978-1285770178 Case Printout Case CPC-14-08

Miss.App.,2006.

Trustmark Nat. Bank v. Barnard

the administration of two loans, and bank counterclaimed for payment on the loans and attorney fees. The Chancery

Court, Simpson County, J. Larry Buffington, J., ordered debtor to pay $4,500 on one note and to pay the full princi-

pal on the other, plus statutory interest, and ordered the bank to clear the notes off debtor’s credit report. Bank ap-

[6] Bills and Notes 56 52

56 Bills and Notes

56I Requisites and Validity

56I(B) Form and Contents of Promissory Notes and Duebills

56k48 Nature of Contract and Liability of Maker

56k52 k. Discharge of Maker. Most Cited Cases

Discharge is available only to the extent of the collateral’s impairment.

J. Mark Franklin, III, R. Keith Foreman, Ridgeland, Lara E. Gill, for appellant.

¶ 1. Loyd Dean Barnard brought a declaratory judgment action against Trustmark National Bank. Barnard alleged

that he was damaged as a result of Trustmark’s negligence in the administration of two loans. Trustmark filed a

counterclaim for payment on the loans and attorney’s fees.

¶ 2. The chancellor found both parties negligent. The chancellor ordered Barnard to pay $4,500 on the May note and

II. The chancellor erred as a matter of law in granting equitable relief on the claim of collateral impairment with-

out proof of impairment by the lender and without proof of damages.

Finding error, we reverse, render and remand.

truck before the loan came due or at the end of the term. Barnard used the trucks, and he repaid the loan, principal

and interest, to Trustmark through the proceeds received when the truck was sold by Easy Way.

¶ 5. Here, we consider Barnard’s purchase of three trucks through two promissory notes with Trustmark. This litiga–

tion commenced after Easy Way’s check to Trustmark was returned for insufficient funds.

tember 12, 2000 in the sum of $21,555, said note maturing on March 13, 2001. At the time of the execution of

said notes[,] security agreements in favor of Trustmark together with title applications [were]prepared by Easy

Way on the first two vehicles and by Trustmark on the last vehicle.

The Court further finds that Trustmark National Bank likewise had a relationship with Easy Way and Clarence T.

Morgan, Jr. That Loyd Dean Barnard was a lifetime friend of Clarence T. Morgan, Jr. and Loyd Dean Barnard’s

The Court further finds that exception reports were issued to Trustmark National Bank in Magee from the central

office in Jackson identifying problems with the titles on Barnard’s vehicle and that as early as May of 2000 said

exceptions were received in the Magee office concerning the vehicles purchased by Barnard from Easy Way.

The Court further finds that all parties were negligent in the handling of both of these notes.

The Court further finds that had Trustmark National Bank used due diligence regarding the note of May 2000 that

the May 2000 note that was their statutory requirement, as well as their duty to their customer, that any damages

that occurred, occurred due to their negligence. However, this Court further recognizes that as shown by the testi-

mony, Barnard had the use of one of the vehicles for approximately six months and that to discharge this debt

without some responsibility on the part of Barnard would be against all principles of equity. And therefore, as to

this note, the Court finds that the same should be discharged with the exception of $4,500.

¶ 7. We must examine the evidence surrounding the two notes.

A. May note

standard was applied. Sanderson v. Sanderson, 824 So.2d 623, 625-26 (¶ 8) (Miss.2002). Legal questions are re–

viewed de novo. Russell v. Performance Toyota, Inc., 826 So.2d 719, 721(¶ 5) (Miss.2002).

ANALYSIS

I. The chancellor erred as a matter of law in granting equitable relief contrary to binding statutory authority.

[3] ¶ 18. Trustmark first argues that equity must follow the law. Trustmark asserts that the Uniform Commercial

Code (“UCC”) dictates that a maker cannot be discharged from a note. Barnard argues that the UCC is not control-

ling in this case. Rather, Barnard argues that Trustmark had a duty under the Mississippi Motor Vehicle and Manu-

on the vehicles that were part of the May 2000 note … any damages that occurred, occurred due to [Trustmark’s]

negligence.” As a result, Trustmark argues that the chancellor granted Barnard a partial discharge of his obligations

under the May note. Trustmark also claims that the chancellor found Barnard responsible for his loss under the Sep–

tember note but discharged him of his obligation to pay interest and attorney’s fees. Trustmark asserts that the chan-

cellor ignored binding authority to discharge Barnard from his payment obligations under the note.

amount of the right of recourse of the party asserting discharge, or (ii) the reduction in value of the interest causes

an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The bur-

den of proving impairment is on the party asserting discharge.

Trustmark argues that Mississippi law provides that the maker of a note is not entitled to discharge of his obligations

Sav. & Loan Ass’n, 506 So.2d 241, 244 (Miss.1987). Trustmark could recover against Barnard and was not required

to look to the collateral. Id. at 242-43.

¶ 22. According to Trustmark, Barnard’s action is simply his effort to claim impairment of collateral as defense to

payment of the May and September notes. Trustmark contends that such defense is not available to Barnard and is

tion of this action. Barnard argues that “Miss.Code Ann. [§ ] 75-9-104(c) excludes liens given by statute, which is

exactly the purpose of Miss.Code Ann. § 63–21-1, et seq., from the provisions of the secured transactions chapter of

the Uniform Commercial Code.” The problem with this argument is that section 75-9–104(c) FN1 provides that the

104(c) was moved to Miss.Code Ann. § 75-9-109(d)(2).

¶ 24. We disagree with Barnard and agree with Trustmark. Accordingly, we reverse and render, finding that the

chancellor applied an erroneous legal standard. Because this is an action on the note, the Uniform Commercial Code

controls. If this were an action to determine who had priority as to the collateral, Barnard’s argument may have mer–

third truck, through the September note, Barnard turned the truck over to a third party for resale. Barnard did noth-

ing to protect himself or his interest in the proceeds from that sale. Barnard, rather than Trustmark, delivered the

truck for resale.

¶ 26. The security agreement required Barnard to use reasonable care to protect and preserve the collateral in his

II. The chancellor erred as a matter of law in granting equitable relief on the claim of collateral impairment without

proof of impairment by the lender and without proof of damages.

¶ 27. Trustmark argues that (1) there was no evidence that it was negligent, and (2) there was no proof of impaired

nard. The trial court found, “[t]hat Trustmark carried the floor plan for Morgan. Morgan, with the exception of one

vehicle, purchased these vehicles for Barnard using his floor plan with Trustmark and later paying off the floor plan

with proceeds from the loans that Barnard obtained through Trustmark.” Three paragraphs later, the chancellor

found “[t]hat had Trustmark National Bank used due diligence regarding the note of May 2000 that the scheme of its

other customer, Easy Way and Morgan, would have been caught much earlier and the resulting loss, if any, would

¶ 37. For these reasons, we reverse and render judgment in favor of Trustmark. We remand for the chancellor to

determine the amount due under the notes, including all principal, interest, attorney’s fees and costs.

¶ 38. THE JUDGMENT OF THE CHANCERY COURT OF SIMPSON COUNTY IS REVERSED, REN-

DERED AND REMANDED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLEE.

LEE AND MYERS, P.JJ., SOUTHWICK, IRVING, CHANDLER, BARNES, ISHEE AND ROBERTS, JJ., CON-

CUR. KING, C.J., CONCURS IN RESULT ONLY WITHOUT SEPARATE WRITTEN OPINION.

Miss.App.,2006.

Trustmark Nat. Bank v. Barnard

930 So.2d 1281

END OF DOCUMENT