June H. McMurphy v. Three Rivers Planning and Development District
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2005-CA-02106-COA
JUNE H. MCMURPHY
APPELLANT
v.
THREE RIVERS PLANNING AND DEVELOPMENT
DISTRICT, INC.
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEY FOR APPELLANT:
ATTORNEYS FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEE
10/18/2005
HON. JACQUELINE ESTES MASK
PONTOTOC COUNTY CHANCERY COURT
JOHN S. HILL
SIDRA PATTERSON WINTER
PHILLIP L. TUTOR
CIVIL - CONTRACT
CHANCELLOR ENTERED JUDGMENT FINDING
MCMURPHY ASSIGNED CERTAIN NUMBER OF
SHARES OF STOCK.
AFFIRMED - 03/20/2007
BEFORE MYERS, P.J., CHANDLER AND ROBERTS, JJ.
ROBERTS, J., FOR THE COURT:
SUMMARY OF THE CASE
¶1.
This contractual interpretation case arose from a corporation’s decision to finance the
purchase of a retail business. The corporation, MM&K, Inc., did not have sufficient collateral to
finance the purchase, so Three Rivers Planning and Development District, Inc., one of the two
financing entities, demanded additional collateral from the principal owners. June McMurphy, the
mother-in-law of Harley Boone, one of MM&K’s principal owners, intended to aid her son-in-law
in his collateral obligation. McMurphy executed a document and assigned 1,552 shares of stock to
Three Rivers as Boone’s portion of the additional collateral obligation.
¶2.
Eventually, MM&K defaulted on its obligation to Three Rivers. Three Rivers intended to
liquidate McMurphy’s stock. Three Rivers interpreted the assignment as a pledge of the stock,
including any appreciation in value that accrued subsequent to McMurphy’s pledge. McMurphy
disagreed. She did not interpret the assignment as inclusive of any appreciation in value. Rather,
she interpreted the assignment as a pledge of a specific value of the stock as of the date of the
assignment. Unable to resolve their differences, the matter went before the Pontotoc County
Chancery Court.
¶3.
The chancery court agreed with Three Rivers’ interpretation of the assignment. That is, the
chancellor interpreted the assignment as a pledge of the stock itself, including any appreciation in
value subsequent to the execution date, rather than a pledge of a specific value of the stock, less any
appreciation in value. McMurphy appeals and claims the chancellor erred in her interpretation. We
find no error and affirm.
FACTS AND PROCEDURAL HISTORY
¶4.
Harley Boone and Dennis Pate were the principal owners of a corporation called MM&K,
Inc. MM&K sought to purchase Trace Farm Supply, a retail business located in Tupelo, Mississippi.
MM&K lacked the capital to purchase Trace Farm Supply outright. To that end, MM&K sought to
borrow money from The Peoples Bank and Three Rivers Planning and Development District, Inc.
¶5.
During July of 1997, The Peoples Bank loaned MM&K $300,000 and Three Rivers loaned
it $200,000. However, Three Rivers took a second priority security position to any collateral that
would stem from Trace Farm Supply. Because Three Rivers felt under-collateralized, Three Rivers
demanded additional collateral from Boone and Pate, individually. Boone’s mother-in-law, June
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McMurphy, helped Boone with his obligation. McMurphy executed a document titled “Assignment
of Shares of Stock.” Specifically, McMurphy pledged 1,552 shares of Deposit Guaranty National
Bank (DGNB) stock. This case focuses on the contractual language of that document. In particular,
the issue is whether McMurphy pledged a particular limited dollar amount or whether she pledged
the stock itself, including any appreciation in value subsequent to execution of the document.
¶6.
In any event, during September of 1998, Boone bought out Pate and became the sole owner
of MM&K. However, Boone was required to replace Pate’s $100,000 collateral pledge. To
accomplish that, McMurphy allowed Boone to present her $100,000 certificate of deposit to
People’s Bank. Boone then sent his mother- in-law’s $50,000 certificate of deposit to Three Rivers,
which already had McMurphy’s $50,000 DGNB stock assignment.
¶7.
The record does not indicate exactly when, but at some point after Boone bought out Pate,
MM&K defaulted on its loans. Three Rivers sought to liquidate McMurphy’s stock, which
appreciated in value subsequent to the assignment. Three Rivers claimed that the assignment granted
them a security interest in the stock regardless of the value. Though the stock was valued at slightly
less than $50,000 at the time McMurphy executed the assignment, Three Rivers sought to liquidate
whatever amount necessary over and above $50,000 necessary to satisfy the deficiency.
¶8.
McMurphy claimed that the assignment was for no more than $50,000. Accordingly,
McMurphy refused to sign over her stock. McMurphy claimed that the assignment only granted
Three Rivers a security interest in the stock up to a $50,000 limit.
¶9.
On July 26, 2004, Three Rivers filed a complaint against McMurphy for mandatory
injunction to transfer the shares of stock. McMurphy filed an answer and a counterclaim. Within
those pleadings, McMurphy argued that the assignment was ambiguous and that any ambiguity
should be resolved against Three Rivers. By her counterclaim, McMurphy submitted that Three
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Rivers apply $50,000 worth of stock to Boone’s delinquency and deliver any amount over and above
$50,000 to her.
¶10.
On September 28, 2005, the Pontotoc County Chancery Court conducted a hearing on Three
Rivers’ complaint and McMurphy’s countercomplaint. The parties did not submit any testimony
during that hearing. Instead, the transcript reflects that counsel for each party argued in chambers,
though counsel agreed that the argument would not be on the record. However, the parties submitted
several exhibits; in particular, they submitted (a) McMurphy’s first assignment of stock, (b)
McMurphy’s second assignment of stock, (c) the deposition of Suzanne Smith, Boone’s ex-wife and
McMurphy’s daughter, (d) the deposition of Reed Hillen, the attorney who represented Boone and
Pate incident to their purchase of Trace Farm Supply, (e) June McMurphy’s deposition, (f) the
deposition of Randy Kelley, the executive director of Three Rivers, (g) the deposition of Mitchell
Montgomery, the division director of Three Rivers’ loan division, and (h) Harley Boone’s
deposition.
¶11.
On October 18, 2005, the chancellor rendered judgment on the matter. The chancellor found
that, according to the plain language of her stock assignment, McMurphy assigned a certain number
of shares, but not a certain dollar value of shares. That is, the chancellor found that McMurphy did
not assign a $50,000 maximum of value in the shares. Rather, the chancellor found that McMurphy
assigned 1,552 shares as a whole, including any appreciated value over and above $50,000.
Aggrieved, McMurphy appeals.
STANDARD OF REVIEW
¶12.
Questions concerning construction of contracts are questions of law. Parkerson v. Smith, 817
So. 2d 529 (¶7) (Miss. 2002). We review questions of law pursuant to a de novo standard. Ellison
v. Meek, 820 So.2d 730 (¶11) (Miss. 2002).
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ANALYSIS
I.
DID THE ASSIGNMENT PLEDGE A NUMBER OF SHARES OR A PARTICULAR
DOLLAR VALUE FOR THOSE SHARES?
¶13.
The sole issue on appeal is whether the language of the assignment granted Three Rivers a
security interest in the stock itself, including any appreciation in value that accrued subsequent to
the assignment. McMurphy contends that she never intended to pledge more than $50,000.
According to McMurphy, Boone had to come up with $100,000 to secure his portion of the July
1997 loan from Three Rivers. McMurphy submits that her assignment covered one half of Boone’s
obligation. The relevant document titled “Assignment of Shares of Stock” stated:
FOR VALUE RECEIVED I/we hereby assign to Three Rivers Planning and
Development District, Inc., a Mississippi non-profit corporation, 1552 shares of
Deposit Guaranty National Bank Stock, held at Three Rivers Planning and
Development District, Inc., in the amount of Forty nine thousand six hundred and
sixty four ($49,664.00) Dollars, as collateral for a loan to MM&K, Inc.
This assignment shall be a continuing one and shall be effective for any
renewals of above loan until same is entirely paid, and shall operate as security for
payment of any other debts or liabilities of the undersigned to you now in existence
or hereafter contracted.
Three Rivers Planning and Development District, Inc. is hereby authorized
to use the proceeds of the above to pay any note or notes representing the unpaid
balance of the above loan or loans at maturity or thereafter, with interest and costs,
if not otherwise paid.
/s/June H. McMurphy
¶14.
It seems that McMurphy’s 1,552 shares appreciated to 3,395 shares, though the means of that
appreciation is not among the record. Nevertheless, we are called upon to interpret the language
from that July of 1997 assignment document.
¶15.
“The primary purpose of all contract construction principles and methods is to determine and
record the intent of the contracting parties.” Facilities, Inc. v. Rogers-Usry Chevrolet, Inc., 908
So.2d 107 (¶6) (Miss. 2005). As with any contract interpretation case, we follow a three-tiered
approach. Id. at (¶7). First, we apply the “four corners” test. Id. That is, we look to the language
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the parties used in expressing their agreement. Id. We read the contract as a whole, so that we give
effect to all of its clauses. Id.
¶16.
The pertinent language of the assignment is not complicated or convoluted. The assignment
specifically stated that McMurphy “assign[ed] to Three Rivers . . . 1552 [sic] shares of Deposit
Guaranty National Bank Stock . . . in the amount of Forty nine thousand six hundred and sixty four
($49,664.00) Dollars, as collateral for a loan to MM&K, Inc.” A fair reading of that language
indicates that McMurphy assigned 1,552 shares of DGNB stock to Three Rivers. While the
assignment specifies the value of the shares as of the execution of the assignment, no language
within the assignment operates to limit the value of the assignment to the value as of that time.
¶17.
Additionally, the assignment states that “Three Rivers . . . is hereby authorized to use the
proceeds of the above [the 1,552 shares of DGNB stock] to pay any note or notes representing the
unpaid balance of the above loan or loans at maturity or thereafter, with interest and costs, if not
otherwise paid.” (emphasis added). That language does not limit the value of the shares at $50,000.
To the contrary, this language indicates that Three Rivers may use the proceeds of the DGNB stock
to off set any unpaid portion of the loan Three Rivers advanced to MM&K. Nothing in the
agreement reads to limit of those proceeds at a $50,000 cap.
¶18.
McMurphy has continuously stated that she did not intend to advance more than $50,000 as
collateral. That may very well be, but we cannot discern that intent from the agreement that she
signed. In interpreting the assignment agreement, we are not as concerned with what McMurphy and
Three Rivers may have intended as we are with what they said. Facilities, Inc., 908 So.2d at (¶6).
The reasoning behind this set of priorities is that the words employed in the agreement are the best
resource for ascertaining intent and assigning meaning with fairness and accuracy. Id. Accordingly,
we are not at liberty to infer intent contrary to that which emanates from the agreement. Id. Because
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nothing in the language of the assignment limits the value of McMurphy’s DGNB stock to a $50,000
value, we do not find that the chancellor erred. As such, we affirm.
¶19. THE JUDGMENT OF THE PONTOTOC COUNTY CHANCERY COURT IS
AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.
MYERS, P.J., CHANDLER AND GRIFFIS, JJ., CONCUR. LEE, P.J., DISSENTS
WITH SEPARATE OPINION, JOINED BY KING, C.J., IRVING AND ISHEE, JJ. BARNES
AND CARLTON, JJ., NOT PARTICIPATING.
LEE, P.J., DISSENTING:
¶20.
With respect to the majority, I must dissent. The majority affirms the chancellor’s order that
“Three Rivers may liquidate sufficient shares of stock to satisfy the outstanding indebtedness, with
any surplus to be returned to McMurphy.” After reviewing the language of the assignment and the
facts, I find that McMurphy’s intent was to pledge $50,000 collateral, with the stock as security, and
nothing more.
¶21.
In looking at the assignment of stock, the majority finds that the “pertinent language is not
complicated or convoluted” and thus relies on the four corners of the assignment to determine the
parties’ intent. It is apparent to me that the contract language is ambiguous, and, therefore, we
cannot rely on the four corners rule to determine intent. Tupelo Redevelopment Agency v. Abernathy,
913 So. 2d 278, 283 (¶12) (Miss. 2005). In the event that a contract is ambiguous, the subsequent
interpretation presents a question of fact for the trier of fact. Id. This Court is not at liberty to infer
intent contrary to that emanating from the text at issue. Id. at 284 (¶12).
¶22.
According to the language of the assignment, McMurphy assigned 1,552 shares of DGNB
stock, but the assignment also stated that the amount of the stock assigned was $49,664. The
assignment is not dated. It is unclear exactly what McMurphy meant to pledge. She could have
intended to pledge 1,552 shares of DGNB stock or the exact amount of $49,664 which was
mentioned in the assignment. Further, the assignment is silent as to what would happen if there were
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a stock split, if the bank changed names, or if the stock value dramatically increased, as happened
in this case. “Where a contract is silent as to one of its terms, the court is not bound to adopt a
construction which is not compelled by the instrument and which no man in his right mind would
have agreed to.” Id. at 284 (¶14). It is not reasonable to believe that McMurphy would have agreed
to pledge all her DGNB stock no matter how much the stock increased in value. It is also not
reasonable to believe that she would have pledged stock valued at approximately $49,664 as
potential security for the entire amount of a $200,000 loan.
¶23.
Having found that the contract is ambiguous, the next step is to look at parol or extrinsic
evidence to determine the parties’ intent. Pursue Energy Corp. v. Perkins, 558 So. 2d 349, 353
(Miss. 1990). When the $200,000 loan was taken out, Three Rivers required $100,000 in collateral
to secure the indebtedness. Boone pledged a $50,000 certificate of deposit owned by Imogene
Boone. To make up the remaining $50,000, McMurphy pledged $50,000 worth of stock. Further,
the assignment does not even state for what McMurphy was putting up collateral. The agreement
simply states that the assignment was “collateral for a loan to MM&K, Inc.”
¶24.
According to the canons of statutory construction, since the assignment of stock was prepared
by Three Rivers, any ambiguity must be construed against Three Rivers. Id. at 352-53. To allow
Three Rivers to recover up to the amount of the outstanding balance of the loan from McMurphy’s
stock would be unjust enrichment. Three Rivers, the drafter of the assignment, is using ambiguities
in the assignment to take advantage of Ms. McMurphy. It is clear to me that Three Rivers did not
intend to receive the assignment of stock as total satisfaction of the outstanding balance in case of
a default. If it was Three Rivers’s true intent to take the shares in full satisfaction of the
indebtedness, then it would have to take the stock as is, regardless of the value at the time of default.
It is unlikely that Three Rivers would have been pleased with this result if the stock had dramatically
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decreased in value. It would be hard to imagine Three Rivers not demanding the deficiency from
McMurphy to make up for the $50,000 payment. Under the majority’s interpretation of the contract,
Three Rivers can “have its cake and eat it too.”
¶25.
Having determined the contract to be ambiguous, I find that the parties’ clear intent shown
from extrinsic evidence at the time the assignment of stock was drafted was that McMurphy would
be liable for $50,000, nothing more and nothing less. I would reverse and render holding McMurphy
liable for the indebtedness up to $50,000.
KING, C.J., IRVING AND ISHEE, JJ., JOIN THIS OPINION.
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