Court Opinion

ID: 9622647
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:21:30.531364+00
Date Added: 2024-06-11T17:33:03.045620
License: Public Domain

THOMAS, Justice,
dissenting, with whom CARDINE, J., joins.
I dissent from the majority disposition of this case, and I join in the keen and logical dissenting opinion of Justice Cardine. I offer a brief elaboration of the analysis of this case to sharpen the points made by Justice Cardine and to protest the impact of this case upon Wyoming law. I am constrained to wonder, as I am sure others will, “Whatever happened to the Uniform Commercial Code?”
As I understand the holding of this case, First National Bank, Cortez, Colorado (Cortez Bank), having notice of the existence of a security agreement between the Walkers and First Interstate Bank of Riverton, N.A. (Riverton Bank), is excused from any requirement that it examine the security agreement or make further inquiry. If this is not the thrust of the majority decision, then we apparently are declaring invalid any clause in a security agreement that would purport to secure antecedent indebtedness. This latter disposition surely would be unique in the law.
As Justice Cardine points out in his dissenting opinion, had the Cortez Bank examined the security agreement, as filed in the office of the County Clerk of Fremont County or in the file of the Federal Avia*1035tion Administration (FAA) or as furnished by the Walkers upon request, the instrument would have disclosed, without equivocation, the intent of the Walkers and the Riverton Bank to secure antecedent debts. Additional research in the office of the County Clerk of Fremont County or further inquiry of the Walkers should have disclosed the aggregate amount of any antecedent indebtedness. The majority opinion notes correctly that the validity of the security agreement, which was filed with the FAA, is controlled by state law. Unfortunately, the majority then fails to apply the appropriate Wyoming law. Instead, the majority decision affords substantive effect to what appears to be a certificate of examination of the records of the FAA by Federal Aviation Title Company, although there is no indication in the record that the information actually was obtained by the Cortez Bank. The majority then holds that, since the certificate of examination did not allude to any antecedent debt, the Riverton Bank is limited in priority to the dollar amount that the agents of the Federal Aviation Title Company chose to set forth on the face of the certificate. This result pertains despite the fact that the Riverton Bank had done all that it possibly could to comply with the requirements of the Uniform Commercial Code (U.C.G.), as adopted in Wyoming, and with federal law, and despite the fact that the majority opinion concedes the proposition that no substantive effect flows from the requirement of federal law that the security agreement be recorded with the FAA. It almost appears that the Riverton Bank is barred from its claim to the security in this instance by what simply may have been a mistake on the part of the Federal Aviation Company, a result that is difficult to understand or accept.
Contrary to the holding of the majority, the law does not require that a security agreement recite the amount of the debt secured. See § 34-21-922, W.S.1977 (1987 Cum.Supp.) (U.C.C. § 9-203); Clovis National Bank v. Harmon, 102 N.M. 166, 692 P.2d 1315 (1984); 8 R. Anderson, Uniform Commercial Code § 9-203:27 at 676 (1985). The statutes contain minimal requirements with respect to the enforceability and the attachment of a security interest. If the collateral is not in the possession of the secured party, it is necessary that the debt- or have signed a written security agreement that contains a description of the collateral and manifests the intention of the parties to create a security interest in that collateral. WYHY Federal Credit Union v. Burchell, Wyo., 643 P.2d 471 (1982); 8 Anderson, supra, § 9-203:17 at 669-670. If value has been given, and the debtor has rights in the collateral, the security interest attaches and becomes enforceable against the debtor with respect to the collateral as soon as all of the minimal requirements have been met. Section 34-21-922, W.S.1977 (1987 Cum.Supp.); Uniform Commercial Code (U.L.A.) § 9-203, Comment 1, 1972 Official Comment. Value as defined by § 34-21-120(a)(xliv) and (B), W.S.1977, includes total or partial satisfaction of a pre-existing claim.
The security agreement between the Riv-erton Bank and the Walkers met the requirement for giving of value, and it provided that all amounts owed to the bank, whether then existing or later advanced, were covered. The Cessna aircraft was described as the collateral. Section 34-21-120(a)(iii), W.S.1977, contains a definition of agreement, which provides that the bargain of the parties may be found in the language used or by implication from other circumstances. At the time the security agreement was executed, the Walkers owed the Riverton Bank $93,000 on a promissory note that was made on August 7, 1981. It is clear that the parties intended the aircraft as collateral to secure the preexisting debt. See Clovis National Bank v. Harmon, supra. Since the Walkers had rights in the collateral (the Cessna), and the agreement did not provide otherwise, the security interest of the Riverton Bank attached when the Walkers signed the security agreement of April 6,1984. That security interest was perfected, according to law, on April 23, 1984, when the Riverton Bank filed the security agreement with the FAA. See Bank of Oklahoma, City Plaza v. Martin, Okl.App., 744 P.2d 218 (1987); In *1036re Gelking, 754 F.2d 778 (8th Cir.1985). Subsequently, the Cortez Bank perfected its security interest in the same Cessna by filing with the FAA, but the interest of the Riverton Bank was superior to that of the Cortez Bank, at least according to § 34-21-941(e)(i), W.S.1977 (1987 Cum.Supp.). Although the Cortez Bank alleged otherwise in its pleadings, the only amounts claimed by the Riverton Bank relate to the existing indebtedness plus the new promissory note made when the Walkers signed the April 6, 1984 security agreement; no issue is present with respect to any priority that the Cortez Bank might have over a supplemental security agreement, which was signed by the Walkers on September 4, 1984, and recorded with the FAA on October 5, 1984, after the perfection of the security interest of the Cortez Bank.
The express concern of the majority with respect to lack of notice to the Cortez Bank, because of its conclusion that the FAA records do not contain sufficient information to advise subsequent creditors that an aircraft may be collateral for preexisting debts, is not a material consideration. It is not clear from this record what information may be obtained from the files of the FAA. The record does establish that the Riverton Bank filed the April 6, 1984 security agreement with the FAA, and it was returned by the FAA stamped:
“RETURNED FOR YOUR RECORDS NOT NEEDED FOR FAA FILES.”
The record also encompasses a document, addressed to the Riverton Bank, which is entitled “EXAMINATION CERTIFICATE OF RECORDS,” prepared by the Federal Aviation Title Company and certifying information found in the records that it examined. It appears that the majority assumes that the only information contained in the FAA files is that reflected in the examination certificate and that, had the Cortez Bank examined the FAA records, it justifiably would have reached the conclusion that the Riverton Bank’s security interest in the Cessna was limited to the amount advanced at the time the April 6, 1984 security agreement was signed. Even if one were to accept those assumptions, the concern with respect to the sufficiency of information in the FAA file to provide appropriate notice to subsequent creditors is not well founded. Filing with the FAA furnishes notice, and the opportunity to obtain the appropriate information is available to subsequent creditors in other ways.
A federal filing system with respect to conveyances of aircraft was adopted for the purpose of providing a central source of information from which notice of transactions could be obtained through an indexing system. See Philko Aviation, Inc. v. Shacket, 462 U.S. 406, 103 S.Ct. 2476, 76 L.Ed.2d 678 (1983). The function of the system is very similar to the notice provided through local filing systems for secured transactions. See In re Gelking, supra; Bank of Oklahoma, City Plaza v. Martin, supra; Uniform Commercial Code (U.L.A.) § 9-302, Comment 8, 1975 Official Comment. In this instance, the information that is found in the “EXAMINATION CERTIFICATE OF RECORDS” is exactly the same as that which should be included in a financing statement. If the Cortez Bank had examined the FAA record, it would have known of the prior security interest in the Cessna in favor of the River-ton Bank, and it then would have had the opportunity to obtain all appropriate information.
This court, in a number of instances, has recognized the difference between a financing statement and a security agreement and the requirements and functions of a financing statement. See, e.g., Landen v. Production Credit Association of Midlands, Wyo., 737 P.2d 1325 (1987); Sannerud v. First National Bank of Sheridan, Wyo., 708 P.2d 1236 (1985); Daly v. Shrimplin, Wyo., 610 P.2d 397 (1980); American National Bank of Riverton v. First National Bank of Lander, Wyo., 446 P.2d 968 (1968). In Daly v. Shrimplin, supra, the court pointed out that a financing statement is filled to give constructive notice of a security interest in property. We noted that § 34-21-951, W.S.1977, encompasses the formal requisites of financing statements, and we quoted the following with approval:
*1037“ The purpose of the filed statement or agreement is to give the minimum information necessary to put a searcher on inquiry. The section contemplates that the complete state of affairs will be learned only after such inquiry. * * * ’ Bank of North America v. Bank of Nutley, 94 N.J.Super. 220, 227 A.2d 535, 539 (1967).” Daly v. Shrimplin, supra, 610 P.2d at 404.
In Landen v. Production Credit Association of Midlands, supra, we quoted the provisions of § 34-21-951(a), W.S.1977, which do not require that the amount of indebtedness be stated, but do require “an address of the secured party from which information concerning the security interest may be obtained * * All of that was present in this instance.
The decisions of this court heretofore have been entirely consistent with the application of the U.C.C. as understood by the drafters, and respected authorities in this area of the law. Uniform Commercial Code (U.L.A.) § 9-402, Comment 2, 1981 Official Comment, from which § 34-21-951, W.S.1977, was drawn, says, in pertinent part:
“This section adopts the system of ‘notice filing’ which proved successful under the Uniform Trust Receipts Act. What is required to be filed is not, as under chattel mortgage and conditional sales acts, the security agreement itself, but only a simple notice which may be filed before the security interest attaches or thereafter. The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs. Section 9-208 provides a statutory procedure under which the secured party, at the debtor’s request, may be required to make disclosure. Notice filing has proved to be of great use in financing transactions involving inventory, accounts and chattel paper, since it obviates the necessity of refiling on each of a series of transactions in a continuing arrangement where the collateral changes from day to day. Where other types of collateral are involved, the alternative procedure of filing a signed copy of the security agreement may prove to be the simplest solution. Sometimes more than one copy of a financing statement or of a security agreement used as a financing statement is needed for filing. In such a case the section permits use of a carbon copy or photographic copy of the paper, including signatures. “However, even in the case of filings that do not necessarily involve a series of transactions the financing statement is effective to encompass transactions under a security agreement not in existence and not contemplated at the time the notice was filed, if the description of collateral in the financing statement is broad enough to encompass them. Similarly, the financing statement is valid to cover after-acquired property and future advances under security agreements whether or not mentioned in the financing statement.”
In his work on the U.C.C., Anderson says:
“When a proper filing is made, third persons are presumed to have notice of and are subject to the provisions of the security agreement. A person is charged with possessing the information that could have been discovered had he made the inquiry suggested by the filing.” 9 R. Anderson, Uniform Commercial Code, § 9-402:6 at 448 (3d ed. 1985). (Footnotes omitted.)
Later, Anderson says:
“The financing statement only gives notice that a security interest is claimed in certain described collateral. There is no requirement that the financing statement identify the obligation that is secured by the secured transaction nor to state the terms of such obligation. As there is no requirement that the financing statement identify the debt, there is no requirement that the financing statement set forth the amount of the debt, that future advances may be made, or the maximum amount of the debt.
“Because the financing statement does not identify any particular debt as underlying the secured transaction, the one *1038financing statement may cover many successive obligations of the debtor with respect to the described collateral, without regard to the fact that different obligations are involved, or that there has been a refinancing of the obligation underlying the original secured transaction. Thus one filing of a financing statement may cover all secured transactions between the debtor and creditor and there is no requirement that a new financing statement be filed every time that a later secured transaction is entered into.” 9 R. Anderson, Uniform Commercial Code, supra, § 9-402:22 at 462. (Footnotes omitted.)
The function of the requirement that aircraft conveyances be filed with the FAA essentially is to provide notice similar to the notice provided by a financing statement. Had the Cortez Bank done what the U.C.C. contemplates, as it has been interpreted, and pursued inquiry through the Walkers in order to obtain copies of the security agreements or looked for filed security agreements in the office of the County Clerk of Fremont County, or if any existing microfilm copy of the security agreement at the FAA had been examined, the instrument clearly would have disclosed the intent of the Walkers and the Riverton Bank to secure antecedent debts. I perceive this to be the requirement imposed upon a competing creditor by virtue of Wyoming’s version of the U.C.C. “The law is almost elementary that whatever puts a party on inquiry amounts to ‘notice.’” Rodin v. State ex rel. City of Cheyenne, Wyo., 417 P.d 180, 195 (1966).
There is no necessity to provide more protection to subsequent creditors than the legislature did in adopting the U.C.C. Yet the majority opinion extends additional protection contrary to the intention of the drafters of the U.C.C. that the duty of inquiry assigned to a subsequent creditor does not end with an investigation of the financing statement or even the security agreement. See Western State Bank v. Grumman Credit Corporation, 564 F.Supp. 9 (D.Mont.1982). Section 34-21-927, W.S.1977 (1987 Cum.Supp.), adopted from § 9-208 of the U.C.C., sets forth the opportunity, provided by the legislature, for a debtor to obtain verification of the amount owed and the extent of the collateral. Other cases which have been decided under the U.C.C. and the Official Comments to § 9-208 of the U.C.C. demonstrate that subsequent creditors must utilize this avenue as well. Uniform Commercial Code (U.L.A.) § 9-208, Comment 2, 1981 Official Comment states, in pertinent part:
“The financing statement required to be filed under this Article (see Section 9-402) may disclose only that a secured party may have a security interest in specified types of collateral owned by the debtor. Unless a copy of the security agreement itself is filed as the financing statement third parties are told neither the amount of the obligation secured nor which particular assets are covered. Since subsequent creditors and purchasers may legitimately need more detailed information, it is necessary to provide a procedure under which the secured party will be required to make disclosure. On the other hand, the secured party should not be under a duty to disclose details of business operations to any casual inquirer or competitor who asks for them. This Section gives the right to demand disclosure only to the debtor, who will typically request a statement in connection with negotiations with subsequent creditors and purchasers, or for the purpose of establishing his credit standing and proving which of his assets are free of the security interest. The secured party is further protected against onerous requests by the provisions that he need furnish a statement of collateral only when his own records identify the collateral and that if he claims all of a particular type of collateral owned by the debtor he is not required to approve an itemized list.”
Also see 8 R. Anderson, supra, § 9-208:7 at 20; 8 W. Hawkland, Uniform Commercial Code § 9-208:01 at 567 (1986) (“Section 9-208, the mechanism chosen by the drafters of the Code for enabling interested parties to determine the existence and scope of any *1039security interest, reflects a compromise between the legitimate needs of potential creditors and purchasers, the privacy rights of the debtor, and the legitimate commercial need of secured parties to be free from unwarranted inquiries.” (Footnote omitted.))
I am in complete accord with Justice Cardine’s conclusion that a rule basically aimed at identifying the intent of parties to security agreements now is extended to benefit a competing creditor. With a minimum of diligence, the competing creditor could have discovered either that it was being misled by its borrowers or what the facts were if the borrowers did not understand them. The effect of the majority decision has to be that Wyoming lending institutions will be reluctant now to assist their existing debtors by increasing the amount of borrowing. They cannot rely upon a security agreement to give them priority with respect to antecedent indebtedness, and they may choose not to assume the burden of evaluating the file for intervening liens. I suggest that ultimately the citizens of Wyoming are going to suffer a detriment so that the First National Bank of Cortez, Colorado may have an advantage in this case.
Finally, I note that a legislative enactment, which provided that:
“(b) Underlying purposes and policies of this act [U.C.C.] are:
“(i) To simplify, clarify and modernize the law governing commercial transactions;
“(ii) To permit the continued expansion of commercial practices through custom usage and agreement of the parties;
“(iii) To make uniform the law among the various jurisdictions.” (Section 34-21-102(b), W.S.1977),
now is given a construction antithetical to that stated purpose. A law that was assumed to provide certainty now is afflicted with the uncertainty created by this court’s interpretation. In this instance, that result is neither necessary, appropriate nor fair.
I would affirm the judgment of the trial court in this case.