No. 14803 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

HAROLD LEE STURDEVANT, JR., 

Plaintiff and Appellant, 

VS . 

FIRST SECURITY BANK OF DEER LODGE, 

a banking corporation, and FIRST 

NATIONAL BANK OF HELENA, a nationally 

chartered bank, 

Defendants and Respondents. 

Appeal from: District Court of the First Judicial District, 

Honorable Gordon R. Bennett, Judge presiding. 

Counsel of Record: 

For Appellant: 

Tipp, Hoven and Skjelset, Missoula, Montana 

For Respondents: 

~aniels and Mizner, Deer Lodge, Montana 

Submitted on briefs: January 24, 1980 

Decided: 'EB 1 3 ,980 

Filed: ~'Ec & 2 
Mr. Justice John C. Sheehy delivered the Opinion of the Court. 

Appeal is from a summary judgment granted in the District 

Court, First Judicial District, Lewis and Clark County. The 

District Court entered summary judgment upholding the right 

of the respondent banks to repossess a Mooney aircraft and 

sell the same; the proceeds to be applied to debts owed by 

Harold Lee Sturdevant, Sr. to the banks. 

The action was filed by Harold Lee Sturdevant, Jr. on 

October 31, 1978 when the plaintiff allege that a Mooney 

aircraft was wrongfully repossessed by the defendant banks. 

He prayed for a preliminary injunction restraining the disposing 

of the aircraft and asked that he be given possession of it 

during the pendency of the suit. The District Court issued a 

temporary restraining order. The defendant banks filed motions 

to dismiss on the ground that the complaint failed to state a 

claim upon which relief could be granted. On November 21, 1978, 

a hearing was held on the motions to dismiss and at the same 

time on an order to show cause why a preliminary injunction 

should not be granted to give plaintiff temporary possession 

of the plane. Upon stipulation by counsel, the motions to 

dismiss were converted to motions for summary judgment and 

after posthearing briefs were filed and the matter submitted, 

the court granted summary judgment in favor of the banks. 

The agreed facts are that on August 4, 1972, Harold 

Sturdevant, Sr. (plaintiff's father) executed a security 

agreement with First Security Bank of Deer Lodge securing 

a note for $15,069.62 to purchase a Mooney aircraft. The 

plane was listed as collateral on the security agreement 

which was recorded with the FAA on January 23, 1973. 

-1- 
On August 21, 1975, the loan had been paid down by the 

father but the note was renewed by him for a total sum of 

$10,970. There is no evidence that any security agreement 

in connection with this loan was filed with any office. 

On April 7, 1977, the father executed a security agreement 

with First Security Bank of Deer Lodge for a loan of $32,249.40 

to purchase a Cessna airplane which was to be its collateral. 

There is no evidence that this security agreement was filed with 

any office. 

On October 25, 1977, Harold Sturdevant, Jr. purchased the 

Mooney plane from his father. No notice of this sale was given 

to the secured bank and there is no evidence that the sale was 

authorized by the Bank. Harold Sturdevant, Jr. knew of the 

existing security interest in the plane when he purchased it. 

On October 4, 1978, payments to the bank on the Cessna plane 

and the Mooney plane were delinquent. Plaintiff's father 

mailed a check to the Bank to satisfy the obligation on the 

Mooney plane. 

On October 6, 1978, First Security Bank of Deer Lodge in 

conjunction with First National Bank of Helena repossessed the 

Mooney plane for delinquency of the payments on the second 

Mooney loan. 

On October 9, 1978, the Bank received the payment on the 

Mooney debt that had been mailed by the father on October 4. 

After the repossession, the son personally tendered payment 

of $1,632.54 and $47.79 (storage costs), the full amount of the 

remaining Mooney obligation, in an attempt to redeem the Mooney 

plane, pursuant to section 87A-9-506, R.C.M. 1947 (now section 

30-9-506, MCA). The tender was refused by the defendant banks. 

The amount is presently deposited with the court pending the 

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outcome of the suit. It is clear that the defendant banks 

intend to sell the Mooney plane to satisfy the delinquent 

obligations on the Cessna loan. 

On that statement of facts, the son phrases the issue 

as whether a bank may hold property for the payment of a 

debt of another when that property is no longer owned by 

the borrower and is not described in the security agreement. 

We restate the issues as follows: 

(1) Does the security agreement of August 4, 1972 in 

which the Mooney aircraft is listed as collateral include a 

security interest for the later incurred Cessna debt of the 

father? 

(2) What effect does section 30-9-311, MCA, have on the 

sale of the Mooney aircraft by the father to the son? 

(3) What are the redemption rights of the son under these 

facts and under section 30-9-506, MCA? 

Each security agreement executed in this case contained 

the following language, described by the District Court as a 

"dragnet clause": 

"The undersigned (hereinafter called Borrower) 

hereby grants to the secured party in the above 

note (hereinafter called 'Bank') a security 

interest in the following described property 

(hereinafter called 'Collateral') including 

proceeds and products: [herein is specific 

property description] together with all parts, 

accessories, repairs, improvements and accessions thereto now or hereafter at any time made 

or acquired; and All property of every kind and 

description in which the Borrower has or may 

acquire any interest now or hereafter at any 

time in the possession or control of the Bank 

for any reason including without limitation, 

property delivered to the Bank as collateral 

for safekeeping, or for collection or exchange 

for other property, and all dividends and distributions on and other rights in connection 

with such property to secure payment to the 

Bank at its banking house at the address 

stated on this note and all other notes given 
hereafter in renewal thereof, and all other 

notes of Borrower concurrently herewith, 

heretofore or hereafter delivered to or 

purchased or otherwise acquired by the 

Bank and all other liabilities and indebtedness of Borrower to Bank due or to become 

due, direct or indirect, absolute or contingent, joint or several, howsoever created, 

arising or evidenced, now existing or hereafter at any time created, arising or incurred, 

(hereinafter called 'Secured Obligations')." 

The District Court found that the foregoing clause was 

clear, unambiguous and therefore it must be upheld. In Re 

Riss Tanning Corporation (2nd Cir. 1972), 468 F.2d 1211; 

Kenneally v. Standard Electronics Corporation (8th Cir. 

1966), 364 F.2d 642; In Re Iredale's Ltd. (9th Cir. 1973) , 

Nothing in the Uniform Commercial Code that we are able 

to find prohibits such a clause as was used in these security 

instruments. Therefore, the effect of the execution of the 

security interest in the Mooney aircraft instrument, being 

very broadly stated, extends to and covers the debt incurred 

in connection with the Cessna aircraft, even though a separate 

security agreement was executed for that purchase. 

The broad language used in the first Mooney security agreement meant that the Mooney aircraft was collateral not only 

for the first note, but for the renewal note, and for any other 

subsequent loans made by the bank to Harold Sturdevant, Sr. 

The security agreement for the Mooney aircraft had a further 

provision that prevented sale of the Mooney unless the proceeds 

of the sale were paid to the bank. That provision stated: 

"Borrower will not sell, transfer, lease or 

otherwise dispose of the Collateral, or attempt 

or offer to do any of the foregoing without 

the prior written consent of the Bank, and unless 

the Proceeds of any such sale, transfer, lease, 

or other disposition are paid directly to the 

Bank. 'I 
The bank had no knowledge of, and did not receive the 

proceeds of the sale. Harold Lee Sturdevant, Jr. argues 

however, that he was within his rights to purchase from 

the father under section 30-9-311, MCA, of the Uniform 

Commercial Code, which provides as follows: 

"The debtor's rights in collateral may be 

voluntarily or involuntarily transferred (by 

way of sale, creation of a security interest, 

attachment, levy, garnishment or other judicial 

process) notwithstanding a provision in the 

security agreement prohibiting any transfer or 

making the transfer constitute a default." 

It is incorrect to assume that section 30-9-311, MCA, 

permits a transfer by a debtor of collateral under a security 

agreement free of the security interest of the creditor in 

the collateral. Sturdevant, Jr. refers us to the official 

Code Comment under section 9-311, Uniform Commercial Code, 

apparently to the language regarding the purpose of that 

section whichstates that it is "[tlo make clear that in all 

security transactions under this Article, the debtor has an 

interest (whether legal title or an equity) which he can dispose of and which his creditors can reach". 

The body of a law developing with respect to this section 

indicates that the interest of the debtor in the collateral 

may be transferred by him even though the security agreement 

purports to prohibit such transfer and makes the transfer a 

default. Production Credit, Etc. v. Equity Coop, Etc. (Wis. 

1978), 261 N.W.2d 127. However, the fact that the collateral 

may be transferred voluntarily or involuntarily does not destroy or adversely affect a prior perfected security interest, 

without the consent of the secured party. Am. Heritage Bank 

'Apt ' , 

& Trust Co. v. 0 & E., Inc. (Cola.! 1978), 576 P.2d 566, 568. 
In fact section 30-9-311, MCA is intended to protect the 

secured creditor's interest by assuring that any sale of 

the collateral or transfer by operation of law is subject 

to the security interest. Earthmovers, Inc. v. Clarence L. 

Boyd Company, Inc. (Okla. App. 1976), 554 P.2d 877, 879. 

Irrespective of the section, a security agreement may 

declare that the debtor commits a default when he makes 

a transfer of the collateral because the creditor has a 

right to determine who shall be the debtor in possession. 

Poydan, Inc. v. Agia Kiriaki, Inc. (N.J. 1974), 130 N.J. Super. 

Therefore, the father had the right transfer his 

interest in the Mooney airplane to his son where the security 

instrument is perfected, and he is not in default; but the 

creditor, without knowledge of the transfer and under this 

agreement, not having received the proceeds, could under the 

security agreement consider such a transfer a default. In 

any event, the security interest of the creditor here followed the collateral though the transfer occurred under 

section 30-9-311, MCA. 

The rights of redemption of the son are found in section 

30-9-506, MCA. That section provides: 

"At any time before the secured party has disposed 

of collateral or entered into a contract for 

its disposition under 30-9-504 or before the 

obligation has been discharged under 30-9-505(2), 

the debtor or any other secured party may unless 

otherwise agreed in writing after default redeem 

the collateral by tendering fulfillment of all 

obligations secured by the collateral as well as 

the expenses reasonaSly incurred by the secured 

party in retaking, holding and preparing the 

collateral for disposition, in arranging for th~ 

sale, and to the extent provided in the agreement 

and not prohibited by law, his reasonable attorneys' 

fees and legal expenses." 
Here the agreed facts are that the father mailed a 

check for the balance of the Mooney debt before the repossession 

but the check was received by the bank after the repossession. 

Also the sum tendered covered only the amount of the Mooney 

debt and storage costs. In this case, section 30-9-506, MCA, 

required more: the debtor or any other secured party should 

tender "fulfillment of all obligations secured by the collateral." In this case that included the further debt on 

the Cessna airplane. Since that full tender was not made, 

the tender offered by the son in this case did not fulfill 

the requirements of section 30-9-506, MCA. 

No questions are raised as to the identity of the aircraft, 

or the propriety of the repossession, except as we have discussed 

foregoing. Accordingly, we affirm the ~istrict Court. 

y--~-%zJustice -.-.- 

We Concur: 

mief Justice