Court Opinion

ID: 9560304
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:47:03.629605+00
Date Added: 2024-06-11T09:12:49.171086
License: Public Domain

*688WARREN, J.
Plaintiff brought this declaratory judgment action to establish the validity and enforceability of defendant United States National Bank’s (Bank) security interest in $80,144 in cash proceeds from plaintiffs 1981 seed crop that had been in the possession of defendant Full Circle, Inc. (defendant). Defendant asserted that it was entitled to the money; in the alternative, it counterclaimed for a judgment against plaintiff in the amount of those proceeds. In a cross-claim, it sought to be subrogated to Bank’s security interest and personal guarantees. The trial court held that Bank has a security interest in the money as the proceeds from collateral, awarded Bank a money judgment against defendant in the sum of $80,144, plus prejudgment interest, awarded defendant a money judgment against plaintiff in the same sum, denied defendant’s subrogation claim and awarded costs and disbursements to plaintiff. Defendant appeals. We vacate the award of damages and prejudgment interest to Bank and the award of damages to defendant. We affirm in all other respects.
Plaintiff is a corporation engaged in farming. On January 14,1981, in order to secure financing for its 1981 operating expenses, it granted Bank a security interest in its crops (growing or to be grown within two years), livestock, equipment and supplies and any proceeds from the sale or other disposition of any of the described collateral. Bank perfected its security interest on January 21,1981.
During 1981, plaintiff purchased, on credit, chemicals and fertilizer from defendant, a farm-supply company; by February, 1982, it owed defendant approximately $80,144. In order to satisfy that debt, plaintiff sold defendant quantities of white wheat, for which it received two checks totalling $59,754.98, both of which it endorsed and turned over to defendant for credit to its account. It also sold defendant merit bluegrass, in return for which it received a credit to its account of $20,390.68 and a check for $51,387.42, which it kept. This action was filed after Bank notified plaintiff that its security interest extended to the proceeds from those sales and that, under the terms of the security agreement executed by plaintiff, plaintiff was obligated to recover the cash proceeds in defendant’s possession (the value of the two checks plaintiff had endorsed over to defendant for credit to its *689account) and to deliver the proceeds to it.
At the outset, we consider defendant’s contention that the complaint fails to state facts sufficient to constitute a claim. A complaint for declaratory relief is legally sufficient if it alleges the existence of an actual controversy relating to the legal rights and duties of the parties, even if the plaintiff is not entitled to further relief. The question is whether a justiciable controversy exists. Goose Hollow v. City of Portland, 58 Or App 722, 650 P2d 135 (1982). In Cummings Constr. v. School Dist. No. 9, 242 Or 106, 110, 408 P2d 80 (1965), the court quoted with approval from Portland Web Pressmen’s Union v. Oregonian Pub. Co., 188 F Supp 859 (DC Or 1960), aff’d 286 F2d 4 (9th Cir), cert den 366 US 912 (1961):
“ ‘A justiciable controversy is distinguished from a difference or dispute of a hypothetical or abstract character; [sic] from one that is abstract or moot. The controversy must be definite and concrete, touching the legal relations of the parties having adverse legal interests. It must be a real and substantial controversy admitting of specific relief through a decree of conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’ ” (Citations omitted.)
Here, plaintiff alleged a legal duty owed to Bank to recover the proceeds that it had delivered to defendant. The security agreement, incorporated in the complaint, required plaintiff “to defend the collateral against the claims and demands of all persons.” Plaintiff also alleged that Bank had a legal right to the possession of the proceeds pursuant to a perfected security interest. Defendant denied both allegations. The pleadings, therefore, evidence a concrete and definite controversy regarding the legal rights and duties of the parties. Accordingly, the trial court did not err in denying defendant’s motion to dismiss for failure to state a claim.
On the merits, defendant first contends that the trial court erred in finding that the proceeds from plaintiffs crops that were sold in the ordinary course of business were subject to Bank’s security interest.1 It argues that, pursuant to ORS *69079.3060(2), Bank’s security interest did not “continue” in the identified cash proceeds, because sales in the ordinary course were authorized by Bank.
ORS 79.3060(2) provides:
“Except where ORS 79.1010 to 79.5070 otherwise provide, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.”
Defendant misinterprets that statute to mean that a security interest continues in identifiable proceeds only if the sale or other disposition was not authorized by the secured party. It reasons that Bank consented to the sale of collateral in the ordinary course; therefore, its security interest in the collateral ceased when plaintiff sold the crops to defendant. So far, defendant’s reasoning is correct. It does not follow, however, that Bank’s security interest in the proceeds of the collateral ceased. Defendant’s interpretation is contrary to the plain meaning of the statute, which clearly provides that the security interest continues in any identifiable proceeds, regardless of whether the sale was authorized by the secured party. Baker Prod. Credit v. Long Cr. Meat, 266 Or 643, 513 P2d 1129 (1973).
Defendant next contends that Bank waived whatever security interest it did have in the proceeds by failing to notify potential purchasers of plaintiffs crops that it intended to enforce its security interest and to request that it be named co-payee on checks issued in payment for the crops. However, the code imposes no such duties on secured parties, and there is no reason for us to do so here. In Community Bank v. Jones, 278 Or 647, 669, 566 P2d 470 (1977), the court said:
“Where an agreement is clear upon its face, a court should be hesitant to infer waiver from the post-agreement conduct of the secured creditor.”
Here, the security agreement expressly covered proceeds from the sale of plaintiff s crops. There is no evidence that Bank did anything that would constitute a waiver of that security interest.
Defendant also contends that, even if Bank’s security interest did extend to the proceeds in defendant’s possession, *691the trial court erred in awarding Bank a money judgment under the pleadings. It points out that neither plaintiff nor Bank included in its prayer a demand for monetary relief. We agree and, therefore, delete from the judgment the award of damages to Bank.
The propriety of awarding relief to a defendant who has not filed a cross-claim was discussed in City of Portland v. Hespe, 69 Or App 663, 687 P2d 804 (1984). In that case, the city brought an action to declare that certain buildings were public nuisances and that the city could abate the nuisance by demolition. The defendants were Hespe, who was the vendor of the property, the vendee and several sub-vendees. The vendee had commenced a strict foreclosure action against her sub-vendees, and that action was consolidated with the city’s action. The trial court granted the vendee strict foreclosure and declared that the structures were a public nuisance and could be demolished unless the vendee were to perform certain acts, including paying off Hespe. We reversed and remanded with instructions to delete from the judgment the condition that the vendee pay off Hespe, because Hespe had not cross-claimed for that relief. We stated:
“Defendants Hespe, et al, Corey’s contract vendors, filed no cross-claim against Corey. Their answer to the city’s complaint merely contended that they were not ‘owners’ subject to the nuisance abatement proceeding and asked that the complaint be dismissed and for such ‘other and further relief as the Court may deem just and proper.’ Although under ORCP 67C a court is empowered under certain circumstances to grant relief not demanded in the pleadings, the rule does not extend the court’s authority to grant relief on a cross-claim which was never pleaded.” 69 Or App at 665.
The dissent argues that the money judgment in favor of Bank is proper, because this is a proceeding in equity and as such, the court may grant relief beyond that prayed for in the complaint.2 That misses the mark. Whether a declaratory *692judgment proceeding is legal or equitable depends upon the underlying nature of the case, including the relief requested. North Pac. Ins. Co. v. Forest Indus. Ins. Exch., 280 Or 313, 317, 571 P2d 138 (1977); Seal Rock Water Dist. v. City of Toledo, 77 Or App 251, 255, 712 P2d 174 (1986). In this case, plaintiff requested the court to interpret the security agreement between it and Bank. Declaratory judgment proceedings requesting the construction of contracts are legal in nature. C & B Livestock v. Johns, 273 Or 6, 10, 539 P2d 645 (1975); Seal Rock Water Dist. v. City of Toledo, supra, 77 Or App at 255; Weathers v. M. C. Lininger & Sons, 68 Or App 30, 33, 682 P2d 770, rev den 297 Or 492 (1984).
Even if the dissent were correct in its characterization of this case, a court nevertheless may not grant money damages to a party who has requested no relief whatsoever. The fact that the Bank may later employ the declaration in this case to obtain a judgment in another proceeding does not change the rule. It was Bank’s choice not to file a cross-claim. Accordingly, the judgment of $80,144 in favor of Bank and against defendant is deleted.3 It is conceded that the trial court erred in awarding Bank prejudgment interest; it had not been pleaded. See Booras v. Uyeda, 295 Or 181, 187 n 3, 666 P2d 791 (1983). We vacate that portion of the judgment, as well. Because we delete the judgment in favor of Bank, defendant is not entitled to its judgment against plaintiff on its counterclaim for $80,144. Accordingly, that judgment is vacated.4
*693Judgment modified to delete the award of damages and prejudgment interest to Bank and the award of damages to defendant; otherwise affirmed.

 ORS 79.3060(1) provides, in part:
“ ‘Proceeds’ include whatever is received upon sale, exchange, collection or other disposition of collateral or proceeds. * * * Money, checks, deposit accounts, and the like are ‘cash proceeds.’ All other proceeds are noncash proceeds.”

 The dissent cites ORCP 67C(1) to illustrate “the authority of courts granting remedies in equity proceedings to fashion such relief as will best accomplish the ends of justice.” 84 Or App at 694. That rule provides:
“Every judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if such relief has not been demanded in the pleadings, except:
“C(l) A judgment by default shall not be different in kind from or exceed in *692amount that prayed for in the demand for judgment. However, a default judgment granting equitable remedies may differ in kind from or exceed in amount that prayed for in the demand for judgment, provided that reasonable notice and opportunity to be heard are given to any party against whom the judgment is to be entered.
“C(2) Where a demand for judgment is for a stated amount of money as damages, any judgment for money damages shall not exceed that amount.”
ORCP 67C(1) does not authorize a court to grant relief to a defendant who has not cross-claimed. City of Portland v. Hespe, 69 Or App 663,665,687 P2d 804 (1984). The statute merely allows the court in an equity case to grant a judgment that “may differ in kind from or exceed in amount that prayed for in the demand for judgment.” (Emphasis supplied.) Bank, having made no demand for relief, cannot be granted relief. See ORCP 18. The case law cited by the dissent does not provide otherwise.

 Because we vacate the award of damages to Bank, we need not address defendant’s assignment of error regarding subrogation and its argument concerning marshalling.

 Because we vacate the award of damages to defendant, its contention that the *693trial court erred in refusing to award it costs and disbursements against plaintiff has no merit.