St. Paul Mercury Ins. Co. v. Merchants & Marine Bank
| Docket Number: | 2003-CA-01869-SCT Linked Case(s): 2003-CA-01869-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 08-26-2004 Opinion Author: Waller, P.J. Holding: Reversed and Remanded |
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| Additional Case Information: |
Topic: Interpleader action - Assignment of construction contract - Security interest - Section 75-9-203(1)(a)(b)(c) - Section 75-9-312(5)(a) - Exemption from filing - Section 75-9-302(1)(e) Judge(s) Concurring: Smith, C.J., Cobb, P.J., and Dickinson, J. Non Participating Judge(s): Diaz, Carlson, Graves and Randolph, JJ. Dissenting Author : Easley, J. Procedural History: Summary Judgment Nature of the Case: CIVIL - OTHER |
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| Trial Court: |
Date of Trial Judgment: 08-06-2003 Appealed from: Harrison County Circuit Court Judge: Jerry O. Terry, Sr. Disposition: The circuit court granted summary judgment to Merchants in regard to the amount of the interpled funds requested and granted summary judgment to St. Paul in regard to the amount of the interpled funds remaining after payment to Merchants. Case Number: A2401-01-492 |
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| Party Name: | Attorney Name: | |||
| Appellant: | St. Paul Mercury Insurance Company |
MARK D. HERBERT
LISA ANDERSON REPPETO |
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| Appellee: | Merchants & Marine Bank | DAVID W. MOCKBEE |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Interpleader action - Assignment of construction contract - Security interest - Section 75-9-203(1)(a)(b)(c) - Section 75-9-312(5)(a) - Exemption from filing - Section 75-9-302(1)(e) |
| Summary of the Facts: | The Gulfport School District deposited $227,738.16 with the Harrison County Circuit Court in an interpleader action. St. Paul Mercury Insurance Company and Merchants and Marine Bank both claimed priority to differing amounts. The court granted summary judgment to Merchants in regard to the amount of the interpled funds requested and granted summary judgment to St. Paul in regard to the amount of the interpled funds remaining after payment to Merchants. St. Paul appeals. |
| Summary of Opinion Analysis: | Mississippi's version of UCC Article 9 applies to assignments of construction contracts. Merchants contractually took a security interest by way of assignment in Schwegman Constructors' right to payment for construction work. This transaction is therefore covered by the UCC. Under section 75-9-203(1)(a)(b)(c), a security interest attaches when there is an agreement; value is given; and the debtor has rights in the collateral. In Merchants' case it executed an agreement with Schwegman Constructors to take an assignment of Schwegman Constructors' right to payment number eight; it gave value of $105,000; and pursuant to Schwegman Constructors' work on its project for the School District, Schwegman Constructors had rights in payment number eight. In St. Paul's case, it executed an agreement with Schwegman Constructors to take an assignment of Schwegman Constructors' right to payment number eight; it gave value by waiving its right to seek personal indemnification from Joe Schwegman after Schwegman Constructors' default on its contractual obligations which St. Paul had bonded; and pursuant to Schwegman Constructors' work on its project for the School District, Schwegman Constructors had rights in payment number eight. Under section 75-9-312(5)(a), if conflicting security interests have attached, priority over the contested collateral goes to the party who filed or perfected first. The language of Merchants' agreement with Schwegman Constructors shows that though the agreement involved an assignment, the assignment of payment number eight merely operated as a means of securing the loan of $105,035. The intended effect of Merchants' transaction was to secure a loan by way of assignment. Both Merchants and St. Paul entered into transactions covered by the UCC. Both properly attached their interest in the collateral. However, because St. Paul acted in compliance with Mississippi law by attaching and immediately perfecting its interest by filing, it earned the right to priority over Merchants' interest in the collateral. Knowledge is statutorily irrelevant to the inquiry unless Merchants at least filed a financing statement which it did not. In an issue of first impression, Merchants argues that even if the UCC applies, it is exempt under section 75-9-302(1)(e) which provides that a party may be exempt from filing where an assignment (done or in conjunction with others) to the same assignee does not transfer a significant part of the outstanding accounts of the assignor. Schwegman Constructors' outstanding accounts receivable for the month ending June 30, 2001, totaled $1,274,117.95. Merchant's loans to Schwegman Constructors totaled $335,019, representing more than one quarter of Schwegman Constructors' total outstanding accounts receivable. This is by no means a casual or isolated assignment transferring an insignificant part of Schwegman Constructors' outstanding accounts receivable. Therefore, Merchants is not exempt from the filing requirement. |
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