FIRST STATE BANK OF BLANCHARD v. ARMSTRONG

FIRST STATE BANK OF BLANCHARD v. ARMSTRONG
1926 OK 565
248 P. 1107
119 Okla. 98
Case Number: 16706
Decided: 06/22/1926
Supreme Court of Oklahoma

FIRST STATE BANK OF BLANCHARD
v.
ARMSTRONG et al.

Syllabus

¶0 1. Chattel Mortgages--Continuing Security for Renewal Note. Where a bank holds two notes of a debtor, each secured by a chattel mortgage containing the clause, "This mortgage is intended and shall be held and construed to be as and for the security of the second party so long as the second party may be in any manner interested in the payment of the indebtedness hereby secured or any part thereof," and thereafter another note is executed for the indebtedness and the original notes stamped "paid," and delivered to the mortgagor, the mortgages are not them-by extinguished in the absence of an agreement to that effect.
2. Same--Replevin by Mortgagee--Defendant Estopped by Giving Redelivery Bond. Where, in a replevin action, the defendant, upon service of summons and the order of replevin, executes a redelivery bond, he thereby admits that he is in possession of the property, and he and his sureties on the redelivery bond are estopped from setting up the defense that the property had been sold at foreclosure sale of another mortgage prior to the commencement of the action.
3. Appeal and Error--Sufficiency of Record--Trial on Stipulated Issues. When the parties in open court stipulate the issues to be tried, and trial is had upon the issues as stipulated, the appeal will not be dismissed for failure to incorporate the pleadings in the case-made where the parties had due notice of tbe settling and signing of the case-made, and no objections were made or amendments suggested.

McKeown & Green, for plaintiff in error.
C. Guy Cutlip and Thos. J. Horsley, for defendants in error.

RAY, C.

¶1 Upon a service of writ of replevin in an action by the First State Bank of Blanchard, the defendant I. N. Armstrong gave a redelivery bond with W. A. Armstrong, J.H. Robertson, B. E. Joptal, F. L. Huston, T. T. McAnally, and A. W. Armstrong, as sureties, and thereafter filed answer. At the time the case was regularly set for trial the defendant failed to appear either in person or by attorney, and judgment was for plaintiff. Thereafter plaintiff commenced suit on the redelivery bond. Thereafter the defendant in the replevin action filed his petition to vacate the judgment, upon the ground that his failure to appear for trial was caused by the court clerk notifying his attorney, who was a resident of another county, that the jury had been discharged and the case would not be called for trial. The judgment was vacated, and the parties by their respective attorneys, in open court, stipulated that the replevin action and the action on the redelivery bond should be consolidated and tried together to the court without a jury, and that in the event the court should find that there was any sum due the plaintiff bank by Armstrong, defendant in the replevin suit, judgment should be rendered for that amount against the defendants in the suit on the redelivery bond. The court found for the plaintiff bank, and against the defendant Armstrong, and entered judgment in the replevin action for the bank against the defendant Armstrong, in the sum of $ 302.88 and interest, and $ 25 attorney's fee, but refused to render judgment against the sureties on the redelivery bond, defendants in the other case.

¶2 The only complaint of the plaintiff bank in its appeal is that the court erred in refusing to render judgment against the sureties on the redelivery bond as per stipulation. The facts are that in the fall of 1918, the defendant I. N. Armstrong, then a resident of McClain county, was indebted to the First State Bank of Blanchard, the indebtedness being evidenced by two promissory notes, each secured by a separate chattel mortgage. After certain payments were made, the balance owing to the bank was included in one note of $ 287.50, executed by the defendant Armstrong to the bank. At that time, or soon thereafter, the original notes were stamped "paid," and delivered to Armstrong. In December, 1918, Armstrong moved to Seminole county, and took the property described in the two mortgages with him. The mortgages were not filed for record in Seminole county. In its petition filed in the district court of Seminole county June 2, 1920, the plaintiff bank alleged that the note of $ 287.50 was a renewal of the original notes secured by the two chattel mortgages, and by reason thereof it alleged a special ownership in the mortgaged property and entitled to possession. Copies of the two mortgages and the note of $ 287.50 were attached to the petition as exhibits. The defendant's answer was, first, a general denial, except as to certain admissions; second, an admission that plaintiff was a corporation; third, that the original notes and mortgages were executed by him to the bank, but that the two notes contained certain items of usury; fourth, that the original notes were fully paid, including the usury; that he did not sign the alleged renewal note of $ 287.50, and that if plaintiff held such a note it was a forgery. The answer contained other allegations not necessary to a decision here. To this answer plaintiff replied by general denial.

¶3 A prima facie case was made by plaintiff's evidence. The defendant Armstrong testified that he paid the original notes, and that he did not sign the note of $ 287.50. The trial court found to the contrary, and no question is raised as to such finding. The defendant Armstrong and certain of the sureties on the redelivery bond testified that in the spring of 1919 a representative of the plaintiff bank was in Seminole county for the purpose of looking after the mortgaged property, and when Armstrong exhibited to him the two original notes stamped "paid," he said there was something wrong, and left Seminole county without making any attempt to make collection or to take possession of the property; that when the summons and order of replevin were served on the defendant Armstrong, he again exhibited the notes stamped "paid," as evidence that the indebtedness had been fully paid, and the sureties were thereby induced to sign the redelivery bond. Plaintiff's witnesses testified that the original notes stamped "paid" ought to have been retained by the bank until the renewal note was paid, but that a subordinate employee of the bank had given them to Armstrong inadvertently. On this evidence the trial court found that the defendant Armstrong was indebted to the plaintiff bank for the amount of the $ 287.50 note, interest, and attorney's fee, which was in effect a finding that the indebtedness for which the original notes were given had not been paid, and that the $ 287.50 note evidenced that indebtedness as testified by plaintiff's witnesses; but held that the indebtedness was not secured by the mortgages given to secure the original notes, and refused to enter judgment against the sureties on the redelivery bond.

¶4 The general rule sustained by the great weight of authority is as stated in State v. Lonewolf, 63 Okla. 166, 163 P. 532:

"A note executed for a balance due upon a previous debt or demand is not a payment or extinguishment of the original demand, nor of a chattel mortgage given to secure same and will not bar an action of replevin for possession of the property described in said mortgage after the maturity of said note."

¶5 In the instant case the mortgages contained this clause:

"It is expressly understood and agreed that any future transactions by which the first party may become indebted to the second party prior to full payment of indebtedness herein specified, are to be based upon this mortgage as security, and the same shall be so held and construed. This mortgage is intended and shall be held and construed to be as and for the security of the second party so long as the second party may be in any manner interested in the payment of the indebtedness hereby secured or any part thereof. * * *"