Cub Cadet Corp. v. Mopec, Inc.

• Decision Date: 28 May 2002
• Docket Number: No. WD 59963.,WD 59963.
• Citation: 78 S.W.3d 205
• Parties: CUB CADET CORPORATION, an Ohio Corporation, Appellant, v. MOPEC, INC., a Missouri Corporation, d/b/a Martin Equipment, E. Russell Martin, Sr., Estate, E. Russell Martin, Jr., Conservator, and Shirley Martin, Individually and as Guardian for the Estate of E. Russell Martin, Sr., Respondents.
• Court: Missouri Court of Appeals

78 S.W.3d 205

CUB CADET CORPORATION, an Ohio Corporation, Appellant, v. MOPEC, INC., a Missouri Corporation, d/b/a Martin Equipment, E. Russell Martin, Sr., Estate, E. Russell Martin, Jr., Conservator, and Shirley Martin, Individually and as Guardian for the Estate of E. Russell Martin, Sr., Respondents.

No. WD 59963.

Missouri Court of Appeals, Western District.

May 28, 2002.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 2, 2002.

COPYRIGHT MATERIAL OMITTED

Richard M. Beheler, Kansas City, for Appellant.

Leonard K. Breon, Warrensburg, for Estate of E. Russell Martin, Sr.

Robert M. Liston, Sedalia, for Mopec, Inc., and Shirley Martin.

Before ELLIS, P.J., and EDWIN H. SMITH and HOWARD, JJ.

VICTOR C. HOWARD, Judge.

Cub Cadet Corporation filed suit seeking a deficiency judgment and fraud damages against Mopec Corporation and its principals/guarantors, Russell and Shirley Martin,¹ after Cub Cadet repossessed and sold Mopec's inventory of outdoor equipment that was supplied by Cub Cadet. Relying on the Southern District's opinion in Textron Financial Corp. v. Trailiner Corp., 965 S.W.2d 426, 431-32 (Mo.App S.D.1998), motion for rehearing and application for transfer denied, the trial court held that Cub Cadet's failure to plead proper notice of sale under section 400-9.504(3) RSMo 2000² precluded admission of evidence to prove notice was given. Without this evidence of notice, Cub Cadet could not prove compliance with section 400.9-504(3), so it could not recover a deficiency judgment against Mopec.

Cub Cadet appeals from the trial court's judgment, alleging, among other things, that the holding in Textron is wrong, and the trial court erred in barring all recovery due to Cub Cadet's failure to plead notice.³

For the following reasons, we affirm.

Background

The issue on appeal concerns a pleading requirement. Thus, we provide only a brief background below. Additional facts will be included in our discussion of the issue on appeal where necessary.

On April 14, 1994, Cub Cadet and Mopec entered into an agreement under which Cub Cadet agreed to supply an inventory of outdoor power equipment to Mopec, subject to Cub Cadet's security interest in the inventory.⁴ The agreement provided that, upon sale of an inventory item, Mopec would remit the item's wholesale price to Cub Cadet.

In August of 1994, Cub Cadet audited its inventory at Mopec and discovered discrepancies. Although the parties attempted to remedy the discrepancies, subsequent audits by Cub Cadet revealed further discrepancies. Thus, Cub Cadet removed its remaining inventory from Mopec's business premises. In November of 1994, Cub Cadet demanded that Mopec pay the balance due, which at the time was approximately $137,000. Cub Cadet's efforts to collect from Mopec were unsuccessful, and it eventually sold the remaining items of inventory that it had taken from Mopec's premises.

Cub Cadet then filed suit against Mopec, in which Cub Cadet sought to recover the money due it. When this case was finally tried to the court on August 30, 2000, it was on Cub Cadet's amended petition, which was filed on the morning of trial. As set forth above, the trial court entered judgment for Mopec. This appeal follows.

Standard of Review

Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976) governs our review of this court-tried case. Commerce Bank, N.A. v. Dooling, 875 S.W.2d 943, 945 (Mo. App. E.D.1994). We will uphold the trial court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. at 945-46. We view the evidence and all reasonable inferences therefrom in a light most favorable to the judgment and disregard all contrary evidence. Id. at 946.

Discussion

Cub Cadet's point on appeal concerns the trial court's reliance upon the Southern District's holding in Textron as barring recovery of a deficiency judgment because of Cub Cadet's failure to plead notice. Cub Cadet maintains that the Textron holding is wrong and should not be followed, "in that neither section 400.9-504 nor the Missouri common law require that notice be pled in order to state a breach of contract/guaranty claim."

Applicability of the UCC: We first address Cub Cadet's argument in its reply brief that its cause of action is not "a `deficiency judgment' claim dependent solely on the provisions of the Missouri Commercial Code as the basis for the cause of action." Cub Cadet maintains that its claim "is simply a breach of contract/guaranty action on the underlying agreement entered between them on April 14, 1994.... In Missouri, the elements of a breach of contract action where the existence of the contract is undisputed is breach and damages. This was pled by Cub Cadet." (Citations omitted.) Specifically, Cub Cadet attempts to skirt UCC requirements — in particular, the notice pleading requirements under Article 9, section 400.9-504(3) as interpreted in Textron — by classifying its contract cause of action as being "subject to not based upon the provisions of the Commercial Code." (Cub Cadet's emphasis.) Cub Cadet maintains, without citation to relevant authority, that this is "a relevant distinction in determining whether Cub Cadet was required to plead facts showing compliance with the notice provisions of the Code." The purpose of such a distinction is unclear. If a claim is subject to the UCC,⁵ its applicable provisions cannot be avoided. Indeed, the UCC has not completely displaced the common law. Section 400.1-103 states that "[u]nless displaced by the particular provisions of this chapter, the principles of law and equity ... shall supplement [the Code's] provisions." (Emphasis added.) However, as emphasized, if a provision of the UCC applies that displaces the common law, the common law contrary to that provision cannot apply.

The transaction between the parties is a secured transaction under Article 9 of the UCC. Section 400.9-102 sets forth the relevant scope of Article 9:

(1) Except as otherwise provided in section 400.9-104 on excluded transactions (not applicable in this case) this article applies

(a) to any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel papers, or accounts.

Section 400.9-109(4) specifically defines the inventory that served as the collateral in the parties' secured transaction at issue as a class of "goods" covered under Article 9. Thus, section 400.9-504(3), which applies to Cub Cadet's disposal of the collateral after Mopec's default, is an applicable provision. The notice requirements thereunder could not be avoided by reference to the common law.

Moreover, Cub Cadet acknowledges the applicability of section 400.9-504(3) in its argument. It argues that the holding in Textron concerning the notice pleading requirements under section 400.9-504(3) is wrong because other states' interpretations of similar, if not identical, sections do not require that notice be pled. It does not argue that Textron's holding is inapplicable. In reading the trial transcript, it is clear that at trial Cub Cadet sought recovery of a deficiency on the theory that the contract created a secured transaction governed by Article 9 of the UCC. It cannot now argue its inapplicability. Article 9 of the UCC is applicable to the transaction in question, and we disagree with Cub Cadet's arguments to the contrary.

Choice of Law: Cub Cadet also maintains that the contract indicates that because the parties agreed in their contract that Ohio law would apply and Ohio law does not require that notice be pled, we are bound to apply Ohio law. Section 400.1-105 allows that:

when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this chapter applies to transactions bearing an appropriate relation to this state.

We need not reach the application of section 400.1-105, because even assuming, arguendo, that section 400.1-105 allows for the application of Ohio law to the issue at hand, Cub Cadet never raised the issue of Ohio law being applicable at the trial level. In Cohen v. Ozark Airlines, Inc., 623 S.W.2d 84, 87 (Mo.App. E.D.1981), plaintiff argued that the trial court should have applied the law of another state in lieu of the law of Missouri. The Eastern District "view[ed] the requirement of Rule 55.21(b) that there be allegations `which show that the law of another state must be applied' as necessitating some sort of notice in this regard." Id. Because Cohen provided no notice to the trial court or the defendant, through pleading or otherwise, of his belief that another state's law applied, the Eastern District concluded that "the [trial] court should not be convicted of error on matters which were not brought to its attention. Plaintiff is not entitled to sit back in silence at the trial court level and pick and choose the law of other jurisdictions on appeal." Id. Thus, in accord with Cohen, "[w]ithout mining the depths of conflict laws, we find that the trial court properly applied Missouri law for the simple reason that it was never put on notice by [Cub Cadet] that the law of another state was applicable." Id. at 86.

Pleading Requirements Under Section 400.9-504(3): As previously mentioned, Cub Cadet filed an amended petition on the day of the trial. Count I of Cub Cadet's amended petition is entitled "Action on a Contract." In summary, Cub Cadet alleged in its amended petition as follows:

Cub Cadet entered into a contract with Mopec under which Mopec would sell Cub Cadet's outdoor power equipment. Mopec granted a security interest to Cub Cadet in the equipment inventory provided by Cub Cadet. The contract was terminated, and Cub...