Western Nat. Bank of Casper v. Harrison

• Decision Date: 14 April 1978
• Docket Number: No. 4781,4781
• Citation: 577 P.2d 635
• Parties: 23 UCC Rep.Serv. 1383 WESTERN NATIONAL BANK OF CASPER, Appellant (Defendant below), Larry Darlington (Defendant below), v. James HARRISON, Appellee (Plaintiff below).
• Court: Wyoming Supreme Court

Page 635

577 P.2d 635

23 UCC Rep.Serv. 1383

WESTERN NATIONAL BANK OF CASPER, Appellant (Defendant below), Larry Darlington (Defendant below), v. James HARRISON, Appellee (Plaintiff below).

No. 4781.

Supreme Court of Wyoming.

April 14, 1978.

Mayne W. Miller, Miller & Miller, Casper, signed the brief and appeared in oral argument on behalf of the appellant.

H. B. Harden, Jr., Harden & Harden, Casper, signed the brief and appeared in oral argument on behalf of the appellee.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

RAPER, Justice.

By this appeal, defendant-appellant challenges a judgment of the district court for Natrona County, Wyoming, awarding plaintiff-appellee damages for the improper disposition of collateral following plaintiff-appellee's default on a loan. In urging reversal, defendant-bank asserts:

1. That appellee waived any right of action against appellant when he consented to a later sale of the collateral;

2. That its delivery of a repossession title to an accommodation maker on the loan was not a sale or disposition of the collateral without notice to appellee; and

3. That the trial court improperly computed the damages assessed against it.

Other than a modification of damages, we shall affirm the judgment of the district court.

On April 24, 1973, plaintiff and his wife purchased a used mobile home. Since the couple, due to their ages, did not have adequate credit to finance the purchase themselves, plaintiff's father-in-law, Larry Darlington, also a defendant below, co-signed the note and security agreement as an accommodation party. The cash price of the mobile home was $1,780.00, of which $300.00 was paid by plaintiff as a down payment. The contract was then assigned by the dealer to the defendant-bank and a title to the mobile home placed in defendant's files, in either plaintiff's name alone or in the name of plaintiff and his wife, jointly. The contract in evidence specifically provides that the buyer grants to the seller and assigns a security interest "under the Uniform Commercial Code."

The monthly payments due on the loan were paid by plaintiff to defendant until August, 1975, at which time the August 5th payment was made by plaintiff's mother. By the end of September, 1975, the September 5th payment had not been made and defendant notified the dealer that the contract was in default. The defendant then, in turn, notified Darlington that the account was in jeopardy and the note would have to be paid off. Darlington contacted defendant-bank and was requested to pay the delinquent installment to bring the loan up to date.

At about this time, plaintiff and his wife were separated and plaintiff was in jail. As a consequence, Darlington requested that defendant-bank repossess the trailer so that plaintiff's wife and child could use it as a home. Defendant-bank responded that it was unwilling to physically repossess the home itself, but informed Darlington that if he could obtain possession and would pay off the balance due, it would give him title thereto. After explaining these circumstances to plaintiff's mother, Darlington obtained her permission to remove the trailer from her property, and on September 26, 1975, paid the balance due on the note. As a consequence, defendant secured a repossession title in its name, released the security agreement and transferred the repossession title to Darlington, the final effect being a transfer of title from plaintiff and his wife to Darlington. During the period in which this series of events transpired, it was known to both the defendant-bank and Darlington that plaintiff was in jail, yet he was never notified concerning either the account delinquency nor the subsequent transfer of title.

After obtaining possession and title, Darlington did repair and reconditioning work on the trailer. Following a reconciliation by plaintiff and his wife, Darlington told the couple that they could move back into the mobile home provided he received, in return, the amount of his repair investment. Instead, plaintiff and his wife agreed that the trailer should be sold and the proceeds applied first to repay Darlington for his investment, with any surplus going to plaintiff. The mobile home was ultimately sold for $1,700.00, plaintiff receiving neither any proceeds from the sale nor an accounting from Darlington with regard to the sale. Initiation of the action herein followed.

Following trial below, the district court determined, for the purpose of computing damages, that the value of the mobile home was its sale price, $1,700.00. It then allowed defendant Darlington an offset for the loan payoff made, $525.22, the labor and materials used in reconditioning the trailer, $498.88, as well as payments made to plaintiff's wife, $200.00, and entered judgment against him for $475.90. The defendant- bank was allowed an offset for only the $525.22 payoff made by Darlington, damages of $1,174.78, thus being awarded against it. Only the defendant-bank has appealed.

Although not at all clear from the brief filed herein, it would appear what defendant is urging by its first point for reversal, that by consenting to the sale of the reconditioned mobile home, plaintiff in some manner waived any right to receive notice of the disposition of the loan collateral under § 34-9-504(3), W.S. 1957, 1975 Cum.Supp. ¹ We cannot agree. The trial court's implicit denial of the assertion through its judgment was clearly proper. This court has acknowledged, in construing the Uniform Commercial Code, that § 34-9-501(3)(b), ² specifically directs that notice may not be waived or varied. Aimonetto v. Keepes, Wyo. 1972, 501 P.2d 1017.

The law, as amalgamated by the Uniform Commercial Code, has retained the flexibility of making available other congruent concepts. Section 34-1-103, W.S. 1957, 1975 Cum.Supp., enunciates access to supplementary general principles of law in words as follows:

"Unless displaced by the particular provisions of this act (§§ 34-1-101 to 34-10-105), the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions."

By that provision, the law of waiver comes into play. A party cannot be held to have waived a right based upon material facts, the existence of which he did not know. Gorrell v. City of Casper, Wyo. 1962, 371 P.2d 835; Howrey v. Star Ins. Company of America, 1934, 46 Wyo. 409, 28 P.2d 477. An effective waiver requires full knowledge of rights being waived. See also 28 Am.Jur.2d, Estoppel and Waiver, §§ 154, pp. 836-837, and 158, pp. 840-843. In the situation herein, plaintiff was never made aware of the disposition by the appellant of the collateral involved, nor of the transfer to Darlington. Without knowledge of such transactions, a valid waiver was not possible, even without the benefit of the Uniform Commercial Code.

As a second basis for reversal, defendant asserts that the accommodation maker Darlington falls within the scope of § 34-9-504(5), W.S. 1957, 1975 Cum.Supp.:

"(5) A person who is liable to a secured party under a guaranty, indorsement, repurchase agreement or the like and who receives a transfer of collateral from the secured party or is subrogated to his rights has thereafter the rights and duties of the secured party. Such a transfer of collateral is not a sale or disposition of the collateral under this article." (Emphasis added.)

Therefore, argues defendant, although Darlington was not liable under a guaranty, indorsement or repurchase agreement, he was liable in a like manner, as an accommodation party. Defendant thus asserts that it dealt properly with Darlington and was not required to give notice to plaintiff under the circumstances of this case because it had a right to transfer the collateral to Darlington as one in the position of a guarantor.

We cannot join with the defendant in that view. By issuing a " repossession title" to Darlington, the defendant-bank extinguished the plaintiff's interest, without giving him the benefit of the preceding quoted provisions of § 34-9-504 and other rights. The defendant cannot, under the circumstances of this case, be forgiven for dealing improperly with the plaintiff. Under the general provisions of the Uniform Commercial Code, "Every contract or duty within this act (§§ 34-1-101 to 34-10-105) imposes an obligation of good faith in its performance or enforcement." Section 34-1-203. "Good faith" is defined by § 34-1-201(19) to mean "honesty in fact in the conduct or transaction concerned." ³ When § 34-9-504(5) provides for a " transfer" of collateral to a guarantor, a transfer by a secured party having the right to do so, is contemplated; for example, if the defendant had regularly received possession, as a matter of right, by reason of the default under the provisions of § 34-9-503. Upon receiving a payoff from the guarantor, the defendant could therefore have then transferred the possession to the guarantor, along with its rights as a secured party. Section 34-9-504(5) does not contemplate the complete extinguishment of the plaintiff's rights as done by a "repossession title". Defendant's conduct was not honest in fact, because it transferred title it did not have. Under the circumstances here, the plaintiff would be entitled to notice of such an irregular disposition. If the bank did not repossess, it could hardly give a " repossession" title. The defendant knew or should have known that, in fact, it had no absolute title to transfer but only a security interest.

Defendant's assertion is refuted by other provisions of the Uniform Commercial Code. The accommodation party, Darlington, is defined by the Code as "one who signs an instrument in any capacity for the purpose of lending his name to another party to it." § 34-3-415(1). If an...