Court Opinion

ID: 880344
Source: CourtListenerOpinion
Date Created: 2013-06-05 00:03:44.322303+00
Date Added: 2024-06-11T10:55:10.146832
License: Public Domain

No. 8 9 - 2 2 3
                           IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                   1989

IJARRY GAY,
                               Plaintiff and Appellant,
                -vs-
CABINET PUBLISHING, INC.,
                               Defendant and Respondent.

APPEAL FROM:                   District Court of the Nineteenth Judicial District,
                               In and for the County of Lincoln,
                               The Honorable Robert S. Keller, Judge presiding.
COUNSEL OF RECORD:
                For Appellant:
                               Richard R. Buley; Tipp, Frizze1.l   &   Ruley, Missoula,
                               Montana
                For Respondent:

                               L. Charles Evans, Libby, Montana

                                                  Submitted on Briefs: Aug. 10, 1 9 8 9
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                                                     Decided:   September 14, 1989
   -    d       -
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Justice John Conway Harrison delivered the Opinion of the
Court.

      Larry Gay (Gay) initiated this action to recover
proceeds   from   sale   of   equipment   respondent Cabinet
Publishing, Inc. (Cabinet) allegedly sold in violation of
Article 9 of the Uniform Commercial Code. Following a bench
trial, the District Court of the Nineteenth Judicial
District, Lincoln County, entered judgment for Cabinet ruling
that the transaction between Gay and Cabinet was a true lease
and not subject to Article 9.        From that judgment, Gay
appeals. We affirm.
      Appellant raises two issues for review.
      1. Did the District Court err in determining that the
lease agreement between Gay and Cabinet was a true lease and
not a secured transaction?
      2. Did the sale of the equipment conform to the
requirements of the U.C.C.?
      On April 2, 1979, Summit County Sentinel Corporation,
owned by William C. King and Clara C. King, purchased Western
Montana Publishing Company (Western) from Paul and Iris
Verdon. Western ran the weekly newspaper in Libby, Montana
called the Western News.    The Verdons retained a perfected
security interest in all the business' printing equipment.
      Sometime in 1979, Gay and Rodney Johansen started a
newspaper called Bargain Express, which competed with the
Western News. After a period of stiff competition, Gay and
Johansen agreed to sell the Bargain Express to Western. On
December 18, 1980, the parties executed a contract whereby
Western agreed to give up the job printing and office supply
business and assign such rights, including most of the
Lincoln County printing contract, to Gay and Johansen. As
part of the contract, Western transferred to Gay and Johansen
certain inventory and equipment not subject to the Verdons'
security interest.
      Additionally, the contract provided that Western would
lease to Gay and Johansen the equipment that was subject to
the Verdons' security interest. The lease was to run until
May 1, 1994 at which time Western's indebtedness to the
Verdons would be satisfied. At that time, Gay and Johansen
would have an option to purchase the equipment for $50. As
consideration for the lease, Gay and Johansen agreed to pay
the taxes on the equipment, insure it against theft and
damage and keep it in good repair.       If Gay and Johansen
failed to perform their obligations, then the contract
provided for a five-day default period after which time
Western could repossess the equipment if the default was not
cured.    The contract expressly stated that the leased
equipment was subject to Verdons' security interest. At the
time of the contract, Gay and Johansen also entered into a
side agreement with Western in which they agreed not to move
the leased equipment without written permission of the
Verdons.   This agreement was in writing and sent to the
Verdons.
      Cabinet, owned by Mark and June McMahon, purchased
Summit's interest in Western on August 27, 1981.      Cabinet
assumed Western's purchase and lease agreement with Gay and
Johansen.
      Between September, 1981 and September, 1982, Gay and
Johansen encountered numerous difficulties.        They were
arrested and convicted on federal counterfeiting charges and
had to serve almost three months in prison beginning February
1, 1982.    On November 2, 1981, they were served with an
eviction notice at their Express Press location. On January
8, 1982, Gay moved all the printing equipment from the
Express Press building into storage. Also during this time,
United Bank obtained a judgment against Gay and Johansen on
defaulted loans and seized and sold whatever assets it could.
      On July 2, 1982, Cabinet served a Notice of Default on
Gay in connection with the leased equipment. Gay did not pay
the taxes on the equipment for either 1981 or 1982.       Gay
failed to insure the equipment against theft at any time and
what insurance had been on the equipment had expired in the
fall of 1981.    Also the equipment was not in good repair.
Gay and Johansen did not correct the default within the
five-day period.
      As to the repossessed equipment, Cabinet and the
Verdons agreed that the equipment should be sold and the
proceeds applied to the Verdon debt.     Cabinet subsequently
had the repossessed equipment appraised by a Mr. Buckner, a
licensed broker from Spokane, Washington.        Some of the
equipment was then sold to a Ray Denning at its fair market
value as determined by Buckner. Buckner sold the remainder
at fair market value to third parties.      The proceeds were
then applied to the Verdon obligation as agreed.

                          I.
     Did the District Court err in determining that the
lease agreement was a true lease and not a secured
transaction? Due to our holding on issue two, we need not
discuss this issue. The evidence shows a valid sale.
      Did the sale of the equipment conform to the
requirements of the U.C.C.?
      Section 30-9-504, MCA, sets forth both the secured
party's right to dispose of collateral after default and a
scheme of priorities for distributing the proceeds.     Under
§ 30-9-504, MCA, the secured party may sell the collateral in
any commercially reasonable manner. The proceeds must then
be distributed in the following order: (1) to the expenses
of the sale; (2) to satisfy the indebtedness secured by the
security interest under which the disposition is made; and
(3) to satisfy any subordinate security interest if certain
requirements are met. The secured party must account to the
debtor for any surplus. Additionally, the U.C.C. requires
the secured party to notify the debtor of the time and manner
of sale.
      Appellant contends that respondent violated § 30-9-504,
MCA, because respondent failed to give him proper notice of
sale and failed to account for the surplus proceeds of the
sale.
      The status of the parties in relation to the equipment
is not in dispute.       Verdons and respondent are secured
parties with Verdons' security interest being superior to
respondent's. Appellant is the debtor-in-default. Also, no
dispute exists that both secured parties, Verdons and
respondent, planned that a sale should take place and that
the proceeds should be applied to the Verdon indebtedness.
Because of this plan, in effect both secured parties disposed
of the equipment and the proceeds were then applied to
satisfy the "indebtedness secured by the security interest
under   which    the   disposition   is   made."      Section
30-9-504(1) (b), MCA.  The distribution of the sale proceeds
conformed to the requirements of B 30-9-504, MCA. No surplus
proceeds remained to distribute to appellant.
      Appellant also asserts summarily that respondent did
not give him proper notice of the time and manner of sale.
However, appellant failed to give this Court any arguments or
any references to the record in support of his assertion. We
reject appellant's contention.
      This Court affirms correct District Court decisions.
We affirm the District Court.

                                                       \

We concur: