Trustmark Nat'l Bank v. Enlightened Props., LLC

330 So.3d 772

TRUSTMARK NATIONAL BANK, Appellant

v.ENLIGHTENED PROPERTIES, LLC, Appellee

NO. 2020-CA-01402-COA

Court of Appeals of Mississippi.

November 2, 2021

ATTORNEY FOR APPELLANT: CHRISTOPHER HANSER MEREDITH, Ridgeland

ATTORNEYS FOR APPELLEE: ROBERT THOMAS SCHWARTZ, Biloxi, F. M. TURNER III, Hattiesburg, CHRISTIAN JANE'T STRICKLAND, Biloxi

BEFORE WILSON, P.J., McDONALD AND EMFINGER, JJ.

EMFINGER, J., FOR THE COURT:

¶1. On June 21, 2020, the Chancery Court of Harrison County began a trial on Trustmark National Bank's (Trustmark) complaint for declaratory relief against Enlightened Properties LLC (EP), which ultimately concluded on September 23, 2020. On November 19, 2020, the chancery court entered an order containing a ruling in favor of EP. Aggrieved by the chancery court's judgment, Trustmark appealed.

FACTS AND PROCEDURAL HISTORY

¶2. EP developed a fitness facility that operated under the name "E-Fit," which EP ultimately sold to Cedar Lake Wellness Facility LLC (CLWF) in 2008. CLWF also purchased from EP approximately six acres on which the E-Fit facility was located. A separate entity, Enlightened Fitness and Wellness Inc. (EFW), was in charge of the day-to-day operations of the E-Fit facility and was the only entity that generated income. EP retained ownership of the remaining land surrounding the E-Fit facility, approximately thirty-three acres.

¶3. On July 25, 2008, CLWF entered into a term loan agreement (CLWF loan agreement) with Trustmark National Bank (Trustmark) associated with financing of the E-Fit facility. The term loan agreement between Trustmark and CLWF covered two separate term loans in the amounts of $9,129,000 and $2,107,500, for a total of $11,236,500. Also on July 25, 2008, EFW entered into a separate term loan agreement (EFW loan agreement) with Trustmark associated with the inventory and equipment in the E-Fit facility. That loan agreement also covered two separate term loans in the amounts of $1,440,000 and $750,000, for a total of $2,190,000. The total amount borrowed by CLWF and EFW for the benefit of E-Fit was $13,426,500. In turn, CLWF executed two deeds of trust on the E-Fit facility and property (six acres) in favor of Trustmark. One deed of trust was offered as collateral for the CLWF loan agreement, and the other deed of trust was offered as collateral for the EFW loan agreement. Both deeds of trust were executed on July 25, 2008. Additionally, in consideration for both the CLWF loan agreement and the EFW loan agreement, EP executed two deeds of trust in favor of Trustmark that encumbered EP's thirty-three acres surrounding the fitness facility. The EP deed of trust securing the CLWF loans was recorded in the Harrison County land records as instrument number 2008-4097-T-J2 (EP D/T 4097). The EP deed of trust securing the EFW loans was recorded in the Harrison County land records as instrument number 2008-4104-T-J2 (EP D/T 4104). There were additional personal guaranty agreements executed by various individuals in conjunction with the term loan agreements, but they are not directly at issue in this appeal.

¶4. As a part of a restructuring of the debts of CLWF and EFW in 2011, Trustmark executed a release in favor of EP (Release) on October 4, 2011. The effect of the Release is the subject of this litigation. The Release included two attachments. The body of the Release indicated that Exhibit A was a term loan agreement executed on July 25, 2008. The term loan agreement attached as Exhibit A was the EFW loan agreement. The Release also stated that it pertained "only to that certain Deed of Trust attached hereto as Exhibit B." However, instead of a deed of trust, the property description for the thirty-three acres EP owned was attached as Exhibit B.¹ After the Release was executed, Trustmark recorded a cancellation of EP D/T 4097 on October 28, 2011.

¶5. On February 24, 2016, Trustmark filed a complaint in the Chancery Court of Harrison County seeking in Count I confirmation of interest in real property, in Count II expungement of authority to cancel, and in Count III declaratory relief against EP. According to the complaint, in August 2015, the underlying loans to CLWF and EFW went into default, and on August 17, 2015, Trustmark sent a default notice to both CLWF and EFW, as well as a courtesy copy to EP. In its complaint, Trustmark further alleged that EP D/T 4097 had been inadvertently cancelled and that the Release only provided for the release of EP D/T 4104. On February 25, 2016, Trustmark executed and filed of record a second authority to cancel for the EP D/T 4104.

¶6. On January 9, 2019, at the beginning of a hearing on competing motions for summary judgment, Trustmark voluntarily dismissed Counts I and II of the complaint, leaving only the question of declaratory relief requested in Count III for the chancellor's consideration. At this hearing, the chancery court found the Release to be "ambiguous as to which deed(s) of trust Trustmark agreed to release," and the court determined extrinsic evidence would be considered to resolve the issue. Because genuine issues of material fact existed, the chancery court denied both parties’ motions for summary judgment and ordered that the matter proceed to trial. An order was entered of record to this effect on July 25, 2019. On June 21, 2020, the trial on Trustmark's claim for declaratory relief began, and it concluded on September 23, 2020. On November 19, 2020, the chancery court entered an order finding, in part, as follows:

[F]irst, that if there is no ambiguity in the Release, the land description of the EP property and the terms of the Release unencumbered all of EP's property described and attached to the Release. Alternatively, from the viewpoint that there is an ambiguity in the Release, the Court resolves it in favor of the Defendant, EP, for the reasons set forth herein.

STANDARD OF REVIEW

¶7. In cases involving the construction of contracts, two separate standards of review are required. A de novo standard of review should be applied in first determining whether a contract is ambiguous. Gibbs v. Moody , 180 So. 3d 830, 833 (¶10) (Miss. Ct. App. 2015) (citing Royer Homes of Miss. Inc. v. Chandeleur Homes Inc ., 857 So. 2d 748, 751 (¶4) (Miss. 2003) ). Pursuant to Royer , if there is no ambiguity, we must enforce the contract as it is written. Royer , 857 So. 2d at 752 (¶7). However, in the event an ambiguity is found, the subsequent interpretation presents a question of fact committed to the fact finder. Id . In that instance, this Court will not disturb a chancellor's findings of fact unless they are manifestly wrong or clearly erroneous or unless the chancellor applied an erroneous legal standard. Gibbs , 180 So. 3d at 832-33 (¶10).

ANALYSIS

¶8. Trustmark's arguments on appeal are stated in the alternative. First, Trustmark argues that the Release is not ambiguous and that it clearly required Trustmark to release only EP D/T 4104. In the alternative, if the Release is found to be ambiguous, using the canons of construction in the manner Trustmark contends is appropriate, the Release should still be interpreted to require Trustmark to release only EP D/T 4104.

I. Is the Release ambiguous?

¶9. As stated above, a de novo standard of review is used to make the determination as to whether the Release is ambiguous. Id . at 833 (¶10). The court in Royer , also gave direction as to how to begin this process:

This Court has set out a three-tiered approach to contract interpretation. Legal purpose or intent should first be sought in an objective reading of the words employed in the contract to the exclusion of parol or extrinsic evidence. First, the "four corners" test is applied, wherein the reviewing court looks to the language that the parties used in expressing their agreement. We must look to the "four corners" of the contract whenever possible to determine how to interpret it. When construing a contract, we will read the contract as a whole, so as to give effect to all of its clauses. Our concern is not nearly so much with what the parties may have intended, but with what they said, since the words employed are by far the best resource for ascertaining the intent and assigning meaning with fairness and accuracy. Thus, the courts are not at liberty to infer intent contrary to that emanating from the text at issue. On the other hand, if the contract is unclear or ambiguous, the court should attempt to harmonize the provisions in accord with the parties’ apparent intent. Only if the contract is unclear or ambiguous can a court go beyond the text to determine the parties’ true intent. The mere fact that the parties disagree about the meaning of a contract does not make the contract ambiguous as a matter of law.

Secondly, if the court is unable to translate a clear understanding of the parties’ intent, the court should apply the discretionary "canons" of contract construction. Where the language of an otherwise enforceable contract is subject to more than one fair reading, the reading applied will be the one most favorable to the non-drafting party. Finally, if the contract continues to evade clarity as to the parties’ intent, the court should consider extrinsic or parol evidence. It is only when the review of a contract reaches this point that prior negotiation, agreements[,] and conversations might be considered in determining the parties’ intentions in the construction of the contract. Of course, the so-called three-tiered process is not recognized as a rigid "step-by-step" process. Indeed, overlapping of steps is not inconceivable.

Royer , 857 So. 2d at 751-53 (¶¶10-11) (citations and internal quotation marks omitted). So we begin the process by reviewing the "four corners" of the Release. We must read the contract as a whole so as to give effect to, or harmonize, the various provisions of the agreement, if possible.

¶10. The Release begins as follows:

RELEASE

THIS RELEASE (this "Agreement") is made and entered into effective as

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