450 N.W.2d 435 (S.D. 1990), 16511, Massey Ferguson Credit Corp. v. Bice

Docket Nº:16511.
Citation:450 N.W.2d 435
Opinion Judge:The opinion of the court was delivered by: Morgan
Party Name:MASSEY FERGUSON CREDIT CORPORATION, Plaintiff and Appellee, v. Richard BICE, Defendant, Appellant and Third Party Plaintiff, v. Wayne NELSON, individually and Wayne Nelson, d/b/a Depot Equipment of Ideal, South Dakota, Third Party Defendant.
Attorney:Stanley Whiting, Winner, South Dakota, Attorney for Plaintiff and appellee.
Case Date:January 17, 1990
Court:Supreme Court of South Dakota
 
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Page 435

450 N.W.2d 435 (S.D. 1990)

MASSEY FERGUSON CREDIT CORPORATION, Plaintiff and Appellee,

v.

Richard BICE, Defendant, Appellant and Third Party Plaintiff,

v.

Wayne NELSON, individually and Wayne Nelson, d/b/a Depot

Equipment of Ideal, South Dakota, Third Party Defendant.

No. 16511.

Supreme Court of South Dakota.

January 17, 1990

Argued Nov. 19, 1989.

Page 436

Stanley Whiting, Winner, for plaintiff and appellee.

John J. Simpson, Winner, for defendant and appellant.

Alvin Pahlke, Winner, for third party defendant and appellee.

MORGAN, Justice.

Richard Bice (Bice) appeals from a judgment granting summary judgment in favor of third-party defendant Wayne Nelson, individually and Wayne Nelson, d/b/a Depot Equipment of Ideal, South Dakota (Nelson). Additionally, Bice appeals an order denying his motion for a new trial and an order for repossession of a combine. This litigation has its conception in three separate transactions: the first arises from the sale and purchase of a combine and two heads; the second arises from a purported sale-purchase of a tractor for the purpose of securing money upon the assignment of the sales documents; and the third arises from the execution of a renewal and refinancing agreement that combined the combine and tractor payments and rescheduled the payments due thereon. We affirm the judgment.

THE FIRST TRANSACTION

On October 25, 1979, Bice purchased a new Massey Ferguson 750 combine and two heads from Depot Equipment. Bice executed a retail installment sales contract 1 and security agreement on the same

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date and Nelson assigned the contract to Massey Ferguson Credit Corporation (MF Credit). MF Credit maintained a retail financing agreement with dealers such as Depot Equipment, which allowed the dealers to send installment sales contracts to MF Credit. If the contracts passed MF Credit's credit investigation, the corporation would purchase the contracts and pay the dealer. MF Credit is strictly a financing company for Massey Ferguson dealers and other machinery dealers. Massey Ferguson, Inc. is the corporation that manufactures the Massey Ferguson farm equipment and sells equipment directly to dealers such as Depot Equipment.

Bice executed an application for credit on the purchase of the combine on October 25, 1979. He also executed a financing statement on the combine and two heads which was filed with the Tripp County Register of Deeds on November 7, 1979. On June 24, 1985, another financing statement was filed with the register of deeds, duly executed by Bice, which gave MF Credit a secured interest in the combine and two heads. Bice does not claim his name was forged on either of these documents. This combine contract will reenter the picture again when Bice needs refinancing of a tractor and the combine.

THE SECOND TRANSACTION

On September 4, 1981, Nelson appeared at Bice's home and informed him that Depot Equipment was in financial trouble and that he needed to do something to make Depot's inventory look better. Together, the two men contrived a scheme for the sale to Bice of a non-existent John Deere tractor 2 and the assignment of the contract to MF Credit for immediate cash to Nelson and Nelson to furnish Bice the money to make the payments. In furtherance of this scheme, Bice signed a blank installment sales contract 3 as a buyer of farm equipment. Subsequently, the contract was filled in to show that Bice purchased a John Deere 4240 tractor from Depot Equipment and that Depot received a Massey Ferguson 1135 tractor in trade. Neither of these transactions occurred. Bice knew that he would not take possession of the John Deere tractor and that he had not traded in a Massey Ferguson tractor. More importantly, Bice knew that he was aiding in creating a sham contract for the specific purpose of Nelson selling the contract to MF Credit. Nelson received $18,000 from MF Credit and MF Credit received unsecured paper because no equipment changed hands.

As part of the scheme, Bice and Nelson agreed that when payments came due on the tractor, Nelson would advance the money to Bice who would in turn make the payments. Bice stated that the bogus contract "would not hurt a soul" so long as Nelson gave him the money to make payments.

Unfortunately, Nelson didn't provide the funds on time for Bice to make payments. The first payment was due on September 1, 1982. After the first payment was missed, a MF Credit representative, Ken Hansen (Hansen), visited Bice. Bice did not inform Hansen that he had never received the John Deere tractor. Hansen made several subsequent visits after missed payments and was never informed by Bice that he did not have the tractor.

Finally, Nelson did provide Bice with $8,000 to begin making payments. Bice paid $6,000 to MF Credit on May 3, 1983, and $2,300 to MF Credit on April 6, 1984. No subsequent payments were made. It was only after Massey Ferguson Inc. terminated Nelson's Massey Ferguson dealer's sales and service agreement on October

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19, 1984, that Bice informed Hansen that he never had the John Deere tractor and there was no collateral to repossess.

As time elapsed, Bice defaulted on the combine contract and a renewal and refinancing agreement was signed by Bice on July 24, 1984. Nelson is listed as a guarantor on this agreement. Bice also defaulted on the bogus tractor contract at approximately the same time.

THE THIRD TRANSACTION

On October 1, 1985, Bice executed a renewal and refinancing agreement to replace the one made on July 24, 1985. This agreement extended the tractor and combine repayment from November 1, 1985, until November 1, 1987. The agreement was signed in blank by Bice in Hansen's presence. Bice testified that Hansen was aware of the tractor fraud when he had him sign the refinancing agreement in blank. Nelson was not a party to the agreement extending the tractor and combine repayment. Bice claims that Hansen wanted to put the combine, two heads, and the John Deere tractor on the same renewal agreement, but Bice only wanted the combine and two heads. Bice testified that Hansen later put the tractor on the renewal agreement in addition to the combine and two heads without Bice's permission.

MF Credit brought suit against Bice on the retail sales contracts, refinancing agreement, and security agreements covering the combine and the John Deere tractor. Additionally, they sought a finding that they had a perfected security interest in the equipment.

Bice filed a third-party complaint against Nelson seeking indemnity should he be held liable to MF Credit. He based his indemnity claim on Nelson's failure to deliver the tractor and the combine claim based on Nelson's signing the July 24, 1984, refinancing agreement as a guarantor.

The trial court granted a motion for summary judgment in Nelson's favor dismissing the third-party complaint on the grounds that Bice was in pari delicto in the fraud with Nelson and not entitled to indemnity. Further, the trial court held that Nelson's guarantee ran to MF Credit and not Bice; therefore, as a matter of law Bice was not entitled to recovery.

MF Credit's causes of action went to a jury and they were awarded $23,494.79 as damages on the combine contract and $19,000 as damages on the tractor contract. As part of his defense, Bice argued that the combine was purchased by Bice Farms, Inc. and not Bice individually. The jury rejected this claim by returning a verdict against Bice individually.

Following the verdict Bice moved for a new trial, claiming he had discovered new evidence that implicated Massey Ferguson, Inc.'s employee in preparing the illegal tractor contract. The...

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