Jackson v. Luellen Farms, Inc.

• Court: Indiana Appellate Court
• Writing for the Court: Robb
• Citation: Jackson v. Luellen Farms, Inc., 877 N.E.2d 848 (Ind. App. 2007)
• Decision Date: 12 December 2007
• Docket Number: No. 05A02-0701-CV-30.,05A02-0701-CV-30.
• Parties: John K. JACKSON, Appellant-Defendant, v. LUELLEN FARMS, INC., Appellee-Plaintiff.

877 N.E.2d 848

John K. JACKSON, Appellant-Defendant, v. LUELLEN FARMS, INC., Appellee-Plaintiff.

No. 05A02-0701-CV-30.

Court of Appeals of Indiana.

December 12, 2007.

James R.A. Dawson, Sommer Barnard PC, Indianapolis, IN, Attorney for Appellant.

Scott E. Shockley, DeFur Voran, LLP, Muncie, IN, Attorney for Appellee.

OPINION

ROBB, Judge.

Case Summary and Issues

Following a bench trial, John Jackson appeals the trial court's judgment in favor of Luellen Farms, Inc. ("LFI"), in the amount of $180,048.12, representing the unpaid balance of a promissory note (the "Note"). Jackson raises four issues, which we consolidate and restate as: (1) whether the trial court erred in finding Jackson personally liable on the Note; (2) whether the Note fails for lack of consideration; and (3) whether the trial court erred in determining the amount of the judgment. Although we conclude that Jackson's signature evidenced an intent to bind him personally, we also conclude that the Note fails for lack of consideration; we therefore reverse.¹

Facts and Procedural History

Jackson was the owner and president of Hartford Packing Company, Inc., a business that purchased tomatoes from farmers and produced canned tomato products. LFI grew tomatoes, and sold tomatoes to Hartford for more than thirty years. Frequently, Hartford would not pay LFI for the tomatoes on delivery, but would wait until after the first of the year. On two occasions, once in 1997, and once in 1998, LFI extended loans to Hartford. Both times Hartford repaid the loan in full. As of October 1, 1999, Hartford owed LFI $224,656.78 for tomatoes delivered by LFI in 1998 and 1999. On this date, Marvin Luellen, president of LFI, presented the Note in the amount of $225,000 to Jackson to memorialize the amount owed by Hartford to LFI. The complete text of the Note is as follows:

  $225,000   Mooreland, Ind., Oct 1, 19992
                

[Left blank] Days after date we or either of us promise to pay to order of Luellen Farms Inc.³

Two Hundred twenty-five Thousand Dollars

And Attorney's Fees. Value received. Without any relief whatever from valuation or appraisement laws, with seven per cent. interest⁴ from date until paid. The drawers and endorsers severally waive presentment for payment, protest and notice of protest and nonpayment of this note. This note is in renewal of a note or balance due thereon dated [left blank] and described in a certain mortgage recorded in Chattel Mortgage Record No. [left blank] at Page [left blank] of the mortgage records of Henry County, Indiana, and not in payment of such original note, the original note being filed with said mortgage and not delivered. Payment of this renewal note shall entitle the maker to the delivery and cancellation of said original note. All covenants and agreements in said mortgage contained shall apply to this renewal note and this renewal note shall be taken and considered only as an extension of time for the payment of said debt secured by said mortgage or the proportionate part thereof and not in release or discharge of said original debt and in no sense a novation thereof, and this covenant shall be binding upon subsequent purchasers of the property pledged in said mortgage with covenant to assume and pay the same.

Negotiable and payable at Farmers State Bank, of Mooreland, Indiana.

Appellant's Appendix at 17. Jackson signed the Note "Hartford Packing Company, Inc." with "John K. Jackson" underneath. Id.

Hartford made several payments on the Note, ultimately repaying LFI $55,000. In November 1999, Hartford went out of business owing creditors somewhere between two and a half to three million dollars and unable to repay the remaining balance on the Note. Thereafter, LFI received a $40,000 payment from Wells-Fargo in settlement of a lawsuit filed in federal court against Hartford and two banks.

On November 12, 2004, LFI filed a complaint against both Hartford and Jackson. On July 27, 2005, LFI filed an amended complaint, which was later dismissed. On August 12, 2005, Jackson filed an answer and affirmative defenses. Hartford neither appeared nor filed an answer.⁵ After Jackson and LFI waived their right to a jury trial, the trial court held a bench trial on November 3, 2006.

At trial, Luellen testified that he understood that Jackson had signed the Note personally, and that it been Luellen's intent to make Jackson personally liable for the amount owed from Hartford to LFI. Jackson, on the other hand, testified that he did not intend to make himself personally liable for Hartford's debt. He also argued that the Note was unenforceable due to lack of consideration.

After trial, the trial court issued a judgment in favor of LFI in the amount of $180,048.12. Along with this judgment, the trial court sua sponte issued findings of fact and conclusions of law, which we will reproduce below as needed. Jackson now appeals.

Discussion and Decision

Jackson presents two theories as to why he should not be held liable on the Note. We will first address Jackson's argument that he is not liable because he signed in solely his representative capacity. Concluding that the Note evidences an intent to bind Jackson personally, we will then address whether this promise is supported by consideration.

I. Jackson's Personal Liability

In finding Jackson personally liable, the trial court issued the following relevant findings of fact:

24. That according of [sic] the testimony of Marvin Luellen, he wanted John K. Jackson to sign the promissory note in his individual capacity due to the fact that he knew John K. Jackson owned some farmland and would have the means of repaying the note.

* * *

26. That John K. Jackson did not qualify his signature as President of Hartford Packing Company, Inc.

* * *

31. That the plaintiff submitted into evidence the check for $200,000.00 that was loaned to Hartford Packing Company on April 29, 1997, and the endorsement shows it was signed Hartford Packing Company, Inc., John K. Jackson, President.

* * *

37. That according to John K. Jackson, he signed the promissory note obligating Hartford Packing Company, Inc., and not himself personally.

* * *

42. That the signature of John K. Jackson on the October 1, 1999, note is not unambiguous because of the fact that he did not sign in his capacity as an officer of Hartford Packing Company, Inc.

43. That since John K. Jackson's signature is not unambiguous, the provisions of Indiana Code 26-1-3.1-402(b)(2)(B) applies [sic].

44. That John K. Jackson is liable on the instrument unless he is able to prove that the original parties did not intend that he be personally liable on the instrument.

* * *

47. That it is obvious from the testimony of both Marvin Luellen and John K. Jackson that they had different intents on the way the October 1, 1999, promissory note was signed.

48. That the defendant, John K. Jackson, has failed to prove that it was the intentions of both the plaintiff and John K. Jackson that John K. Jackson was signing the October 1, 1999, promissory note solely as a representative of Hartford Packing Company, Inc.

Appellant's App. at 7-11 (emphasis in original). The trial court then concluded that Indiana Code section 26-1-3.1-402 applies, that the parties had different intentions as to whether Jackson was signing as an individual or as Hartford's president, and that LFI should recover from Jackson on the Note.

Jackson argues the trial court's order is in error because the Note is not a negotiable instrument, and therefore Indiana Code section 26-1-3.1-402 does not apply. As this section is inapplicable, Jackson argues the trial court improperly placed the burden on him to demonstrate that both parties did not intend for Jackson to be personally liable under the Note. Although we agree that the trial court improperly concluded the Note was a negotiable instrument,⁶ we nevertheless conclude that Jackson is personally liable under the Note.

A. Standard of Review

In cases such as this, where the trial court sua sponte issues findings and conclusions, we use a two-tiered standard of review. Briles v. Wausau Ins. Cos., 858 N.E.2d 208, 212 (Ind.Ct.App.2006). First, we determine whether the evidence supports the trial court's findings. Id. We will conclude that the evidence does not support a finding only when the finding is not supported by any facts or reasonable inferences from the facts in the record. Id. We consider only the evidence favorable to the judgment, make all reasonable inferences in favor of the judgment, and do not reweigh evidence or judge witness credibility. Id. On the other hand, we give no deference to a trial court's conclusions of law, and review such conclusions de novo. Id. Sua sponte findings control only those issues covered by the findings, and for any issue not covered by the findings we use a general judgment standard of review. Butler Univ. v. Estate of Verdak, 815 N.E.2d 185, 190 (Ind.Ct.App.2004). Under this standard, we will affirm the judgment on any legal theory supported by the evidence. Id. at 190-91.

B. Whether the Note is a Negotiable Instrument

Indiana Code Section 26-1-3.1-402 deals with situations in which an agent signs a negotiable instrument on behalf of a principal. This section applies only if the document is a negotiable instrument, as defined in Indiana Code section 26-1-3.1-104. See Ind.Code § 26-1-3.1-102(a) ("Ind.Code 26-1-3.1 applies to negotiable instruments."). Under section 104,

"negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money....

Ind.Code §...