Melcher v. Bank of Madison, A-93-670

• Decision Date: 11 April 1995
• Docket Number: No. A-93-670,A-93-670
• Citation: 3 Neb.App. 665,529 N.W.2d 814
• Parties: , 27 UCC Rep.Serv.2d 1422 Ervin MELCHER, Appellee, v. The BANK OF MADISON, Appellant.
• Court: Nebraska Court of Appeals

Page 814

529 N.W.2d 814

3 Neb.App. 665, 27 UCC Rep.Serv.2d 1422

Ervin MELCHER, Appellee, v. The BANK OF MADISON, Appellant.

No. A-93-670.

Court of Appeals of Nebraska.

April 11, 1995.

Syllabus by the Court

1. Directed Verdict: Appeal and Error. A trial court may sustain a motion for a directed verdict or a motion for judgment notwithstanding the verdict only where reasonable minds cannot differ and can draw but one conclusion from the evidence, and the issue should be decided as a matter of law; if there is any evidence which will sustain a finding for the party against whom the motion for directed verdict is made, the case may not be decided as a matter of law.

2. Verdicts: Appeal and Error. A jury verdict will not be disturbed on appeal unless it is clearly wrong.

3. Appeal and Error. As to questions of law, an appellate court has an obligation to reach a conclusion independent from a trial court's conclusion in a judgment under review.

4. Torts: Conversion: Property: Words and Phrases. The term "tortious conversion" means any distinct act of dominion wrongfully asserted over another's property in denial of or inconsistent with that person's rights. In order for the cause of action to arise, the tort-feasor must have assumed and exercised the right of ownership over goods or chattels belonging to another.

5. Torts: Conversion: Property: Proof. A plaintiff who asserts that a defendant has tortiously converted plaintiff's property generally must prove that (1) plaintiff has an immediate right to possession of the subject property, and (2) defendant wrongfully possesses such property.

6. Taxation: Property. Factors pertinent to determination of ownership for tax purposes include whether legal title passes; the manner in which the parties treat the transaction; whether the purchaser acquired any equity in the property; whether the purchaser has any control over the property and, if so, the extent of such control; whether the purchaser bears the risk of loss or damage to the property; and whether the purchaser will receive any benefit from the operation or disposition of the property.

7. Replevin. The purpose of a replevin action is primarily to adjudicate the right of possession of property.

8. Pleadings. Where a defendant is in default the allegations of the petition are to be taken as true against him.

9. Contracts: Consideration. Consideration is sufficient to support a contract if there is any detriment to the promisee or benefit to the promisor.

10. Contracts: Consideration. Generally, a court will not inquire into the adequacy of consideration for a contract, inasmuch as consideration based on value of property or performance of a promise is a matter of personal judgment by parties to a contract.

11. Contracts: Consideration. Ordinarily, a contract will not be held invalid for inadequacy of consideration alone, unless inadequacy is so great as to furnish of itself evidence of fraud.

12. Property: Sales: Consideration. A sale of property ordinarily occurs upon a transmutation of property from one person to another in consideration of some price or recompense in value.

13. Uniform Commercial Code: Security Interests. The purchase money priority is an exception to the first-to-file rule, and it should be applied only in accordance with the limitations established by the Uniform Commercial Code.

14. Security Interests. To effect perfection by possession, possession must be unequivocal, absolute, and notorious, so that third persons may be advised.

Daniel A. Fullner, of Moyer, Moyer, Egley, Fullner & Warnemunde, Madison, for appellant.

Vince Kirby, Norfolk, for appellee.

SIEVERS, C.J., MILLER-LERMAN, J., and HOWARD, District Judge, Retired.

MILLER-LERMAN, Judge.

The Bank of Madison appeals the judgment entered against it by the district court for Madison County, Nebraska, following a trial to a jury. By its verdict, the jury found that The Bank of Madison had wrongfully converted a John Deere model 4450 tractor allegedly owned by Ervin Melcher, plaintiff-appellee, and awarded damages to him in the amount of $28,000. For the reasons recited below, we reverse.

FACTS

This case involves the resolution of various conflicting ownership interests in a John Deere model 4450 tractor (the 4450 tractor). The persons and entity involved are Ervin Melcher (Ervin); Donald Melcher (Don), Ervin's 37-year-old son and a former part-time In April 1979, by virtue of a document entitled "Financing Statement," Don granted the Bank

grain farmer with 6 acres of his own and approximately 160 acres leased from Ervin; and The Bank of Madison (the Bank).

a security interest in the following collateral, whether now owned or hereafter acquired by the debtor; all equipment, including but not limited to all farm equipment, tractors, machinery and implements: all farm products, including but not limited to crops, livestock, and supplies used or produced in farming operations; all contract rights and accounts; and in additions, accessions and substitutions thereto; and all products and proceeds thereof.

The security agreement underlying the original 1979 security interest evidenced by the above-referenced financing statement is not part of the record in front of this court. The security interest in Don's property secured Don's present and future indebtedness to the Bank. The Bank perfected its security interest in the above-described property by filing the Uniform Commercial Code financing statement on May 1, 1979. By filing the necessary continuation financing statements, the Bank held a perfected security interest in all of Don's farm property and equipment throughout the period in question in this case.

The testimony shows that at least since early 1986, Don had been having frequent mechanical difficulties with his John Deere model 4430 tractor (the 4430 tractor). Consequently, Don had been looking at the 4450 tractor at C.C. Implement, Inc. (C.C.), and had even taken it home to his farm to try it out. Don returned the 4450 tractor to C.C. after deciding it was out of his price range.

At Don's request to him to "go out and trade [the 4430 tractor] for that [4450] tractor," Ervin went to C.C. on June 9, 1986, and traded the 4430 tractor toward the $40,357.50 total purchase price of the 4450 tractor. The sales contract between C.C. and Ervin for the 4450 tractor reflects that C.C. gave a $15,000 credit for the trade-in of Don's 4430 tractor, less the $7,693 balance due on the 4430 tractor. Ervin also tendered $5,000 in cash toward the purchase of the 4450 tractor. The balance due on the 4450 tractor, after subtracting the $5,000 cash payment and the trade-in value of the 4430 tractor, less balance due, equaled $28,050.50. According to Ervin's testimony, he paid off the balance due on the 4450 tractor soon after the purchase. After the purchase of the tractor, Ervin directed Tim Tighe, vice president of the Bank, to prepare a promissory note from Don in favor of Ervin in the amount of $28,000. Tighe testified that Ervin indicated to him that Don was the owner of the 4450 tractor, that Ervin had loaned Don the money to purchase the tractor, and that the purpose of the note was to evidence and document such loan. Pursuant to Ervin's instructions, the note carried interest at the rate of 8 percent, called for one $5,000 payment, and extended for a term of 1 year. The 4450 tractor did not serve as security for the note. Don executed the note at Ervin's request. Ervin testified that the parties executed identical notes for the years 1988 through 1991. Each of the notes included the notation "loan to purchase John Deere 4450 MFWD tractor."

Ervin and Don both testified that Don never paid Ervin any money toward the satisfaction of the notes. However, the record indicates that the testimony in this regard may not be completely accurate. Exhibit 49, a commercial lending agreement, reflects that Don obtained a $5,000 loan from the Bank on February 17, 1987. According to the language of Exhibit 49, the purpose of the loan was "Business: First payment on John Deere 4450 MFWD tractor." Also on February 17, Don wrote a check to Ervin in the amount of $5,000. The memo on the check notes "4430 last payment."

Don's testimony with respect to the February 17 loan and check to Ervin was inconsistent. First, Don testified that he did not know if he had borrowed the money to pay Ervin. Thereafter, Don testified that the purpose of the loan was to make the final payment on the 4430 tractor. Notwithstanding Don's explanation, it is undisputed that the 4430 tractor had been traded in and paid off 8 months prior to the date of the loan, and it would appear logical that the purpose of the $5,000 loan to Don was to permit Don Ervin testified that he had possession of the 4450 tractor from the time of its purchase until it was seized and sold in 1992. However, the record indicates that after the purchase of the 4450 tractor on June 9, 1986, C.C. delivered it directly to Don's farm. Ervin also testified that all of the members of the Melcher family used the tractor whenever they needed it. It is clear from the record that Don used the 4450 tractor in his farming operations from 1986 through 1992. Additionally, Don and Ervin agreed that Don would be responsible for all necessary repairs on the 4450 tractor.

to make the one-time $5,000 payment to Ervin as required by the promissory note executed in connection with the 4450 tractor.

Rodney Zwygart, a certified public accountant who prepared the income tax returns for both Ervin and Don for the years in question, testified that Don deducted the depreciation generated by the 4450 tractor on his tax returns for 1986 and subsequent years. Ervin never claimed any depreciation for the 4450 tractor. Zwygart testified that prior to March 1, 1987, Ervin explained to him that Don would take the entire depreciation deduction for the 4450 tractor because Ervin had previously sold the 4450 tractor...