The Sale and the Bill of Sale

November 19, 2019 § 1 Comment

Dan McIntosh, IV (Dan) transferred his extensive gun collection to his father, Dan McIntosh, III (Mac), after he faced criminal charges in federal court. Dan gave Mac a bill of sale for the property. Mac, an attorney, represented Dan and eventually succeeded in getting the young man a favorable plea deal, although under its terms he was a convicted felon.

Dan later decided he wanted his guns back. Mac and Dan’s friend explained that he could not have them in his possession under state and federal law.

Unconvinced, Dan firebombed Mac’s home and rammed it with his Lexus; when he was arrested, he had a loaded shotgun in his vehicle. He had told his mother that he was in the middle of his suicide and he “had one thing to do before [his] life [ended.” In jail, Dan hanged himself.

Dan’d mother Beverly opened his estate and sued Mac for return of the gun collection. She claimed, among other things, that there was no consideration for the transfer, and a special chancellor was assigned the case. He found that the bill of sale and transfer were proper. Beverly appealed.

In Quick, Executrix of the Estate of McIntosh  v. McIntosh, decided October 22, 2019, the COA affirmed. You can read the entire opinion with its more complete recitation of facts. I thought you might find the court’s explication of the law of bill of sale and contracts useful. Here is how judge Westbrooks addressed it:

¶12. The chancellor found as a matter of law “that the April 2010, Bill of Sale from Mac to Dan was valid and that Dan became the owner of all of the items included in the Bill of Sale at that time and, further, that at the time of his demise, the assets included in the Bill of Sale were not assets of Mac’s estate.” There need not be any further iteration of his legal finding.

¶13. A “bill of sale” is defined as “an instrument for conveying title to personal property, absolutely or by way of security.” Black’s Law Dictionary (10th ed. 2014). “A transfer may be either an absolute assignment by way of gift or sale, or an assignment by way of mortgage or security only; but in either case when a written document of any sort is used to effect the transfer, the document is called technically a ‘bill of sale.’” Albert Gibson, Arthur Weldon & H. Gibson Rivington, Gibson’s Conveyancing 302 (14th ed. 1933). Mississippi has long recognized that “the acknowledgment of payment contained in the ‘bill of sale’ is merely a receipt which may be contradicted by parol evidence.” Smith v. Stevens, 299 So. 2d 690, 691 (Miss. 1974) (citing Fowlkes v. Lea, 84 Miss. 509, 36 So. 1036 (1904)). A bill of sale is an instrument that is evidence of a contract. Historically the Mississippi Supreme Court has used the two terms interchangeably. See Mitts v. Price, 129 Miss. 554, 163-65 (1922) (illustrating the supreme court employing the terms “bill of sale” and “contract” interchangeably in its analysis to determine the reasonable performance period under the bill of sale at issue and discussing the bill of sale as a written contract for the sale of property); see also Hercules
Powder Co. v. Westmoreland, 249 Miss. 849, 164 So. 2d 471, 474 (1964) (using the phrase “bill of sale or contract” when finding that a valid contract of employment existed between co-defendants).

¶14. In order to form a valid contract, the laws of this State require the following: “(1) two or more contracting parties; (2) consideration; (3) an agreement that is sufficiently definite; (4) parties with the legal capacity to make a contract; (5) mutual assent; and (6) no legal prohibition precluding contract formation.” Gandy v. Estate of Ford, 17 So. 3d 189, 193 (¶7) (Miss. Ct. App. 2009). A valid contract has to be supported by consideration. Id.

Consideration is, of course, one of the six elements required for the existence of a valid contract. The Mississippi Supreme Court has defined consideration for a promise as (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise, bargained for and given in exchange for the promise.

Marshall Durbin Food Corp., 909 So. 2d at 1273 (¶14) (citation and internal quotation marks omitted).

Where the instrument in controversy contains a statement or recital of consideration, it creates a rebuttable presumption that consideration actually existed. The general rule is that this presumption is established even by such expressions as “for value,” “for good and sufficient consideration,” “for value received” or, as in the present case, “for valuable consideration.”

Daniel v. Snowdoun Ass’n, 513 So. 2d 946, 950 (Miss. 1987) (citations omitted). “While the presumption does not preclude the defendant from putting on proof designed to show that the consideration was not actually paid, his ‘rebuttal must be made by a clear preponderance of the evidence.’” Marshall Durbin Food Corp., 909 So. 2d at 1274 (¶15) (quoting Daniel, 513 So. 2d at 950).

¶15. In Daniel, a nonprofit corporation (Snowdoun) was established in a codicil of the will of the testatrix, Elizabeth Garth, conveying the title to her childhood home to be opened as a museum. Daniel, 513 So. 2d at 948. Other bequeaths [sic] were made to the Mississippi University for Women and St. Paul’s Episcopal Church. Id. The widower sued, seeking to renounce the will, take his legal share, and have the bequests to MUW and St. Paul declared void. Id. The nonprofit corporation was not named as a party to the will contest, and its participation in settlement negotiations was not clear. Id. Regardless, a settlement was reached, leaving Snowdoun with about $100,000 as a result. Id. Daniel also executed a memorandum of understanding (MOU) in which he agreed to set up an inter vivos trust as a depository for the money. Id. Snowdoun was named the beneficiary of the trust. Id. Daniel failed to set up the trust fund, and Snowdoun sued for specific performance. Id. The MOU became the subject of litigation. Id. The nonprofit sued Daniel for specific performance. Id. In response Daniel claimed the agreement failed for lack of consideration. Id. He claimed that he only offered encouragement and appreciation, which is not consideration. Id at 949. The court was left to weigh whether the MOU was supported by consideration. Id. The case cited bedrock canons for the element of consideration in agreements: “[M]ere sentiments such as affection, love and the like, cannot in themselves furnish adequate consideration for an enforceable contract . . . considerations must come from the parties to the agreement.” Id. at 949. Further explaining that “[c]onsideration means something which is of some value in the eye of the law, moving from the plaintiff; it may be some benefit to the defendant or some detriment to the plaintiff; but in all events it must be moving from the plaintiff.” Id.

¶16. While Daniel tried to claim that Snowdoun had no inducement because their interests were aligned during the settlement that led to the MOU, Snowdoun claimed that it intervened in the negotiations because of Daniel’s encouragement. The Mississippi Supreme Court found that the record could support both and held it “will not overturn a chancellor’s finding of fact unless he is manifestly wrong.” Id. at 951.

The court went on to find various ways that the chancellor’s findings of consideration were supported by evidence, and went on to conclude that Beverly had failed to rebut the presumption of valid consideration by clear and convincing evidence.

Four Judges, and a Remand Makes Five

March 27, 2017 § 2 Comments

When Jon A. Swartzfager and Thomas R. Saul had a disagreement over the sale of some land, Saul filed suit in chancery court for breach of contract, equitable estoppel, and promissory estoppel.

The chancellor of the district recused, and the MSSC appointed Special Chancellor #1. That judge granted partial summary judgment and conducted some proceedings, in one of which he declared a written instrument to be a valid, enforceable contract. Before he got to a trial, however, Chancellor #2 unfortunately died.

Enter Chancellor #3. This time, the judge did set the case for trial, and it was heard on November 29, 2012, and January 25 and April 8, 2013. Before Chancellor #3 could render a final judgment, he, too, died.

The MSSC appointed Chancellor #4, who huddled with the attorneys and entered an order memorializing the parties’ agreement that he could review the existing record and render a decision. Chancellor #4 did just that, finding that Swartzfager had breached the contract, and awarding damages of more than $200,000, which included $79,098.81 in prejudgment interest. Swartzfager appealed.

In the case of Swartzfager v. Saul, decided February 16, 2017, the MSSC reversed in part and remanded. Essentially, the court affirmed everything but the award of prejudgment interest, and remanded for the chancellor to recompute damages without the prejudgment interest.

Only thing is, Chancellor #4 is now retired and is no longer sitting as a senior or special judge, so he will not be available to  deal with the case on remand.

Enter Chancellor #5. Stay tuned.

A few interesting points from the decision by Justice Maxwell:

  • Swartzfager argued that the MSSC should review the case de novo because Chancellor #4 based his decision on testimony before previously-assigned chancellors; he also urged that the previous chancellors’ findings should be given no deference. The court rejected that claim at ¶18 on the principle of judicial estoppel. The parties had agreed to follow that procedure, and he is precluded from taking a contrary position at a later stage of the case.
  • Another point pressed unsuccessfully by Swartzfager was that it was error for the chancellor to adopt Saul’s findings of fact and conclusions of law verbatim. The court disagreed, pointing out that the judge made his own findings, including adopting some findings of previous chancellors. I might add that even if the chancellor had wholly adopted Saul’s findings, it was not error for him to do so. You can read a post about the subject here.
  • The reversal on the issue of prejudgment interest came about because Saul had not included a prayer for that relief in his complaint, and so he was precluded from getting that relief per MRCP 8. The court noted that, since the reversal was based on the state of the pleadings, and not on the merits, it did not need to address whether the damages were liquidated, or if there were bad faith, which are two of the bases necessary to support an award of prejudgment interest.
  • There’s a lot of substance in this case that you might find useful, including: what it takes for a writing to be a contract; equitable estoppel; emotional distress damages arising out of a contract dispute; and assessment of attorney’s fees in absence of punitive damages.

A Primer on the Law of Pre-Nups

August 18, 2014 § Leave a comment

Only a couple of weeks ago I posted some random thoughts on pre-nuptial agreements that I thought you might find useful.

Then, last week, as if on cue, the COA handed down its decision in McLeod v. McLeod on August 12, 2014, a case involving a pre-nuptial agreement. Judge Griffis’s opinion is a concise statement of the law that you would need in a case involving one of these agreements. Here it is, extracted for your use:

¶11. The Mississippi Supreme Court has held that prenuptial agreements must be fair in the execution, and a duty of disclosure shall be imposed. Smith v. Smith, 656 So. 2d 1143, 1147 (Miss. 1995) (citing Hensley v. Hensley, 524 So. 2d 325, 327 (Miss. 1988)).

¶12. Prenuptial agreements are enforced like contracts: the first rule of interpretation of contracts is to follow the intent of the parties. Long v. Long, 928 So. 2d 1001, 1003 (¶14) (Miss. Ct. App. 2006). This intent was recognized initially by the prenuptial agreement, which provided:

Each of the parties shall retain all rights in his or her own separate property, as hereinafter defined, whether now owned at the time of the marriage of the parties or acquired thereafter, and each of them shall have the absolute and unrestricted right to dispose of such property during his or her lifetime and upon his or death, free from any claim which may be made by the other by reason of their marriage, and with the same effect as if no marriage had occurred between them, and such separate property shall not be subject to any division between the parties . . . as marital property subject to equitable distribution or division under the laws of Mississippi . . . .

¶13. “A contract may be either procedurally or substantively unconscionable.” West v. West, 891 So. 2d 203, 213 (¶26) (Miss. 2004). Procedural unconscionability deals with the formation of the contract. Id. (citing East Ford, Inc. v. Taylor, 826 So. 2d 709, 714 (Miss. 2002)). Substantive unconscionability is apparent “when the terms of the agreement are so one-sided that no one in his right mind would agree to its terms.” Id. (citing In re Last Will & Testament of Johnson, 351 So. 2d 1339, 1341 (Miss. 1977)).

*   *   *

¶15. Each party must enter a prenuptial agreement voluntarily. Deborah H. Bell, Bell on Mississippi Family Law § 23.02[2] (2nd ed. 2011). In In re Last Will & Testament of Cooper, 75 So. 3d 1104, 1108 (¶11) (Miss. Ct. App. 2011), this Court affirmed the chancellor’s judgment and found that there was no evidence to support a claim of involuntariness, because neither party was “forced in any way to sign” the prenuptial agreement.

¶16. This Court has held that “it is well established that ‘a person is under an obligation to read a contract before signing it, and will not as a general rule be heard to complain of an oral misrepresentation the error of which would have been disclosed by reading the contract.’” Ware v. Ware, 7 So. 3d 271, 277 (¶20) (Miss. Ct. App. 2008) (quoting Oaks v. Sellers, 953 So. 2d 1077, 1082 (¶17) (Miss. 2007)). And, as this Court has stated, “it is not now and never has been the function of this Court to relieve a party to a freely negotiated contract of the burdens of a provision which becomes more onerous than had originally been anticipated.” In re Cooper, 75 So. 3d at 1107 (¶9).

*   *   *

¶21. … While disclosure is of “paramount importance,” this Court has found that a prenuptial agreement can still be valid even if a financial disclosure is not attached. Mabus v. Mabus, 890 So. 2d 806, 819-21 (¶¶53, 59, 64) (Miss. 2003).

¶22. Here, the agreement stated that a full disclosure was made. Specifically, it provided:

[Willie] hereby states: that he has been fully informed regarding the property and estate of [Jeanell] and has examined the statement of her assets set forth in Exhibit “A” annexed hereto prior to signing this Agreement . . . .

[Jeanell] hereby states: that she has been fully informed regarding the property and estate of [Willie] and has examine the statement of his assets set forth in Exhibit “B” annexed hereto prior to signing this agreement.

*   *   *

¶24. Prenuptial agreements “must be fair ‘in the execution’ or procedurally fair.” Bell, at § 23.02[5] (citing Mabus, 890 So. 2d at 821; Smith, 656 So. 2d at 1147). Fairness in the execution can be affected by the presence of individual counsel, whether the parties had time to review the agreement, education of the parties, and whether the agreement was explained. Id.

*   *   *

¶26. This Court in Ware, 7 So. 3d at 277 (¶20), found that there was no evidence to suggest that one of the parties was forced to sign the prenuptial agreement, although one party admitted that she did not read the contract nor take it to an attorney to review it before she signed it. This Court held that “it is well established that ‘a person is under an obligation to read a contract before signing it, and will not as a general rule be heard to complain of an oral misrepresentation the error of which would have been disclosed by reading the contract.’” Id. (quoting Oaks, 953 So. 2d at 1082 (¶17)). Additionally, “independent counsel is not required to fairly execute a prenuptial agreement.” Id. (quoting Mabus, 890 So. 2d at 821 (¶63)).

*   *   *

¶29. Substantive unconscionability is apparent “when the terms of the agreement are so one-sided that no one in his right mind would agree to its terms.” West, 891 So. 2d at 213 (¶26) (citing In re Johnson, 351 So. 2d at 1341). The Mississippi Supreme Court has defined an unconscionable contract as “one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other.” In re Johnson, 351 So. 2d at 1341 (quoting Terre Haute Cooperage, Inc. v. Branscome, 203 Miss. 493, 503, 35 So. 2d 537, 541 (1948)).

¶30. Two clauses were included in the agreement that provided what would happen if one of the parties died:

Upon the death of either party during their marriage, with the other Party surviving, the Parties agree that all property which is joint tenancy with right of survivorship property or survivorship marital property shall pass to the surviving party by right of survivorship.

Both parties agree that a Will of the estates and properties will be executed at a later date that will outline estates, beneficiaries, survivorship, and or any other grounds not covered by this agreement.

¶31. In his order, the chancellor stated:

Under the prenuptial agreement, Jeanell was entitled to only that which Willie promised he would leave her in his Last Will and Testament, whenever he decided to have that document prepared. No specifics regarding what he intended to leave her in order to provide for her as she had requested were provided and are purely speculative. As written, this provision is inequitable and unenforceable and does nothing to provide for Jeanell at the time of a divorce or at the time of his death. On the other hand, under the laws in Mississippi, without a prenuptial Jeanell would be entitled to an equitable share of the marital estate at the time of divorce.

. . . As such the court finds that the prenuptial agreement “ . . . was such an agreement that no wife in her senses and not under a delusion would agree to and no fair-minded husband would propose.”

¶32. In Crisler v. Crisler, 963 So. 2d 1248, 1252-53 (¶9) (Miss. Ct. App. 2007), this Court stated:

[P]arties are bound by what they promise in writing. But, we are not bound to adopt a construction not compelled by the instrument in which we would have to believe no man in his right mind would have agreed to. A construction leading to an absurd, harsh or unreasonable result in a contract should be avoided, unless the terms are express and free of doubt.

(Citing Frazier v. Ne. Miss. Shopping Ctr., 458 So. 2d 1051, 1054 (Miss. 1984)). Further, in Hensley, the court stated: “[I]t is not now and never has been the function of this Court to relieve a party to a freely negotiated contract of the burdens of a provision which becomes more onerous than had originally been anticipated.” Hensley, 524 So. 2d at 328.

The COA reversed the chancellor’s ruling that this particular agreement was unenforceable. I recommend you read the opinion to see how the COA reached its conclusion. You will find it instructive as to how the court views these contracts.

I stand by my previous recommendations, however. You should be careful to see that every i is dotted and every t crossed. Even though every desirable formality was not observed in McLeod, there was adequate language in the agreement to overcome Ms. McLeod’s objections to it on appeal, and the facts were found by the COA to be in favor of enforcement. Sloppy drafting and unfavorable facts would probably have produced a different outcome.

Where Am I?

You are currently browsing entries tagged with contracts at The Better Chancery Practice Blog.