State Bank Of Piper City v. A-Way, Inc.

504 N.E.2d 737 (1987)

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Nature of the Case

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Facts

P filed a complaint against D to enforce its security interest in grain and the proceeds from sales of grain held by D on account for a debtor of P. In February 1982, P was awarded a judgment in the amount of $131,083.91 against William C. Brenner upon his default on promissory notes that had been secured, under article 9. P had a security interest in grain owned by Brenner, which was stored in D's warehouse. P served D with a citation to discover assets that it held on Brenner's behalf. The number of bushels of grain D held was 5,141.20. P moved for an order requiring D to pay P $5,141.20, confusing the number of bushels with their value, 'as partial satisfaction for the judgment entered' in its suit against Brenner. D failed to appear, and acting upon the order, D sold the grain, obtaining $11,310.64; of that amount, the defendant remitted $5,141.20 and applied the balance to outstanding charges on Brenner's accounts. P eventually figured it out and sued D to enforce its security interest in the proceeds of the grain sale over and above $5,141.20. The court dismissed the complaint on the grounds that the doctrines of merger and res judicata barred the suit. The appellate court reversed the dismissal. D appealed. D contends that under the doctrine of merger that any rights P had under the promissory notes of Brenner merged into the judgment, extinguishing any interest it had in the grain. A judgment at law or a decree in chancery, upon the contract or instrument upon which the proceeding is based, becomes entirely merged in the judgment. By the judgment of the court, it loses all of its vitality and ceases to bind the parties to its execution. Its force and effect are then expended, and all remaining legal liability is transferred to the judgment or decree. Once becoming merged in the judgment, no further action at law or suit in equity can be maintained. Second, under principles of res judicata D claims P is barred from bringing the present action because the issue now raised could have been litigated in the citation proceeding.