Daniel v. Stevens

• Citation: 183 W.Va. 95,394 S.E.2d 79
• Decision Date: 18 May 1990
• Docket Number: No. 19042,19042
• Court: West Virginia Supreme Court
• Parties: , 12 UCC Rep.Serv.2d 854, 9 A.L.R.5th 1153 E. Byrd DANIEL v. Cecil D. STEVENS and the Guaranty National Bank, a National Bank Association.

Page 79

394 S.E.2d 79

183 W.Va. 95, 12 UCC Rep.Serv.2d 854,

9 A.L.R.5th 1153

E. Byrd DANIEL v. Cecil D. STEVENS and the Guaranty National Bank, a National Bank Association.

No. 19042.

Supreme Court of Appeals of West Virginia.

May 18, 1990.

Syllabus by the Court

1. "It is essential to an estoppel by conduct that the party claiming to have been influenced by the conduct of another should not only be destitute of information as to the matter to which such conduct relates, but also without convenient and available means of acquiring such information." Syl. pt. 5, Atkinson v. Plum, 50 W.Va. 104, 40 S.E. 587 (1901).

2. Equitable estoppel is not a legally cognizable defense to avoid a prior perfected security interest in collateral, where the subsequent creditor or purchaser claims the equitable estoppel based upon an alleged representation by the prior secured party that its security interest had been terminated or released, but where the subsequent creditor or purchaser has not utilized available and convenient means of assuring priority, specifically, waiting until after a termination statement or a written release has been filed, pursuant to W.Va.Code, 46-9-404, as amended, or W.Va.Code, 46-9-406, as amended, respectively, before acquiring an interest in the collateral from the debtor.

3. The husband's signature on the financing statement as a "debtor" is sufficient notice to interested persons that the secured party has a valid security interest in the listed collateral to the extent of the husband's ownership interest therein, even if the wife is a co-owner of the collateral and a co-debtor and she has not signed the financing statement. In those circumstances interested persons cannot successfully claim the total invalidity of the security interest based upon the allegation or the fact that the wife did not sign the financing statement as another "debtor," as required by W.Va.Code, 46-9-402(1), as amended.

4. Notice of a written motion in limine presented during a hearing or trial need not be served in accordance with Rule 6(d) of the West Virginia Rules of Civil Procedure.

5. " 'A movant is entitled to summary judgment where the facts established show a right to judgment with such clarity as to leave no room for controversy and show affirmatively that the adverse party cannot prevail under any circumstances.' Hanks v. Beckley Newspapers Corporation, 153 W.Va. 834 [, 837, 172 S.E.2d 816, 818] (1970)." Syl. pt. 1, George v. Blosser, 157 W.Va. 811, 204 S.E.2d 567 (1974).

Paul A. Ryker, Huntington, for E. Byrd Daniel.

Richard Mills, Rood & Mills, Huntington, for Cecil D. Stevens.

John R. Cyrus, Lockwood, Egnor, Gardner & Cyrus, Huntington, for Guaranty National Bank. McHUGH, Justice:

This appeal involves the enforceability of a security interest in certain collateral, where the filing and other requirements of the Uniform Commercial Code for perfecting the security interest have been met, at least as to one debtor, but where the buyer claims that the secured party has told the buyer that the security interest in the collateral has been "released" prior to the purchase of the collateral by the buyer from the debtor. ¹ Agreeing with the Circuit Court of Cabell County, West Virginia, that there is no genuine issue as to any material fact and that the bank as the secured party is entitled to a judgment as a matter of law, we affirm the entry of summary judgment in favor of the bank and reject the equitable estoppel argument and the other arguments of the appellant as the buyer, for the reasons stated herein.

I

One of the appellees, Cecil D. Stevens ("the debtor") owned a certain forty-two-foot houseboat. The debtor had obtained loans from the other appellee, The Guaranty National Bank, of Huntington, West Virginia ("the bank" or "the secured party"), beginning in 1971. In 1983 the bank consolidated and refinanced the debtor's outstanding loans into one loan in the amount of $163,000.00. That loan was evidenced by, among other things, a security agreement, signed by the debtor, dated November 3, 1983, with the houseboat as collateral. A financing statement listing the houseboat as collateral had been filed previously, on July 7, 1983, in the office of the Clerk of the County Commission of Cabell County, West Virginia, and in the office of the Secretary of State of the State of West Virginia. ² The delay from July, 1983, when the financing statement was filed, to November, 1983, when the security agreement was signed, was caused by the debtor's lengthy delay in signing the security agreement. ³

The debtor sold the houseboat nearly four years later, on September 10, 1987, to the appellant, E. Byrd Daniel, for $28,000.00. The debtor had told the appellant about the bank's "lien" against the houseboat prior to the sale. Moreover, at the time of the sale the aforementioned financing statement listing the houseboat as collateral was duly of record in the aforestated two offices, and was still effective under W.Va.Code, 46-9-403(2) [1974], which provides that a filed financing statement is effective for a period of five years from the date of filing, here, five years after July 7, 1983. ⁴ No termination statement had been filed. Such a statement would have shown that the bank as the secured party no longer claimed a security interest under the financing statement. See W.Va.Code, 46-9-404(1) [1974]. ⁵

According to the depositions, the appellant claims that the bank's loan officer had told the appellant over the telephone in late August, 1987, prior to the sale of the houseboat by the debtor to the appellant in September, 1987, that although there had been a "lien" on the boat in favor of the bank, it had been "released." The bank's loan officer in his deposition denied making this statement.

The appellant admits that he did not search the records of the aforestated two offices to confirm the alleged oral statement of the bank's loan officer that the security interest had been "released," i.e., that a termination statement or a written release had been filed. Instead, the appellant claims he was entitled to rely upon such oral statement.

The appellant brought a declaratory judgment action to determine the validity and enforceability of the bank's security interest in the houseboat. On the day of the scheduled trial and immediately prior to the start thereof, the bank presented a written motion in limine to prevent the appellant from introducing evidence of the purported oral statement by the bank's loan officer that the security interest had been "released." The trial court (the Circuit Court of Cabell County) agreed with the bank that such evidence, even if found to be true, would be insufficient as a matter of law to estop the bank from enforcing its security interest. The trial court therefore granted the bank's motion in limine. Upon the appellant's request, the trial court considered its ruling to be the equivalent of granting a motion for an appealable partial summary judgment to the bank. ⁶

II

The appellant argues that the trial court improperly entered summary judgment for the bank because the alleged oral statement by the bank's loan officer that the security interest had been "released," if assumed to be true for purposes of the pretrial motion, was the type of matter upon which the appellant was entitled to rely and would, therefore, equitably estop the bank from enforcing the security interest in the houseboat. We disagree.

At the outset it is significant to state two fundamental provisions of article 9 of the Uniform Commercial Code, on "Secured Transactions," as adopted in this state, with respect to the priority in a conflict between a perfected secured creditor and a subsequent purchaser of the collateral from the debtor. ⁷ First, W.Va.Code, 46-9-306(2) [1974] provides: "Except where this article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor." In the present case the security agreement proscribed the sale of the houseboat without the prior written consent of the bank as the secured party. The bank did not give such written consent, and nothing in the record indicates that the bank otherwise authorized the sale. ⁸ Second, even when the secured party does not authorize the sale or other disposition of the collateral, W.Va.Code, 46-9-307(2) [1987] provides:

In the case of consumer goods [in the hands of the seller], a buyer takes free of a security interest even though perfected [without filing, such as a purchase money security interest,] if he [or she] buys without [actual] knowledge of the security interest, for value and for his [or her] own personal, family or household purposes unless prior to the purchase the secured party has filed a financing statement covering such goods.

(emphasis added) Here the appellant admits having actual knowledge of the security interest in the houseboat prior to his purchasing the same, and the bank as the secured party had filed a financing statement covering the houseboat. Therefore, unless the bank is equitably estopped from enforcing its security interest in the houseboat against the appellant, the bank has priority over the appellant as to the houseboat. See 9 R. Anderson, Anderson on the Uniform Commercial Code §§ 9-307:18, 9-307:21 (3d ed. 1985). ⁹

The Court enunciated the elements of equitable estoppel in syllabus point 6 of Stuart v. Lake Washington Realty Corp., 141 W.Va. 627, 92 S.E.2d 891 (1956):

The general rule governing the doctrine of equitable estoppel is that in order to constitute equitable estoppel or estoppel in pais there must exist a false representation or a concealment of material facts; it must have been made with knowledge, actual or constructive of...