First Nat. Bank & Trust Co. v. Lygrisse

• Decision Date: 16 July 1982
• Docket Number: No. 52962,52962
• Citation: 231 Kan. 595,647 P.2d 1268
• Court: Kansas Supreme Court
• Parties: FIRST NATIONAL BANK & TRUST COMPANY, Appellee, v. Lowell L. LYGRISSE and Judith Lygrisse, et al., Appellants.

Page 1268

647 P.2d 1268

231 Kan. 595

FIRST NATIONAL BANK & TRUST COMPANY, Appellee, v. Lowell L. LYGRISSE and Judith Lygrisse, et al., Appellants.

No. 52962.

Supreme Court of Kansas.

July 16, 1982.

Syllabus by the Court

1. Subsequent debts may be secured under the dragnet clause of a real estate mortgage in either of two ways: (1) by specifically stating on the face of the new note that it is secured by the prior mortgage; or (2) by showing that the subsequent debt is of the same kind or character as, or part of the same transaction or series of transactions with, that originally secured by the mortgage.

2. Antecedent debts may be secured by a mortgage containing a dragnet or other advances clause only if the antecedent debts are clearly identified in the mortgage. This rule, however, has no application where subsequent notes specifically indicate that certain antecedent debts were intended to be secured.

3. Promissory notes and mortgages are contracts between the parties, and the rules of construction applicable to contracts apply to them.

4. The intention of the parties and the meaning of a contract are to be deduced from the instrument where its terms are plain and unambiguous.

5. The best and most persuasive evidence of the intention of parties who enter into a written agreement is that which is expressed by the terms of that agreement.

6. A presumption of validity attaches to a judgment of the district court until the contrary is shown, and before this court will set aside a judgment it must be affirmatively made to appear that such judgment is erroneous.

7. The burden is upon an appellant to designate a record sufficient to present its points to this court, and to establish the claimed error.

8. On appeal, error below is never presumed and the burden is on the appellant to make it affirmatively appear.

9. Where an appellant has failed to procure an official transcript or abstract the testimony of record or reconstruct it in some accepted manner, this court will not review any action of the trial court requiring an examination of the evidence.

Carl L. Wettig, Wichita, argued the cause and was on the brief for appellant Judith Lygrisse.

Anne L. Baker, of Eidson, Lewis, Porter & Haynes, Topeka, argued the cause, and Michael G. Coash, of Bond, Bond & Coash, El Dorado, was on the brief for appellee.

Anne L. Baker and Charles N. Henson, of Eidson, Lewis, Porter & Haynes, Topeka, were on the brief for amicus curiae Kansas Bankers Ass'n.

MILLER, Justice:

This is an appeal by Judith Lygrisse, one of the defendants in a real estate mortgage foreclosure action commenced by the plaintiff, First National Bank & Trust Company of ElDorado, Kansas. The mortgage upon which the action is brought covered a loan of $47,000. It contains a "dragnet" or "future advances" clause. The trial judge held that the mortgage secured a debt of some $206,000 plus interest. The Court of Appeals reversed, finding that only $47,000 plus interest was secured by the mortgage. First Nat'l Bank & Trust Co. v. Lygrisse, 7 Kan.App.2d 291, 640 P.2d 1274 (1982). On April 14, 1982, we granted review.

The sole issue raised by the appellant in her brief is whether "future advances" were made by the bank to the mortgagors, Lowell and Judith Lygrisse, and whether the "future advances" are secured by the real estate mortgage.

On January 30, 1976, Lowell Lygrisse and Judith Lygrisse, husband and wife, executed a note and mortgage to the bank. The note was for $47,000; the mortgage covered a quarter section of land in Sedgwick County which was the homestead of the mortgagors. In the lower left hand corner of the note appears the following reference to the mortgage:

"NOTE SECURED BY R. E. Mtg. dtd. 1/30/76."

The mortgage contains the following paragraph which gives rise to this dispute:

"It is the intention and agreement of the parties that this mortgage also secures any future advancements made to mortgagors, or either or any of them, by mortgagee and all indebtedness in addition to the above amount which mortgagors, or either or any of them, may owe to mortgagee, however evidenced, whether by note, book account or otherwise, in amount not to exceed $400,000.00. This mortgage shall remain in full force and effect until all amounts due hereunder, including future advancements, are paid in full, with interest. Upon the maturing of the indebtedness for any cause, the total debt on such additional loans, if any, with interest, shall at the same time and for the same specified causes be considered matured, and shall be collectible out of the proceeds of sale through foreclosure or otherwise."

The figure "$400,000.00" was typed into the printed mortgage form.

A few weeks later, on April 12, 1976, Mr. and Mrs. Lygrisse executed another note to the bank in the amount of $274,664.01. This note consolidated various obligations of the Lygrisses to other banks, the original $47,000 debt, other obligations of the Lygrisses to the plaintiff bank, accrued interest, and a new advance of $18,000. In the lower left hand corner of the note appears:

"NOTE SECURED BY S/A 509 head of cattle, machinery & equip., Financial Stmt., R.E. Mtg. dtd. 1/30/76."

On October 15, 1976, both Mr. and Mrs. Lygrisse signed a renewal note in the amount of $287,960.76. It recited the same notation referring to the mortgage.

Subsequently, two renewal notes were signed by Lowell Lygrisse only. Interest on the principal sum was the only amount added. On May 10, 1977, Lowell Lygrisse signed the first of the two renewal notes in the amount of $295,000; a notation referring to the mortgage appeared thereon. On November 15, 1977, Lowell Lygrisse signed the final renewal note, in the amount of $309,000. Reference to the mortgage was omitted.

The trial judge made the following findings:

"The question is whether the subsequent consolidation of the $47,000.00 indebtedness, secured by the mortgage, with other notes of indebtedness antecedent to the execution of the mortgage; and subsequent renewals of this consolidated indebtedness with the addition of interest charges fall within the scope of the above ('dragnet' or 'future advances') clause.

"The law as stated in Emporia State Bank & Trust Company v. Mounkes, 214 Kan. 178 (519 P.2d 618), provides as follows: 'Dragnet clauses are not, however, highly regarded in equity and should be carefully scrutinized and strictly construed.'

'Where a mortgage is given to secure a debt specifically named, the security will not ordinarily be extended to cover debts subsequently incurred unless they be of the same class or character and so related to the primary debt secured that the assent of the mortgagor can be inferred.'

'In the absence of clear evidence of a contrary intention, a mortgage containing a dragnet type provision will not be extended to cover subsequent advances or loans unless they be of the same kind and quality or relate to the same transaction or series of transactions or unless the document evidencing the same refers to the mortgage as providing security therefor.'

"Based upon the facts of this case and law as stated, I find as follows:

"1. That the note dated April 12, 1976, not only consolidated numerous notes and accurred (sic) interest, but also included a further advance of $18,000.00 to 'pay interest, purchase feed and fertilizer, and gas, and ... and general operating expenses.' "2. That the note dated April 12, 1976, consolidated not only numerous notes, but consolidated the collateral securing those notes including the mortgage dated January 30, 1976.

"3. That the note dated April 12, 1976, specifically refers to the mortgage dated January 30, 1976, as part of the security therefor.

"4. That all the notes consolidated on April 12, 1976, were related to the farming and cattle operations of the Defendants Lygrisse as opposed to the business of Butler County Implement, Inc.

"5. That the consolidation and subsequent renewals, including the additions of interest, constituted advances of the same kind and quality, and related to the same transaction or series of transactions as the principal obligation secured.

"6. That there was no evidence presented of any intention by the parties to exclude the mortgage from the other collateral listed on the November 15, 1977, note; and conclude that it wasn't included due to error or inadvertence.

"For the above reasons, I find that the indebtedness evidenced by the November 15, 1977, note is secured by the mortgage dated January 30, 1976; and Plaintiff should be given judgment in the amount due and owing on said note; and that the security represented by the mortgage dated January 30, 1976, constitutes the first and prior lien upon the real estate subject only to the two mortgages of Eureka Federal Savings & Loan Association which has hereinbefore been stipulated to by the parties, and to the property taxes due and owing to Sedgwick County, Kansas, as also stipulated to by the parties herein."

The trial court found that the total principal and interest owing on the November 15, 1977, note was $206,413.91. That amount was held to be secured by the mortgage. The trial court found that certain other loans from the Bank to the Lygrisses were not secured by the mortgage; no appeal has been taken from that portion of the court's order, and we are not concerned with it here.

Mr. and Mrs. Lygrisse were divorced during the pendency of the foreclosure proceedings, and the homestead (the mortgaged property) was awarded to Mrs. Lygrisse. She appeals from the judgment of foreclosure.

The Court of Appeals noted that the controlling case is Emporia State Bank & Trust Co. v. Mounkes, 214 Kan. 178, 519 P.2d 618 (1974). It quoted various portions of that opinion, including the following:

"In summary, we hold that in the absence of clear, supportive evidence of a contrary intention a mortgage containing a dragnet type clause will not be extended to cover future advances...