Smith v. Cleveland Steam Laundry, Inc.

Ethridge, J., delivered the opinion of the court. Appellants were the complainants in the court below, and filed a bill to foreclose a deed of trust given by the appellee's to secure sixteen promissory notes, of one hundred dollars each; each note being payable to a separate person, and all of them being due on January 1, 1922. The deed of trust, after setting out the names of the persons to whom the notes were payable, recited, “And whereas, the said corporation is anxious to secure the payment of said notes at maturity thereof,” proceeded to convey to [258] the trustee therein named and describing the property embraced in the deed of trust, and then continued: “This conveyance is in trust. Should the said Cleveland Steam Laundry pay said notes and indebtedness and interest owing thereon at maturity this conveyance shall be void; otherwise, at the request of the holders and owners of two-thirds or more of the above-described notes and indebtedness, in writing, the said W. W. Simmons, trustee, or any successor appointed in his place, shall sell said property and land, or a sufficiency thereof to satisfy the notes and indebtedness aforesaid then unpaid, after first giving notice of the time, place, and terms of sale in accordance with section 2772 of the Mississippi Code of 1906, and the amendments thereto,” etc. Complainants held five of said notes, and filed their bill on June 13, 1922, setting forth that their said notes were past due and unpaid, though demand for payment had been made, and asked for a decree in favor of each individual complainant for the amount of his note, with interest and attorney’s fees, and for the sale of property conveyed in the deed of trust, and joined as defendants in said suit the trustee named in the deed of trust and the holders of the other notes. At the return term the trustee procured time in which to file an answer, and decree pro confesso was taken against the Laundry and the othér defendants, and final judgment against the Laundry, appellee, for the amount due on said notes, with interest and attorney’s fees, and a commissioner was appointed to make a sale, etc. One week after this decree was filed the appellee filed a motion to set aside this decree pro confesso• and final decree thereon, and for leave to file a demurrer to the bill, which motion was sustained and the demurrer heard- and also sustained, and the bill of complaint was dismissed, from which this appeal is prosecuted. It is the contention of the appellants that the clause in the deed of trust providing for written notice by two-thirds of the holders of the said notes had no application to a suit in equity to foreclose, but that equity exercised juris [259] diction in such case independent of the provisions in the deed of trust providing for sale in pais by the trustee, citing and relying upon McDonald v. Vinson, 56 Miss. 497, and Ford v. Russell, Freem. Ch. 42, and other authorities. The appellees do not contend that equity has not jurisdiction to foreclose independently of the trustee, and state their position in the following language in their brief: “We do not now argue, and did not argue in the lower court, that a deed of trust cannot be foreclosed in chancery, nor did we argue in the lower court, nor do we intend to argue here, that the method of foreclosure provided in the contract is exclusive; but it was our contention in the lower court, and it is our contention here, that each of the parties to the transaction between the Cleveland Steam Laundry and the parties named as beneficiaries in the deed of trust entered into this loan under the agreement as set up in the deed of trust, to wit, that ten or more holders of the said notes would have to agree to the taking of the property of the Cleveland Steam Laundry for the payment of the debt before the deed of trust could be foreclosed; that, this being their contract, the security conveyed, to wit, the property of the Cleveland Steam Laundry, could not be sold by any method in a court of law or a court of equity, or by a trustee, until that time had arrived.” It will be noted from this statement that the appellees contend that the deed of trust constitutes a contract under which the property cannot be resorted to for satisfaction of debt until and unless two-thirds of the holders of the note request foreclosure, in writing; and the chancellor below adopted this theory of the contract. We are unable to agree with the chancellor in his holding. The provision for foreclosure in the deed of trust refers only to foreclosure by trustee. The note and deed of trust both make the debt due on January 1, 1922, and there is no provision negativing the idea of resorting either to a suit at law or a foreclosure in equity. The duty of the defendant was to pay the notes at maturity, and there is nothing in the contract that prevents a resort to a court [260] of equity. Of course, a trustee can only foreclose under the conditions of the instrument authorizing him to act; but this does not constitute an agreement on the part of the parties that the courts shall not be resorted to, and through them the property be subjected to the payment of the debt for which it is security. The judgment will therefore be reversed, the demurrer overruled, and the cause remanded, with leave to answer within thirty days after receipt of the mandate in the court below. Reversed and remanded.