First National Bank in Dallas v. Rozelle

Citation493 F.2d 1196
Decision Date31 January 1974
Docket Number72-1865.,No. 72-1864,72-1864
PartiesFIRST NATIONAL BANK IN DALLAS, a National Banking Association, Plaintiff-Appellant and Cross-Appellee, v. F. McQueen ROZELLE, Defendant-Appellee and Cross-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Peter B. Bradford, Oklahoma City, Okl. (Judson S. Woodruff, and McAfee, Taft, Cates, Mark, Bond & Rucks, Oklahoma City, Okl., on the brief), for plaintiff-appellant and cross-appellee.

James D. Grigsby, Oklahoma City, Okl. (Andrew Wilcoxen, Muskogee, Okl., on the brief), for defendant-appellee and cross-appellant.

Before PHILLIPS, HILL and HOLLOWAY, Circuit Judges.

HOLLOWAY, Circuit Judge.

This diversity action by the bank seeks recovery on several notes and foreclosure against defendant Rozelle's interest in oil and gas leaseholds and personal property thereon in Hughes County, Oklahoma. The trial court denied foreclosure, holding that a proper tender had been made on the indebtedness secured by the mortgage and that other indebtedness asserted by the bank was not covered by the mortgage, or had been paid. Recovery was also denied on Rozelle's counterclaim for damages arising from allegedly wrongful refusal to release the mortgage on proper tender. Both parties have appealed. We are unable to agree with the conclusion of the trial court in ruling against the bank as to the coverage of the mortgage, but agree with the denial of recovery on the counterclaim.

The background facts concerning the transactions between the bank and Rozelle extend back for several years. The Hughes County mortgage, which is the focal point of this controversy, was executed in August, 1967, by Rozelle in connection with the borrowing of $40,000 for secondary recovery operations on the mortgaged leasehold properties in Hughes County. A note for $40,000 (note 1) was executed contemporaneously therewith. This debt was paid but additional borrowing occurred, evidenced by a $100 note (note 2) made in September, 1969, to keep the Hughes County mortgage alive, and a $15,000 note (note 3) executed in October, 1969. There is admittedly a balance owing of $9,100 on these notes.

It is undisputed that Rozelle made a tender of this $9,100 balance before commencement of this foreclosure suit. Rozelle maintains the bank wrongfully refused the tender and refused to release the mortgage for satisfaction of all the indebtedness covered by it. His counterclaim is premised on the statutory liability for refusal to release a mortgage as provided by 46 O.S.A. § 15. The bank maintains that it was entitled to reject the tender and to refuse release of the mortgage because a future advance clause and omnibus provision of the mortgage brought other unpaid indebtedness within the security of the mortgage.

The additional indebtedness in question was represented by three notes executed in September, 1969 — one for $109,580 (note 4); one for $50,000 (note 5); and a third for $2,500 (note 6). These funds were to be used in connection with Rozelle's ranching operations on land in Pushmataha County, Oklahoma. A second mortgage was given by Rozelle on the Pushmataha County real estate to secure these notes.

In connection with the Pushmataha County ranching operations, Rozelle had borrowed larger amounts from Connecticut General Life Insurance Company and gave a first mortgage to the company as security. Connecticut General brought a foreclosure action in the trial court against Rozelle and also joined the bank. A decree for foreclosure of the first mortgage was entered, which has been affirmed. Rozelle v. Connecticut General Life Insurance Co., et al., 471 F.2d 29 (10th Cir.), cert. denied, 411 U. S. 921, 93 S.Ct. 1549, 36 L.Ed.2d 314. In that suit the bank cross-claimed against Rozelle for recovery on notes 4, 5 and 6 relating to the indebtedness incurred in connection with the Pushmataha County ranching operations. As reflected by the Court's opinion and the brief of the bank on this appeal, judgment on those three notes was entered against Rozelle and in favor of the bank.

There was also an additional indebtedness of Rozelle and his mother which had been incurred in connection with cattle operations. In May, 1967, Rozelle and his mother borrowed $50,000 from the bank for the purchase of cattle. They gave a promissory note to the bank for this amount (the cattle note) and it was secured by a deed of trust on land in Garland, Texas. As will be detailed further, the bank did not seek recovery on this note in its complaint in this case, but there was a considerable amount of proof concerning this indebtedness at trial.

The foreclosure case before us now was tried to the court. The court found that in July, 1970, payment of the $9,100 balance due, plus interest, on the Hughes County indebtedness was tendered by Rozelle; that the bank refused this tender and the demand for release of the Hughes County mortgage on the ground that the bank considered the mortgage as security for all of Rozelle's indebtedness to the bank which then was substantially in excess of the amount tendered; and that this refusal by the bank was made in good faith. The court found that Rozelle's evidence was wholly inadequate to prove that at any time material to the case the bank had been guilty of bad faith or had intentionally acted in an arbitrary, capricious, malicious or oppressive manner toward Rozelle. The court concluded that the counterclaim was without merit and should be denied.

The court found further that Rozelle had executed the Pushmataha County notes (notes 4, 5 and 6) and that they were not paid when due; that these loans were not within the contemplation of the parties when the mortgage on the Hughes County property was given and were unrelated to the activity or interest of Rozelle in that property; and that there was no specific intent on Rozelle's part that the omnibus provision of the Hughes County mortgage should include the loans on the Pushmataha County property. The court concluded that the security afforded by the Hughes County mortgage did not include notes 4, 5 and 6.

In connection with proof that concerned the cattle loan, the court found that the May, 1967, cattle note had been paid in full by Rozelle in January, 1968, and that the note was cancelled. The findings stated that, for reasons not satisfactorily explained by the bank, the entire amount of this obligation was transferred to the bank's ledger sheet for Rozelle as an indebtedness of his to the bank, and that the bank deemed itself secured by the Hughes County mortgage for this debt also.

As to the bank's right of foreclosure on the indebtedness that was held to be secured by the Hughes County mortgage, the court concluded that Rozelle was entitled to a reasonable period of 30 days from the entry of judgment within which to renew his tender of the balance due of $9,100. At the expiration of such period the court concluded that if payment was not made, the note and mortgage would then be due and payable and the plaintiff bank entitled to foreclose.

Three principal issues are presented by the appeal and cross-appeal, to which we now turn.

1. The Hughes County Mortgage and its future advance and omnibus provision.

Our first question is whether the obligations relating to the Pushmataha County ranching operations became part of the secured indebtedness of the Hughes County mortgage by operation of its future advance and omnibus provision. The mortgage was executed on August 31, 1967, to secure note 1 for $40,000 and contained the following provisions:

"ARTICLE I — Secured Indebtedness
"1.1 Provided, however, that subject to the limitation expressed in Section 1.2, this Mortgage is given to secure the following indebtedness, obligations and liabilities: (a) One certain promissory note of even date herewith executed by Mortgagor, payable to the order of Mortgagee at its office in Dallas, Texas, in the principal sum of $40,000.00,
* * * * * *
"and any and all renewals or extensions of said note or notes, or any part thereof, (b) all indebtedness of Mortgagor to Mortgagee, arising pursuant to the provisions hereof, and any and all renewals or extensions of the same, or any part thereof, (c) all loans and advances which Mortgagee may hereafter make to Mortgagor, and any and all renewals or extensions of the same, or any part thereof,
* * * * * *
"(f) all other and additional debts, obligations and liabilities of every kind and character of Mortgagor now or hereafter existing in favor of Mortgagee, regardless of whether such debts, obligations or liabilities be direct or indirect, primary or secondary, joint, several, or joint and several, fixed or contingent, and regardless of whether such present or future debts, obligations and liabilities may, prior to their acquisition by Mortgagee, be or have been payable to or be or have been in favor of some other person, or have been acquired by Mortgagee in a transaction with one other than Mortgagor, together with any and all renewals and extensions of such debts, obligations and liabilities, or any part thereof.
"1.2 The words `Secured Indebtedness,\' as used herein, shall mean all of the indebtedness, obligations and liabilities described or referred to above in paragraphs (a) through (f) of Section 1.1, provided however that the aggregate of the secured indebtedness exclusive of interest, attorneys fees and other charges shall never exceed the sum of $150,000.00, provided further that if the foregoing blank is not filled in such aggregate shall not exceed one million dollars."1
* * * * * *
"ARTICLE VI — Miscellaneous
"6.1 The rights, titles, interests, liens and powers hereunder are cumulative of each other and of all other rights, titles, interests, liens and powers which may now or hereafter exist to secure the payment of said indebtedness, or any part thereof. The security herein and hereby provided

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