Court Opinion

ID: 9851181
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:08:34.625877+00
Date Added: 2024-06-11T09:20:50.653173
License: Public Domain

VOGEL, Justice,
dissenting.
I dissent, for the reason that the Uniform Commercial Code, in my opinion, governs this case entirety rather than partially.
In my view, the majority opinion errs in deciding that the non-U.C.C. parol-evidence rule applies and in deciding that the subordination agreement is not governed by the U.C.C.
The subordination agreement is not a document to be construed by itself, but is a part of a long series of transactions affecting Gamble-Skogmo, Reiff, and Peoples Bank & Trust. This series of transactions involved sales of inventory and went on for some years. All of it is governed by the U.C.C., not just part of it. Section 41-01-02, N.D.C.C. [§ 1-102, U.C.C.], states that the Code is to be liberally construed and applied to promote its underlying purposes and policies, and that one of its underlying purposes and policies is to simplify, clarify, and modernize the law governing commercial transactions. Subdivision 3 of the same statute provides that the effect of provisions of the Code may be varied by agreement. The Code itself specifically recognizes subordination agreements in Section 41-09-37, N.D.C.C. [§ 9-316, U.C.C.]. Courts have recognized that subordination agreements are governed by the Uniform Commercial Code. Williams v. First National Bank & Trust Co. of Vinita, 482 P.2d 595 (Okl.1971); Vahlsing Christina Corporation, Inc. v. First National Bank of Hobbs, 491 S.W.2d 954 (Tex.Civ.App.1973).
*347The majority opinion itself cites eases extending the principles of the Uniform Commercial Code by analogy. It cites no cases to the effect that a subordination agreement is not governed by the Uniform Commercial Code. It relies on Section 41-01-03, N.D.C.C. [§ 1-103, U.C.C.], but that statute by its terms applies only where the Uniform Commercial Code does not displace prior law. Here, prior law is displaced by the Uniform Commercial Code provisions allowing subordination agreements, Section 41-09-37, N.D.C.C. [§ 9-316, U.C.C.], and providing a new parol-evidence rule, Section 41-02-09, N.D.C.C. [§ 2-202, U.C.C.]. I would hold that the subordination agreement is governed by the Uniform Commercial Code.
If the Uniform Commercial Code governs the subordination agreement here, then there is no reason for not applying the Uniform Commercial Code parol-evidence rule, Section 41-02-09, N.D.C.C. [§ 2-202, U.C.C.].1 That rule does not refer to sales, and Section 41-02-02, N.D.C.C. [§ 2-102, U.C.C.], refers to “transactions in goods,” a broader term than “sales.” Chapter 41-02, N.D.C.C. [Article 2, U.C.C.], may be applied to transactions which are analogous to sales although not technically sales. Hunt Foods and Industries, Inc. v. Doliner, 26 A.D.2d 41, 270 N.Y.S.2d 937 (1966).
Once that rule is applied, rather than the older North Dakota general parol-evidence rule found in Section 9-06-07, N.D.C.C., much of the majority opinion becomes inapplicable and the result must be just the opposite. We should affirm the district court.
The difference between the two parol-ev-idence rules is striking.2 Section 9-06-07, N.D.C.C., says flatly that the execution of a contract in writing supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument. Section 41-02-09, N.D.C.C. [§ 2-202, U.C.C.], contains similar language but is applicable only when the writing is intended to be a final expression of the agreement, and goes on to say that the writing may be explained or supplemented by course of dealing or usage of trade or by course of performance, and by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
The lower court obviously held, and I think properly, that the Uniform Commercial Code parol-evidence rule applied. It therefore received in evidence the letter quoted in the majority opinion which the majority opinion holds was improperly admitted, and the court considered evidence of Reiff, Lerberg, and Isaak (an employee of Gamble-Skogmo) which clearly indicated that all parties considered that the subordination agreement applied only to the extent of a $15,000 priority to Gamble-Skogmo, and gave priority to the Bank’s claim thereafter.
Since the Uniform Commercial Code rule applies, cases construing the North Dakota parol-evidence rule, such as those cited in the majority opinion, do not apply.
I agree that the trial court’s conclusion of law No. 2 is a finding of fact. I cannot agree that this finding of fact is clearly erroneous, or erroneous at all. On the contrary, there is evidence, as I said, that all parties understood that Gamble-Skogmo’s priority extended to only $15,000. The trial court no doubt also was influenced, as well as it might be, by the letter quoted in the majority opinion and by the fact that the Bank’s additional $15,000 loan after Reiff was in serious financial difficulty would have made no sense at all unless the Bank had reason to believe that it was protected *348by the subordination agreement. It also is worth noting that the Bank was requested by Gamble-Skogmo to make the additional loan.
■ Since I believe that this is a case which is governed entirely by the Uniform Commercial Code, that the Uniform Commercial Code parol-evidence rule applies to the subordination agreement and rider, and that the trial court applied the parol-evidence rule properly and found as a fact that Gamble-Skogmo’s priority was to the extent of only $15,000,1 would affirm the trial court’s judgment.

. For a case where we recently applied the U.C.C. parol-evidence rule and allowed parol evidence to explain a written memorandum where there was no finding that the writing was intended to be a complete and exclusive statement of the terms of the agreement, see Merwin v. Ziebarth, 252 N.W.2d 193, 197-198 (N.D.1977).

. See White & Summers U.C.C. HB §§ 2-9 to 2-12 for discussion of differences between § 2-202 and traditional parol-evidence rules.