FirsTier Bank, N.A. v. Triplett

• Decision Date: 05 March 1993
• Docket Number: No. S-90-581,S-90-581
• Parties: , 20 UCC Rep.Serv.2d 549 FIRSTIER BANK, N.A., a Banking Corporation, Appellee, v. Richard L. TRIPLETT and Coralea J. Triplett, Appellants.
• Court: Nebraska Supreme Court

Page 339

497 N.W.2d 339

242 Neb. 614, 20 UCC Rep.Serv.2d 549

FIRSTIER BANK, N.A., a Banking Corporation, Appellee, v. Richard L. TRIPLETT and Coralea J. Triplett, Appellants.

No. S-90-581.

Supreme Court of Nebraska.

March 5, 1993.

Syllabus by the Court

1. Uniform Commercial Code: Negotiable Instruments: Promissory Notes. Discharge of a negotiable instrument such as a promissory note is governed by the Uniform Commercial Code.

2. Actions: Uniform Commercial Code. An action under the Uniform Commercial Code is one at law.

3. Appeal and Error. Regarding a question of law, an appellate court has an obligation to reach a conclusion independent from a trial court's conclusion in a judgment under review.

4. Judgments: Appeal and Error. In a bench trial of a law action, a trial court's factual findings have the effect of a verdict and will not be set aside unless clearly erroneous. In reviewing a judgment awarded in a bench trial of a law action, an appellate court does not reweigh evidence, but considers the evidence in the light most favorable to the successful party, who is entitled to every reasonable inference deducible from the evidence.

5. Intent. Intent is a question of fact.

6. Promissory Notes. The unintentional cancellation and surrender of a promissory note through clerical error do not discharge the maker of the note.

Gregory P. Drew, Blair, for appellants.

Wyman E. Nelson, Blair, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

FAHRNBRUCH, Justice.

After finding that Richard L. and Coralea J. Triplett had not fully paid a promissory note they had given for money they borrowed from FirsTier Bank, N.A., the district court for Washington County entered a $7,231.55 judgment in favor of FirsTier and against the Tripletts.

At trial and in this appeal, the Tripletts, who are husband and wife, contend that their debt was satisfied when their note was marked "paid" and mailed to them by FirsTier. The trial court found that the note was unintentionally marked "paid" and mailed to the Tripletts as a result of clerical error and without the bank's authority.

ASSIGNMENT OF ERROR

Restated, the sole issue on appeal is whether the district court erred in granting a money judgment on a promissory note that had been marked "paid" and returned to the maker.

SCOPE OF REVIEW

Discharge of a negotiable instrument such as a promissory note is governed by the Uniform Commercial Code. See Neb.U.C.C. § 3-605 (Reissue 1980). An action under the Uniform Commercial Code is one at law. See, Neb.U.C.C. § 1-101 et seq. (Reissue 1992); First Nat. Bank & Trust Co. v. Hughes, 214 Neb. 42, 332 N.W.2d 674 (1983). Regarding a question In a bench trial of a law action, a trial court's factual findings have the effect of a verdict and will not be set aside unless clearly erroneous. In reviewing a judgment awarded in a bench trial of a law action, an appellate court does not reweigh evidence, but considers the evidence in the light most favorable to the successful party, who is entitled to every reasonable inference deducible from the evidence. Young v. Dodge Cty. Bd. of Supervisors, supra; Ballard v. Giltner Pub. Sch., 241 Neb. 970, 492 N.W.2d 855 (1992); K & K Farming v. Federal Intermediate Credit Bank, 237 Neb. 846, 468 N.W.2d 99 (1991).

of law, an appellate court has an obligation to reach a conclusion independent from a trial court's conclusion in a judgment under review. Young v. Dodge Cty. Bd. of Supervisors, 242 Neb. 1, 493 N.W.2d 160 (1992); Maack v. School Dist. of Lincoln, 241 Neb. 847, 491 N.W.2d 341 (1992).

FACTS

At trial, two original promissory notes the Tripletts gave to FirsTier were referred to as exhibits 7 and 8. Exhibit 7, dated April 17, 1986, was for $14,000. It was secured by a 1985 Toyota pickup and a 1979 Lincoln automobile and was originally due April 20, 1990. By subsequent agreement, the due date was extended to June 20, 1990. Exhibit 8, dated June 16, 1987, was for $3,500. The note was secured by a 1979 Ford van.

The Tripletts sold the Toyota, and on July 6, 1987, Richard Triplett tendered a check for $7,200 as payment on the notes to FirsTier's branch at Blair, Nebraska. At the time the check was tendered, the balances were $10,498.79 on exhibit 7 and $2,418.73 on exhibit 8.

In late July 1987, the Tripletts received a letter from FirsTier containing an original "Note and Security Agreement," exhibit 7, which was stamped "PAID ... FirsTier Bank, N.A. Omaha, Nebraska." The stamp was signed by a clerk and hand dated "7-7-87." In November 1987, exhibit 8 was returned to the Tripletts. It also was stamped "PAID ... FirsTier Bank, N.A. Omaha, Nebraska," and hand dated "7-7-87," but was signed by another clerk.

At trial, a bank officer testified that when a note has been paid in full, it is FirsTier's practice to send a computer-generated form letter over the original loan officer's name, thanking the customer for his or her business. He testified that the loan officer never sees or signs these letters, which he believed were signed by a clerk.

Richard Triplett testified that more than a year after receiving the last note, he received notice from FirsTier that the Tripletts still owed money on one of the notes. When FirsTier demanded payment of the note, Richard Triplett indicated to FirsTier that "the loan was paid up."

In May 1989, FirsTier sued the Tripletts for payment of the balance remaining on exhibit 7, for reformation and reinstatement of the erroneously canceled note, and for reinstatement of FirsTier's security interest.

At trial, Leonard Olson, FirsTier's vice president and manager of loan operations, testified that exhibit 7 had never been paid in full, although regular payments had been made until one large payment of $4,781.27 was made on July 6, 1987. At the time of trial, exhibit 7 had an outstanding balance of $7,231.55, representing $5,717.52 in principal plus accrued interest, which continued to accrue at a rate of 10 percent, or $1.57 per day. Olson also testified that with the payment of $2,418.73 on July 6, 1987, exhibit 8 was paid in full.

Olson testified that through clerical error, the file for exhibit 7 was pulled instead of the file for exhibit 8 and that a clerk erroneously marked exhibit 7 "paid." Olson testified that the employee who marked exhibit 7 "paid" was a loan service clerk, one step above an entry-level position. According to Olson, the loan service clerk did not have authority to release a note which had not been paid in full, and FirsTier never intended to discharge exhibit 7 without payment in full. Both Olson and Lloyd Sheve, vice president and manager of FirsTier's Blair branch, testified that only In spite of Richard Triplett's initial representation to FirsTier that "the loan was paid up," the Tripletts do not dispute the fact that exhibit 7 has never been paid in full. Both of the Tripletts testified that they knew the $7,200 check was insufficient to pay off the balances of both notes. Richard Triplett testified that he had made no representations to FirsTier that he was paying off both notes. He testified that he did not know whether FirsTier had made an error in releasing exhibit 7.

the bank's collection department could authorize the release of an unpaid note, and they testified that neither of them had ever received authorization to settle and release exhibit 7.

Instead, the Tripletts alleged that exhibit 7 was discharged pursuant to § 3-605 (Reissue 1980) by (1) intentional cancellation of the note which was not a result of a mutual mistake or a unilateral mistake caused by the Tripletts' fraud or inequitable conduct and (2) surrender of the note.

The district court made specific factual findings that

at the time of the $7,200.00 payment by the Defendants [Tripletts] to the Plaintiff [FirsTier], the Defendants specifically acknowledged and knew that said $7,200.00 was insufficient to make payment in full on both promissory notes.... [T]here was no intent on the part of FirsTier Bank to release promissory note [exhibit 7] for less than payment in full thereof, there was no agreement nor consideration to support same that promissory note [exhibit 7] would be released without payment in full, the stamping of [exhibit 7] as paid in full and the return thereof to the Defendants was as a result of a clerical error, allowing said release of promissory note [exhibit 7] would result in unjust enrichment to the [Tripletts], and the individual in the clerical position stamping promissory notes for return to bank customers did not have the authority or power to authorize the release of promissory notes without payment in full thereof.

The court entered a $7,231.44 judgment, plus interest and costs, in favor of FirsTier on its first cause of action and granted no relief on the second and third causes of action. The Tripletts appealed. FirsTier did not cross-appeal.

ANALYSIS

The Tripletts claim that their debt on exhibit 7 was discharged as a matter of law under § 3-605(1) (Reissue 1980) because FirsTier marked exhibit 7 "paid" and returned it to them. FirsTier counters that a promissory note is not discharged when it is canceled as the result of clerical error by a party who has no authority to release a loan. The bank's position is that such an action does not constitute intent to cancel the maker's indebtedness and that therefore there was no discharge of the note.

Section 3-605 governed the discharge of negotiable instruments through cancellation or renunciation at all times material to this case. That statute provided in part:

(1) The holder of an instrument may even without consideration discharge any party

(a) in any manner apparent on the face of the instrument or the indorsement, as by intentionally cancelling the instrument or the party's signature by destruction or mutilation, or by striking out the party's signature; or

(b) by renouncing his rights by a writing signed and...