Case Title: Bank of Beulah v. Chase

Citation: 231 N.W.2d 738

Docket Number: 

State: north-dakota

Court: North Dakota Supreme Court

Date: 1975-06-23T00:00:00Z

Document:
231 N.W.2d 738 (1975) BANK OF BEULAH, Beulah, North Dakota, a banking corporation, Plaintiff-Appellee, v. Monroe CHASE, Defendant, Dakota National Bank of Bismarck, Bismarck, North Dakota, a banking corporation, Defendant and Appellant. Civ. No. 9066. Supreme Court of North Dakota. June 23, 1975. *739 Alfred C. Schultz, Sperry & Schultz, Bismarck, for plaintiff-appellee. Robert O. Wefald, Wheeler, Wolf, Wefald & Durick, Bismarck, for defendant-appellant. *740 PAULSON, Acting Chief Justice. The Bank of Beulah, Beulah, North Dakota, commenced a claim and delivery action against Monroe Chase and Dakota National Bank of Bismarck, Bismarck, North Dakota [now known as the Dakota Northwestern Bank], to recover possession of a motor vehicle. The Dakota National Bank interposed an answer and counterclaim against the Bank of Beulah for delivery of title to the motor vehicle and cross-claimed against Monroe Chase. The Bank of Beulah replied to the counterclaim; Monroe Chase defaulted in district court. The trial was held in the District Court of Burleigh County and judgment was entered on November 8, 1974, in favor of the Bank of Beulah against the defendants. Dakota National Bank has appealed. Monroe Chase has not perfected an appeal. The parties to this appeal stipulated to the following facts: Upon these facts, the trial court concluded that the Bank of Beulah had perfected its lien and, therefore, had a valid and existing first lien on the vehicle sold to Chase. The trial court stated that in determining priority of liens, the motor vehicle title registration statutes contained in Chapter 39-05, N.D.C.C., take precedence over the general provisions of the Uniform Commercial Code contained in Title 41, N.D.C.C. Counsel for Dakota National Bank contend on appeal that certain provisions of the U.C.C. are determinative of this action, and that, under the U.C.C., Dakota National Bank is entitled to the proceeds of the motor vehicle in question. Counsel for the Bank of Beulah strenuously urge support of the trial court's determination and further argue that, even if the provisions of the U.C.C. are said to apply to this case, the Bank of Beulah is entitled to priority because it has perfected its security interest by filing a U.C.C.-1 financing statement. We hold, initially, that the provisions of the U.C.C. and not the provisions of our title registration laws for motor vehicles govern the case before us. Subsequent to the issuance of the trial court's memorandum opinion, this court decided the case of Ramsey National Bank & Trust Company v. Suburban Sales & Service, Inc., 231 N.W.2d 732 (N.D.1975). In Ramsey, one of the issues before us was whether the Ramsey Bank had perfected its security interest in an automobile it had floor-planned for Suburban Sales & Service. In determining whether the security interest was to be perfected under the motor vehicle title registration laws or under the U.C.C., we stated, in Ramsey, supra, 231 N.W.2d at 737: Thus, we clearly indicated in Ramsey, although we did not hold, that security interests *742 in an automobile inventory are governed by the U.C.C., and not by our title registration laws. We reaffirm those principles enunciated in Ramsey and we adopt the rationale set forth therein. Implicit in this decision is our conclusion that Monroe Chase was a motor vehicle dealer and that, by the terms of the Chase-Bank of Beulah contract, the parties intended the motor vehicle which was purchased by Chase to be resold. The following provisions of the U.C.C. are determinative of this case [§§ 41-09-27, 41-09-28, and 41-09-29, N.D.C.C.]: Paragraph 3 of the 1972 Official Comment to § 9-306, U.C.C. [3 U.L.A.-U.C.C., (Master Ed., 1974 P.P.)] sets forth the intended purposes of these three sections of the U.C.C.: Applying this interpretation of the provisions of §§ 9-306, 9-307, and 9-308 [§§ 41-09-27, 41-09-28, and 41-09-29, N.D. C.C.] to the case at bar, it may be seen that the Bank of Beulah has rights only to the proceeds received from Chase's sale of the vehicle if: We believe that the Bank of Beulah did authorize Chase to resell the motor vehicle, although we do not find it necessary to so hold. The contract and security agreement into which the Bank of Beulah, Chase, and Spier Sales entered contained the notation of "Resale" on its face. It is argued by the Bank of Beulah that the purpose of this notation was to avoid double sales taxation. We find this argument to be unpersuasive. The notation is an express indication that the Bank of Beulah authorized the resale of the vehicle. The facts surrounding the transaction give further indication of the nature of the contract. At the time of the contract, Chase was validly licensed in North Dakota as a motor vehicle dealer. Upon sale of the vehicle, Spier Sales transferred the certificate of origin to Chase; had this been a sale to an ultimate consumer, Spier Sales would have been required to obtain a certificate of title for the vehicle and deliver such certificate to Chase. Finally, this was but one of six or seven sales made to Chase in his capacity as a motor vehicle dealer. Even if it were to be argued that the sale of the motor vehicle by Chase was unauthorized, the Bank of Beulah nevertheless would have lost its security interest in the motor vehicle pursuant to the provisions of § 41-09-28, N.D.C.C. [§ 9-307, U.C.C.]. There has been no showing by the Bank of Beulah that Hager knew that the sale to him was in violation of the security interest held by the Bank of Beulah. Thus, Hager comes within the definition of a "Buyer in ordinary course of business" as set out in § 41-01-11(9), N.D.C.C., and, accordingly, he is entitled to the protection of § 41-09-28, N.D.C.C. [§ 9-307, U.C.C.]. Under § 41-09-27, N.D.C.C. [§ 9-306, U.C.C.], the Bank of Beulah has a right only to the proceeds of the sale of the motor vehicle from Chase to Hager, such proceeds being the contract executed by Hager and Chase, and later assigned, for value, from Chase to Dakota National Bank. Thus, the conflicting security interests are not in the motor vehicle itself, but rather in the Hager contract which carried the right to repossession of the motor vehicle. As stated in the 1972 Official Comment, 3 U.L.A.-U.C.C. (Master Ed., 1974 P.P.), priority of conflicting security interests in chattel paper is to be determined by reference to § 9-308, U.C.C. [§ 41-09-29, N.D.C.C.]. The Arkansas Supreme Court has recently decided a case in which § 9-308, U.C.C., was interpreted. Commercial Credit Corp. v. National Credit Corp., 251 Ark. 541, 473 S.W.2d 876 (1971). The facts of Commercial Credit are parallel *745 to the case at bar. National Credit had floor-planned a vehicle for an automobile dealer. The dealer subsequently sold the vehicle and assigned, for value, the consumer's sales contract to Commercial Credit. In holding that Commercial Credit's security interest in the consumer contract prevailed over that of National Credit's, the Arkansas Supreme Court quoted with approval, in Commercial Credit, supra, 473 S.W.2d at 880-881 of its opinion, from Spivack, Secured Transactions under the Uniform Commercial Code, prepared for the joint committee on continuing legal education of the American Law Institute and the American Bar Association for September, 1960, at page 106 thereof: We find that the decision in Commercial Credit comports with the clear language of § 9-308, U.C.C. In the instant case, it has been shown that Dakota National Bank gave new value for the Hager contract and took possession of the contract in the bank's ordinary course of business. The security interest of Dakota National Bank, therefore, by the terms of § 41-09-29, N.D.C.C., has priority over the Bank of Beulah's claim to the proceeds. The Bank of Beulah, in its brief and on oral argument, has stressed that it has perfected its security interest while Dakota National Bank has not. It is argued that equity demands that the Bank of Beulah prevail. In response to this argument, we quote from Chrysler Credit Corporation v. Sharp, 56 Misc.2d 261,288 N.Y.S.2d 525, 534 (1968): The Bank of Beulah, in an argument not pertaining to the merits of this case, has suggested that this appeal should be dismissed because Dakota National Bank has accepted benefits of the trial court's judgment and, therefore, should not be allowed to contest the judgment. It is argued that Dakota National Bank received a benefit when, in accordance with the trial court's judgment, Dakota National Bank yielded possession of the motor vehicle to the Bank of Beulah, thereby avoiding further storage costs. In support of this argument the Bank of Beulah cites general statements of law found in Siedenburg v. *746 Sommerfeld, 77 S.D. 191, 90 N.W.2d 77 (1958); Miller v. Miller, 76 N.D. 558, 38 N.W.2d 35 (1949) (dissenting opinion); and 4 C.J.S. Appeal and Error § 215 (1957). We have considered this argument and find it to be without merit. The "benefits" received by the Dakota National Bank were not ordered or decreed in the trial court's judgment, nor will such "benefits" be affected by a reversal of that judgment. The case law cited by the Bank of Beulah is inapposite to the argument it makes. In Siedenburg, supra, the appellant accepted a sum of money granted him in a quiet title action; in Miller, supra, the appellant appealed from a divorce decree which had granted her possession of certain real estate. It is only when an appellant accepts benefits of the judgment that an appellant will not be allowed to contest the judgment. Such is not the case before us. The judgment of the district court is reversed. PEDERSON, VOGEL and SAND, JJ., concur. ERICKSTAD, C.J., deeming himself disqualified, did not participate.