Court Opinion

ID: 9663742
Source: CourtListenerOpinion
Date Created: 2023-08-23 23:49:34.9052+00
Date Added: 2024-06-11T18:14:55.836781
License: Public Domain

Spencer, J.,
dissenting.
I respectfully dissent from the majority opinion herein, which I believe is based upon a misconception of both the facts and the law.
The words “All Petroleum products, tires and other motor vehicle supplies, now owned or after acquired” were typed in by some person at the bank. The examination of that entire section reveals that “All Petroleum products, tires and other motor vehicle supplies, now owned or after acquired,” were part of the description of the term “Inventory,” contained in that section. The inventory so described was to be pledged only if the *589“Mark if applicable” box was actually marked.. Someone connected with, the bank marked that box, without the defendant’s consent, and after the agreement was signed. (Exhibit 23.) Defendant’s copy of the security agreement, which is the copy on which the bank is now attempting to rely for its replevin, was not marked in that section. It does not require a legal proposition to show that “All Petroleum products, tires and other motor vehicle supplies, now owned or after acquired,” were not pledged unless the pertinent box was marked. A rather simple understanding of basic English seems to make this abundantly clear.
It is obvious that the defendant had a line of credit with the bank and that he fully performed the conditions of the agreement granting the line of credit. Yet the president of the bank, for his own purposes, ignored and violated that agreement. The following questions and answers are from his deposition: “ ‘Isn’t it a fact that he always made his payments in accordance with the $12,000 program?’ Answer. ‘If you want to go by the record, that’s true.’ Question: ‘According to the record he paid more than that, isn’t that a fact?’ Answer: ‘That’s true.’ Question: ‘Would you kindly tell us why you had enough?’ Answer: ‘Because he spend (sic) too much money.’ Question: ‘What do you mean by, spent too much money?’ Answer: ‘Well, he ran out of money. I wasn’t going to loan him any more. That’s all there was to it.’ Question: ‘Well, he ran out of money because you refused to keep your commitment, isn’t that right?’ Answer: T refused to loan him any more money.’ Question: ‘That’s why be ran out of money?’ Answer: ‘Definitely. I refused to loan him any more money; that’s why he ran out of money.’ Question: ‘Now, why did you refuse to lend him any more money?’ Answer: ‘Because I didn’t want to lend him any more money.’ Question: ‘You didn’t have a good reason?’ Answer: T had my own reason. Just didn’t want to loan him any more money.’ *590Question: ‘What was your reason?’ Answer: T didn’t want to loan him any more money.’ Question: ‘That’s your only reason?’ Answer: ‘That’s my reason.’ ”
After refusing to honor its commitments to provide defendant with working capital, thus forcing him to close his doors, the bank then took all his security at a time when he was paying down his indebtedness, and ■then made no effort to satisfy the remaining indebtedness with that security. As of the date of trial, which was almost 1 year after the original taking, all the defendant’s property was still sitting in a storage lot and warehouse, depreciating and deteriorating in' the elements.
Sections 1-203 and 9-504, Nebraska Uniform Commercial Code, impose on the secured party the responsibility of proceeding in good faith and in a commercially reasonable manner in disposing of the collateral. The plaintiff’s actions in this case do not meet either of these requirements. Good faith on the part of the bank has been totally lacking in all phases of the case.
Defendant contends that the alteration of the security agreement of 1965 was material, and it is therefore void. I agree. The majority opinion assumes a consent to unilaterally fill in certain blanks. I disagree. Furthermore, the bank president was not merely filling in blanks when he made the alterations. In addition, he added crossed out words and added others, clearly changing the original intent. This is evidenced by a comparison of the pertinent provisions of the copies of the security agreement of September 3, 1965. Where a party to a written instrument unilaterally fills in certain blanks, changes certain language, and marks as applicable certain paragraphs which at the time of the signing of the agreement were not marked as applicable, the alterations are material, fraudulent, and void the agreement.
The following from the defendant’s brief is very pertinent: “This entire case revolves around the ques*591tion of what consideration was offered to Mr. Hull to induce him to make the pledges contained in the security agreements of September 3, 1965, and September 27, 1968. If the only consideration to be offered by the ■Bank were the notes of $12,000 dated August 12, 1965, and a note for $64,000 dated September 3, 1965, then •why were those figures not inserted at the time of the execution of the agreement, and why did the original agreement refer to the ‘note’ rather than ‘notes’, and why would a man pledge $80,000 additional collateral for the same consideration that he already had?”
Clearly, the alteration in the present case was material, because it limited the bank’s obligation to specific notes of $12,000 and $64,000, and renewals thereof, whereas the unaltered copy did not limit the bank’s obligation in any way. Also, at the time of execution the words “of even date herewith” were crossed out, thus evidencing an intention not to limit the bank’s obligations to notes executed on September 3, 1965. Nevertheless, in 1967, the bank president unilaterally inserted a note “of even date,” i. e., $64,000 note dated September 3, 1965. Furthermore, the altered original caused the defendant Hull to pledge his inventory, which at that time was valued somewhere between 30 and 40 thousand dollars. This was clearly not intended by the defendant when he signed the instrument, nor was it possible for him to pledge his inventory at that time because it was already pledged to Champlin Petroleum Company.
In this case we are aborting our law on material alteration. To allow the plaintiff bank to stand on the defendant’s unaltered copy of the security agreement, as the majority opinion does, violates the principié announced in our previous cases. In effect it permits the bank to unilaterally alter the agreement, and then, when discovered and exposed, adopt a position which is no worse than the position it was in before it altered the security agreement. It encourages fraud and deceit. *592This is evidenced by the fact that until the defendant’s unaltered copy was produced when his deposition was taken 11 days prior to the trial, the bank’s chief executive officer, who later admitted to altering the agreement, had steadfastly maintained under oath that he had never altered any of the security agreements.
When we adopted the Uniform Commercial Code we armed the banking industry with a sweeping and powerful instrument called the security agreement. To permit the bank, as the majority opinion does, to alter this powerful instrument unilaterally and with impunity, makes a mockery of the long-established sanctity of the written contract, and reduces the individual to a helpless eunuch in his dealings with the banking industry under the Uniform Commercial Code.
There is little question the replevin procedure employed herein is unconstitutional under Fuentes v. Shevin (1972), 407 U. S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556. While the defendant is not relying on the unconstitutionality of the statute but rather on the merits of his case, I make this observation to call the Bar’s attention to the unconstitutionality of our present replevin statute.
Smith, J., joins in this dissent.