## Facts

- Weeks Brothers, Inc., an Idaho ranching corporation, employed Larry Dowdy.
- Weeks Brothers owned a tractor-trailer and agreed to sell it to Dowdy for $16,000.
- Valley Bank, an Idaho bank, agreed to finance the sale on the condition that Weeks Brothers co-sign the obligation.
- On June 17, 1981, Dowdy and Weeks Brothers executed a $16,000 promissory note and security agreement, payable by Dowdy within six months.
- Valley Bank paid the $16,000 to Weeks Brothers but retained the truck’s title at the bank in Weeks Brothers’ name, subject to the bank’s security interests, rather than placing title in Dowdy’s name at that time.
- Dowdy had possession of the tractor-trailer from June 17, 1981 until trial.
- During his possession, Dowdy maintained and repaired the tractor-trailer, spending $4,658.98 for parts and claiming $2,000 for labor (total claimed: $6,658.98).
- About three months after the transaction, Dowdy moved from Idaho to South Dakota and took the tractor-trailer with him.
- Dowdy made no payments of principal or interest on the note.
- Valley Bank sued in South Dakota seeking possession of the tractor-trailer.
- Dowdy counterclaimed seeking reimbursement for repair costs, asserting detrimental reliance/promissory estoppel and, alternatively, a possessory mechanic’s lien (and also pled negligence).
- The trial court awarded possession to Valley Bank and also awarded Dowdy $6,658.98 for repairs on equitable grounds; it denied Dowdy a possessory mechanic’s lien.
- Valley Bank appealed the repair-cost award; Dowdy sought review of the denial of a possessory mechanic’s lien.

## Issues

1. Whether the trial court erred by admitting parol evidence of an alleged oral agreement related to the promissory note and security agreement.
2. Whether Dowdy was entitled to recover repair costs from Valley Bank under detrimental reliance or promissory estoppel based on an alleged promise to transfer title to him.
3. Whether Dowdy was entitled to a possessory mechanic’s lien for the repair costs on the tractor-trailer.

## Decision

- The Supreme Court of South Dakota affirmed the award of possession of the tractor-trailer to Valley Bank.
- The court reversed the portion of the judgment requiring Valley Bank to pay Dowdy $6,658.98 for repairs under detrimental reliance/promissory estoppel.
- The court affirmed the denial of Dowdy’s claim to a possessory mechanic’s lien.
- Any claimed error concerning parol evidence did not change the outcome because Dowdy failed to establish entitlement to equitable relief.

## Legal Principles

- Promissory estoppel (detrimental reliance) requires proof of the necessary elements by clear and convincing evidence, including a promise and reliance that results in a legally recognized detriment.
- Expenditures for maintenance and repairs made by a buyer in possession of a vehicle, standing alone, do not establish a compensable detriment as against the secured lender when the buyer made no payments on the debt and does not prove that the lender’s promise caused the expenditures.
- A possessory mechanic’s lien is statutory and is not available where the claimant’s relationship to the property and transaction does not fit the statute’s purpose (e.g., a purchaser/co-obligor improving the very collateral securing his own unpaid obligation).
- A secured creditor is entitled to possession of collateral upon default under a valid note and security agreement, subject to applicable enforcement rules.

## Conclusion

Valley Bank was entitled to repossess the tractor-trailer after Dowdy’s total default on the purchase note. Although Dowdy claimed he repaired the truck in reliance on an expected transfer of title, the Supreme Court of South Dakota held he did not prove, by clear and convincing evidence, the elements needed for promissory estoppel or detrimental reliance to shift repair costs to the bank, and it also held he could not obtain priority through a statutory possessory mechanic’s lien for repairs to the collateral he was buying under the secured transaction.


Valley Bank v. Dowdy, 337 N.W.2d 164 (1983)