BEFORE PATTERSON, DAN LEE AND SULLIVAN
SULLIVAN, JUSTICE, FOR THE COURT:
This is an appeal from a decree of the Chancery Court of Lafayette County, Mississippi, denying a motion
to set aside a default judgment.
S & W Construction Company of Tennessee, Inc., a Tennessee corporation (S & W) sued Dr. Joseph Villard in a Tennessee court on a debt of $484,110, and on May 12, 1982, obtained a default judgment in that amount. On July 30, 1982, S & W enrolled that judgment in the Lafayette County Chancery Court and petitioned for writs of garnishment and attachment in order to secure any debts owed to Dr. Villard in the hands of North Mississippi Savings & Loan Association and First National Bank of Oxford, Mississippi. First National Bank responded to the writs and denied possession of any property or debts owing to Dr. Villard. The Savings and Loan did not answer and default was entered by the chancery clerk against it on October 7, 1982. That same day, S & W moved in chancery court for a default judgment; at S & W's request, the chancellor telephoned Malcolm Reese, president of North Mississippi Savings and Loan Association, to inform him of the impending judgment.
For the first time, Reese obtained counsel for the Savings and Loan, and that attorney sought a continuance, to which the attorney for S & W would not agree. The Savings and Loan still did not answer and did not appear and default judgment was entered against it for the full amount of the debt, plus costs and attorney's fees.
On October 11, 1982, the Savings and Loan moved to set the default aside, alleging that it occurred due to Dr. Villard's misrepresentations to Mr. Reese. Reese testified that Villard owned 71% of the stock of the Savings and Loan and had accounts therein totaling $350,000, but that these accounts were pledged to the Federal Home Loan Bank of Little Rock, Arkansas. Additionally, Reese stated that he had personal possession of 600 shares of corporate stock in the Savings and Loan that belonged to Dr. Villard. Reese admitted that when he got the initial summons he called Villard and was assured by him that the debt to S & W would soon be paid. Only after the chancellor telephoned Reese did Reese employ counsel for the association.
Attached to the Savings and Loan Association's motion to set aside the default was a sworn answer to the writ of garnishment stating that the only assets of Dr. Villard's held by the Association were certain accounts pledged to the Federal Home Loan Bank.
On April 8, 1983, the chancellor refused to set
aside the default judgment and on April 11, 1983, a writ of execution was issued against North Mississippi Savings & Loan Association. That same day, North Mississippi Savings & Loan Association was placed in receivership with the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver. At this time, substantially all assets and liabilities of the Savings and Loan were transferred to a newly organized entity, the New North Mississippi Federal Savings & Loan Association (New Association).
After being advised by FSLIC that under Federal law writs of execution could not be enforced against the new association, S & W on April 16, 1983, petitioned the Chancery Court for a writ of assistance so that the prior judgment could be executed upon. On April 28, 1983, FSLIC and the New Association filed a sworn declaration to the same effect as that filed by the old association on October 11, 1982. This declaration was followed by an alternative motion to rescind and strike the default judgment. The chancellor also denied these motions.
BASED UPON MISSISSIPPI CODE ANNOTATED 11-35-31 (SUPP. 1984), DID THE CHANCELLOR ERR AS A MATTER OF LAW IN REFUSING TO GRANT NORTH MISSISSIPPI SAVINGS & LOAN ASSOCIATION'S SWORN MOTION TO VACATE DEFAULT JUDGMENT AND THE APPELLANT'S DECLARATION?
11-35-31 reads in its entirety as follows:
If a garnishee, personally summoned, shall fail to answer as required by law, or if a scire facias on a judgment nisi be executed on him, and he fail to show cause for vacating it, the court shall enter a judgment against him for the amount of plaintiff's demand; and execution shall issue thereon, provided, however, that the garnishee may suspend the execution by filing a sworn declaration in said court showing the property and effects in his possession belonging to the debtor, and his indebtedness to the debtor, if any, or showing that there be none, if that be true; ...