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:
e
" o r , ~ 5&4,.op_c)
p.
Chief J u s t i c e