Opinion ID: 160061
Heading Depth: 3
Heading Rank: 1

Heading: NTPCA's Lien Priority Claim

Text: 13 NTPCA argues that the district court erred in granting summary judgment for MCNB on its claim that it has priority in the proceeds 5 from the Clarks' sale of their cattle to Conley. NTPCA puts forth a number of different legal theories in support of this claim. We hold that the district court erred in granting summary judgment against NTPCA on the lien priority claim, but only as to one of the theories asserted by NTPCA.
14 NTPCA first urges that the district court erred in rejecting NTPCA's claim that it has priority in the proceeds received by MCNB from the sale of the 1,090 head of cattle based on the theory that MCNB terminated the 1991 Financing Statement. 6 NTPCA can provide no direct evidence to show that MCNB terminated the 1991 Financing Statement. In an effort to show that MCNB terminated the statement, NTPCA emphasizes that (1) the 1991 Financing Statement was missing from the public record and (2) MCNB engaged in a pattern of filing and releasing financing statements. NTPCA asserts that, based on this evidence, a genuine issue of material facts exists as to whether MCNB also terminated the 1991 Financing Statement. We agree. 15 The record reflects that NTPCA searched the McCurtain County records for liens against or other security interests in the Clarks' assets on December 9, 1992, March 10, 1993, November 1, 1994, and October 20, 1995. NTPCA never located a copy of the 1991 Financing Statement during these searches. Moreover, NTPCA requested the McCurtain County Clerk to conduct a certified lien search on November 3, 1995. Apparently, this lien search did not reveal the existence of the 1991 Financing Statement either. 16 The fact that the financing statement was missing from the record, alone, would not be sufficient to put NTPCA into a position of first priority. Under the UCC, the presentation for filing of a financing statement and tender of the filing fee or acceptance of the statement by the filing officer constitutes proper filing. See Okla. Stat. Ann. tit. 12A, § 9-403(1). In addition, a secured party does not bear the risk of improper filing or indexing as long as its conduct does not lead to the error on the part of the filing officer. See Okla. Stat. Ann. tit. 12A, § 9-407 cmt.1; McMillin v. First Nat'l Bank & Trust Co., 407 F. Supp. 799, 803 (W.D. Okla. 1975); Liberty Nat'l Bank & Trust Co. v. Garcia, 686 P.2d 303, 306 (Okla. Ct. App. 1984). 17 NTPCA argues, however, that the present situation can be distinguished from these cases, because MCNB engaged in a practice of filing and later terminating financing statements. NTPCA argues that a fact finder could infer that the 1991 Financing Statement was terminated like a number of other financing statements filed by MCNB with the McCurtain County Clerk in connection with loans made to the Clarks. NTPCA provides evidence to show that MCNB filed UCC-1 financing statements on: September 28, 1989; July 2, 1990; October 22, 1990; March 28, 1991; September 20, 1991; June 23, 1992; December 15, 1992; December 15, 1994; and November 12, 1995. 18 Moreover, NTPCA provides evidence that six of these eight financing statements were terminated by MCNB. 7 Wyrick testified during his deposition that on September 26, 1990, MCNB terminated the financing statements filed on September 28, 1989 and July 2, 1990. In addition, the record includes copies of the October 22, 1990 financing statement and the March 28, 1991 financing statement which each bear the handwritten statement Released 9-11-91. 8 NTPCA has also produced a copy of the June 23, 1992 financing statement bearing a stamp from the County Clerk's office stating Released December 3, 1992 and a copy of the December 15, 1994 financing statement bearing a stamp from the County Clerk's office stating Released March 12, 1993. 9 19 The record also includes evidence describing the practice of the McCurtain County Clerk's office when terminating UCC-1 financing statements. Karen Conaway, the McCurtain County Clerk, stated in a sworn affidavit that [w]henever a termination statement or release of lien is presented to the Clerk's Office, the Clerk removes the original filing maintained in the public records, stamps it released and returns it to the secured party. Based on this explanation of the procedures used by the McCurtain County Clerk's office, a fact finder could conclude that the financing statements bearing the released notation had been terminated by MCNB. 10 20 We also believe a fact finder could conclude that MCNB terminated the 1991 Financing Statement because it wished to hide its lending relationship with the Clarks and its related security interests in the Clarks' livestock. A fact finder could draw this inference from evidence suggesting that MCNB terminated a number of its other financing statements in order to prevent NTPCA from detecting its security interests in the Clarks' cattle. NTPCA conducted regular inspections of the McCurtain County records in order to ensure the absence of any other liens which could impair NTPCA's collateral. Apparently, NTPCA almost always gave Rowland Clark advance notice of its intention to inspect the McCurtain County records a few days before it did so. On three occasions, MCNB's decision to terminate financing statements preceded NTPCA's lien searches by a few days. Specifically, MCNB terminated two financing statements on September 26, 1990 the day before NTPCA performed a search of the liens on file at McCurtain County. Similarly, MCNB terminated two other financing statements on September 11, 1991, which was one day before NTPCA inspected the county records. Finally, MCNB allegedly terminated the June 23, 1992 financing statement just six days before NTPCA inspected the McCurtain County records on December 9, 1992. 21 We further note that a fact finder could also find it significant that MCNB terminated its financing statements despite the fact there was a substantial amount remaining due on MCNB's loans to the Clarks that were associated with these liens. 11 When MCNB terminated the financing statements filed on September 28, 1989 and July 2, 1990, the Clarks still owed MCNB $193,931.31. Similarly, when MCNB allegedly terminated the October 22, 1990 and March 28, 1991 financing statements, the Clarks owed $199,677.96 to MCNB. Finally, the Clarks owed MCNB $199,536.24 when MCNB allegedly terminated the filing statements filed on June 23, 1992 and December 15, 1992. This evidence tends to support the conclusion that the financing statements were released for the purposes of hiding the lending relationship, rather than because the Clarks had repaid their loans to MCNB. 22 We find NTPCA's evidence supporting the conclusion that MCNB engaged in a practice of terminating UCC-1 financing statements in order to preclude detection of its lending relationship with Rowland Clark by NTPCA is sufficient to create a genuine issue of material fact as to whether MCNB also terminated the 1991 Financing Statement. We therefore conclude that the district court erred in granting summary judgment for MCNB on NTPCA's lien priority claim.
23 NTPCA also claims that, even if MCNB's 1991 Financing Statement is valid and gives MCNB first priority in some of the cattle the Clarks sold to Conley, NTPCA nonetheless has priority over MCNB in the proceeds from the sale of at least 600 of the cattle because those cattle were located in Texas at the time of the sale. 12 NTPCA bases this argument on the fact that its 1993 Financing Statement covered all cattle owned by the Clarks whereas MCNB's 1991 Financing Statement only covered the Clarks' cattle located in McCurtain County. We hold that the district court did not err in granting summary judgment to MCNB on this claim. 24 As noted above, the record reflects that Conley purchased 1,090 steers from Rowland Clark in September 1995 and October 1995, and that Conley provided payment for the steers in the form of three checks: one to Rowland Clark individually for $135,464.50; one to Rowland Clark and MCNB for $205,856.43; and one to Rowland Clark and NTPCA for $111,000.94. Based on these checks, however, NTPCA cannot show that MCNB received proceeds from the sale of the 600 Texas cattle. Although the September 13 check to Rowland Clark bears a notation indicating that the check is payment for 308 steers, neither of the other two checks indicate the number of cattle sold to Conley with respect to those sales. There is no evidence that the proceeds from the sale of the Texas cattle went to MCNB or that those proceeds did not go to Rowland Clark and NTPCA. 13 Because NTPCA has failed to produce any evidence indicating that MCNB received proceeds from the sale of the Texas cattle, we cannot conclude that the district court erred in granting summary judgment for MCNB on this theory.
25 NTPCA further argues that it has priority in the cattle sold to Conley based on the fact that it held a PMSI in the 1,688 head of cattle that the Clarks purchased through their loan from NTPCA. NTPCA alleges that the cattle sold to Conley were one and the same as those in which it held a PMSI. A party holds a PMSI in collateral if the security interest is taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used. Okla. Stat. Ann. tit. 12A, § 9-107. A perfected purchase money security interest generally takes priority over other perfected security interests. See Okla. Stat. Ann. tit. 12A, § 9-312. Thus, NTPCA argues that, even if MCNB's 1991 Financing Statement is valid, it has a right to the proceeds of the sale to the extent that the Clarks sold cattle to Conley in which NTPCA held a PMSI. 26 Even assuming NTPCA did, in fact, have a PMSI in the cattle purchased with proceeds from its loan to the Clarks, we would nonetheless find that this argument does not warrant reversal because NTPCA cannot show that MCNB received proceeds from the sale of cattle in which it held a PMSI. NTPCA attempts to demonstrate that the cattle in which it had a PMSI were the same cattle the Clarks sold to Conley based on the average weight of the cattle purchased, sold, and owned by the Clarks at various points in time. It is impossible, however, for NTPCA to correlate the cattle sold to Conley with the cattle originally purchased by the Clarks based on average weight. 14 This is because evidence of the average weight of the cattle owned by the Clarks at any given point in time in no way shows that those cattle were one and the same as those in which NTPCA held a PMSI. 15 27 In addition, there is undisputed evidence in the record that NTPCA had no way of knowing whether the 1,090 head of cattle sold to Conley in September and October 1995 were the cattle in which NTPCA held a PMSI. Thomas Welch, Vice President of NTPCA and loan officer for the Clarks, stated during his deposition that, aside from 202 head of cattle sold to a Texas feed lot, Welch had no idea when or to whom the Clarks sold the remaining 1,486 head of cattle in which it held a PMSI. This evidence, coupled with the fact that no inferences may be drawn from the evidence of average weight offered by NTPCA, we conclude that the NTPCA has not shown that a genuine issue of material fact exists as to whether the cattle in which it held a PMSI were sold to Conley. 16
28 NTPCA also asserts that the district court erred in granting summary judgment for MCNB on its waiver and estoppel theories. These arguments are without merit, and we therefore find no error on the part of the district court. 29 NTPCA argues that, even assuming MCNB did not terminate the 1991 Financing Statement, MCNB should be barred from asserting its priority because MCNB waived its first-priority status. NTPCA asserts that MCNB knowingly relinquished its rights in the 1991 Financing Statement by engaging in a pattern of filing and then subsequently terminating financing statements filed after that time. Although it is true that a party may waive a known right by expressing an intention to relinquish that right, see Yates v. American Republics Corp., 163 F.2d 178, 179 (10th Cir. 1947), the fact that MCNB terminated financing statements filed after September 1991, in no way indicates that MCNB intended to relinquish its priority status as established by the 1991 Financing Statement. Indeed, MCNB's willingness to terminate later financing statements could support exactly the opposite conclusion that MCNB believed the 1991 Financing Statement continued to assure its priority status. 30 NTPCA also urges that MCNB should be equitably estopped from relying on the 1991 Financing Statement. In order to succeed in this claim, NTPCA must show: 31 (1) the party to be estopped must know the facts; (2) the party to be estopped must intend that his conduct will be acted upon or must so act that the party asserting the estoppel has the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true facts; and (4) the party asserting the estoppel must rely on the other party's conduct to his injury. 32 Penny v. Giuffrida, 897 F.2d 1543, 1545-46 (10th Cir. 1990). NTPCA reasons that MCNB should be estopped from asserting its priority status in light of NTPCA's reliance on MCNB's release of the December 15, 1992 financing statement on March 12, 1993. 33 The record reflects that, on March 10, 1993, NTPCA conducted a spot check of the McCurtain County records. NTPCA discovered MCNB's financing statement of December 15, 1992 that day. NTPCA apparently asked Rowland Clark about the financing statement, and Rowland Clark told NTPCA that the financing statement was filed in connection with a loan that he had co-signed for his son. Rowland Clark also told NTPCA he would have MCNB release the financing statement, which MCNB did on March 12, 1993. Based on these facts alone, NTPCA cannot show that MCNB ever intended NTPCA to believe that it had no security interests in the Clarks' livestock once it released the December 12,1995 financing statement. This evidence does not preclude the possibility that MCNB fully intended to enforce its rights with respect to the 1991 Financing Statement even though it was willing to release the December 12, 1992 financing statement. We therefore conclude that the district court properly granted summary judgment to MCNB on the equitable estoppel claim.
34 MCNB asserts that, regardless of any party's priority interests in the cattle, it is entitled to retain all proceeds received from the sale of the cattle to Conley because it was a transferee in the ordinary course of business. Comment 2(c) to Okla. Stat. Ann. tit. 12A, § 9-306 provides that [w]here cash proceeds are covered into the debtor's checking account and paid out in the operation of the debtor's business, recipients of the funds of course take free of any claim which the secured party may have in them as proceeds. The Oklahoma Supreme Court has interpreted this comment to require that the transferee have acted in good faith and without knowledge of the other party's security interest in order to obtain the benefit of the affirmative defense. See Anderson, Clayton & Co. v. First Am. Bank, 614 P.2d 1091, 1094-95 (Okla. 1980). 35 The district court did not address this claim in its order granting summary judgment for the defendants, and we decline to consider it on appeal. As a general rule, we do not consider issues not passed on below, and it is appropriate to remand the case to the district court to address an issue first. See R. Eric Peterson Constr. Co. v. Quintek, Inc., 951 F.2d 1175, 1182 (10th Cir. 1991). This rule is particularly applicable in the present case given that the determination of whether MCNB acted in good faith and without notice of NTPCA's security interest are factual inquiries that are best resolved in the first instance by the district court. Moreover, the question of whether MCNB is entitled to assert this defense is necessarily intertwined with the resolution of the conspiracy and fraud claims in this case. Comment 2(c) to § 9-306 emphasizes: 36 What has been said [concerning the affirmative defense available to a recipient of proceeds] relates to payments and transfers in ordinary course. The law of fraudulent conveyances would no doubt in appropriate cases support recovery of proceeds by a secured party from a transferee out of ordinary course or otherwise in collusion with the debtor to defraud the secured party. 37 Given our conclusions at Parts I.B. and I.C., infra, that it is necessary to remand the fraud and conspiracy claims to the district court, it would be inappropriate for this court to determine if MCNB is entitled to retain the proceeds of the cattle sale as a transferee in the ordinary course.