EB Grain Co. v. Denton

325 S.E.2d 522 (1985)

E-B GRAIN COMPANY v. Willis T. DENTON and wife, Karla S. Denton and Stephenson Tobacco Warehouse, Inc.

No. 847SC609.

Court of Appeals of North Carolina.

February 19, 1985.

*524 Fields, Cooper & Henderson by Milton P. Fields, Rocky Mount, for plaintiff, appellee.

Mast, Tew, Armstrong & Morris, P.A. by L. Lamar Armstrong, Jr., and George B. Mast, Smithfield, for defendant, appellant.

HEDRICK, Chief Judge.

We note at the outset that in its complaint plaintiff sought to recover for conversion of tobacco grown in Edgecombe and in Nash Counties. While the record is less than clear, the parties conceded in oral argument before this Court that Judge Winberry allowed plaintiff to recover damages only for conversion of the tobacco grown in Nash County. In its argument before this Court plaintiff concedes that Judge Winberry properly denied plaintiff's claim based on conversion of the Edgecombe County tobacco because of plaintiff's failure to perfect its security interest *525 in this tobacco. For purposes of this appeal, then, we are concerned only with the ruling of the trial court as it relates to the tobacco grown in Nash County.

Defendant first assigns error to the court's denial of its motion to dismiss for failure to state a claim for relief. Its contention in this regard rests on two grounds: First, it argues that Mr. and Mrs. Denton were not in default on the future advance note when the complaint was filed on 25 February 1983 because the face of the note reveals that principal and interest were not due and payable until 15 March 1983. This argument ignores provisions of the future advance note and security agreement which state:

Debtor will ... not ... sell or otherwise dispose of [the collateral] or any interest therein, or permit others to do so, without the prior written consent of Secured Party.... . . . . . Default shall exist hereunder if Debtor fails to ... observe or perform any covenants or agreements herein.... Upon any such default ... Secured Party, at its option, with or without notice as permitted by law, may (a) declare the unpaid balance on the Note and any indebtedness secured hereby immediately due and payable....

Construed liberally, as is required, Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970), plaintiff's complaint sufficiently alleges that defendants breached the provisions of the future advance note and security agreement by selling tobacco subject to plaintiff's security interest to defendant Stephenson without plaintiff's prior written consent; such violation of the terms of the agreement constitutes default, rendering the unpaid balance on the note immediately due and payable.

Defendant's second argument in support of its contention that its motion to dismiss should have been granted is that "the complaint failed to allege any claim against Stephenson or that Stephenson owed plaintiff any sum of money." While the allegations in plaintiff's complaint in regard to defendant Stephenson are not as detailed as might be desired, we think it clear that plaintiff has alleged facts sufficient to state a claim for relief. The complaint asserts that plaintiff has a recorded security interest in tobacco as well as proceeds from the disposition of such tobacco, that this collateral was sold by the debtors to defendant Stephenson, that defendant Stephenson did not provide plaintiff with proceeds from the sale, and that defendant Stephenson has refused to pay plaintiff any amount. These allegations are sufficient to state a claim for relief based on conversion of collateral by Stephenson. See Hall v. Odom, 240 N.C. 66, 81 S.E.2d 129 (1954). See also Annot., 96 A.L.R.2d 208 (1964). This assignment of error is without merit.

Defendant next assigns error to the court's grant of summary judgment for plaintiff. Defendant contends that the competent evidence introduced by plaintiff in support of its motion was insufficient to show the absence of a genuine issue of material fact as to each essential element of its claim for conversion.

Conversion is "an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of an owner's rights." Gallimore v. Sink, 27 N.C.App. 65, 67, 218 S.E.2d 181, 183 (1975) (citations omitted). Summary judgment was properly granted in the instant case only if the materials properly considered by the trial judge establish: (1) plaintiff's interest in the property, and (2) defendant Stephenson's unauthorized assumption and exercise of the right of ownership to the exclusion of plaintiff's rights. We now turn to the evidence introduced by plaintiff in support of its motion for summary judgment.

We first note that plaintiff's claim of "ownership" in the tobacco so as to support a claim for conversion is based on its claim that it possesses a valid security interest in the property pursuant to the North Carolina Commercial Code. See F.D.I.C. v. Loft Apartments, 39 N.C.App. 473, 250 S.E.2d *526 693 (action for wrongful conversion of security interest may be maintained in North Carolina) disc. rev. denied, 297 N.C. 176, 254 S.E.2d 39 (1979). In support of its claim in this regard plaintiff offered into evidence two documents: a copy of the "future advance note and security agreement," executed by the Dentons in favor of plaintiff, and a copy of a financing statement, admitted by defendant to be a genuine copy of the statement filed in the office of the Nash County Register of Deeds.

Defendant vigorously contends that plaintiff failed to offer competent evidence that "it had a valid and enforceable security agreement covering tobacco grown by the Dentons." Defendant bases this contention on its argument that the only evidence offered by plaintiff to prove the agreement between plaintiff and the Dentons was the copy of the security agreement attached to plaintiff's unverified complaint. Defendant asserts that proof of the security agreement was essential to plaintiff's claim, and that the copy offered by plaintiff was never properly authenticated and is thus incompetent evidence.

Defendant correctly asserts that proof of a written security agreement between plaintiff and the debtors is essential to its claim of an enforceable security interest in the tobacco. G.S. 25-9-203(1) provides in pertinent part:

[A] security interest is not enforceable against the debtor or third parties ... unless ... the debtor has signed a security agreement which contains a description of the collateral....

Consistent with the language of the statute, our Courts have recognized that "[t]he mere filing of a financing statement ... does not necessarily indicate that a security interest exists." Evans v. Everett, 10 N.C. App. 435, 438, 179 S.E.2d 120, 123 (citation omitted), rev'd on other grounds, 279 N.C. 352, 183 S.E.2d 109 (1971). "[A] financing statement does not ordinarily create a security interest. It merely gives notice that one is or may be claimed." Evans v. Everett, 279 N.C. 352, 358, 183 S.E.2d 109, 113 (1971) (citation omitted).

Defendant points out that the copy of the security agreement attached to the unverified complaint was never admitted by defendant to be genuine, and argues that because it was never properly authenticated, the security agreement could not be considered by Judge Winberry in ruling on plaintiff's motion for summary judgment. The record reveals that defendant, in its answer, generally denied plaintiff's allegations of a security agreement between plaintiff and the Dentons based on its lack of "sufficient knowledge to form a belief as to the truth of these allegations." The record does not reflect that defendant made timely objection to the court's consideration of the document it now challenges on appeal, nor does the record contain any evidentiary material introduced by defendant in opposition to plaintiff's motion for summary judgment that raises a genuine issue as to the authenticity of the security agreement. "[A]s is true of other material introduced on a summary judgment motion, uncertified or otherwise inadmissible documents may be considered by the court if not challenged by means of a timely objection." Insurance Co. v. Bank, 36 N.C. App. 18, 26, 244 S.E.2d 264, 269 (1978) (holding court did not err in granting summary judgment based on copy of certificate of deposit attached to unverified complaint). See also Gebb v. Gebb, 67 N.C. App. 104, 312 S.E.2d 691 (1984) (holding court did not err in granting summary judgment based on copy of contract of sale attached to unfiled deposition of party). We hold the court correctly concluded that there exists no genuine issue of material fact as to the existence of a written security agreement executed by the debtors.

Defendant next challenges the effectiveness of the financing statement introduced by plaintiff and identified as Exhibit 64. Defendant first alleges that the financing statement is not signed by the debtor as is required by G.S. 25-9-402(1). Exhibit 64, admitted by defendant to be a genuine copy of plaintiff's filing in Nash County, clearly bears the signatures of the debtors, however, and so we hold defendant's *527 contention in this regard to be without merit.

Defendant also contends that the financing statement does not contain the debtors' mailing address as is required by G.S. 25-9-402(1). Examination of Exhibit 64 reveals that the debtors' address is listed as "Whitakers, N.C. 27891." Our Supreme Court has recognized that G.S. 25-9-402 "adopts a system of notice filing," Evans v. Everett, 279 N.C. 352, 355, 183 S.E.2d 109, 112 (1971), which "indicates merely that the secured party who has filed may have a security interest in the collateral described." Id. at 356, 183 S.E.2d at 112 (quoting Official Comment to G.S. 25-9-402(1)). Consistent with the "notice filing" policy identified in Evans, G.S. 25-9-402(8) (Cum. Supp.1983) provides: "A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading." We think that the debtors' mailing address as shown on Exhibit 64 is not so incomplete as to be misleading or as to interfere with the notice function of the filing. We are cognizant of the fact that defendant Stephenson had regular business dealings with the debtor, and so was in a position to directly inquire about plaintiff's security interest had defendant wished to do so. Furthermore, the deposition of defendant Stephenson's president, introduced by plaintiff, contains the following statement: "[W]e do not check the records in the various counties to determine if a crop lien has been filed." Because defendant Stephenson did not check the Nash County filings, it was not aware of the financing statement in question and thus could not have been prejudiced by technical defects in that document.

Defendant next contends the Nash County financing statement was ineffective because "it contained no description of the real property on which the alleged tobacco was to be grown." G.S. 25-9-402(1) (Cum. Supp.1983) requires that "[w]hen the financing statement covers crops growing or to be grown, the statement must indicate that the collateral is or includes crops and must contain a description of the real estate concerned." In the instant case, the financing statement identified "the real estate concerned" by means of farm numbers Q1959 and V2567, in addition to listing the number of acres involved, the kind of crop grown on the land, and the county in which the land was located. The record contains affidavits explaining that the United States Department of Agriculture, through the Agricultural Stabilization and Conservation Service, assigns tobacco farms identification numbers, known as ASCS numbers. Each ASCS county office has maps showing the location of farms in that county as indicated by ASCS numbers. ASCS farm numbers are used as a matter of course by farmers and others connected with the business of farming, and are an integral part of the regulatory system established by the Department of Agriculture. Defendant Stephenson, in its answer to plaintiff's request for admissions, has admitted its familiarity with ASCS farm numbers and with the United States tobacco marketing program.

In its brief defendant argues that "the question of sufficiency of description cannot be answered simply by establishing that the property could have been identified through a series of searches." We do not agree, for we believe that under G.S. 25-9-402(1) a description of real estate is sufficient if the description permits identification of the land involved by recourse to public records. See G.S. 25-9-110 (Cum. Supp.1983): "For the purposes of this article any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described." See also Amended Official Comment to G.S. 25-9-110: "The test of sufficiency of a description laid down by this section is that the description do the job assigned to itthat it make possible the identification of the thing described."

Having held that plaintiff introduced evidence sufficient to establish the absence of genuine issues of material fact as to its perfected security interest in the *528 collateral, we next examine plaintiff's evidentiary showing as to the second element of its claim for conversion: defendant Stephenson's unauthorized assumption and exercise of the right of ownership to the exclusion of plaintiff's rights. In this regard defendant first contends that plaintiff has not demonstrated that the tobacco sold by Stephenson was tobacco subject to plaintiff's perfected security interest. The record, however, does not bear out defendant's contentions. Exhibits 1 through 62, admitted by defendant to be genuine copies of tobacco sale bills prepared by defendant, contain ASCS farm numbers identifying the source of tobacco for each sale. Identification of tobacco grown on farms Q1959 and V2567 and purchased from the Dentons through defendant Stephenson is thus easily accomplished by reference to these records.

Defendant next argues that plaintiff has not adequately demonstrated that its sale of the tobacco in question was unauthorized and wrongful. Defendant points to the rule, set out in the Amended Official Comment to G.S. 25-9-307 (Cum.Supp. 1983), which provides that a buyer of collateral takes free of a security interest where the secured party has expressly or impliedly authorized the sale. Defendant argues, in essence, that the evidence demonstrates that plaintiff knew or could have learned that the Dentons were selling their tobacco through defendant, and that plaintiff "failed to notify Stephenson or contact it in any way." This evidence, says defendant, raises genuine issues of material fact as to the affirmative defenses of waiver, estoppel, and laches. We do not agree. We first note that the future advance note and security agreement executed by the Dentons expressly prohibited sale of the collateral without plaintiff's prior written consent. Thus there was no express authorization of sale here. As to whether plaintiff may be said to have impliedly consented to such sale, and as to the related defenses of estoppel, waiver, and laches, we note the provisions of G.S. 1A-1, Rule 56(e), North Carolina Rules of Civil Procedure:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

In the instant case, defendant raised the affirmative defenses of waiver, estoppel, and laches in its answer. In response to plaintiff's motion for summary judgment, however, defendant did not come forward with any evidentiary material in support of its allegations. Consequently, the record discloses no genuine issue of material fact in this regard. We hold that summary judgment for plaintiff was properly granted.

Citing Hardin v. Ray, 89 N.C. 364 (1883); Coates v. Wilkes, 94 N.C. 174 (1886); and May v. Insurance Co., 172 N.C. 795, 90 S.E. 890 (1916), defendant next contends that Judge Winberry was without jurisdiction to hear plaintiff's motion for summary judgment "on Saturday, out of session and over Stephenson's written objection." Suffice it to say that the cases upon which defendant relies are clearly distinguishable and do not support its contention. The controlling statute is G.S. 7A-47.1 which provides:

In any case in which the superior court in vacation has jurisdiction, and all the parties unite in the proceedings, they may apply for relief to the superior court in vacation, or during a session of court, at their election. The resident judge of the judicial district and any special superior court judge residing in the district and the judge regularly presiding over the courts of the district have concurrent jurisdiction in all matters and proceedings in which the superior court has jurisdiction out of session; provided, that in all matters and proceedings not requiring a jury or in which a jury is waived, the resident judge of the district and any *529 special superior court judge residing in the district shall have concurrent jurisdiction with the judge holding the courts of the district and the resident judge and any special superior court judge residing in the district in the exercise of such concurrent jurisdiction may hear and pass upon such matters and proceedings in vacation, out of session or during a session of court.

We take judicial notice that Judge Winberry is a resident superior court judge in the seventh judicial district, of which Nash County is a part. We believe Judge Winberry clearly had authority under G.S. 7A-47.1 to hear plaintiff's motion for summary judgment, even though defendant's counsel objected. To interpret the statute in the manner advocated by the defendant would mean that no superior court judge could hear any matter, whether in or out of session, without "all the parties unit[ing] in the proceedings." The assignment of error is without merit.

Defendant finally contends that "the court erred in its calculation of damages that plaintiff was entitled to recover from Stephenson." It is well settled "under the common law, that the measure of damages for a wrongful conversion of personal property is the fair market value of the chattel at the time and place of conversion," Russell v. Taylor, 37 N.C.App. 520, 524, 246 S.E.2d 569, 573 (1978), limited, of course, to the extent of plaintiff's ownership interest in the property converted, i.e., the amount secured by the collateral in question. "Fair market value is the price the property would bring when offered for sale by one who desires, but is not compelled to sell, and is bought by one desiring to buy, but not under the necessity of purchasing." City of Kings Mountain v. Cline, 19 N.C.App. 9, 10, 198 S.E.2d 64, 65 (1973). Our Supreme Court has said that summary judgment may be proper on the issue of damages "where the moving party sufficiently establishes by competent documents that a liquidated amount is owing him, and the opposing party fails to show facts which dispute that evidence." Conner Co. v. Spanish Inns, 294 N.C. 661, 678, 242 S.E.2d 785, 795 (1978). Where damages are not reduced to a liquidated amount, however, but are instead measured by fair market value, a genuine issue of material fact is presented which must be resolved by the jury. 22 Am.Jur.2d Damages Section 342 (1965) ("The assessment of unliquidated damages must rest in the sound discretion of the jury, under the guidance and control of the trial judge.").

In the instant case, the only evidence before Judge Winberry in regard to damages was in the form of tobacco sale bills showing the amount paid by defendant Stephenson to the Dentons after Stephenson deducted its commission, a handling fee, and an auction fee from the amount it received from tobacco companies purchasing the tobacco. While some evidence of the fair market value of the tobacco at the time and place of conversion, the tobacco sale bills relied on by the judge are not sufficient to establish the absence of any genuine issue of material fact in this regard. Accordingly, summary judgment as to damages owed plaintiff by defendant Stephenson must be vacated and the cause remanded for trial on this issue.

The result is: That portion of the judgment declaring defendant liable to plaintiff for its wrongful conversion of tobacco grown on and sold from Nash County farm lot numbers Q1959 and V2567 will be affirmed; that portion of the judgment assessing damages in the amount of $45,007.53 with interest will be vacated and the cause will be remanded to the superior court for trial on the issue of the amount of damages plaintiff is entitled to recover from defendant for its wrongful conversion of plaintiff's security interest in the tobacco grown on and sold from the Nash County farms.

Affirmed in part, vacated and remanded for trial in part.

BECTON and COZORT, JJ., concur.