Ike W. Thrash v. Deutsch Kerrigan & Stiles, LLP.

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2014-CA-01472-SCT
IKE W. THRASH AND DAWN INVESTMENTS,
LLC
v.
DEUTSCH, KERRIGAN & STILES, LLP
DATE OF JUDGMENT: 09/16/2014
TRIAL JUDGE: HON. LAWRENCE PAUL BOURGEOIS, JR.
TRIAL COURT ATTORNEYS: NICHOLAS VAN WISER
WILLIAM E. WHITFIELD, III
M. JASON SUMRALL
COURT FROM WHICH APPEALED: HARRISON COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANTS: NICHOLAS VAN WISER
ATTORNEYS FOR APPELLEE: WILLIAM E. WHITFIELD, III
MATTHEW JASON SUMRALL
MATTHEW D. MILLER
NICHOLAS KANE THOMPSON
NATURE OF THE CASE: CIVIL - TORTS-OTHER THAN PERSONAL
INJURY & PROPERTY DAMAGE
DISPOSITION: AFFIRMED - 01/14/2016
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
PIERCE, JUSTICE, FOR THE COURT:
¶1. This appeal arises from a trial court’s grant of summary judgment dismissing Ike
Thrash’s and Dawn Investments LLC’s claims for negligence and breach of fiduciary duty
against Deutsch Kerrigan & Stiles, LLP (DKS). DKS filed suit in circuit court against
Thrash, Dawn Investments, and U.S. Capital seeking a declaratory judgment that the failure
of Joel L. Blackledge, a former DKS attorney, to conduct a foreclosure sale properly was not
the proximate cause of Thrash’s and Dawn Investments’ damages. Thrash and Dawn
Investments counterclaimed, alleging that Blackledge was negligent and breached his
fiduciary duty by improperly conducting the foreclosure sale, leading to Thrash and Dawn
Investments suffering damages. The parties agreed to dismiss DKS’s complaint for
declaratory judgment and proceed under Thrash’s and Dawn Investments’ counterclaim. The
parties were realigned, naming Thrash and Dawn Investments (the Dawn Plaintiffs) as
Plaintiffs and DKS as Defendant. Both parties filed motions for summary judgment, and the
trial court granted DKS’s motion. The Dawn Plaintiffs then filed this appeal. We find that
the trial court was correct in finding that DKS did not owe the Dawn Plaintiff a duty.
FACTS AND PROCEDURAL HISTORY
¶2. In 2005, Coastal Land Development Company (Coastal) and Richard Landry
purchased two pieces of property, financed by U.S. Capital. Coastal and Landry executed
a promissory note in favor of U.S. Capital for $4,500,000, naming Joel L. Blackledge, an
associate with DKS, as the trustee. Coastal and Landry defaulted on the loan several times,
and in August 2007, Blackledge initiated foreclosure proceedings. Blackledge posted the
Notice of Substituted Trustee’s Sale at the Harrison County Courthouse, and the Notice was
published in The Sun Herald for three consecutive weeks on the following Wednesdays,
August 15, 22, and 29, 2007. On Thursday, August 30, 2007, Blackledge conducted the
foreclosure sale. Ike Thrash, the managing member of Dawn Investments, acting on its
behalf, was the only bidder at the sale and offered to pay $5.6 million for both properties.
Blackledge prepared a trustee’s deed on August 30, 2007, in favor of Dawn Investments.
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¶3. Thrash deposited the $5.6 million dollars into the trust account of his attorney,
Charliene Roemer. On Thursday, September 6, 2007, the trustee’s deed was delivered to
Dawn Investments. Thrash then authorized the transfer of the funds to U.S. Capital. The
transfer occurred at 1:21 p.m. At 11:26 that morning, Coastal filed for Chapter 11
Bankruptcy. Neither Thrash nor Blackledge was aware of the bankruptcy filing, but William
J. Little Jr., Coastal’s bankruptcy attorney, notified Roemer through email on September 6,
at 12:46 p.m., of the bankruptcy filing.
¶4. Subsequently, Thrash and Roemer discovered that the foreclosure sale had been
conducted improperly. According to the statute, the foreclosure sale must occur one week
following the last day of publication; however, the foreclosure sale was conducted one day
after the last day of publication. Miss. Code Ann. § 89-1-55 (Rev. 2011); Osborne v. Neblett,
65 So. 3d 311, 313 (Miss. Ct. App. 2011). Thrash notified U.S. Capital of the error and
demanded the funds be returned, but U.S. Capital refused. The Dawn Plaintiffs then filed suit
against U.S. Capital and Blackledge in chancery court. In October 2007, this suit was
removed to the United States District Court for the Southern District of Mississippi and then
was transferred to Bankruptcy Court.
¶5. In September 2007, Thrash filed a Motion for Relief from Automatic Stay or in the
Alternative, for Declaratory Relief with the Bankruptcy Court of the Southern District of
Mississippi, requesting the court to find that Coastal was divested of its interest in the
properties following the foreclosure sale. Later that month, Coastal brought suit against the
Dawn Plaintiffs and Blackledge in the United States Bankruptcy Court for the Southern
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District of Mississippi, alleging that the foreclosure sale was void and requesting that the
transfer of the properties be avoided. In January 2008, Dawn Investments entered a
Settlement Agreement with Coastal whereby Coastal agreed to sell the Brodie Road Property
and the Lemoyne Boulevard Property to Dawn Investments for approximately $11 million.1
Coastal agreed to dismiss the suit it had filed against Dawn Investments and each party
agreed to release the other from all claims and liability. The Bankruptcy Court approved the
Settlement Agreement. In February 2008, the Bankruptcy Court dismissed the Motion for
Relief without prejudice, per Dawn Investment’s motion. Subsequently, the Bankruptcy
Court entered an order finding the foreclosure sale on August 30, 2007, to be void and of no
effect.
¶6. In November 2007, the Dawn Plaintiffs entered into a Settlement Agreement with
U.S. Capital, agreeing to pay U.S. Capital an additional 425,000. U.S. Capital agreed to
assign all of its claims against Coastal and Landry to the Dawn Plaintiffs. The Dawn
Plaintiffs also agreed to release U.S. Capital and its agents from liability and cause the
chancery court claim against U.S. Capital, which had been removed to Bankruptcy Court be
dismissed with prejudice. In March 2008, Landry and Coastal filed a motion to dismiss the
Chapter 11 bankruptcy. The motion was granted.
¶7. DKS then filed suit in circuit court against the Dawn Plaintiffs and U.S. Capital. The
Dawn Plaintiffs counterclaimed. DKS’s complaint for declaratory judgment was dismissed
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The purchase price of the properties was $11,331,373.24 but $10,831,373.24 was
used to offset the debts of both properties. Dawn Investments paid Coastal the remaining
$500,000 in cash at the closing.
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and the parties were realigned, naming Thrash and Dawn Investments as plaintiffs and DKS
as the defendant. In March 2010, the Dawn Plaintiffs filed a motion for summary judgment,
seeking judgment on the negligence and breach-of-fiduciary duty claims. In February 2011,
DKS responded to the motion for summary judgment and filed its own motion for summary
judgment, seeking dismissal of the Dawn Plaintiffs’ claims. In September 2014, the trial
court granted DKS’s motion, dismissing all of the Dawn Plaintiffs’ claims. This appeal
followed.
¶8. Thrash raises the following four issues on appeal:
1. Whether the trial court erred in holding that DKS, the substituted
trustee under the land deed of trust, owed no duty of care to the
Dawn Plaintiffs, third-party bidders at the foreclosure sale, in the
performance of the foreclosure sale.
2. Whether the trial court erred in holding that the foreclosure sale,
which was subsequently determined to be void, was not the
proximate cause of the Dawn Plaintiffs’ injury.
3. Whether the trial court erred in rendering a final judgment on
DKS’s motion for summary judgment without specifically
addressing the Dawn Plaintiffs’ breach-of-fiduciary duty claim.
4. Whether the trial court erred in holding that DKS owed no
fiduciary duty to the Dawn Plaintiffs with respect to the handling
of the funds paid by the Dawn Plaintiffs to complete the foreclosure
sale.
¶9. Because the first issue is dispositive, we will not discuss the remaining issues.
ANALYSIS
¶10. When reviewing a trial court’s grant or denial of a motion for summary judgment, this
Court applies a de novo standard of review. City of Jackson v. Sutton, 797 So. 2d 977, 979
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(Miss. 2001). Summary judgment is proper if there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. M.R.C.P. 56(c). The moving
party bears the burden to show that no genuine issue of material fact exists, and the evidence
must be viewed in the light most favorable to the nonmovant. Monsanto Co. v. Hall, 912 So.
2d 134, 136 (Miss. 2005). Otherwise, the motion should be denied.
¶11. In a negligence action, the plaintiff must prove by a preponderance of the evidence
that there was a duty, breach, causation, and damages. Entrican v. Ming, 962 So. 2d 28, 32
(Miss. 2007). If the plaintiff fails to prove each element, summary judgment is appropriate.
¶12. The trial court granted summary judgment in favor of DKS after finding no material
fact issue as to the negligence or the breach-of-fiduciary duty claims. As to the negligence
claim, the trial court cited Wansley v. First National Bank of Vicksburg, 566 So. 2d 1218,
1223 (Miss. 1990), stating:
A trustee under a deed of trust does not assume the important obligations
which in some instances are cast upon a trustee by operation of law. The
Trustee of a trust deed is not a trustee in the strict sense of the word. The role
of such a trustee is more nearly that of a common agent of the parties to the
instrument.
¶13. The Court held that, because neither of the Dawn Plaintiffs was a party or signatory
to the Deed of Trust, Blackledge did not owe either a duty. The Dawn Plaintiffs, however,
contend that the trial court erred in its ruling because, as a third-party purchaser, DKS owed
them a legal duty to conduct the sale properly and reasonably could have foreseen that Thrash
would rely on Blackledge’s work. Further, the Dawn Plaintiffs contend that, had the sale
been renoticed and held again, Thrash would not have lost the $5.6 million dollars it wired
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to U.S. Capital. We find that the trial court’s judgment should be affirmed because
Blackledge, as trustee, did not owe a legal or fiduciary duty to the Dawn Plaintiffs.
¶14. Regarding a deed of trust, this Court has found that “[t]he role of such a trustee is
more nearly that of a common agent of the parties to the instrument.” Wansley, 566 So. 2d
at 1223. The deed of trust in this case named Coastal and Landry as the debtors, U.S. Capital
as the beneficiary, and Blackledge as the trustee. Accordingly, as trustee, Blackledge owed
a duty to the parties to the instrument: U.S. Capital, the beneficiary, and Coastal and Landry,
the debtors. Wansley, 566 So. 2d at 1223 (“The trustee is little more than an agent, albeit for
both parties, and the writing prescribes his duties.”). Blackledge, however, did not owe a
legal duty or fiduciary duty to the Dawn Plaintiffs as a purchaser in the foreclosure sale.
Thrash was not a party to the deed of trust; neither did he have a contractual relationship with
Blackledge.
¶15. To determine whether a fiduciary relationship exists in a commercial transaction, the
Court considers “whether (1) the parties have shared goals in each other’s commercial
activities, (2) one of the parties places justifiable confidence or trust in the other party’s
fidelity, and (3) the trusted party exercises effective control over the other party.” Hartman
v. McInnis, 996 So. 2d 704, 708 (Miss. 2007). “These factors must exist beyond those
features common to every free-market transaction, such as the hope by both parties that the
transaction is profitable, trust of the lender in handling the loan, and the lender’s greater
familiarity with the loan process.” Id. at 709.
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¶16. As to the first prong, the Dawn Plaintiffs contend that they had a “shared goal” with
DKS because DKS was the seller of the property, and Thrash, acting on behalf of Dawn
Investments, was the buyer. As to the second prong, the Dawn Plaintiffs contend that they
placed trust in DKS because, at the direction of Blackledge, Thrash authorized his attorney
to wire $5.6 million to U.S. Capital. As to the third prong, the Dawn Plaintiffs contend that
Blackledge had exercised control because Blackledge had conducted the sale, was authorized
to dispose of the property, and because he had instructed Thrash to transfer the funds to U.S.
Capital.
¶17. Nevertheless, the Dawn Plaintiffs have failed to show that there was a fiduciary
relationship. On the first prong, that the parties hope the transaction be profitable is
insufficient. The Court has clearly stated that “features that are common to every free-market
transaction,” such as the hope of a profitable transaction, do not meet the criteria for a
fiduciary relationship. McInnis, 996 So. 2d at 708.
¶18. The Dawn Plaintiffs’ reasoning regarding the second prong also is insufficient. Thrash
should have consulted with his attorney before he authorized the transfer of $5.6 million and
should not have relied on Blackledge, who was not Thrash’s representative.
¶19. Lastly, Blackledge did not exercise control over the Dawn Plaintiffs. As trustee,
Blackledge had authority to conduct the foreclosure sale and dispose of the property. This
is common authority given to trustees in foreclosure dealings and does not signify that
Blackledge exercised control over the Dawn Plaintiffs. Moreover, Thrash authorized the
transfer of the funds.
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¶20. Further, Roemer, Thrash’s attorney, could have discovered that the sale had been
conducted prematurely before she transferred the funds. Blackledge sent Roemer the
Trustee’s Deed on Thursday, September 6, 2007, one week after the foreclosure sale. The
Trustee’s Deed included the dates of publication, August 15, 22, and 29, and the date of the
actual sale, August 30. Roemer had the opportunity to verify whether the foreclosure sale
met the requirements of the statute but apparently failed to do so. Although Blackledge
prematurely conducted the sale, he did not have a duty to the Dawn Plaintiffs.
CONCLUSION
¶21. Based on the above analysis, this Court affirms the judgment of the Harrison County
Circuit Court.
¶22. AFFIRMED.
DICKINSON, P.J., KITCHENS, KING AND COLEMAN, JJ., CONCUR.
WALLER, C.J., RANDOLPH, P.J., LAMAR AND MAXWELL, JJ., NOT
PARTICIPATING.
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