of the land which covered everything about the land, and it could convey such rights as it deemed necessary with any conditions, so they created the following Trust: "It is understood, however, that grantors are to remain in possession of the land here conveyed until the mortgage concurrently given herewith is liquidated and that grantors to that end, shall collect rents in said property and control the same until said obligation is fully paid."
The above property was owned by the Bank, the above express trust was in writing, signed by the Bank, and the deed was filed and recorded in the chancery clerk's office of Oktibbeha County, Mississippi, where the land is located. The above paragraph in said deed complies with every provision of Sec. 269, Code 1942. It is plain language and no one could misunderstand its meaning. The purpose of the creation of the trust is stated that the Bank is to remain in possession until the mortgage concurrently given herewith is liquidated, which means paid, and this is stressed because at the end of the paragraph it is stated "until said obligation is fully paid," what obligation?
The Bank, its officers, decided that they could operate the 522 acres of land and the rents and revenues therefrom would pay off the obligation, so they would not let him operate it, he was old and feeble, and the Bank remained in possession of the property, reserved the right to collect the rents from said property and control the same. How long? "Until said obligation is fully paid," what did it mean by "said obligation"? What were they talking about? The obligation was the mortgage and the deed of trust executed of even date with the deed for $1,848.00.
When the deed was executed and delivered by the Bank to R.T. Bell it conveyed the fee title to Bell, and the Bank reserved an equitable interest in the land under the express trust set forth in the deed. Bell became the beneficiary to the property subject to the payment of the obligation. He had a vested right, the fee title, and the Bank had an equitable right to the rents and revenues to be applied on the obligation to itself, and this was a vested equitable title retained by the Bank, in fact it never departed with that right and interest to the possession, control, management and collection of the rents and revenues from the land, and it should be considered a beneficiary under the Trust to the extent of the amount of its mortgage held against Bell; and under the terms and provision of said Trust the Bank assumed the role of Trustee to manage, control, keep possession, collect rents for the purpose of paying off the obligation evidenced by the mortgage.
First that the Bank, when it claimed under the trustee's deed, acquired no title, and when the Bank through its receiver conveyed the land to Wellborn, no title was conveyed to Wellborn, and likewise, step by step, on down to the appellees. The Bank had possession, control, management, right to collect rents, in fact everything about the land was retained and remained in the Bank, these rights were all that passed under the conveyance by the receiver, but not the fee title, and in the several conveyances thereafter down to the appellees, the fee title did not pass; however, the Bank under the deed containing the trust remained in possession and held these rights for the purposes therein stated, that is, it assumed the responsibility to pay the obligation of Bell to the Bank, and to hold the possession and other rights stated in the deed until the obligation was fully paid, and the deed says what obligation, "mortgage concurrently given herewith is liquidated," and this provision in this deed is paramount to the deed of trust concurrently given, and is controlling, and this deed was placed on the record in 1931 and notice to the world, and these appellees should have investigated said provision.
Second, each grantee in the several conveyances down to and including the appellees were holding the possession, control, management as the Bank held the same, with all of the responsibilities assumed by the Bank, and they and each of them became substitutes for the Bank, and these appellees are substitutes for the said Bank, and they only hold such equitable title as the Bank held, if any, at the time they acquired their deed from Wellborn. The Bank was in a fiduciary relation with Bell and they assume the same relationship and everything else therewith and cannot escape by technical points raised in various avenues arising from decisions upon other cases upon statement of facts entirely different to this case.
And cited in support the following:
Secs. 269, 869, Code 1942; Secs. 137, 138 of Patton on Titles; Hodge v. Joy, (Ala.), 92 So. 171; Bibbs v. Hunter, 79 Ala. 351; 54 Am. Jur., Secs. 18, 228, 248, 254; 49 L.R.A. (N.S.) 1059; Smith Co. Oil Co. v. Jefcoat, 33 So.2d 630; Howard v. Wactor, 41 So.2d 259; 66 C.J. 1119, 1123, Secs. 946, 955; Spellman v. Taylor, 96 Miss. 693; Deason v. Taylor, 53 Miss. 701; Reddoch v. Williams, 92 So. 831-835; Griffith's Mississippi Chancery Practice, Sec. 293; Federal Land Bank v. Miss. Power Light Co., 157 Miss. 737, 128 So. 98; Triplett v. Bridgeport, 205 Miss. 328, 38 So.2d 756; Wight v. Ingram-Day Lbr. Co., 17 So.2d 196.
Livingston Fair, for appellees.
All of the essential allegations and admissions enumerated in the bill resolve the case down to the question of whether or not the stipulation in the deed ever constituted a trust, and if it did constitute a trust, whether that trust has been terminated by the subsequent acts of Mr. Bell and the complainants.
We call the Court's attention to the following Mississippi cases: "Where same person is both trustee and beneficiary no trust estate exists." Enochs Flowers v. Roell, 154 So. 299.
The stipulation here involved was no more than an agreement between Mr. Bell and the Bank that all of the revenue from the land should be applied on the payment of the debt due the Bank, and we think the principle has been definitely settled in favor of the defendants in the following cases: Cudahy Packing Co. v. Miller's Estate, 60 So. 574; Cohn v. McClintock, 66 So. 217. See also Harris v. Bailey Avenue Park, 32 So.2d 694.
The stipulation in the deed names no trustee, states no intention to create a trust, no provision is there made for a conveyance of any further interest in the land from the Bank and no time nor method is expressed therein for termination of a trust, and we most respectfully submit that no trust ever existed as a result of the stipulation.
We submit that if a trust ever existed as a result of the stipulation in the deed there was subsequently a merger of the title and the trust, if any, was thereby terminated. If we are mistaken in its merging at that point, it certainly merged in the receiver of the Bank with the foreclosure of the mortgage and thereby terminated any interest the complainants could ever have had if the instrument had created a trust. This principle has been definitely settled by this Court and numerous courts of other states. Willey v. W.J. Hoggson Corp., 106 So. 412; Enochs Flowers v. Roell, 154 So. 299.
If the stipulation was sufficient to establish a trust the Bank was the beneficiary therein to the extent that it was enabled to collect any rents produced by the land. When Mr. Bell executed the deed of trust foreclosed by the receiver he conveyed and warranted all interest and title, whether legal or equitable, he then possessed in the land. The receiver of the Bank caused a foreclosure of the deed of trust by a legally appointed substituted trustee, and this trustee executed a valid trustee's deed conveying the land to the receiver which completed definitely the merger of all the title outstanding and of all rights of the parties in the land, and if a trust was created in the beginning it was certainly terminated with the foreclosure of the deed of trust and the merger of title in the receiver of the Bank. City Savings Bank Trust Co. of Vicksburg v. Cortright, 84 So. 136; Connecticut General Life Ins. Co., et al., v. Planters Trust Savings Bank, et al., 181 So. 724.
On January 21, 1930, R.T. Bell, now deceased, and his wife, Mrs. M.J. Bell, were indebted to the Merchants Farmers Bank of Starkville in the sum of $1,848.34, according to the allegations of the original and amended bills of complaint herein, the first of which was filed on April 4, 1951, by the said Mrs. M.J. Bell and two of her children against the defendants, Walter Bennett and F.L. Fair, Sr.
The bill of complaint further alleges that R.T. Bell and wife executed to the bank a general warranty deed on January 21, 1930, to certain lands in Oktibbeha County, therein described; that on the same date the bank in turn executed unto the said R.T. Bell a special warranty deed, reconveying said land to him, and thereupon the said R.T. Bell and wife executed a deed of trust on the land in favor of the bank to secure the said indebtedness of $1,848.34.
The special warranty deed from the bank to R.T. Bell contained the following provision: "It is understood, however, that grantors are to remain in possession of the land here conveyed until the mortgage concurrently given herewith is liquidated and that grantors to that end, shall collect rents on said property and control the same until said obligation is fully paid."
There is exhibited to the bill of complaint a deraignment of title to the land in controversy, and it appears from the bill of complaint and the deraignment of title as an exhibit thereto that subsequent to January 21, 1930, the said R.T. Bell and wife gave to the bank certain renewal deeds of trust which disclose that the indebtedness increased with each renewal until finally one of the deeds of trust was foreclosed during the year 1936 for the satisfaction of the said indebtedness, in connection with the liquidation of the said Merchants Farmers Bank, and that whatever title was acquired by the purchaser at the foreclosure sale finally became vested in James Y. Welborn, and that thereafter title was acquired by the defendants, Bennett and Fair, during the year 1951, shortly prior to the filing of the original bill of complaint herein.
The bill alleges that under the quoted provision of the special warranty deed made by the bank to R.T. Bell on January 21, 1930, an express trust was created whereby the bank was to hold possession of the land as trustee for the Bells until the rents and profits therefrom should liquidate the indebtedness secured by the deed of trust executed by them in favor of the bank on that day; that the bank, while a going concern, thereafter collected rents and sold timber from the land in amounts far exceeding the indebtedness due under the deed of trust and the subsequent renewals thereof; and that the predecessors in title of the defendants Bennett and Fair, who owned the land from time to time subsequent to the foreclosure in 1936, had also sold timber from the land and realized other profits therefrom.
The bill of complaint seeks to confirm the title of Mrs. Bell and two of her children to the land in controversy, to cancel the claim of the defendants as a cloud thereon, and seeks from these two defendants, who are the only persons made defendants herein and who did not acquire the land until the early part of the year 1951, as aforesaid, an accounting for all timber sold and other profits realized from the land by their predecessors in title upon the theory that the foreclosure sale was void on the ground that the same was inconsistent with the trust created by the quoted provision from the special warranty deed hereinbefore mentioned. The complainants do not point out wherein the foreclosure was invalid except on the theory last above stated.
The chancellor sustained a demurrer to the bill of complaint, and also to the amended bill of complaint, and granted an appeal from his decree sustaining the demurrers and dismissing the bill and amended bill of complaint. The decree does not recite whether or not the complainants had declined to plead further prior to the dismissal of their amended bill of complaint.
(Hn 1) We are of the opinion that neither the original nor amended bills of complaint stated any ground for relief against the appellees Bennett and Fair; that the general warranty deed from R.T. Bell and wife to the Merchants Farmers Bank of January 21, 1930, the special warranty deed from the bank reconveying the land to R.T. Bell and retaining the possession thereof for the collection of rents and profits as additional security for the payments of the indebtedness secured by its deed of trust, and the deed of trust from R.T. Bell and wife executed on the same day to secure the indebtedness of $1,848.34, should all be construed together as one transaction; that there are no allegations in the bill of complaint that would disclose that the bank was without authority to foreclose the last renewal of the deed of trust; and that therefore the trial court was not in error in sustaining the demurrer to the original and to the amended bills of complaint, respectively.
In view of what is hereinbefore stated, the decree appealed from must be affirmed and the cause remanded for such further proceedings as the complainants may see fit to take not inconsistent with this opinion.
Affirmed and remanded.
Hall, Lee, Arrington and Lotterhos, JJ., concur.