Court Opinion

ID: 9577723
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:37:20.875907+00
Date Added: 2024-06-11T13:21:08.224656
License: Public Domain

CARMODY, Justice (dissenting). The consequences and repercussions that today’s decision will have on security, interests involving farm products and the applicability of the Commercial Code to such transactions are incalculable. Thus, even though it may sound like “a voice crying in the wilderness,” -1 feel required to respectfully voice my dissent. My disagreement relates to three separate facets of the majority opinion, i. e., (1) the disposition of the waiver contention, (2) the conclusion as to the Swastika K cattle, and (3) the statement by the majority that the Commercial Code does not require application to these facts rules differing from the pre-code law. THE WAIVER: Apparently, the majority finds a waiver on the basis that plaintiff permitted Bunch and other debtors to retain possession of cattle and to sell them at the time the debtor chose, and relied upon the honesty of the debtor to bring the proceeds of the sales to the bank. There is not one word in the record that the plaintiff had any knowledge of sales by Bunch from the time of the signing of the security instrument until after the last sale was made. The majority says that the plaintiff was aware of its right to require written authority, but it elected to waive this right. At the most, the record discloses merely a failure by the plaintiff to insist on its right to a written consent, as provided in the security agreement, but this was at a time when plaintiff had no knowledge that the cattle were being, or had been, sold. This was not an intentional relinquishment of a known right, Miller v. Phoenix Assur. Co., Limited, of London, 1948, 52 N.M. 68, 191 P.2d 993. Plaintiff had the known right that the cattle not be sold without written consent, so, absent knowledge of the sales,there could be no intentional relinquishment of the right. Intentional relinquishment must of necessity be based upon knowledge of the facts, and this must be true as to the law of waiver generally and waiver by implied acquiescence or consent, which is apparently relied upon by the maj ority. Actually, the conduct of the plaintiff relied upon is more in the nature of that upon which estoppel is frequently based; however, the majority and I agree that the essential elements of estoppel are lacking in this case. The majority places great reliance on First National Bank & Trust Co. of Oklahoma City, Old. v. Stock Yards Loan Co. (8th Cir. 1933), 65 F.2d 226, and says that the course of conduct on the part of the bank in that case was such as was followed by the plaintiff here. In that case, the court based its decision on general inattention to the status of the cattle, the lack of care on the part of the bank as to the location of the cattle at the time of the making of the mortgage, lack of care as to the movements of cattle from county to county, all as tending to emphasize a lack of care by the bank; in such a situation, the court found a waiver. The situation in the instant case is far different. Here the evidence showed only the unauthorized sales and a claimed common practice and usage to depend on the honesty of cattlemen. A case much closer on facts, and cited by the majority but on another point and ignored as to the waiver problem, is United States v. Sómmerville (3d Cir. 1964), 324 F.2d 712, in which the ' facts relied upon to show a waiver' were much stronger than 'in the instant case, yet the court refused to find a waiver. There, the facts were that the lending agency had loaned money, even though there were previous defaults and sales of secured livestock, had refused to supply auctioneers with lists of livestock, and did not give notice to the appellant auctioneer that it was going to look to him for payment, but merely filed suit after two years from the date of the conversion. If, under the facts in Sommerville, there was no waiver, it is erroneous to apply the doctrine where all the plaintiff did was rely upon the good faith and honesty of its debtors. The majority also seeks to distinguish Security State Bank v. Clovis Mill & Elevator Co, 1937, 41 N.M. 341, 68 P.2d 918, on the stated basis that consent and waiver were not involved in that case. Admittedly, in Clovis Mill, this court did not, in so many words, mention waiver. There, proof was offered as to a custom upon which purchasers of grain claimed to rely as a defense to an action for conversion. In that case, of course, the Clovis Mill was a purchaser rather than an auctioneer as we have here; but if a purchaser cannot, under our decisions, rely on a custom conflicting with a contract, certainly the defendant here, as an auctioneer and standing in the shoes of the debtor, should not be placed in a superior position. See also Higgins v. Cauhape, 1927, 33 N.M. 11, 261 P. 813. A casual reading of the opinion in Security State Bank v. Clovis Mill & Elevator Co., supra, would make it appear that it is not analogous to the instant proceeding, because, as stated by the majority, the opinion, discussing the custom, states: “ * * * for purchasers * * * to rely upon evidence .furnished them by mortgagors as to the existence of mortgages * * However, in examining the original file in the Supreme Court (No. 4172), it is obvious that an error was made in the preparation of the opinion and the word “mortgagors” should have been “mortgagees.” As a matter of fact, the appellant’s brief in that case stated as its Point Four the following: “THE COURT ERRED IN HOLDING THAT APPELLANT HAD CONSTRUCTIVE NOTICE OF APPELLEE’S CHATTEL MORTGAGE, REGARDLESS OF THE FACT THAT APPELLEE FAILED TO NOTIFY APPELLANT THEREOF ACCORDING TO THE CUSTOM AND USAGE OF TPIE LOCALITY.” The “appellee” referred to in the above point was the bank (the mortgagee), not the “mortgagor,” who was not a party 'to the lawsuit. It must be assumed that the court in writing the opinion made a mistake as to the description of the individual concerned, as there was neither testimony nor point relied upon for reversal as to the mortgagor’s furnishing anything. The testimony was all to the effect that banks and lending agencies furnished lists to the elevator, and that it was from this list, or lack thereof, that the elevator was guided in making payments for grain. In the above context, therefore, the Security State Bank case is directly in point here and is authority against the position taken by the majority. It is unfortunate that the error in typing and printing occurred; nevertheless, the statement by the court in that case, that custom cannot prevail against the terms of a contract in conflict with it, is the law in this state and is contrary to First National Bank & Trust Co. of Oklahoma City, Okl. v. Stock Yards Loan Co., supra, the principal authority relied upon by the majority. See Higgins v. Cauhape, supra. SWASTIKA K CATTLE: I disagree with the majority’s disposition 'as to these cattle. The trial court’s finding No. 6 was to the effect that the plaintiff consented to the sales of these cattle and “did consent to the remitting of any proceeds to Bill Bunch, Jr.” This finding simply is not supported by any evidence in the record. Insofar as the claimed consent to the sales, it can only be found by inference added on inference, and there is literally nothing in the record justifying the trial court’s finding that the plaintiff consented to the remitting of the proceeds to Bunch, Jr. For this reason alone, I am of the opinion that the judgment of the trial court with respect to these cattle was incorrect and must be reversed. I am also of the opinion that the trial court erred in excluding the stipulation referred to in the majority opinion, and, though it might have made no difference in the judgment of the trial court, I feel it was an abuse of discretion to refuse the tender. APPLICABILITY OF THE COMMERCIAL CODE: The most serious and, in my view, far-reaching effect of the majority opinion is the statement above referred to, that the Uniform Commercial Code does not displace the law of waiver, or waiver by implied acquiescence or consent. The majority relies basically upon § 50A-1-103, N.M. S.A.19S3, without taking any note of other provisions of the Code which I deem controlling. The only other sections of the Code even noticed by the majority are §§ 50A-9-306 and 50A-9-307, N.M.S.A.1953, which have no bearing whatsoever on the facts of this lawsuit, inasmuch as they are concerned only with rules of priority. See 2 Gilmore, Security Interests in Personal Property 714 (1965). Of particular importance here is § 50A-1-205(4), N.M.S.A.1953, which reads as follows: “(4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.” The security agreement specifically provided that the property could not be sold without the prior written consent of the plaintiff. Admittedly, there was no written waiver, as is contemplated under § 50A-1-107, N.M.S.A.1953, and the only way in which the trial court and the maj ority have been able to arrive at a waiver is the finding that, by common practice, usage and procedure, Bunch was allowed to sell the cattle covered by the security agreement. Obviously, such a finding and such a conclusion by my brethren is contrary to § 50A-l-205(4), N.M.S.A.1953, supra, as well as Security State Bank v. Clovis Mill & Elevator Co., supra. The trial court referred to “common practice, usage and procedure,” which is really not very different from the terms of the statute in its reference to “course of dealing or usage of trade.” To all intents and purposes, they are the same, and the statute required the trial court to give effect to the express terms of the security agreement as controlling over course of dealing and usage of trade. Prior to the acts of conversion (the sales), there was no default, and there is no competent evidence showing that prior to default plaintiff waived any right. There being no waiver of any right before its violation, .the violation of the right to written consent is the only possible subject for waiver. Without knowledge of a violation there could be no waiver. The contrary conclusion b}'- the majority ignores the determinative statutes as well as case authority. In addition, the plaintiff’s right to take possession under § 50A-9-503, N.M.S.A. 1953, in case of default could not have been waived before the default, because until that time it was not available. This is plaintiff’s only effective remedy and it is completely nullified by the majority opinion. It should be kept in mind at all times that the defendant auctioneer was the agent of the debtor Bunch. He is in' no better position here than was the debtor himself. See Producers Livestock Loan Co. v. Idaho Livestock Auction (9th Cir. 1956), 230 F.2d 892; Birmingham v. Rice Bros., 1947, 238 Iowa 410, 26 N.W.2d 39, 2 A.L.R.2d 1108; First National Bank of Pipestone v. Siman (1937), 65 S.D. 514, 275 N.W. 347; and Bunn v. Walch, 1959, 54 Wash.2d 457, 342 P.2d 211. Thus, here, the defendant had no more right than the debtor himself to rely on a custom and usage which was contrary to the express terms of the contract. The Commercial Code also has a decided bearing upon the Swastika K disposition.' The trial court, by refusing to admit the tendered evidence of ownership, never arrived at a decision as to whether these particular cattle were “similar collateral acquired” under the provisions of § 50A-9-204(3), N.M.S.A.1953, in that they may have been covered by the original security agreement and were possibly after-acquired property and not proceeds subject to rules for perfection of proceeds. Broadly speaking, the majority seems to have carved out an exception to the application of the Commercial Code of security interests in farm products. In so doing, the general purposes of the Commercial Code, §§ 50A-1-102, 50A-1-106, as well as many other provisions of Ch. 50A, N.M. S.A.1953, are placed in jeopardy and “the door is opened” for judicial construction of the Code in a manner not contemplated by the authors or the legislature. For the above reasons, I respectfully dissent.