          IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

                             NO. 2016-CA-00007-COA

COMPETITION MARINE OF MS, INC. A/K/A                                APPELLANTS
COMPETITION SPORTS OF MS, INC. AND
GINA PRICHARD NADEAU

v.

WHITNEY BANK, A MISSISSIPPI STATE                                       APPELLEE
CHARTERED BANK F/K/A HANCOCK BANK,
A MISSISSIPPI STATE CHARTERED BANK
DOING BUSINESS UNDER TRADE NAME
HANCOCK BANK

DATE OF JUDGMENT:           11/23/2015
TRIAL JUDGE:                HON. LAWRENCE PAUL BOURGEOIS JR.
COURT FROM WHICH APPEALED: HARRISON COUNTY CIRCUIT COURT,
                            FIRST JUDICIAL DISTRICT
ATTORNEYS FOR APPELLANTS:   WILLIAM B. WEATHERLY
                            RICHARD CLARENCE SMITH
ATTORNEYS FOR APPELLEE:     MICHAEL ANTHONY SHAW
                            BENJAMIN HARTE HARRIS III
NATURE OF THE CASE:         CIVIL - CONTRACT
TRIAL COURT DISPOSITION:    SUMMARY JUDGMENT GRANTED TO
                            APPELLEE
DISPOSITION:                AFFIRMED - 05/23/2017
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      BEFORE LEE, C.J., BARNES, ISHEE AND GREENLEE, JJ.

      BARNES, J., FOR THE COURT:

¶1.   In this debt-collection case, Competition Marine of MS Inc. (Competition Marine)

and Gina Nadeau, its president, appeal the judgment of the Circuit Court of Harrison

County, which granted Whitney Bank’s1 motion for summary judgment. The case involved

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       Whitney Bank was formerly known as Hancock Bank, a Mississippi state-chartered
bank doing business under the trade name Hancock Bank. Although many of the pertinent
two promissory notes executed by Appellants in favor of Whitney Bank. The trial court

awarded Whitney Bank $633,401.72 on the first promissory note (Note 1). This amount

represented principal, accrued interest, and late fees; pre-judgment interest of $9,243.82; and

post-judgment interest at the rate of 5.250%. The trial court awarded Whitney Bank

$191,324.80 on the second promissory note (Note 2), representing principal, accrued

interest, and late fees; pre-judgment interest of $2,928.96, and post-judgment interest at the

rate of 6.0%. The trial court also awarded attorney fees at the rate of 25% of the

indebtedness. Finding no error, we affirm the trial court’s decision granting summary

judgment in favor of Whitney Bank.

              STATEMENT OF FACTS AND PROCEDURAL HISTORY

¶2.    On July 6, 2007, Competition Marine executed Note 1 payable to Whitney Bank for

the principal amount of $700,000 at an interest rate of 7.5%.2 Nadeau, as president of


events occurred while the bank was known as Hancock Bank, we shall refer to the Appellee
as Whitney Bank throughout.
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           Note 1 provided the following:

       LATE CHARGE. If a payment is 16 days or more late, Borrower will be
       charged 4.000% of the unpaid portion of the regularly scheduled payment or
       $5.00, whichever is greater.

       INTEREST AFTER DEFAULT. Upon default, including failure to pay upon
       final maturity, the total sum due under this Note will continue to accrue
       interest at the interest rate under this Note.

       DEFAULT. Each of the following shall constitute an event of default (“Event
       of Default”) under this Note:

                Payment Default: Borrower fails to make any payment when due under
                this Note.

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Competition Marine, executed a Commercial Guaranty for the loan, personally guaranteeing

full repayment for Competition Marine’s indebtedness to the bank.3 Note 1 was to be repaid

in fifty-nine monthly installments of $5,703.79, beginning August 20, 2007. Note 1 was

secured by a deed of trust in favor of the bank on real property at 309 Courthouse Road in


      ....

      LENDER’S RIGHTS. Upon default Lender may declare the entire unpaid
      principal balance under this Note and all accrued unpaid interest immediately
      due, and then Borrower will pay that amount.

      ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to
      help collect this Note if Borrower does not pay. Borrower will pay Lender
      that amount. This includes, subject to any limits under applicable law,
      Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is
      a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings
      (including efforts to modify or vacate any automatic stay or injunction), and
      appeals, if not prohibited by applicable law, Borrower also will pay any court
      costs, in addition to all other sums provided by law.
      3
          The Commercial Guaranty stated as follows:

      CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE.
      For good and valuable consideration, Guarantor absolutely and
      unconditionally guarantees full and punctual payment and satisfaction of the
      Indebtedness of Borrower to Lender, and the performance and discharge of
      all Borrower’s obligations under the Note and the Related Documents. This
      is a guaranty of payment and performance and not of collection, so Lender can
      enforce this Guaranty against Guarantor even when Lender has not
      exhausted Lender’s remedies against anyone else obligated to pay the
      Indebtedness or against any collateral securing the indebtedness, this
      Guaranty or any other guaranty of the Indebtedness. Guarantor will make any
      payments to Lender or its order, on demand, in legal tender of the United
      States of America, in same-day funds, without set-off or deduction or
      counterclaim, and will otherwise perform Borrower’s obligations under the
      Note and Related Documents. Under this Guaranty, Guarantor’s liability is
      unlimited and Guarantor’s obligations are continuing.

(Emphasis added).

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Gulfport, Mississippi. On August 24, 2012, Competition Marine renewed Note 1 for

another five years with the principal amount totaling $632,555.84.

¶3.    On December 8, 2011, Competition Marine executed a second promissory note, Note

2, payable to Whitney Bank for the principal amount of $191,324.80, with an interest rate

of 6%, to be repaid in fifty-nine monthly installments of $2,132.61, beginning January 8,

2012. The provisions of Note 2 were similar to that of Note 1. Collateral for the loan

consisted of deeds of trust in favor of Whitney Bank on real property at 309 Courthouse

Road, and additionally, #2 Villa Cove Drive in Gulfport. Nadeau again personally

guaranteed the commercial loan.

¶4.    On July 15, 2014, counsel for Whitney Bank sent two letters to Nadeau demanding

payment on the loans as they were in default. When payment was not made Whitney Bank

sued Competition Marine and Nadeau for monetary damages in the amount of $748,496.19.

Whitney Bank also sought attorney’s fees of at least 25% of this figure, or $187,124.05, and

other expenses, as well as pre- and post-judgment interest.

¶5.    Competition Marine and Nadeau in turn filed a counterclaim against Whitney Bank

on the grounds the bank intentionally misled them into believing the loans were current in

order to add fees and interest to the debt. Also, Nadeau believed the payments were being

automatically drafted from a bank account. Competition Marine and Nadeau also claimed

that Whitney Bank was deliberately bringing financial harm to them by suing on collection

of the debt rather than invoking rights under the deeds of trust. They contend the bank

refused to release the deeds of trust, thereby making it impossible for them to use the



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collateral to satisfy the debt.

¶6.    On August 4, 2015, Whitney Bank moved for summary judgment. Competition

Marine and Nadeau responded, arguing the bank should be required to foreclose on the

underlying collateral before obtaining summary judgment for monetary damages, because

a foreclosure sale would reduce Nadeau’s liability under the guaranties. They acknowledged

their argument was not supported by current law but based on principles of fairness, equity,

and public policy.

¶7.    After a hearing, the circuit court granted summary judgment in favor of Whitney

Bank. Competition Marine and Nadeau timely appealed.

                                  STANDARD OF REVIEW

¶8.    An appellate court reviews a trial court’s grant of a motion for summary judgment de

novo. Bosarge v. LWC MS Properties LLC, 158 So. 3d 1137, 1142 (¶14) (Miss. 2015)

(citation omitted). Summary judgment is proper “if the pleadings, depositions, answers to

interrogatories and admissions on file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party is entitled to judgment as

a matter of law.” M.R.C.P. 56(c). “The moving party has the burden of demonstrating that

no genuine issue of material fact exists, and the nonmoving party must be given the benefit

of the doubt concerning the existence of a material fact.” Bosarge, 158 So. 3d at 1142 (¶14).

If the moving party meets its burden, the nonmoving party “may not rest upon the mere

allegations or denials of the pleadings,” but “must set forth specific facts showing there is

a genuine issue for trial.” Id. (citation omitted).



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                                        ANALYSIS

¶9.    Appellants argue that a genuine issue of fact remains regarding whether Whitney

Bank acted reasonably in choosing to proceed with a collection action against Appellants

before pursuing foreclosure proceedings on the real-estate collateral used to secure the loan.

They admit current Mississippi law is not in their favor, but make a public-policy argument

to change the law in this area.

¶10.   Appellants base their “reasonableness” argument upon the contractual principle of

the implied covenant of good faith and fair dealing. Appellants claim a party who has broad

contractual discretion “owes a duty to the other party to exercise discretion in a reasonable

and expected manner that is consistent and non-interfering with the other party’s attempt to

comply with the terms of the contract.” For public policy’s sake, Appellants contend that

bank creditors should not be permitted to “strategically prosecute collection actions against

debtors and guarantors while simultaneously holding on to their rights” in the collateral that

secures the debt, when the debt could be reduced by a foreclosure sale. Furthermore, they

suggest this policy would also substantially reduce the attorney’s fees awarded in these types

of actions.

¶11.   More specifically, Appellants request that the controlling authority of West Point

Corp. v. New North Mississippi Federal Savings & Loan Association, 506 So. 2d 241 (Miss.

1987), be revisited and overturned. In West Point, the Mississippi Supreme Court held that

the lender “had the right to sue and recover in a court of law on the promissory note, without

first proceeding to a foreclosure of the deed of trust.” Id. at 242. The court cited the



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American Jurisprudence treatise in support: “[A] creditor whose debt is secured by

mortgage may pursue his remedy in personam for the debt, or his remedy in rem to subject

the mortgaged property to its payment.” Id. (citing 55 Am. Jur. 2d Mortgages § 541 (1971)).

Additionally, the West Point Court stressed the long-standing nature of this holding by citing

Rea v. O’Bannon, 171 Miss. 824, 158 So. 916 (1935). Rea discussed how, in the context

of a default where there was a lien on the property, a promissory note holder has the right

to elect the remedy of either foreclosure or collect the debt in a legal forum, or both.4 Id. at

832, 158 So. at 918.

¶12.   This Court has addressed a similar situation in Knights Properties Inc. v. State Bank

& Trust Company, 77 So. 3d 491 (Miss. Ct. App. 2012). In Knights, this Court affirmed

summary judgment in favor of the lender/bank. Id. at 492-93 (¶1). As here, the corporate

borrower had secured a commercial loan with real estate and later defaulted on the loan. Id.

at 492 (¶1). One of the officers, Chad Knight, executed a commercial guarantee. Id. at 493

(¶4). Although Knight claimed the collateral was valued at $300,000, he failed to inform

the bank that the property had restrictions which substantially decreased its value. Id. Upon

default, the bank began foreclosure proceedings until it discovered the discrepancy in the

land’s value. Id. Because of the discrepancy, the bank decided to forego foreclosure and

pursue a monetary judgment against the corporation and the guarantor. Id. at (¶5). Based

upon the principle established in Rea and West Point that “there is no inconsistency in a



       4
         The Rea Court stated: “There is no inconsistency between the legal and equitable
remedial rights possessed by a mortgagee in case of a breach, and he may exercise them all
at the same time, and resort to one is not a waiver of the other.” Id. at 832, 158 So. at 918.

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mortgagee’s legal and equitable rights” after a breach, this Court held that the lender was not

precluded by the doctrine of election of remedies from seeking monetary judgment against

a promisor and guarantor instead of foreclosure. Id. at 494-95 (¶15) (quoting Rea, 171 Miss.

at 832, 158 So. at 918). Knight illustrates the longstanding law in Mississippi that a lender

has multiple remedies upon default, and may sue upon the note before foreclosing on

collateral.

¶13.   Here, the loan documents for both notes specifically call for monetary payment to the

bank, and do not require the bank to foreclose in the event of a default. Accordingly, the

lender may choose to proceed with a collection suit on the loan instead of foreclosing on

real-estate collateral. Appellants here cited no Mississippi authority to the contrary. Instead,

Appellants cite cases from Idaho and New Jersey in support of a “foreclosure-first rule.”

However, these cases are governed by unique state statutes. Idaho’s “one-action rule”

requiring that a mortgagee exhaust the security before proceeding against the debtor on the

underlying debt is based on statute. See Eastern Idaho Prod. Credit Ass’n v. Placerton Inc.,

606 P.2d 967, 971 (Idaho 1980); McRay v. Twitchell, 735 P.2d 1098, 1099 (Idaho Ct. App.

1987).5 The New Jersey case cited by the Appellants is also based on a state statute. See

Wildwood Title & Trust Co. v. Geisenhoner, 11 N.J. Misc. 871, 168 A. 751, 752 (1933).

The case explains the statute was “enacted to counteract a prevailing evil which then existed



       5
         The Idaho Supreme Court explained, however, that the law was established for
public policy concerns: “To allow the creditor to retain the security without ascertaining its
value, and then to give him a judgment for the full amount of the debt, is contrary to the
policy of Idaho law requiring foreclosure prior to recovery on the debt.” Placerton Inc., 606
P.2d at 972.

                                               8
and which was very oppressive to mortgage debtors.” 168 A. at 753. However, the

Appellee notes current New Jersey statutory law excludes commercial loans from the

foreclosure-first rule. See N.J.S.A. 2A: 50-2.3. Appellants’ arguments for a “foreclosure-

first rule” are more appropriately addressed to the Mississippi Legislature.

¶14.   Appellants’ argument that such lending practices breach the implied covenant of good

faith and fair dealing also fails. The Mississippi Uniform Commercial Code defines “good

faith” as “honesty in fact and the observance of reasonable commercial standards of fair

dealing.” Miss. Code Ann. § 75-1-201(b)(20) (Rev. 2016). We cannot say, under the

promissory notes executed, that the transaction was contractually unfair or unreasonable

according to current commercial lending practices in Mississippi. Additionally, the

Mississippi Supreme Court has stated that taking actions expressly authorized by the contract

cannot breach the implied covenant of good faith and fair dealing. See Limbert v. Miss.

Univ. For Women Alumnae Assoc., 998 So. 2d 993, 999 (¶14) (Miss. 2009) (quoting GMAC

v. Baymon, 732 So. 2d 262, 269 (¶29) (Miss. 1999)).

¶15.   Most importantly, however, this Court is not at liberty to overturn Mississippi

Supreme Court precedent, regardless of any possible public-policy benefits or principles of

equity. We are “bound to uphold and apply all precedent handed down from the supreme

court” and are not “empowered to reverse the precedent surrounding the issue presented.”

Carr v. State, 942 So. 2d 816, 817 (¶4) (Miss. Ct. App. 2006). Under current Mississippi

case law, Whitney Bank’s actions were legal and proper; Appellants have failed to create a

genuine issue of material fact to the contrary. Therefore, we find the trial court did not err



                                              9
in granting summary judgment in favor of Whitney Bank.

¶16. THE JUDGMENT OF THE CIRCUIT COURT OF HARRISON COUNTY,
FIRST JUDICIAL DISTRICT, IS AFFIRMED. ALL COSTS OF THIS APPEAL
ARE ASSESSED TO THE APPELLANTS.

    LEE, C.J., IRVING AND GRIFFIS, P.JJ., ISHEE, CARLTON, FAIR,
WILSON, GREENLEE AND WESTBROOKS, JJ., CONCUR.




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