Barber-Greene Co. v. National City Bank of Minneapolis
| Decision Date | 27 April 1987 |
| Docket Number | BARBER-GREENE,No. 86-5219,86-5219 |
| Citation | 816 F.2d 1267 |
| Parties | 3 UCC Rep.Serv.2d 1234 COMPANY, Appellee, v. NATIONAL CITY BANK OF MINNEAPOLIS, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Kevin M. Busch, Minneapolis, Minn., for appellant.
Stephen H. Cohen, Minneapolis, Minn., for appellee.
Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BOWMAN, Circuit Judge.
National City Bank of Minneapolis appeals from a judgment entered upon a jury verdict in favor of Barber-Greene Company. The dispute at trial was whether Barber-Greene's security interest in the proceeds from the sale of inventory by a common debtor is superior to the security interest claimed by the bank.
Although Barber-Greene filed its financing statement approximately five years before the bank filed its statement, Barber-Greene's statement did not contain the debtor's signature. Instead, one of Barber-Greene's managers signed his name on the line below the debtor's typewritten name. The jury was instructed that Barber-Greene's financing statement was nevertheless valid if the debtor "adopted" the signature before the bank filed its statement. By special verdict, the jury indicated that it found the debtor had so adopted the signature on Barber-Greene's financing statement, rendering Barber-Greene's security interest in the proceeds superior to the bank's interest. Issues concerning the proceeds were reserved for post-trial determination by the magistrate. 1 The magistrate found that the proceeds are identifiable and that Barber-Greene is entitled to them. On appeal, the bank contends that the magistrate erred in failing to instruct the jury that the adoption, to be effective, must be in writing. The bank also contends that the magistrate erred in concluding that Barber-Greene is entitled to the proceeds in question. For the reasons discussed below, we affirm.
Barber-Greene sold machinery on credit to Zeco Company pursuant to "floor-plan agreements" and "dealer agreements." Zeco, in turn, resold the machinery to its customers. Zeco granted Barber-Greene security interests in the machinery that it purchased pursuant to the agreements. Zeco and Barber-Greene had done business this way for several years.
In 1973, the bank entered into a credit agreement with Zeco whereby the bank extended loans to Zeco secured by all Zeco's inventory. The bank set up three accounts, which the parties refer to as the "collateral account," the "loan account," and the "general operating account." Pursuant to the terms of their agreement, the proceeds from the sale of all Zeco's inventory were deposited in the collateral account. The bank periodically, and at its discretion, transferred funds from the collateral account to the loan account, reducing Zeco's loan balance accordingly. Zeco operated its business out of the general operating account. Upon Zeco's request for credit, the bank, if sufficient collateral existed, would credit an amount to Zeco's general account and debit the loan account accordingly. The bank, attempting to perfect its security interest, filed a financing statement with the state on June 18, 1973.
Barber-Greene had filed a similar financing statement almost five years earlier on July 31, 1968. The statement covered all machinery sold to Zeco. Barber-Greene's financing statement, however, did not carry the signature of the debtor, Zeco. Instead, under Zeco's typewritten name was the signature of one of Barber-Greene's managers.
This dispute arose in June 1980 when, after Zeco's financial condition had deteriorated, the bank applied the balances in all Zeco's accounts, including the collateral account, to Zeco's debt. Barber-Greene claimed that the collateral account contained the proceeds from two sales of machinery in which it held security interests--the Ulland sale ($78,000) and the Duinick sale ($64,485). Barber-Greene maintained that its financing statement was filed first, and therefore its security interest in the proceeds from the two sales is superior to the security interest claimed by the bank. The bank, on the other hand, maintained that Barber-Greene's prior financing statement is invalid and ineffective without the debtor's signature. Alternatively, the bank maintained that the proceeds in question are unidentifiable, and therefore Barber-Greene is not entitled to relief.
The magistrate informed the jury that in these circumstances a security interest may be perfected by filing a valid financing statement, and that when two such statements covering the same collateral exist, the first one filed has priority. The magistrate explained that a valid financing statement must be, among other things, signed by the debtor. "Signed," he explained, is defined by the Uniform Commercial Code to include "any symbol executed or adopted by a party with present intention to authenticate a writing." The jury was told that it must determine whether the signature by Barber-Greene's manager was adopted by Zeco with the intent to authenticate the financing statement. The jury was instructed: "[i]f you find that Zeco intended the financing statement to be valid and expressed that intent by word or deed you may find that Zeco adopted the signing shown, and therefore signed the financing statement."
The bank requested an instruction that an adoption, ratification, or authorization of the signature on a financing statement is effective only if signed by the debtor. This request was denied.
The jury, by special verdict, found that (1) Zeco knowingly authorized Barber-Greene to sign a financing statement on its behalf, and (2) before the bank filed its statement Zeco had adopted the signature on Barber-Greene's statement with the present intent to authenticate the statement. Accordingly, Barber-Greene's security interest is superior to the bank's interest.
The parties had agreed that the issues concerning the proceeds to be recovered by the prevailing party would be decided by the magistrate. The magistrate held that Barber-Greene was entitled to the proceeds from both the Ulland and Duinick sales. The magistrate found, contrary to the bank's argument, that the lowest intermediate balance principle is inapplicable in this case and that the proceeds are identifiable. The proceeds were paid directly to the bank when deposited in the collateral account. The magistrate concluded, therefore, that the bank as an inferior creditor was not entitled to the proceeds. This appeal followed.
On appeal, the bank contends that the magistrate erred in failing to instruct the jury that a debtor's adoption of a signature must be in writing. The bank cites no authority for its position, but argues that requiring a written adoption in these circumstances avoids the issues of authentication, authority, and fraud that the Uniform Commercial Code was intended to eliminate and promotes the certainty and predictability that the Code was intended to establish. The bank also contends that the magistrate erred in holding that Barber-Greene is entitled to the proceeds in question. The bank argues that the deposits in the collateral account were "payments" to the bank and as such cut off any rights of Barber-Greene to the proceeds and rendered the proceeds unidentifiable. The bank also argues that even if the proceeds are identifiable, Barber-Greene's security interest was extinguished by Zeco's subsequent use of the proceeds.
A valid and effective financing statement must be, among other things, signed by the debtor. Minn.Stat.Ann. Sec. 336.9-402(1) (1987). " 'Signed' includes any symbol executed or adopted by a party with present intention to authenticate a writing." Id. Sec. 336.1-201(39). The term "adopted" is not defined in the Code. The jury was instructed that it could consider Zeco's words or conduct when determining whether Zeco adopted the signature on the financing statement. The magistrate specifically denied the bank's request for an instruction that the adoption, ratification, or authorization must be in writing.
We normally defer to the trial court's rulings on questions of the law of the state in which it sits. McAninch v. Traders National Bank, 779 F.2d 466, 469 (8th Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 2917, 91 L.Ed.2d 545 (1986). The bank does not contend that the magistrate's view of Minnesota's version of the U.C.C. is contrary to any reported opinion of the Minnesota Supreme Court. Indeed, the bank maintains that the issue whether an adoption of a debtor's signature should be in writing is one of first impression. When the state's highest court has not decided the issue, the trial court's interpretation "is entitled to substantial deference unless it is 'fundamentally deficient in analysis or otherwise lacking in reasoned authority.' " Dabney v. Montgomery Ward & Co., 761 F.2d 494, 499 (8th Cir.) (quoting Kansas City Power & Light v. Burlington Northern R.R., 707 F.2d 1002, 1003 (8th Cir.1983)), cert. denied, --- U.S. ----, 106 S.Ct. 233, 88 L.Ed.2d 232 (1985). We hold that the magistrate's ruling that the adoption need not be in writing is not violative of the above principle.
The Code does not require a written adoption. Had the drafters intended that the adoption be in writing, we think they would have specifically expressed such a requirement. Even though a written adoption may be preferable, the Code does not so provide and, in fact, indicates to the contrary. We are not at liberty to rewrite legislation.
Further, the magistrate's ruling is consistent with the underlying purposes and policies of the Code, both in general and specifically with the purpose and policy of the section defining the term "signed." We think that allowing an adoption to be by word or deed "permits the continued expansion of commercial practices through custom, usage and agreement of the...
To continue reading
Request your trial
-
Davis v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
...it is fundamentally deficient in analysis or otherwise lacking in reasoned authority. Id. at 208; Barber-Greene Co. v. National City Bank of Minneapolis, 816 F.2d 1267, 1270 (8th Cir.1987). After careful review of South Dakota law, we hold that the district court's decision to instruct the ......
-
General Elec. Capital Corp. v. Union Planters Bank
...opinion interpreting comment 2(c) supports GE Capital's position, but it is not squarely on point. In Barber-Greene Co. v. National Bank of Minneapolis, 816 F.2d 1267 (8th Cir.1987), the bank and the debtor had a financing arrangement similar to the present case. Like Union Planters, the ba......
-
In re Halmar Distributors, Inc.
...to the precise example used in the comment, as suggested by the phrase "of course" used in the comment. Barber-Greene Co. v. Nat'l City Bank of Minneapolis, 816 F.2d 1267 (8th Cir. 1987), cited by G.E., dealt with a fact pattern quite different from that present here. The cash transfers to ......
-
Orix Credit Alliance, Inc. v. Sovran Bank, N.A.
...Sec. 8.9-306, Comment 2(c) (emphasis added). We disagree. To support its argument, Orix relies on Barber-Greene Co. v. National Bank of Minneapolis, 816 F.2d 1267 (8th Cir.1987). In Barber-Greene, a supplier sold machinery on credit to a debtor, taking a security interest in that machinery.......