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No. 84-281
IN THE SUPREME COURT OF THE STATE OF MONTANA

1985

VERLIN F. WIPPERT and LORETTA L. WIPPERT, Plaintiffs and Appellants, -vsTHE BLACKFEET TRIBE OF THE BLACKFEET INDIAN RESERVATION, et al., Defendants and Respondents.

APPEAL FROM:

District Court of the Ninth Judicial District, In and for the County of Glacier, The Honorable R. D. McPhillips, Judge presiding.

COUNSEL OF RECORD: For Appellants: Frisbee, Moore For Respondents: Cannon
& &

Stufft, Cut Bank, Montana

Sheehy; Ross W. Cannon, Helena, Montana

Submitted on Briefs:

Sept. 6, 1984

Decided: February 14, 1985
$ 6 , "

Filed:

'1385

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Clerk

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Mr. Justice L. C. Gulbrandson delivered the Opinion of the Court. Verlin R. Wippert and Loretta Wippert Rex, plaintiffs below, appeal from a decision of the Ninth Judicial District, Glacier County, ordering the Wipperts to pay the Blackfeet Tribe a deficiency judgment of $14,330.59. We reverse.

This case was originally filed as a quiet title action, and was first considered
I

by

this

Court

in

Wippert

v.

Blackfeet Tribe (Mont. 1982), 654 P.2d 512, 39 St.Rep. 2117. At that time we affirmed the trial court's determination that a Blackfeet Tribal Court judgment against the Wipperts must be enforced as a matter of comity. However, the case was

remanded to the District Court for an. independent determination of the correct amount remaining unsatisfied Tribal Court judgment. The facts as gleaned from the record appear to be as follows: In 1974, the Wipperts operated a cattle ranch east In on the

of Browning, Montana on the Blackfeet Indian Reservation. March of 1974 the F!ipperts

began borrowing money from the Funds totalling $44,,729.97 As

Blackfeet Tribal Credit Program.

were eventually advanced to the Wipperts by the Tribe.

part of the transaction, the parties entered into a security agreement on March 1, 1974. According to the agreement, the

collateral for the loan was to be "all cattle or hereafter acquired by the debtors. l'

. . . now owned

The security agree-

ment contained. a default clause, and provided that in case of default the rights and duties of the parties would. be governed by the Montana Uniform Commercial Code (UCC). The

agreement specifically provided that any notice of sale of the collateral required by the UCC would be satisfied "by

g i v i n g t h e Debtor a t l e a s t f i v e d a y s p r i o r w r i t t e n n o t i c e of t h e t i m e and p l a c e o f any p u b l i c s a l e The W i p p e r t s d e f a u l t e d on 1975.

...

"
i n November of

their

loan

They were n o t i f i e d o f t h e T r i b e ' s i n t e n t i o n t o f o r e loan t o enforce t h e security agreement in a

c l o s e on t h e

March 8 , 1976 l e t t e r from t h e B l a c k f e e t T r i b a l C r e d i t Committee. sell While t h a t l e t t e r mentioned t h e Committee's i n t e n t t o the collateral and apply the proceeds to the amount

u n p a i d on t h e l o a n , it s a i d n o t h i n g a b o u t t h e t i m e o r p l a c e
of t h e proposed s a l e .

The r e c o r d i n d i c a t e s t h a t t h e W i p p e r t s

r e c e i v e d no n o t i c e a t a l l from t h e T r i b e i n f o r m i n g them o f t h e d a t e and l o c a t i o n o f t h e f o r e c l o s u r e s a l e . On A p r i l 15, 1976, t h e Blackfeet T r i b a l Court issued

its order

f i n d i n g t h e W i p p e r t s i n d e f a u l t on t h e l o a n and

permitting t h e t r i b e t o s e l l t h e Wipperts' c a t t l e i n order t o s a t i s f y t h e o u t s t a n d i n g b a l a n c e due. The Montana caring cattle April the were 19, sold 1976. prior at public auction in Shelby, c o s t s of applied

on
for

After to

deducting t h e sale, the Tribe loan,

cattle

$27,031 t o t h e amount due on t h e W i p p e r t s ' d e f i c i e n c y o f $17,698. The before jury. the trial upon remand
R. D.

leaving a

was

heard

on March

23,

1983, a

Honorable

McPhillips,

s i t t i n g without

On March 28,

1984, t h e c o u r t f i l e d i t s f i n d i n ~ sand

c o n c l u s i o n s and an o r d e r r e q u i r i n g t h e W i p p e r t s t o pay t o t h e T r i b e t h e $14,330 t h a t remained u n p a i d a f t e r o t h e r f u n d s had been a p p l i e d t o t h e d e f i c i e n c y . Wipperts t o pay t h e T r i b e ' s The c o u r t a l s o o r d e r e d t h e fees. The

c o s t s and a t t o r n e y

Wipperts appeal. from t h i s judgment. The f o l l o w i n g i s s u e s a r e p r e s e n t e d f o r review:

1. Did the District Court err in ruling that the Tribe

complied with the notice requirements of the UCC thereby entitling it to a deficiency judgment?
2. Did the District Court err in awarding the Tribe

attorney fees?
3. Did the District Court err in allowing the Tribe to
Dr?

recover interest in its judgment? Did the District Court err in determining the unpaid balance on the loan from the Tribe to the Wipperts? Upon consideration of the first issue, we conclude that the judgment against appellants must be reversed. fore need. not address the remaining issues. The Wipperts maintain the District Court's deficiency judgment cannot stand in li.uht of the fact that the Tribe failed to give the FJipperts adequate notice of the sale of their collatera.1 as required by both section 30-9-504(3),
MCA, and the terms of the security agreement between the

We there-

parties. Title 30, Cha.pter 9, MCA is th.at portion of the UCC which regulates secured transactions. Section 30-9-504(3),

MCA prescribes the manner in which a secured party may dis-

pose of colla.tera1 following default. that statute provides:

In pertinent part,

I' (3) Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms, but every aspect of the disposition including the method, manner, time, place and terms must be commercial~ly reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale shall be sent by the secured party to the debtor.

...

...

..

11

The respondent Tribe argues that since the collateral in this case was of a type customarily sold on a recognized market, i.e. cattle sold at public auction, notice of sale was not required under section 30-9-504 (3), MCA. We do not

agree that cattle constitute a type of collateral "customari-

ly sold on a recognized market."

It has been found that a

"recognized market" under UCC section 9-504 (3) would be akin to a stock market, or commodity market. Truck, Inc. (Tex.Civ.App. 1976), 533 S.W.2d O'Neil v. Mack 832, 836; Norton

v. National Bank of Commerce of Pine Bluff (Ark. 1966), 398 S.W.2d 538, 540. ble These markets deal with essentially tangiis determined by external factors

goods whose price

normally beyond the control of specific interested buyers, and where "haggling and competitive biddi.nq are not primary factors in each sale." Norton, 398 S.W.2d at 540. See also

The White and Summers, Uniform Commercial Code S26-10 (l-980). "recognized market" exception was included in the statute because lack of notice to the debtor in such cases woul-d not prejudice the debtor's right to minimize his liability by participation in the sale. Norton, 398 S.W.2d at 541.

We concur with the reasoning of the North Dakota Supreme Court in State Bank of Towner v. Hansen (N.D. 1981), 302 N.W.2d 760, 765, where it was stated: "Neither livestoclc nor farm machinery are sold on markets wherein the price is fixed at any given moment and is free from competitive bidding. To the contrary, competitive bidding is the focal point of the type of auction sales a.t which this collatera.1 was disposed. A debtor, upon receiving proper notice, might be able to attract additional interested persons to bid up the price of these goods, or he might attend himself and bid at the auction. Thus, the failure to give the debtor notice might very well result in prejudice to him. We agree with the Texas Court of Civil

Appeals in OWei.1, supra that 'the term "recognized market" within the meaning of the U.C.C. is most restrictive.' Only those items of collateral which are commonly sold on a market such as the stock market or the commodity market wherein the price at any given moment is fixed and is free from an individualized competitive bidding process fall within the category of 'recognized market' collateral which is exempt from the notice requirement.

. ."

We conclude that cattle are not a type of collateral customarily sold on a recognized ma-rket,and for that reason the Tribe was obligated to provide the Wipperts with "reasonable notification of the time and place" auction sale of the cattle. Although the UCC is silent regarding what constitutes reasonable notice, the officia.1 comment to section 30-9-504 provid.es some guidance:

for the public

" [A]t a minimum [notice] must be

sent in such time that persons entitled to receive it will have sufficient time to take appropriate steps to protect their interests by taking part in the sale or other disposition if they so desire." In addition, we note that the

parties specifically agreed in their security agreement on what notice to the debtor would be required in the event of a foreclosure sale. Section 8 of the security agreement pro-

vides that the rights and responsibilities of the parties are to be controlled by the UCC and. then states: "Any require-

ment of said Code of reasonable notification of the time and place of any public sale

.. .

shall be met by giving the

Debtor at least five days prior written notice of the time and place of any public sale." This agreement concerning

notice requirements is valid and binding on the parties so long as it is not manifestly unreasonable. Section

30-9-501(3)(b), MCA; Liberty Bank v. Honolul-u Providoring,

Inc.

(Hawaii 1982), 650 P.2d

576, 579; Chapman v.

Field

(Ariz. 1979), 602 P.2d 481, 485.

Under the circumstances, we

cannot say that the notice requirement specified in the agreement is manifestly unreasonable. It is clear from our review of the record that no notice whatsoever regarding the time and place of the foreclosure sale was given by the Tribe to the Wipperts.
At

trial evidence of notice-of-sale was the following letter from the Tribal Credit Committee to the Wipperts: "March 8, 1976. Dear Mr. and Mrs. Wippert: At a duly called, noted and convened session of the Blackfeet Tribal Credit Committee the following action was taken on your loan, CF3411 with the Blackfeet Tribe of the Blackfeet Indian Reservation: After again reviewin9 all the facts the motion carried to declare in default and proceed with foreclosure to proper procedure to have the cattle picked up and taken to market. It is the committee's intention that all security offered for CF3411 be sold and the proceeds, less cost of sale, applied on the loan. This action is being taken in accordance with authority given by you in Section 7 of the Loan Agreement, CF3411." This letter fails to satisfy the notice requirements of either the UCC or the security agreement. There is no men-

tion of either the time or place of sale, and without that information a debtor

is precluded

from taking action to

assure that a competitive price is obtained for his collateral at a public sale. We hold that failure to provide the notice required by section 30-9-504 (3), MCA, precludes a creditor's right to See Farmers State Bank v.

obtain a deficiency judgment.

734. Mobile Homes Unlimited (1.979), 181 P4ont. 342, 593 ~ . 2 d The failure of respondent to provide the notice re-

quired precludes the issuance of a deficiency judgment in this case.

The decision of the District Court is reversed and the matter is remanded for further proceedings in accordance with this opinion.
/"

Justice We concur:

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