Sturdevant v. First Security Bank

606 P.2d 525, 186 Mont. 91, 28 U.C.C. Rep. Serv. (West) 569, 1980 Mont. LEXIS 652
Montana Supreme Court·Decided February 13, 1980·No. No. 14803·Published·Cited by 9 cases

Opinion

MR. JUSTICE SHEEHY

delivered the opinion of the Court.

Appeal is from a summary judgment granted in the District Court, First Judicial District, Lewis and Clark County. The District Court entered summary judgment upholding the right of the respondent banks to repossess a Mooney aircraft and sell the same; the proceeds to be applied to debts owed by Harold Lee Sturdevant, Sr. to the banks.

The action was filed by Harold Lee Sturdevant, Jr. on October 31, 1978 when the plaintiff allege that a Mooney aircraft was wrongfully repossessed by the defendant banks. He prayed for a preliminary injunction restraining the disposing of the aircraft and asked that he be given possession of it during the pendency of the suit. The District Court issued a temporary restraining order. The defendant banks filed motions to dismiss on the ground that the complaint failed to state a claim upon which relief could be granted. On November 21, 1978, a hearing was held on the mo[93]*93tions to dismiss and at the same time on an order to show cause why a preliminary injunction should not be granted to give plaintiff temporary possession of the plane. Upon stipulation by counsel, the motions to dismiss were converted to motions for summary judgment and after posthearing briefs were filed and the matter submitted, the court granted summary judgment in favor of the banks.

The agreed facts are that on August 4, 1972, Harold Sturdevant, Sr. (plaintiff’s father) executed a security agreement with First Security Bank of Deer Lodge securing a note for $ 15,069.62 to purchase a Mooney aircraft. The plane was listed as collateral on the security agreement which was recorded with the FAA on January 23, 1973.

On August 21, 1975, the loan had been paid down by the father but the note was renewed by him for a total sum of $ 10,970. There is no evidence that any security agreement in connection with this loan was filed with any office.

On April 7, 1977, the father executed a security agreement with First Security Bank of Deer Lodge for a loan of $32,249.40 to purchase a Cessna airplane which was to be its collateral. There is no evidence that this security agreement was filed with any office.

On October 25, 1977, Harold Sturdevant, Jr. purchased the Mooney plane from his father. No notice of this sale was given to the secured bank and there is no evidence that the sale was authorized by the Bank. Harold Sturdevant, Jr. knew of the existing security interest in the plane when he purchased it. On October 4, 1978, payments to the bank on the Cessna plane and the Mooney plane were delinquent. Plaintiff’s father mailed a check to the Bank to satisfy the obligation on the Mooney plane.

On October 6, 1978, First Security Bank of Deer Lodge in conjunction with First National Bank of Helena repossessed the Mooney plane for delinquency of the payments on the second Mooney loan.

On October 9, 1978, the Bank received the payment on the Mooney debt that had been mailed by the father on October 4.

[94]*94After the repossession, the son personally tendered payment of $1,632.54 and $47.79 (storage costs), the full amount of the remaining Mooney obligation, in an attempt to redeem the Mooney plane, pursuant to section 87A-9-506, R.C.M. 1947 (now section 30-9-506, MCA). The tender was refused by the defendant banks. The amount is presently deposited with the court pending the outcome of the suit. It is clear that the defendant banks intend to sell the Mooney plane to satisfy the delinquent obligations on the Cessna loan.

On that statement of facts, the son phrases the issue as whether a bank may hold property for the payment of a debt of another when that property is no longer owned by the borrower and is not described in the security agreement.

We restate the issues as follows:

(1) Does the security agreement of August 4, 1972 in which the Mooney aircraft is listed as collateral include a security interest for the later incurred Cessna debt of the father?

(2) What effect does section 30-9-311, MCA, have on the sale of the Mooney aircraft by the father to the son?

(3) What are the redemption rights of the son under these facts and under section 30-9-506, MCA?

Each security agreement executed in this case contained the following language, described by the District Court as a “dragnet clause”:

“The undersigned (hereinafter called Borrower) hereby grants to the secured party in the above note (hereinafter called ‘Bank’) a security interest in the following described property (hereinafter called ‘Collateral’) including proceeds and products: [herein is specific property description] together with all parts, accessories, repairs, improvements and accessions thereto now or hereafter at any time made or acquired; and All property of every kind and description in which the Borrower has or may acquire any interest now or hereafter at any time in the possession or control of the Bank for any reason including without limitation, property [95]*95delivered to the Bank as collateral for safekeeping, or for collection or exchange for other property, and all dividends and distributions on and other rights in connection with such property to secure payment to the Bank at its banking house at the address stated on this note and all other notes given hereafter in renewal thereof, and all other notes of Borrower concurrently herewith, heretofore or hereafter delivered to or purchased or otherwise acquired by the Bank and all other liabilities and indebtedness of Borrower to Bank due or to become due, direct or indirect, absolute or contingent, joint or several, howsoever created, arising or evidenced, now existing or hereafter at any time created, arising or incurred, (hereinafter called ‘Secured Obligations’).”

The District Court found that the foregoing clause was clear, unambiguous and therefore it must be upheld. In re Riss Tanning Corporation (2nd Cir. 1972), 468 F.2d 1211; Kenneally v. Standard Electronics Corporation (8th Cir. 1966), 364 F.2d 642; In re Iredale’s Ltd. (9th Cir. 1973), 476 F.2d 938.

Nothing in the Uniform Commercial Code that we are able to find prohibits such a clause as was used in these security instruments. Therefore, the effect of the execution of the security interest in the Mooney aircraft instrument, being very broadly stated, extends to and covers the debt incurred in connection with the Cessna aircraft, even though a separate security agreement was executed for that purchase.

The broad language used in the first Mooney security agreement meant that the Mooney aircraft was collateral not only for the first note, but for the renewal note, and for any other subsequent loans made by the bank to Harold Sturdevant, Sr.

The security agreement for the Mooney aircraft had a further provision that prevented sale of the Mooney unless the proceeds of the sale were paid to the bank. That provision stated:

“Borrower will not sell, transfer, lease or otherwise dispose of the Collateral, or attempt or offer to do any of the foregoing without the prior written consent of the Bank, and unless the Proceeds of [96]

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Sturdevant v. First Security Bank, 606 P.2d 525, 186 Mont. 91, 28 U.C.C. Rep. Serv. (West) 569, 1980 Mont. LEXIS 652 (Mo. 1980).

606 P.2d 525 (Sturdevant v. First Security Bank) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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