Arvest Bank v. Spiritbank, N.A.

• Decision Date: 16 May 2008
• Docket Number: No. 103,709. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.,103,709. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.
• Citation: 2008 OK CIV APP 55,191 P.3d 1228
• Parties: ARVEST BANK, Norman, Oklahoma, Plaintiff/Appellant/Counter Appellee, v. SPIRITBANK, N.A., Defendant/Third Party Plaintiff/Appellee/Counter Appellant, and Oliver Auto Group, Inc., and David G. Oliver, Defendants/Third Party Plaintiffs, v. Trac's Sports & Imports, Inc. and Citizen's Bank of Edmond, Third Party Defendants.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

191 P.3d 1228

2008 OK CIV APP 55

ARVEST BANK, Norman, Oklahoma, Plaintiff/Appellant/Counter Appellee, v. SPIRITBANK, N.A., Defendant/Third Party Plaintiff/Appellee/Counter Appellant, and Oliver Auto Group, Inc., and David G. Oliver, Defendants/Third Party Plaintiffs, v. Trac's Sports & Imports, Inc. and Citizen's Bank of Edmond, Third Party Defendants.

No. 103,709. Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.

Court of Civil Appeals of Oklahoma, Division No. 1.

May 16, 2008.

As Corrected May 23 and September 11, 2008.

Appeal from the District Court of Oklahoma County, Oklahoma; Honorable Noma Gurich, Trial Judge

AFFIRMED IN PART, REVERSED IN PART AND REMANDED

Thomas J. Blalock, John B. Jenkins, Commercial Law Group, P.C., Oklahoma City, Oklahoma, and John W. Swinford, Jr., John W. Swinford, Jr., P.C., Oklahoma City, Oklahoma, for Arvest Bank.

John M. Coffey, James U. White, Jr., White, Coffey & Fite, P.C., Oklahoma City, Oklahoma, for SpiritBank, N.A.

OPINION

ADAMS, Presiding Judge.

¶ 1 After the trial court entered an order granting Arvest Bank (Arvest) and SpiritBank, N.A. (Spirit) only part of the relief each had requested, Arvest filed an appeal and Spirit filed a counter appeal. Each argued that the other was not entitled to relief because the trial court had erred in its determination as to the priority of and existence of security interests in proceeds from automobiles when applying the provisions of the Uniform Commercial Code (UCC) adopted in Oklahoma. We agree that the trial court erred in failing to apply the law for the priority accorded depositary banks as to proceeds traced by Spirit which were attributable to sales prior to the appointment of a receiver and reverse that portion of the judgment. As to the proceeds from sales conducted under court orders by the receiver, Spirit's security interest has priority over that of Arvest, and the award to Arvest of proceeds from the sales of these cars also must be reversed. The matter is remanded to the trial court for the entry of appropriate orders.

¶ 2 This controversy arises from the operation of the used luxury automobile dealership Oliver Auto Group (OAG) formed by David Oliver (Oliver) in 1996. That same year, Allen Randall Trachtenberg (Trachtenberg) began operation of Trac's Sports and Imports (TSI), another licensed used car dealership. Arvest extended financing to OAG on March 22, 2002, under what is commonly referred to in the car industry as a flooring agreement, floor plan or floor plan agreement and filed a financial statement that same day to perfect its security interest in OAG's inventory and in other assets. Prior to the start of Arvest's floor plan for OAG, TSI had placed cars on OAG's lot on a consignment basis, a sales method Trachtenberg testified was also used at other automobile sales lots. TSI had a floor plan with Spirit which was secured by its accounts and other property, including its car inventory.¹

¶ 3 By the fall of 2002, OAG was in default on its note. Arvest sued OAG, Oliver, and Spirit on November 22, 2002, claiming OAG was in default on the note and asking for relief including an injunction, replevin and the appointment of a receiver. In December of 2002, Spirit answered and filed a counter petition claiming that it had a perfected security interest in various automobiles on OAG's lot which had been consigned there by its debtor, TSI, and asked for the automobiles or any proceeds from their sales. Spirit also joined TSI as a third party defendant, claimed a security interest in TSI's cars, and sought to collect proceeds from sales of those cars.

¶ 4 Restated, both Arvest and Spirit claim to either hold a security interest which predominates over one held by the other or to be entitled to proceeds from the sales of cars because the other's security interest had either failed to attach or had lapsed.² The basic underlying facts are not at issue, but the legal effect of the transactions is disputed.

¶ 5 The parties stipulated that (1) TSI's loans with Spirit began in 1999, and were renewed periodically thereafter; (2) TSI's credit line with Spirit increased from $100,000 to $450,000 and the last renewal was in the principal sum of $395,446.91; (3) Spirit "properly perfected its security interest" by filing a financing statement with the Oklahoma County Clerk on December 1, 1999; (4) the last renewal of TSI's loan with Spirit, on June 30, 2003, includes indebtedness for advances to TSI for cars at issue in the litigation; (5) Trachtenberg, the "sole shareholder and director" of TSI, signed a personal guarantee of the debt to Spirit; (6) OAG sold cars to TSI and that Paul Harlin Farmer (Farmer) "acting on behalf of [TSI], requested advances upon the [Spirit] line of credit"; (7) Spirit advanced funds for TSI to purchase cars from OAG and titles for the cars were delivered to Spirit; and (8) when TSI cars were sold, either Farmer or another named OAG employee would obtain titles from Spirit using "trust receipts signed as agent for [TSI]." They also stipulated that Spirit "would have a security interest in the [cars] as well as the sale proceeds."

¶ 6 The parties further stipulated that (1) OAG, by and through Oliver, entered into "a $2.5 Million floor plan financing agreement" with Arvest "[o]n or about March 22, 2002"; (2) Oliver signed a personal guaranty for the Arvest loan; (3) the Arvest loan proceeds paid off other banks and consolidated OAG's floor plan financing with Arvest; (4) Arvest's loan agreement required the monthly submission of Borrowing Base Certificates to it; (5) Arvest's advances were determined by a formula stated in the Borrowing Base Certificates; (6) those certificates were delivered to Arvest for the months of March through October, 2002; and (7) Oliver executed all of the Borrowing Base Certificates.

¶ 7 The parties also stipulated that (1) a receiver was appointed to account for and to liquidate OAG's car inventory; (2) the inventory was liquidated; (3) "the cash that is claimed by Spirit is on deposit pending a determination of entitlement to those proceeds"; (4) that nine of the listed "Subject Vehicles" were sold prior to the appointment of the receiver and were not sold by the receiver; and (5) "[s]ubsequent to the receiver's appointment, [Spirit] discovered that the Subject Vehicles, which were subject to its security interest, had been sold by OAG and the proceeds not paid to [Spirit]."

¶ 8 The cars called "Subject Vehicles" in the stipulation include the eight cars later denominated as the Pre-Litigation Cars during the litigation and nine cars later sold by the receiver and identified as the Post-Litigation Cars.³ The parties each claimed entitlement to $267,922 in proceeds from the sales of these seventeen cars.

¶ 9 Pursuant to a December 30, 2004 agreed order, proceeds from the receiver's sales, after deducting certain fees and expenses, were deposited with either Arvest, Spirit, or Citizens Bank of Edmond (Citizens) subject to a right to object and to file by a certain date a motion to recover any proceeds in which the party claims a prior perfected security interest or claim.

¶ 10 The trial court concluded that Spirit was entitled to $143,522 and Arvest was entitled to $124,400. The judgment contains specific findings as to each of the seventeen cars' proceeds and determines Arvest is entitled to proceeds of $51,300 from the Pre-Litigation Cars and $73,100 from the Post-Litigation Cars, and Spirit Bank is entitled to proceeds of $128,622 from the Pre-Litigation Cars and $14,900 from the Post-Litigation Cars. The journal entry states that Spirit is entitled to judgment in rem against TSI and is not barred by a settlement between TSI and Spirit from pursuing its rights to collect the debt through the collateral. After adjusting for the proceeds each bank held, a $55,522 judgment in favor of Spirit and against Arvest was entered. The appeal and counter appeal followed.⁴

¶ 11 Arvest claims that the underlying facts are not in dispute but that the operative effect of those facts and the legal conclusions applied to them are at issue in its appeal. It argues the trial court did not properly interpret applicable provisions of Oklahoma's UCC, 12A O.S.2001 § 1-101, et seq. Spirit's appeal likewise is dependent upon the legal effect of the facts.

STANDARD OF REVIEW

¶ 12 When the facts shown by the evidence are not in dispute, an appeal presents only a question of law. Baptist Building Corporation v. Barnes, 1994 OK CIV APP 71, 874 P.2d 68. Questions of law are reviewed by a de novo standard. Bank of Wichitas v. Ledford, 2006 OK 73, 151 P.3d 103. That is, the appellate court has the plenary, independent and non-deferential authority to re-examine a trial court's legal rulings. Neil Acquisition, L.L.C. v. Wingrod Investment Corporation, 1996 OK 125, 932 P.2d 1100. The appellate court independently reviews questions of law because it is its role to define the law. Matter of Estate of Crowl, 1987 OK 13 737 P.2d 911.

¶ 13 The court's findings in a non-jury trial are entitled to the same weight and consideration as would be given to a jury's verdict. Soldan v. Stone Video, 1999 OK 66, 988 P.2d 1268. The trial court's fact determinations in such a trial bear the same force as determinations by a well-instructed jury and will be sustained if supported by any competent evidence. Bradley v. Clark, 1990 OK 73, 804 P.2d 425.

ANALYSIS

¶ 14 In its appeal, Arvest claims entitlement to all the proceeds from the sales of all the cars based on its security agreement with OAG. Arvest argues that the trial court erred in entering judgment in rem in favor of Spirit because all its claims against TSI were premised upon debts extinguished by a Settlement Agreement and a dismissal with prejudice which operated as a retraxit and effected a judgment against TSI. Arvest also argues that TSI was not a buyer in the ordinary course of business and...