BEFORE ROY NOBLE LEE, C.J., PRATHER AND ZUCCARO, JJ.
ZUCCARO, JUSTICE, FOR THE COURT:
Arlan Robinson filed a declaratory judgment (Rule 57 M.R.C.P.) complaint in the Chancery Court of Stone County where he named as defendants Harold Conner Cain; H. T. Cain; the First National Bank of Wiggins; Gwendolyn J. Waits, Trustee for the benefit of Arlan Robinson; First National Bank of the South; and Oscar Gold, Trustee for the benefit of the First National Bank of the South. The Chancellor entered judgment in favor of Robinson. From that judgment Harold Conner Cain, H. T. Cain, and the First National Bank of Wiggins appeal.
The cast of characters in this comedy of errors is as follows:
Arlan Robinson was plaintiff below and is appellee here. [Robinson]
Harold Conner Cain and H. T. Cain, father and son, were defendants below and are appellants here. [Cains]
First National Bank of Wiggins - a banking corporation having its principal place of business in Wiggins, Mississippi - was defendant below and is appellant here. [FNB-Wiggins]
First National Bank of the South - a banking corporation having its principal place of business in Ocean Springs, Mississippi - was defendant below. FNB-South has failed to designate whether it is appellant or appellee here. Its position is that of appellee, because it prevailed below and thus would prefer that the judgment be affirmed. [FNB-South]
On January 18, 1980, Robinson sold 300 acres of land to the Cains. Part of the purchase price was deferred, so the Cains executed a $300,000.00 promissory note and executed a
deed of trust to Gwendolyn J. Waits as trustee with Robinson as beneficiary. The terms of the promissory note were that the $300,000.00 was to be paid in ten (10) annual installments of $30,000.00 each, plus accrued interest at ten percent (10%) per annum; annual payments were due January 19 of each year, with the first payment to be made January 19, 1981. The Cains made the first two scheduled payments of $30,000.00 plus accrued interest on January 19, 1981, and January 25, 1982, and thereby reduced the principal balance on the Cains to Robinson note to $240,000.00.
The first tangle in what has become a financial Gordian knot occurred when Robinson - seller of the property, holder of the note, and beneficiary of the deed of trust - decided to borrow some money from FNB-Wiggins, using the Cains to Robinson note and deed of trust as collateral. Although Robinson borrowed much less than the face value of the note (the balance on the note was $240,000.00 plus accrued interest and Robinson borrowed approximately $75,000.00), and although Robinson and FNB-Wiggins intended the note and deed of trust to be assigned to FNB-Wiggins as collateral only, nevertheless, Robinson executed in favor of FNB-Wiggins what is on its face, an absolute, unconditional assignment of the Cains to Robinson note and deed of trust. The assignment was recorded in the Stone County Chancery Clerk's office, and a marginal notation of the assignment was made on the face of the Cains to Robinson deed of trust, which had also been filed in the Stone County Chancery Clerk's Office. This assignment, which appeared to be absolute although it was intended only as collateral, was prepared by FNB-Wiggins. After the note and deed of trust were assigned to it, FNB-Wiggins notified the Cains, apparently by telephone, that Cains were to make future payments on the note to FNB-Wiggins. The FNB-Wiggins bank president did not recall whether he in notifying the Cains characterized the assignment as absolute or conditional. Harold Conner Cain testified that he was never told the assignment was anything other than absolute.
As instructed, the Cains made their check for the January 19, 1983 installment payable to FNB-Wiggins. A notation on the check recited" For Arlan Robinson note. "That payment reduced the principal balance on the Cains to Robinson note to $210,000.00.
The knot began to tighten in September of 1983, when Cains decided to borrow $2.1 million from FNB-South, a bank which, to that point, had not been involved in any of the transactions at issue here. FNB-South required as security for loan to Cains first liens on several parcels of property,
including that secured by the Cains to Robinson note, part of the loan proceeds from FNB-South to the Cains to be disbursed were to pay off the Cains to Robinson note and deed of trust so FNB-South would have first lien on the 300 acres.
Tom Matthews, FNB-South's attorney, checked title to the 300 acres and discovered that the Cains to Robinson note and deed of trust had been assigned to FNB-Wiggins. Because the assignment appeared to be unconditional, Matthews concluded that FNB-Wiggins owned the note and deed of trust. Matthews then telephoned FNB-Wiggins to ask for the pay-off amount on" the note ". What happened during that call is disputed. Matthews testified at trial that when he telephoned FNB-Wiggins he asked for" a pay-off of the deed of trust that had been initially given by Cains to Arlan Robinson and assigned to the [FNB-Wiggins]. "The president of FNB-Wiggins, however, testified that Matthews asked for the pay-off on" the Arlan Robinson note. "The Chancellor found that Matthews asked for the pay-off on the Cains to Robinson note that had been assigned to FNB-Wiggins. The pay-off figure which FNB-Wiggins quoted to Matthews was $75,906.50. This was actually the pay-off on Robinson's note to FNB-Wiggins, which was secured by the Cains to Robinson note and deed of trust. The Chancellor found that FNB-Wiggins was in error in quoting that figure since Matthews had asked for the pay-off on the Cains to Robinson note, the principal balance on which was $210,000.00, plus accrued interest.
When Matthews told the Cains that the pay-off was $75,906.50, they had him to check again, although they did not tell Matthews or anyone else that the pay-off should have been much higher. Harold Conner Cain claimed he believed the amount was correct because he" assumed "Robinson had discounted the note when he sold it to FNB-Wiggins.
FNB-South made the loan to the Cains; closing occurred on September 29, 1983. As part of that closing, Matthews' law firm issued a check on its trust account payable to FNB-Wiggins in the amount of $75,906.50. Matthews' secretary was instructed to type on the check this notation:" Pay-off Cain DT to Robinson Assg. to 1st National Bnk of Wiggins. "However, the secretary inadvertently typed" Pay-off Robinson DT to Cain Assg. to 1st National Bnk Wiggins. "Of course, there was no" Robinson deed of trust to Cain. "FNB-Wiggins endorsed the check, applied it in full payment of Robinson's debt to FNB-Wiggins, and gave the Cains credit for that amount on Cains' note owing to Robinson.
At that point, FNB-South believed it had a first lien on
the 300 acres. This belief was based on 1) the fact that a title search indicated that the Cains to Robinson note and deed of trust had been unconditionally assigned to FNB-Wiggins, and 2) the fact that, when asked for a pay-off on the Cains to Robinson note assigned to it, FNB-Wiggins gave a figure of $75,906.50 as the pay-off figure. That amount having been paid to FNB-Wiggins, FNB-South understandingly believed it held the first lien on the 300 acres.
There is one final tangle in the knot. Because the $75,906.50 check paid off Robinson's debt to FNB-Wiggins, that bank executed a" Cancellation of Assignment of Annual Installment Note and Deed of Trust. "This instrument cancelled Robinson's assignment to FNB-Wiggins of the Cains to Robinson note and deed of trust. The deputy chancery clerk of Stone County, however, marked the Cains to Robinson deed of trust cancelled, based on the instrument which cancelled only the assignment. This final twist is actually not of significant consequence to this appeal since it occurred three weeks after the closing of the FNB-South loan, and FNB-South admitted that it could not have relied on a marginal notation entered on the deed of trust three weeks after it disbursed the loan proceeds. Clearly, FNB-South relied on 1) the recorded unconditional assignment and 2) the erroneous pay-off quoted by FNB-Wiggins of $75,906.50.
On August 17, 1984, Robinson filed a Complaint for Declaratory Judgment under Rule 57 M.R.C.P. in the Chancery Court of Stone County. Named as defendants were the Cains, FNB-Wiggins, FNB-South, the trustee of the Cains to Robinson deed of trust, and the trustee of the Cains to FNB-South deed of trust. In that Complaint, Robinson sought the following relief:
a) that the court declare that the Robinson to FNB-Wiggins assignments of the Cains to Robinson note and deed of trust were not absolute but were for collateral only;
b) that the court declare that the Cains to Robinson deed of trust remained a first deed of trust prior and superior to the Cains to FNB-South deed of trust on the same property;
c) that if the court find that FNB-Wiggins' acceptance of the $75,906.50 served to pay off the Cains to Robinson note and deed of trust, that the court would also
find FNB-Wiggins, by so accepting payment, breached its fiduciary duty to Robinson, and that FNB-Wiggins therefore was indebted to Robinson for the unpaid principal and interest, for which Robinson should be awarded judgment [Here Robinson appears to pray for a money judgment against FNB-Wiggins]; and
d) that Robinson recover costs and reasonable attorney's fees.
The Cains cross-claimed against FNB-Wiggins asking, in essence, indemnification as to any liability the ...