No. 84-281
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985
VERLIN F. WIPPERT and LORETTA
L. WIPPERT,
Plaintiffs and Appellants,
-vs-
THE BLACKFEET TRIBE OF THE
BLACKFEET INDIAN RESERVATION,
et al.,
Defendants and Respondents.
APPEAL FROM: District Court of the Ninth Judicial District,
In and for the County of Glacier,
The Honorable R. D. McPhillips, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Frisbee, Moore & Stufft, Cut Bank, Montana
For Respondents:
Cannon & Sheehy; Ross W. Cannon, Helena, Montana
Submitted on Briefs: Sept. 6, 1984
Decided: February 14, 1985
$ 6 , " '1385
Filed:
- --
Clerk
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.
Verlin R. Wippert and Loretta Wippert Rex, plaintiffs
below, appeal from a decision of the Ninth Judicial District,
Glacier County, ordering the Wipperts to pay the Blackfeet
Tribe a deficiency judgment of $14,330.59. We reverse.
This case was originally filed as a quiet title action,
and was first considered by this Court in Wippert v.
Blackfeet Tribe (Mont. 1982), 654 P.2d 512, 39 St.Rep. 2117.
I
At that time we affirmed the trial court's determination that
a Blackfeet Tribal Court judgment against the Wipperts must
be enforced as a matter of comity. However, the case was
remanded to the District Court for an. independent determina-
tion of the correct amount remaining unsatisfied on the
Tribal Court judgment.
The facts as gleaned from the record appear to be as
follows: In 1974, the Wipperts operated a cattle ranch east
of Browning, Montana on the Blackfeet Indian Reservation. In
March of 1974 the F!ipperts began borrowing money from the
Blackfeet Tribal Credit Program. Funds totalling $44,,729.97
were eventually advanced to the Wipperts by the Tribe. As
part of the transaction, the parties entered into a security
agreement on March 1, 1974. According to the agreement, the
collateral for the loan was to be "all cattle . . . now owned
or hereafter acquired by the debtors. l' The security agree-
ment contained. a default clause, and provided that in case of
default the rights and duties of the parties would. be gov-
erned by the Montana Uniform Commercial Code (UCC). The
agreement specifically provided that any notice of sale of
the collateral required by the UCC would be satisfied "by
g i v i n g t h e Debtor a t l e a s t f i v e d a y s p r i o r w r i t t e n n o t i c e of
t h e t i m e and p l a c e o f any p u b l i c s a l e ... "
The W i p p e r t s d e f a u l t e d on their loan i n November of
1975. They were n o t i f i e d o f t h e T r i b e ' s i n t e n t i o n t o f o r e -
c l o s e on t h e loan t o enforce t h e security agreement in a
March 8 , 1976 l e t t e r from t h e B l a c k f e e t T r i b a l C r e d i t Commit-
tee. While t h a t l e t t e r mentioned t h e Committee's i n t e n t t o
sell the collateral and apply the proceeds to the amount
u n p a i d on t h e l o a n , it s a i d n o t h i n g a b o u t t h e t i m e o r p l a c e
of t h e proposed s a l e . The r e c o r d i n d i c a t e s t h a t t h e W i p p e r t s
r e c e i v e d no n o t i c e a t a l l from t h e T r i b e i n f o r m i n g them o f
t h e d a t e and l o c a t i o n o f t h e f o r e c l o s u r e s a l e .
On A p r i l 15, 1976, t h e Blackfeet T r i b a l Court issued
its order f i n d i n g t h e W i p p e r t s i n d e f a u l t on t h e l o a n and
permitting t h e t r i b e t o s e l l t h e Wipperts' c a t t l e i n order t o
s a t i s f y t h e o u t s t a n d i n g b a l a n c e due.
The cattle were sold at public auction in Shelby,
Montana on April 19, 1976. After deducting t h e c o s t s of
caring for the cattle prior to sale, the Tribe applied
$27,031 t o t h e amount due on t h e W i p p e r t s ' loan, leaving a
d e f i c i e n c y o f $17,698.
The trial upon remand was heard on March 23, 1983,
before the Honorable R. D. McPhillips, s i t t i n g without a
jury. On March 28, 1984, t h e c o u r t f i l e d i t s f i n d i n ~ sand
c o n c l u s i o n s and an o r d e r r e q u i r i n g t h e W i p p e r t s t o pay t o t h e
T r i b e t h e $14,330 t h a t remained u n p a i d a f t e r o t h e r f u n d s had
been a p p l i e d t o t h e d e f i c i e n c y . The c o u r t a l s o o r d e r e d t h e
Wipperts t o pay t h e T r i b e ' s c o s t s and a t t o r n e y fees. The
Wipperts appeal. from t h i s judgment.
The f o l l o w i n g i s s u e s a r e p r e s e n t e d f o r review:
1. Did the District Court err in ruling that the Tribe
complied with the notice requirements of the UCC thereby
entitling it to a deficiency judgment?
2. Did the District Court err in awarding the Tribe
attorney fees?
3. Did the District Court err in allowing the Tribe to
Dr?
recover interest in its judgment?
Did the District Court err in determining the unpaid
balance on the loan from the Tribe to the Wipperts?
Upon consideration of the first issue, we conclude that
the judgment against appellants must be reversed. We there-
fore need. not address the remaining issues.
The Wipperts maintain the District Court's deficiency
judgment cannot stand in li.uht of the fact that the Tribe
failed to give the FJipperts adequate notice of the sale of
their collatera.1 as required by both section 30-9-504(3),
MCA, and the terms of the security agreement between the
parties.
Title 30, Cha.pter 9, MCA is th.at portion of the UCC
which regulates secured transactions. Section 30-9-504(3),
MCA prescribes the manner in which a secured party may dis-
pose of colla.tera1 following default. In pertinent part,
that statute provides:
I' (3) ...
Sale or other disposition 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 commercial~ly reasonable. Unless
collateral is perishable or threatens to
decline speedily in value or is of a type
customarily sold on a recognized market,
reasonable notification of the time and
place of any public sale ... shall be
sent by the secured party to the debtor.
.. 11
The respondent Tribe argues that since the collateral
in this case was of a type customarily sold on a recognized
market, i.e. cattle sold at public auction, notice of sale
was not required under section 30-9-504 (3), MCA. We do not
agree that cattle constitute a type of collateral "customari-
ly sold on a recognized market." It has been found that a
"recognized market" under UCC section 9-504 (3) would be akin
to a stock market, or commodity market. O'Neil v. Mack
Truck, Inc. (Tex.Civ.App. 1976), 533 S.W.2d 832, 836; Norton
v. National Bank of Commerce of Pine Bluff (Ark. 1966), 398
S.W.2d 538, 540. These markets deal with essentially tangi-
ble goods whose price is determined by external factors
normally beyond the control of specific interested buyers,
and where "haggling and competitive biddi.nq are not primary
factors in each sale." Norton, 398 S.W.2d at 540. See also
White and Summers, Uniform Commercial Code S26-10 (l-980).The
"recognized market" exception was included in the statute
because lack of notice to the debtor in such cases woul-d not
prejudice the debtor's right to minimize his liability by
participation in the sale. Norton, 398 S.W.2d at 541.
We concur with the reasoning of the North Dakota Su-
preme Court in State Bank of Towner v. Hansen (N.D. 1981),
302 N.W.2d 760, 765, where it was stated:
"Neither livestoclc nor farm machinery are
sold on markets wherein the price is
fixed at any given moment and is free
from competitive bidding. To the con-
trary, competitive bidding is the focal
point of the type of auction sales a.t
which this collatera.1 was disposed. A
debtor, upon receiving proper notice,
might be able to attract additional
interested persons to bid up the price of
these goods, or he might attend himself
and bid at the auction. Thus, the fail-
ure to give the debtor notice might very
well result in prejudice to him. We
agree with the Texas Court of Civil
Appeals in OWei.1, supra that 'the term
"recognized market" within the meaning of
the U.C.C. is most restrictive.' Only
those items of collateral which are
commonly sold on a market such as the
stock market or the commodity market
wherein the price at any given moment is
fixed and is free from an individualized
competitive bidding process fall within
the category of 'recognized market'
collateral which is exempt from the
notice requirement. . ."
We conclude that cattle are not a type of collateral
customarily sold on a recognized ma-rket,and for that reason
the Tribe was obligated to provide the Wipperts with "reason-
able notification of the time and place" for the public
auction sale of the cattle.
Although the UCC is silent regarding what constitutes
reasonable notice, the officia.1 comment to section 30-9-504
provid.es some guidance: " [A]t a minimum [notice] 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 disposi-
tion if they so desire." In addition, we note that the
parties specifically agreed in their security agreement on
what notice to the debtor would be required in the event of a
foreclosure sale. Section 8 of the security agreement pro-
vides that the rights and responsibilities of the parties are
to be controlled by the UCC and. then states: "Any require-
ment of said Code of reasonable notification of the time and
place of any public sale .. . shall be met by giving the
Debtor at least five days prior written notice of the time
and place of any public sale." This agreement concerning
notice requirements is valid and binding on the parties so
long as it is not manifestly unreasonable. Section
30-9-501(3)(b), MCA; Liberty Bank v. Honolul-u Providoring,
Inc. (Hawaii 1982), 650 P.2d 576, 579; Chapman v. Field
(Ariz. 1979), 602 P.2d 481, 485. Under the circumstances, we
cannot say that the notice requirement specified in the
agreement is manifestly unreasonable.
It is clear from our review of the record that no
notice whatsoever regarding the time and place of the fore-
closure sale was given by the Tribe to the Wipperts. At
trial evidence of notice-of-sale was the following letter
from the Tribal Credit Committee to the Wipperts:
"March 8, 1976. Dear Mr. and Mrs.
Wippert: At a duly called, noted and
convened session of the Blackfeet Tribal
Credit Committee the following action was
taken on your loan, CF3411 with the
Blackfeet Tribe of the Blackfeet Indian
Reservation: After again reviewin9 all
the facts the motion carried to declare
in default and proceed with foreclosure
to proper procedure to have the cattle
picked up and taken to market. It is the
committee's intention that all security
offered for CF3411 be sold and the pro-
ceeds, less cost of sale, applied on the
loan. This action is being taken in
accordance with authority given by you in
Section 7 of the Loan Agreement, CF3411."
This letter fails to satisfy the notice requirements of
either the UCC or the security agreement. There is no men-
tion of either the time or place of sale, and without that
information a debtor is precluded from taking action to
assure that a competitive price is obtained for his collater-
al at a public sale.
We hold that failure to provide the notice required by
section 30-9-504 (3), MCA, precludes a creditor's right to
obtain a deficiency judgment. See Farmers State Bank v.
Mobile Homes Unlimited (1.979), 181 P4ont. 342, 593 ~ . 2 d734.
The failure of respondent to provide the notice re-
quired precludes the issuance of a deficiency judgment in
this case.
The decision of the District Court is reversed and the
matter is remanded for further proceedings in accordance with
this opinion.
/"
Justice
We concur:
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