The First National Bank of Hoxie v. Schruben

• Decision Date: 10 March 1928
• Docket Number: 27,794
• Parties: THE FIRST NATIONAL BANK OF HOXIE, Appellee, v. W. H. SCHRUBEN and M. E. SCHRUBEN, Appellants (W. E. HILLSTEAD, Appellee)
• Court: Kansas Supreme Court

265 P. 53

125 Kan. 417

THE FIRST NATIONAL BANK OF HOXIE, Appellee, v. W. H. SCHRUBEN and M. E. SCHRUBEN, Appellants

(W. E. HILLSTEAD, Appellee)

No. 27,794

Supreme Court of Kansas

March 10, 1928

Decided January, 1928

Appeal from Sheridan district court; CHARLES I. SPARKS, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. JUDGMENTS--Res Judicata--Matters Which Should Have Been Litigated. Rule followed that when a cause of action has been prosecuted to final judgment all matters pertaining thereto and which were or properly should have been litigated under the facts constituting such cause of action, are conclusively determined by that judgment and binding upon all parties to the litigation and those in privity with them.

2. ACTIONS--Splitting Causes of Action--Promissory Note. Rule followed that a promissory note constitutes a single cause of action, and where an owner thereof sues and recovers upon a portion thereof such suit is a bar to a recovery upon the remaining portion of that note.

3. SAME--Splitting Causes of Action. The rule against splitting of a single cause of action applied in the circumstances stated in the opinion.

W. L. Sayers, J. Q. Sayers, both of Hill City, and F. A. Sloan, of Hoxie, for the appellants.

W. H. Clark and C. L. Thompson, both of Hoxie, for the appellee.

OPINION

DAWSON, J.:

This appeal presents the question whether a promissory note on which a judgment was recovered for part of its face value may be assigned to another holder and a further recovery be obtained thereon in behalf of such later assignee, under circumstances which may be briefly stated as follows:

Some time prior to April 27, 1921, W. H. Schruben, a Sheridan county farmer, purchased 70 acres of land in Florida near Lake Okechobee at $ 200 per acre. He paid half the purchase price and gave his note for $ 7,000 secured by a second mortgage on 480 acres of Sheridan county land to secure its payment. The payee of the note, one Thomas Lynn, transferred it to W. E. Hillstead, who put up the note and mortgage with the First National Bank of Hoxie as security for a loan in his own behalf. Originally Hillstead's obligation to the bank was $ 3,800, but it had been reduced to $ 800.

On February 2, 1923, the First National Bank of Hoxie brought suit against Schruben and wife, alleging its ownership of the $ 7,000 note and mortgage, and the default of the makers in the payment of interest and taxes in breach of the terms of the mortgage, whereby the entire sum became due, and plaintiff prayed judgment for principal and interest on the note, aggregating $ 8,151, and for foreclosure of the second mortgage and sale of the premises, subject to the lien of the first mortgagee, one George A. Launchbaugh.

On March 28, 1923, plaintiff filed an amended petition to the same general effect as its first petition so far as we are presently concerned.

On application of Schruben and wife, W. E. Hillstead was made a party to the action by order of court, and on August 23, 1923, Schruben and wife filed their answer admitting execution of note and mortgage, denying that the said First National Bank was the owner of the note or was the real party in interest, and alleging that the note sued on was the property of Hillstead. The answer further alleged that the note was procured by fraud perpetrated by Hillstead and the original payee in said note, and that the plaintiff bank at all times had knowledge of said facts. The answer also set up a cause of action for $ 14,000 damages against W. E. Hillstead, and prayed a recovery therefor against Hillstead, and that the note be canceled.

"2. Defendants further allege that this action was not prosecuted in the name of the real party in interest, for that the note and mortgage sued on are the property of the defendant, W. E. Hillstead.

"3. Defendants further state that the note and mortgage sued on were procured from the defendants Schruben and Schruben by the false and fraudulent representations of the payee therein named, and his agents, as will more fully appear hereinafter in the cross petition herein; and said defendants allege that the said plaintiff at all times had notice and knowledge of the facts constituting a defect of title in said note and mortgage as hereinafter alleged."

On September 28, 1923, Hillstead filed a verified answer as follows:

"Comes now defendant W. E. Hillstead, and for his answer to the cross petition of defendants Wm. H. Schruben and M. E. Schruben, filed August 28, 1923, denies generally and specifically each and every material allegation therein, except as herein expressly admitted.

"Defendant Hillstead admits that Wm. H. Schruben entered into a contract in writing for the purchase of lands in Florida."

The bank joined issue on Schruben's answer by a verified reply filed September 20, 1923, which read thus:

"Comes now the plaintiff and for its reply to the second and third paragraphs of the answer and cross petition of defendants Wm. H. Schruben and M. E. Schruben, filed August 28, 1923, deny generally and specifically each and every material allegation in said pleading."

At the March term, 1924, the cause was tried before a jury on these issues. The following instructions were given:

"4. The plaintiff in this action has admitted that it does not own all of the note sued on in this case, but only has certain interests therein. The plaintiff, under the evidence introduced in this case, cannot recover any verdict in excess of the amount of its interests in the note at this time, if it has any such interest. . .

"14. You have heretofore been told in these instructions that the plaintiff could only recover whatever interest it might have at this time in the note and mortgage sued on. That statement is only intended to be applicable in case the defendants Schruben have proven fraud and misrepresentations, as claimed by them, and as referred to in these instructions. In case such fraud and misrepresentations have not been so proven, then, under the evidence given in the trial of this case, the plaintiff would be entitled to recover the full amount due on said note."

The jury rendered a verdict as follows:

"We the jury empaneled and sworn in the above entitled . . . do find upon our oaths for the plaintiff, the First National Bank of Hoxie, Kan., and against the defendants Wm. H. Schruben and M. E. Schruben, and fix plaintiff's recovery at the sum of $ 995."

The jury failed to agree on the issues joined between Schruben and Hillstead. The record recites:

"That on said March 8, 1924, the court having interrogated the jury, and being informed as required by law in the premises, finds that no probability exists that the said jury will be able to reach a verdict upon the matters and issues submitted to said jury upon the cross petition of the defendants Wm. H. Schruben and M. E. Schruben and as against the defendant W. E. Hillstead, and said jury was thereupon discharged without a verdict having been reached, as to said last mentioned issues."

Judgment for $ 995 was accordingly entered in favor of the bank on March 8, 1924; the second mortgage was foreclosed and the property ordered sold (subject to the first mortgage) to satisfy the judgment; which was accordingly done, and the judgment and costs were satisfied.

During the pendency of the foregoing action, Launchbaugh, holder of the first mortgage on Schruben's lands, brought suit to foreclose, and all the parties to the bank's action were impleaded. No contest arose against the first mortgagee, and judgment was entered in his favor; but on February 5, 1924, Hillstead filed an answer in the case of Launchbaugh v. Schruben et al., in which he alleged that he had sold, indorsed and delivered the $ 7,000 note and second mortgage to the Hoxie bank before maturity, and "that the First National Bank of Hoxie, Kan., has at all times, and now is the owner and holder thereof."

Following other allegations Hillstead's answer concluded thus:

"Wherefore this answering defendant prays that the said mortgage of the First National Bank of Hoxie, Kan., be adjudged to be a valid lien on and upon the real estate described in said mortgage, being the same real estate described in plaintiff's mortgage, and that the said mortgage premises be ordered sold in the manner provided by law, and that the proceeds arising from the said sale of premises be applied: First, to the payment of taxes against the said premises; second, to the payment of costs; third, to the payment of the sums of money due on the mortgages sued upon herein; and that the balance of the money arising from the sale of the said premises, if any there be, be paid over to the codefendants, William H. Schruben and Mary H. Schruben."

On May 29, 1924, Hillstead filed an amended answer and cross petition in the case of Launchbaugh v. Schruben et al., in which he repeated most of the matters alleged in his answer of February 5, and including the ownership of the $ 7,000 note by the Hoxie bank, and narrating the outcome of the litigation between the bank and the Schrubens and Hillstead, and--

"That a judgment was rendered on March 8, 1924, declaring the First National Bank to be the owner of an interest in the above-described mortgage and note, to the extent of $ 995 . . and that said bank caused said land to be sold to satisfy the said judgment in the manner required by law, and after the sale of the said land, that said bank turned over to and delivered to the defendant, W. E. Hillstead, the above-described real estate mortgage, together with said note; . . . that there is at this time due and unpaid on said mortgage and note the sum of $ 7,203.75, together with interest at six per cent from March 8, 1924, . ....