Competition Marine of MS, Inc. v. Whitney Bank
220 So. 3d 1019
| Miss. Ct. App. | 2017Background
- Competition Marine of MS, Inc. executed two commercial promissory notes (Note 1 and Note 2) with Whitney Bank; Gina Nadeau personally guaranteed both loans.
- Note 1 originated in 2007 (renewed in 2012) for roughly $700,000 (renewed principal ~$632,556) at 7.5%; Note 2 originated in 2011 for $191,324.80 at 6%.
- Both notes contained default provisions, post-default interest, late charges, and an attorney-fee clause (bank entitled to attorneys’ fees and collection expenses).
- Whitney Bank sued in July 2014 after defaults; sought monetary judgments (including pre- and post-judgment interest) and attorney’s fees.
- Appellants counterclaimed, alleging the bank misled them about payment status, improperly withheld foreclosure (preventing use of collateral to satisfy debt), and acted unreasonably by suing for monetary damages rather than foreclosing.
- The trial court granted summary judgment for Whitney Bank; the Court of Appeals affirmed, awarding judgment sums, pre-judgment interest, post-judgment interest, and 25% attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether lender must foreclose before suing on the note | Bank should be required to foreclose first because foreclosure could reduce guarantor liability and suing first is unfair | Bank may elect remedies; notes permit suit on the debt without prior foreclosure | Court held lender may sue on the promissory notes without first foreclosing (current Mississippi precedent controls) |
| Whether lender’s choice to sue (instead of foreclosing) breached implied covenant of good faith and fair dealing | Nadeau/Competition Marine: suing while retaining collateral was unreasonable and breached good faith; public-policy argument to change law | Whitney: actions were contractually authorized; no breach where contract permits the conduct; commercial standards satisfied | Court held no breach; exercising expressly authorized contractual rights cannot violate implied covenant |
| Whether disputes about bank’s conduct created genuine issues of material fact precluding summary judgment | Appellants: factual issues about bank misleading them and automatic drafts warranted trial | Bank: evidence supports default and entitlement to judgment under notes and guaranties; no Mississippi authority supports appellants’ position | Court found no genuine issue of material fact that would defeat summary judgment for the bank |
| Whether public-policy or out-of-state authority requires a different rule (foreclosure-first) | Appellants relied on Idaho/New Jersey cases/statutes supporting a foreclosure-first rule to protect debtors | Bank: those authorities are statutory or jurisdiction-specific and not controlling in Mississippi; any change should come from Legislature | Court declined to adopt foreclosure-first rule; left change to Legislature, applying existing Mississippi case law |
Key Cases Cited
- West Point Corp. v. New N. Miss. Fed. Sav. & Loan Ass'n, 506 So.2d 241 (Miss. 1987) (lender may sue on promissory note without first foreclosing)
- Rea v. O’Bannon, 158 So. 916 (Miss. 1935) (mortgagee may pursue both legal and equitable remedies; foreclosure and suit on note are consistent)
- Knights Props., Inc. v. State Bank & Trust Co., 77 So.3d 491 (Miss. Ct. App. 2012) (affirming lender’s right to seek monetary judgment rather than foreclose where appropriate)
- Limbert v. Miss. Univ. for Women Alumnae Ass’n, 998 So.2d 993 (Miss. 2008) (party’s exercise of rights expressly authorized by contract does not breach implied covenant of good faith and fair dealing)
- GMAC v. Baymon, 732 So.2d 262 (Miss. 1999) (cited for principle that contractual authorization insulates conduct from implied-covenant claims)