Wilson v. Burrows , 27 Utah 2d 436 ( 1972 )

TUCKETT, Justice:

In this appeal we are only concerned with the issues raised in the court below pertaining to the claims of Walker Bank & Trust Company and Leo Wilson and Bernice Wilson, his wife, and Dale L. Wilson, Administrator of the Estate of Zelma M. Wilson, deceased. The court is called upon to make a determination as to the validity and priority of the rights of the Bank as a chattel mortgagee of a number of cattle and the Wilsons as conditional vendors.

During the months of May and June, 1966, one Wesley Burrows entered into negotiations with the Wilsons for the purchase of ranching operations in Garfield County. The negotiations were culminated on June 25, 1966, when uniform real estate contracts were entered into by Burrows as buyer, and the Wilsons as sellers of the ranches. The Zelma Wilson contract pertained to certain real estate, grazing permits, 137 head of cattle and miscellaneous farm equipment. The Leo and Bernice Wilson contract covered real property, grazing permits, 206 head of cattle with calves and miscellaneous farm equipment. The two herds of cattle were collected with the assistance of the Wilsons, branded with Burrows’ brand and turned over to Burrows during May and June, 1966.

On June 15, 1966, Walker Bank granted to Burrows a loan in the sum of $80,000 which was secured by a livestock chattel mortgage from Burrows including the cattle covered by the Wilsons’ real estate contracts. On June 21, Walker Bank filed its financing statement with the office of the Secretary of State covering the cattle pursuant to the provisions of the Uniform Commercial Code. Out of the proceeds of the loan partial payments were made to the Wilsons on the purchase contracts. No financing statement or other document was filed on behalf of any of the Wilsons covering their contracts until February of 1967.

Subsequently Burrows defaulted in his. payments to the Wilsons and in 1968, the Wilsons repossessed their ranches and retook possession of the remaining cattle.

After a trial in the district court of Garfield County, findings and judgment were-entered in favor of the Wilsons. The court determined that rights of the Wil-sons as conditional vendors were prior to' the security rights of the Walker Bank as. mortgagee. From that decision Walker Bank appealed.

The 1965 Session of the Utah Legislature adopted the Uniform Commercial Code which became effective on January 1, 1966. The transactions we are here concerned with fall within the provisions of the chapter of the Code known as Uniform Commercial Code — Secured Transactions. Livestock fall within the classification set forth in Section 70A-9-102(2) (3).

While it is undoubtedly true that under the sales contracts entered into by the Wilsons with Burrows as vendee, the Wilsons retained security interest in the property sold, it is also true that Walker Bank under its mortgage also acquired security interest in the livestock. The record clearly indicates that the Wilsons surrendered possession of the livestock to Burrows, and it is noted that the contracts contained the following statement:

The Seller agrees to release all cattle to the Buyer so that he may put them under loan in his own name.

The trial court was of the opinion that this statement was insufficient to pass ownership of the cattle to Burrows as of the date of the contracts, but the statement coupled with the actual transfer of physical possession of the cattle to Burrows clearly indicates that the Wilsons intended to surrender possession to the vendee.

Assuming that the Wilsons by virtue o'f their contracts, and Walker Bank by virtue ‘of its chattel mortgage, each obtained a security interest in the cattle, what are the priorities? There is no dispute in the record that Walker Bank perfected its security interest by filing its financing statement in accordance with the provisions of Section 70A-9-302 some months before the filing of a financial statement by the Wilsons. It would thus appear that the security interest of the Wilsons is subordinate to that of Walker.¹

It is the Wilsons’ contention here that the Utah Livestock Brand and Anti-Theft Act² controlled the sale of the cattle to Burrows, and that the making of a contract in violation of its provisions was void. The purpose of the statute was aimed at the theft of livestock within the State and to impede the sale of stolen animals. It would not appear that the Legislature intended the statute to apply to sales such as we have here between the Wilsons and Burrows. In any event, the Wilsons cannot now claim that their contracts entered into with Burrows were not made in good faith. We must conclude that the contracts were not void.

As to the judgment entered by the court below insofar as it pertains to the issues respecting the claim of Walker Bank, the matter is reversed and remanded to the court below with directions to alter its findings and judgment in keeping with the views herein expressed. Appellant is entitled to costs.

CROCKETT, J., concurs. ELLETT, J., concurs in the result.

1 . McDonald v. Peoples Automobile Loan & Fin. Co., 115 Ga.App. 483, 154 S.E.2d 886; Bloom v. Hilty, 427 Pa. 463, 234 A.2d 860; United States v. The Baptist Golden Age Home, D.C., 226 F.Supp. 892.

2 . Section 4-13-1, et seq., U.C.A.1953; Pugh v. Stratton, 22 Utah 2d 190, 450 P.2d 463.