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 theFifth Judicial District, Honorable Frank E. Blair, Judge presiding. Counsel of Record: ForAppellant: Bennett and Bennett, Bozeman, Montana Lyman Bennett Jr. argued, Rozeman, Montana For Respondent: Schulz and Davis, Dillon, Montana Carl MeDavis argued, Dillon, Montana Chester Jones argued, Virginia City, Montana

Filed: 

## !AN tr Submitted: November 

### 3, 1975 Decided 'j27FMr. 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 judgmentwas entered thereon. Plaintiffs appeal from this judgment and denial of their motion for judgment notwithstanding the verdict or alternatively for a new trial. PlaintiffArnold 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 cropsproduced 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 lessproductive 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'sunorthodox 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'smotion 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 forpunitive 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 theirmotion. Plaintiffs list six issues for reviewon 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? Theprincipal issue on appeal is whether there had been a default ant1 proper notification of the private sale of the hay. We conclude that therewas 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, togetherwith 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 agreementprovides that a default exists whenever: (1)any money due and payable remains unpaid, (2) there is a failure to perform any of theprovisions of the security agreement, (3) there is substantial damage ordestruction toany portion of thecollateral, or (4) the secured party deems itself insecure for any reason whatsoever. The agreement alsoprovides that theborrower willkeep the collateral insured against loss, damage, theft and other risks and that any lossrecovered from this insurance shall be paid to the secured party toreduce the outstanding indebtedness regardlessof whether the indebtedness isdue and owing. It isclear thatArnold Fairchild did not comply with the security agreement and was indefault. This testimony establishes that Dave Williams of Williams Feed, Inc. demanded payment and gave noticeof default: "Q. And atthattimedid you make any demand upon the Plaintiff [Fairchild] forpayment of thenote? A. I did. "Q. And the debt? A. I did. "Q. What did you say? A. I told him he'd better getbusy and sell that hay and I didn't say sometime. I saidwe could sellit if he couldn't, but we wanted toget that account cleared up. We'd carried him since the fallbefore and we felt we were entitled toour 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 gethim $17.50 [perton] for thehay and if he could do better togo get it, but toget it done." The tenor of Williams' testimony isthat the debt was due and payable and that the hay should be sold immediately to provide the funds forpayment. Heoffered toallowFairchild to sell the hay on his own ata betterprice, if he could getone, but did not give him an extension of time forpayment of the note. Fairchildwas indefault because he failedtotake any stepsto sell the hay and pay thenote. Default alsooccurred when he failed toturnhis haildamage proceeds over tothedefendant 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 donewithout breach of the peace ormay proceed by action. 

## * 

## * *"

(Emphasissupplied.) 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 LawsAnnotated,Official Comment, 1972. County Construction Co. v. Livengood Construction Co., 393 Pa. 39, 142A.2d 9. Section 87A-9-504,R.C.M. 1947,allows the secured party to sell the collateral after default: "(3) Disposition of the collateralmay be by public or private proceedings and may be made by way of one ormore contracts. Sale or other dispositionmay 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 termsmust 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. 

## * * *" (Emphasissupplied.) TheUniform Commercial Code, § 9-504,Uniform LawsAnnotated, Official Comment 5, 1972, states: "'Reasonable notification' isnot defined in this Article [Secured~ransactions];at a minimum it must be sent in such time that persons entitled to receive itwill 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 requirementsof Uniform Commercial Code, § 9-504(3). Crest InvestmentTrust, Inc. v. Alazas, 264 Md. 571, 287A.2dGl; GAC Credit Corp. v. Small Business Administration, 323 F.Supp. 795; 

### 4Anderson, 2nd Ed,Uniform Commercial Code,

### B 9-504:16. Although at trial itwas disputed whether the notificationoccurred 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 salepursuant 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 damagesmay 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 conductof the defendant is unjustifiable. Cherry-BurrellCo.

v. Thatcher, 107 F.2d 65;Moelleur v. Moelleur, 55 Mont. 30, 173 P. 419; Ramsbacher v. Hohrnan, 80Mont. 480, 261 

### P. 273. We agreewith the conclusion of the district court that the facts of the instant case do not supportan inferenceof malice. Defendant, in selling the hay,wasmerely exercising its rightsunder the security agreement and was not engaging in

a wanton orwillful act constitutingmalice. 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

onwhich conflicting evidence was presented at the trial. The juryweighed the evidence and resolved the disputed facts infavor 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