No. 12887 

IN THE SUPREMH COURT OF THE STATE OF MONTANA 

1975 

ARNOLD FAIRCHILD., H. B. LANDOE and 

F. D. LICHTENBERG, 

Plaintiff% and Appellants, 

WILLIAMS FEED, INC., 

Defendant and Respondent. 

Appeal from: District Court of the Fifth Judicial District, 

Honorable Frank E. Blair, Judge presiding. 

Counsel of Record : 

For Appellant : 

Bennett and Bennett, Bozeman, Montana 

Lyman Bennett Jr. argued, Rozeman, Montana 

For Respondent : 

Schulz and Davis, Dillon, Montana 

Carl Me Davis argued, Dillon, Montana 

Chester Jones argued, Virginia City, Montana 

Filed : !AN tr 

Submitted: November 3, 1975 

Decided 'j27F 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

Plaintiffs sued defendant for damages based on breach 

of contract and conversion. Following a jury trial in the 

district court of Madison County before the Hon. Frank E. Blair, 

the jury returned a verdict for defendant and judgment was entered 

thereon. Plaintiffs appeal from this judgment and denial of 

their motion for judgment notwithstanding the verdict or alternatively for a new trial. 

Plaintiff Arnold Fairchild leased two farm units in 

Madison County from plaintiffs H. B. Landoe and F. D. Lichtenberg. 

Rent was to be paid in the form of a percentage of the crops produced on the land by Fairchild. Defendant Williams Feed, Inc. 

supplied Fairchild with the seed and supplies necessary to grow 

the crops. Fairchild executed a demand note and a security interest in the crops. 

At the district court trial plaintiffs contended that 

defendant supplied a less productive variety of barley seed than 

had been ordered, resulting in a reduced yield and damages of 

$2,618. Plaintiffs also claimed that defendant unlawfully seized 

and converted the hay crop causing actual damages of $5,790.02 

and punitive damages of $10,000. 

Defendant, on the other hand, claimed that plaintiffs' 

low barley yield was attributable to Fairchild's unorthodox farming methods and repeated hail damage. Defendant contended the 

hay was not converted but instead foreclosed upon and sold in a 

commercially reasonable manner after Fairchild defaulted in payment of the demand note. 

The district court granted defendant's motion to dismiss 

plaintiffs Landoe and Lichtenberg from the suit at the close of 

the plaintiffs' case in chief. At the conclusion of all the 

evidence, the district court dismissed plaintiffs' claim for 
punitive damages. Plaintiffs' motions for directed verdicts 

on both claims for relief were denied. The jury returned a 

verdict for defendant. Following denial of plaintiffs' motion 

for a judgment notwithstanding the verdict or alternatively 

for a new trial, plaintiffs appeal from the judgment and denial 

of their motion. 

Plaintiffs list six issues for review on appeal: 

1. Did the district court err in dismissing this action 

as to the claims of plaintiffs H. B. Landoe and F. D. Lichtenberg? 

2. Did the district court err in withdrawing from the 

jury the issue of punitive damages? 

3. Did the district court err in denying plaintiffs' 

motion for directed verdict on the claim for breach of contract? 

4. Did the district court err in denying plaintiffs' 

motion for a directed verdict on their claim for conversion? 

5. Was the evidence in this action sufficient to justify 

the verdict of the jury? 

6. Did the district court err in denying plaintiffs' 

motion for judgment notwithstanding the verdict or in the alternative for a new trial? 

The principal issue on appeal is whether there had been 

a default ant1 proper notification of the private sale of the hay. 

We conclude that there was a default and defendant complied with 

section 87A-9-504, R.C.M. 1947, in disposing of the hay. 

On June 11, 1968, Arnold Fairchild signed a note agreeing 

to pay the sum of $10,023.15 to Williams Feed, Inc. on demand, 

together with interest at the rate of 8% per annum. On the same 

date he also executed a security agreement giving defendant a 

security interest in his hay and grain crops. The agreement provides 

that a default exists whenever: (1) any money due and payable 

remains unpaid, (2) there is a failure to perform any of the 
provisions of the security agreement, (3) there is substantial 

damage or destruction to any portion of the collateral, or (4) 

the secured party deems itself insecure for any reason whatsoever. The agreement also provides that the borrower will keep the 

collateral insured against loss, damage, theft and other risks 

and that any loss recovered from this insurance shall be paid to 

the secured party to reduce the outstanding indebtedness regardless of whether the indebtedness is due and owing. 

It is clear that Arnold Fairchild did not comply with 

the security agreement and was in default. This testimony establishes that Dave Williams of Williams Feed, Inc. demanded payment and gave notice of default: 

"Q. And at that time did you make any demand 

upon the Plaintiff [Fairchild] for payment of 

the note? A. I did. 

"Q. And the debt? A. I did. 

"Q. What did you say? A. I told him he'd better 

get busy and sell that hay and I didn't say sometime. I said we could sell it if he couldn't, 

but we wanted to get that account cleared up. 

We'd carried him since the fall before and we felt 

we were entitled to our money. 

"Q. Was there anything else said? A. Well, he 

still said he didn't want to sell. 

"Q. Was anything said about the price of hay at 

that time? A. Yes, I told him we could get him 

$17.50 [per ton] for the hay and if he could do 

better to go get it, but to get it done." 

The tenor of Williams' testimony is that the debt was 

due and payable and that the hay should be sold immediately to 

provide the funds for payment. He offered to allow Fairchild to 

sell the hay on his own at a better price, if he could get one, 

but did not give him an extension of time for payment of the 

note. Fairchild was in default because he failed to take any 

steps to sell the hay and pay the note. Default also occurred 

when he failed to turn his hail damage proceeds over to the 
defendant as required by the security agreement. 

Section 87A-9-503, R.C.M. 1947, provides in pertinent 

part : 

" * * * a secured party has on default the right 

to take possession of the collateral. In taking 

possession a secured party may proceed without 

judicial process if this can be done without 

breach of the peace or may proceed by action. * * *" 

(Emphasis supplied. ) 

The secured party's right to possession of the collateral 

accrues immediately upon default of the provisions of the security 

agreement. Uniform Commercial Code § 9-503, Uniform Laws Annotated, Official Comment, 1972. County Construction Co. v. Livengood Construction Co., 393 Pa. 39, 142 A.2d 9. 

Section 87A-9-504, R.C.M. 1947, allows the secured party 

to sell the collateral after default: 

"(3) Disposition of the collateral may be by 

public or private proceedings and may be made by 

way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at 

any time and place and on any terms but every 

aspect of the disposition including the method, 

manner, time, place and terms must be commercially 

reasonable. * * * Reasonable notification of the 

time and place of any public sale or reasonable 

notification of the time after which any private 

sale or other intended disposition is to be made 

shall be sent by the secured party to the debtor. 

* * *" (Emphasis supplied.) 

The Uniform Commercial Code, § 9-504, Uniform Laws Annotated, Official Comment 5, 1972, states: 

"'Reasonable notification' is not defined in this 

Article [Secured ~ransactions]; at a minimum it 

must be sent in such time that persons entitled 

to receive it will have sufficient time to take 

appropriate steps to protect their interests by 

taking part in the sale or other disposition if 

they so desire." 

Oral notice is sufficient to meet the requirements of 

Uniform Commercial Code, § 9-504(3). Crest Investment Trust, 

Inc. v. Alazas, 264 Md. 571, 287 A.2dGl; GAC Credit Corp. v. 

Small Business Administration, 323 F.Supp. 795; 4 Anderson, 2nd 

Ed, Uniform Commercial Code, B 9-504:16. 

Although at trial it was disputed whether the notification 
occurred in September or October of 1968, Fairchild had sufficient notice to allow him to take steps to protect his interest 

in the hay prior to its sale in December 1968 and January 1969. 

The record indicates that as late as January 1969, Fairchild 

had made no effort to sell the hay and pay the note. Consequently defendant had the right to take possession of the hay and 

sell it at a private sale pursuant to section 87A-9-504, R.C.M. 

1947. 

Plaintiffs next contend that the trial court erred in 

dismissing plaintiffs H. B. Landoe and F. D. Lichtenberg from 

the suit. This issue is irrelevant in view of our affirmance 

of the judgment for defendant. 

Plaintiffs also contend the district court erred in withdrawing the issue of punitive damages from the jury. They rely 

on the proposition that exemplary damages may be awarded where 

the defendant has been guilty of actual or presumed malice (section 

17-208, R.C.M. 1947), and that malice can be implied where the 

conduct of the defendant is unjustifiable. Cherry-Burrell Co. 

v. Thatcher, 107 F.2d 65; Moelleur v. Moelleur, 55 Mont. 30, 173 

P. 419; Ramsbacher v. Hohrnan, 80 Mont. 480, 261 P. 273. 

We agree with the conclusion of the district court that 

the facts of the instant case do not support an inference of 

malice. Defendant, in selling the hay, was merely exercising 

its rights under the security agreement and was not engaging in 

a wanton or willful act constituting malice. In addition to extending credit to Fairchild for farming supplies, defendant repeatedly loaned him money for living expenses. There is simply 

no evidence supporting an inference of malice. 

The remaining issues involve disputed factual questions 

on which conflicting evidence was presented at the trial. The 

jury weighed the evidence and resolved the disputed facts in 
favor of defendant. This Court will not reverse the jury's 

determination of the facts based on substantial, though conflicting evidence. Richardson v. Howard Motors, Inc., 163 > 

Mont. 347, 516 P.2d 1153 and cases cited therein. 

The judgment of the district court is affirmed. 

Justice 

a 

We concur: 3..! 

Chief Justice