Calva Products v. Security Pacific Nat. Bank

• Decision Date: 28 October 1980
• Parties: CALVA PRODUCTS et al., Plaintiffs and Appellants, v. SECURITY PACIFIC NATIONAL BANK, Defendant and Respondent. Civ. 21580.
• Court: California Court of Appeals Court of Appeals

Page 582

168 Cal.Rptr. 582

111 Cal.App.3d 409

CALVA PRODUCTS et al., Plaintiffs and Appellants, v. SECURITY PACIFIC NATIONAL BANK, Defendant and Respondent.

Civ. 21580.

Court of Appeal, Fourth District, Division 2, California.

Oct. 28, 1980.

Mallery & Stern, Claremont, and Jon A. Kodani, Pacific Palisades, for plaintiffs and appellants.

Butterwick, Bright, Pettis & Cunnison, Inc., and J. D. Butterwick, Riverside, for defendant and respondent.

TAMURA, Associate Justice.

Plaintiffs (Calva and Chase) brought an action against Security Pacific National Bank (Security Pacific) and other named and unnamed defendants for damages for conversion of 900 head ¹ of plaintiffs' cattle.

The trial court granted Security Pacific's motion for a summary judgment and plaintiffs appeal from the ensuing judgment. The principle issue concerns the constitutionality of Civil Code section 2980.5 requiring the recordation of bailment and feeding contracts for dairy cattle.

The record on appeal reveals the following facts:

Early in 1972 Evan and Janice Tiss, owners of Tiss Farms, ² applied to Security Pacific for a loan to finance the purchase of day-old dairy calves to be raised by them for sale as replacement animals for dairy herds. The Tisses originally applied for a $5,000 line of credit which was gradually increased to $40,000 as they built up their herd. As collateral for the loan, the Tisses executed a security agreement encumbering their livestock and farming equipment. The agreement specifically included "(a)ll livestock now owned or hereafter acquired by Debtor including but not limited to those located on the Tiss Ranch, 36980 Los Alamos Rd. Murrieta, Calif. (Riverside County) including that certain herd of 25 cattle and all increases thereof." Evan Tiss and Security Pacific also executed a financing statement specifically covering all livestock then owned or thereafter to be acquired by Tiss. The financing statement was duly filed with the Secretary of State pursuant to the California Uniform Commercial Code.

In early 1973 Calva, a corporation engaged in calf raising, entered into a letter agreement with Tiss Farms under which the Tisses would raise calves for Calva for a fixed fee for each animal. ³ The calves were purchased by one of Calva's purchasing agents, delivered to Tiss Farms to be raised, and picked up by Calva when they had reached an agreed-upon weight. At approximately the same time, Chase, a corporation engaged in the dairy business and in raising dairy cattle, began similar business dealings with Tiss. As explained in a deposition by Glyn Sunley Chase, Jr., President of Chase, "(o)ur deal with him was us buying-he would buy calves for us and we have the choice of either paying him or paying the people he bought them from. Then he would raise them and then we would pay him a certain price for them. I believe it was 175 to 200 pounds." Chase and Tiss entered a written agreement setting out the terms of their contract. ⁴ Neither Calva In July of 1973, Security Pacific learned from Wells Fargo Bank that approximately 340 of the 650 calves on the Tiss property were actually owned by the Tule Cattle Company. When confronted with this knowledge, Evan Tiss admitted that he had misrepresented the size of his herd and that Tule Cattle Company did own the 340 calves. Because of the misrepresentation, the fact that the collateral had been rendered inadequate as a result of its discovery, and concern about the possibility that Tiss would improperly care for the remaining herd or abandon his operation, Security Pacific decided to call in its loan immediately, and to take possession of the cattle and liquidate the herd if payment were not forthcoming.

nor Chase recorded the agreements with Tiss.

Security Pacific experienced some difficulty in selling the calves on the market because of their condition. On July 19, 1973, it sold the herd to Tule Cattle Company for $17,500. A balance of $22,500 remains owing on the Tiss loan. Sometime during the sale period, either just before or just after the sale to Tule Cattle Company, both Calva and Chase contacted Security Pacific to inform the bank that they owned cattle on the Tiss property.

Calva and Chase brought the instant action for conversion of the herd left on the Tiss property. Security Pacific moved for summary judgment supported by a number of documents-declarations by two bank officials and the bank's attorney and documents supporting these declarations including the depositions of the presidents of both Calva and Chase and the written agreements between Calva and Tiss, and Chase and Tiss. In its points and authorities, Security Pacific argued that the facts were undisputed that both Calva and Chase had cattle on the Tiss property pursuant to contracts for the feeding of dairy cattle, that the contracts had not been recorded, and that consequently Security Pacific's interest in the cattle as a bona fide encumbrancer prevailed over Calva's and Chase's ownership interest in the cattle under Civil Code section 2980.5. ⁵ Plaintiffs presented counterdeclarations Plaintiffs raise two contentions on appeal. First, they maintain that the trial court erred in granting summary judgment because there were justiciable issues of fact. Second, they contend that Civil Code section 2980.5 as applied to them results in an unconstitutional denial of due process. We have concluded that plaintiffs' contentions lack merit and that the judgment should be affirmed.

and argued that triable issues of fact existed which precluded the granting of summary judgment on their suit. The motion was granted and judgment entered for defendant.

I SUMMARY JUDGMENT

A motion for summary judgment should be granted only if all the admissible evidence contained in the declarations submitted by the parties shows that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ.Proc., § 437c; Blair v. Pitchess, 5 Cal.3d 258, 285, 96 Cal.Rptr. 42, 486 P.2d 1242; Black v. Sullivan, 48 Cal.App.3d 557, 567, 122 Cal.Rptr. 119; Daugherty Co. v. Kimberly-Clark Corp., 14 Cal.App.3d 151, 154, 92 Cal.Rptr. 120.) If there is a single material factual issue, the motion for summary judgment must be denied. (Walsh v. Walsh, 18 Cal.2d 439, 441, 116 P.2d 62.) Affidavits of the party moving for a summary judgment are to be strictly construed, while the counteraffidavits of his opponent are to be liberally construed; all doubts as to the propriety of granting the motion are to be decided in favor of the party opposing the motion. (E. g., Corwin v. Los Angeles Newspaper Service Bureau, Inc., 4 Cal.3d 842, 851, 94 Cal.Rptr. 785, 484 P.2d 953; Slobojan v. Western Travelers Life Ins. Co., 70 Cal.2d 432, 436-437, 74 Cal.Rptr. 895, 450 P.2d 271; Loree v. Robert F. Driver Co., 87 Cal.App.3d 1032, 1035, 151 Cal.Rptr. 557.)

In the instant case, plaintiffs point to two questions of fact which they maintain give rise to triable issues of material fact. First, they contend that Chase, since it arguably purchased the calves from Tiss which it contracted with Tiss to feed, was in a buyer-seller relationship with Tiss and thus not subject to the tenets of Civil Code section 2980.5. Second, they argue that since Security Pacific arguably had actual notice of their ownership interest after its discovery of Tiss' misrepresentation concerning the Tule Cattle Company calves and before sale of the remaining calves in the Tiss herd, it was not a bona fide encumbrancer entitled to take priority over their interest. Neither of these questions raises a material justiciable issue of fact.

Turning first to the issue of the nature of Chase's relationship to Tiss, whether Tiss sold the calves to Chase at some point or acted as Chase's agent in purchasing calves for it is irrelevant. If Tiss was Chase's agent, so that Chase had title to the calves from the time they were in Tiss' possession until Chase sold the cows, then the agreement between Tiss and Chase was clearly for "feeding of cattle" pursuant to Civil Code section 2980.5, subdivision (a), so that failure to record the agreement pursuant to subdivision (b) rendered the calves subject to Security Pacific's prior perfected interest pursuant to subdivision (c). If Tiss sold the calves to Chase when they were brought onto the Tiss property, so that Chase held title to the calves while Tiss was feeding them, then the agreement between Chase and Tiss was still clearly for "feeding of cattle" under the provisions of Civil Code section 2980.5. Finally, if Tiss sold Chase calves when they had been raised to a certain weight and were received by Chase for use in its operations or for further marketing, then the calves on the Tiss property at the time of Security Pacific's sale had not yet been received by Chase and were still Tiss' property and as such subject to Security Pacific's security interest in Tiss' livestock. Thus, under any of the possible interpretations of the agreement between Tiss and Chase, no justiciable issue of fact was presented.

The contention that Security Pacific's actual knowledge of plaintiffs' ownership interest in the Tiss herd at or about the time the bank foreclosed on its security presented a triable material issue is likewise without merit. Plaintiffs contend that they apprised Security Pacific of their ownership interest on the day before the bank liquidated the herd to satisfy the Tiss debt. Under the requirements of Civil Code section 2980.5, subdivisions (b) and (c), however, Security Pacific's security in the Tiss herd would not be defeated by actual knowledge of another ownership interest in the herd unless that knowledge preceded its acquisition of a security interest in the herd. Plaintiffs made no showing that Security Pacific had notice of their ownership interest before it acquired a security interest in the calves. Consequently, that Security Pacific may have received...