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HENRY CLAY COCHRAN AND AUDREY L. COCHRAN v. DEPOSIT GUARANTY NATIONAL BANK AND WILLIAM S. MULLINS

JULY 08, 1987

HENRY CLAY COCHRAN AND AUDREY L. COCHRAN
v.
DEPOSIT GUARANTY NATIONAL BANK AND WILLIAM S. MULLINS, III, TRUSTEE



BEFORE ROY NOBLE LEE, P.J.; ROBERTSON AND ANDERSON, JJ.

ROBERTSON, JUSTICE, FOR THE COURT:

This case presents the question whether the holder of a deed of trust securing an indebtedness may upon default foreclose, notwithstanding the prior renewal of the secured (but now in default) indebtedness by one other than the grantor in the deed of trust. We hold that it may and affirm.

On November 17, 1978, Henry Clay Cochran and Audrey L. Cochran and two others executed and delivered a $125,000.00 promissory note in favor of The First National Bank of Laurel, Mississippi, predecessor of Deposit Guaranty National Bank (hereinafter "Bank"). The Cochrans were Defendants below and are Appellants here. The Bank was Plaintiff below and is one of the Appellees here. On the same day, the Cochrans executed and delivered unto the Bank's trustee, a deed of trust wherein, as security for the aforesaid indebtedness, they conveyed in trust certain real property owned by them in the city of Laurel, Mississippi. The deed of trust contained a clause which reads as follows:

 In addition to the indebtedness specifically mentioned above and any and all extensions or renewals of the same, or any part thereof, this conveyance shall also cover such future and additional advances as may be made to the grantor, or either of them, by the beneficiary, the beneficiary to be the sole judge as to whether or not such future and additional advances shall be made.

 The Cochrans entered into this secured transaction in connection with a business venture in which they and two others were involved, a business subsequently incorporated as The Lite House, Inc.

 On November 15, 1979, the Bank made a "future and additional advance" and on that same day The Lite House, Inc.

 made and delivered to the Bank its $86,000.00 promissory note payable in ninety days. The note was endorsed by Henry Clay Cochran and another. This $86,000.00 note was renewed on February 13, 1980, and on June 12, 1980.

 After having previously acquired the interest of the their co-venturers, the Cochrans, on September 15, 1980, conveyed their interest in The Lite House, Inc. to Lonnie Reynolds. Acting as the new president of the corporation, Reynolds, on November 14, 1980, on March 2, 1981, on October 22, 1981, and on May 10, 1982, made further renewals of the $86,000.00 note in question. Cochran was out of the business at this time and did not participate in these renewals. Subsequently, The Lite House business foundered financially and ultimately failed.

 After default, the Bank commenced the present civil action for judicial foreclosure by filing its complaint on December 21, 1983, in the Chancery Court for the Second Judicial District of Jones County, Mississippi. The dispositive issue is whether the November 17, 1978, deed of trust executed by the Cochrans remained valid and enforceable with respect to the $86,000.00 indebtedness originally contracted on November 15, 1979, and renewed so many times. The Chancery Court answered the question in the affirmative. The Cochrans here appeal.

 We proceed here in the field of privately made law. Our positive law empowers parties such as the Cochrans and the Bank to make rules regarding their rights and obligations, which we may be called upon to enforce. The parties have acted pursuant to this authority first on November 17, 1978. On that occasion the Cochrans conveyed to the Bank's trustee the property in dispute and agreed that the lien of the deed of trust would secure "any and all extensions or renewals" of the original $125,000.00 indebtedness and also "future and additional advances." Technically speaking, the indebtedness at issue is not an extension or renewal of the original indebtedness but rather it is an extension or renewal of a future advance. Our question is whether that technicality is of consequence.

 Without doubt, the deed of trust by its terms secured the original $86,000.00 future advance note executed November 15, 1979. If that note had not been paid or renewed, and if the Bank had thereupon declared default, there would have been no question but that the deed of trust would have stood as security upon which the Bank could have foreclosed.

 The Cochrans concede this proposition but argue that

 their property no longer stands as security for this indebtedness because subsequent renewals were effected by Reynolds and were not signed or endorsed by either of the Cochrans. They rely upon Miss. Code Ann. 75-3-401 (1972) which provides that "no person shall be liable on an instrument unless their signature appears thereon." But all this means is that the Cochrans have no personal liability on the $86,000.00 note as subsequently renewed by Reynolds. It in no way operates to cancel the original deed of trust.

 We have ancient authority to the effect that the lien of a deed of trust continues enforceable so long as the original debt or any part of it may be traced into a new note, notwithstanding the new note be made by a new debtor. Kausler v. Ford, 47 Miss. 289 (1872); Heard v. Evans, 1 Freem.Ch. 79 (Miss.1843). These cases state principles applicable in the absence of agreement to the contrary. Here there is no agreement to the contrary. Indeed, the agreement, the privately made law, is that the conveyance was made in trust to secure payment of the indebtedness described in the deed of trust. That indebtedness, as indicated above, includes extensions and renewals ...


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