Opinion
No. 37695.
February 5, 1951.
1. Mortgages — bank as trustee and beneficiary — insolvency — liquidation proceedings — appointment of substituted trustee — presumption respecting as to banking laws of state of trustee's domicile.
The owner of real property in this state executed a mortgage on the property to a Louisiana bank and trust company as trustee to secure the bonds of the owner in a large sum of which bonds the bank became the owner or beneficiary. The mortgage provided for the appointment of a substituted trustee in case of the original trustee's resignation, incapacity or inability to act, the successor to be appointed by the holders of not less than the majority in amount of all notes secured by the mortgage and then outstanding, the appointment to be evidenced by a written instrument or instruments under the hands of such holders of such notes and properly executed and recorded in Mississippi. Before foreclosure the bank became insolvent, and was placed in charge of the Louisiana Examiner of State Banks who under Louisiana law was authorized to perform any acts and take such steps as may be necessary to conserve the bank's assets, and the bank examiner thereupon notified the bank that it was forbidden to act as trustee under the bond mortgage in question and the officers of the state banking department followed up this notice by a petition in the Civil District Court of the parish where the bank was located and wherein its affairs in liquidation were being administered for a judgment expressly prohibiting the bank from acting as trustee and informing the court that the said officers had appointed a named trustee, and the petition was sustained by the court and the appointment of the substituted trustee was approved: Held
(1) That the bank was more than a mere naked trustee;
(2) That all parties to the mortgage when contracting it or under it were presumed to do so in recognition of the law of Louisiana as to the powers and duties of the bank examiner and of the jurisdiction of the Louisiana courts in the liquidation of insolvent banks in that state to supersede any authority vested by the mortgage in the trustee and beneficiary in the course of liquidation of an insolvent bank, and to appoint a substituted trustee in the place of the insolvent bank, and that when such substituted trustee was appointed by that authority the original trustee was required to obey and was incapacitated to act in any manner contrary to the mandate of the court in the premises. And
(3) That the appointment of the substituted trustee made as aforesaid was valid.
2. Mortgages — substituted trustee — instrument — executed and recorded.
The provision aforementioned that the instrument or instruments evidencing the substitution of the trustee shall be "properly executed and recorded in the State of Mississippi" did not mean that the instruments shall be both executed and recorded in Mississippi but that it shall be properly executed wherever done and as was done in the instant case, and thereafter shall be properly recorded in Mississippi as was also done.
3. Limitations of actions — laches.
The suit to cancel and remove clouds on the allegation that a substituted trustee's sale was void, filed two days before the bar of the ten-year statute of limitations, was not, under the facts of the case, barred by laches.
Headnotes as approved by McGehee, C.J.
APPEAL from the chancery court of Hinds County; V.J. STRICKER, Chancellor.
Forrest B. Jackson, and Watkins, Edwards Ludlam, for appellants.
I. The action by complainants not barred by laches, nor by limitations nor by estoppel. Brown v. British American Mortgage Co., et al., 86 Miss. 388, 38 So. 312; Chandler, et al. v. Bank of Brooksville, 178 So. 797, 798; Taylor, et al. v. Twiner, et al., 9 So.2d 644, 646; Hill v. Nash, et al., 73 Miss. 849, 19 So. 707, 710; Houston v. National Mutual Building Loan Ass'n., et al., 80 Miss. 31, 31 So. 540, 542; 2 Jones Mortgages, Sec. 1885; 11 American and English Encyclopedia Law, 2nd Ed., p. 225, Note 4 and the authorities.
There is no element of estoppel here whatever. Helm v. Yerger, 61 Miss. 51, points out the difference between mere laches and estoppel in cases of this sort. The cases of Westbrook v. Munger, 61 Miss. 336, and Hill v. Nash, 73 Miss. 862, 19 So. 710, are conclusive that so far as mere laches is concerned, there being no element of estoppel in the case, no lapse of time short of the period that would bar the bill to redeem under Sec. 2732 of the Code of 1892 (ten years) will bar the right to fill the bill. Cox, et al. v. American Freehold and Land Mortgage Co. of London, 88 Miss. 88, 40 So. 739, 740; Lake v. Perry, 95 Miss. 550, 49 So. 569, 574; Comans v. Tapley, et al., 101 Miss. 203, 57 So. 567, 573; Johnson, et al. v. Carter, et al., 11 So.2d 196, 197; Griffith's Mississippi Chancery Practice, Sec. 33, p. 37; Booker, et al. v. Federal Land Bank of New Orleans, 185 Miss. 281, 164 So. 877, 879; Tiffany on Real Property, 3rd Ed., Vol. 4, Sec. 1235, p. 656; Staton v. Bryant, et al., 55 Miss. 261, 275; Sulpine v. Dunbar, et al., 55 Miss. 255, 260; Lucas v. New Hebron Bank, Inc., et al., 181 Miss. 762, 180 So. 611, 613; Roberts v. Bookout, et al., 162 Miss. 676, 139 So. 175, 176; Scottish-Am. Mort. Co., Ltd., et al. v. Bunckley, et al., 88 Miss. 641, 41 So. 502, 503; D. Rosenbaum Sons v. Blackwell, 110 Miss. 452, 70 So. 548, 549; Murphy v. Jackson, et al., 69 Miss. 403, 13 So. 728; Davis v. Butler, et al., 128 Miss. 847, 91 So. 279, 280.
II. Complainants authorized to maintain action as stockholders of non-existent defunct corporation for all shareholders.
A. Pearl Realty Company has been dissolved in law by the operation of the statutes of the State of Mississippi. Sec. 178, Const. of 1890; Sec. 1326, Code 1942 (Laws 1934, Chap. 121, as amended by Laws 1940, Chap. 115); Sec. 9326, Code 1942 (Laws 1934 Chap. 121); 13 Am. Jur. Sec. 1286, p. 1158; Fletcher Cyclopedia Corporations, Permanent Ed., Vol. 16, p. 655, Sec. 7966; Secs. 5352, 5353, 5354 Code 1942; Barber v. International Co. of Mexico, 73 Conn. 578, 44 At. 758, 765; Brent, et al. v. B.E. Brister Sawmill Co., et al., 103 Miss. 876, 60 So. 1018, 43 L.R.A. (N.S.) 720; Fletcher Cyclopedia Corporations Permanent Ed., Vol. 16, p. 828, Sec. 8097; 20 C.J.S. p. 126, Sec. 1898.
B. The present case presents a proper factual situation for a court of equity to ignore the corporate entity of Pearl Realty Company and look to the stockholders as the real owners of the corporate property. Vol. 1, Fletcher Cyclopedia Corporation, Perm. Ed., Sec. 41 p. 134; Maloney Tank Mfg. Co. v. Mid-Continent Petroleum Corp., et al., 49 F.2d 146, 150; Maryland Unemployment Compensation Board v. Albrecht, et al., 36 A.2d 666, 669; Packard Clothes, Inc. v. Director of Division of Employment Security, 61 N.E.2d 528, 531; Geary v. Cain, et al., 9 P.2d 396; Epton v. Moskee Investment Co., et al., 174 P.2d 418, 421; Vol. 1 Fletcher Cyclopedia Corporations, Perm. Ed., Sec. 41, p. 143; Majestic Co. v. Orpheum Circuit, 21 F.2d 720; Sterling v. Trust Co. of Norfolk, et al., 141 S.E. 856, 859; Dixie Coal Mining Mfg. Co., v. Williams, 128 So. 799; Sunset Farms, Inc. v. Superior Court of Imperial County, 9 Del. App. 2d 389, 50 P.2d 106, 111; Long v. Carolina Baking Co., 190 S.C. 367, 3 S.E.2d 46; Overfield v. Pennroad, 42 F. Supp. 586; Markovitz v. Markovitz, 336 Pa. 122, 8 A.2d 36; Caldwell v. Roach, 44 Wyo. 319, 12 P.2d 376; State v. Northwest Magnesite Co., 182 P.2d 643, 664; Wofford, et al. v. Wofford, et ux., 129 Fla. 445, 176 So. 499, 503; Biscayne Realty Ins. Co. v. Ostend Realty Co., 109 Fla. 1, 408 So. 560; Morowetz on Private Corporations, Vol. 1, Sec. 1; Mayer v. Eastwood, Smith Co., 122 Fla. 34, 164 So. 684; Montgomery v. Central National Bank Trust Co. of Battle Creek, et al., 267 Mich. 142, 255 N.W. 674, 275; Waller v. Waller, et al., 49 A.2d 449, 452; Newark Ladder Bracket Sales Co., Inc., et al. v. Furniture Workers' Union, Local 66, et al., 125 N.J. Equity 99, 4 A.2d 49; Tellis v. Tellis, 132 N.J. Eq. 20, 25, 26 A.2d 249, 250.
C. Appellants are equitable owners of the title to the property in dispute and appellants can maintain this action. Sec. 1324 Code 1942.
Equitable title is the right in the party to whom it belongs to have the legal title transferred to him. See Thygerson v. Whitbeck, 16 P. 403, 404, 5 Utah 406; Pogue v. Simon, 47 Or. 6, 81 P. 566, 567, 114 Am. St. Rep. 903; Wyatt v. Meade County Bank, 40 S.D. 111, 166 N.W. 423, 424; Karalis v. Agnew, 111 Minn. 522, 127 N.W. 440, 441; Joy v. Midland State Bank of Omaha Nebraska, 133 N.W. 276, 277, 28 S.D. 262; Harris v. Mason, 120 Tenn. 668, 115 S.W. 1146, 1154; State ex rel. City of St. Louis v. Baumann, 348 Mo. 164, 153 S.W.2d 31, 35; Sterber v. Combs, 121 W. Va. 509, 5 S.E.2d 420, 423; Waller v. Waller, 49 A.2d 449, 542; Beckett v. Planters' Compress Bonded Warehouse Co., et al., 107 Miss. 305, 65 So. 275, 276; Woodville Lodge No. 3581, Grand United Order of Oddfellows, et al. v. Poole, et al., 1 So.2d 780, 781.
The foreclosure was void.
(a) Insolvency of an individual serving as trustee does not cause an incapacity or inability on the part of the individual to act as trustee. Restatement of the Law of Trusts, Sec. 107d, p. 280; Perry on Trust and Trustees, Vol. 1, 7th Ed., Sec. 58, p. 46, and Sec. 279, p. 497, and Sec. 292, p. 514; Pomeroy's Equity Jurisprudence, Vo. IV 5th Ed. Sec. 1086 p. 258; C.J. 570, Sec. 327; Dwight v. Simon, et al., 4 La. 490, 494.
(b) Insolvency and the appointment of a receiver or liquidator does not destroy the corporate entity of a corporation. Thompson on Corporations, 3rd Ed. Vol. 8, Sec. 6436, p. 610; 13 Am. Jur. 1174 Sec. 1313; 19 C.J.S. 1444, Sec. 1670; Vol. 2, Banks and Banking, Zollmann, Sec. 752, p. 130; Saroy Oil Co. v. Emery, et al, 137 Okla. 67, 277 P. 1029; Twyman v. Smith, 119 Fla. 365, 161 So. 427, 429; Camp v. First National Bank of Ocala, 44 Fla. 492, 33 So. 241, 244.
In numerous cases the federal courts have held that insolvency of a banking corporation does not dissolve the bank's corporate entity. The first of these decisions was the First National Bank of Bethel v. The National Pahquioque Bank, 14 Wall 383, 20 L.Ed. 840, 844. To the same effect, see Chemical National Bank v. Hartford Deposit Co., 161 U.S. 1, 40 L.Ed. 595, 597; Central National Bank v. Connecticut Mutual Life Insurance Co., 104 U.S. 54, 26 L.Ed. 693; Rosenblatt v. Johnston, 104 U.S. 462, 463, 26 L.Ed. 832, 833; Starr v. Schran, 24 F. Supp. 889, 890; Connolly v. First National Bank of Detroit, 86 F.2d 683, 686; Luella Hannan Memorial Home v. First National Bank in Detroit, 31 F. Supp. 276, 280; Whittenbel v. Loughman, 80 F.2d 222, 224; and District of Columbia v. Wardell, 32 F. Supp. 769, 771. And see also the recent case of Tangipahoa Bank Trust Co. v. Guwang, 15 So.2d 148; Dolhonde v. Tangipahoa Bank Trust Co., 153 So. 71 and Williams et al. v. DeSoto Bank Trust Co., et al., 189 La. 245, 179 So. 303.
Insolvency and the appointment of a receiver of a banking corporation does not cause an incapacity or inability on the bank's part to act as a naked trustee. 7 Am. Jur. 516, Sec. 714; Mitchell, Chief State Bank Examiner, et al. v. Shuford, 200 N.C. 321, 156 S.E. 513; Sanders, et al. v. Hall, et al., 74 F.2d 399, 405, certiorari denied, 295 U.S. 739, 79 L.Ed. 1686; Folk v. Hughes, 100 S.C. 220, 84 S.E. 713, 714; Nelson v. Ratliff, 72 Miss. 656, 18 So. 487; Bank of Commerce of Oregon City v. Ryan, et al., 69 P.2d 964, 966; Union Guardian Trust Co. v. Stillman, et al, 300 Mich. 27, 1 N.W.2d 439, 441; Peck v. Searle, 117 Conn. 573, 169 A. 602; Noel State Bank v. Blakely Real Estate Improvement Corp., et al., 53 N.E.2d 621, 625.
Interstate Trust and Banking Company was capable of acting as trustee and it was not the intention of the legislature to defeat that capacity by providing that the State Bank Commissioner take possession of the Bank's affairs. Hardesty v. Fairmount Supply Co., 123 W. Va. 161, 14 S.E.2d 436, 437; 50 Am. Jur. Sec. 243, p. 238. The annotator in 102 A.L.R. 124, 126 recognizes that the court should consider the bank's duties as trustee before it passes on the effect of insolvency upon the bank's power to continue to act as trustee.
The Interstate Trust and Banking Company not having been removed nor having resigned, there was no vacancy existing in the office of trustee and no successor trustee could be appointed.
In common usage words "successor" and "substitute" have entirely different meanings. 60 C.J. p. 980, 985.
The present instrument contemplates a vacancy in the office of trustee prior to the appointment of a new trustee.
Certainly no appointment of a successor could be made until the condition authorizing the appointment existed. Webb v. Biles, et al., 192 Miss. 474, 6 So.2d 117; Epstein v. Choldenko, et al., 272 Ill. App. 155. Compare State ex rel. Doolittle v. Hays, 91 Miss. 755, 45 So. 728.
An attempt to agree upon a successor trustee was a condition precedent to the appointment of the successor trustee, and there having been no attempt to agree the appointment of the successor trustee was void. Hill, et al. v. Atlantic N.C.R. Co., 143 N.C. 539, 55 S.E. 854, 859; Clarkson, et al. v. Ruiz, et al., 108 S.W.2d 281, 285; Vaughn et al. v. Powell, et al., 65 Miss. 401, 4 So. 257; Walker v. Brungard, 21 Miss. 723; Webb v. Biles, et al., 192 Miss. 474, 6 So.2d 117, 120; Sharpley v. Plant, 79 Miss. 175, 28 So. 799.
The appointment of a successor trustee was not executed and recorded in the State of Mississippi as was required by the terms of the deed of trust and the appointment was therefore void. Sharpley et al. v. Plant, 79 Miss. 175, 28 So. 799, 802; Webb v. Biles, et al., 192 Miss. 474, 6 So.2d 117, 120; Vaughn et al. v. Powell, et al., 65 Miss. 401, 4 So. 257; see also Watson v. Perkins, 88 Miss. 64, 40 So. 643; Jones v. Salmon, 128 Miss. 508, 91 So. 199; Powers v. Interstate Trust and Banking Co., 163 Miss. 30, 139 So. 318, and Walker v. Brungard, 21 Miss. 723; compare Guion v. Pickett, 42 Miss. 77, 81; McNeill v. Lee, 79 Miss. 455, 30 So. 821, 822; Clarkson et al. v. Ruiz, et al., 180 S.W.2d 281, 285.
Wm. Harold Cox, Wells, Wells, Newman Thomas, and Adams Adams, for appellees.
I. The complainants and intervenors, who are appellants here, have not shown by this record that they have any legal or equitable title to the property in suit and certainly they have not shown that they have the better title thereto so as to entitle them individually to institute and maintain this action. Secs. 9327, 5352, 5354, Code 1942; Secs. 404, 405 Code 1930; Jones v. Rogers, 85 Miss. 802, 38 So. 742; 30 C.J.S. Sec. 149, pp. 578-588; Nicholson v. Myers, 170 Miss. 441, 154 So. 282, 283; Levy v. Campbell, 200 Miss. 721, 28 So.2d 224; Woodward v. Moss, 202 Miss. 33, 30 So.2d 420; Dorsey v. Sullivan, 199 Miss. 602, 24 So.2d 852.
(A) The effect of the suspension of Pearl Realty Company was not to dissolve the corporation or to vest its assets in its stockholders without a judicial determination of the delinquency of the corporation and that it had finally forfeited its right to exist as a corporate entity. Secs. 3053, 3054, 3062, 3065, 3066, 3067, 3068, 3069, 3070 Code 1930; Jackson Loan Trust Co. v. State, 56 So. 293, 101 Miss. 440; Yates v. Summers, 177 Miss. 252, 170 So. 827; Home Mut. Building Loan Ass'n. v. Leonard, et al., 77 Miss. 39, 25 So. 351, 352; Vicksburg Lodge v. Grand Lodge, 116 Miss. 214, 76 So. 572.
(B) Sec. 9327 Code 1942 did not have the effect to nullify the charter or dissolve the corporation known as Pearl Realty Company but simply nullified its right "To exercise powers originally granted" it and left the corporation intact in full possession and control of its assets subject to an administration of such estate either under Sec. 4170 Code 1930, or Sec. 4173 Code 1930, unless such final suspension were abated. Sec. 9327 Code 1942; Dittman et al. v. Myers, et al., 95 S.W.2d 1332, 1335; Watts, et al. v. Liberty Royalties Corp., et al., 106 F.2d 941; Stensvad v. Ottman, et al., 20 P.2d 507; 13 Am. Jur. Secs. 1335, 1337, pp. 1187-1189; 19 C.J.S., Sec. 1649, pp. 1420-1421, Sec. 1649, pp. 1421, 1422-23, Sec. 1772, p. 1562; 18 C.J.S. Sec. 105, pp. 501-502; Maloney Mercantile Co. v. Johnson County Savings Bank, 121 S.W. 889; State ex rel. Preston Mill Co. v. Howell, Secretary of State, (Wash.), 121 P. 861; Arthur v. President, Directors and Commercial Railroad Bank of Vicksburg, 9 S. M. 394, 430; Dorr v. Board of Levee Commissioners, 28 So. 938; Bohannon v. Binns, 31 Miss. 355; Hays v. Central Business Property Co., 249 P. 1057, 1058; Munn v. Wadley, et al., 189 So. 561, 566, appeal dismissed 309 U.S. 622, 60 S.Ct. 511; Coulter Richards v. William Robertson, 24 Miss. 278, p. 131; In re St. Vincent De Paul Benev. Ass'n. of New Orleans, 175 So. 140, 143; 19 C.J.S. Sec. 1643; Woodville Lodge v. Poole, 190 Miss. 798, 1 So.2d 780, 781.
II. Myron Turfitt was duly appointed successor trustee in strict conformity with the decree of the district court of the Parish of Orleans and the requirements and provisions of the foreclosed bond mortgage providing therefor.
(A) The district court of the Parish of Orleans, State of Louisiana, had the full power and authority independently of the Bond Mortgage to appoint Myron Turfitt, successor trustee, and the decree of said court providing for the appointment of such successor trustee is res judicata. Portland Trust Savings Bank v. Rosenberg, 49 P.2d 467; Sanders, et al. v. Hall, et al., 74 F.2d 399, 404-05, affirmed 55 S.Ct. 653; State ex rel. Bannister v. Cantley, Commissioner of Finance, 52 S.W.2d 397; In re Estate of Pauline Strasser, deceased, William Hickey, appt. 102 A.L.R. 117, 121-122, 123-124, 262 N.W. 137.
(B) The appointment of the successor trustee in this case was accomplished in strict conformity with all of the requirements of Sec. 4, Article 8, of the Bond Mortgage, above quoted. McNeill v. Lee, 79 Miss. 455; McLendon v. McGee, 189 Miss. 712, 198 So. 725, 726; Sec. 2168 Code 1930; Parker v. McCaskey Register Co., 177 Miss. 347, 171 So. 337; Wasson Bond Mortgage Co. v. Therrell, 151 So. 497; Webster v. Kantz, et al., 123 P. 139-142; M.J. Wade v. William Thompson, et al., 52 Miss. 367; Webb v. Biles, 192 Miss. 474, 6 So.2d 117; Chandler v. Bank of Brooksville, 181 Miss. 529, 178 So. 797; Allen Gravel Co. v. Nix, 129 Miss. 809, 93 So. 244; Adams et al. v. St. Clair, et ux., 185 Miss. 416, 188 So. 559, 560; Thompson v. Wynne, 127 Miss. 773, 90 So. 482; Stringer v. Price, 143 Miss. 189, 108 So. 431; Watkins v. McDonald, et al., 41 So. 376; Jones v. Salmon, 128 Miss. 508, 91 So. 199; Guion v. Pickett, 42 Miss. 77; Hull v. Federal Land Bank of New Orleans, 186 Miss. 593, 191 So. 118; West v. Union Naval Stores Co., 117 Miss. 153, 77 So. 961; Federal Land Bank v. Miller, 199 Miss. 615, 25 So.2d 11; Baker v. Connecticut General Life Ins. Co., et al., 196 Miss. 701, 18 So.2d 438; Scruggs v. Northern, et al., 123 Miss. 169, 85 So. 89; Sec. 1587 Code 1930; Griffith's Mississippi Chancery Practice, Sec. 364, p. 370; Brown v. British American Mortg., 86 Miss. 388, 38 So. 312; Melchor v. Casey, 173 Miss. 67, 161 So. 692, 694-695; Viator v. Stone, 201 Miss. 487, 29 So.2d 274.
III. The statutes of limitation of the State of Mississippi present a bar to any possible claim of the appellants or the corporation to the property in suit.
(A) The statutes of limitation in Mississippi were not tolled as against Atlantic Life Insurance Company and its trustees until the supplemental bill of complaint was filed on March 17, 1948. 54 C.J.S. Sec. 276, pp. 311-314, Sec. 278, pp. 318-319; Dinkins v. Bowers, 49 Miss. 219; Potts v. Hines, 57 Miss. 735; 34 Am. Jur., Limitation of Action, Sec. 275; Brown v. Goolsby, 34 Miss. 437; Dunn Construction Co. v. Bourne, 172 Miss. 620, 159 So. 841; Hamilton Bros. Co., Inc. v. Baxter, 188 Miss. 610, 195 So. 335; State v. Woodruff, 81 Miss. 456, 33 So. 78; Cottrell v. Smith, 146 Miss. 837, 112 So. 465; Sec. 712 Code 1942; Secs. 714, 2289 Code 1930; Davis v. Gulf Refining Co., 202 Miss. 808, 32 So.2d 133; Crowder v. Neal, 100 Miss. 730, 57 So. 1; Sec. 2315 Code 1930; Neely v. Craig, 162 Miss. 712, 139 So. 835; Hubbard v. Massey, 192 Miss. 95, 4 So.2d 230.
IV. The bill of complaint of these appellants and their proof, such as it was, in support thereof is lacking in equity and good conscience and the learned chancellor correctly decreed thereon that there was no merit therein.
(A) Irrespective of any statute of limitations, this action has long since become barred by the unreasonable delay in instituting such suit because of the hardship and delay and inequity visited by such delay upon these appellees in the bringing of this voluntarily delayed action for nearly ten years under the unjust and inequitable circumstances presented in this record. 18 C.J.S. Sec. 569, pp. 1290-1291; 37 Am. Jur. Sec. 716, pp. 149-150; 30 C.J.S. Secs. 113, p. 524, 116, p. 538, 100, p. 499, 118, pp. 541-542; 37 Am. Jur. Sec. 715, p. 149; 41 C.J., Sec. 1461, p. 1006; Griffith's Miss. Chancery Practice, Sec. 32, Chamberlayne Jones, et ux. v. Smith, et al., 33 Miss. 215; Cross et al. v. Hedrick, 66 Miss. 61, 7 So. 496; Comans v. Tapley, 101 Miss. 203, 57 So. 567; Barron v. Federal Land Bank of New Orleans, 182 Miss. 50, 180 So. 74; McLean v. Love, et al., 172 Miss. 168, 157 So. 361; Vanlandingham v. Meridian Creek Drainage Dist., 191 Miss. 345, 2 So.2d 591; Sample, et al. v. Romine, 193 Miss. 706, 8 So.2d 257; Koenig v. Calcote, 25 So.2d 763; Twin States Realty Co. v. Kilpatrick, 199 Miss. 545, 26 So.2d 356; Stanley v. Stanley, 29 So.2d 641, 201 Miss. 545; Marks v. Toney, 196 Miss. 572, 18 So.2d 452, 453; Backus-Brooks Co. v. Northern Pac. Ry. Co., 21 F.2d 4, 12-13; Johnson et al. v. Atlantic, G. W.I. Transit Co., 156 U.S. 618, 15 S.Ct. 520, 531-532; Holmberg, et al. v. Armbrecht, et al., 327 U.S. 302, 66 S.Ct. 582, 584; Dickson, et al. v. Joshua Green, Jr., 24 Miss. 612; Kelso v. Robinson, 172 Miss. 828, 161 So. 135; Jones v. Crawford, 201 Miss. 791, 30 So.2d 513; Hamilton v. Federal Land Bank, 184 Miss. 878, 186 So. 832.
(B) These appellees occupied the favored position on this record of an innocent purchaser and an innocent lienor for full value in good faith and from such a litigant a court of equity under the circumstances in this case will take nothing away. 54 Am. Jur., Sec. 266, pp. 209-211; 12 C.J.S. Sec. 48, p. 1020; McNatt v. Hyman, 36 So.2d 161, 204 Miss. 824; Hafter, et al. v. Strange, 65 Miss. 323, 3 So. 190, 191; Simmons v. Dantzler, 152 Miss. 428, 118 So. 829; Lee v. Boyd, 195 Miss. 794, 16 So.2d 30; United States v. Detroit Timber Lumber Co., 200 U.S. 321, 26 S.Ct. 282, 285; Colorado Coal Iron Co. v. United States, 123 U.S. 307, 8 S.Ct. 131; United States v. Wm. H. Clark, 200 U.S. 601, 26 S.Ct. 340; Wright Blodgett Co. v. United States, 237 U.S. 397, 35 S.Ct. 341; Griffith's Mississippi Chancery Practice, p. 785; Yazoo M.V.R. Co. v. Adams, 81 Miss. 90, 32 So. 937; Carr v. Miller, State Tax Collector, 162 Miss. 760, 139 So. 851; Lee v. Memphis Publishing Co., 195 Miss. 264, 14 So.2d 351.
This is a suit to cancel and remove some alleged clouds from the title of the property that is commonly known as the Tower Building in Jackson, and which was sold under a bond mortgage on February 7, 1938, to satisfy an indebtedness owing to the Interstate Trust Banking Company of New Orleans, Louisiana, in liquidation. The mortgage was executed on November 1, 1931, by the Pearl Realty Company, a domestic corporation for owning, operating, and controlling specifically the Tower Building properties. On January 3, 1949, the said Tower Building property was also sold under an execution on a judgment rendered May 16, 1938, against Pearl Realty Company in favor of the Interstate Trust Banking Company, and which judgment was later revived for the principal sum of $241,201.09 in September 1945 in favor of Charles H. Russell, assignee of the original judgment, against the said judgment debtor. It is through the bond mortgage foreclosure and execution sales that the appellee Mississippi Tower Building, Inc., (by mesne conveyances under the former sale and as purchaser at the latter) now claims to own said property, subject to the lien of a deed of trust executed by it on April 2, 1945, in favor of the appellee Atlantic Life Insurance Company, to secure an original indebtedness of $350,000.00.
While the material facts in the case are practically undisputed, as disclosed by several volumes of documentary evidence and oral testimony, there are numerous questions of law discussed in the nearly 500 pages of briefs and presented for decision, if we should hold that neither the bond mortgage foreclosure nor the sale by the sheriff under execution was valid. During the several weeks intervening since this voluminous record and the exhaustive, if not exhausting, briefs, but nonetheless able ones, were submitted, we have given much study and due consideration to all of the questions involved and the decisions upon which the respective parties rely. The fact that we are taking a short-cut in this opinion to a decision of the case is not therefore due to any disposition to side-step any of the points presented for decision; we have gained fairly definite ideas as to how each of the questions should be determined, but we have concluded that the decision reached on the first of the questions stated in the next two succeeding paragraphs has rendered it unnecessary that we base our opinion on any other ground. Even so, the opinion will of necessity be long enough.
The validity of the foreclosure sale under the bond mortgage is challenged solely on the ground that the appointment of Myron Turfitt of New Orleans as successor trustee to the Interstate Trust Banking Company, original trustee and principal beneficiary under the bond mortgage, was not in accordance with the terms and provisions thereof.
The validity of the sale under the execution is challenged on the ground that when the judgment was revived in September 1945 in favor of the execution creditor, Charles H. Russell, and against the judgment debtor, Pearl Realty Company, the said corporation had long since become non-existent on account of the suspension thereof having become final for failure to pay its corporate franchise tax to the State within one year after the same had become delinquent, and at the expiration of which period, Section 9327, Code of 1942, provides that "said organization, insofar as being a going concern, with rights to exercise powers originally granted are concerned, shall be considered as non-existent", it being the contention of its stockholders and creditors, as complainants, and who are the appellants, Miss Martha C. Enochs and others, that even though the corporation was not dissolved by any judicial proceeding, it was incapable of suing and being sued, since this was one of the powers originally granted; and it being the contention of the appellees that the suspension of the said corporation, although the same became final, did not have the effect of nullifying the charter or dissolving the corporation by operation of law but left the same intact so far as the full possession and control of its assets were concerned, subject to an administration thereof, since said Section 9327, supra, also provides ". . . and the disposition of assets, and winding up of the affairs of the organization may be accomplished in such manner as may be provided by law."
Without conceding or deciding that the judgment was not legally revived (since service of process for the time required by law was had upon an officer of the corporation in the suit to revive, and the circuit court necessarily adjudicated the then existence of the corporation in order to render a judgment against it), we shall confine our discussion to the sole question of whether or not the foreclosure sale on Feb. 7, 1938, was validly made by a legally appointed successor trustee. If this question can be answered in the affirmative, then it will be readily seen that the question of whether or not the sale under execution on the judgment was valid becomes immaterial, as does likewise the question of whether or not the principal complainants, Miss Martha C. Enochs, Mrs. Mary Enochs Nugent, Mrs. Edwina Enochs Flowers, Mrs. Lucy Enochs Robinson and Isaac C. Enochs, as stockholders and creditors of the Pearl Realty Company, and other stockholders and creditors on whose behalf the suit is brought, are the real parties in interest and the proper ones to maintain the suit in the place and stead of the mortgagor, Pearl Realty Company. Also, if the foreclosure is valid, we do not even reach the several other issues involved.
(Hn 1) The Pearl Realty Company executed the bond mortgage in question on Nov. 1, 1931, to secure Series A Bonds or notes in the sum of $120,000, and Series B Bonds or notes in the sum of $114,500, subject to a then existing and paramount deed of trust in favor of the Metropolitan Life Insurance Company in the sum of $225,000. The Series A Bonds or notes were to first be paid in full out of the proceeds of any foreclosure sale of the Tower Building under the bond mortgage before any part of such proceeds could be applied to the Series B Bonds or notes. The bonds or notes were all originally issued in favor of Enochs Flowers, Ltd., and the Series A Bonds or notes were later pledged by the bond mortgage to the Interstate Trust Banking Company in their full amount of $120,000 to secure an indebtedness of the Pearl Realty Company to the said bank, which was also named as trustee in the bond mortgage, as aforesaid. Therefore, an important fact is that the Interstate Trust Banking Company was not a mere naked trustee at the time of the appointment of Myron Turfitt as successor trustee on March 4, 1937, and for the reason that the Series A Bonds had also been sold by an auctioneer on Dec. 24, 1936, to O.H. Pittman as nominee for the benefit of the said Interstate Trust Banking Company.
Among other provisions, the bond mortgage contains the following: "In case of the Trustee's resignation, incapacity or inability to act, or its removal hereunder, then and in that event a successor may be appointed by the holder or holders of not less than a majority in amount of all notes hereby secured and then outstanding by an instrument or concurrent instruments under the hands and seal (if required) of such holders of such notes and properly executed and recorded in the State of Mississippi, provided in case of inability to agree upon such Trustee, the majority in amount then outstanding of series 'A' notes shall be vested with this power exclusively." (Italics ours.)
The original trustee did not resign as such, nor was it removed by any formal action in that behalf; in fact it was not removed as trustee at all, unless the fact of its becoming insolvent and being placed in liquidation during the year 1934, together with the rendition of the orders or decrees of the Civil District Court of the Parish of Orleans, Louisiana, in which the liquidation of the original trustee bank was being administered, amounted to what may be termed a removal of the said trustee within the contemplation of law, governing a Louisiana banking institution, in liquidation.
But we go directly to the question of whether or not, under the facts and circumstances hereinafter stated, there was an "incapacity or inability to act" on the part of the said insolvent corporate trustee at the time of the appointment of Myron Turfitt as the successor trustee on March 4, 1937.
Act No. 300 of the Laws of the General Assembly of Louisiana in 1910, LSA-RS 6:383 et seq., provides, among other things, that "whenever the State Examiner of State Banks shall have reason to conclude after investigation that any such corporation (state banking association, savings bank or trust company) is in an unsound or unsafe condition to transact the business for which it was organized; or that it is unsafe, inexpedient or hazardous for it to continue business, then the State Examiner of State Banks with the consent and approval of the Governor wherever practicable may and is hereby authorized to close the bank forthwith and take possession of its books, property and affairs and retain such possession until its affairs are finally liquidated as hereinafter provided for, . . . . On taking such possession of (such) a corporation the State Examiner of State Banks shall be authorized to perform any acts and to take such steps as may be necessary to conserve its assets, and he shall proceed to liquidate its affairs as hereinafter set forth. He shall collect all moneys and claims belonging to it, and, on the order of the District Court of its domicile, may sell or compound all doubtful debts." (Italics ours.)
Thus, it will be seen that a mortgagor in this State when contracting a mortgage with a banking institution of Louisiana as beneficiary and trustee, is presumed to do so in recognition of the authority conferred by law on the state examiner of state banks in Louisiana to take possession of the property and affairs of such banking institution in the event of its insolvency and liquidation and to perform any acts and to take such steps as may be necessary to conserve its assets, including the bonds or notes secured by the mortgage, the situs of which as personal property before foreclosure is in that state where the mortgagee is domiciled, and the mortgagor is presumed to recognize the jurisdiction of the courts of that state to liquidate the affairs of the mortgagee, and is presumed to know that such jurisdiction and authority conferred by its laws will supersede any authority vested by the mortgage in such banking institution as beneficiary and trustee therein, in the event of insolvency and liquidation, and is also presumed to recognize, and to have contracted with reference to, the laws of that state and the jurisdiction of its state examiner of state banks and of its courts to provide for the substitution of a trustee to act in the place and stead of the insolvent banking institution in liquidation for the purpose of collecting its assets for the benefit of its creditors and stockholders; and that such insolvent beneficiary and trustee bank, in liquidation, could not act in such capacity without the consent of the state examiner of state banks and of the courts of Louisiana having charge of the liquidation proceedings.
Moreover, it seems clear from the provisions of the said Act No. 300, Laws of 1910 of Louisiana, that the provision that "the State Examiner of State Banks shall be authorized to perform any acts and to take such steps as may be necessary to conserve its assets" has the effect of vesting in said official a discretion and the exercise of his judgment in determining what steps may be necessary to conserve the insolvent bank's assets.
On Jan. 11, 1937, J.S. Brock, the official referred to in the said Act No. 300, Laws of 1910, wrote to the Interstate Trust Banking Company, in liquidation, and, after fully identifying the bond mortgage in question, stated that "In view of the fact that the bank is now in liquidation under my supervision and control, by virtue of the provisions of Act 300 of 1910, 'I hereby forbid the bank to act in its capacity as trustee under the indenture (bond mortgage) and the supplemental agreement. Please govern yourselves accordingly.'"
We do not have the benefit of all the facts that may have governed the state examiner of state banks when he determined that it was necessary, in order to conserve the assets of the bank, that he should forbid it to act in its capacity as trustee under this bond mortgage. If the original trustee bank should have undertaken to conduct a foreclosure sale of the property, it would have been necessary that it should have done so through some of its trust officers or other officers or employees. Myron Turfitt was an assistant trust officer of said bank, and the state examiner of state banks had the right to recommend to the Civil District Court of Louisiana, in which the bank's affairs were being liquidated, but subject to the court's approval, his choice of a suitable employee of the bank or some other person to conduct such foreclosure.
On Jan. 13, 1937, there was filed on behalf of the said commissioner or examiner of state banks a petition in Civil District Court for the Parish of Orleans, Louisiana, and also on behalf of O.H. Pittman and Walter Cook Keenan, his Special Agents, and Chas. W. Hogan, Liquidator, who had been appointed under the provisions of the said Act 300, Laws of 1910, and which petition advised the said court of the action of the examiner of state banks in forbidding and prohibiting the Interstate Trust Banking Company from acting in its capacity as trustee and recommended that the said court enter an order setting forth whether or not the said trustee, then in liquidation, can or should act as trustee under the bond mortgage. Thereupon, there was duly entered an order by H.C. Cage, judge of the said district court, which recited that "the Interstate Trust Banking Company, in liquidation, be and it is hereby forbidden and prohibited from acting as trustee" under the bond mortgage in question. This order is not shown to have been set aside, vacated or appealed from, and insofar as the record discloses is therefore still in force and effect.
The appointment of Myron Turfitt as successor trustee was executed by the Interstate Trust Banking Company, in liquidation, the then beneficial owner of all the Series A Bonds, by J.S. Brock, said bank commissioner, Pittman and Keenan, Special Agents of the liquidation, Chas. W. Hogan, Liquidator, selected by the directors of the bank when placed in liquidation, and by O.H. Pittman, the holder of all the Series A Bonds as nominee of the said bank in liquidation; and the selection and appointment of the said Turfitt was with the approval of the Civil District Court.
Since the Civil District Court of the Parish of Orleans, in which the liquidation of the original trustee bank was being administered, and where the situs of the Series A Bonds and the mortgage was, as personal property before a foreclosure of the realty described therein, had full jurisdiction of the subject matter of the liquidation, including the bonds and mortgage, and of the said original trustee, this order of the court forbidding said insolvent trustee to act in such capacity was sufficient to require obedience thereto and to render such trustee incapacitated, and unable to act, since the collection of any indebtedness owing to the bank in liquidation was under the jurisdiction of the examiner of state banks, his assistants, and the liquidator in the liquidation proceedings, and of the Civil District Court.
It is to be conceded, as contended for by the appellants, that the weight of authority sustains the view that the insolvency of, or the appointment of a receiver for, a trustee does not ipso facto render such trustee incapacitated or unable to act as such, and especially unless the trustee is in charge of an active trust in administering an estate under a will or engaged in the collection of funds under a trust agreement for the benefit of creditors or the investment and reinvestment of funds entrusted to it as trustee thereof. It seems also that no distinction has been drawn between the status of an insolvent corporate trustee and an insolvent individual trustee where the only function to be performed by either is to make a sale under a foreclosure for the benefit of some third person. However, we are of the opinion that in the very nature of the case where an indebtedness is owing to a corporate creditor as beneficiary in the mortgage or deed of trust and such creditor is also named as trustee in the instrument to be foreclosed, the said insolvent institution, when placed in liquidation, would necessarily become incapacitated or unable to act as trustee in furtherance of the collection of its assets by a proposed foreclosure, since the receiver or liquidator of the corporate creditor would be entitled, and be charged with the duty, to collect all of its assets and administer the same for the benefit of all creditors and stockholders; and this would especially be true when a court of competent jurisdiction over the subject matter of the liquidation, which has territorial jurisdiction over the insolvent creditor and trustee, has by solemn order or decree forbidden the defunct corporation to act as trustee in the premises. No court would permit an involuntary bankrupt to proceed to collect by foreclosure of liens any indebtedness owing to him and administer the same to the displacement of the trustee in bankrupty, nor would any court of equity permit an insolvent debtor to proceed with the collection by foreclosure of indebtedness owing to him and to the displacement of the authority of a receiver, whose duty it is to collect and conserve the assets for the benefit of all creditors.
As heretofore shown, it was the duty of the state examiner of state banks of Louisiana under the express provisions of Act 300, Laws of 1910, to take possession of all of the property of the insolvent Interstate Trust Banking Company, including the Series A Bonds and the bond mortgage securing the same, and to retain the same until its affairs should become finally liquidated under the jurisdiction of the courts of Louisiana. Such right and duty of the said official is wholly inconsistent with the theory that the original trustee was capacitated and able to act as such at the time Myron Turfitt was appointed as successor trustee on March 4, 1937, after the liquidation proceedings had been in progress against the original trustee since the year 1934.
Aside from any other consideration, the original trustee could not act contrary to the mandate of the Civil District Court unless and until the order forbidding it to do so had become vacated. While not analogous on its facts, this Court held in Equitable Life Assurance Society v. Gex' Estate et al., 184 Miss. 577, 186 So. 659, that a temporary restraining order of the same Civil District Court of the Parish of Orleans, Louisiana, which forbade a certain course of action was not only binding upon the parties to the proceeding but that the same equally precluded others, who had knowledge of the order, from taking such course of action.
In the instant case, Mr. E.G. Flowers, President of the mortgagor, Pearl Realty Company, was a Director in the Interstate Trust Banking Company, the beneficiary and original trustee in the mortgage, and the mortgagor through its president had known for nearly a year, by notice of record and otherwise, that Myron Turfitt had been appointed as successor trustee of the said banking institution in liquidation. The trial court would have been warranted in finding as a fact that Mr. Flowers was approached with reference to the proposed appointment of the successor trustee, before the appointment was made, and that the same met with his approval. Moreover, the Series B Bonds or notes, on Sept. 30, 1933, while then held by Enochs Flowers, Ltd., were conveyed by said firm to the Jackson-State National Bank as trustee for the benefit of the creditors of the said transferror, in what was known as the "Jackson Pool Agreement", and of which trust the Interstate Trust Banking Company was the largest beneficiary and creditor, holding $138,000.81 of indebtedness out of the total of $225,000 for the payment of which the trust was created. The principal complainants in the instant suit were partners in the firm of Enochs Flowers, Ltd. and had individually executed the said trust agreement jointly with the firm.
The observations last above stated should be brought to bear on the question raised by the second paragraph of Section 4 of Article 8 of the bond mortgage hereinbefore quoted, which provides that "A successor (trustee) may be appointed by the holder or holders of not less than a majority in amount of all notes hereby secured and then outstanding . . . provided in case of inability to agree upon such trustee, the majority in amount then outstanding of Series 'A' notes shall be vested with this power exclusively." It is shown that O.H. Pittman, nominee for the benefit of the Interstate Trust Banking Company, had, prior to the appointment of the successor trustee, acquired all of the Series A Bonds or notes amounting to $120,000, which constituted a majority in amount of both the Series A Bonds and the Series B Bonds, the latter being in the sum of $114,500.
For whatever it may be worth, the trust officer of the Jackson-State National Bank in charge of the assets of the "Jackson Pool Agreement", and to which bank the Series B notes had been conveyed as trustee, and who was administering the trust for the benefit of the creditors therein named, likewise consented to the appointment of the successor trustee. But the appellants, as stockholders in the Pearl Realty Company, mortgagor in the bond mortgage, make the contention that there should have been an attempt on the part of the holder of the Series A Bonds to agree with the holder of the Series B Bonds upon the appointment of such successor trustee. Of this failure to attempt to agree on a successor trustee, neither the mortgagor nor Enochs Flowers, Ltd., as payee, can complain, since they were not the holders of Series B Bonds when the successor trustee was appointed. However, the trustee in the "Jackson Pool Agreement" did agree to such appointment for whatever such agreement may be worth, as did likewise the President of the mortgagor, Pearl Realty Company, as aforesaid. And after the successor trustee, prior to the foreclosure under the bond mortgage, had made written demand in writing as such trustee upon the mortgagor for the payment of both the Series A and Series B Bonds, no objection was registered by the mortgagor to his capacity as such trustee to make such demand.
(Hn 3) The present suit was filed on Feb. 5, 1948, two days before the completion of the bar of the ten-year statute of limitations, Sections 709-10-11, Code of 1942, as to the appellee Mississippi Tower Building, Inc., and under the facts of the case the same is not barred by laches. As to whether or not there was a ratification by the holder of the Series B Bonds of the appointment of the successor trustee, we deem it unnecessary to decide because we have reached the conclusion that under all of the facts and circumstances hereinbefore stated, there was "incapacity" and "inability" on the part of the original trustee to act as such in the foreclosure.
(Hn 2) Lastly, on the question of the validity of the foreclosure, involving as it does the regularity or legality alone of the appointment of the successor trustee for that purpose, the appellants contend that the appointment was void for the reason that said Section 4, Article 8 of the bond mortgage required that the instrument should have been both "properly executed and recorded in the State of Mississippi", whereas the same was not both executed and recorded in Mississippi but was properly executed in New Orleans, Louisiana, and then recorded in Mississippi. Our opinion as to this contention is that the words "properly executed" meant that a properly executed instrument was required, the words "properly executed" referring to the character of instrument thereinabove mentioned, and that the words "recorded in the State of Mississippi" have reference to where such an instrument should be placed of record, after being "properly executed."
It follows that we are therefore of the opinion that the bond mortgage was legally foreclosed, and that the fee simple title of the Tower Building property was acquired from the purchaser by the Mississippi Tower Building, Inc., through mesne conveyances, and that the trial court committed no error in confirming its title thereto. Therefore, the decree dismissing the bill of complaint, and in all other respects, is hereby affirmed.
Affirmed.
Ethridge, C., took no part in this decision.