## Facts

- National Livestock Credit Corporation made cattle-production loans to G.W. Schultz and Schultz Cattle Co. over many years.
- In 1973, the parties executed a large promissory note and a security agreement granting National a security interest in Schultz Cattle’s herd while leaving the cattle in Schultz’s possession.
- The security agreement restricted sales absent the creditor’s written consent, and contemplated sales only for fair market value with proceeds paid jointly to debtor and secured party; related loan terms required remittance of sale proceeds to National.
- Despite these written restrictions, Schultz repeatedly sold collateral cattle and received buyer checks payable only to Schultz (not jointly), later forwarding proceeds to National in various nonconforming ways.
- National knowingly accepted this practice for a long period, did not insist on joint-payee checks or contemporaneous written consent, and did not object to Schultz’s ordinary-course marketing of the herd.
- In 1974, National renegotiated repayment and authorized Schultz to liquidate the herd over several months.
- Schultz sold more than 400 head of cattle to Iowa Beef Processors, Inc. and Wilson & Co.; each purchaser paid Schultz (or related entities) directly by checks not naming National.
- Schultz failed to remit the proceeds to National and used the money to pay other creditors.
- National demanded payment from the purchasers and sued them (and Schultz entities) for conversion, asserting its perfected security interest continued in the cattle and proceeds.

## Issues

1. Whether National’s long-standing acceptance of nonconforming cattle sales and payment practices waived the security agreement’s sale restrictions so the challenged sales were authorized.
2. Whether National was equitably estopped from denying Schultz’s authority to sell the cattle free of National’s claim, based on purchasers’ reliance on National’s manifested acquiescence.
3. Whether prevailing defendants in this conversion action could recover attorney’s fees under Okla. Stat. tit. 12, § 940(A).

## Decision

- The appellate court affirmed summary judgment for the purchasers (IBP and Wilson).
- The court held National waived enforcement of contractual sale-restriction protections (including joint-payee payment requirements) through a long, knowing course of conduct inconsistent with those terms.
- The court also held National was estopped to deny that Schultz was authorized to sell in the manner used, because National’s conduct reasonably induced purchaser reliance in ordinary trade transactions.
- The appellate court affirmed the denial of attorney’s fees, concluding § 940(A) did not apply to this conversion claim.

## Legal Principles

- A secured party may waive contractual protections in a security agreement through a long-continued course of performance that knowingly tolerates deviations from express restrictions.
- Security agreements are contracts; general contract doctrines such as waiver and course of performance may be applied in disputes involving Article 9 collateral dispositions.
- If a secured party’s conduct effectively authorizes a debtor’s disposition of collateral in a particular manner, a buyer purchasing in that manner is not liable for conversion premised on unauthorized sale.
- Equitable estoppel can bar a secured creditor from asserting lack of authorization when the creditor knowingly permits nonconforming sales, accepts benefits without objection, and third parties reasonably rely on the apparent authority created by that conduct.
- Okla. Stat. tit. 12, § 940(A) does not automatically authorize attorney’s fees in conversion actions; applicability depends on whether the specific claim fits the statute’s scope.

## Conclusion

Because National knowingly allowed and accepted collateral sales and payment methods contrary to its written protections, the purchasers’ transactions were treated as authorized and National was barred by waiver and estoppel from recovering for conversion; the purchasers were not entitled to attorney’s fees under § 940(A).


Nat’l Livestock Credit Corp. v. Schultz, 653 P.2d 1243 (Okla. Ct. Civ. App. 1982)