No. 8 4 - 4 3 2
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985
BANK OF SHERIDAN, a Montana Banking
Corp. ,
Plaintiff and Respcndent,
-vs-
CLOYD W. DEVERS I
Defendant and Appellant.
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Beaverhead,
The Honorable Frank Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Datsopoulos, MacDonald & Lind; Edward A. Murphy,
Missoula, Montana
For Respondent :
Kirwan & Barrett; Kelly M. Hogan, Bozeman, Montana
Submitted on Briefs: June 6, 1985
Decided: July 30, 1985
Filed:
M r . J u s t i c e Frank B. M o r r i s o n d e l i v e r e d t h e O p i n i o n of the
Court.
Cloyd W. Devers a p p e a l s t h e January 18, 1984, findings
of f a c t and c o n c l u s i o n s o f law and t h e J u l y 2 4 , 1984, o r d e r
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 C o u r t g r a n t i n g two d e f i c i e n c y
judgments t o t h e Bank o f S h e r i d a n . We reverse the order of
t h e D i s t r i c t Court.
Appel l a n t Cloyd D e v e r s ( D e v e r s ) e x e c u t e d two p r o m i s s o r y
n o t e s t o t h e Bank o f S h e r i d a n (Bank) on A p r i l 1 6 , 1 9 8 1 , one
f o r $94,802.71 and t h e o t h e r f o r $21,580.03. The n o t e s w e r e
s e c u r e d by D e v e r s ' farm machinery, e q u i p m e n t and l i v e s t o c k .
Devers s u b s e q u e n t l y d e f a u l t e d on t h e n o t e s . Devers f i l e d a
petition f o r b a n k r u p t c y on August 21, 1981. Bank filed a
c o m p l a i n t August 25, 1 9 8 1 , demanding t h e $104,021.90 due and
owing on t h e two n o t e s . Subsequentl-y, w i t h t h e Bankruptcy
Court's permission, Bank repossessed the collateral. The
l i v e s t o c k was i m m e d i a t e l y s o l d a t a p u b l i c a u c t i o n i n I d a h o
Falls, Idaho. The farm m a c h i n e r y and e q u i p m e n t w e r e s o l d a t
various s a l e s over a period of time.
A w r i t t e n n o t i c e d a t e d November 8 , 1 9 8 2 , was s e n t by t h e
a t t o r n e y f o r Bank t o D e v e r s s t a t i n g t h a t c e r t a i n l i s t e d f a r m
m a c h i n e r y and e q u i p m e n t would b e s o l d a t a p r i v a t e a u c t i o n i n
B a n k ' s l o b b y on November 1 9 , 1 9 8 2 , a t 10:OO a.m. The l o c a l
n e w s p a p e r s w e r e u n a b l e t o p u b l i s h t h e n o t i c e p r i o r t o Nov~m-
b e r 1 9 , 1982. T h e r e f o r e , t h e s a l e d a t e was changed t o Novem-
b e r 24, 1982. A n o t i c e was p u b l i s h e d i n t h r e e l o c a l p a p e r s
l i s t i n g t h e i t e m s f o r s a l e ( i n c l u d i n g two p i e c e s o f e q u i p m e n t
not listed on Devers' notice) and stating the following:
"Submit B i d s t o J i m S h i r e s , Bank o f S h e r i d a n , P. 0 .
Box 587, S h e r i d a n , M t . 59749
"Please enclose a s e p a r a t e sealed envelope with
y o u r b i d e n c l o s e d , showing ' e q u i p m e n t b i d 1 on t h e
o u t s i d e o f envelope. B i d s w i l l b e opened November
24, 1982, a t 10:OO a.m. W e reserve the r i g h t t o
r e f u s e any o r a l l b i d s . Contact J i m Shires a t
842-5411 t o v i e w any o f t h e s e i t e m s . "
T h i s same n o t i c e was p o s t e d i n B a n k ' s l o b b y .
D e v e r s c o n t e n d s h e r e c e i v e d no n o t i c e , w r i t t e n o r o r a l ,
o t h e r t h a n t h a t d a t e d November 8 , 1 9 8 2 , and t h a t h e was n e v e r
notified of the change in the sale date. Mr. Robert T.
S m i t h , P r e s i d e n t o f t h e Bank o f S h e r i d a n , t e s t i f i e d a t t r i a l
t h a t h e was c e r t a i n M r . S h i r e s , t h e n V i c e P r e s i d e n t o f Bank,
had " i n f o r m e d " Devers o f t h e s a l e . Regarding h i s conversa-
t i o n w i t h Devers, M r . S h i r e s t e s t i f i e d a s follows:
"Q. I ' l l r e f e r you t o t h e a u c t i o n s a l e , p r i v a t e
a u c t i o n s a l e o f November 2 4 t h , 1 9 8 2 , and t h e d a y s
prior t o that. Did you h a v e o c c a s i o n a t a n y t i m e
d u r i n g t h e month o f November t o d i s c u s s t h i s p a r -
t i c u l a r s a l e w i t h M r . Devers?
"A. On one o c c a s i o n , M r . Devers c a l l e d m e c o n c e r n -
i n g t h e p i c k u p t h a t was b e i n g s o l d , y e s .
"Q. Do you r e c a l l a p p r o x i m a t e l y when t h a t c o n v e r -
s a t i o n took place?
"A. Some t i m e i n b e t w e e n t a k i n g p o s s e s s i o n o f the
e q u i p m e n t and t h e s a l e .
"Q. Did h e q u e s t i o n you a t a n y t i m e c o n c e r n i n g t h e
p a r t i c u l a r t i m e t h a t t h e s a l e was g o i n g t o t a k e
place, o r anything of t h a t nature?
"A. I b e l i e v e we discussed t h a t . W e talked about
t h e s a l e and t h e f a c t t h a t w e w e r e t a k i n g b i d s on
t h e equipment, yes."
Approximately one-half of Devers' farm machinery and
equipment was sold at the November 24, 1982, sale. The
remaining e q u i p m e n t was sold a t several different "private
treaty" sales over the course of several months. It is
u n d i s p u t e d t h a t Devers was g i v e n no n o t i c e o f any s a l e s u b s e -
q u e n t t o November 2 4 , 1982.
After t h e c o l l a t e r a l was s o l d , Bank f i l e d a m o t i o n f o r
judgment by d e f a u l t on September 2 6 , 1983, r e q u e s t i n g d e f i -
c i e n c y judgments o f $36,995.21 on o n e n o t e and $7,908.96 on
the other, attorney's fees, c o l l e c t i o n e x p e n s e s and c o s t s .
Following a bench t r i a l , Bank was awarded d e f i c i e n c y judg-
ments o f $29,926.22 and $ 7 , 9 0 8 . 8 3 , a s w e l l a s $5,733.58 for
the cost of the sales.
I n h i s a p p e a l o f t h e o r d e r , Devers r a i s e s t h e f o l l o w i n g
issues:
1. Whether the trial court erred in holding Devers
l i a b l e f o r d e f i c i e n c i e s on two p r o m i s s o r y n o t e s when: ap-
proximately one-half of the notes' c o l l a t e r a l was s o l d a t a
s a l e ; Devers' n o t i c e o f s a l e was e r r o n e o u s a s t o t h e d a t e and
n a t u r e o f t h e s a l e ; and t h e o t h e r h a l f o f t h e c o l l a t e r a l was
s o l d a t s a l e s w i t h no n o t i c e t o D e v e r s ?
2. Assuming D e v e r s i s l i a b l e f o r t h e d e f i c i e n c i e s , is
t h e t r i a l c o u r t ' s d e t e r m i n a t i o n o f t h e amount o f d e f i c i e n c y
s u p p o r t e d by s u b s t a n t i a l c r e d i b l e e v i d e n c e ?
Our resolution of issue one renders consideration of
i s s u e two moot.
The Uniform Commercial Code is codified in Title 30,
C h a p t e r s 1 t h r o u g h 9 o f t h e Montana Code A n n o t a t e d . Pursuant
t o 5 30-9-504(3), MCA, a s e c u r e d c r e d i t o r i s e n t i t l e d t o s e l l .
collateral after a default, s o long a s "every a s p e c t of t h e
disposition i n c l u d i n g t h e method, manner, time, place, and
terms" a r e c o m m e r c i a l l y r e a s o n a b l e . T h i s i n c l u d e s a commer-
c i a l l y reasonable n o t i f i c a t i o n t o t h e d e b t o r o f t h e pending
sale. Montana s t a t u t e s p r o v i d e :
"Unless collateral is perishable o r threatens t o
d e c l i n e s p e e d i l y i n v a l u e o r i s o f a t y p e customar-
i l y s o l d on a r e c o g n i z e d m a r k e t , r e a s o n a b l e n o t i f i -
c a t i o n o f t h e t i m e and p l a c e o f a n y p u b l i c s a l e o r
r e a s o n a b l e n o t i f i c a t i o n o f t h e t i m e a f t e r which any
p r i v a t e s a l e o r o t h e r intended d i s p o s i t i o n i s t o be
made s h a l l be s e n t by t h e s e c u r e d p a r t y t o t h e
debtor i f he has n o t signed a f t e r d e f a u l t a s t a t e -
ment r e n o u n c i n g o r m o d i f y i n g h i s r i g h t t o n o t i f i c a -
t i o n of sale." 5 3 0 - 9 - 5 0 4 ( 3 ) , MCA.
Devers n e v e r renounced h i s r i g h t t o n o t i f i c a t i o n .
" [ T l h e b u r d e n o f p r o v i n g t h e commercial r e a s o n a b l e n e s s
of t h e disposition of collateral i s on t h e s e c u r e d p a r t y . "
Farmers State Bank v. Mobile Homes Unlimited (1979), 181
Mont. 342, 347, 593 P.2d 734, 737. The b u r d e n o f p r o v i n g t h e
commercial r e a s o n a b l e n e s s o f t h e n o t i f i c a t i o n o f a d e b t o r o f
a n impending s a l e i s t h e r e f o r e on t h e s e c u r e d p a r t y . Bank
h a s n o t m e t t h i s burden.
D e v e r s a l l e g e s t h a t t h e November 8 , 1 9 8 2 , n o t i c e o f s a l e
was c o m m e r c i a l l y u n r e a s o n a b l e b e c a u s e i t c o n t a i n e d an i n c o r -
rect s a l e d a t e and stated that the s a l e would b e p r i v a t e ,
when i n f a c t t h e a c t u a l s a l e c o n d u c t e d was p u b l i c . W e need
n o t d e c i d e t h e n a t u r e o f t h e November 24, 1982, s a l e a s t h e
n o t i c e g i v e n D e v e r s was c o m m e r c i a l l y u n r e a s o n a b l e n o t i c e o f
either a private o r a public sale.
The o n l y w r i t t e n n o t i c e g i v e n Devers o f t h e i n i t i a l s a l e
contained the wrong date. It also failed to state that
sealed b i d s w e r e t o be submitted. The o n l y e v i d e n c e p r e s e n t -
e d by Bank t o c o u n t e r D e v e r s ' t e s t i m o n y t h a t h e r e c e i v e d no
n o t i c e , w r i t t e n o r o r a l , o f t h e c o r r e c t d a t e o f t h e s a l e was
M.
r Shire's testimony quoted previously. However, Shires
never t e s t i f i e d t h a t he t o l d Devers t h e c o r r e c t d a t e o f t h e
sale. Further, neither the sale notices i n t h e newspapers
n o r t h e n o t i c e p o s t e d i n B a n k ' s l o b b y c o u l d be r e l i e d on by
Bank t o p r o v i d e n o t i c e o f t h e c o r r e c t d a t e and method o f s a l e
t o Devers. See L i b e r t y N a t i o n a l Bank o f Fremont v. Greiner
(Ohio App. 1978), 405 N.E.2d 317, and Hodges v. Norton
(N.C.App. 1 9 7 6 ) , 223 S.E.2d 848.
Finally, Bank failed t o p r o v i d e Devers w i t h n o t i c e o f
any s a l e h e l d s u b s e q u e n t t o November 24, 1982. In order f o r
the manner of disposition of the collateral to have been
c o m m e r c i a l l y r e a s o n a b l e and f a i r t o d e b t o r , notice of these
subsequent sales should a l s o have been provided. As time
passed, Devers might have found himself in a more stable
p o s i t i o n and t h u s a b l e t o p u r c h a s e some o f h i s own e q u i p m e n t .
On t h e b a s i s o f t h e p r e c e d i n g d i s c u s s i o n , w e h o l d t h a t
t h e f o l l o w i n g f i n d i n g o f t h e t r i a l j u d g e i s n o t s u p p o r t e d by
s u b s t a n t i a l , c r e d i b l e evidence.
"4. The s e c u r e d p r o p e r t y was s o l d by t h e P l a i n -
t i f f , the livestock a t a public auction a t a live-
s t o c k m a r k e t and t h e farm m a c h i n e r y and e q u i p m e n t
and o t h e r p r o p e r t y a t a p r i v a t e s a l e c o n d u c t e d by
the Plaintiff. The D e f e n d a n t had b o t h a c t u a l and
c o n s t r u c t i v e n o t i c e o f t h e v a r i o u s s a l e s and, i n
f a c t , by h i s c o n d u c t , r a t i f i e d , a p p r o v e d and p a r -
t i c i p a t e d i n t h e s a l e procedure."
Bank's f a i l u r e t o g i v e t h e d e b t o r commercially reason-
able notice of the s a l e s of h i s c o l l a t e r a l p r e c l u d e s Bank
from r e c o v e r i n g any d e f i c i e n c y judgment from Devers. ~ippert
v . B l a c k f e e t T r i b e o f t h e B l a c k f e e t I n d i a n R e s e r v a t i o n (Mont.
The d e c i s i o n o f t h e t r i a l c o u r t a w a r d i n g Bank two d e f i -
c i e n c y judgments a g a i n s t Devers i s r e v e r s e d .
W e concur:
r,