Case Title: FIRST WESTSIDE NAT L BANK v LLERA

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1978-06-05T00:00:00Z

Document:
No. 13912 IN THE SUPREME COURT OF THE STATE OF MONTANA 1978 FIRST WESTSIDE NATIONAL BANK OF GREAT FALLS, a National Banking Association, Plaintiff and Respondent, ALLEN R. LLERA, EDITH S. TYNES and LINDA L. FISHER, Defendants and Appellants. Appeal from: District Court of the Eighth Judicial District, Honorable Truman Bradford, Judge presiding. Counsel of Record: For Appellants: John M McCarvel argued, Great Falls, Montana For Respondent : Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana Lon T. Holden argued, Great Falls, Montana Submitted: April 24, 1978 Decided : N N 5 1g78 M r . Justice Gene B. Daly delivered the Opinion of the Court: Defendant Allen R. Llera on September 29, 1976, borrowed $5,340.42 from plaintiff F i r s t Westside National Bank of Great Falls. Llera gave the bank h i s promissory note due i n 90 days on December 29, 1976, and signed a security agreement describing a 1976 Mercury automobile a s collateral. Llera presented the bank with a t i t l e to the automobile i n the joint names of himself and Edith S. Tynes, Llera's mother. Llera obtained the t i t l e by searching through the personal papers of h i s mother, i n her residence, and without her knowledge. The bank never f i l e d the security agreement with the Montana Registrar of Motor Vehicles a s a l i e n on the automobile. Llera defaulted on the loan when he failed t o pay h i s obligation by December 29, 1976. O n January 28, 1977, Llera applied for a duplicate t i t l e for the vehicle claiming the original c e r t i f i c a t e of t i t l e (which was i n the bank's possession) was l o s t , mutilated or illegible. The Registrar of Motor Vehicles issued a duplicate t i t l e i n the name of Edith S. Tynes and/or Allen R. Llera, dated January 28, 1977. Tynes and Llera then completed the assignuent portion of the duplicate t i t l e and transferred t h e i r interests t o Edith S. Tynes and/or Linda L. Fisher. Linda L. Fisher is the s i s t e r of Llera and the daughter of Tynes. Fisher gave no consideration for the assignment, and was not even aware the assignment was made. The bank did not consent t o the assign- ment of interest, although i t s consent was required for a valid assignment under the terms of the security agreement. On March 28, 1977, two months subsequent t o the assignment of interest in the automobile from Llera t o Fisher, the bank f i l e d a claim i n District Court, Cascade County, against Llera t o recover the $5,340.42 principal, plus interest on the de- faulted promissory note. The bank i n i t s complaint requested the court t o issue an order directing Llera t o relinquish posses- the sion of the automobile t o the bank so that/bank could s e l l it. The bank then f i l e d an amended complaint joining Tynes and Fisher as additional defendants. Tynes claimed the f i r s t time she learned of the loan, the note, and the security agreement executed by Llera, was when the bank's assistant vice-president i n the loan department notified her on February 22, 1977. After a show cause hearing, the District Court ordered Tynes and Fisher t o deliver the automobile t o the bank by M a y 31, 1977 for sale, with the proceeds of sale t o be divided equally between Tynes and the bank. Tynes and Fisher appeal from the court's order and allege three specifications of error in their appeal from the District Court order: 1. Did plaintiff bank have a valid security interest i n the automobile? 2. Did the District Court e r r i n ordering that the vehicle i t s e l f , rather than merely Llera's one-half interest i n the vehicle, be sold t o satisfy Llera's debt? 3. Did the District Court e r r i n declining t o award attorney fees t o Tynes and Fisher? The f i r s t consideration is that the c e r t i f i c a t e of ownership for the 1976 Mercury automobile held by the bank on making the loanwas an "and/oru t i t l e , that is, the original c e r t i f i c a t e of ownership was issued showing the owners t o be "Edith S. Tynes &/or Allen R. Llera.'' There appears to -he l i t t l e o r no statutory authority for the proposition that an "and/or1' t i t l e is one creating a joint tenancy e s t a t e with right of survivorship. Section 67-307, R.C.M. 1947, provides that the ownership of property by several persons is e i t h e r a joint interest, a partnership interest, or an interest i n common. It i s further provided i n section 67-308, R.C.M. 1947, that "A joint interest i s one owned by several persons i n equal shares, by a t i t l e created by a single w i l l or transfer, when especially declared i n a w i l l or transfer t o be a joint tenancy * * *.It (Emphasis added. ) It is then provided i n section 67-313, R.C.M. 1947, that every interest i n property created i n favor of several persons i n t h e i r own right is an interest i n common unless for a partnership, o r un- less declared i n its creation t o be a joint tenancy interest. The essential ingredient i n a joint tenancy e s t a t e is the right of survivorship. Yet it is d i f f i c u l t t o find i n the phrase "and/oru an intent that the survivor s h a l l be entitled t o the whole of the property. Nonetheless it has come t o be widely accepted, particularly i n the consumer goods industry, that ownership documents which carry the names of two or more persons with the phrase "and/ortt does in fact create a joint tenancy estate. Moreover, t h i s Court held i n Marshall v. Minlschmidt, (1966), 148 Mont. 263, 269, 419 P.2d 486, that the names of three owners shown on a recorded c a t t l e brand, joined by the word "ort', was i n fact a joint tenancy interest in the brand, and therefore of the c a t t l e bearing such brand. Following Marshall, theref ore, w e may assume that in Montana an ownership document showing t i t l e i n two or more persons "and/ort' has the effect of creating a joint tenancy e s t a t e with right of survivorship. This applies t o personal property, not r e a l estate. See: Section 67-310, R.C.M. 1947. Next, w e consider the nature of the interest of the joint tenants i n the joint tenancy property. The statute creating joint tenancies i n Montana mandatorily s t a t e s that "A joint interest is one owned by several persons i n equal shares * * *.It Section 67-308, R.C.M. 1947. The effect of the statute is t o include a l l of the incidents of a joint tenancy e s t a t e a t common law. Hennigh v. Hennigh, (1957), 131Mont. 372, 377, 309 P.2d 1022. Thus, accepting the ''and/or" t i t l e as having created a joint tenancy in t h i s case, the legal result is that Allen R. Llera owned an equal share i n the automobile, and the right of survivorship with h i s mother. To obtain a valid security interest i n Llera's interest i n the automobile, the bank had t o s a t i s f y the three requirements of section 876-9-204(1), R.C.M. 1947. F i r s t , there had t o be an "agreement" between the secured party and the debtor that the secured party would take a security interest i n the property; the security agreement which Llera signed s a t i s f i e d t h i s requirement. Second, the bank has t o give "value" for the security agreement; the loan by plaintiff bank t o Llera satisfied t h i s requirement. Third, the debtor has t o have "rights i n the collateral"; here Llera was a joint owner of the automobile. The bank's security interest i n the vehicle was unperfected because it did not record the lien. When Llera fraudulently obtained a duplicate t i t l e t o the vehicle and purported t o assign h i s joint interest i n it t o h i s s i s t e r Linda Fisher, she did not take free of the bank's security interest. For the reason Llera made the assignment t o Fisher gratuitously and without her knowledge, she was not a buyer "for value" under section 87A-9-307, R.C.M. 1947. Only buyers for value without knowledge of the bank's security interest, o r subsequent secured creditors who recorded t h e i r liens prior t o the bank, would take priority over the ban& unperfected security interest. The next consideration i s the legal effect of the loan and subsequent default upon the joint tenancy estate i n the automobile. When Llera made the loan, he did not execute the assignment porrion of the t i t l e instrument. Therefore che unity of t i t l e as between Llera and h i s mother was not broken by Llera's a c t a t that point. Upon h i s default however, the bank under its security agreement became entitled t o the interest of Llera, and the joint tenancy interest of the son and the mother was severed. There no longer was a t i t l e "created by a single * * * transfer.'' Section 67-308, R.C.M. 1947. The mother and the bank, on ~ l e r a ' s default, became tenants i n common i n the ownership of the automobile. Section 67-313, R.C.M. 1947. It was t h i s cotenancy in common which the District Court had before it when it ordered the automobile sold and the proceeds divided. 2 American Law of Property (1952) 56.2. The right of one cotenant i n a joint tenancy e s t a t e t o mortgage or encumber h i s interest i n the joint tenancy property i s recognized i n Thompson v. Thompson, (1963), 218 C.A.2d 804, 32 Cal.Rptr. 808, 810. Upon default, the one-half interest of Llera, s t a t u t o r i l y mandated, thereupon transferred to the bank. In that situation, even i n an equitable proceedings such a s a partition action, although the automobile was paid for by the mother, and almost exclusively used by her, the bank became entitled t o one-half of the proceeds of the sale of the automobile. The bank, in the District Court, did not follow the statutory procedure for partition of personal property. Section 93-6301.2, R.C.M. 1947. Instead, through a show cause proceeding the District Court ordered the automobile sold. While it might be preferable that the matter be handled through an action f o r partition, it appears the result i s the same. In the interest of judicial economy w e find the order of the District Court should be af f inned. Fisher and Tynes may not recover attorney fees under section 93-8601.1, R.C.M. 1947, which provides that when one party t o a contract has a contractual right t o attorney fees i n actions brought upon the contract, a l l "parties t o the contract" s h a l l have reciprocal rights t o attorney fees. Here the bank sued upon its contract with Llera. The bank and Llera were the only parties t o the contract. Since Tynes and Fisher were not "parties t o the contract'' sued upon by the bank, they could i n no event become entitled t o attorney fees under section 93-8601.1, 9 R.C.M. 1947. The judgment of the District Court is affirmed. Justice W e Concur: "or,~p. 5 & 4 , . o p _ c ) Chief Justice