Court Opinion

ID: 9558814
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:17:29.284118+00
Date Added: 2024-06-11T09:09:36.739005
License: Public Domain

*1348BRIGHTMIRE, Judge,
dissenting.
I am unable to concur in affirming the summary judgment granted in this case.
Title 12A O.S.1991 § 9-203(l)(a), reads in pertinent part as follows:
“... a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:
(a) ... the debtor has signed a security agreement which contains a description of the collateral.... 6
It is uncontroverted that McKown never signed a written security agreement. In its petition, filed December 6, 1985, Bank seeks recovery from OFIXCO of certain money— which in April 1985 OFIXCO owed to McKown — based on McKown’s “oral agreement with Plaintiff,” by which McKown “assigned Plaintiff a security interest in [McKown’s] accounts and contracts receivable.” Bank further alleged that “Defendant, OKLAHOMA FIXTURE COMPANY, was notified of this [oral] assignment by a letter from Plaintiff dated May 1, 1985” and that OFIXCO “acknowledged receipt of said letter and agreed to make payment as directed to the Plaintiff.” Bank does not mention written evidence of a security agreement of any kind in its petition.
As the majority points out, Bank sent a written security agreement to McKown for his signature on May 6, 1985. McKown never signed it.
The court can judicially notice that it is very unusual for a bank to advance money, particularly a substantial amount, solely on the basis of an oral promise or commitment of the debtor to repay, secured by an oral promise to sign a mortgage or, as in this case, sign a security agreement assigning certain receivables. Moreover, it is not clear just what, if any, funds Bank released on the basis of the oral OFIXCO receivable assignment. This is because Bank had already granted McKown a $500,000 line of credit secured by a real estate mortgage. The OFIXCO official filed an affidavit saying he thought he was merely acknowledging receipt of the May 1, 1985, letter. And when OFIXCO told McKown — who incidentally had been a member of Bank’s board of directors — about the letter, McKown said he had not signed any security agreement and if OFIXCO paid the money owed to him to Bank he would sue OFIXCO. Under these circumstances OFIXCO paid the money to McKown, who a short time later filed a chapter seven bankruptcy petition. Bank then filed this lawsuit against McKown and Central Bank and Trust Company of Tulsa (formerly Republic Bank) seeking, in its first cause of action, foreclosure of a mortgage McKown had given on a piece of property to secure the $500,000 line of credit; and in its second cause of action a judgment against OFIXCO for the money the latter owed and paid to McKown on the Shilitos-Rikes receivable.
In - September 1988, Bank moved for a summary judgment against OFIXCO stating, among other things, that “[a]t the request of the bank, Mr. McKown pledged additional collateral [to secure the $500,000 line of credit] assigning the proceeds of his contract rights for certain ... work being done for Oklahoma Fixture company (‘OFIXCO’).” Bank further stated that “[o]n April 23,1985, McKown sent a copy of a draw application that he ... was assigning to the bank” and attached a copy of the letter. It reads:
April 23, 1985
Elvis Howell
First National Bank of Stillwater P.O. Box One Stillwater, OK 74077
Dear Elvis:
Per our conversation today, I am enclosing a copy of our draw applications to Oklahoma Fixture Company on the Shilitos-Rikes project to be use [sic ] as collateral on our line of credit. In talking with you, *1349John and I told you a wrong figure which we discovered after I hung up. I believe I told you approximately $300,000. when in fact the figure is approximately $200,000., I apologize, but we looked at the wrong draw request.
John called our insurance agent on the house in Rambling Oaks, he is to send us another insurance certificate with the amount insured on it. We will forward it as soon as we receive it.
Elvis, I hope this is all the information that you needed, if not please do not hesitate to contact John or myself. Thank you for your assistance.
Sincerely,
McKown Industries, Inc. /s/
Bill G. McKown President
BGM/sam
Enclosures:
Attached to the letter was a copy of an application numbered 10 dated April 25, 1985, entitled “Contractor’s Application for Payment.”
This motion for judgment was overruled December 12, 1988.'
A second motion for summary judgment was filed November 21, 1991. The same exhibits were attached and in addition Bank attached some deposition testimony that had been taken. There was also an affidavit of Bank’s president which referred to a $500,-000 promissory note executed by McKown in July 1984 with respect to which the controversial OFIXCO receivable was to, according to Bank, become additional collateral. The affidavit itemized disbursements by Bank to McKown between April 23, 1985, and June' 19, 1985, in the total sum of $325,709.23. It also itemized payments by McKown between April 23,1985, and May 23, 1985, in the total sum of $306,839.19. And then, in the final paragraph, the president said the plaintiff bank “would not have allowed advances by the borrower in excess of a total of $250,000 except that the borrower provided additional collateral in the form of an assignment of the Shilitos-Rikes project contract with Oklahoma Fixture Company.”
It is on the basis of the McKown April 23 letter and the April 25 application for payment attached to it — that the trial court concluded were “[a]s a matter of law ... sufficient to meet the statutory requirements for a valid security interest,” and therefore granted Bank a summary judgment against OFIXCO for $159,128, plus prejudgment interest in the amount of $64,940.36, for a total of $224,068.36 which will accrue post-judgment interest of 9.58 percent per annum until paid.
In my opinion the judgment is not only unjust and unfair it is contrary to law according to my perception of the uncontroverted facts relied upon by the movant Bank. And the reason for this is that I do not agree that our rules of document construction will permit a judicial metamorphosis of MeKown’s April 23 informational letter into a signed agreement granting Bank a security interest in MeKown’s account receivable from OFIX-CO. At the very least there exists a question of fact as to what McKown meant and intended by the language he used in his April 23 letter.
The term “security agreement” is defined in 12A O.S.1991 § 9-105(l)(Z) as “an agreement which creates or provides for a security interest.” Subject letter is not an agreement and does not create or provide for a security interest. In a most liberally read light all the epistle says is that to correct misinformation McKown gave “Elvis” earlier during a discussion about collateral, McKown was enclosing a copy of his company’s request for payment for work completed on the Shilitos-Rikes project. Thus, all the letter means to me is that McKown and Elvis had talked earlier about McKown signing an assignment of the OFIXCO receivable and information was needed as to how much was due or expected on the Shilitos-Rikes contract and because McKown had given Elvis some in*1350correct figures he was sending the draw application to confirm the corrected collateral figures to be used in preparing appropriate documents for execution. For to construe the letter otherwise one would have to say that the term “draw application” means “account receivable” and this gaping abyss I am unable to logically, grammatically or legally bridge. In other words, I cannot equate D telling B the amount he has requested obli-gor C to pay D, with D telling B that he grants to B an interest in receivables which obligor C owes or will owe D on a certain contract.
The UCC provides a very simple procedure to be followed by a lender to perfect an enforceable security interest agreement— one, incidentally, which is a basic attribute of sound business practice — namely, get it in writing. And, of course, the reason for this is to avoid the very type of controversy which has arisen here.
It is not persuasive for the president of a bank to swear at this late date, as he did in his affidavit, that the bank would not have advanced the borrower in excess of $250,000 unless the borrower had provided “additional collateral in the form of an assignment of the Shilitos-Rikes project contract with Oklahoma Fixture Company,”7 because of the admitted fact that it actually did make such an advance knowing that to enforce a non-held collateral it had to have a •written security agreement signed by the borrower.
Nor do I believe that OFIXCO’s signing of the letter sent by Bank somehow breathes enforceability into an oral assignment of collateral.
The majority refers to what it calls the extremes of relevant cases in point. In my opinion the facts here are even less sufficient than those in the cases cited by the majority as being at the rejection extreme, e.g., Mitchell v. Shephard Mall State Bank, 458 F.2d 700 (10th Cir.1972) (interpreting Oklahoma law). And, certainly, subject facts fall far short of those said to sufficiently comply with the requirements of § 9-203. For instance, In re Numeric Corp., 485 F.2d 1328 (1st Cir.1973), holds it was sufficient compliance ■with the UCC where a loan to the Numeric Corporation from Russell Blank was secured by (a) an executed promissory note; (b) a formally adopted resolution at a special meeting of the directors held April 13, 1962, which directed the clerk to prepare UCC-conforming “financing statements” on behalf of corporation to “Russell Blank,” as secured creditor in such a manner and form as to cover Russell Blank’s security interest in the property of the corporation as set forth in a Bill of Sale dated March 2, 1962, “and the resolution authorized the treasurer to execute and deliver the' documents to Blank”; and (c) the delivery of the promissory note to Blank on the same day a financing statement, which referred to Blank as the “secured party” and listed the property in the Bill of Sale as the property covered by the statement, was filed of record — June 15, 1962.
On June 26,1963, Numeric was adjudged a bankrupt.
Unlike the case sub judiee, Numeric involved some written documents created by the debtor which at least purported to expressly grant a security interest in the specifically described collateral — the criterion established by the Tenth Circuit interpreting Oklahoma law.8
The same thing is true with respect to the facts in Economy Finance Agency v. Stickney, 738 P.2d 1386 (Okl.App.1987). There it was held that the security agreement requirements of § 9-203(1) were satisfied by the debtor’s execution of two loan contracts, each of which contained a description of the collateral, and the value given along with this critical notation: “ ‘You are giving a security interest in the property’ and ‘The lender retains a security interest in the subject of *1351this agreement’, the listing of collateral, together with the UCC-1 and the endorsement of lien on the Certificate of Title for the pickup
In the ease sub judice we have nothing even close to or resembling the facts underlying the Numeric or Mitchell holdings.
I would therefore reverse the summary judgment and remand for further proceedings.

. Emphasis added.

. I presume the president means assignment of McKown’s "receivable” as distinguished from the “contract.”

. Mitchell v. Shepherd Mall State Bank, 458 F.2d 700 (10th Cir.1972).