Title: BANK OF SHERIDAN v DEVERS
Citation: N/A
Docket Number: 84-432
State: Montana
Issuer: Montana Supreme Court
Date: July 30, 1985

No. 84-432 IN THE SUPREME COURT OF THE STATE OF MONTANA 1985 BANK OF SHERIDAN, a Montana Banking Corp. , Plaintiff and Respcndent, -vs- CLOYD W . DEVERS I Defendant and Appellant. APPEAL FROM: District Court of the Fifth Judicial District, In and for the County of Beaverhead, The Honorable Frank Davis, Judge presiding. COUNSEL OF RECORD: For Appellant: Datsopoulos, MacDonald & Lind; Edward A . Murphy, Missoula, Montana For Respondent : Kirwan & Barrett; Kelly M. Hogan, Bozeman, Montana Filed: Submitted on Briefs: June 6, 1985 Decided: July 30, 1985 M r . J u s t i c e Frank B. Morrison d e l i v e r e d t h e Opinion of t h e Court. Cloyd W. Devers a p p e a l s t h e January 18, 1984, f i n d i n g s o f f a c t and conclusions o f law and t h e J u l y 2 4 , 1984, o r d e r o f t h e F i f t h J u d i c i a l D i s t r i c t Court g r a n t i n g two d e f i c i e n c y judgments t o t h e Bank o f Sheridan. W e r e v e r s e t h e o r d e r o f t h e D i s t r i c t Court. Appel l a n t Cloyd Devers (Devers) executed two promissory n o t e s t o t h e Bank o f Sheridan (Bank) on A p r i l 16, 1981, one f o r $94,802.71 and t h e o t h e r f o r $21,580.03. The n o t e s w e r e secured by Devers' farm machinery, equipment and l i v e s t o c k . Devers subsequently d e f a u l t e d on t h e notes. Devers f i l e d a p e t i t i o n f o r bankruptcy on August 21, 1981. Bank f i l e d a complaint August 25, 1981, demanding t h e $104,021.90 due and owing on t h e two notes. Subsequentl-y, w i t h t h e Bankruptcy C o u r t ' s permission, Bank repossessed t h e c o l l a t e r a l . The l i v e s t o c k was immediately sold a t a p u b l i c a u c t i o n i n Idaho F a l l s , Idaho. The farm machinery and equipment w e r e s o l d a t v a r i o u s s a l e s over a p e r i o d of time. A w r i t t e n n o t i c e d a t e d November 8 , 1982, was s e n t by t h e a t t o r n e y f o r Bank t o Devers s t a t i n g t h a t c e r t a i n l i s t e d farm machinery and equipment would be s o l d a t a p r i v a t e a u c t i o n i n Bank's lobby on November 19, 1982, a t 10:OO a.m. The l o c a l newspapers w e r e unable t o p u b l i s h t h e n o t i c e p r i o r t o Nov~m- b e r 19, 1982. Therefore, t h e s a l e d a t e was changed t o Novem- b e r 24, 1982. A n o t i c e was published i n t h r e e l o c a l papers l i s t i n g t h e i t e m s f o r s a l e ( i n c l u d i n g two p i e c e s o f equipment n o t l i s t e d on Devers' n o t i c e ) and s t a t i n g t h e following: "Submit Bids t o J i m S h i r e s , Bank o f Sheridan, P. 0. Box 587, Sheridan, M t . 59749 " P l e a s e e n c l o s e a s e p a r a t e s e a l e d envelope w i t h your bid enclosed, showing 'equipment b i d 1 on t h e o u t s i d e o f envelope. Bids w i l l be opened November 24, 1982, a t 10:OO a.m. W e r e s e r v e t h e r i g h t t o r e f u s e any o r a l l b i d s . Contact J i m S h i r e s a t 842-5411 t o view any o f t h e s e i t e m s . " This same n o t i c e was posted i n Bank's lobby. Devers contends he received no n o t i c e , w r i t t e n o r o r a l , o t h e r t h a n t h a t dated November 8 , 1982, and t h a t he was never n o t i f i e d o f t h e change i n t h e s a l e d a t e . M r . Robert T. Smith, P r e s i d e n t o f t h e Bank o f Sheridan, t e s t i f i e d a t t r i a l t h a t he was c e r t a i n M r . S h i r e s , then V i c e P r e s i d e n t o f Bank, had "informed" Devers o f t h e s a l e . Regarding h i s conversa- t i o n w i t h Devers, M r . S h i r e s t e s t i f i e d a s follows: "Q. I ' l l r e f e r you t o t h e a u c t i o n s a l e , p r i v a t e a u c t i o n s a l e o f November 24th, 1982, and t h e days p r i o r t o t h a t . Did you have occasion a t any t i m e d u r i n g t h e month o f November t o d i s c u s s t h i s par- t i c u l a r s a l e w i t h M r . Devers? "A. On one occasion, M r . Devers c a l l e d m e concern- i n g t h e pickup t h a t was being s o l d , yes. "Q. Do you r e c a l l approximately when t h a t conver- s a t i o n took place? "A. Some t i m e inbetween t a k i n g possession o f t h e equipment and t h e s a l e . "Q. Did he q u e s t i o n you a t any t i m e concerning t h e p a r t i c u l a r t i m e t h a t t h e s a l e was going t o t a k e p l a c e , o r anything o f t h a t n a t u r e ? "A. I b e l i e v e we discussed t h a t . W e t a l k e d about t h e s a l e and t h e f a c t t h a t we w e r e t a k i n g b i d s on t h e equipment, yes." Approximately one-half o f Devers' farm machinery and equipment was s o l d a t t h e November 24, 1982, s a l e . The remaining equipment was s o l d a t s e v e r a l d i f f e r e n t " p r i v a t e t r e a t y " s a l e s over t h e course of s e v e r a l months. It i s undisputed t h a t Devers was given no n o t i c e o f any s a l e subse- quent t o November 2 4 , 1982. A f t e r t h e c o l l a t e r a l was s o l d , Bank f i l e d a motion f o r judgment by d e f a u l t on September 26, 1983, r e q u e s t i n g d e f i - ciency judgments o f $36,995.21 on one n o t e and $7,908.96 on t h e o t h e r , a t t o r n e y ' s f e e s , c o l l e c t i o n expenses and c o s t s . Following a bench t r i a l , Bank was awarded d e f i c i e n c y judg- ments o f $29,926.22 and $7,908.83, a s w e l l a s $5,733.58 f o r t h e c o s t o f t h e s a l e s . In h i s appeal o f t h e o r d e r , Devers r a i s e s t h e following i s s u e s : 1. Whether t h e t r i a l c o u r t e r r e d i n holding Devers l i a b l e f o r d e f i c i e n c i e s on two promissory n o t e s when: ap- proximately one-half o f t h e n o t e s ' c o l l a t e r a l was s o l d a t a s a l e ; Devers' n o t i c e o f s a l e was erroneous a s t o t h e d a t e and n a t u r e o f t h e s a l e ; and t h e o t h e r h a l f o f t h e c o l l a t e r a l was s o l d a t s a l e s w i t h no n o t i c e t o Devers? 2. Assuming Devers i s l i a b l e f o r t h e d e f i c i e n c i e s , i s t h e t r i a l c o u r t ' s determination o f t h e amount o f d e f i c i e n c y supported by s u b s t a n t i a l c r e d i b l e evidence? Our r e s o l u t i o n o f i s s u e one r e n d e r s c o n s i d e r a t i o n o f i s s u e two moot. The Uniform Commercial Code i s c o d i f i e d i n T i t l e 30, Chapters 1 through 9 o f t h e Montana Code Annotated. Pursuant t o 5 30-9-504(3), MCA, a secured c r e d i t o r i s e n t i t l e d t o s e l l . c o l l a t e r a l a f t e r a d e f a u l t , s o long a s "every a s p e c t o f t h e d i s p o s i t i o n i n c l u d i n g t h e method, manner, t i m e , p l a c e , and terms" a r e commercially reasonable. T h i s i n c l u d e s a commer- c i a l l y reasonable n o t i f i c a t i o n t o t h e d e b t o r o f t h e pending s a l e . Montana s t a t u t e s provide: " U n l e s s c o l l a t e r a l is p e r i s h a b l e o r t h r e a t e n s t o d e c l i n e s p e e d i l y i n value o r is o f a t y p e customar- i l y s o l d on a recognized market, reasonable n o t i f i - c a t i o n of t h e t i m e and p l a c e o f any p u b l i c s a l e o r reasonable n o t i f i c a t i o n o f t h e t i m e a f t e r which any p r i v a t e s a l e o r o t h e r intended d i s p o s i t i o n i s t o be made s h a l l be s e n t by t h e secured p a r t y t o t h e d e b t o r i f he has n o t signed a f t e r d e f a u l t a s t a t e - ment renouncing o r modifying h i s r i g h t t o n o t i f i c a - t i o n o f s a l e . " 5 30-9-504(3), MCA. Devers never renounced h i s r i g h t t o n o t i f i c a t i o n . "[Tlhe burden o f proving t h e commercial reasonableness o f t h e d i s p o s i t i o n o f c o l l a t e r a l i s on t h e secured p a r t y . " Farmers S t a t e Bank v. Mobile Homes Unlimited (1979), 181 Mont. 342, 347, 593 P.2d 734, 737. The burden o f proving t h e commercial reasonableness o f t h e n o t i f i c a t i o n o f a d e b t o r of an impending s a l e i s t h e r e f o r e on t h e secured p a r t y . Bank has n o t m e t t h i s burden. Devers a l l e g e s t h a t t h e November 8 , 1982, n o t i c e o f s a l e was commercially unreasonable because it contained an i n c o r - r e c t s a l e d a t e and s t a t e d t h a t t h e s a l e would be p r i v a t e , when i n f a c t t h e a c t u a l s a l e conducted was p u b l i c . W e need n o t decide t h e n a t u r e o f t h e November 24, 1982, s a l e a s t h e n o t i c e given Devers was commercially unreasonable n o t i c e o f e i t h e r a p r i v a t e o r a p u b l i c s a l e . The only w r i t t e n n o t i c e given Devers o f t h e i n i t i a l s a l e contained t h e wrong d a t e . I t a l s o f a i l e d t o s t a t e t h a t s e a l e d b i d s w e r e t o be submitted. The only evidence p r e s e n t - ed by Bank t o counter Devers' testimony t h a t he received no n o t i c e , w r i t t e n o r o r a l , o f t h e c o r r e c t d a t e o f t h e s a l e was M r . S h i r e ' s testimony quoted p r e v i o u s l y . However, S h i r e s never t e s t i f i e d t h a t he t o l d Devers t h e c o r r e c t d a t e o f t h e s a l e . F u r t h e r , n e i t h e r t h e s a l e n o t i c e s i n t h e newspapers nor t h e n o t i c e posted i n Bank's lobby could be r e l i e d on by Bank t o provide n o t i c e o f t h e c o r r e c t d a t e and method of s a l e t o Devers. See L i b e r t y National Bank o f Fremont v. Greiner (Ohio App. 1978), 405 N.E.2d 317, and Hodges v. Norton (N.C.App. 1 9 7 6 ) , 223 S.E.2d 848. F i n a l l y , Bank f a i l e d t o provide Devers w i t h n o t i c e o f any s a l e held subsequent t o November 24, 1982. I n o r d e r f o r t h e manner of d i s p o s i t i o n of t h e c o l l a t e r a l t o have been commercially reasonable and f a i r t o d e b t o r , n o t i c e o f t h e s e subsequent s a l e s should a l s o have been provided. A s t i m e passed, Devers might have found himself i n a more s t a b l e p o s i t i o n and t h u s a b l e t o purchase some o f h i s own equipment. O n t h e b a s i s o f t h e preceding d i s c u s s i o n , w e hold t h a t t h e following f i n d i n g o f t h e t r i a l judge i s n o t supported by s u b s t a n t i a l , c r e d i b l e evidence. "4. The secured p r o p e r t y was s o l d by t h e Plain- t i f f , t h e l i v e s t o c k a t a p u b l i c a u c t i o n a t a l i v e - s t o c k market and t h e farm machinery and equipment and o t h e r p r o p e r t y a t a p r i v a t e s a l e conducted by t h e P l a i n t i f f . The Defendant had b o t h a c t u a l and c o n s t r u c t i v e n o t i c e o f t h e v a r i o u s s a l e s and, i n f a c t , by h i s conduct, r a t i f i e d , approved and par- t i c i p a t e d i n t h e s a l e procedure." Bank's f a i l u r e t o g i v e t h e d e b t o r commercially reason- a b l e n o t i c e o f t h e s a l e s o f h i s c o l l a t e r a l p r e c l u d e s Bank from recovering any d e f i c i e n c y judgment from Devers. ~ i p p e r t v. B l a c k f e e t T r i b e o f t h e Blackfeet Indian Reservation (Mont. The d e c i s i o n o f t h e t r i a l c o u r t awarding Bank two d e f i - ciency judgments a g a i n s t Devers i s reversed. W e concur: r,