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EMANUEL CRYSTAL & GERALD P. CRYSTAL v. GEORGE J. DUFFY

AUGUST 20, 1986

EMANUEL CRYSTAL & GERALD P. CRYSTAL
v.
GEORGE J. DUFFY



BEFORE WALKER, C.J., HAWKINS, P.J. AND PRATHER, J.

PRATHER, JUSTICE, FOR THE COURT:

The question presented by this appeal is whether grantees of mortgaged premises who specifically assume liability for primary and secondary mortgage debts remain personally liable to the holder of the secondary mortgage subsequent to foreclosure of the first trust deed, when the assumptors purchase the premises at the foreclosure sale.

The holder of the secondary note, George J. Duffy, filed suit against Emanuel and Gerald Crystal, the grantee assumptors, upon a secondary deed of trust which incorporated a promissory note. After suit was transferred from Circuit to the Chancery Court of Hinds County, the chancellor held that the Crystals were liable to Duffy for the debt and granted judgment. Feeling aggrieved, defendants appealed, assigning the following as error:

 (1) The lower court erred in ruling that the appellants became personally liable to the appellee by virtue of an assumption warranty deed of which the appellee was not aware and did not approve, accept or ratify.

 (2) The lower court erred in failing to rule that the appellee's cause of action was barred by the doctrine of laches.

 I.

 A previous opinion rendered by this Court concerning the same transaction, but different parties, is found in Hudson v. Bank of Edwards, 469 So.2d 1234 (Miss. 1985), from which

 opinion this Court quotes the factual situation giving rise to the second lawsuit.

 Appellant Norman H. Hudson is chairman of the board of Flying H. Ranch, Inc. ("Flying H"), a Mississippi corporation. On January 29, 1979, Hudson representing "Flying H" , entered into a contract with the Duffys for the purchase of a 111 acre farm near Edwards, Mississippi, for $168,000. In order to finance the purchase of the property, "Flying H" executed a note to First National Bank of Vicksburg (FNB), dated February 1, 1981, in the amount of $128,000. This note was collaterally endorsed by the Crystals. Repayment of the note was secured by two deeds of trust. "Flying H" executed a land deed of trust to FNB dated February 1, 1979. As collateral guarantors, the Crystals executed a land deed of trust to FNB on four tracts of property in Clinton, Mississippi.

 To secure the balance of the purchase price, "Flying H" executed a note and deed of trust to the Duffys for $40,000, covering the ranch.

 On March 19, 1981, "Flying H" executed a promissory note to the Bank of Edwards in the principal amount of $38,000, which was also secured by a deed of trust on the ranch.

 On August 11, 1981, "Flying H" conveyed the subject property to the Crystals by an assumption warranty deed, the stated consideration of which was the assumption by the Crystals of the indebtedness secured by the deeds of trust to FNB and to the Duffys. Thereafter, the note to FNB became in default and the bank instituted foreclosure proceedings.

 "Flying H" , which had meantime filed for bankruptcy, sought to enjoin the foreclosure of the subject property by FNB on the grounds that it was a violation of the automatic stay in 362 of the Bankruptcy Code. The bankruptcy court ruled that "Flying H" was not the owner of the subject property, having conveyed all interest thereto to the Crystals on August 11, 1981, by the assumption warranty deed. The bankruptcy court's order dated June 15, 1982, vacated a prior order which had stayed FNB from foreclosing on the subject property.

 * * *

 On July 19, 1982, the Bank of Edwards filed a petition for temporary restraining order and preliminary injunction against FNB and Al Binder, trustee, seeking to enjoin the foreclosure sale of the property on the theory that FNB was required to marshal its assets and seek first to recover the indebtedness owed from the collateral endorsers of the note of "Flying H" to FNB, or from other property owned by the collateral endorsers other than the subject property.

 On October 28, 1982, the Bank of Edwards made an oral motion to voluntarily dismiss its complaint to enjoin the foreclosure proceeding, which the trial court sustained in an agreed order of dismissal.

 The foreclosure sale was held on November 19, 1982, and the Crystals, the collateral endorsers on the "Flying H" note and holders of the assumption warranty deed, purchased the property for $127,875.14. The trustee's deed conveyed the ...


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