Jones and Laughlin Supply v. Dugan Production Corp.

• Decision Date: 23 March 1973
• Docket Number: No. 1057,1057
• Citation: 1973 NMCA 50,85 N.M. 51,508 P.2d 1348
• Parties: , 12 UCC Rep.Serv. 362 JONES & LAUGHLIN SUPPLY, a division of Jones & Laughlin Steel Corporation, a Pennsylvania corporation, Plaintiff-Appellee, v. DUGAN PRODUCTION CORPORATION, d/b/a Potwin Supply Company, a New Mexico corporation, and George McDonald, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

Page 1348

508 P.2d 1348

85 N.M. 51, 12 UCC Rep.Serv. 362

JONES & LAUGHLIN SUPPLY, a division of Jones & Laughlin

Steel Corporation, a Pennsylvania corporation, Plaintiff-Appellee, v. DUGAN PRODUCTION CORPORATION, d/b/a Potwin Supply Company, a

New Mexico corporation, and George McDonald,

Defendants-Appellants.

No. 1057.

Court of Appeals of New Mexico.

March 23, 1973.

B. J. Baggett, Baggett & Baggett, Farmington, for defendant-appellants

Thomas J. Hynes, Farmington, for plaintiff-appellee.

OPINION

LOPEZ, Judge.

Plaintiff filed suit to replevy certain pieces of equipment which were bought at a sheriff's sale by the defendants. The case was tried by the court without a jury and the court awarded judgment in favor of the plaintiff on certain items of equipment, and granted judgment against the plaintiff on certain other pieces of equipment. The defendants appeal and the plaintiff cross-appeals.

We reverse on the defendant's appeal and we dismiss plaintiff's cross-appeal.

The issue are: (1) whether a Whealand rotary table and a Waukesha gasoline engine were included in a certain security agreement executed between Lucky Drilling Company as debtor and plaintiff as secured party and, therefore, whether the court erred in holding that these two items of equipment were subject to a replevin action by the plaintiff; (2) question of jurisdiction on cross-appeal.

(1) The court erred in granting judgment to plaintiff on the Whealand rotary table and the Waukesha gasoline engine.

The case arose out of a sheriff's sale in which certain pieces of equipment belonging to Lucky Drilling Company were sold to the defendants. At the sheriff's sale, Dugan Production Corporation d/b/a Potwin Supply Company (defendant) purchased the Whealand rotary table in question. The defendant, George McDonald, purchased the Waukesha gasoline engine. Prior to the sheriff's sale, Lucky Drilling Company mortgaged certain equipment to plaintiff and plaintiff took a security agreement and mortgage on March 31, 1970. A review of the record reveals that this security agreement, together with an unsigned financing statement with exhibits was filed on April 28, 1970 in the office of the County Clerk of San Juan County, New Mexico and on April 24, 1970 in the office of the New Mexico Secretary of State.

Examination of the transcript and the security agreements reveals that the two items in question were not specifically described in the security agreement or in the financing statement or in the exhibits. The exhibits do not list the items in question. The financing statement was not signed by the debtor or the secured party as required by § 50A--9--402, N.M.S.A.1953 (Repl.Vol. 8, pt. 1).

The financing statement contains the wording: '. . . all hand tools, drill collars, drill pipe, equipment, accessories, parts, exchanges, substitutions, additions, accretions, betterments, supplies and items that Debtor may now have or hereafter acquire and use with or as part of such collateral or in connection therewith.. . .' The financing statement further contains the wording: 'Debtor's seven complete rotary drilling rigs identified as No. 1 . . .' through 'No. 7 . . ., including all components as described on Exhibit 'A' and Exhibit 'B' attached hereto. . . .' This financing statement is not signed by the debtor or the mortgagee.

The security agreement which is signed by all the parties contains the wording: 'Debtor's seven rotary drilling rigs Nos. 1 thru 7 including all components as described on Exhibit 'A' (6 pages) and Exhibit 'B' (7 pages), both of which are attached hereto and made a part hereof by this reference, . . ., togehter with all hand tools, drill collars, drill pipe and together with all equipment, accessories, parts, exchanges, additions, betterments, and appliances that Debtor may hereafter acquire and use with or as a part of the above described goods. . . .' The security agreement does not contain the language 'equipment, parts, supplies and items which the Debtor may now have' as does the financing statement.

The undisputed testimony is that the Whealand rotary table in question had been bought with Rig No. 2 originally and prior to the giving of the security agreement had been replaced by a Brewster rotary table. The Whealand rotary table was returned to the parts inventory in the Bloomfield yard and never used again. The inventory mentioned in the Exhibits 'A' and 'B' lists the Brewster rotary table as a component part of Rig No. 2. In respect to the V--12 gasoline Waukesha engine, the testimony reveals that this engine was purchased with Rig No. 3 and later on was replaced by V--12 Waukesha diesel engine before the security agreement was executed. The inventory mentioned in the Exhibits 'A' and 'B' shows the V--12 diesel engine as a component of Rig No. 3 and not the engine in question.

Plaintiff would have the two disputed items included within the security agreement on the basis of the 'used with' language of the security agreement and on the basis of similar language included in certain of the exhibits referred to in the security agreement. This argument is without merit for two reasons. First, the 'used with' phrase in the security agreement applies only to after-acquired property and the disputed items are not in that category. Second, the 'used with' phrase in the exhibits applies only to rigs 4 through 7, and the evidence is undisputed that the disputed items were not used with those rigs. The disputed items cannot be included in the security agreement on the basis of 'used with' language in the security agreement or the exhibits.

The financing statement was not signed pursuant to the provisions of § 50A--9--402, supra. There is a conflict in the language of the security agreement and the financing statement. We follow the reasoning in the Anderson Uniform Commercial Code, Vol. 4 at 124 (2d Ed. 1971) referring to Uniform Commercial Code which states:

' § 9--110. Sufficiency of Description.

'. . .

' § 9--110:17.--Conflicting descriptions in security agreement and financing statement.

'When there is a conflict between the financing statement on file and the security agreement as to the property involved, the latter prevails for...