Citizen's Nat. Bank of Willmar v. Taylor
| Decision Date | 07 June 1985 |
| Docket Number | No. C4-83-842,C4-83-842 |
| Citation | 368 N.W.2d 913,41 U.C.C.Rep.Serv. 516 |
| Parties | 41 UCC Rep.Serv. 516 CITIZEN'S NATIONAL BANK OF WILLMAR, Respondent, v. Douglas W. TAYLOR, Appellant. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. We affirm the trial court's direction of the verdict.
2. Respondent violated the usury laws by altering the interest rates on the notes to a usurious level and obtaining appellant's consent to the alteration. Because appellant consented to the alteration of the notes, respondent had to enforce the notes as altered and could not enforce the notes according to their original tenor under Minn.Stat. Sec. 336.3-407(2)(b) (1984).
3. Trial court's approval of the sale of appellant's personal property as commercially reasonable was proper.
Douglas W. Taylor, pro se.
L. Wayne Larson, Willmar, for respondent.
Considered and decided by the court en banc without oral argument.
Appellant Douglas Taylor appeals from the judgment of the trial court finding him liable to respondent Citizen's National Bank of Willmar on three promissory notes in the amount of $48,991.96, together with 15% interest computed from September 9, 1982. The trial court issued a post-trial order confirming the sale of personal property to satisfy the indebtedness and later denied a motion by appellant to reconsider the confirmation of the sale. Appellant appeals from the adverse judgment, contending that he was denied his right to a jury trial; that the rate of interest on the notes was usurious; that the respondent fraudulently altered the notes; and that the sale of the personal property was commercially unreasonable and should not have been approved. We affirm in part, reverse in part, and remand for modification of the amount of the judgment.
Respondent Citizen's National Bank of Willmar commenced this action to recover on three promissory notes executed by appellant Douglas Taylor. Taylor signed the first demand note in the amount of $37,448.41 on September 15, 1980. This note represented a renewal of Taylor's obligation under several previous notes. On October 2, 1980, Taylor signed a second note for $1,000. Taylor signed a third note for $4,680 on October 22, 1980. The demand notes called for interest at a stated rate of 15%. The appellant used the proceeds in his farming operation, and the notes were secured by farm equipment.
Interest was due on the demand notes every 6 months, and was therefore due on Taylor's notes in March of 1981. The first, and largest, of the three notes indicates that the bank sent its usual notice of the amount due to Taylor on March 10, 1981. The bank then sent a letter to Taylor on April 1, 1981, saying that it had not received a response from him about the note that had come due, and asking Taylor to contact the bank upon receipt of the letter. The first note also indicates that the bank sent Taylor yet another notice on its standard form on April 29, 1981.
The second note indicates that the bank sent Taylor a notice of amount due on March 30, 1981, and again on April 29, 1981. The third note shows that notice was sent on it on April 29, 1981. Finally, the third note indicates that a letter was sent to Taylor regarding his indebtedness on June 2, 1981. In that letter, the bank noted that Taylor had not responded to previous letters concerning the notes, and asked Taylor to "stop in right away and take care of these past due items." Taylor testified that he did not receive any of these notices or letters. The bank officer to whom returned mail is brought testified that these notices were not returned undelivered. The bank received no response from Taylor.
On May 26, 1981, the bank sent Taylor the following letter:
Your three notes came due May 1, 1981, in excess of $40,000.00. The interest on those notes effective today is 22 1/2%.
It is necessary that you stop in the bank and pay the interest to bring the notes current and take them off a past due status. You should do that this week.
The three notes were altered by crossing out the 15% interest figure in pencil and writing in its place on the face of each note Paul Peterson, the loan officer who dealt with Taylor, said the notes would have been changed on the date indicated, May 26. The alteration was not made by Peterson, but by a bank employee in accordance with what Peterson described as "normal banking procedures" when a demand note is overdue. Peterson testified that in May of 1981, interest rates were changing and the bank renewed demand notes as they came due at the current rate. The bank would notify the customer and change the note. Peterson testified that the bank always notified the customer when it changed the interest rate on any note, and that interest rates have been lowered, as well as raised, in this manner in the past.
Taylor admitted that he received the bank's May 26 letter. Taylor apparently did not go to the bank before June 8 because the bank sent him a letter on that date advising him that no more credit would be extended and that the bank expected full payment on the notes "around the first of July." Taylor eventually went to the bank and discussed his situation with loan officer Peterson. As a result of this visit, the bank agreed to extend the notes to August 1, 1981. A statement that the notes were extended was stamped on the back of each note, Peterson initialed the back of each note, and Taylor signed on the back of each note.
At Taylor's request, Peterson later extended the notes to September 10, 1981. Taylor did not pay anything on the notes until December 3, 1981. On that day, Taylor paid the bank $7,114.44 on the notes. Upon accepting this payment, the three notes were canceled and the parties executed a fourth demand note in the amount of $40,663.02 to reflect the aggregate indebtedness originally represented by the first three notes.
The bank discovered that the principal amount on the fourth note was incorrect and Peterson called Taylor on December 4, asking him to come in and sign a new, correct note. The bank had omitted the interest charge of 22 1/2% on the largest note in computing the principal amount on the fourth note. The bank therefore requested that Taylor sign a fifth note in the amount of $45,710.92 to correctly reflect the debt owed. Taylor then wrote to the bank on December 10, requesting a "written statement of interest rates charged, how calculated, including dates and amount due on my current loan with your bank." The bank complied with this request on January 6, 1982, providing Taylor with the following calculations:
Note # Amount Interest from
------------------- ---------- -------------------
33142 (first note) $37,448.41 9-15-80 to 5-26-81
15% $3,947.69
5-26-81 to 12-3-81
22 1/2% $4,470.40
Total: $8,418.09
33201 (second note) $ 1,000 10-2-81 to 5-26-81
15% $98.33
5-26-81 to 12-3-81
22 1/2% $119.38
Total: $217.71
33283 (third note) $ 4,680 10-22-80 to 5-26-81
15% $421.20
5-26-81 to 12-3-81
22 1/2% $558.68
Total: $979.88
Total Principal: $43,128.41
Total Interest Due: 9,615.68
Check Account OD 81.27
----------
52,825.36
Less grain check 7,114.44
----------
New Note $45,710.92
Taylor's denial of the request to sign the fifth note prompted the bank to abandon any demands based upon the fourth note and to commence this action to recover on the three original notes. Items of Taylor's personal property securing the indebtedness were later seized, notice of sale was provided, and the items were sold for the aggregate price of $13,343.
1. After the bank sued Taylor to recover on the three demand notes, Taylor counterclaimed for damages, alleging that the bank had charged him usurious interest, and for punitive damages, alleging that the bank had fraudulently altered the notes with willful indifference to Taylor's rights. Taylor requested a jury trial. The trial court impaneled a jury and the jury heard all the testimony and viewed all the exhibits. At the close of the evidence, the trial court granted the bank's motion to dismiss the claim for punitive damages, and released the jury.
The trial court then issued findings of fact and conclusions of law, finding Taylor liable on the notes according to their original tenor. In reaching its conclusion, the trial court found that the bank altered the notes in the good faith, but mistaken, impression that it could change the interest rate after a default on a demand note. The court concluded that the alteration was not fraudulent. The court also found that Taylor consented to the alteration. Taylor contends that the questions of fraud and consent are questions of fact and should have been submitted to the jury for determination. Taylor claims that the trial court denied him his constitutional right to trial by a jury by proceeding as it did.
Although the trial court did not indicate that it directed a verdict on the issues of fraud and consent, it in effect did so. This court has held that direction of a verdict, where warranted by the evidence, does not violate the constitutional right to a jury trial. Anderson v. Sears, Roebuck & Co., 223 Minn. 1, 7, 26 N.W.2d 355, 358 (1946), overruled on other grounds, Ryan v. Griffin, 241 Minn. 91, 62 N.W.2d 504 (1954); Kernan v. St. Paul City Ry. Co., 64 Minn. 312, 313, 67 N.W. 71, 72 (1896). In reviewing the grant of a directed verdict, this court makes an independent assessment of its appropriateness. A motion for a directed verdict...
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