Court Opinion

ID: 9658003
Source: CourtListenerOpinion
Date Created: 2023-08-23 20:43:45.794502+00
Date Added: 2024-06-11T18:13:50.529550
License: Public Domain

HENDERSON, Justice
(dissenting).
As the muscle of the railroads began to weaken in the 1940’s through excessive regulation and taxation of government; and as the highways of this state, through the power of the people’s purse, vastly improved; and as the trucking industry began to flourish by the use of these modern highways and the industrial might of Detroit; and as the demand for a place to sell livestock grew, rather than to train livestock to Omaha, Nebraska, or to Sioux City, Iowa, a new and vital industry was birthed in this state. We South Dakotans saw sale barns, sometimes known as livestock pavilions, crop up across our state and we also saw them develop in our sister states and down into the great Southwest. It was wartime then. It was dreadfully important that livestock be marketed. Consumers, our troops, allies, and the producer all benefited from the livestock producer and the livestock sale pavilions. Today, as back in the 1940’s, these livestock sale barns serve a great public need. Livestock can no longer be shipped into the great railway centers. Therefore, the country sale barn has become a mecca for the livestock producer, big and small, to sell his livestock. These livestock sale barns must be given a fair shake in the law lest they perish. If they perish across this state, many of our producers (farmers and ranchers) will be relegated to selling their livestock directly to the packing plants or mammoth corporate entities specializing in the purchase and sale of meat. Therefore, I take a dim view of jeopardizing the sale barns in this state. Needless to say, this opinion has a significant economic impact upon them. Believing this opinion is founded upon errors of law, I respectfully dissent.
This decision is basically unfair to the sale barns of the State of South Dakota. This decision reverses judgments secured by several livestock sale barns and reverses the combined judgments of several distinguished circuit judges of this state whose decisions were arrived at independently after considered reflection and are now reversed in a consolidated appeal.
It is my opinion that the main body of law in the U.S.Á. favors the position of the sale barns and is opposed to the position of the Production Credit Association. Production Credit Association seeks to take advantage of these sale barns by virtue of being a secured party and relying upon its security agreement. However, the true facts of this case reveal a typical “fine print” offense by a lending institution which defies all truth, all reason, and all logic in this case. Production Credit Association admits that it consented to the sales both in conduct and by written document, but now it argues before the highest Court of this state that it did not waive the security agreement on file. The plain truth of this case is that the Production Credit Association saw fit and chose to ignore its own written agreement. Production Credit Association, from time to time, did not believe that Bellman was selling the cattle fast enough. Production Credit Association wanted Bellman to sell the cattle “within cash flows.” Production Credit Association permitted Bellman to collect the proceeds of the sale of these cattle in his own name. All of this is substantiated by the depositions on file herein. The circuit *834court judges read these depositions and knew what they were doing. In fact, the record discloses that the Production Credit Association absolutely violated its own written security agreement 83 times by 83 separate sales and received these 83 sales slips. These 83 sales of cattle, with the Production Credit Association actually encouraging a liquidation of this herd, took place over a period of three years.
Under South Dakota law and the facts and circumstances of this case, the Production Credit Association did not retain a security interest in the cattle or proceeds. Thus, the Production Credit Association could not maintain these separate conversion actions and summary judgments were properly entered against it. I reach this conclusion for three reasons.
First, under SDCL 57A-9-306(2), a security interest in collateral and its proceeds is discontinued if the debtor disposes thereof and the debtor’s actions were authorized by the secured party in the security agreement or otherwise. In the present case, cash flow projections and statements, and various loan applications and attachments, were labeled by the Production Credit Association employees as authorization or written consent for sale of cattle. These documents, as denominated by the Production Credit Association itself, and despite the majority’s characterization, constituted written authorization by the secured party for the sale of the cattle and thus discontinued the security interest in the cattle and the proceeds. Such a conclusion does not emasculate the parties’ purposes and objectives and does not transform a “standard cash flow or repayment projection” (which is not denominated by the secured party as an “authorization or written consent for sale ”) into a written consent to sell and a surrender of the security interest.
Second, and additionally, by prior course of dealing, the Production Credit Association had permitted Bellman Farms to sell secured cattle through livestock sale pavilions. This conduct or course of dealing, constituted an “otherwise” or implied authorization within the purview of SDCL 57A-9-306(2), to sell the secured cattle and thereby discontinued the Production Credit Association’s security interest in the collateral and its proceeds. Western Idaho PCA v. Simplot Feed Lots, Inc., 106 Idaho 260, 678 P.2d 52 (1984). The course of dealing between the secured party and the debtor can result in a waiver or implied consent and authority to sell free of the security interest. State Bank, Palmer v. Scoular-Bishop, 217 Neb. 379, 349 N.W.2d 912 (1984). See also, Planters PCA v. Bowles, 256 Ark. 1063, 511 S.W.2d 645 (1974); Humboldt Trust & Savings Bank v. Entler, 349 N.W.2d 778 (Iowa App.1984); Clovis Nat’l Bank v. Thomas, 77 N.M. 554, 425 P.2d 726 (1967); Benson County Coop. v. Central Livestock Ass’n, 300 N.W.2d 236 (N.D.1980); Poteau State Bank v. Denwalt, 597 P.2d 756 (Okla.1979). Thus, the sale barns are relieved of conversion liability upon a showing of acquiescence or consent to the sale on the part of the secured party. Rapid City PCA v. Transamerica Ins. Co., 85 S.D. 395, 184 N.W.2d 49 (1971). The fact that the proceeds of such prior sales were paid over to the Production Credit Association and the present Bellman Farm’s proceeds were not, does not abrogate the Production Credit Association’s waiver or discontinuance of the security interests. See Parkersburg State Bank v. Swift Ind. Packing Co., 764 F.2d 512 (8th Cir.1985). A “conditioned” consent, if the Production Credit Association’s prior course of dealing can be so characterized, and the failure of such condition, does not prevent the security interest’s discontinuance or waiver. Accord First Nat’l Bank & Trust Co. v. Iowa Beef Processors, Inc., 626 F.2d 764 (10th Cir.1980); Moffat County State Bank v. Producers Livestock Marketing Ass’n, 598 F.Supp. 1562 (D.Colo.1984); Western Idaho Production Credit Ass. v. Simplot Feed Lots, 106 Idaho 260, 678 P.2d 52; Anon, Inc. v. Farmers PCA, 446 N.E.2d 656, 37 A.L.R.4th 776 (Ind.App.1983); Ottumwa PCA v. Keoco Auction Co., 347 N.W.2d 393 (Iowa 1984); Peoples Nat’l Bank & Trust v. Excel Corp., 236 Kan. 687, 695 P.2d 444 (Kan.App.1985); and Charterbank Butler v. Central Cooperatives, Inc., 667 S.W.2d 463 (Mo.App.1984).
*835Third, where one of two entities must suffer by the act of a third, the one which enabled such entity to occasion the loss must suffer. Nat’l Livestock Credit Corp. v. Schultz, 653 P.2d 1243 (Okla.App.1982). Here, as between the Production Credit Association and the sale barns, the Production Credit Association should bear the loss. The Production Credit Association’s lax enforcement of the security interest’s terms and its acquiescence in Bellman Farm’s sale of secured cattle furnished the circumstances occasioning the loss herein. Therefore, they should bear that loss. See Ottumwa PCA v. Keoco Auction Co., 347 N.W.2d 393. The Production Credit Association elected to allow Bellman Farms to sell the cattle without complying with the security instruments and it cannot now rely on those same instruments to hold the sale barns liable. The Production Credit Association made its own bed; let them sleep in it. Call it country justice. Therefore, conversion against these sale barns does not lie as a matter of law and there is no question of fact. I would accordingly affirm the various circuit court summary judgments entered herein.