State Exchange Bank of Culver v. Teague

• Decision Date: 24 July 1986
• Docket Number: No. 3-984A254,3-984A254
• Parties: The STATE EXCHANGE BANK OF CULVER, Indiana, Defendant-Appellant, v. Ernest E. TEAGUE and Bertha Teague, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 262

495 N.E.2d 262

The STATE EXCHANGE BANK OF CULVER, Indiana, Defendant-Appellant, v. Ernest E. TEAGUE and Bertha Teague, Plaintiffs-Appellees.

No. 3-984A254.

Court of Appeals of Indiana,

Third District.

July 24, 1986.

William L. Fortin, Stevens, Travis, Fortin, Lukenbill & Burbrink, Plymouth, Anthony W. Mommer, Kevin A. Hoover, Krieg DeVault Alexander & Capehart, Indianapolis, for defendant-appellant.

Tony H. Abbott, Foley & Abbott, Indianapolis, for plaintiffs-appellees.

GARRARD, Judge.

Ernest and Bertha Teague (Teagues) brought this action against the State Exchange Bank of Culver, Indiana (Bank) and others, ¹ seeking compensatory and punitive damages stemming from a grossly mishandled repossession which had been initiated by the Bank.

From May of 1973 through July of 1974, the Bank made several loans to the Teagues to be invested in the Teagues' farming operation. The last of these loans was given on July 30, 1974 for the purpose of consolidating the Teagues' indebtedness with the Bank into a single promissory note in the amount of $8,836.16. To secure this loan the Teagues gave the Bank a security interest in their livestock, farm machinery and equipment, feed, seed, fertilizer and other supplies used in the farming operation, as well as those crops to be grown and harvested during the 1974 farm season. The loan was to be repaid in four months. The Teagues were unable to meet this time constraint and defaulted on the note. Thereafter, the Bank filed its replevin action against the Teagues on January 21, 1975, seeking a personal judgment against the Teagues on the note and seeking recovery of the collateral in which the Bank held its security interest. The replevin action was filed in the Fulton Circuit Court.

Within a month the Fulton Circuit Court issued a prejudgment order of possession on Bank's motion, ordering Sheriff Newgent to seize the Teagues' livestock and farming equipment on March 5, 1975. The Fulton Circuit Court instructed Sheriff Newgent to deliver the property to the Bank unless the Teagues put up a redelivery bond by March 18. On the morning of March 5, Ernest Teague convinced the Sheriff to delay the repossession until he had a final opportunity to meet with the Bank's president, whom Teague claimed had agreed to delay the repossession while the Teagues sought refinancing. Being unsuccessful at the Bank, Teague returned to his farm to find a rather chaotic repossession underway.

The repossession was described by Sheriff Newgent as a "free for all" with 100 or more people scurrying about the farm. Newgent indicated that while he knew most of these people were not authorized to aid in the repossession, he could not control the crowd with his small staff. No inventory was taken while the Teagues' property was being seized. When the repossession was over, there was nothing left on the farm.

Approximately 55 head of cattle seized during the repossession were transported to the Rochester Sale Barn. Although the Teagues had until March 18 to file a redelivery bond and get the cattle back, Orland Boone, the owner of the Rochester Sale Barn, sold the cattle on March 8. Boone testified that he sold the cattle on March 8 as per the instructions of Newgent given before the repossession had even occurred. Newgent denied instructing Boone to sell the cattle on March 8. The Bank filed a petition to have the sale approved by the Fulton Circuit Court, alleging that the sale was made "by error and inadvertence, and due to mistake and misunderstanding." Bank's Exhibit 34. The Teagues' first attorney responded to this petition with a request for additional time within which to investigate and respond to the Bank's attempt to have the premature sale approved. Within this request for additional time the Teagues' attorney noted discrepancies between the Sheriff's inventory of items seized and the items which the Teagues claimed were taken.

At this point the Teagues began going through several attorneys, missing many court dates and requesting numerous continuances. No responsive pleading was ever filed by the Teagues in answer to the Bank's original replevin complaint. The Fulton Circuit Court found the Teagues to be in default and eventually approved the sale of the livestock at the Rochester Sale Barn. On December 23, 1975, the Fulton Circuit Court entered a default judgment against the Teagues. The court directed the Bank to deduct the net proceeds obtained from the sale of the Teagues' farm equipment from the judgment amount once the equipment was sold.

The Teagues brought the present action to recover compensatory damages for the livestock and equipment seized and unaccounted for, for the sale of the livestock by the Rochester Sale Barn at an amount less than the fair market value, and for the mental anguish suffered by the Teagues as a result of the abusive repossession and the consequences therefrom. The Teagues also sought punitive damages. After summary judgment was entered in favor of all defendants except the Bank due to the Teagues' failure to comply with the Tort Claims Act, the trial was held and the case went to the jury. The Teagues attempted to prove that the Bank had virtually assumed control of the repossession and should therefore be responsible for the damages stemming from the manner in which it was conducted. A verdict was returned for the Teagues with compensatory and punitive damage awards totalling $440,000. The Bank now appeals.

Throughout the course of this litigation the Bank has maintained that the Teagues' claims were barred by the doctrine of res judicata. Close to one-third of the Bank's over thirty assignments of error bear directly on the issue of what effect, if any, the Bank's original replevin action has on the claims now raised. While a discussion of the res judicata issue is not necessary to our disposition of this appeal, it could be helpful to the parties upon remand.

The Indiana courts have consistently required the presence of four elements to merit the application of res judicata:

"The basic elements of res adjudicata are four-fold: (1) the former judgment must have been rendered by a court of competent jurisdiction; (2) the matter now in issue was, or might have been, determined in the former suit; (3) the particular controversy adjudicated in the former action must have been between the parties to the present suit; and (4) judgment in the former suit must have been rendered on the merits. Middlekamp v. Hanewich (1977), 173 Ind.App. 571, 364 N.E.2d 1024, 1033; Crown Point School Corp. v. Richards (1973), 154 Ind.App. 545, 549, 290 N.E.2d 449, 452; Wright v. Kinnard (1970), 147 Ind.App. 484, 488, 262 N.E.2d 196, 199-200."

Moxley v. Indiana Nat. Bank (1982), Ind.App., 443 N.E.2d 374, 377 (quoting from Blake v. Blake (1979), 181 Ind.App. 304, 391 N.E.2d 848, 851). Only the second element, whether the Teagues' claims were, or might have been, determined in the Bank's original replevin action, is subject to any dispute. (A default judgment is a judgment on the merits for purposes of res judicata. Patterson v. State (1859), 12 Ind. 86.)

A replevin action is a speedy statutory remedy designed to allow one to recover possession of property wrongfully held or detained as well as any damages incidental to the detention. Wardman-Justice Motors v. Petrie (D.C.Cir.1930), 39 F.2d 512, 515. The only issue necessarily decided in a replevin action is the right to present possession. McFadden v. Ross (1886), 108 Ind. 512, 8 N.E. 161. Of course, the judgment entered in a replevin action is conclusive as to all questions which were litigated or which might have been litigated under the issues. McFadden v. Ross, supra; McFadden v. Fritz (1886), 110 Ind. 1, 10 N.E. 120.

In the present case, the Bank's replevin action put into issue the size of the Teagues' indebtedness to it and its right to possession of the Teagues' livestock and equipment pursuant to the security agreement. After the premature sale of the Teagues' livestock and the Bank's request that such sale be approved, the value of the livestock sold clearly became a question that needed to be answered before the court could determine the remaining indebtedness of the Teagues to the Bank. In fact, the court eventually approved the sale of the livestock by the Rochester Sale Barn as commercially reasonable in spite of the fact that the Teagues had no notice of the sale and that the sale was had before the time in which the Teagues had to file a redelivery bond had run. See IC 34-1-11-18 (court may direct the sheriff to sell perishable goods which have been attached upon reasonable notice). In approving the sale, the Fulton Circuit Court determined that the sale price represented the fair market value of the livestock. If the Teagues had had any complaint concerning the value for which the livestock was sold or the fact that they were not notified of the sale, the forum for these complaints would have been either the Fulton Circuit Court during the replevin proceedings or this court by perfecting an appeal from the Fulton Circuit Court action. To the extent that the jury was allowed to consider whether the livestock was sold at a fair price in the present action, such was error. The Teagues are barred from relitigating the fair market value of the livestock or the reasonableness of the sale and cannot now receive compensatory damages concerning the sale. These issues were addressed by the Fulton Circuit Court and cannot be relitigated.

The Bank has also argued that the Teagues put the issue of any discrepancy between what they claim was taken and what the sheriff's inventory listed as taken into the replevin action when the Teagues' attorney alluded to the discrepancies in his motion for additional time to respond to the Bank's requested approval of the livestock sale. The Bank argues that motion for additional time can be construed as a pleading and that for the purpose of applying res judicata,...