Bank of Eastern Oregon v. Griffith

BUTTLER, P. J.,

concurring in part; dissenting in part.

I concur in affirming the judgment against Leonard, but because I disagree with the majority’s conclusion that Bank waived its perfected security interest in the equipment that Griffith traded to Condon Motors, I dissent from the reversal of the judgment against Condon.

Given Condon’s argument, a critical question is whether Bank consented to the trade before it took place. The majority recognizes the importance of that inquiry, 101 Or *535App at 533, and, after discussing it, begrudgingly defers to the trial court’s finding that there was no prior consent by Bank. However, it concludes that we need not decide that question, because at some time after the trade, Bank crossed off the traded equipment on a copy of the 1980 financing statement. However, not even Condon would have us go that far; it relies on the prior permission of Bank, coupled with the later crossing out as showing a waiver by Bank.

Three witnesses testified on the waiver issue: Griffith and two bank officers, Pierce and Pierson. Griffith was uncertain as to both the time and content of his conversation with Pierce. The best that he could say was that he was “sure” that he had told Pierce, because “it’s pretty hard to get anything by Gene Pierce and the bank.” Even so, he could not remember when that was. On the other hand, Pierce’s testimony relating to consent was clear and unequivocal — he had never consented to the trade. Pierson testified that, to the best of his knowledge, no one at the bank gave permission to Griffith to trade the equipment and that, had he been asked, he would not have consented. As between Griffith and Bank’s officers, the trial court believed the latter.

The trial court found:

“The equipment was specifically listed on the security agreement between the bank and Griffiths executed on March 10, 1980. In the fall of 1981, Griffiths came to the bank to renew their operating loan. A bank officer crossed the traded equipment off that listed in the 1980 agreement, as Griffiths told him it was traded. On September 15,1981 they signed a different security agreement in which the traded equipment was deleted. In late 1983 or early 1984, a different bank officer made the notation ‘traded’ on the 1980 agreement, next to the crossed out items.”

It is clear that the court did not find that Bank had consented to the trade; it found that Bank had learned of it after the fact and had noted that fact on a copy of the 1980 security agreement. The trial court implicitly found that whatever Griffith had to say on the subject was so vague and indefinite that it could not support a finding that Bank had consented to the trade or that, even if his testimony could support such a finding, it was not as credible as that of Bank’s officers, Pierce and Pierson.

*536Waiver is an affirmative defense, and the party asserting it has the burden of proof. ORCP 19B. Waiver is a voluntary, intentional relinquishment of a known right. Cross v. Campbell, 173 Or 477, 493, 146 P2d 83 (1944); Puziss v. Geddes, 96 Or App 154, 158, 771 P2d 1028 (1989). It is primarily a question of intent, which may be express, such as by a written release under ORS 79.4060, or implied from the conduct of the secured party. However, the intention to waive must clearly appear; it will not be inferred, except from a clear and unequivocal act manifesting an intent to waive. Smith v. Martin, 94 Or 132, 141, 185 P 236 (1919). There is no evidence of a clear and unequivocal act that manifests Bank’s intention to waive its security interest. Condon has not sustained its burden of proof.

There are other reasons why there was no waiver. Section 7.6 of the security agreement provides:

“Non-Waiver by Secured Party
“Secured party shall not be deemed to have waived any of his rights under this or any other agreement or instrument signed by the debtor unless the waiver is in writing signed by the secured party. No delay in exercising the secured party’s rights shall be a waiver nor shall a waiver on one occasion operate as a waiver of such right on a future occasion.” (Emphasis supplied.)

Any waiver of Bank’s security interest had to be in writing; there was no written waiver. Further, the parties agreed that Bank’s delay in exercising its rights would not operate as a waiver. Although there may be circumstances under which Bank would be estopped from relying on the non-waiver provision, no estoppel is claimed here. Neither is there any contention that Bank accepted any benefits, if there were any, from the trade of the equipment. See Smith v. Martin, supra.

In an analogous case, the Supreme Court relied on the parties’ agreement in disposing of the defendants’ contentions that the secured party had “abandoned” or waived its security interest. In Community Bank v. Jones, 278 Or 647, 566 P2d 470 (1977), the defendants argued that the bank had waived its perfected security interest in the debtor’s automobile inventory, originally evidenced by a security agreement, by later accepting trust receipts on the vehicles. The *537security agreement included after-acquired inventory and proceeds and expressly provided that any waiver of its security interest had to be in writing. The court, in finding no waiver, stated that “[w]here an agreement is clear upon its face, a court should be hesitant to infer waiver from the post-agreement conduct of the secured creditor.” 278 Or at 669. The same is true here.

Neither does Bank’s inaction after it learned of the trade amount to a waiver of its security interest. Although the UCC does not deal with waiver of security interests, as such, ORS 79.2050 provides, in part:

“A security interest is not invalid or fraudulent against creditors by reason of liberty in the debtor to use, commingle or dispose of all or part of the collateral * * * or to use, commingle or dispose of proceeds, or by reason of the failure of the secured party to require the debtor to account for proceeds or replace collateral.”

Here, Bank did not object to the Griffiths’ trading the equipment when it learned of it after the fact. Clearly, it could have done so, because the trade-in violated the security agreement. It could have foreclosed or it could have required an accounting; it was, however, not required to do either in order to retain its security interest. Condon took the equipment subject to Bank’s security interest, and Bank did not release it. Condon does not contend that it relied on Bank’s having waived or released its interest. Accordingly, unless there was some reason why Bank was concerned about the Griffiths’ creditworthiness at the time when it was considering renewing its line of credit, there was no reason for Bank to take any action. Under ORS 79.2050, Bank’s after-the-fact acquiescence in the trade-in did not invalidate its security interest.

Bank’s conduct here was equivocal and ambiguous at best. There is no evidence that Bank did any more than acquiesce in the trade-in after the fact and note that the Griffiths no longer had possession of the traded equipment. Because its security interest had been perfected by the filing of a financing statement that covered all equipment and machinery, without describing any of it, including replacements and proceeds, the Griffiths’ lack of possession did not affect Bank’s security interest. Failure to list the equipment in *538the 1981 agreement was also nothing more than an acknowledgment that the equipment was no longer in the debtor’s possession. As noted, the financing statement perfected Bank’s security interest in all equipment, including proceeds, replacements and after-acquired property. Furthermore, Bank did not file a termination statement of the 1980 agreement1 or record a release of its security interest in the traded equipment. In fact, this action is based on that security agreement. As the trial court stated, the evidence shows only that Bank failed to pursue a remedy when it first became available. It was not required to pursue it. There was no waiver, and the trial court properly awarded Bank a one-half interest in the traded equipment.

I would affirm the trial court’s judgment in its entirety and, therefore, dissent.

Defendants do not contend that the 1981 security agreement revoked or rescinded the 1980 agreement on which plaintiff based this action.