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Pennington Group, LLC v. PriorityOne Bank

Court of Appeals of Mississippi

February 7, 2017

THE PENNINGTON GROUP, LLC, JOE PENNINGTON, HELEN PENNINGTON, AND PENNIBUNKPORT INVESTMENTS, LLC APPELLANTS
v.
PRIORITYONE BANK APPELLEE

          DATE OF JUDGMENT: 07/07/2015

         RANKIN COUNTY CHANCERY COURT HON. WILLIAM R. BARNETT TRIAL JUDGE

          ATTORNEYS FOR APPELLANTS: SEAN A. MILNER STEVEN PRICE NIXON

          ATTORNEY FOR APPELLEE: DEREK ANDREW HENDERSON

         EN BANC.

          LEE, C.J.

         ¶1. The Rankin County Chancery Court found that PriorityOne Bank held a first lien position over Helen Pennington, and that the foreclosure conducted by Helen was subject to PriorityOne's priority position. Finding no reversible error, we affirm.

         FACTS AND PROCEDURAL HISTORY

         ¶2. On June 10, 2008, The Pennington Group LLC (TPG) executed a deed of trust to PriorityOne Bank, pledging a certain tract of real property located in Rankin County, Mississippi, to secure the debt of Ridgeview Homes LLC for the amount of $80, 454. On February 17, 2009, TPG executed a second deed of trust to PriorityOne, again pledging the same property to secure the debt of Ridgeview Homes for the amount of $151, 129. And on October 31, 2011, TPG executed a third deed of trust to PriorityOne, pledging the same property to secure the debt of Depco Holdings LLC for the amount of $143, 066.55. David Pennington signed all three deeds of trust as a manager of TPG. David was also a member and manager of both Ridgeview Homes and Depco Holdings. Depco Holdings was also listed as a member and manager of Ridgeview Homes. All three deeds of trusts were recorded in the Rankin County Chancery Clerk's Office.

         ¶3. On November 9, 2011, TPG executed four deeds of trust to Helen, David's mother, pledging the same property to secure the debt of TPG for the following amounts: $19, 875.36; $56, 000; $27, 000; and $27, 322.33. Each of the four deeds of trust indicated that interest on these loans began accruing on a date prior to November 9, 2011 - one dated as far back as December 22, 2005. There is no record, however, of any loan, promissory note, or check corresponding with these debts. These four deeds of trust were signed by Joe Pennington (Joe), David's father and Helen's husband, as a manager and member of TPG. The deeds were recorded on the same date, November 9, 2011, in the Rankin County Chancery Clerk's Office.

         ¶4. Depco Holdings defaulted on the 2011 PriorityOne loan. Consequently, PriorityOne instituted foreclosure proceedings in July 2012. It is undisputed that at that time, PriorityOne held first lien position on the subject property, and Helen held second lien position. The foreclosure sale of the subject property was scheduled for August 23, 2012. During the bench trial, Joe Allbritton (Allbritton), senior vice president and loan officer at PriorityOne, testified that Joe approached him and requested that PriorityOne not follow through with the foreclosure. Allbritton also testified that Joe's request stemmed from the fact that TPG owned the subject property, and Joe owned TPG. According to Allbritton, Joe hoped he could "clean [the property] up and perhaps sell the lots."

         ¶5. At Joe's request, PriorityOne stopped the foreclosure and issued a $160, 837.46 loan to TPG. Allbritton testified that the amount reflected the unpaid sums of Depco Holdings, minus interest Joe requested not to pay. On behalf of TPG, Joe executed a promissory note to PriorityOne Bank on August 22, 2012, which listed the same subject property as collateral for the loan. The promissory note also read: "Borrower acknowledges this Note is secured by 1st Deed of Trust covering [the subject property]." Allbritton testified that PriorityOne did not actually receive any cash money in this transaction with Joe. Rather, as part of the transaction, Joe signed a "Disbursement Request and Authorization" form on behalf of TPG, indicating how the funds were to be applied. Specifically, the form indicated that $160, 607.46 was the "amount paid to others on Borrower's behalf." The document also indicated that the "specific purpose of the loan is: [a] REFINANCE OF BUSINESS DEBT." TPG also executed a deed of trust dated August 22, 2012, in favor of PriorityOne, pledging the same property as security interest for the loan. The deed of trust was signed by Joe and recorded on August 23, 2012.

         ¶6. In November 2013, PriorityOne received notice that Helen was foreclosing on the subject property. PriorityOne notified Helen that it retained first lien position by way of its 2008, 2009, 2011, and 2012 deeds of trust, and that any foreclosure sale of the property was subject to PriorityOne's priority position. Helen responded that she held first lien priority, and she continued with foreclosure proceedings. The foreclosure sale took place on December 5, 2013. The winning bidder was Pennibunkport Investments LLC, which was created the same date of the foreclosure sale. Helen was the sole member and manager of Pennibunkport.

         ¶7. PriorityOne filed suit against TPG, Joe, Helen, and Pennibunkport. The chancellor held that PriorityOne had first lien position by virtue of its 2008, 2009, 2011, and 2012 deeds of trust, and therefore, the foreclosure conducted by Helen was subject to PriorityOne's priority. The Penningtons appeal, and we have condensed their issues as follows: (1) whether the chancellor erred in finding that PriorityOne held first lien position over Helen, and (2) whether the chancellor erred in finding that the entire proceeds of the 2012 PriorityOne loan ...


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