Title: BATEY LAND LIVESTOCK CO v NIXON
Citation: N/A
Docket Number: 13370
State: Montana
Issuer: Montana Supreme Court
Date: March 2, 1977

No. 13369 & 13370 I N THE S U P R E M E COURT O F THE STATE O F MONTANA 1977 B A T E Y L A N D & LIVESTOCK C O M P A N Y , a Montana Corporation, P l a i n t i f f and Appellant, -vs- ROBERT NIXON, Defendant and Third Party P l a i n t i f f and Appellant versus Fred Hail and Respondent t o Batey -vs- ROBERT BRAATON and H E L E N BRAATON, h i s wife and FRED HALL, Third Party Defendants and Respondents. ............................................................ BATEY LAND & LIVESTOCK, a Montana Corporation, P l a i n t i f f and Appellant, -vs- ROBERT PAULEY, Defendant and Third Party P l a i n t i f f and Appellant versus Fred Hall and Respondent t o Batey -vs- ROBERT BRAATON and HELEN BRAATON, h i s wife and FRED HALL, Third Party Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e Sixteenth J u d i c i a l D i s t r i c t , Honorable A. B. Martin, Judge presiding. Counsel of Record: For Appellants: Krutzfeldt and Haker, Miles City, Montana W. J. Krutzfeldt argued, Miles City, Montana Anderson, Symrnes, Forbes Peete & Brown, B i l l i n g s , Montana James L. Jones argued, B i l l i n g s , Montana For Respondents: Lucas, J a r d i n e and Monaghan, Miles C i t y , Montana Thomas M. Monaghan argued, Miles City, Montana Submitted: January 1 2 , 1977 Decided : WAR 2 1977 M r . Justice Gene B. Daly delivered the Opinion of the Court. Batey Land & Livestock Company appeals from summary judgment rendered for defendants Robert Nixon and Robert Pauley by the d i s t r i c t court, Custer County, i n actions for conversion. Defendants Nixon and Pauley appeal from the d i s t r i c t court's order dismissing t h e i r third party complaints against Fred Hall for indemnification. O n May 2, 1968, Baby Land & Livestock Company (Bgtey) sold 215 head of Pereford c a t t l e , 198 cows and 17 bulls, branded Heart bar H , t o Robert and Helen Braaton. Payment was made by promissory note i n the amount of $43,000 executed by Braatons and payable i n installments of $10,000 plus interest on November 1st of each year commencing i n 1968. Braatons also executed a security agreement on May 2, 1968, pledging the c a t t l e a s security for the indebtedness. A financing statement was f i l e d with the Rosebud C6unty clerk and recorder on M a y 6, 1968. O n May 2, 1968 Braatons borrowed $13,570 from the Miles City Production Credit Association (PCA) and executed a security agreement l i s t i n g i t e m s of personal property, including c a t t l e , a s c o l l a t e r a l for the loan: " 2. LIVESTOCK, E Q U I P M E N T ANDIOR OTHER-. G O O D S - A l l livestock, equipment, and/or other goods of every kind and description now owned o r hereafter acquired by the Debtor, including, but not limited t o , the following: Fifty Head of Hereford Cattle, Branded: Left Rib, subject t o prior lien, and described a s follows: 48 Cows 2 Bulls Two Hundred Fifteen Head of Hereford Cattle, Branded: Right Ribs, held by B i l l of Sale, subject t o prior lien, and described a s follows: 198 Cows 17 Bulls ALSO: One Hundred Per-Cent (100%) of the increase from One Hundred Ninety-Eight Head of Hereford Cows, branded : Right Ribs, said increase t o be Right Ribs; @ branded:" The security agreement provided t h a t Braatons not s e l l o r dispose of any of t h e c o l l a t e r a l without t h e consent of PCA. O n May 9 , 1968, Robert L. Batey, acting i n h i s capacity a s president of Batey Land & Livestock Company, executed a subordina- t i o n agreement prepared by PCA. By the terms of : the agreement, Batey consented t o give P C A a f i r s t l i e n on Braatons' personal property, not t o exceed $13,570 the amount of t h e loan: [May 9, 1968 Subordination Agreement] "In order t o a s s i s t him t o obtain t h i s loan, I agree t h a t any i n t e r e s t o r l i e n which I have o r may obtain during t h e l i f e of such security agreement, i n o r on h i s r e a l o r personal property (including crops), and t h e increase from 198lHereford cows, b r a n d e d : w marked on r i g h t side, w i l l be considered junior and in- f e r i o r t o t h a t l i e n which you may take on such property t o secure your loan. I further agree t h a t I w i l l not d i s t u r b him i n the possession of e i t h e r h i s r e a l o r personal property, f o r a period not t o exceed eight months from t h i s date, without f i r s t securing your written consent." O n May 21 and May 28, 1968, P C A f i l e d notices of security agreement with the Montana Livestock Commission, Helena, Montana, t o perfect i t s security i n t e r e s t embodied i n the May 2, 1968 security agreement. Neither notice referred t o o r specified any livestock branded Heart bar H. The only livestock specified were those c a t t l e branded Lazy H hanging H (3) and M hanging 0 (w). Braatons negotiated a second loan with P C A f o r $21,610 and executed a second security agreement on October 31, 1968. This security agreement a l s o l i s t e d items of personal property, including c a t t l e , a s c o l l a t e r a l f o r t h e loan: "LIVESTOCK, EQUIPMENT AND/OR OTHER G O O D W 1 1 livestock, equipment,and/or other goods of every kind and descrip- t i o n now owned o r hereafter acquired by the Debtor, in- cluding, but not limited t o , the following: F i f t y Head of Hereford Cattle, Branded: 3 Left Ribs and Thirty Head of Hereford Calves, Branded: % Right Ribs, described as follows: 48 Cows 30 Calves 2 Bulls Two Hundred Seventeen Head of Hereford Cattle, Branded: Right Ribs, subject t o a f i r s t security interest held by Batey Land & Lovestock Co., described a s follows: 200 Cows 17 Bulls ALSO: One Hundred Per Cent (100%) of the increase from T w o Hundred (200) Head of Hereford Cows, B r a n d e d : m Right Ribs, said increase t o be branded: Right Ribs ;'I O n October 31, 1968, Robert L. Batey, once again acting i n h i s capacity a s president of Batey Land & Livestock Company, executed a second subordination agreement. I n the same language used i n the f i r s t subordination agreement, Batey consented t o give PCA a f i r s t l i e n on Braatons' personal property, not t o exceed $21,610 the amount of the second loan: [October 31, 1968 Subordination Agreement] "In Order t o a s s i s t him t o obtain t h i s loan, I agree t h a t any interest or l i e n which I have or may obtain during the l i f e of such security agreement, i n o r on h i s r e a l or personal property (including crops), and the increase from 200 Hereford cows, b r a n d e d : m marked on right side, w i l l be considered junior and inferior t o that l i e n which you may take on such property t o secure your loan. I further agree that I w i l l not disturb him i n the possession of e i t h e r h i s r e a l or personal property, for a period not t o exceed twelve months from t h i s date, without f i r s t se- curing your written consent." O n November 19, 1968 P C A f i l e d a notice of renewal of security agreement with the Montana Livestock Commission i n order t o perfect its security interest embodied i n the October 31, 1968, security agreement. This notice, a s i n the case of the prior two notices, failed t o refer t o o r specify Heart bar H c a t t l e , specifying only c a t t l e branded Lazy H hanging H and M hanging 0. O n April 21, 1969, Batey f i l e d a notice of security interest with the Montana ~ i v e s t o c k Commission t o perfect i t s security interest embodied i n the May 2, 1968, security agree- ment. e his notice specified livestock branded Heart bar H a s being the subject matter of the security agreement dated May 2, 1968, and l i s t e d Robert and Helen Braaton a s the debtors. Subsequent t o the above transactions, Braatons solicited the services of Fred Hall, a livestock broker, t o negotiate the sale of "Braatons"' cattle. O n ~ecember 6, 1969, Hall negotiatdd with Robert Nixon for the sale of 80 head of c a t t l e , branded Heart bar H for $18,400';' Hall further negotiated with Robert Pauley the s a l e of 20 head of c a t t l e , branded Heart bar H, for $4,200 on December 12, 1969. Hall received payment of the e n t i r e amount from both sales ($22,600) and issued h i s own per- sonal check made payable t o "Robert R. Braaton & P.C .A." i n the amount of $21,990. ($22,600 l e s s $610 Hall's commission for the two sales a t $10 per head.) O n April 26, 1971 Batey f i l e d s u i t against Braatons i n Rosebud County t o recover sums owed by Braatons. The only gay- ments made by Braatons on the $43,000 promissory note appear t o be a payment of $10,000 plus interest made on November 4, 1968, and a payment of ;510,000 plus interest made on November 11, 1969. O n the same date a s the f i l i n g i n Rosebud County, Batey f i l e d the instant actionsin the d i s t r i c t court of Custer County against Nixon and Pauley, for conversion of the Heart bar H c a t t l e . Batey obtained a judgment against Braatons i n the amount of $15,000 on July 22, 1974. That judgment remains entirely unpaid, the Braatons apparently being judgment proof. O n February 11, 1974, Nixon and Pauley f i l e d amended third party complaints against the Braatons and Hall, alleging breach of warranty of title. , After the district court, Rosebud County, determined the liability of Braatons, and upon submission of the instant matters to the district court,; Custer County, Nixon, Pauley and Hall moved for summary judgment. Batey responded by filing a cross-motion for summary judgment. On March 7, 1975 the district court entered its ;memorandum and order denying all defendants' motions for summary judgment and granting Batey's motion on its theory of wrongful conversion. The district court concluded Batey had a perfected security interest in the cattle and Nixon and Pauley had converted the collateral by their purchases. The court found Hall to be a joint tortfeasor in the conversion of the cattle, but failed to find sufficient proof establishing fraud. Subsequent to the district court's order, Nixon and Pauley discovered the subordination agreements which gave PCA a paramount lien. By order dated April 30, 1975 the district court granted " a , motion to set aside the court's order granting summary judgment in favor of Batey. A trial without jury was ordered. The district court granted summary judgment for Nixon and Pauley on March 22, 1976. In its order and memorandum the district court found PCA had a security interest in the Heart bar H cattle for $35,360, the amount of the two loans; that Batey signed agreements subordinating its security interest to the security interest held by PCA; that the subordination agreement signed by Batey was not ambiguous; thatthe security interest agreement between Braatons and PCA gave Braatons the right to sell the Heart bar H cattle with the consent of PCA; that PCA's acceptance of the proceeds from the sales constituted con- sent to the sales; that Nixon and Pauley ,had no actual notice of Batey's security interest; and that the sale of the cattle to Nixon and Pauley was conducted openly, fairly and.at market value. The d i s t r i c t court further ordered the actions against the third party defendants be dismissed with prejudice. A s i n the d i s t r i c t court, t h i s Court w i l l t r e a t the separate actions against defendants Nixon and Pauley a s one, because of the similarity of facts and legal issues presented. O n review, i n i t i a l l y Batey conterids t h e - d i s t r i c t court erred when it granted defendants' motion for summary judgment. I n other words, it i s argued the d i s t r i c t court erred when it found the P C A possessed a perfected f i r s t lien; that the Heart bar H c a t t l e were the subject matter of the unambiguous subor- dination agreement executed by Batey;and there was no issue of fact t o be decided by a jury. A summary judgment can be granted only where the p r e t r i a l record discloses (1) the absence of any genuine issue of material fact and (2) that the moving party is entitled t o judgment a s a matter of law. Rule 56(c), M.R.Civ.P. For an extensive dis- cussion of the principles of summary judgment under Rule 56(c) see: Harland v. Anderson, Mont . , 548 P.2d 613, 33 St.Rep. 363. This Court's i n i t i a l inquiry concerns the presence o r absence of a genuine issue of material fact. Batey contends PCA's failure t o specify Heart bar H c a t t l e i n i t s notices of security agreement and notice of renewal of security agreement i s proof of PCA'S lack of intent t o secure a f i r s t l i e n on the Heart bar H c a t t l e , I n light of t h i s evidence, Batey contends the subordina- tion agreements are ambiguous and t h e i r interpretation is a genuine issue of material fact. It is argued we must look t o the intent of the parties and the underlying circumstances surrounding the execution of the subordination agreements in resolving the legal effect of the subordination agreements. We disagree. The subordination agreements executed by Batey aredear and specific. Each of the instruments contains language sub- ordinating Batey's lien on Braatons' real or personal including crops and the increase from the Heart bar H cattle, to PCA1s lien. Sections 13-704 and 13-705, R . C . M . 1947, are controlling: Section 13-704: "Intention to be ascertained from language. The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." Section 13-705: "Interpretation of written contracts. When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to the other provisions of this chapter." The subordination agreements fail to present a question of fact. The plain and clear meaning of the instruments is control and the intent of the parties is to be ascertained from the instruments. Fulton V . Clark, 167 Mont. 399, 538 P.2d 1371, 32 St. Rep. 8 0 8 . As a matter of law, the subordination agreements give PCA a first lien on the Heart bar H cattle in the amount of $35,350. Since the proceeds of the sale, which the district court found to be open, fair and at market value, were less than this amount, the PCA did not exceed its security interest in the collateral. Batey contends that even if the subordination agreements are found to give PCA a superior lien, PCA failed to perfect its security interests when it failed to specify Heart bar H cattle as being the subject matter of the security agreements in the notices of security agreement and the notice of renewal of security agreement. This argument may be resolved by defining the purposes of the various instruments. The security agreement is the instrument which places the encumbrance on the debtor's property. The financing statement is to evidence an encumbrance on the real or personal property of a debtor and is filed with the county clerk and recorder where the debtor resides for the purpose of giving notice to third parties and perfecting the security interest, in compliance with the Uniform Commercial Code, section 87A-9-401, R.C.M. 1947. The filing of notices of security agreement and notices of renewal of security agreement with the Montana Livestock Commission is in compliance with section 52-319, R . C . M . 1947, which seeks to protect livestock markets from liability for conversion arising out of the sale of livestock burdened with liens. Montana Meat Co. v. Missoula Livestock Auction Co., 125 Mont. 66, 230 P.2d 955. The PCA perfected its security interest when it filed its financing statement on May 13, 1968, and listed "all livestock" as being the collateral for the security agreement. This instru- ment,:+dSly filed in the county where the debtor resided, gave notice to third parties that PCA had a perfected lien on Braatons' cattle. PCA's failure to adequately describe the Heart bar H cattle in the notices of security agreement and the notice of renewal of security agreement would act as a bar to PCA only if the cattle were sold by a livestock market and PCA was attempting to satisfy its lien by an action against the livestock market for conversion. Going one step further, Batey in executing the subordina- tion agreements, had actual notice of PCA's superior lien. Such actual notice estops Batey from coming before the courts and claiming that a sale of the Heart bar H cattle defeated his security interest in the collateral. The conclusive legal effect of the subordination agreements is to subordinate Batey of any interest in the proceeds from the sale of Heart bar H cattle, up to the amount of PCA's lien. We find it unnecessary to discuss defendants' appeal of the district court's order dismissing the third party complaints that against Fred Hall having resolvedlthe district court, in'granting defendants' motion for summary judgment, was not presented with any genuine issue of material fact and as a matter of law de- fendants were entitled to judgment. , The judgment of the district court affirmed. 1 We Concur: