No. 12887
IN THE SUPREMH COURT OF THE STATE OF M N A A
OTN
1975
ARNOLD FAIRCHILD., H. B. LANDOE and
F. D. LICHTENBERG,
P l a i n t i f f % and A p p e l l a n t s ,
WILLIAMS FEED, I N C . ,
Defendant and Respondent.
Appeal from: D i s t r i c t Court o f t h e F i f t h J u d i c i a l D i s t r i c t ,
Honorable F r a n k E. B l a i r , Judge p r e s i d i n g .
Counsel of Record :
For Appellant :
B e n n e t t and B e n n e t t , Bozeman, Montana
Lyman B e n n e t t Jr. a r g u e d , Rozeman, Montana
F o r Respondent :
Schulz and Davis, D i l l o n , Montana
C a r l M e Davis a r g u e d , D i l l o n , Montana
C h e s t e r J o n e s a r g u e d , V i r g i n i a C i t y , Montana
Submitted: November 3 , 1975
Decided 'j27F
Filed : !AN tr
Mr. Justice Frank I. Haswell delivered the Opinion of the Court.
Plaintiffs sued defendant for damages based on breach
of contract and conversion. Following a jury trial in the
district court of Madison County before the Hon. Frank E. Blair,
the jury returned a verdict for defendant and judgment was entered
thereon. Plaintiffs appeal from this judgment and denial of
their motion for judgment notwithstanding the verdict or alterna-
tively for a new trial.
Plaintiff Arnold Fairchild leased two farm units in
Madison County from plaintiffs H. B. Landoe and F. D. Lichtenberg.
Rent was to be paid in the form of a percentage of the crops pro-
duced on the land by Fairchild. Defendant Williams Feed, Inc.
supplied Fairchild with the seed and supplies necessary to grow
the crops. Fairchild executed a demand note and a security inter-
est in the crops.
At the district court trial plaintiffs contended that
defendant supplied a less productive variety of barley seed than
had been ordered, resulting in a reduced yield and damages of
$2,618. Plaintiffs also claimed that defendant unlawfully seized
and converted the hay crop causing actual damages of $5,790.02
and punitive damages of $10,000.
Defendant, on the other hand, claimed that plaintiffs'
low barley yield was attributable to Fairchild's unorthodox farm-
ing methods and repeated hail damage. Defendant contended the
hay was not converted but instead foreclosed upon and sold in a
commercially reasonable manner after Fairchild defaulted in pay-
ment of the demand note.
The district court granted defendant's motion to dismiss
plaintiffs Landoe and Lichtenberg from the suit at the close of
the plaintiffs' case in chief. At the conclusion of all the
evidence, the district court dismissed plaintiffs' claim for
punitive damages. Plaintiffs' motions for directed verdicts
on both claims for relief were denied. The jury returned a
verdict for defendant. Following denial of plaintiffs' motion
for a judgment notwithstanding the verdict or alternatively
for a new trial, plaintiffs appeal from the judgment and denial
of their motion.
Plaintiffs list six issues for review on appeal:
1. Did the district court err in dismissing this action
as to the claims of plaintiffs H. B. Landoe and F. D. Lichtenberg?
2. Did the district court err in withdrawing from the
jury the issue of punitive damages?
3. Did the district court err in denying plaintiffs'
motion for directed verdict on the claim for breach of contract?
4. Did the district court err in denying plaintiffs'
motion for a directed verdict on their claim for conversion?
5. Was the evidence in this action sufficient to justify
the verdict of the jury?
6. Did the district court err in denying plaintiffs'
motion for judgment notwithstanding the verdict or in the alterna-
tive for a new trial?
The principal issue on appeal is whether there had been
a default ant1 proper notification of the private sale of the hay.
We conclude that there was a default and defendant complied with
section 87A-9-504, R.C.M. 1947, in disposing of the hay.
On June 11, 1968, Arnold Fairchild signed a note agreeing
to pay the sum of $10,023.15 to Williams Feed, Inc. on demand,
together with interest at the rate of 8% per annum. On the same
date he also executed a security agreement giving defendant a
security interest in his hay and grain crops. The agreement provides
that a default exists whenever: (1) any money due and payable
remains unpaid, (2) there is a failure to perform any of the
p r o v i s i o n s o f t h e s e c u r i t y agreement, (3) there is substantial
damage o r d e s t r u c t i o n t o any p o r t i o n of t h e c o l l a t e r a l , o r ( 4 )
t h e s e c u r e d p a r t y deems i t s e l f i n s e c u r e f o r any r e a s o n whatso-
ever. The agreement a l s o p r o v i d e s t h a t t h e borrower w i l l keep t h e
c o l l a t e r a l i n s u r e d a g a i n s t l o s s , damage, t h e f t and o t h e r r i s k s
and t h a t any l o s s r e c o v e r e d from t h i s i n s u r a n c e s h a l l be p a i d t o
t h e secured p a r t y t o reduce t h e outstanding indebtedness regard-
l e s s o f whether t h e i n d e b t e d n e s s i s due and owing.
I t i s clear t h a t Arnold F a i r c h i l d d i d n o t comply w i t h
t h e s e c u r i t y agreement and was i n d e f a u l t . This testimony estab-
l i s h e s t h a t Dave W i l l i a m s o f W i l l i a m s Feed, I n c . demanded pay-
ment and gave n o t i c e of d e f a u l t :
"Q. And a t t h a t t i m e d i d you make any demand
upon t h e P l a i n t i f f [ F a i r c h i l d ] f o r payment o f
t h e n o t e ? A. I did.
"Q. And t h e d e b t ? A. I did.
"Q. What d i d you s a y ? A. I t o l d him h e ' d b e t t e r
g e t busy and s e l l t h a t hay and I d i d n ' t s a y some-
time. I s a i d w e c o u l d s e l l it i f he c o u l d n ' t ,
b u t we wanted t o g e t t h a t a c c o u n t c l e a r e d up.
We'd c a r r i e d him s i n c e t h e f a l l b e f o r e and w e f e l t
we were e n t i t l e d t o o u r money.
"Q. Was t h e r e a n y t h i n g e l s e s a i d ? A. Well, he
s t i l l s a i d he d i d n ' t want t o s e l l .
"Q. Was a n y t h i n g s a i d a b o u t t h e p r i c e o f hay a t
t h a t t i m e ? A. Y e s , I t o l d him w e c o u l d g e t him
$17.50 [ p e r t o n ] f o r t h e hay and i f he c o u l d do
b e t t e r t o go g e t i t , b u t t o g e t i t d o n e . "
The t e n o r o f W i l l i a m s ' t e s t i m o n y i s t h a t t h e d e b t was
due and p a y a b l e and t h a t t h e hay s h o u l d be s o l d immediately t o
p r o v i d e t h e f u n d s f o r payment. H e offered t o allow Fairchild t o
s e l l t h e hay on h i s own a t a b e t t e r p r i c e , i f he c o u l d g e t o n e ,
b u t d i d n o t g i v e him a n e x t e n s i o n o f t i m e f o r payment o f t h e
note. F a i r c h i l d w a s i n d e f a u l t b e c a u s e he f a i l e d t o t a k e any
s t e p s t o s e l l t h e hay and pay t h e n o t e . Default a l s o occurred
when he f a i l e d t o t u r n h i s h a i l damage p r o c e e d s o v e r t o t h e
defendant as required by the security agreement.
Section 87A-9-503, R.C.M. 1947, provides in pertinent
part :
" * * * a secured party has on default the right
to take possession of the collateral. In taking
possession a secured party may proceed without
judicial process if this can be done without
breach of the peace or may proceed by action. * * *"
(Emphasis supplied.)
The secured party's right to possession of the collateral
accrues immediately upon default of the provisions of the security
agreement. Uniform Commercial Code § 9-503, Uniform Laws Anno-
tated, Official Comment, 1972. County Construction Co. v. Liven-
good Construction Co., 393 Pa. 39, 142 A.2d 9.
Section 87A-9-504, R.C.M. 1947, allows the secured party
to sell the collateral after default:
"(3) Disposition of the collateral may be by
public or private proceedings and may be made by
way of one or more contracts. Sale or other dis-
position may be as a unit or in parcels and at
any time and place and on any terms but every
aspect of the disposition including the method,
manner, time, place and terms must be commercially
reasonable. * * * Reasonable notification of the
time and place of any public sale or reasonable
notification of the time after which any private
sale or other intended disposition is to be made
shall be sent by the secured party to the debtor.
* * * " (Emphasis supplied.)
The Uniform Commercial Code, § 9-504, Uniform Laws Anno-
tated, Official Comment 5, 1972, states:
"'Reasonable notification' is not defined in this
Article [Secured ~ransactions]; at a minimum it
must be sent in such time that persons entitled
to receive it will have sufficient time to take
appropriate steps to protect their interests by
taking part in the sale or other disposition if
they so desire."
Oral notice is sufficient to meet the requirements of
Uniform Commercial Code, § 9-504(3). Crest Investment Trust,
Inc. v. Alazas, 264 Md. 571, 287 A.2dGl; GAC Credit Corp. v.
Small Business Administration, 323 F.Supp. 795; 4 Anderson, 2nd
Ed, Uniform Commercial Code, B 9-504:16.
Although at trial it was disputed whether the notification
occurred in September or October of 1968, Fairchild had suffi-
cient notice to allow him to take steps to protect his interest
in the hay prior to its sale in December 1968 and January 1969.
The record indicates that as late as January 1969, Fairchild
had made no effort to sell the hay and pay the note. Consequent-
ly defendant had the right to take possession of the hay and
sell it at a private sale pursuant to section 87A-9-504, R.C.M.
1947.
Plaintiffs next contend that the trial court erred in
dismissing plaintiffs H. B. Landoe and F. D. Lichtenberg from
the suit. This issue is irrelevant in view of our affirmance
of the judgment for defendant.
Plaintiffs also contend the district court erred in with-
drawing the issue of punitive damages from the jury. They rely
on the proposition that exemplary damages may be awarded where
the defendant has been guilty of actual or presumed malice (section
17-208, R.C.M. 1947), and that malice can be implied where the
conduct of the defendant is unjustifiable. Cherry-Burrell Co.
v. Thatcher, 107 F.2d 65; Moelleur v. Moelleur, 55 Mont. 30, 173
P. 419; Ramsbacher v. Hohrnan, 80 Mont. 480, 261 P. 273.
We agree with the conclusion of the district court that
the facts of the instant case do not support an inference of
malice. Defendant, in selling the hay, was merely exercising
its rights under the security agreement and was not engaging in
a wanton or willful act constituting malice. In addition to ex-
tending credit to Fairchild for farming supplies, defendant re-
peatedly loaned him money for living expenses. There is simply
no evidence supporting an inference of malice.
The remaining issues involve disputed factual questions
on which conflicting evidence was presented at the trial. The
jury weighed the evidence and resolved the disputed facts in
favor of defendant. This Court will not reverse the jury's
determination of the facts based on substantial, though con-
flicting evidence. Richardson v. Howard Motors, Inc., 163
>
Mont. 347, 516 P.2d 1153 and cases cited therein.
The judgment of the district court is affirmed.
Justice
a
We concur: 3..!
Chief Justice