Citizens Nat. Bank v. Waltman, 49001

• Decision Date: 09 March 1977
• Docket Number: No. 49001,49001
• Citation: 344 So.2d 725
• Parties: CITIZENS NATIONAL BANK v. Mrs. Evelyn WALTMAN. 2 opinions attached.
• Court: Mississippi Supreme Court

Page 725

344 So.2d 725

CITIZENS NATIONAL BANK v. Mrs. Evelyn WALTMAN. 2 opinions attached.

No. 49001.

Supreme Court of Mississippi.

March 9, 1977.

Rehearing Denied April 27, 1977.

Cox & Dunn, William H. Cox, Jr., Vardaman S. Dunn, Jackson, for appellant.

Heber A. Ladner, Jr., Pittman & Nobles, Crymes G. Pittman, Jackson, for appellee.

EN BANC.

WALKER, Justice, for the Court:

Mrs. Evelyn Waltman instituted this action in the Circuit Court of the First Judicial District of Hinds County, Mississippi, seeking to recover damages arising as a result of alleged fraud and negligence in connection with a series of loan transactions involving her, her late husband, Billy J. Mann, and the defendant, Citizens National Bank. The jury returned a verdict for Mrs. Waltman in the amount of $102,000, but the trial judge ordered a remittitur, accepted by the plaintiff, in the amount of $32,000. The Bank's motion for judgment notwithstanding the verdict or, in the alternative, a new trial having been overruled, it brings its appeal to this Court.

Mrs. Waltman, a widow and a business woman, married Billy J. Mann on January 31, 1971. On March 1, 1971, she and her husband executed a note in the amount of $22,445.40 to the Citizens National Bank, pledging as collateral a 40 acre farm in Copiah County owned by Mrs. Waltman and several shares of stock, which later proved to be worthless, owned by her husband. The only real factual dispute in this case involves the circumstances of that transaction. Mrs. Waltman testified that her husband had called her late on the afternoon of March 1 to inform her that he had negotiated a business loan but that her collateral was needed before the Bank could close the deal. She resisted this suggestion, but the loan officer, Bobby Pace, assured her that all was in order. When she arrived at the Bank, both the note and the deed of trust had already been prepared, the description of her property having already been typed into the deed of trust. She did not wish to mortgage her property, but Pace assured her that her farm would serve only as interim security for a few days until her husband's stock arrived from Shreveport. Relying on this assurance, she signed the note and the deed of trust. Pace, of course, substantially contradicted this testimony, but, because of our disposition of the case, it is not necessary to review his testimony in any detail. It seems to be undisputed that the proceeds of the loan were used to satisfy Mr. Mann's indebtedness to a Shreveport Bank, as well as two earlier loans by Citizens National to Mr. Mann and an $800 loan to Mrs. Waltman. Mrs. Waltman claimed that the Bank never informed her of the existence of these prior loans to Mann, which her collateral was used to secure. However, these prior loans do appear on the loan disbursement sheet executed in conjunction with the disclosure statement signed by Mrs. Waltman. After satisfying these debts, Mr. Mann and Mrs. Waltman received only $10,000 in cash for their $22,000 note.

Apart from this initial conflict in testimony, the facts in the case seem hardly to be in dispute. Mr. Mann incurred further debts with the Bank, including a note executed on September 22, 1971, in the amount of $2,682. By the time of that loan, the March 1 loan had become delinquent, and Mr. Mann and Mrs. Waltman had separated because of his financial irresponsibilities. By August 23 the Bank had discovered that the stock pledged by Mr. Mann had no value whatsoever. Mr. William White, the vice-president of the Bank, called Mrs. Waltman and told her that she would have to bring the loan up-to-date. The Bank required her to put up her 89 shares of General Motors Stock as collateral for the original debt on September 10, 1971. On June 15, 1972, the Bank sold 20 shares of that stock to bring the loan current. The note again became delinquent, and Mrs. Waltman executed another note on November 24, 1972, in the amount of $17,552.62. The renewal was supported by the same collateral and was executed in her name alone, retiring the original note. Whereas the original note had been payable in 60 monthly installments, this note was to be payable in full within six months. Furthermore, as a condition of this renewal, Mrs. Waltman was required to accept responsibility for the September 22, 1971, loan to Mr. Mann, a loan that the Bank had made with full knowledge that Mr. Mann's earlier loan had become delinquent. This note also became delinquent, and Mrs. Waltman executed a final note, in the amount of $17,552.62, on August 8, 1973, payable on September 7, 1973. At the time of this last renewal, Mrs. Waltman had been discovered from Mr. Mann since July 18, 1973. When this final note became delinquent, the Bank foreclosed the mortgage on Mrs. Waltman's farm on December 26, 1973, sold the remaining General Motors stock and retired the indebtedness.

In her amended declaration, Mrs. Waltman sought recovery for, inter alia, the tort of fraud and deceit, arising from the Bank's alleged misrepresentation that her farm was only to be used for a few days as interim security for the original loan.

Under her second count, she alleged that the Bank tortiously coerced her into assuming responsibility for an independent debt of Mr. Mann as a condition for renewing the original debt.

We need not decide whether the jury was properly instructed, nor whether it could properly accept the version of the facts offered by Mrs. Waltman. Nor need we decide whether, accepting Mrs. Waltman's version of the facts as true, the Bank committed any actionable wrong, either fraudulently or negligently. We have reached the inescapable conclusion that by executing the last renewal note on August 8, 1973, with full knowledge of the surrounding circumstances, Mrs. Waltman waived any cause of action she might have had against the Bank based on the earlier notes. Therefore, the defendant's peremptory instructions should have been granted. Although the Bank in its answer did not use the term waiver, the defense of waiver is amply pled in its answer to Count II, Paragraph 10.

At the time of the last renewal, Mrs. Waltman was well aware of the facts constituting the alleged fraud. She knew that the Bank's alleged assurance that her land was needed only as interim security had been proven false. She knew that Mr. Mann's stock, which the Bank allegedly had assured her was valuable, had proven worthless. She knew or was charged with the knowledge that the Bank had used the original loan to pay off earlier debts of Mr. Mann. She knew that the Bank had required her to assume his later debts in the renewal of November 24, 1972.

Our law is clear that the execution of a renewal note with full knowledge of the facts constituting a defense to the original note waives that defense as to the renewal. Justice Griffith explained this doctrine in Gay v. First Nat'l Bank, 172 Miss. 681, 686, 160 So. 904, 905 (1935);

Where a party has full knowledge of all defenses to a note and executes a new note payable at a future date, he then waives all his defenses and becomes obligated to pay the new note. Tallahatchie Home Bank v. Aldridge, 169 Miss. 597, 604, 153 So. 818. And where the facts and circumstances are such that a reasonably prudent person, judged by normal standards, would or should have made inquiry, which inquiry, if reasonably pursued and with ordinary diligence, would have led to full knowledge of his defenses, then it becomes the duty of the party or parties to make such inquiry or investigation before executing the renewal...