Case Title: Citizens Bank & Trust Co. v. Gibson

Citation: 490 N.E.2d 728

Docket Number: 86S04-8603-CV-312

State: indiana

Court: Indiana Supreme Court

Date: 1986-03-27T00:00:00Z

Document:
490 N.E.2d 728 (1986)
THE CITIZENS BANK & TRUST COMPANY OF WASHINGTON, Appellant/Cross-Appellee (Plaintiff below),
v.
Pearson E. GIBSON and Marion M. Gibson, Appellees/Cross-Appellants (Defendants below), and Lafayette Production Credit Association, Appellee (Defendant below).
No. 86S04-8603-CV-312.

Supreme Court of Indiana.
March 27, 1986.
James F. Havill, Washington, William E. Statham, Gerald Allega, Clark, Statham, McCray, Thomas & Krohn, Evansville, for appellant/cross-appellee.
Christopher E. Baker, Rubin & Levin, Indianapolis, for appellees/cross-appellants Pearson E. Gibson and Marion M. Gibson.
John C. Duffey, Thomas L. Ryan, Stuart & Branigin, Lafayette, for appellee Lafayette Production Credit Ass'n.
GIVAN, Chief Justice.
Appellant and appellees have both petitioned for transfer from the Court of Appeals opinion reported in 463 N.E.2d 276. We grant both petitions for transfer. We adopt the recitation of the procedural history as provided by the Court of Appeals.
The Court of Appeals reversed and held the action for foreclosure of the mortgage was appropriate. They also held Gibson's release did not operate as an election of remedies precluding action against the bank.
The Court of Appeals outlined the pertinent facts which we also adopt.
The appellees contend the Court of Appeals erred in that the term "and borrowers" is an unnecessary description *730 of the word mortgagor or is an ambiguous term which cannot support the conclusion of the Court of Appeals that the trial court's decision is contrary to law. They maintain this is particularly true in light of the rule of contract construction which requires a printed contract form to be strongly construed against the party drafting the document. See Colonial Discount Corporation v. Berkhardt (1982), Ind. App., 435 N.E.2d 65.
The clause at issue is often referred to as a dragnet clause and has as its purpose the creation of an open-ended mortgage. These provisions are valid in Indiana. See Merchants National Bank v. H.L.C. Enterprises, Inc. (1982), Ind. App., 441 N.E.2d 509 and cases cited therein. The Court in Merchants cited the following language from 172 A.L.R. 1079, 1080 (1948).
The trial court interpreted the intent and language of the parties as follows.
We hold the decision of the trial court was not contrary to law. The customary method to include future several debt under a mortgage is to include a phrase such as "the indebtedness of the mortgagors or either of them." See Noble County Bank v. Waterhouse (1929), 89 Ind. App. 94, 163 N.E. 119. We do not find within the language of the words "and borrowers" the degree of an unequivocal intent required to secure the several indebtedness of the parties.
We hold the trial court did not err in denying judgment against Mrs. Gibson personally and in denying foreclosure of the mortgage.
The second facet of this appeal concerns Gibson's counterclaim against the bank alleging fraud, negligence and breach of contract. We adopt the Court of Appeals statement of the procedural and factual history.
In Juerling the court dealt with a factual pattern similar to the case at bar. A bookkeeper employed by a corporation systematically forged the signature of the owner of the corporation to checks made payable to herself. After the discovery of the deception, the corporation and the employee entered into a written agreement whereby the bookkeeper acknowledged her acts and agreed to turn over to the corporation virtually all of her assets. A few months later the corporation filed suit against the bank which had allegedly negligently paid over a forged signature. The trial court granted a summary judgment in favor of the bank involved. The Court of Appeals affirmed that judgment.
The Court of Appeals quoted 10 Am.Jur.2d Banks, § 508 (1963) for the proposition that two views exist on the question of whether a depositor who obtains judgment against either a bank or the receiver loses his rights against the other. The court adopted the view that a depositor has an election to proceed against either but if he chooses to proceed against the receiver and obtains a direct benefit then he is precluded from suing the bank. See Juerling, supra.
The Court of Appeals distinguished the case at bar from Juerling on the grounds Juerling involved restitution and not a written release. The Court concluded the case at bar must be resolved under the law concerning releases and not the law concerning restitution and the election of remedies.
Appellant, Citizens Bank, argues the Court of Appeals created a distinction in Juerling which is not supported by the language of the case. Appellant contends the rule of Juerling should be applied when the depositor has received a direct benefit, notwithstanding whether the benefit flows from an act of restitution or accompanies a release.
Appellees, arguing in behalf of the holding of the Court of Appeals, adopt the interpretation of Juerling. In addition they contend the result of the trial court's ruling on the issue of summary judgment has prevented the litigation of the issue of the intent of the parties to the release. They further point out the bank was not a party to the release and a material issue of fact does exist as to whether the release should also operate to have an effect on the bank. In essence they argue the question of the release and its effect is one which must be considered prior to a consideration of the question of an election of remedies. Accordingly, they maintain the trial court erred when it granted the summary judgment motion.
The question is whether the focus of Juerling is on the fact a direct benefit was received or on the mechanism through which the benefit was received. We hold it is on the former. It is the benefit which *732 serves to ratify the actions of the bank and create the election of remedies situation. Juerling distinguished its facts from other cases in Indiana by stating:
Gibson obtained a direct benefit from the forger prior to the time he filed suit against the bank. We find he elected his source of remedy and is precluded from bringing an action against the bank.
In all other matters we adopt the holdings of the Court of Appeals. The trial court is in all things affirmed.
DeBRULER, PIVARNIK and DICKSON, JJ., concur.
SHEPARD, J., dissents and would vote to affirm the decision of the Court of Appeals.