Benson County Co-op. Credit Union v. Central Livestock Ass'n, Inc.

• Decision Date: 21 November 1980
• Docket Number: No. 9818,9818
• Citation: 31 U.C.C.Rep.Serv. 300,300 N.W.2d 236
• Parties: 31 UCC Rep.Serv. 300 BENSON COUNTY COOPERATIVE CREDIT UNION, Plaintiff/Appellee, v. CENTRAL LIVESTOCK ASSOCIATION, INC., Defendant/Appellant. Civ.
• Court: North Dakota Supreme Court

Page 236

300 N.W.2d 236

31 UCC Rep.Serv. 300

BENSON COUNTY COOPERATIVE CREDIT UNION, Plaintiff/Appellee, v. CENTRAL LIVESTOCK ASSOCIATION, INC., Defendant/Appellant.

Civ. No. 9818.

Supreme Court of North Dakota.

Nov. 21, 1980.

Nilles, Hansen, Selbo, Magill & Davies, Fargo, for defendant/appellant; argued by W. Todd Haggart, Fargo.

Lamb, Schaefer, McNair & Larson, Fargo, for plaintiff/appellee; argued by Michael D. McNair, Moorhead, Minn.

PAULSON, Justice.

Central Livestock Association, Inc. (hereinafter "Central Livestock") appeals from a summary judgment entered by the Cass County District Court on March 12, 1980. We reverse the judgment of the district court and remand the case for trial.

Lyla Hagen and her mother, Hazel Hagen (hereinafter "Lyla" or "Hazel"), conducted a hog-raising operation near Maddock. On February 9, 1976, Lyla applied for a $24,000.00 loan from the Benson County Cooperative Credit Union (hereinafter "Credit Union"). The Credit Union approved her application and loaned Lyla $24,000.00 on February 10, 1976. Lyla, as borrower and maker, executed a note to the Credit Union for $24,000.00. The note was to be repaid in ten annual installments of $2,400.00 each plus interest. The first payment was due on December 10, 1976. The loan was made to allow Lyla to purchase hogs and feed for the hogs. On February 10, 1976, Lyla also executed a security agreement which listed the Credit Union as the secured party. The schedule of property covered by the security agreement included 50 sows; 185 feeder pigs; and a 1962 D-14 Allis Chalmers Tractor with Dual Loader. Lyla warranted that the collateral for the loan was used for business operations. The security agreement signed by Lyla contained a clause which provided that no part of the property subject to the security agreement was to be sold by the debtor without the written consent of the Credit Union. On February 14, 1975, at 8:50 a. m., a financing statement was executed by Lyla and Hazel and was filed with the Benson County Register of Deeds by the Credit Union. The financial statement covered the proceeds of collateral as well as the products of collateral. The collateral was described as a 1962 D-14 Allis Chalmers Tractor with Dual Loader; 45 sows; and 185 feeder pigs.

Because of low hog prices and high feed prices, Lyla was unable to make the first payment due under the note. Accordingly she entered into an extension agreement with the Credit Union on December 15, 1976. A few months later, Lyla prepared and submitted a personal financial statement which she signed in her individual capacity. The security agreement signed by Lyla was also signed in her individual capacity. However, the financing statement was executed by both Lyla Hagen and Hazel Hagen. The financing statement was prepared and filed before the Credit Union's loan to Lyla on February 10, 1976, and the financing statement did not refer to the loan. Following the execution of the February 10, 1976, security agreement, Lyla made shipments of hogs to Central Livestock for sale of the hogs on her account. The net proceeds of these sales were remitted to Lyla but Lyla failed to apply the proceeds of the sales to the amount due under the terms of the note. In January of 1978, Lyla informed the Credit Union that the hogs had been sold and that Lyla and Hazel were filing for bankruptcy. The manager of the Credit Union knew that Lyla was raising hogs and selling them prior to the execution of the December 15, 1976, extension agreement. Although Lyla had sold some of the hogs subject to the Credit Union's claimed security interest, the Credit Union was primarily concerned with receiving its annual payments and did not insist that its consent be obtained before further sales took place.

The Credit Union initiated this action by issuing a complaint on March 20, 1979, which alleged that Central Livestock had purchased property secured by the Credit Union's security agreement and was liable for conversion. The Credit Union claimed that Lyla and Hazel were doing business as a partnership despite the fact that none of the records of sale prepared by Central Livestock reflect joint shipments by Lyla and Hazel or by a purported partnership. Lyla and Hazel were paid by separate checks. The records of sale prepared by Central Livestock reveal that Lyla's gross sales totaled $8,048.38, with net sales of $7,693.44. The amount of gross sales by Hazel through Central Livestock totaled $10,070.30, with net sales of $9,623.99. The difference between the gross sales and net sales reflects trucking, yardage, feed, sales commissions, and transit insurance expenses incurred by Lyla and Hazel in marketing the hogs. The gross sales of Lyla and Hazel totaled $18,215.50, while the net sales totaled $17,405.63. On October 9, 1979, a hearing was held on the Credit Union's motion for summary judgment. On February 29, 1980, the Cass County District Court held that the Credit Union was entitled to summary judgment in the amount of $18,215.50, plus interest from the date of each sale of hogs, together with costs and disbursements.

In its order allowing the Credit Union's motion for summary judgment, the district court determined that the financing statement covering the identical property listed in the security agreement was filed in the office of the register of deeds on February 14, 1976, instead of February 14, 1975, which is the date listed on the financing statement. The district court determined that the loan was executed by Lyla in a partnership capacity even though the note and the security agreement did not reflect this fact. The district court based its conclusion that Lyla and Hazel were partners on the fact that the financing statement was signed by both Lyla and Hazel. No consent was given either orally or in writing by the Credit Union to the Hagens which would authorize the sale of the hogs. The balance owing on the promissory note is $22,302.17, plus interest. The district court also determined that the Credit Union had not asked Lyla and Hazel about sales of hogs prior to January of 1978, when Lyla informed the Credit Union that all the hogs were sold and that Lyla and Hazel were filing for bankruptcy. The district court also determined that Central Livestock was guilty of converting the hogs to their own use and was liable for the value of the hogs as of the date of the conversion.

Four issues are presented for our consideration. The issues are as follows:

1. Whether or not the district court improperly made findings on genuine issues of material fact in granting the motion for summary judgment 2. Whether or not the deposition testimony of Gordon Arne, the manager of the Credit Union, creates a genuine issue of material fact as to whether the Credit Union, by its conduct, waived its rights under the security agreement;

3. Whether or not a genuine issue of material fact exists as to the scope of the security interest, i. e., whether it attached to hogs owned by Lyla alone or to hogs owned by Hazel; and

4. Whether or not the district court improperly computed the amount of damages awarded.

Rule 56(c) of the North Dakota Rules of Civil Procedure provides that a party who moves for summary judgment has the burden of clearly showing that there is no genuine issue as to any material fact.

On appeal from a summary judgment, the evidence must be viewed in the light most favorable to the party against whom the summary judgment was granted. Winkjer v. Herr, 277 N.W.2d 579 (N.D.1979). This court cannot decide disputed issues of material fact; we may only determine whether a genuine issue exists and whether the law was applied correctly. Accordingly, we reverse the grant of a summary judgment motion if it appears from the record that there is an unresolved issue of material fact. Summary judgment is not appropriate if the moving party is not entitled to judgment as a matter of law or if reasonable differences of opinion exist as to the inferences to be drawn from undisputed facts. Helbling v. Helbling, 267 N.W.2d 559 (N.D.1978); Farmers Elevator Co. v. David, 234 N.W.2d 26 (N.D.1975). Under Rule 56(c), N.D.R.Civ.P., we may consider the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits in determining whether or not there is a genuine issue of material fact. Only those questions that are within the range of allowable controversy are material.

I.

The first issue raised by Central Livestock concerns whether or not the district court improperly made findings on genuine issues of material fact when it granted the motion for summary judgment. Central Livestock asserts that in the district court's findings, which were labeled "UNDISPUTED FACTS" in the district court's order allowing the motion for summary judgment, the district court made numerous findings which are disputed by Central Livestock. Central Livestock also asserts that the district court failed to view the entire record in the light most favorable to the party opposing the motion. Pioneer State Bank v. Johnsrud, 284 N.W.2d 292 (N.D.1979); Winkjer v. Herr, 277 N.W.2d 579 (N.D.1979). Central Livestock alludes to as erroneous the district court's conclusion that the financing statement was filed on February 14, 1976, rather than on February 14, 1975. Central Livestock also argues as erroneous the district court's conclusion that Lyla and Hazel operated as a partnership.

The district court's conclusions are not supported by the facts. In regard to the financing statement, the financing statement could have been previously obtained and filed by the Credit Union in connection with another transaction. It is also interesting to note that February 14, the date on which the financing statement was filed, fell on a Saturday in 1976. The Credit Union acknowledges that the district court committed error in assuming that the true date of the financing statement was February 14, 1976, rather than February 14,...