Rush v. U.S. Bancorp Equipment Finance

• Decision Date: 14 November 2007
• Docket Number: No. 24387.,24387.
• Citation: 742 N.W.2d 266,2007 SD 119
• Court: South Dakota Supreme Court
• Parties: William R. RUSH, Individually, North American Truck & Trailer, Inc., and Carolina Commercial Truck Sales, L.L.C., Plaintiffs and Appellants, v. U.S. BANCORP EQUIPMENT FINANCE, INC., Defendant and Appellee.

742 N.W.2d 266

2007 SD 119

William R. RUSH, Individually, North American Truck & Trailer, Inc., and Carolina Commercial Truck Sales, L.L.C., Plaintiffs and Appellants, v. U.S. BANCORP EQUIPMENT FINANCE, INC., Defendant and Appellee.

No. 24387.

Supreme Court of South Dakota.

Considered on Briefs August 27, 2007.

Decided November 14, 2007.

Laura L. Koob, Brian L. Radke of Radke Law Office, P.C., Sioux Falls, South Dakota, Attorneys for plaintiffs and appellants.

Roger W. Damgaard of Woods, Fuller, Shultz & Smith, P.C., Sioux Falls, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice.

[¶ 1.] In this appeal from a summary judgment, a debtor contends that its creditor should have protected the debtor's financial circumstances by perfecting the creditor's security interest. From the language of the contract documents, we conclude that the security interest was for the protection of the creditor, and its failure to perfect that interest created no claim for the debtor. Therefore, we affirm summary judgment for the creditor.

Background

[¶ 2.] William Rush is the president of North American Truck & Trailer and Carolina Commercial Truck Sales, LLC. Rush, North American, and Carolina will be collectively referred to as "plaintiffs." US Bancorp Equipment Finance Inc. provided financing to North American in the form of a sale-leaseback arrangement for the purchase of twenty Volvo trucks. North American purchased the trucks and then sold them to U.S. Bancorp which, in turn, agreed to lease the trucks to North American. North American then subleased the trucks to Carolina by executing a document similar to the lease between U.S. Bancorp and North American. North American assigned its interest in this sublease to U.S. Bancorp, and Carolina executed a security agreement in favor of U.S. Bancorp, granting a security interest in the trucks. Carolina, in turn, leased the trucks to the end user, Oklahoma Southern Transportation, Inc.

[¶ 3.] Oklahoma Southern took possession of the trucks, and Carolina received the manufacturer's statements or certificates of origin (MSO). The MSOs identified Carolina as the lessor, Oklahoma Southern as the lessee, and U.S. Bancorp as the lienholder. According to U.S. Bancorp, it was the responsibility of Oklahoma Southern to title and license the trucks, but Oklahoma Southern licensed the trucks without first obtaining titles. It was able to do this through a loophole in Oklahoma law. Because Oklahoma Southern licensed the trucks without titling them, U.S. Bancorp's interest in the trucks did not become perfected.

[¶ 4.] In 2000, Oklahoma Southern filed for Chapter 11 bankruptcy. At the same time, plaintiffs became aware that Oklahoma Southern did not obtain titles to the trucks, and therefore, U.S. Bancorp's security interest was not perfected. The trucks became property of the bankruptcy estate and Oklahoma Southern stopped paying on the lease to Carolina. Plaintiffs were nevertheless required to pay on their lease to U.S. Bancorp. In 2001, Carolina moved for relief from the automatic stay to foreclose on and repossess the trucks. The trustee objected to the motion because Carolina was an unsecured creditor. Carolina was ultimately able to settle with the trustee, whereby Carolina paid $25,000 for the release of the trucks.

[¶ 5.] Plaintiffs brought suit against U.S. Bancorp asserting that the bank had a duty under the parties' various contractual agreements to ensure that U.S. Bancorp's security interest was properly perfected. According to plaintiffs, had U.S. Bancorp properly perfected its security interest, plaintiffs would have been able to immediately repossess the trucks or have them released from the bankruptcy estate. Because U.S. Bancorp failed to ensure that the security interest in the trucks was properly perfected, plaintiffs asserted that they suffered financial losses.

[¶ 6.] US Bancorp moved for summary judgment. In granting the motion, the circuit court concluded that "there was no duty, contractual or otherwise, on the part of the Bank to either ensure that the trucks were titled in the name of the bank" or to perfect "its security interest in the trucks." The court also concluded that there was no special relationship between the parties, other than that of creditor and debtor. Finally, the court declined to consider the course of dealings between the parties because the contract language specifically prohibited it. Plaintiffs appeal asserting that (1) U.S. Bancorp had a duty to title the twenty trucks and perfect its security interest; and (2) the course of dealings between the parties placed that duty on the bank.

Standard of Review

[¶ 7.] "When reviewing a grant of summary judgment, we decide only whether there were genuine issues of material fact and whether the law was correctly applied." Heib v. Lehrkamp, 2005 SD 98, ¶ 19, 704 N.W.2d 875, 882 (citing SDCL 15-6-56(c); Keystone Plaza Condominiums Ass'n v. Eastep, 2004 SD 28, ¶ 8, 676 N.W.2d 842, 846). "We view the evidence in a light most favorable to the nonmoving party." Toben v. Jeske, 2006 SD 57, ¶ 9, 718 N.W.2d 32, 35 (citing Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968)). The moving party has the burden of showing "the absence of any genuine issue of material fact and entitlement to judgment as a matter of law." Yarcheski v. Reiner, 2003 SD 108, ¶ 15, 669 N.W.2d 487, 493 (citing S.D. Dept. of Rev. v. Thiewes, 448 N.W.2d 1, 2 (S.D.1989)).

Analysis and Decision

[¶ 8.] Plaintiffs first claim that the "Warranties and Covenants of the Debtor" clause of the security agreement imposed a duty on U.S. Bancorp to perfect its security interest in the trucks. The language of that clause stated:

At the request of the Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by the Secured Party to further the purpose of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect.

Plaintiffs also invoke the power of attorney clause in the master lease to argue that the bank had two specific duties: (1) "authority to complete and execute financing statements"; and (2) "conform the description of the Property in any such financing statement or other documentation."¹

[¶ 9.] We see nothing in the language of the security agreement or power of attorney clause that imposed an affirmative duty on the bank to perfect. Just the opposite, the language of the security agreement imposed a duty on the debtor to assist the creditor in the creditor's effort to perfect, if the creditor so desired. The power of attorney clause gave the bank the "authority" to do certain things to perfect its security interest, but did not impose any duty on it to perfect.

[¶ 10.] In aid of their position, plaintiffs advance the maxim expressio unius est exclusio altreius, the expression of one thing is the exclusion of another. See Accounts Mgmt., Inc. v. Litchfield, 1998 SD 24, ¶ 9, 576 N.W.2d 233, 236. Because the security agreement did not state that Carolina was obligated to perfect U.S. Bancorp's security interest, according to plaintiffs, it was clearly U.S. Bancorp's duty. Moreover, plaintiffs claim that the agreement was ambiguous and that it should have been construed against U.S. Bancorp, which could have drafted it to have Carolina ensure that...