Farm Credit Services of the Midlands, PCA v. First State Bank of Newcastle, Wyoming, No. 20094

• Court: Supreme Court of South Dakota
• Writing for the Court: SABERS
• Citation: 1998 SD 13,575 N.W.2d 250,35 UCCRep.Serv.2d 324
• Parties: 35 UCC Rep.Serv.2d 324, 1998 SD 13 FARM CREDIT SERVICES OF THE MIDLANDS, PCA, Plaintiff and Appellant, v. FIRST STATE BANK OF NEWCASTLE, WYOMING, Defendant and Appellee, and Kathleen Reynolds; and Rasmussen Motors, Defendants. . Considered on Briefs
• Decision Date: 14 January 1998
• Docket Number: No. 20094

Page 250

575 N.W.2d 250 35 UCC Rep.Serv.2d 324, 1998 SD 13 FARM CREDIT SERVICES OF THE MIDLANDS, PCA, Plaintiff and Appellant,
v.
FIRST STATE BANK OF NEWCASTLE, WYOMING, Defendant and Appellee,
and
Kathleen Reynolds; and Rasmussen Motors, Defendants. No. 20094. Supreme Court of South Dakota. Considered on Briefs Jan. 14, 1998.
Decided Feb. 18, 1998.
Rehearing Denied March 30, 1998.

Brent A. Wilbur of May, Adam, Gerdes & Thompson, Pierre, for plaintiff and appellant.

Todd D. Hauge of Bakewell, Hauge & Vander Heide, Custer, for defendant and appellee.

SABERS, Justice

¶1Trial court granted summary judgment to defendant bank, ruling that its unperfected purchase money security interest took priority over plaintiff creditor's unperfected security interest. We affirm.

FACTS

¶2During the 1990's, Chance and Neteri Reynolds (hereinafter "Debtor") obtained various loans from Farm Credit Services of the Midlands (Farm Credit) and First State Bank of Newcastle, Wyoming (Bank). On March 21, 1995, Debtor executed a security agreement in favor of Bank. The agreement specifically describes two 1995 Dodge pickup trucks by their vehicle identification numbers. In return, Bank loaned Debtor the money for the purchase of the two trucks.

¶3Approximately two years earlier, Debtor executed a security agreement in Farm Credit's favor, giving Farm Credit a security interest in various collateral, including accounts, livestock, equipment, and certain titled motor vehicles. Although the 1995 Dodge trucks were not described in the agreement, it stated that Farm Credit's security interest would attach to after-acquired property. Neither Bank nor Farm Credit perfected their security interests in the trucks by noting their liens on the certificates of title.

¶4In March of 1996, Debtor defaulted on its loans with both Bank and Farm Credit. Farm Credit brought a declaratory action to determine the rights of the parties to various items of collateral. The two trucks were eventually sold at public auction by a receiver appointed by the trial court. This dispute centers upon the proper distribution of the proceeds of that sale. The trial court granted summary judgment to Bank and Farm Credit appeals.

¶5.STANDARD OF REVIEW

¶6This appeal requires us to examine the statutes governing secured transactions. Questions of statutory interpretation require de novo review. Maynard v. Heeren, 1997 SD 60, p 5, 563 N.W.2d 830, 833. Since there are no factual issues in this case, summary judgment will be affirmed if the trial court correctly decided the legal issue presented. Weiss v. Van Norman, 1997 SD 40, p 9, 562 N.W.2d 113, 115 (citations omitted).

¶7.WHETHER FARM CREDIT'S SECURITY INTEREST ATTACHED TO THESE TRUCKS.

¶8The parties concede that neither perfected their security interests in the trucks by placing a lien on the titles in accordance with SDCL 32-3-38. A lien on a motor vehicle is not valid against subsequent lien holders or claimants in the absence of a notation of the lien on the certificate of title.

Page 252

SDCL 32-3-41; ¹ see also SDCL 57A-9-302(3)(b) & (4):

(3) The filing of a financing statement otherwise required by this chapter is not necessary or effective to perfect a security interest in property subject to:

...

(b) a certificate of title statute of this state under the law of which indication of a security interest on the certificate of title is required as a condition of perfection; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of this chapter (Part 4) apply to a security interest in that collateral created by him as debtor. ²

...

(4) Compliance with a statute or treaty described in subsection (3) is equivalent to the filing of a financing statement under this chapter, and a security interest in property subject to the statute or treaty can be perfected only by compliance therewith[.]

(Emphasis added); accord Pokela v. Dakotas United Methodist Fed. Credit Union (In re Huyck), 167 B.R. 908, 910 (Bankr.D.S.D.1994).

¶9Article 9 of the Uniform Commercial Code, codified at SDCL ch. 57A-9, governs secured transactions. See SDCL 57A-9-302(4) ("Duration and renewal of perfection of a security interest perfected by compliance with the statute or treaty are governed by the provisions of the statute or treaty; in other respects the security interest is subject to this chapter.") (emphasis added).

¶10Since both security interests are unperfected, "the first to attach has priority." SDCL 57A-9-312(5)(b). ³ Both parties claim that their security interests in the trucks "attached" simultaneously and argue equitable principles to enforce their respective interests. ⁴ We disagree, and affirm because we conclude that Farm Credit's security interest never...