Jones v. Marengo State Bank

• Decision Date: 25 July 1988
• Docket Number: No. 63A01-8712-CV-00335,63A01-8712-CV-00335
• Citation: 526 N.E.2d 709
• Parties: Donald L. JONES and Central Timber Corporation, Defendants-Appellants, v. MARENGO STATE BANK, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 709

526 N.E.2d 709

Donald L. JONES and Central Timber Corporation, Defendants-Appellants, v. MARENGO STATE BANK, Plaintiff-Appellee.

No. 63A01-8712-CV-00335.

Court of Appeals of Indiana First District.

July 25, 1988.

Gerald M. Arthur, Petersburg, Gerald R. Thom, Thom & DeMotte, Jasper, for defendants-appellants.

Roger S. Curry, Schneider, Lett, Shaneyfelt & Curry, Jasper, for plaintiff-appellee.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Donald L. Jones and Central Timber Corporation appeal from the Pike Circuit Court's judgment in favor of the Marengo State Bank on three (3) promissory notes. We affirm.

FACTS

Donald J. Jones is the owner and president of Central Timber Corporation, a sawmill and lumber company located in Petersburg, Indiana. Jones and Central Timber borrowed money from Marengo State Bank (hereinafter Bank) through three (3) separate financing transactions. The first transaction entered into between the Bank and Jones occurred on July 9, 1985, and involved a $40,000 loan to Jones for the purchase of a ten percent (10%) interest in Reid Transportation, a trucking firm. To obtain the loan Jones filled out a loan application form which among other things described the property Jones would give as collateral for the loan. Originally Jones offered five (5) over-the-road tractors, one (1) W-18 Case Articulate Loader, one (1) 2010 F John Deere Fork Lift, and one (1) 1974 Parkway Mobile Home.

Glenn Morgan, the president of the Bank at the time of the first transaction, processed the $40,000 loan application. The Bank approved the loan and lent Jones the $40,000. In return for the funds Jones signed a promissory note (No. 131929) and entered into a security agreement which gave the Bank a security interest in various pieces of equipment and property as collateral for the loan. However, immediately prior to the execution of the promissory note, the Bank examined the titles to the over-the-road tractors and rejected them as collateral because they already had liens against them. Jones then offered a 1972 Fruehauf trailer and a 1973 Mack tractor in place of the five (5) over-the-road tractors. After the note was signed and executed the Bank examined the Fruehauf trailer and the Mack tractor and their titles and accepted them as collateral. Accordingly, the loan application was changed to show the rejection of the over-the-road tractors and the acceptance of the Fruehauf and Mack as collateral. Finally, on July 9, 1986, the promissory note and security agreements were executed and the Bank gave Jones $40,000. Thereafter, Jones gave Reid Transportation $30,000 and retained $10,000 to cancel a debt Reid Transportation had with Central Timber. In August of 1985, Jones forwarded the Fruehauf and Mack titles to the Bank, whose name was added to the titles as lien holder. Thereafter, a loan officer for the Bank, Mike Smith, added the Fruehauf and Mack and their serial numbers to the Bank's copy of the promissory note. In January of 1986, Jones defaulted on the $40,000 note. The Bank extended the repayment time and Jones executed a renewal promissory note (No. 133156) for a principal of $39,639.72. Jones defaulted on the renewal note.

The second transaction also involved a loan. The Bank lent $5000 to Jones to purchase an ASM trailer, and in return Jones signed a promissory note (No. 132179). This note was renewed on February 6, 1986, and the renewal note was renewed on May 8, 1986, by another renewal promissory note (No. 133849). The principal on the last renewal note was $4,166.47. Jones defaulted on this note also.

The third transaction also involved a loan. The Bank gave this loan to Jones on January 7, 1986, and in return Jones executed a promissory note in the amount of $8,199.54 and gave the Bank a security interest in a 1981 Lincoln Automobile. Although some principal on this note was paid, Jones ultimately defaulted on this note also.

On August 13, 1986, Jones and Central Timber initiated an action in Federal District Court, (Jones v. Marengo State Bank No. NA 86-188-C), which alleged violations of federal banking laws and regulations, and alleged fraud. On October 30, 1986, the bank filed a complaint against Jones in the Pike Circuit Court to collect on the three (3) defaulted notes. The Bank's complaint requested prejudgment possession, foreclosure, and sale of the collateral with the proceeds to be applied to a judgment in an amount that equalled the total of the three (3) notes, expenses, costs, attorneys fees, and interest. On November 10, 1986, Jones and Central Timber filed an Answer, Affirmative Defenses, a Counterclaim for damages and an Affidavit. Jones also requested a jury trial.

On November 19, 1986, the trial court conducted a hearing pursuant to Indiana Code section 34-1-9.1-1 et seq., and denied the Bank's request for prejudgment possession. On January 13, 1987, a pretrial conference was held and the court issued a pretrial order. The pretrial order stated that the court had jurisdiction and set out the schedule to be followed by the parties. In part, the schedule provided for the following:

"(b) Defendant shall file list of defendant's prospective witnesses and exhibits and shall file the specific acts of defense alleged by the defendant and on which defendant intends to produce evidence at trial fifty (50) days prior to trial date."

Record at 102.

On February 26, 1987, the Bank filed a motion for summary judgment. On May 26, 1987, a hearing was held on the Bank's motion for summary judgment, and the trial court took the motion under advisement. The trial court also held an additional pretrial conference on the same day, in which the trial court reconsidered the prior decision to grant a jury trial, heard statements from both sides, and revoked its decision and denied Jones's request for a jury trial. On June 4, 1987, the trial court granted the Bank's motion for summary judgment with regard to the promissory notes connected to the second and third transactions (i.e., promissory note Nos. 133109 and 133849), and entered a judgment in favor of the Bank for $7,804.10 and $4,554.93 for a total judgment of $12,359.03. The trial court ordered foreclosure on the security interests held in the ASM trailer and the 1981 Lincoln Automobile. The court ordered Jones to deliver this property to the sheriff, who was authorized to sell the property at public auction. The court further ordered that the proceeds be applied to the costs, and the separate amounts due on the notes as reflected by the judgments. The trial court, however, reserved the issue of attorney fees recoverable under these notes.

On June 9, 1987, a bench trial was held on the remaining issues of the Bank's complaint, which included the first promissory note and attorney fees, and also addressed the affirmative defenses and counterclaims raised by Jones. After the hearing, the trial court took all matters under advisement. On July 31, 1987, the trial court entered judgment in favor of the Bank on the complaint, and against Jones on the counterclaim. The court ordered foreclosure on the property listed in the security agreement. Thus, the court ordered Jones to deliver the 1974 Parkway Mobile Home, the W-18 Case Articulate Loader, and the John Deere Forklift to the sheriff for sale. The court further ordered that the proceeds be applied to the judgment entered in favor of the Bank on the promissory note, which included principal of $39,639.72, interest of $9,138.69, and attorney fees of $5000 for a total of $53,778.41, plus post-judgment interest. Jones appeals from this judgment and the trial court's grant of summary judgment on the other two (2) notes.

ISSUES

Rephrased and renumbered, Jones presents the following six (6) issues on appeal:

1. Whether the trial court erred by denying Jones's request for a jury trial?

2. Whether the trial court erred by granting summary judgment on the promissory notes connected to the second and third transactions between Jones and the Bank?

3. Whether the trial court committed reversible error by admitting Plaintiff's Exhibit 2A into evidence?

4. Whether the trial court erred by rejecting Jones's defense of alteration and by entering judgment in favor of the Bank on the $40,000 loan transaction?

5. Whether the trial court erred by entering judgment against Jones on his counterclaim for fraud?

6. Whether the trial court erred by hearing this case since Jones previously had filed a related case in federal court?

DISCUSSION AND DECISION

Issue One

Jones first argues that the trial court erred by denying his request for a jury trial. We disagree. Indiana Rules of Procedure, Trial Rule 38(A) governs the issue of whether a case is triable by jury or by court, and provides as follows:

"Causes triable by court and by jury. Issues of law and issues of fact in causes that prior to the eighteenth day of June, 1852, were of exclusive equitable jurisdiction shall be tried by the court; issues of fact in all other causes shall be triable as the same are now triable. In case of the joinder of causes of action or defenses which, prior to said date, were of exclusive equitable jurisdiction with causes of action or defenses which, prior to said date, were designated as actions at law and triable by jury--the former shall be triable by the court, and the latter by a jury, unless waived; the trial of both may be at the same time or at different times, as the court may direct."

Thus, the right to a jury trial is subject to the determination of whether the case involves an equitable or legal cause of action. Hiatt v. Yergin (1972), 152 Ind. App. 497, 511, 284 N.E.2d 834, 842, trans. denied. In making the equitable/legal determination the court must elicit the main theory of the case by examining the complaint and pleadings and their general scope and tenor. Id., 152 Ind. App. at 518, 284 N.E.2d at 846. However, if an essential part of a cause of action is equitable the rest of the...