First National Bank of Ekalaka v. S , 225 Mont. 281 ( 1987 )

No. 85-539
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
FIRST NATIONAL BANK OF EKALAKA,
Appellant, Intervenor,
-vs-
PEGGY C. STRAIT now HEREFORD,
Plaintiff, Respondent,
-vs-
FRANCIS J. STRAIT, JR.,
,
~efkndant Respondent.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable James B. Wheelis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard 0 Harkins, Ekalaka, Montana
.
For Respondents:
Rex Palmer, Missoula, Montana
Richard Reep, Missoula, Montana
Submitted on Briefs: Sept. 30, 1986
Decided: February 5 , 1987
Filed: FEB 5 - 1987
a 0
*
&
Clerk
$
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
The First National Bank of Ekalaka, Montana, petitioned
for a writ of review for the purpose of reviewing a contempt
judgment and fine levied against it by the Fourth Judicial
District in and for the County of Missoula. We granted the
writ and heard oral argument. The contempt order is vacated.
The matter began as a divorce action in March, 1958,
wherein a child support order was entered in favor of the
wife, (Hereford). The husband (Strait) failed to make many
of the payments required of him in the order. At a hearing
in September, 1974, to determine his total arrearage, the
court determined he owed $5,044 plus interest, and judgment
was entered. Because the children were then adults, no
support accrued thereafter. Hereford filed a motion in the
Fourth Judicial District March 26, 1982, for leave to
execute, pursuant to 5 25-13-102, MCA. The motion was
noticed and heard. Leave to execute was granted until
October 30, 1984. Subsequently, the court has issued several
writs of execution which have not been satisfied.
A writ of execution issued May 10, 1984, in the amount
of $9,619.52 was served May 30 on the First National Bank of
Ekalaka (Bank) where Strait was a customer, demanding all
funds held by the Bank for Strait. There were, however, no
funds in any of Strait's accounts. Several days later the
sheriff, learning that the Bank had taken two of Strait's
vehicles into possession, again served execution upon the
Bank for release of these vehicles. A Bank officer refused
to relinquish them until the Bank received tender of the
amount of the Bank's security interest in the vehicles. The
officer did not reveal the amount of its security interest.
The Bank petitioned this Court for a writ of review of
an order of the District Court holding it in contempt for
refusing to release the vehicles and levying a fine of $500
against it. We agreed to hear oral argument on the
application.
Although the Rank raises several issues in its brief, it
does not have standing to do so, because it is not in this
Court on appeal, S 27-25-102 (I), MCA, nor is it a party
aggrieved. Rule 1, M.R.App.Civ.P. See also Montana Power
Co. v. Montana Department of Public Service Regulation
(Mont. 1985), 709 P.2d 995, 42 St.Rep. 1750.
The scope of review on a writ cannot be extended further
than to determine whether the District Court has exceeded its
authority. Section 27-25-303, MCA. See also State ex rel.
Porter v. First Judicial District (1950), 123 Mont. 447, 215
P.2d 279, and State ex rel. Lay v. District Court (1948), 122
Mont. 61, 198 P.2d 761. On the facts of this case we have
determined the court exceeded its authority in holding the
Bank in contempt.
On May 30, 1984, writ of execution was served upon the
Bank demanding payment of the balance owing to Hereford. The
return of execution shows that there were no funds for deliv-
ery by the Bank to the sheriff and the writ was returned
unsatisfied. At the same time service of the writ was made
upon the Bank, the sheriff delivered to the Bank a letter
from Hereford's attorney addressed to the Bank. The letter
is extremely confusing and contradictory. The attorney
explains that he represents Hereford, who is seeking to
satisfy a judgment against Strait. He is having difficulty
collecting the amount of the judgment, and suggests the Bank
can help him. He mentions that he understands Strait engages
in certain periodic banking transactions and further
understands that Strait has accounts at the Bank, has
borrowed money and even may have secured the money with
vehicles or other property. He then makes the following
request :
You can assist me in collecting the
Judgement [sic] by providing me with as
much information as you have on the
Judgement [sic] debtors [sic] financial
status and the status of the repayment of
any loans you have made to the Judgement
[sic] debtor. Please provide me with a
list of all the accounts which the
Judgement [sic] debtor currently has with
you, including account numbers and
current balances. It would certainly
help if you would tell me when deposits
are generally made into the judgement
[sic] debtors [sic] accounts. Please
also provide me with copies of all
financial statements which the Judgement
[sic] debtor has completed when applying
for loans at your bank.
He asked for information about loans, including amounts
and dates, advancements of money, security interest
description of advances, method of payment, whether cash or
by check, amount applied to principal and amount applied to
interest, account number of the check by which payment was
made, and the balance remaining due and unpaid. He asked the
Bank to file affidavits with the Registrar's Bureau in Deer
Lodge for each vehicle, and with the County Clerk and
Recorder for other security. He said it was not that he did
not trust the Bank, but this would provide an independent
source of verification when he sent the sheriff to execute on
the judgment. Finally, he set forth the following paragraph:
I can tell you in all candor that I
believe the Judgement [sic] debtor is
trying to avoid paying the debt to my
client. The Judgement [sic] debtor might
object to your providing me with any
information if you contact him before
providing me with the information which I
have requested in this letter, so if you
will respond as quickly as possible, the
Judge's Order will have the best chance
of being enforced.
Thank you for your assistance, your help
will aid greatly in collecting the
Judgement [sic].
In its findings of fact, the District Court concluded
that this letter constituted notice sufficient to meet the
requirements of S 25-13-506, MCA, which says in pertinent
part:
Duty of secured party. The secured party
under any security agreement of record,
shall, upon 15 days notice in writing
...
served upon him in person seeking
to satisfy a judgment ... be required
to make and file ... an affidavit
showing the amount of the indebtedness
then actually due and owing ... If
within 15 days from the service of any
such demand ... the secured party shall
fail, refuse, or neglect to file the
affidavit herein required, the security
agreement shall be of no force or effect
as against such creditor upon the seizure
of any such personal property on
execution.
Because the Bank failed to file the affidavits as provided in
the code section, the District Court concluded that its
security interest ceased June 15, 1986. Thus, when a
subsequent writ of execution was served June 28, 1986, the
District Court determined the Bank was required to deliver
the vehicles which were covered by its security interests.
Because it failed to do so, the District Court found the Bank
in contempt.
There is no dispute as to the security interest of the
Bank. It properly had purchase money security interests in
the vehicles which the sheriff sought to seize by writ of
execution.
The Bank argues it is error for the court to hold it in
contempt, because the order is based on the assumption the
Bank forfeited its liens in the vehicles and therefore had no
right to hold the vehicles under the execution order.
We conclude that the letter to the Bank from Hereford's
attorney was insufficient to constitute the notice to the
secured party required in S 25-13-506, MCA. Therefore the
Bank did not lose its security interest in the vehicles under
the forfeiture provisions of that code section.
We emphasize the nature of the letter. It asked for
financial information which the Bank could not properly give.
Clearly this is inconsistent with the notice and demand under
§ 25-13-506, MCA. While it is true that one paragraph could
be construed as a demand under that section, it is not char-
acterized as a request or demand under the code section. The
Rank easily could have failed to construe the letter to be
that type of a notice or demand. In addition, the statements
by Hereford's attorney that Strait might object to the Bank's
providing information and requesting as quick a response as
possible--apparently without notification to its customer,
Strait--are totally inappropriate. Thus it was an abuse of
discretion to find this notice sufficient for purposes of
holding the Bank in contempt for failure to release the
vehicles.
Section 25-13-506, MCA, provides very severe
consequences when it destroys an existing security interest
lien and provides that the security agreement shall be of no
further force and effect. We conclude the letter of
Hereford's attorney is not sufficient to constitute the
notice necessary to bring into effect these severe penalties.
We therefore vacate the District Court's order of
October 1, 1985, h o l d i n g t h e Bank i n contempt.