Citizens Bank of Appleton City v. Schapeler, WD

Decision Date16 November 1993
Docket NumberNo. WD,WD
Citation869 S.W.2d 120
PartiesCITIZENS BANK OF APPLETON CITY, Missouri, Appellant, v. Ruben A. and Norma J. SCHAPELER, Respondent. 47194.
CourtMissouri Court of Appeals

Richard Anthony Koehler, Butler, Wayne Patrick Strothmann, Clinton, for appellant.

Stephen Keith Nordyke, Butler, for respondent.


FENNER, Judge.

Appellant, Citizens Bank of Appleton City, Missouri (Citizens Bank), appeals the judgment entered by the Circuit Court of Bates County, Missouri. The action below commenced by Citizens Bank seeking to recover on a promissory note executed by respondents, Ruben and Norma Schapeler, and their son, Kenneth Schapeler.

The facts relevant to this appeal are as follows: On December 15, 1981, respondents, Ruben and Norma Schapeler (the Schapelers), and their son, Kenneth Schapeler, executed a promissory note in the amount of $167,000 to be paid to the order of Citizens Bank. A deed of trust was also executed to secure the promissory note.

On February 8, 1988, Citizens Bank filed a petition on the promissory note alleging that the Schapelers had failed and refused to pay the promissory note according to its terms. While the Schapelers admitted executing the promissory note in question, they asserted the affirmative defense of fraudulent inducement to sign the promissory note as well as two counterclaims, one for fraudulent misrepresentation and the other for conversion.

The Schapelers alleged that Ted Lambert, who was the president of Citizens Bank at the time the promissory note was executed, represented to them that their execution of the promissory note and deed of trust was only for purposes of obtaining documentation for banking examiners in regard to money that Citizens Bank had already loaned to Kenneth Schapeler and for money that Citizens Bank expected and had already promised to loan to Kenneth regardless of the Schapelers' execution of the promissory note and deed of trust. Lambert further represented that Citizens Bank would make available to Kenneth necessary loans that would allow Kenneth, based upon his business and financial condition, to be in a financial position to repay his loans with Citizens Bank without the necessity of Citizens Bank requesting the Schapelers to pay the promissory note or to foreclose on the deed of trust. Based upon these representations, the Schapelers apparently believed that Citizens Bank did not expect to collect on the promissory note, but would only use it for purposes of satisfying banking examiners to substantiate its prior banking practices of lending money and promising to lend money to Kenneth.

The Schapelers also alleged that on July 19, 1984 they delivered to Citizens Bank, and specifically Ted Lambert, $80,006.41 for the purpose of paying on the promissory note in question, after Citizens Bank demanded such payment. Lambert, however, applied the money to other notes that Kenneth had with Citizens Bank, notes that the Schapelers were not obligated to pay.

A jury trial took place on September 24th and 25th of 1992. Testimony at trial revealed the following: Kenneth Schapeler testified that he had been a customer of Citizens Bank starting sometime around 1978. Over the years, he had borrowed various amounts from the bank in connection with two businesses that he operated, Schapeler Oil and Schapeler Farms. He stated that around December 15, 1981, there was some discussion between him and the bank about consolidating his notes on a larger note. According to Kenneth's testimony, Ted Lambert said that the bank would need some more collateral on the notes for the bank examiners. Lambert apparently indicated that this would also give Kenneth more borrowing power to enable him to continue doing business.

Ruben Schapeler agreed to give 80 acres of land as security for the larger ($167,000) note--the note in question--and executed the note along with his wife and Kenneth. Kenneth testified that on July 19, 1984, his father signed a blank check and wrote the words "special account" on it, instructing Kenneth to apply no more than $85,000 to the note in question. This check had both Kenneth and Ruben's names on it; in other words, it was a joint account. Kenneth stated that he went to the bank and told Lambert that he wanted to apply the check for approximately $80,000 to the note in question. According to Kenneth's testimony, although Kenneth discussed his other notes at Citizens Bank on that day, he never indicated that he wanted to pay off these other notes with the check that his father gave him. Kenneth stated that he told Lambert that his father, Ruben, wanted the money applied to the note in question. It was not until December of 1984 that Kenneth found out that the money had not been applied to the $167,000 note. Apparently, the money had been applied to some of Kenneth's other notes with Citizens Bank. Kenneth eventually had to file for bankruptcy and his house was foreclosed upon.

Ron Hammelman, an experienced banker particularly in the lending area, testified to the customs and procedures that banks typically follow with regard to loans. Mr. Hammelman answered questions concerning the proper procedure to be used when a bank customer brings in funds to the bank to pay off a loan. Mr. Hammelman testified that a bank examiner would not require that additional security or notes be executed by the bank customer who already had notes outstanding at the bank.

Ted Lambert, president of Citizens Bank at the time of the incident in question, testified that the bank examiners did not request the execution of the $167,000 note. As to the check that Kenneth brought to the bank on July 19, 1984, Lambert stated that he applied the check to various loans of Kenneth's. He further testified that he did not consult Ruben before paying off Kenneth's notes with the check. He stated that when Kenneth came into the bank with the check, Kenneth told him that he had $80,000 available to pay on his notes. Lambert expected Ruben to pay his son's notes, even though Ruben's name was not on the notes.

Ruben Schapeler testified that Lambert told him that the bank examiners were requiring Kenneth to get more collateral on the notes that he had at Citizens Bank. Lambert assured Ruben that Kenneth was not in any trouble financially, but that if they signed the $167,000 note, Kenneth could get a line of credit and continue on in his business. Ruben stated that had he known that Kenneth was in any financial trouble and would be unable to repay his notes, he would never have signed the note. Ruben testified that he did not have access to Kenneth's financial information and that he relied upon what Lambert told him about Kenneth's financial condition.

Ruben stated that on July 19, 1984, he gave Kenneth a check to apply to the $167,000 note, instructing Kenneth to fill it out for no more than $85,000. This money was from the sale of property that Ruben and Norma held in their names. Upon finding out that the money had not been applied to the $167,000 note, but to five other of Kenneth's notes (one being Kenneth's wife's note), Ruben tried to contact Lambert but to no avail.

The jury found in favor of the defendants, Ruben and Norma Schapeler. As to the Schapelers' counterclaims for conversion and fraudulent misrepresentation, the jury found in favor of the Schapelers, assessing damages at $80,006.41 for each counterclaim.

On October 9, 1992, the Schapelers filed a Motion to Amend Judgment, seeking to increase the jury's award of $80,006.41 on their counterclaim for conversion to reflect interest on the award from the date of conversion. The trial court sustained this motion to allow 9% interest, and increased the award to $138,951.93.

On October 13, 1992, Citizens Bank filed a Motion for Judgment Notwithstanding the Verdict. The trial court sustained this motion with respect to the Schapelers' counterclaim for fraudulent misrepresentation. As to all other matters raised by Citizens Bank, the motion was overruled. Citizens Bank also filed a Motion for New Trial on October 13, 1992, which motion was overruled. This appeal followed.

Citizens Bank raises nine points on appeal, some of which will be considered together.


In its first point on appeal, appellant argues that the trial court plainly erred in permitting the case to proceed to trial on the Schapelers' affirmative defense of fraudulent inducement and on their two separate counterclaims for conversion and fraudulent misrepresentation. Appellant contends that the affirmative defense of fraudulent inducement to execute the promissory note is inconsistent with and opposite to the two counterclaims, as the defense of fraudulent inducement sought a rescission of the note while each of the counterclaims was based on the validity of the note. Appellant argues that the Schapelers should have been required to elect ahead of trial which of the two inconsistent theories they would pursue.

While it may appear that appellant's argument is based on the doctrine of election of inconsistent theories, a closer look at the trial transcript and appellant's argument in its brief show that appellant's argument is based on the doctrine of election of remedies. In the pretrial conference, the following colloquy occurred:

MR. KOEHLER [attorney for Citizens Bank]: ... I do think--your Honor, I do think we're running into an election of remedies problem, because he [attorney for the Schapelers] says in his opening statement that he acknowledged the [$167,000 note]; then there can't be any misrepresentation toward it. They acknowledge the debt. They made payment on the debt. That doesn't go hand--it can't--you can't acknowledge the debt and say that it was wrong. He's going to have to at some point in time decide which road he's going to...

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