Peterson v. Midland Nat. Bank, 60437

• Decision Date: 11 December 1987
• Docket Number: No. 60437,60437
• Citation: 242 Kan. 266,747 P.2d 159
• Parties: Gary PETERSON, Plaintiff-Appellee, v. MIDLAND NATIONAL BANK, Defendant-Appellant, and Marjorie Wharton Wells, and Wharton Ranches, Inc., Defendants-Appellees.
• Court: Kansas Supreme Court

Page 159

747 P.2d 159

242 Kan. 266

Gary PETERSON, Plaintiff-Appellee, v. MIDLAND NATIONAL BANK, Defendant-Appellant, and Marjorie Wharton Wells, and Wharton Ranches, Inc.,

Defendants-Appellees.

No. 60437.

Supreme Court of Kansas.

Dec. 11, 1987.

Syllabus by the Court

1. The construction of a written instrument is a question of law, and the instrument may be construed and its legal effect determined by an appellate court.

2. A statement made by the owner of pasture to the lending institution holding a security interest in cattle pastured thereon disclaiming any ownership or other property rights or interests in said cattle is held to estop the owner of the pasture from later asserting an agister's lien against the lending institution based on pasture rent due and owing at the time said statement was delivered to the lending institution.

3. The doctrine of unjust enrichment is discussed and held applicable to the claim of a hay dealer against the holder of a security interest in cattle where hay is delivered to said cattle upon the holder's instruction to its debtor to secure feed for the cattle, and that the holder would pay the costs thereof, and where the holder of the security interest benefited from the delivery of the hay.

4. Where defendant has paid monies into court prior to judgment and the same are held in an interest-bearing account pending final determination of the issues, interest awarded should be based on interest earned in the account on that portion of the fund ultimately awarded the plaintiff rather than at the statutory post-judgment rate.

David C. Burns, of Speir, Stroberg & Sizemore, Newton, argued the cause, and A. James Gillmore, of the same firm, was with him on the briefs, for defendant-appellant.

Charles R. Rayl, of Rayl and Fowler, Chartered, Cottonwood Falls, argued the cause and was on the brief for plaintiff-appellee Gary Peterson.

Don C. Krueger, Emporia, argued the cause and was on the brief for defendants-appellees Marjorie Wharton Wells and Wharton Ranches, Inc.

McFARLAND, Justice.

This action was commenced by Gary Peterson against defendant Midland National Bank seeking payment for hay provided to certain cattle in which Midland had a security interest. The Peterson claim was based, in part, upon foreclosure of a lien pursuant to K.S.A. 58-207. Inasmuch as this was a lien foreclosure action, the district court ordered Marjorie Wharton Wells and Wharton Ranches, Inc., brought in as additional parties defendant as they claimed liens in the same cattle. The district court ultimately found that Peterson did not have a valid lien, but awarded him a $7,236.40 judgment against Midland on the theory of unjust enrichment. The district court awarded Marjorie Wharton Wells and Wharton Ranches, Inc., a $46,000.00 judgment against Midland as foreclosure of an agister's lien (K.S.A. 58-220). Midland appeals from both judgments.

We shall first consider the issues raised relative to the Wells-Wharton Ranches judgment.

WELLS-WHARTON RANCHES JUDGMENT

The general relevant and uncontroverted background was found by the trial court to be as follows:

"1. Marjorie Wells is a resident of the state of Texas and owns approximately 7,000 acres of Kansas real estate, individually and through a family corporation. Her husband, B.G. Wells, owns no interest in the corporation. Mrs. Wells leased from her family corporation the Kansas real estate so that she had control of the entire 7,000 acres.

"2. Mr. & Mrs. Wells entered into a written grass and agricultural lease, plaintiff's Exhibit B-4, wherein Mr. Wells leased all 7,000 acres. The lease provided for rent at the rate of $15 per acre. It had a commencement date of November 1, 1983, and extended for five years. The lease was silent as to when the rental payment was due but all the parties agree that it was to be paid in the fall of the year at the conclusion of the pasture season. This follows a commonly accepted practice in the area of paying the pasture rent at the conclusion of the pasture season which commences approximately April 1st and concludes approximately on October 31st of the same year.

"3. The lease was prepared by Mr. Kenneth Shollenbarger, the Texas attorney for Mr. and Mrs. Wells, in 1984. Although it has a commencement date of November 1, 1983, it was not signed by the parties until sometime after the first of August, 1984.

"4. Mr. Wells put approximately 460 head of cattle on the leased premises in March, 1984. The cattle were purchased with loan proceeds received from the Strong City State Bank.

"5. During this same period, the Strong City State Bank desired to sell participation in its loan to B.G. Wells to Midland National Bank because the loan exceeded its loan limits. At the end of February or the first of March, 1984, Robert G. Wall, who manages the loan department for Midland, talked to Ray Meyer, the President of the Strong City State Bank, about the participation. Meyer informed Wall of the history of the bank's relationship with Mr. and Mrs. Wells and pointed out to him the Wells' real estate which was highlighted on a county land map located behind Meyer's desk. Meyer also showed Wall a financial statement for Mr. and Mrs. Wells, signed by Mr. Wells, indicating ownership of the real estate and a substantial net worth.

"6. Wall requested that the Strong City Bank provide him with a current financial statement indicating whether the land was owned by Mr. or Mrs. Wells or the two of them jointly. In response, Wall received from Meyer a financial statement dated March 6, 1984, indicating that B. G. Wells owned the real estate by himself and that it was valued at $1,550,000.00. The financial statements are inaccurate in that Mrs. Wells and her family corporation own the real estate. The two financial statements are shown as Defendants' Exhibits 2 and 6.

"7. Midland purchased a portion of the loan from the Strong City State Bank relying on the financial statement of Mr. Wells and the cattle at the Wells' ranch. Mr. Ray Meyer at the Strong City State Bank agreed to periodically inspect the collateral on behalf of Midland.

"8. In the fall of 1984, the loan came due, and Mr. Wells could not pay it. Midland soon discovered that Mr. Wells did not own the real estate in Chase County.

"9. Midland decided it was necessary to take over the loan directly. It proceeded to purchase the interest of Strong City State Bank."

In the fall of 1984, Mr. Wells was having serious financial problems. He could not pay the Midland loan, and he could not pay the $105,000.00 pasture rent due Mrs. Wells on November 1, 1985. He had subleased a portion of the pasture to the Wells' sons for their own cattle operation Meanwhile, Mr. Wells was negotiating with Midland in an attempt to stave off the financial disaster with which he was confronted. As the trial court found:

and the sons paid their $55,000.00 portion directly to Mrs. Wells. Mrs. Wells took possession of some horses belonging to Mr. Wells for which she gave him a $3,500.00 credit. Mr. Wells' debt to Mrs. Wells was thereby reduced to $46,000.00.

"12. In the fall of 1984, negotiations then ensued as to how Mr. Wells' debt to Midland would be paid. Mr. Wells proposed a plan whereby the 1984 calf crop which had been born to the cattle in Kansas would be moved to pasture land he had arranged for in Texas. The cows and bulls located in Kansas would remain in Kansas for another year in order that Wells could get another calf crop from the Kansas cattle, at which point the herd would be sold and the bank would be paid off.

"13. On November 15, 1984, in connection with the refinancing, Midland wrote Mr. Wells requesting a payment of interest, a disclaimer signed by Mrs. Wells, and a new security agreement and financing statement together with a balance sheet and profit and loss statement for Mr. Wells. Mr. Wells then consulted his attorney, Mr. Kenneth Shollenbarger, an attorney licensed to practice in the state of Texas."

On December 14, Mr. Shollenbarger wrote the following letter to Mr. Wall, Midland's Senior Vice President:

"Mr. Robert G. Wall,

Senior Vice President

Midland National Bank

P.O. Box 427

Newton, Kansas 67114-0427

"Re: Mr. B.G. Wells, Rural Route No. 1, Cottonwood Falls, Kansas 66845

"Dear Mr. Wall:

"This letter confirms our phone conversation of this morning while Mr. Wells was in my office.

"In connection with his present outstanding loan with your bank, I have enclosed the following:

"1. 11-1-84 Promissory Note in the amount of bearing interest at maturing on 5-1-85 (executed by Mr. Wells); and

"2. Kansas Security Agreement covering Mr. Wells' Kansas property, and contract rights, and with respect to Baylor County and Knox County, Texas, locations--calves on wheat pasture in those counties (executed by Mr. Wells); and

"3. Statement or Affidavit to Midland National Bank (with respect to Mr. Wells' farming and ranching operations in Kansas) executed by Marjorie Wharton Wells; and

"4. Check No. 4977 dated 12-12-84 from Ty Jones Cattle Co., Inc. of Canyon, Texas, drawn on the First National Bank of Canyon, Texas and payable to Mr. Wells, but endorsed in favor of your bank, in the amount of $12,000.

"These documents, and these monies, are tendered to the bank as per our phone conversation, understanding, and agreement along the following lines:

"1. The Kansas Security Agreement tracks previously executed Security Agreements executed by Mr. Wells in favor of Midland National Bank, and are intended to cover the listed farm equipment, and all cattle-livestock, and related assets of Mr. Wells' farming and ranching operations in Kansas. You advised that UCC 1's have been filed with the Texas Secretary of State, and in Potter, Baylor and Knox Counties, Texas, covering only calves or cattle located in Texas, and on no other properties.

"2. In consideration of the Ty Jones Cattle Co., Inc., check, and to protect the bank's security position under the...