National Bank of Fulton County v. Haupricht Bros., Inc.

• Decision Date: 14 October 1988
• Docket Number: No. F-87-12,F-87-12
• Citation: 55 Ohio App.3d 249,564 N.E.2d 101
• Parties: , 14 UCC Rep.Serv.2d 215 NATIONAL BANK OF FULTON COUNTY, n.k.a. Toledo Trust Company, Appellee, v. HAUPRICHT BROTHERS, INC. et al., Appellants.
• Court: Ohio Court of Appeals

Page 249

55 Ohio App.3d 249

564 N.E.2d 101, 14 UCC Rep.Serv.2d 215

NATIONAL BANK OF FULTON COUNTY, n.k.a. Toledo Trust Company, Appellee, v. HAUPRICHT BROTHERS, INC. et al., Appellants.

No. F-87-12.

Court of Appeals of Ohio, Sixth District, Fulton County.

Oct. 14, 1988.

Syllabus by the Court

1. The function of a financing statement is to give notice to interested third parties that the person filing it may have a security interest in the property of the debtor named therein. As long as the financing statement gives such notice, the security interest continues perfected.

2. A financing statement is not sufficient to serve as a continuation statement, which, to be valid, must be signed by the secured party, identify the original statement by file number, and state that the original statement is still effective. (R.C. 1309.40[C], applied.)

3. The determination of whether a party is a secured party having a perfected security interest in particular collateral requires more than a review of the security interest. Inquiry as to the character and quality of the notice given by the financing statement becomes particularly important when a challenge is made to the sufficiency with which a debtor is designated in a security agreement.

4. When a third party challenges specificity in the security agreement, that party may succeed against the secured party only when it can prove that it in fact relied on misleading documents in concluding that no competing claim existed.

James E. Hensal, Archbold, for appellee.

Wilbur C. Jacobs, Toledo, for appellants.

PER CURIAM.

The record of this appeal documents a complex and complicated case involving several parties, judgments, and other cases, all of which are related to one another by one crop of seed corn processed in the fall of 1983. The seed corn was grown on premises farmed by defendants-appellants, Haupricht Brothers, Inc., Haupricht Brothers Partnership, and the principals of the corporation and partnership: Gene Haupricht, Arthur Haupricht, and Larry Haupricht. Plaintiff-appellee, Toledo Trust Company, gained actual possession of the corn in 1983 under a court order.

Appellee's possession of the seed corn grew out of the debtor-creditor relationship that exists between appellants and appellee. Appellee owns a note for $335,176 executed by appellants and secured by a mortgage (the "1982 Note"). Appellee was further secured by a security agreement (the "Security Agreement") executed in 1978 by appellee's predecessor in interest, the National Bank of Fulton County ("Fulton Bank"), and Haupricht Brothers, Inc. The Security Agreement memorialized, inter alia, a security interest in future crops. When appellants defaulted on their note with appellee, appellee instituted an action to replevy the seed corn, asserting that it was entitled to the seed corn by its security interest. The court rendered an emergency order granting possession and appellee arranged for the processing and sale of the corn. Upon selling the processed corn, appellee applied the proceeds totaling $60,878.25 toward appellants' debt.

After the corn was sold, appellee was sued by Garno Seed Company ("Garno") in the Federal District Court for the Southern District of Michigan. In this federal diversity action (the "Garno suit"), Garno alleged that appellee's possession of the seed corn was a wrongful taking as against Garno. According to Garno's allegations, it had a contractual right to the corn, and appellee had no security interest in the corn. In September 1985, this case was disposed of by consent judgment, wherein appellee was ordered to pay $30,000 to Garno.

During the spring of 1984, real estate and farm implements owned by appellants were liquidated and the funds were applied to satisfy appellants' debt on the defaulted note. By August 1985, appellants' debt had been reduced to $20,340.75. At that time, a sale of real estate and buildings owned by appellants raised $30,000. However, the proceeds were not applied to cancel appellants' outstanding balance; instead, they were escrowed in apparent contemplation of future litigation between appellee and appellants. Appellee soon thereafter instituted this action against appellants. Appellee essentially sued to recover two separate amounts of money. First, appellee sought the remaining $21,425.12 that appellants owed on the defaulted note. Second, appellee sought reimbursement for both the settlement amount paid to Garno and $19,194.39 in attorney fees paid to defend appellee against Garno.

Appellee moved for summary judgment as to the first amount and the trial court granted this motion. As to the second amount, the jury rendered a verdict in favor of appellee, determining that appellants owed appellee an additional $21,394.80. Accordingly, the trial court's judgment entry found that appellants owed appellee $42,819.92, plus interest at the rate of ten percent per annum from July 15, 1987. The trial court ordered that the escrowed fund, totaling $33,129.89, could be used as a setoff upon appellee's application for the money. Appellants thereafter timely filed their notice of appeal.

Several of appellants' nine assignments of error are closely related. Thus, they are combined for disposition. Specifically, appellants' fifth, sixth, seventh, and eighth assignments of error are considered together. Appellants' third and ninth assignments of error are also discussed together. Our grouping leaves appellants' first, second, and fourth assignments remaining and this decision begins by discussing them individually in that order. Following this, we consider appellants' fifth, sixth, seventh, and eighth assignments of error. Lastly, we address appellants' third and ninth assignments of error.

"Assignment of Error No. 1: The Court erred in refusing to strike the amended complaint herein for failure to follow court rules."

The trial court denied appellants' motion to strike an amended complaint filed by appellee. Under their first assignment of error, appellants contend that appellee's amended complaint "broke about every rule of proper procedure." Nevertheless, appellants fail to specify which rules were broken and upon review we are unable to make a reasonable guess as to their identity. The operative facts relevant to appellants' challenge are the same in the case sub judice as in countless other lawsuits. Upon appellee's request, the trial court granted leave to file an amended complaint. Accordingly, appellee filed its amended complaint. The facileness of this process is easily understandable since Civ.R. 15(A) directs trial courts to freely grant leave to amend complaints "when justice so requires." Because leave to amend is a matter for the discretion of the trial court, Dept. of Taxation v. Cemetery Mgt. Service Co. (1981), 2 Ohio App.3d 115, 117, 2 OBR 128, 130, 440 N.E.2d 1222, 1224, we will not disturb the trial court's decision absent an affirmative showing of abuse of discretion. See Solowitch v. Bennett (1982), 8 Ohio App.3d 115, 116, 8 OBR 169, 170, 456 N.E.2d 562, 564. Appellants do not make such an affirmative showing. Therefore, we conclude that appellants' first assignment of error is not well-taken.

"Assignment of Error No. 2: The Court erred in granting summary judgment to plaintiff on defendant's cross petition."

Appellee moved for summary judgment against appellants' counterclaim. The trial court granted appellee's motion and dismissed appellants' counterclaim, finding that there was no genuine issue of material fact and that appellee was entitled to judgment as a matter of law. Upon review, we affirm the summary judgment because appellants fail to articulate any reasons showing why it was error for the trial court to grant appellee's motion for summary judgment.

As a threshold matter under Civ.R. 56(C), summary judgment will not be granted until the movant sufficiently demonstrates the absence of any genuine issue of material fact. Once the initial burden of Civ.R. 56(C) is met, Civ.R. 56(E) acts to pierce the pleadings and force the non-moving party to demonstrate specific facts showing that there is a genuine issue for trial. Appellants advance no reason showing why this court should find that the trial court erred in determining that appellee satisfied the threshold showing required under Civ.R. 56(C), demonstrating that appellants' counterclaim raised no genuine issue of material fact. Furthermore, appellants make no showing that they presented to the trial court evidence sufficient under Civ.R. 56(E) to withstand a summary judgment. Based on appellants' failure to direct our attention to any evidence showing that the trial court erred in either determining that appellee satisfied the requirement of Civ.R. 56(C), or determining that appellants failed to make the showing required of nonmovants under Civ.R. 56(E), we find appellants' second assignment of error not well-taken.

"Assignment of Error No. 4: The Court erred in excluding evidence offered by defendant and objections to plaintiff's evidence."

Under their fourth assignment of error, appellants have the duty to direct the attention of this court to the specific evidence which appellants claim prejudiced them either in its admission or denial. Schumacher v. Smith (App.1951), 58 Ohio Law Abs. 321, 96 N.E.2d 433. Accordingly, appellants direct this court's attention to three pages of the transcript of proceedings. Our review finds that these three pages record two objections made by appellee during appellants' cross-examination of appellee's witness. Both objections were sustained. Apparently, appellants believe these rulings included improper and prejudicial comments.

The scope of cross-examination and the admissibility of evidence during cross-examination are matters controlled by the sound discretion of the trial judge. O'Brien v. Angley (1980), 63 Ohio St.2d 159, 163, 17 O.O.3d 98, 100, 407 N.E.2d 490, 493. When the trial court determines that certain...