FIRST WESTSIDE NAT L BANK v LLERA
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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: Decided : April 24, 1978 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 def 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 possesthe 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 , 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. provided i n s e c t i o n 67-308, R.C.M. a It i s further 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. real estate. This a p p l i e s t o personal property, n o t 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 Section 67-308, R.C.M. 1947. ** *.It 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 Therefore che assignment p o r r i o n of t h e t i t l e instrument. 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. R.C.M. 1947. Section 67-313, 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 810. 804, 32 Cal.Rptr. 808, 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. 93-6301.2, R.C.M. 1947. Section 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 . sued upon i t s c o n t r a c t with L l e r a . only p a r t i e s t o t h e c o n t r a c t . Here t h e bank The bank and L l e r a were t h e 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, 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 9
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