First Westside Nat. Bank of Gr. Falls v. Llera

                              No. 13912
               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                1978


FIRST WESTSIDE NATIONAL BANK
OF GREAT FALLS, a National
Banking Association,
                      Plaintiff and Respondent,


ALLEN R. LLERA, EDITH S. TYNES and
LINDA L. FISHER,
                      Defendants and Appellants.



Appeal from:    District Court of the Eighth Judicial District,
                Honorable Truman Bradford, Judge presiding.
Counsel of Record:
    For Appellants:

        John M McCarvel argued, Great Falls, Montana
    For Respondent :
        Jardine, Stephenson, Blewett & Weaver, Great Falls,
         Montana
        Lon T. Holden argued, Great Falls, Montana



                                 Submitted:    April 24, 1978
                                   Decided :   N N 5 1g78
M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court:


         Defendant Allen R. L l e r a on September 29, 1976, borrowed

$5,340.42 from p l a i n t i f f F i r s t Westside National Bank of Great

Falls.       L l e r a gave the bank h i s promissory n o t e due i n 90 days

on December 29, 1976, and signed a s e c u r i t y agreement d e s c r i b i n g a

1976 Mercury automobile a s c o l l a t e r a l .                L l e r a presented t h e bank

with a t i t l e t o t h e automobile i n t h e j o i n t names of himself and

Edith S. Tynes, L l e r a ' s mother.                Llera obtained t h e t i t l e by

searching through t h e personal papers of h i s mother, i n h e r

residence, and without h e r knowledge.

         The bank never f i l e d t h e s e c u r i t y agreement with t h e

Montana R e g i s t r a r of Motor Vehicles a s a l i e n on t h e automobile.

L l e r a d e f a u l t e d on t h e loan when he f a i l e d t o pay h i s o b l i g a t i o n

by December 29, 1976.                O January 28, 1977, Llera a p p l i e d f o r a
                                      n

d u p l i c a t e t i t l e f o r t h e v e h i c l e claiming t h e o r i g i n a l c e r t i f i c a t e

of t i t l e (which was i n t h e bank's possession) was l o s t , mutilated

or illegible.           The R e g i s t r a r of Motor Vehicles issued a d u p l i c a t e

t i t l e i n t h e name of Edith S. Tynes and/or Allen R. L l e r a ,

dated January 28, 1977.                 Tynes and L l e r a then completed t h e

assignuent portion of t h e d u p l i c a t e t i t l e and t r a n s f e r r e d t h e i r

i n t e r e s t s t o Edith S. Tynes and/or Linda L. F i s h e r .                    Linda L.

F i s h e r i s t h e s i s t e r of L l e r a and t h e daughter of Tynes.                   Fisher

gave no c o n s i d e r a t i o n f o r t h e assignment, and was n o t even aware

t h e assignment was made.                The bank d i d n o t consent t o t h e assign-

ment of i n t e r e s t , although i t s consent was required f o r a v a l i d

assignment under t h e terms of t h e s e c u r i t y agreement.

         On March 28, 1977, two months subsequent t o t h e assignment

of i n t e r e s t i n t h e automobile from L l e r a t o F i s h e r , t h e bank

f i l e d a claim i n D i s t r i c t Court, Cascade County, a g a i n s t L l e r a
t o recover t h e $5,340.42 p r i n c i p a l , p l u s i n t e r e s t on t h e de-

f a u l t e d promissory note.            The bank i n i t s complaint requested

the c o u r t t o i s s u e an order d i r e c t i n g Llera t o r e l i n q u i s h posses-
                                                            the
s i o n of t h e automobile t o t h e bank s o that/bank could s e l l i t .

The bank then f i l e d an amended complaint joining Tynes and

F i s h e r a s a d d i t i o n a l defendants.        Tynes claimed t h e f i r s t time

she learned of t h e loan, t h e n o t e , and t h e s e c u r i t y agreement

executed by L l e r a , was when t h e bank's a s s i s t a n t v i c e - p r e s i d e n t

i n t h e loan department n o t i f i e d h e r on February 22, 1977.

         A f t e r a show cause hearing, t h e D i s t r i c t Court ordered

Tynes and F i s h e r t o d e l i v e r t h e automobile t o the bank by May 31,

1977 f o r s a l e , with t h e proceeds of s a l e t o be divided equally

between Tynes and t h e bank.                 Tynes and F i s h e r appeal from t h e

c o u r t ' s order and a l l e g e t h r e e s p e c i f i c a t i o n s of e r r o r i n t h e i r

appeal from t h e D i s t r i c t Court order:

         1.     Did p l a i n t i f f bank have a v a l i d s e c u r i t y i n t e r e s t i n

t h e automobile?

         2.     Did t h e D i s t r i c t Court e r r i n ordering t h a t t h e

v e h i c l e i t s e l f , r a t h e r than merely L l e r a ' s one-half i n t e r e s t

i n t h e v e h i c l e , be s o l d t o s a t i s f y L l e r a ' s d e b t ?

         3.     Did t h e D i s t r i c t Court e r r i n d e c l i n i n g t o award

a t t o r n e y f e e s t o Tynes and F i s h e r ?

         The f i r s t c o n s i d e r a t i o n i s t h a t t h e c e r t i f i c a t e of

ownership f o r t h e 1976 Mercury automobile held by t h e bank on

making t h e loanwas an "and/oru t i t l e , t h a t i s , t h e o r i g i n a l

c e r t i f i c a t e of ownership was issued showing t h e owners t o be

"Edith S. Tynes &/or Allen R. Llera.''                         There appears to -he

l i t t l e o r no s t a t u t o r y a u t h o r i t y f o r t h e proposition t h a t an

"and/or1' t i t l e i s one c r e a t i n g a j o i n t tenancy e s t a t e with

r i g h t of survivorship.
         S e c t i o n 67-307, R.C.M.         1947, provides t h a t t h e ownership

of property by s e v e r a l persons i s e i t h e r a j o i n t i n t e r e s t ,                a

p a r t n e r s h i p i n t e r e s t , o r an i n t e r e s t i n common.   It i s further

provided i n s e c t i o n 67-308, R.C.M.              1947, t h a t

         "A j o i n t i n t e r e s t i s one owned by s e v e r a l persons
         i n equal s h a r e s , by a t i t l e c r e a t e d by a s i n g l e
         w i l l o r t r a n s f e r , when e s p e c i a l l y declared i n a
         w i l l o r t r a n s f e r t o be a j o i n t tenancy        ***.It

          (Emphasis added. )

I t i s then provided i n s e c t i o n 67-313, R.C.M.                   1947, t h a t every

i n t e r e s t i n property c r e a t e d i n favor of s e v e r a l persons i n t h e i r

own r i g h t i s an i n t e r e s t i n common unless f o r a p a r t n e r s h i p , o r un-

less declared i n i t s c r e a t i o n t o be a j o i n t tenancy i n t e r e s t .

         The e s s e n t i a l i n g r e d i e n t i n a j o i n t tenancy e s t a t e i s t h e

r i g h t of survivorship.           Yet i t i s d i f f i c u l t t o f i n d i n t h e phrase

"and/oru an i n t e n t t h a t t h e survivor s h a l l be e n t i t l e d t o t h e

whole of t h e property.             Nonetheless i t has come t o be widely

accepted, p a r t i c u l a r l y i n t h e consumer goods i n d u s t r y , t h a t

ownership documents which c a r r y t h e names of two o r more persons

with t h e phrase "and/ortt does i n f a c t c r e a t e a j o i n t tenancy

estate.      Moreover, t h i s Court held i n Marshall v. Minlschmidt,

(1966), 148 Mont. 263, 269, 419 P.2d 486, t h a t t h e names of t h r e e

owners shown on a recorded c a t t l e brand, joined by t h e word

"ort', was i n f a c t a j o i n t tenancy i n t e r e s t i n t h e brand, and

t h e r e f o r e of the c a t t l e bearing such brand.

         Following Marshall, t h e r e f o r e , we may assume t h a t i n

Montana an ownership document showing t i t l e i n two o r more persons

"and/ort' has t h e e f f e c t of c r e a t i n g a j o i n t tenancy e s t a t e w i t h

r i g h t of survivorship.           This a p p l i e s t o personal property, n o t

real estate.          See: Section 67-310, R.C.M.                 1947.

         Next, we consider t h e n a t u r e of t h e i n t e r e s t of t h e j o i n t

t e n a n t s i n t h e j o i n t tenancy property.           The s t a t u t e c r e a t i n g
j o i n t tenancies i n Montana mandatorily s t a t e s t h a t "A j o i n t

i n t e r e s t i s one owned by s e v e r a l persons i n equal s h a r e s                  **        *.It



Section 67-308, R.C.M.               1947.       The e f f e c t of t h e s t a t u t e i s t o include

a l l of t h e i n c i d e n t s of a j o i n t tenancy e s t a t e a t common law.

Hennigh v. Hennigh, (1957), 131Mont. 372, 377, 309 P.2d 1022.

         Thus, accepting t h e ''and/or"                 t i t l e a s having c r e a t e d a

j o i n t tenancy i n t h i s c a s e , t h e l e g a l r e s u l t i s t h a t Allen R.

L l e r a owned an equal share i n t h e automobile, and t h e r i g h t of

survivorship with h i s mother.

         To o b t a i n a v a l i d s e c u r i t y i n t e r e s t i n L l e r a ' s i n t e r e s t

i n t h e automobile, t h e bank had t o s a t i s f y t h e t h r e e requirements

of s e c t i o n 876-9-204(1), R.C.M.               1947.       F i r s t , t h e r e had t o be an

"agreement" between t h e secured party and t h e debtor t h a t t h e

secured p a r t y would take a s e c u r i t y i n t e r e s t i n t h e property; t h e

s e c u r i t y agreement which L l e r a signed s a t i s f i e d t h i s requirement.

Second, t h e bank has t o give "value" f o r t h e s e c u r i t y agreement;

t h e loan by p l a i n t i f f bank t o Llera s a t i s f i e d t h i s requirement.

Third, t h e debtor has t o have " r i g h t s i n t h e c o l l a t e r a l " ;                 here

L l e r a was a j o i n t owner of t h e automobile.

         The bank's s e c u r i t y i n t e r e s t i n t h e v e h i c l e was unperfected

because i t d i d not record t h e l i e n .                When L l e r a f r a u d u l e n t l y

obtained a d u p l i c a t e t i t l e t o t h e v e h i c l e and purported t o a s s i g n

h i s j o i n t i n t e r e s t i n i t t o h i s s i s t e r Linda F i s h e r , she d i d n o t

take f r e e of t h e bank's s e c u r i t y i n t e r e s t .          For t h e reason L l e r a

made t h e assignment t o F i s h e r g r a t u i t o u s l y and without h e r knowledge,

she was n o t a buyer " f o r value" under s e c t i o n 87A-9-307, R.C.M.                                     1947.

Only buyers f o r value without knowledge of t h e bank's s e c u r i t y

i n t e r e s t , o r subsequent secured c r e d i t o r s who recorded t h e i r l i e n s

p r i o r t o t h e bank, would take p r i o r i t y over t h e ban& unperfected

security interest.
         The next c o n s i d e r a t i o n i s t h e l e g a l e f f e c t of t h e loan

and subsequent d e f a u l t upon t h e j o i n t tenancy e s t a t e i n t h e

automobile.        When L l e r a made t h e loan, he d i d not execute t h e

assignment p o r r i o n of t h e t i t l e instrument.              Therefore che

u n i t y of t i t l e a s between Llera and h i s mother was not broken by

Llera's a c t a t t h a t point.          Upon h i s d e f a u l t however, t h e bank

under i t s s e c u r i t y agreement became e n t i t l e d t o t h e i n t e r e s t of

L l e r a , and t h e j o i n t tenancy i n t e r e s t of t h e son and t h e mother

was severed.         There no longer was a t i t l e "created by a s i n g l e

***      transfer.''       Section 67-308, R.C.M.              1947.

         The mother and t h e bank, on ~ l e r a ' sd e f a u l t , became t e n a n t s

i n common i n t h e ownership of t h e automobile.                     Section 67-313,

R.C.M.    1947.      It was t h i s cotenancy i n common which t h e D i s t r i c t

Court had before i t when i t ordered t h e automobile s o l d and t h e

proceeds divided.            2 American Law of Property (1952) 56.2.                        The

r i g h t of one cotenant i n a j o i n t tenancy e s t a t e t o mortgage o r

encumber h i s i n t e r e s t i n t h e j o i n t tenancy property i s recognized

i n Thompson v. Thompson, (1963), 218 C.A.2d                       804, 32 Cal.Rptr. 808,

810.     Upon d e f a u l t , t h e one-half i n t e r e s t of L l e r a , s t a t u t o r i l y

mandated, thereupon t r a n s f e r r e d t o t h e bank.              In that situation,

even i n an e q u i t a b l e proceedings such a s a p a r t i t i o n             action,

although t h e automobile was paid f o r by t h e mother, and almost

e x c l u s i v e l y used by h e r , t h e bank became e n t i t l e d t o one-half of

t h e proceeds of t h e s a l e of t h e automobile.

         The bank, i n t h e D i s t r i c t Court, d i d n o t follow t h e

s t a t u t o r y procedure f o r p a r t i t i o n of personal property.              Section

93-6301.2,      R.C.M.     1947.      I n s t e a d , through a show cause proceeding

t h e D i s t r i c t Court ordered t h e automobile sold.                While i t might

be p r e f e r a b l e t h a t the matter be handled through an a c t i o n f o r

p a r t i t i o n , i t appears t h e r e s u l t i s t h e same.       In the i n t e r e s t
of j u d i c i a l economy we f i n d the o r d e r of t h e D i s t r i c t Court

should be a f f inned.

         F i s h e r and Tynes may n o t recover a t t o r n e y f e e s under

s e c t i o n 93-8601.1,       R.C.M.      1947, which provides t h a t when one

p a r t y t o a c o n t r a c t has a c o n t r a c t u a l r i g h t t o a t t o r n e y f e e s i n

a c t i o n s brought upon t h e c o n t r a c t , a l l " p a r t i e s t o t h e c o n t r a c t "

s h a l l have r e c i p r o c a l r i g h t s t o a t t o r n e y f e e s .   Here t h e bank

sued upon i t s c o n t r a c t with L l e r a .           The bank and L l e r a were t h e

only p a r t i e s t o t h e c o n t r a c t .     Since Tynes and F i s h e r were n o t

" p a r t i e s t o t h e contract'' sued upon by t h e bank, they could i n

no event become entitled t o a t t o r n e y f e e s under s e c t i o n 93-8601.1,                     9




R.C.M.     1947.

         The judgment of t h e D i s t r i c t Court i s affirmed.




                                                    Justice



W Concur:
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           p.
Chief J u s t i c e