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Morgan Cty. Feeders, Inc. v. McCormick - 836 P.2d 1051 (Colo. App. 1992)

Rule:

In certain circumstances, course of performance, which looks to repeated occasions or performance by the parties after or under the contract, is relevant to show a waiver or modification of the agreement. Colo. Rev. Stat. §§ 4-2-208 and 4-1-205, cmt. 2. And, evidence of course of performance is admissible if it does not directly contradict the terms of a written agreement but merely explains or supplements it.

Facts:

In 1990, Morgan County Feeders, as a secured creditor, obtained a default judgment against Neil Allen for $ 1,461.019. Morgan County Feeders attempted to garnish 45 longhorn cows and one bull that were in the possession of Roy Creamer. Creamer contested the garnishment, and Morgan County Feeders filed a post-judgment motion for issuance of a writ of garnishment and to join third-persons who also claimed an interest in the cattle. The court granted Morgan County Feeders' motion. The parties then stipulated to the sale of the cattle, and the proceeds were placed in the registry of the court pending a hearing. At the hearing, Morgan County Feeders claimed a priority in the proceeds based on its perfected security interest arising from a security agreement with Allen, which, in part, contained an after-acquired property clause. McCormick claimed an interest in the proceeds based on an oral agreement with Allen to buy the cattle. At the conclusion of the trial, the court entered judgment in favor of Morgan County Feeders, finding that the 45 longhorn cattle were "equipment" and not "inventory" under the Uniform Commercial Code and that Allen had no authority to dispose of the longhorn cattle free of Morgan County Feeders' perfected security interest. Accordingly, the court awarded Morgan County Feeders the sale proceeds minus certain costs owed to Creamer. McCormick appealed the judgment, contending that the trial court erred in determining that the cattle purchased by Allen were equipment, rather than inventory.

Issue:

Did the trial court err in determining that the cattle purchased by Allen were equipment, rather than inventory?

Answer:

No.

Conclusion:

The court noted that the classification of cattle as equipment rather than inventory was highly unusual, but the evidence established that Allen did not acquire the cattle for resale but used them principally for recreational cattle drives. The court also found that Morgan County Feeders did not waive its security interest in the cattle. Morgan County Feeders did not give written consent to the Allen’s sale of the cattle to McCormick. In addition, there was evidence of the course of dealing between the Allen and the Morgan County Feeders and trade usage to support the finding that the Morgan County Feeders did not impliedly authorize the sale of the cattle. The Morgan County Feeders’ cattle inspector testified that everyone was required to obtain the Morgan County Feeders’ consent to sales of collateral. According to the court, there was no evidence that the Morgan County Feeders would have authorized the sale without assurance of payment.

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