Battle Creek State Bank v. Haake

• Decision Date: 04 December 1998
• Docket Number: No. S-97-713,S-97-713
• Citation: 255 Neb. 666,587 N.W.2d 83
• Parties: , 37 UCC Rep.Serv.2d 192 BATTLE CREEK STATE BANK, appellant, v. Ron HAAKE, appellee.
• Court: Nebraska Supreme Court

Page 83

587 N.W.2d 83

255 Neb. 666, 37 UCC Rep.Serv.2d 192

BATTLE CREEK STATE BANK, appellant, v. Ron HAAKE, appellee.

No. S-97-713.

Supreme Court of Nebraska.

Dec. 4, 1998.

Syllabus by the Court

1. Statutes: Judgments: Appeal and Error. Statutory interpretation is a matter of law, in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the determination made by the courts below.

2. Waiver: Words and Phrases. "Waiver" is defined as a voluntary and intentional relinquishment or abandonment of a known existing legal right, advantage, benefit, claim, or privilege which, except for such waiver, the party would have enjoyed.

3. Waiver: Security Interests: Proof. In cases involving a question of a waiver of a security interest, waiver is a matter of fact for which the standard of proof is by clear and convincing evidence.

4. Statutes: Presumptions: Legislature: Intent. In construing a statute, it is presumed that the Legislature intended a sensible, rather than an absurd, result.

5. Statutes. Where words of a statute are plain and unambiguous, no interpretation is needed to ascertain their meaning.

6. Statutes: Legislature: Intent. When considering a series or collection of statutes pertaining to a certain subject matter which are in pari materia, they may be conjunctively considered and construed to determine the intent of the Legislature, so that different provisions of the act are consistent and sensible.

7. Statutes: Legislature: Intent. In noncriminal cases, statutes are generally not given retroactive effect unless the Legislature has clearly expressed an intention that the new statute is to be applied retroactively.

8. Courts: Jury Instructions. A trial court need not instruct the jury where the facts do not justify the instruction.

W. Bert Lammli, Norfolk, for appellant.

Forrest F. Peetz, of Peetz & Peetz, Oneill, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

Battle Creek State Bank (BCSB) appeals a jury verdict entered in favor of Ron Haake following the trial of BCSB's conversion claim and the denial of BCSB's motion for new trial. BCSB alleged that Haake wrongfully converted certain cash proceeds which BCSB alleged belonged to it. BCSB assigns as error the trial court's refusal to retroactively apply the 1994 amendments to Neb. U.C.C. § 9-306(2) (Cum.Supp.1994) and the entry of the jury's verdict finding that BCSB impliedly waived its right to enforce its security interest in certain cash proceeds. For the reasons recited below, we conclude that the 1994 amendments to § 9-306(2) are not retroactive and that there were no reversible errors in connection with the court's evidentiary rulings or instructions. Accordingly, we affirm.

I. FACTS

In 1986, BCSB began a farm-lending relationship with Todd and Deb Duhachek. The Duhacheks farmed in Madison County, Nebraska. The farm included a small, grade B dairy operation with 25 to 30 cows. When the lending relationship commenced, the Duhacheks granted BCSB a blanket security interest in all of the farm equipment, inventory, and proceeds then owned and thereafter acquired by the Duhacheks. BCSB properly filed and perfected this financing statement and security agreement in Madison County on April 21, 1986, in accordance with the terms of Nebraska's Uniform Commercial Code (U.C .C.).

The Duhacheks moved to a farm in Holt County, Nebraska, in late spring of 1990. According to Todd Duhachek, the objectives for moving the family's farming business to Holt County were to increase and improve its dairy operation and to correspondingly decrease crop production. The Duhacheks' new farm included facilities for grade A milk production which were larger and more elaborate than the grade B production facilities at the Duhacheks' farm in Madison County. BCSB extended additional loans to the Duhacheks when they moved to Holt County, and BCSB obtained an additional financing statement and security agreement from the Duhacheks, which BCSB filed in Holt County on November 29, 1990, to perfect its ongoing security interest in all of the Duhacheks' property and proceeds.

While farming in Madison County from 1986 through 1990, the Duhacheks sold milk produced by their dairy herd to Dodge Dairy, which collected the raw milk from the Duhachek farm every other day. Dodge Dairy paid the Duhacheks for the raw milk. After Dodge Dairy ceased operation, the Duhacheks subsequently did business with Mid-America Dairymen, Inc. (Mid-Am), in essentially the same manner. After their move to Holt County in 1990, the Duhacheks had an identical business relationship with the Northeast Nebraska Milk Producers Co-op.

The financing statements and security agreements which memorialized BCSB's security interest provided that the Duhacheks could not sell or transfer their interest in any of their farm property or proceeds therefrom without prior written authorization from BCSB. Todd Duhachek testified that at all times, BCSB knew that the Duhacheks were selling the milk produced by their dairy operation and that BCSB expected them to do so. It was uncontroverted that when the Duhacheks sold their milk, they never obtained advance written authorization from BCSB as specified in the financing statements, and that BCSB did not require them to do so. Roger Brestel, president of BCSB, stated that the bank intended and expected that the Duhacheks would sell the milk in which BCSB claimed a security interest without obtaining a written waiver from BCSB for each sale because "it was just something that everybody understood."

When the Duhacheks moved to Holt County, they owned approximately 35 dairy cows. Almost immediately, they increased the size of their herd by purchasing additional cows from local sellers, including Haake. Haake had been a dairy farmer in Holt County for 28 years, and in 1990, he sought to reduce and eventually end his dairy operation. When Haake learned of the Duhacheks' move into the area and their interest in expanding their dairy herd, he struck a deal with them in April 1990 to sell the Duhacheks 28 dairy cows. The Duhacheks took possession of the cows, and they agreed to pay Haake on a monthly basis with proceeds from the sale of the cows' milk. The Duhacheks notified Mid-Am of the arrangement, and the Duhacheks executed a written authorization assigning their interests in $930 of each month's proceeds from the sale of milk to be paid by Mid-Am directly to Haake. Todd Duhachek testified, and Brestel admitted at trial, that at some point in 1990, Todd Duhachek notified BCSB of the assignment of proceeds to Haake, and BCSB did not object to the assignment or payment to Haake. The Duhacheks completed payment of their debt to Haake for this lot of cows in April 1993.

In late 1992, the Duhacheks contacted Brestel and requested that BCSB loan them money to further expand their dairy herd. BCSB refused to do so because of concerns about the Duhacheks' ability to repay the loan. The Duhacheks subsequently arranged with Haake to purchase a second lot of cows from him, again with payments extended over a period of months by assignment of the Duhacheks' milk sales proceeds to Haake.

Haake testified that he discussed with his banker, Ralph Adams, who was apparently not associated with BCSB, his sales arrangements with the Duhacheks. Brestel testified that Adams telephoned him at least once to discuss the sales. Before confirming the sales arrangements with the Duhacheks, Haake took no other steps to ascertain if the Duhacheks' property, including after-acquired property, was subject to any preexisting security interest.

After Haake agreed to the deal for the sale of the second lot of dairy cows, the Duhacheks took possession of 26 Holstein cows from Haake. The Duhacheks executed a promissory note to Haake for $23,400 for the second purchase of cows on August 1, 1993. The precise date upon which the Duhacheks took possession of these Holsteins is not clear. The record does, however, contain a financing statement and security agreement executed by the Duhacheks in favor of Haake on August 3. Haake filed this document on August 18 and thereafter asserted a purchase money security interest in the second lot of cows that he had sold to the Duhacheks, including both products and proceeds therefrom.

In accordance with the terms of the agreement, the Duhacheks began paying Haake $755 per month for the second lot of cows on August 15, 1993, after the cows freshened. The payments were made directly to Haake by the Northeast Nebraska Milk Producers Co-op based on the Duhacheks' written assignment of monthly milk sales proceeds in that amount to Haake. Todd Duhachek testified that the second lot of Holsteins produced enough, if not more than enough, milk to cover the cost of the monthly payments to Haake due in connection with the second purchase.

The additional cows continued to bear Haake's brand after the Duhacheks took possession of them. The cows were intermingled with the rest of the dairy herd on the Duhachek farm premises, which was inspected periodically by Brestel and other BCSB representatives in 1993 and 1994. There is no evidence that the Duhacheks tried to conceal this addition to their herd during these inspections by BCSB and its agents.

Todd Duhachek testified that he told Brestel about the August 1993 purchase from Haake after the Duhacheks had executed a written assignment of milk sales proceeds to Haake. Deb Duhachek testified that she did not inform Brestel or other BCSB representatives about the second purchase because she believed that her husband had already done so. Brestel denied that either Todd or Deb Duhachek had advised BCSB of the second purchase from Haake or the 1993 assignment of the Duhacheks' milk sales proceeds to Haake.

Brestel testified that BCSB began to "closely monitor" the Duhacheks' financial...