Title: Sannerud v. First Nat. Bank of Sheridan

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Sannerud v. First Nat. Bank of Sheridan1985 WY 184708 P.2d 1236Case Number: 85-55Decided: 11/06/1985CHRYSANTHE SANNERUD, APPELLANT (DEFENDANT), 

EDWARD N. COLEMAN, JANICE E. COLEMAN, THOMAS A. SAWYER, AND LOEVA M. SAWYER, (DEFENDANTS), 

v. 

FIRST NATIONAL BANK OF SHERIDAN, WYOMING, APPELLEE (PLAINTIFF).
Supreme Court of Wyoming
CHRYSANTHE SANNERUD, 
APPELLANT (DEFENDANT), 

EDWARD N. COLEMAN, JANICE 
E. COLEMAN, THOMAS A. SAWYER, AND LOEVA M. SAWYER, (DEFENDANTS), 

v. 

FIRST NATIONAL BANK OF 
SHERIDAN, WYOMING, APPELLEE 
(PLAINTIFF).

 
 
Appeal from the District 
Court, SheridanCounty, Leonard McEwan, 
J.

 
 
James T. Anest 
of Marken & Anest, Casper, for appellant.

Tom C. Toner of 
Redle, Yonkee & Arney, Sheridan, for 
appellee.

Before THOMAS, C.J., 
ROSE,* ROONEY, and BROWN, JJ., and RAPER, 
J., Retired.

* This case was heard and 
decided prior to the retirement of Justice Rose on October 31, 
1985.

RAPER, Justice, 
Retired.

[¶1.]     The First National Bank 
of Sheridan, Wyoming (appellee) filed a complaint to 
foreclose a mortgage on real property owned by the debtors, Edward and Janice 
Coleman, and to foreclose its security interest in personal property also owned 
by the Colemans. Chrysanthe Sannerud (appellant) was joined in the action. The 
district court granted the appellee's motion for summary judgment, determined 
that appellee's mortgage and security agreement were first and valid liens on 
the property superior to the claim of appellant, and ordered the property sold 
to satisfy the debt owed by the Colemans to appellee. Debtors Colemans and 
others joined permitted a default to be entered against them. The appellant, who 
claims to have a security interest in the personal property, has appealed the 
summary judgment.

[¶2.]     The appellant 
visualizes the issues to be: (1) Did material issues of fact remain which 
precluded summary judgment; and (2) was appellee's security interest superior to 
that of appellant. The appellee frames its concept of the issues to be: (1) Is 
appellant's security agreement which identifies only an intangible interest 
("equity" in a contract for deed) sufficient to perfect a security interest in 
tangible personal property which is subject to appellee's security agreement; 
and (2) does that description give sufficient notice to appellee that appellant 
claims a security interest in a class of collateral not described in appellant's 
security agreement.

[¶3.]     We will 
affirm.

[¶4.]     In October 1982, 
appellant filed with the county clerk for SheridanCounty a security agreement and financing 
statement entered into by debtors Colemans and appellant, as the secured party, 
on June 1, 1982. The collateral to secure appellant was described in the 
instrument as:

"$167,500.00 equity in 
Energy Inn, Sav-Mor Mini Mart and Sav-Mor Service Station on Contract for Deed 
between Thomas A. and Loeva M. Sawyer and Edward M. and Janice E. Coleman dated 
June 1, 1982 in escrow at First National Bank of Sheridan, 
2 N. Main St., Sheridan, 
Wyoming82801
. All proceeds from sale of house 
[and] acreage in Casper, 
Wyo. owned by Edward [and] Janice 
Coleman will be paid to escrow at Hilltop Nat'l Ba[nk]."1

The Sawyers were 
sellers and the Colemans were buyers. They are also the defaulting parties to 
the district court action and not parties to this appeal.

[¶5.]     The indebtedness from 
the Colemans to appellant arose from loans and brokerage fees due appellant from 
the Colemans. Appellant, as a broker, participated in the sale of the Energy Inn 
Motel, Sav-Mor Mini Mart and Sav-Mor Service Station. The Colemans agreed, in 
the standard purchase offer, acceptance and receipt executed by the Colemans and 
the Sawyers, to pay the Sawyers $1,082,500 for the properties which is the 
balance after payment of $10,000 as a deposit, $70,000 loaned to the Colemans by 
the appellant, and a credit of $87,500 which the Colemans agreed to pay as 
broker's fees to the broker "on terms." Apparently appellant as broker also 
advanced the $10,000 deposit in that the total of the deposit, loan and 
brokerage fees equal the amount of the Colemans' note to appellant in the sum of 
$167,500, the amount of indebtedness set out in the security agreement given by 
the Colemans to appellant.

[¶6.]     While the "Contract for 
Deed" referred to in the security instrument does not appear in the record, its 
terms are set out in the escrow instructions to appellee bank dated June 1, 
1982, executed by the Colemans and the Sawyers, to which appellant's security 
agreement and financing statement refers. It was there described as an 
"Agreement for Warranty Deed and Contract for Sale of the Energy Inn Motel, 
Sav-Mor Mini Mart and Sav-Mor Service Station Properties."

[¶7.]     The terms of the 
agreement and contract as in the escrow instructions recited set out the rate of 
payment beginning July 1, 1982, along with other provisions not here involved. A 
relevant provision, however, is that at the date of such agreement and contract, 
the "subject property is currently mortgaged to the First National Bank of 
Sheridan, Wyoming, and the terms of said Promissory Note 
and Mortgage are subject to renegotiation on September 23, 1983." Payments 
provided by the agreement and contract were, according to the escrow 
instructions, to be paid to appellee bank and first applied to the payment of 
the mortgage "presently on the subject property."

[¶8.]     On June 8, 1983, the 
Colemans executed a promissory note to appellee in the sum of $500,000 secured 
by a real property mortgage and security interest in the personal property of 
the three businesses sold as a unit of the same date. The security agreement and 
financing statement had attached to it a detailed and itemized list of the 
inventory, supplies, machinery, equipment, furniture and fixtures covered. The 
real estate mortgage was recorded with the county clerk on June 20, 1983. The 
instrument covering personalty was in the combined form of a security agreement 
and financing statement and filed with the county clerk on June 22, 
1983.

[¶9.]     As of December 3, 1984, 
the Colemans owed the appellee $499,337.13 with interest at 12 percent from 
September 16, 1983, on the foregoing described secured debts. There are other 
secured obligations of the Colemans to the appellee claimed in the district 
court action, but they are not in issue here, so we are not concerned with 
them.

[¶10.]  Appellant, in her "Affidavit in 
Opposition to Motion for Summary Judgment," claims that the security agreement 
and financing statement to her, filed on October 25, 1982, was executed by the 
Colemans and appellant to secure payment of the Colemans' note in the principal 
sum of $167,500 and affected only the personalty of the Energy Inn Motel, 
Sav-Mor Mini Mart and Sav-Mor Service Station. Appellant claims no security 
interest in the real property subject to appellee's mortgage. She further 
asserts that the appellee was as a result of the 1982 security agreement filing 
under an obligation to inquire of appellant what the instrument was intended to 
cover by way of collateral. Appellant argues that if such inquiry had been made, 
appellant would have informed appellee that the parties intended the security 
agreement to cover the personal property included in appellee's security 
agreement, and the court should hear evidence to that effect rather than 
granting summary judgment.

[¶11.]  The district court in its judgment found 
that the appellee's security interest in the personalty described in the 
security agreement and financing statement was as a matter of law a first and 
valid lien superior to the lien and claims of appellant. We 
agree.

[¶12.]  Appellant argues as an issue that the 
summary judgment was precipitous in that there were genuine issues of material 
fact left to be decided as required by Rule 56, W.R.C.P. It is urged by her that 
Exhibit A was missing from the instrument entitled "Security Agreement and 
Financing Statement" attached to the affidavit offered by appellee in support of 
its motion for summary judgment. This position is frivolous in that there is 
attached an inventory of personal property of the motel, mart, and service 
station. The same inventory is attached to the same instrument as an exhibit to 
the complaint filed in the case and served on appellant. It is true that the 
inventory attached is marked "Exhibit `B'" rather than Exhibit A, but there is 
only one exhibit referred to in and forming a part of the security agreement and 
financing statement. W.S. 34-21-951(e) anticipates small, inconsequential 
inaccuracies: "A financing statement substantially complying with the 
requirements of this section is effective even though it contains minor errors 
which are not seriously misleading." We construe the mislabeling of the attached 
exhibit as "B" rather than "A" to be minor and not 
misleading.

[¶13.]  Appellant's answer which she filed pro se 
has attached the security agreement and financing statement given by the 
Colemans to her upon which she relies for her claim. Such agreement and 
statement refers to the contract between the Colemans and Sawyers dated June 1, 
1982, in escrow at appellee bank. She also includes as an exhibit to her answer 
a copy of the escrow instructions. Those escrow instructions refer to personal 
property being part of the transaction.

[¶14.]  Aside from those flags of verification of 
undisputed facts, we are not convinced that there was even a need to have such 
an inventory attached. A generic description of personal property is sufficient 
for a security agreement if the description is adequate to make possible 
identification by inspection. Eggeman v. 
Western National Bank, Wyo., 596 P.2d 318 (1979). Appellee did more 
than required in its filing by using a combined security agreement and financing 
statement. Such a practice usually avoids the necessity of inquiry as to just 
what is covered.

[¶15.]  The real issue in this appeal is whether 
appellant had a valid claim and lien against the inventory of personal property 
of the motel, mart, and service station. Her security was a "$167,500.00 equity 
in Energy Inn, Sav-Mor Mini Mart and Sav-Mor Service Station" given her by the 
Colemans who at the time had only an agreement for warranty deed and contract 
for sale of those properties. The question is whether that security of appellant 
has a priority over the security of appellee, which, according to its regularly 
perfected security agreements, were real estate and:

"All inventory, supplies, 
machinery, equipment, furniture and fixtures including but not limited to items 
as described in `Exhibit A' attached, located at 508 E. 5th Street, Sheridan, 
Wyoming, or wherever located."

[¶16.]  Appellant claims a security interest in 
personal property but nowhere in her security instrument is personal property 
mentioned. She is secured by, and her collateral is, the "equity" of the 
Colemans in the motel, mart, and service station complex. That is all they could 
give her. The Colemans had only a contract by which the sellers agreed to sell 
to them on the terms stated. A debt payable by the Colemans to the appellee was 
created by the contract against both the real estate and personalty of the 
enterprise and continued immediately following the anticipated renegotiation of 
the appellee's mortgage upon the property. Renegotiation was to take place as of 
September 23, 1983, and did in fact shortly follow with a new mortgage on the 
real estate and security agreement on the personal property (goods) executed on 
June 8, 1983, by the Colemans.

[¶17.]  An "equity" in property or an enterprise 
is the value over and above the liens and charges against it. Stewart v. Gurley, 745 F.2d 1194, 1195 
(9th Cir. 1984); Fitzgerald v. Davis, 729 F.2d 306, 
308 (4th Cir. 1984); Dorfman v. 
Dorfman, Tex.Civ.App., 457 S.W.2d 417, 422 (1970); Comstock v. Fiorella, 260 Cal. App. 2d 262, 67 Cal. Rptr. 104, 107 (1968); Crowder v. State, Department of Social 
Security, 42 Wn.2d 782, 259 P.2d 387, 390 (1953).

[¶18.]  An "equity" is not inventory, supplies, 
machinery, equipment, furniture, and fixtures. "[E]quity" is an intangible, 
incapable of identification until the liens and charges against the Energy Inn 
Motel, Sav-Mor Mini Mart, and Sav-Mor Service Station have been satisfied. The 
liens and charges of appellee against such properties have not yet been 
satisfied. Until the business is liquidated, appellant has no claim on any 
particular collateral.

[¶19.]  For the purposes of our discussion, there 
are two types of personal property - tangible and intangible - subject to the 
secured transactions provisions of the Wyoming Uniform Commercial 
Code:

"`Goods' includes all 
things which are movable at the time the security interest attaches or which are 
fixtures * * * but does not include money, documents, instruments, accounts, 
chattel paper, general intangibles, contract rights and other things in action. 
* * *" W.S. 34-21-905(a)(vi).2

Goods are 
further categorized in pertinent part by W.S. 34-21-909 to include 
"`[e]quipment' if * * * used or bought for use primarily in business * * * or * 
* * are not included in the definitions of inventory," paragraph (ii), and 
"`[i]nventory' if they are held by a person who holds them for sale * * * or 
materials used or consumed in a business," paragraph (iv).

[¶20.]  Intangibles are in pertinent part 
explained by the code:

"* * * `Contract right' 
means any right to payment under a contract not yet earned by performance and 
not evidenced by an instrument or chattel paper. `General intangibles' means any 
personal property (including things in action) other than goods, accounts, 
contract rights, chattel paper, documents and instruments. * * *" W.S. 
34-21-906.

[¶21.]  Since under such provisions and 
definitions of the Wyoming Uniform Commercial Code appellant's collateral can 
only be an intangible interest in property, and the appellee's collateral is 
tangible, appellant's collateral is not the same property described in 
appellee's security agreement and financing statement, as appellant claims it 
is. This distinction as controlling is illustrated by Matter of Katz, 563 F.2d 766 (5th Cir. 
1977). Paraphrasing and adopting the holding of Matter of Katz to the 
circumstances we have here, a subsequent potential secured party who looked at 
the financing statement and agreement could reasonably have concluded that the 
appellant was financing the intangible equity of the Colemans, and the tangible 
personal property of the Colemans was unencumbered.

[¶22.]  In Wyoming, the rule is in accord with the 
holding of Matter of Katz. In American 
National Bank of Riverton, 
Wyoming v. First National Bank of 
Lander, Wyoming, Wyo., 446 P.2d 968 (1968), this Court held that where there 
was no provision in the perfected security statement or agreement taken by the 
First National Bank for after-acquired property except as to livestock and 
crops, the American National Bank had a right to assume that it did not include 
an after-acquired pickup.

[¶23.]  This is entirely a question of law only 
requiring a construction of appellant's security agreement and financing 
statement and a construction of appellee's security agreement and financing 
statement. Construction of an unambiguous agreement is done by the court as a 
matter of law. Tate v. Mountain States 
Telephone and Telegraph Company, Wyo., 647 P.2d 58 (1982). Summary judgment is 
proper where the language of an agreement is plain and unequivocal; the language 
in such case is controlling and construction of its provisions is for the court 
as a matter of law. Kuehne v. Samedan Oil 
Corporation, Wyo., 626 P.2d 1035 (1981). The existence of 
such documents is undisputed as is the fact that both were perfected by filing 
with the county clerk. W.S. 34-21-931. No other facts are necessary to a 
resolution of priority of one over the other. The interests of the appellant and 
appellee are not conflicting. Appellee has an interest in goods. Appellant has 
an interest in equity; in other words, at the most, in any surplus remaining 
after appellee's debt and security interest have been satisfied from the sale of 
the real estate and goods.

[¶24.]  Appellant contends that appellee was 
under some obligation to inquire of appellant as to what the parties intended to 
cover. That may not be necessary where the appellant has filed the entire 
agreement creating the security interest. The statutory requirement for 
perfecting a security interest is that only a financing statement need be filed 
as notice. This is referred to as "notice filing." The notice itself indicates 
merely that the party who has filed may have a security interest in the 
collateral described. Further inquiry under those circumstances may be required 
to determine the state of affairs. However, such may not be necessary where the 
entire security agreement between the secured party and debtor is filed. 
Official comment to § 9-402, Uniform Commercial Code (W.S. 34-21-951). It will 
be recalled from the facts we have laid out that appellant did file with the 
county clerk a combination security agreement and financing statement. Appellee 
could see the state of affairs from the agreement. Appellant cannot stretch the 
agreement to include other property. The intention of the parties to an 
agreement is determined by the words of their agreement if clear and 
unambiguous. Kost v. First National Bank 
of Greybull, Wyo., 684 P.2d 819 (1984). The agreement of appellant 
with the Colemans is clear and unambiguous.

[¶25.]  Appellant's description of intangible 
collateral as "equity" was very simply insufficient to give notice of a security 
interest in particular goods.

[¶26.]  Affirmed.

1 We are not concerned 
with the Casper 
property and the proceeds from its sale; they are not at issue in this 
appeal.

2 The instruments which we 
are concerned with were signed prior to amendments of the Wyoming Uniform 
Commercial Code effective July 1, 1983; any amendments do not affect this 
case.